Good day and thank you for standing by. Welcome to the NerdWallet Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Caitlin MacNamee, Investor Relations.

Thank you, operator. Welcome to the NerdWallet Q3 2023 earnings call. Joining us today are Co-Founder and Chief Executive Officer, Tim Chen; and Chief Financial Officer, Lauren StClair. 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 where we are unable without reasonable efforts to calculate certain reconciling items with confidence. With that, I will now turn it over to Tim Chen, our Co-Founder and CEO of NerdWallet. Tim?

Thanks, Caitlin. NerdWallet is rapidly approaching our second anniversary as a public company. In each quarter, I have enjoyed the opportunity to reflect on our progress with the goal of providing you, our shareholders, with the same clarity and confidence our Nerds strive to offer our consumers. I am pleased to report our strong audience growth in Q3 with monthly unique users up 22% year-over-year and record traffic to travel content and personal loans. As we noted last quarter, we are taking share in a large and growing market independent of macroeconomic factors. Our primary addressable market, which is U.S. financial services digital advertising, is expanding with a 2022, three-year CAGR of approximately 23%. Meanwhile, NerdWallet's share in this growing market has also increased with a three-year CAGR of 33%. We've consistently said that over 70% of our traffic comes organically or unpaid to our site, and that remains true today. But we recognize that our investment in sales and marketing has been roughly 70% of revenue in recent periods, so we wanted to walk you through our short- and long-term decision-making on those investments as well as how they'll scale over time. I'd also point you to our shareholder letter as well as the historical financial data spreadsheet that we've posted to our IR website today for a double click on sales and marketing expense allocation. Our trailing 12-month sales and marketing comprises roughly 50% expenses that are fixed in nature. The remaining half is performance marketing, which is variable in nature. Given there is little cost associated with serving an incremental organic visitor, there should be meaningful margin leverage as organic traffic scales. Conversely, paid visitors have lower incremental margins. Out of the 50% of trailing 12-month sales and marketing expenses that we consider relatively fixed in nature, over 20 points are brand marketing, over 20 points are people related costs with the remainder primarily in amortization of M&A. The headcount, which is within the organic and other portion of our sales and marketing, includes content, sales and our marketing and business leaders. We consider the brand portion to be fixed in nature as well because there is a natural equilibrium point where spending more on brand does not drive a 12- to 24-month payback that we can measure with an adequate degree of confidence. While this equilibrium point will vary from year to year, you can see that our trailing 12-month brand spend is down roughly 20% versus the prior comparable period, so we are already finding more efficiencies. Performance marketing, where you have seen us growing aggressively over the past year, is a variable cost and at a relatively lower incremental margin. However, we are breaking even on this spend, so we feel good continuing to take share in this channel and we view it as a means to an end as we look to register a portion of that traffic. With this in mind, we beat our revenue and profitability guidance this quarter, but we continue to see opportunities to more effectively and efficiently serve our growing audience monthly unique users as the macro recovers. To that end, our Nerds have spent the quarter engaged in developing products and initiatives that further our vision for a trusted financial ecosystem where a single platform allows consumers and SMBs to learn, shop, and make decisions about their finances. More specifically, our Nerds have focused their efforts within our three growth pillars; land and expand, vertical integration, and registrations and data-driven engagement, with their progress moving us closer to our vision. Within land and expand, we continue to leverage our organic playbook and trusted brand to help more people in more ways. This quarter, our international team continued our expansion into Canada, making meaningful progress with 87% year-over-year monthly unique user growth, while onboarding financial partners to pave the way for increased monetization. At the same time, the team has steadily ramped their efforts in Australia to position NerdWallet as an emerging player in this international market. For our large U.S. audience, we continue to extend our footprint to new financial topics, providing consumers with actionable guidance and our business with new monetization, registration, and cross-sell opportunities. In Q3, we lapped our acquisition of On the Barrelhead, or OTB, one of our most significant examples of vertical integration or the process by which we pair NerdWallet's reach with best-in-class user experiences. This quarter, our credit cards vertical leveraged OTB's technology to launch a new product, which helps match consumers with personalized prequalified offers for credit cards based on their credit score and preferences. With this product, we are not only able to extend our guidance to subprime and near-prime consumers for whom qualification is a key consideration when shopping for credit cards. We are also able to register and collect data from more shoppers, creating opportunities for future engagement and cross-sell offerings. Registration and data-driven engagement will fuel our ecosystem. With our robust and growing audience, we are investing in critical initiatives to register and engage a growing portion of our addressable market. Ultimately, this will enable us to build a strong base of highly engaged users who turn and return to the NerdWallet ecosystem for all of their money questions and financial product needs. In Q3, a diverse range of efforts from optimized registration prompts to NerdWallet app enhancements to newsletter offerings through our registered user base grew by 38% year-over-year. At the same time, we have launched several bolder consumer offerings that allow us to build deeper relationships with our consumers with the intention of testing a variety of product hypotheses over time. Following on our launch of the Nerd AI chatbot beta in Q2, we've now incorporated registration prompts into our chatbot model to funnel consumers to NerdWallet membership offerings related to their questions. And notably today, we launched NerdUp by NerdWallet, a secured credit card intended to help users build their credit history. While we do not strive to offer our own financial products, our team felt we could design a unique product by leveraging our existing distribution channels to reduce costs. In doing so, we believe we can create a win-win-win for consumers, traditional card issuers, and NerdWallet. For consumers, we can pass on our lower costs with a secured card that requires a low minimum deposit, no annual fees, and no credit check while also offering cashback rewards, helping consumers build good credit behavior and unlock new credit opportunities. For card issuers, we hope to deliver long-term value by connecting them with newly eligible consumers who qualify for more traditional products and services. And throughout this process, we will establish meaningful engaged relationships with NerdUp users within our trusted ecosystem. I am proud of the work we've done this quarter and the many ways in which we are capitalizing on our competitive advantages in brand and reach with product investments that set us up well for the macro recovery. With that, I'll pass it over to Lauren.

Thanks, Tim. We're proud of the quarter that we achieved, delivering Q3 revenue of $153 million, up 7% year-over-year and above the high end of our guidance. We saw stabilizing performance in some of our more challenged verticals, such as credit cards, as well as positive momentum in our loans verticals. Let's take a deeper look at the revenue performance during the quarter within each category. Credit cards delivered Q3 revenue of $54 million, declining 6% year-over-year. As we mentioned last quarter, issuers pulled back primarily in balance sheet-intensive areas such as balance transfer cards, and that dynamic persisted in Q3. Consumer demand remained healthy, and we've continued to deliver high-quality matches to financial institutions, and we believe the strength we've seen in matches indicates we are still taking share of the overall market. Issuer behavior has remained consistent, and while we believe that current conservative trends will continue during Q4, we will be lapping a tougher comparison period as we were still seeing pricing recovery through the end of 2022. As we look beyond the near-term, past cycles would indicate that we should see a period of above-trend growth when card issuers regain confidence and begin taking advantage of our high levels of consumer engagement. Loans generated Q3 revenue of $33 million, growing 16% year-over-year, the first quarter of overall loans growth since Q1 2022. This growth acceleration was in the face of almost a full quarter of organic growth comparison as we surpassed the one-year anniversary of our OTB acquisition during mid-July. This is most prominent in personal loans, which saw another quarter of accelerating growth in Q3, achieved through continued integration and optimization of OTB's technology as well as our improved ability to align consumer demand more effectively with financial service providers. Partially offsetting this, our mortgage vertical continued to be pressured by the rising interest rate environment. While still declining on a year-over-year basis in Q3, we expect growth rate improvements due to easier comps in future quarters. Though given current interest rates, we do not expect material recovery in the near term. We also saw a return to growth within our student loans vertical, though this was primarily due to the back-to-school season impact of loan originations. While refinance demand has started to moderately pick up, it still remains well below historical levels, and we have muted expectations of near-term benefits combined with the fact that Q3 is a seasonally strong quarter for originations. Finally, other verticals finished Q3 with revenue of $66 million, growing 16% year-over-year. Banking grew 43% year-over-year, decelerating versus previous quarters as we begin to compare to last year's high growth levels combined with signs of softening consumer demand as interest rate increases slow. As mentioned last quarter, we believe we've been over-earning a bit in our banking vertical and continued high demand was one of the drivers of our overperformance versus Q3 guidance. As consumer interest starts to moderate, growth should slow further with near-term expectations of year-over-year declines. SMB revenue grew 6% year-over-year as we are seeing some conservative underwriting for SMBs impact our growth rates, combined with tougher comparisons from last year. Growth in other verticals was partially offset by headwinds in insurance, and as we guided to last quarter, it is now declining 23% year-over-year as carriers face ongoing profitability pressure, and we expect these headwinds to continue through Q4. Moving on to investments and profitability. During Q3, we earned $27 million of adjusted EBITDA at an 18% margin, up over 7 points year-over-year. We also earned $10 million of non-GAAP operating income at a 6% margin. We had a GAAP net loss of $1 million, which includes a $5 million income tax provision. Similar to what we mentioned last quarter, we expect to be in a tax expense position for the remainder of the year and also expect to be a cash taxpayer for the foreseeable future. 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 Nerd for their money questions. We provided trustworthy guidance to 24 million average monthly unique users in Q3, up 22% year-over-year. Growth was a result of the strength in many areas across NerdWallet such as travel, banking, investing, and personal loans. We are seeing consistently strong consumer demand for both our learn and shop content and expect MUU growth to outpace revenue growth for the remainder of the year. Despite near-term monetization pressures, we anticipate that the strength in consumer engagement, combined with our matching technology, will accelerate our growth when financial service provider demand returns. Onto our financial outlook. As we prepare to close out the end of 2023, we expect to deliver fourth quarter revenue in the range of $136 million to $140 million, which at the midpoint would decline 3% versus prior year. This also implies approximately 12% revenue growth for the full year 2023. To level set on our normalized revenue cadence, during pre-COVID years, our business had typically seen a seasonal decline from Q3 to Q4, driven by areas such as credit cards, student loans, and mortgages. But when we look back to 2022, credit cards had a stronger than typical Q4 due to the continued pricing recovery, banking was benefiting from stronger than normal deposit demand during the rapidly rising interest rate environment, and insurance accelerated due to better macro dynamics. This year, our quarterly revenue guidance assumes a slightly higher than normal seasonal decline from Q3 to Q4, driven by banking as consumer demand begins to moderate. We expect to have another quarter of strong engagement and financial service providers continue to value the quality of our consumers, putting us in a position of relative strength as we await a sustained macro recovery. Moving to profitability. We expect Q4 adjusted EBITDA in the range of $30 million to $33 million or approximately 23% of revenue at the midpoint, a one-point increase versus prior year. The majority of our brand spend occurred during the first three quarters of this year, and we currently expect to have minimal brand spend in the fourth quarter. As a result, our expected Q4 adjusted EBITDA margin will be higher than the first three quarters of this year although the year-over-year margin accretion is less than what we saw in Q3, driven by a smaller year-over-year benefit from brand spend reduction combined with lower organic revenue growth from banking and student loans. At the midpoint of our Q4 guidance, our annual adjusted EBITDA margin would be approximately 16.5% of revenue, a 4-point increase versus the prior year. We also expect to deliver approximately 4.5% of non-GAAP operating income margin for the full year 2023. Our dedication to delivering margin improvement in the face of significant revenue deceleration showcases the flexibility of our business model, and we are increasing our expectation for 2024 full-year non-GAAP operating income margins from mid-single-digits to mid to high-single digits. We'll provide you a deeper update on our 2024 expectations when we report Q4 results. Finally, a quick update on capital allocation; first, we recently announced that we entered into a newly upsized credit facility with $125 million available to be used. This was done in advance of the expiration of our previous facility and gives us the increased financial flexibility to pursue our growth strategies. We also repurchased $10.8 million of our Class A shares during the quarter at an average price of $8.95 per share. After the end of the third quarter, we completed repurchases for the remainder of our previous authorization, and we announced today that our board has approved an additional authorization of $30 million to be used opportunistically. We will continue to take a pragmatic and data-driven approach to determining when we believe the appropriate time is to deploy capital for any of our capital allocation options, and you should expect us to balance between them during periods of macroeconomic uncertainty and idiosyncratic situations. We will continue to take a long-term view, prioritizing consumer trust, while continuing to diversify and improve our product experiences from cycle to cycle. Our growing consumer mind share with strong traffic and brand signals give us confidence that as macroeconomic conditions recover, our ability to meet consumer needs will compound our value over time. With that, we're ready for questions.

Our first question comes from Jed Kelly with Oppenheimer.

Two if I may. Just circling back to the shareholder letter, it seems from some of the commentary you're kind of focusing on some of the called subprime consumers where NerdWallet historically has been more of prime or super prime. So can you just talk about that strategy? And then, Lauren, you just mentioned raising your operating income expectation, margin expectations to high single digits. Can you talk about some of the confidence that gave you to do this just in this uncertain environment?

Hey, Jed, I'll take the first one. Yes, historically NerdWallet has really served a broad swath of consumers. Our monetization has been disproportionately oriented towards prime consumers due to the nature of the products they qualify for and the lifetime value of those products for issuers, lenders, and insurers, etc. We think that this is just a natural evolution in serving our broader consumer base better. Helping a group of consumers understand what they qualify for and assisting them in building credit is a natural extension of our mission, and so, I am very excited to dive deeper into that through both products like NerdUp, but also more matching-oriented credit card flows.

And to the second part of your question, Jed, as we mentioned in the prepared remarks, we now believe that we can get to mid to high single digits on our non-GAAP operating income margin. Given the high incremental margins we have as a result of our organic traffic, we're confident that we can achieve this margin in a mixed macro environment. Similar to what you saw us do actually in the second half of 2020. And if we think about sort of longer term, I know we've talked a lot about 70% of our traffic coming through organic channels, which gives us higher incremental margins. And over the long-term, we expect our margins to return to and eventually surpass 2019 levels for the adjusted EBITDA. We will gain leverage on the portion of our cost base that is relatively fixed in nature. So, one, we've talked in the past about hitting a logical ceiling on our brand spend. Two, we no longer have the step change in G&A expenses as a result of becoming public. Three, we continue to gain leverage in areas such as R&D and the organic and other portion of our sales and marketing. So, we're proud to have delivered consistent margin accretion on an annual basis since our IPO in late '21, even in difficult macro environments, and we expect this trend to continue into 2024.

Our next question comes from the line of Youssef Squali with Truist.

Two questions for me, please, as well. So maybe, Tim, can you tell us, in your conversations with card issuers, there aren't that many which basically control the market. What are you hearing from them? What are the signals that they're kind of waiting to see before they can reaccelerate the spend? I think you talked about maybe particular cards or balance transfers that are not as much in favor. So maybe just fill us in on some color there. And then, with regards to AI, can you help us understand how you are leveraging AI both in terms of cost mitigation for your internal operations and content creation, but also, in terms of improving marketing efficiency, particularly on the variable side of things? Thank you.

On the issuer side, we continue to see headwinds. We're experiencing a similar environment to last quarter with some marginal changes in terms of positives and negatives from the issuers. The general sentiment is that credit quality is doing okay, normalizing towards pre-pandemic levels as expected. However, banks have some unknowns they're worried about and continue to be conservative in managing their balance sheet. For example, the Basel III end game is looking pretty onerous as currently proposed in terms of increased capital ratio requirements, and there's just some uncertainty regarding what long-term rates could do to the financial system. So, on balance, it looks similar to last quarter. Big picture; we think we're under-earning in cards, but at the same time, it's hard to predict the exact timing of when the issuers will revert to more normalized customer acquisition patterns. As we take a step back, we really think about being single-digit market share in the overall card originations and seeing ample opportunity to grow that by registering users, reintegrating them, and increasing conversion rates. Regarding AI, you raised two important drivers. I'd say on the efficiency side, that's something we're looking at across every function of our business. I'm sure every business out there is exploring different ways to use AI to increase productivity, and so it's broad-reaching. There is a lot of experimentation and learning going on. In terms of delivering better user experiences, that's exciting for us as well. It's actually helping us to both register and engage more users. We recently incorporated registration prompts into our Nerd AI chatbot to funnel consumers to membership offerings related to their inquiries. These embedded registration prompts allow for more personalized and tailored guidance while creating unique revenue and engagement opportunities for us. The Nerd AI chatbot is also doing a better job of getting users to the most relevant user experience on Nerd. So AI is already helping us register and engage more users, and we expect more developments to come.

Our next question comes from the line of Justin Patterson with KeyBanc.

Tim, I wanted to go back to the letter and just talk about some of the product initiatives you've called out. Verticalization sounds like a pretty big unlock within the credit card segment rolling up the OTB product there. That's also dovetailing with some really healthy monthly traffic growth to the site. So I would love to hear a little bit more about how you envision what seems like a faster cadence of product updates on the Company influencing traffic growth in the next few years and, in turn, positioning you for growth whenever market conditions stabilize? Thank you.

Yes. I always point to page two of our shareholder letter as a reference point around our growth pillars and how we think about our product initiative buckets. I’d say, for example, with user registrations, we've been prioritizing this, and we are making good headway, growing 38% year-over-year in our cumulative registered users. Unsurprisingly, personalization drives engagement. The key to driving personalization is first-party data, and a major factor in capturing first-party data is registration. From a product perspective, we're consistently improving registration on ramps throughout the site. I just mentioned adding them into our Nerd AI experience as well as improving personalized nudges when consumers have an opportunity to make a smart money move. We're also focusing on areas of high consumer interest, such as banking or taxes. Yes, you have to catch the fish while they are biting. We are adding even more relevant and personalized reasons to register, and we've seen improvements in registration rates when we do this. We are still in the early days of building out the ecosystem, but we are trying to build as much velocity as we can across all three growth pillars in our product initiatives, including things like NerdUp and that’s how we’re thinking about it.

Yes, maybe I'll just add a quick comment. We're very excited about the Q3 monthly unique user growth that we saw. A lot of that strength comes from verticals where we see high consumer intent as well as product improvements. Similar to areas where we see revenue growth, we saw growth in monthly unique users like banking. We also saw consumer interest in areas like investing and traveling. Linking that back to your question around product initiatives, remember, people come to us to learn, shop, and manage, which means not all visits will result in a monetizing event. Part of that is to reengage users, build trust, and continue to build that relationship, so that when they are in the market for a financial product, they will think of NerdWallet first.

And if I can slip in a quick follow-up. NerdUp is obviously a very different product than what you've had historically. But are there any economic considerations we should be thinking about just for this affecting the model going forward? Thank you.

Yes. First and foremost, we think hard about the fact that trust and objectivity underpin our brand's value. So we thought rigorously about this before launching NerdUp. In terms of the economic model, it’s important to address. Traditionally, credit card issuers make money on swipe fees, annual fees, late fees, and by charging interest on revolving balances. We are taking a different approach with this business. We aim to effectively give most of those economics back to the consumer in the form of no annual fees, low minimum balances, cash-back rewards, and instead focus on helping a broad base of consumers improve their credit scores. This approach nurtures an engaged audience for us, and we hope to refer that audience back to the issuers and lenders we partner with when consumers build up their credit and qualify for unsecured products. That’s the win-win-win we are uniquely positioned to offer. Our consumers build their credit, card issuers access a pool of qualified candidates, and we build a larger base of engaged users. As we think forward about other products, we'd like to apply the same philosophy to any products we launch in the future.

Our next question comes from the line of Ross Sandler with Barclays.

Lauren, just one clarification question and then Tim, a big picture question. On the clarification, did I hear you correctly that loans are supposed to decline year-on-year going forward after growing 43 this quarter? I know we have tough comps there, which makes sense or was that like the overall other segment is going to be declining? Just any clarity there would be helpful. And then, Tim, the MUU growth combined with this sharp deceleration and performance and the negative six-year-on-year for sales and marketing of the total. You talked a little bit about that, but does that more reflect the demand environment being tough and that when that demand environment picks back up, we plan on leaning in? Or is there newfound efficiency or some kind of new philosophy that we might not need as much performance marketing intensity going forward because all these other things like new categories and nudges and better registrations are finally kicking in? Any thoughts just philosophically on that?

Let me start with the clarification. So in Q3 loans grew 16%, and we said that was the first quarter of overall loans growth since Q1 2022. And then maybe I’ll clarify; I'll just reiterate our guidance and explain that a bit more. So, the Q4 guidance is $136 million to $140 million, which, at the midpoint, is a decline of 3% year-over-year. To provide context, from Q3 to Q4, we typically see a normal seasonality of high-single-digit decline quarter-over-quarter, which in normal years is driven by credit cards, student loans, and mortgages. Last year, we did not experience the normal seasonality for three main reasons. First, there was a smaller seasonal decline in credit cards as pricing recovery continued from the lows in 2020. Second, banking was benefiting from stronger-than-normal deposit demand during the rapidly rising interest rate environment. Third, insurance picked up due to better macro dynamics as well as our internal product changes. This year, our quarterly revenue guidance assumes a slightly higher than normal seasonal decline from Q3 to Q4, driven by banking as consumer demand begins to moderate. We expect to have another quarter of strong engagement as financial service providers value the quality of our consumers, positioning us in relative strength as we wait for a sustained macro recovery.

In terms of sales and marketing becoming more efficient year-over-year while monthly unique users are still growing nicely, our consumer demand is strong. However, we are seeing headwinds in monetizing that demand for some of the reasons we mentioned. A key area worthy of further examination from a sales and marketing perspective is brand marketing. We are down year-over-year in brand marketing due to two reasons: first, it’s a tough macro environment for monetization. So when it becomes harder to monetize, we pull back to maintain discipline around payback hurdles on that brand spend. Second, we are still becoming more effective at this. Since 2022 was our first full year of spending on brand campaigns, we’ve learned valuable lessons that will inform how we allocate resources in the future. I'm really excited, though, that despite these challenges, we are exiting this quarter with record brand awareness levels and the highest number of monthly unique users along with that 38% growth in cumulative registrations. So this is all achieved despite lower spending.

Our next question comes from the line of Ralph Schackart with William Blair.

First question, maybe if you could provide some color on what you're seeing in terms of lead volumes versus pricing, maybe some perspective across some of the different products or verticals? And then just a follow-up to that, on the call, you talked about integrating OTB technology into loans. Just more color on what's driving that performance or what you expect that technology to do or just any more specifics on how it is helping drive loans? Thank you.

Yes. I'll speak about pricing. Our ability to monetize is currently most impaired in insurance, as well as in some areas of cards that are more balance sheet-intensive. These are the primary areas to consider. Of course, we have headwinds in other areas driven by increasing rates, but that's more of a consumer demand impact rather than an ability to monetize impact. Regarding the OTB performance, as we fully integrate OTB, we are getting better at asking people questions and then registering them before matching them to the right loan product. This capability can be applied to several different verticals, not just within personal loans. We are definitely seeing the benefits in personal loans first, but this quarter, we launched that product in credit cards that utilizes the same technology platform to enhance matching accuracy. The greatest impacts are in the near-prime and subprime areas, where people are unsure if they qualify and for what products.

Our next question comes from Pete Christiansen with Citi.

Tim, I was just wondering if you could discuss the impressive share gains you've had in traffic this quarter. Is that influencing any behavior of your partners in terms of more campaign activity, more offers, just deeper penetration into the platform overall? And my second question is around the personal loan category. Are you seeing a wide breadth of activity across certain issuers, or is it more concentrated? Just any color there would be helpful.

In terms of share gains, it certainly makes it easier to have conversations around integration. It requires work on both ends in some cases to carry out initiatives like pre-qualified matching, etc. The larger our scale and the longer our history of sending over highly qualified referrals that perform well over time, the greater the incentive for financial institutions to collaborate with us on these initiatives. Regarding personal loans, I believe it reflects NerdWallet-driven activities more than macro conditions. The macro environment remains challenging as in previous quarters. However, we see positive benefits year-over-year from our initiatives.

That concludes today's question. We do have a question from the line of James Faucette with Morgan Stanley.

It's Michael on for James. I just wanted to ask a quick follow-up question on the modernization of NerdUp. Maybe just unpack how you're thinking about the unit economics there? It wasn't entirely clear to me. And then as my follow-up, Tim, I appreciate the comments on the composition of your sales and marketing investments and the incremental margins there. Do you think the 50-50 mix between fixed and variable cost might change as you sort of hit that natural ceiling on brand spend? Just trying to parse out how incremental margins might evolve over time? Thanks.

Sure. In the context of NerdUp, I would describe it simply: we do not earn a lot on the credit card product itself because we are essentially providing rewards while offering no annual fees. However, when people's credit improves and they qualify for an unsecured credit card, we can refer them through our normal channels, enabling us to potentially make money there. This aligns with our traditional business model. So that's the win-win. On the sales and marketing mix between fixed and variable, it can vary. The way we view it is that we have positive incremental margins on both the paid and organic sides. The paid side is more dependent on how competitive we are in certain paid channels compared to others. We think long-term about this. A great registered user experience and generating higher long-term value leads to increased competitiveness. Hence, investments in brand can help with conversion as well. If people are familiar with us and trust our brand, that can provide an ongoing advantage structurally. Moreover, the organic side is a separate thread. It will grow at its own rate based on our investments in core products, as well as registration and re-engagement. We'd love to see growth in both areas. All of this is positive incrementally, but the exact mix will depend on specific factors.

That concludes today's question and answer session. I'd like to turn the call back to management for closing remarks.

All right, thanks all for your questions today. I feel really energized about the opportunities ahead. We have continued strength in our reach and brand, and our focus on relentlessly improving consumer experiences positions us to capture more mindshare and fuel our business for long-term growth. I would like to express my gratitude to the Nerds for their hard work this quarter to help more people in more ways. At the same time, we remain dedicated to creating value for our wider community, reflected in the ESG report we published yesterday, which is available through our IR website. I encourage you to read our report to learn more about NerdWallet’s commitments. With that, we will see you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.