Good day, and thank you for standing by. Welcome to the NerdWallet Q4 2025 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rob Ferris, VP of Finance. Please go ahead.
Thank you, Operator. Welcome to the NerdWallet Q4 and Full Year 2025 Earnings Call. Joining us today are Co-Founder and Chief Executive Officer, Tim Chen, and 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 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.
Tim? Thanks, Rob. This quarter, we exceeded our guidance for revenue and non-GAAP operating income. In a moment, John will talk through our results in more detail. And you can also find more information in the earnings release and shareholder letter posted on our investor relations website. In 2025, we faced headwinds as consumers increasingly turn to AI overviews and LLMs over traditional search, resulting in steep organic search declines. In spite of this, we delivered year-over-year revenue growth of 22% for the full year and 23% for the fourth quarter, as growth in performance marketing, direct, and non-search referral channels more than offset the declines in organic search. Turning to our financial performance, we delivered fourth quarter revenue of $225 million, up 23% year-over-year, and non-GAAP operating income of $25 million, up 47% year-over-year. Revenue growth is driven primarily by personal loans, banking, and insurance, partially offset by credit cards and SMB products. For the full year, we reported revenue of $837 million, up 22% year-over-year, and non-GAAP operating income of $96 million, up over 100% year-over-year. Looking ahead, in the near term, we anticipate continued growth in performance marketing while we expect organic search to remain under pressure. We are keeping the long-term in focus by continuing to invest in building deeper relationships with consumers and SMBs across an increasing number of financial decisions. And now I will pass it over to John to cover our financial results in more detail.
Thanks, Tim. As Tim mentioned, our fourth quarter results exceeded our revenue and non-GAAP operating income guidance due to continued momentum in performance marketing. We remain focused on creating long-term shareholder value by delivering sustainable growth, strong free cash flow generation, and disciplined capital allocation. With Q4 growth ahead of expectations, trailing 12-month adjusted free cash flow increasing to $118 million and Q4 share repurchases of $51 million, we made progress on each of these objectives during the quarter. Total revenue in Q4 was $225 million of 23% year-over-year, exceeding our guidance range. This was driven by a 28% revenue growth in our consumer verticals, partially offset by a 12% revenue decline in our SMD vertical. Within consumer, insurance revenues increased 13% year-over-year, driven by robust auto carrier demand. Lending revenue increased 141% year-over-year, driven by a 264% growth in personal loans and double-digit growth in mortgages and other loans. Emerging verticals' revenue grew 57% year-over-year, driven by banking, as we leveraged conversion data provided by our partners to gain share in a healthy demand environment. Looking forward, we are cautious on the outlook for our banking business as lower interest rates could reduce demand for high-yield savings accounts as the year progresses. Credit card and SMB revenues declined 24% and 12% year-over-year, respectively, driven by organic search headwinds. For the full year, total revenue was $837 million, up 22% versus 2024. for. Revenue from our consumer verticals grew 27% to $737 million, while revenue from our SMB vertical decreased 9% to $100 million, primarily driven by organic search headwinds. Moving on to profitability, Q4 non-GAAP operating income, or NGOI, was $25 million, which was above our guidance range. The BEAT was primarily driven by revenue outperformance partially offset by margin pressure from declining organic search revenue. Q4 gap operating income was $19 million and brand marketing expense was $11 million during the fourth quarter, consistent with prior year levels. Full year 2025 NGOI was $96 million at an 11% margin compared to 2024 NGOI of $48 million at a 7% margin. NGOI margin expansion for the full year was driven by expense discipline partially offset by a 40% increase in workforce marketing investments from 2024 levels. Full year 2025 GAAP operating income was $65 million. Over the last four quarters we generated $118 million of adjusted free cash flow at end of the year with a cash balance of $98 million. Please refer to today's earnings press release for a full reconciliation of our GAAP to non-GAAP measures. In terms of capital allocation, during Q4, we completed $51 million of share repurchases, reflecting our confidence in our wallet's long-term prospects. Looking ahead, we will continue to focus on creating long-term shareholder value through disciplined capital allocation, including both opportunistic share repurchases and bolt-on acquisitions to accelerate our strategic initiatives. Before moving to guidance, I want to highlight a change we're making to our financial reporting beginning in Q1, 2026. Moving forward, we will simplify our revenue reporting from five categories to two, consumer and SMB. Consumer will combine what we currently report as insurance, credit cards loans and emerging verticals smb will continue to report it as it is today our consumers and smbs often engage with us across multiple product categories and we believe this presentation will better reflect that reality we have provided historical data restated under the new revenue categories to facilitate comparisons turning to guidance we expect to deliver first quarter revenue in the range of 224 to 232 million dollars up nine percent every year at the midpoint. In terms of profitability, we expect non-GAAP operating income in the range of 28 to 32 million dollars. Our first quarter guidance assumes similar trends to those we saw in the fourth quarter, namely revenue growth driven by an increase in performance marketing revenue outweighing organic revenue headwinds. We expect the margin compression caused by this ongoing revenue mix shift will be offset by year-over-year declines in brand marketing spend. Recall that in the first quarter of 2025, our brand spend included a Super Bowl ad, an investment we did not repeat in 2026. Looking at the full year, we're expecting non-GAAP operating income to land between 95 and 110 million dollars. We anticipate the first quarter and the third quarter will be our strongest quarters, just like we've seen in the past years. For the rest of the year, we're modeling somewhat softer results compared to our first quarter guidance. This factors in the ongoing headwinds we're facing in organic search, along with our expectation that the recent surge we've enjoyed in banking, both in the fourth quarter and so far in the first quarter, will start to cool off as short-term interest rates drop further. With that, we'll open up for Q&A.
At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while I compile the Q&A roster. Our first question comes from Michael Infante from Morgan Stanley. Please go ahead. Hey, guys. Thanks for taking my question.
I'd be curious on the LLM-based referral traffic in terms of what you guys can see, whether or not it's actually incremental to the business or if you're seeing some level of cannibalization relative to existing organic searches.
Yeah, I'll take that one. So, we're definitely seeing what we believe is incremental. People, I think, are searching more both on traditional search engines as well as LLMs. We see that in the industry data. And then in terms of what we're seeing on our side, the conversion rates on that LLM referral traffic are much higher and growing rapidly. So we do believe it's incremental.
Okay, that's helpful. And then is there a way to sort of help quantify how much of a drag the sort of persistence of these organic traffic headwinds are as it relates to the 26 profitability outlook. I'm just trying to understand, you know, how we should think about any potential, you know, continuation of this performance marketing intensity and if you view that as a form of medium-term headwind to margins. Thanks, guys.
Yeah, I'll take that. So I believe your question is, how should we think about SEO headwinds? Is that right?
That's fair.
Yeah. So, just, first of all, we're not solving for a margin percentage or focused on adding NGOI dollars, as we discussed. So, given the mixed set changes in performance marketing and organic revenue tends to be not as correlated to NGOI and free cash flow. And focusing on margin percentage targets would be limiting for our flexibility as we to make the right economic decisions for our shareholders and so what it is true that what you have seen is correct where we are experiencing a decline in organic revenue but we have been at least from a revenue perspective more than offsetting that with our performance marketing revenue and and in order to uh and what i would guide to is i think you could really take a look at our performance marketing spend trend over the last couple of years. I think they'll give you a pretty good sense of how to think about our revenue growth from a performance marketing standpoint in the outer years. But at the moment, we're not guiding specifically to revenue channels.
That's helpful. Thanks. Thank you. Our next question comes from Jed Kelly from Oppenheimer. Please go ahead.
Hey, great. Thanks for taking my question. Just given the current landscape, you know, you've got a strong brand and broad distribution with a lot of your financial service partners. You know, how can you, can you give us an update just on how you're thinking about vertical integration and how that strategy is going to create a more stickier relationship with the consumer? Thank you.
Yeah, it's a good question. You know, typically, we're pairing, like you said, our brand and reach with better consumer experiences, stickier consumer experiences. And yeah, we're pretty happy with the way that's playing out. You know, typically, you go from a transactional relationship into a relationship with better unit economics and a lot more, a lot closer relationship in terms of understanding what the customer needs so we continue to see opportunities there uh we are quite often the preferred acquirer when we get into corp dev conversations so we continue to look forward to just being being prudent but opportunistic on vertical integration and my my guess would be um you know a lot of these large llms similar to like google and search aren't going to go out and and
create a ton of relationships, right, direct relationships with banks and financial services partners. So shouldn't you as an aggregator or marketplace, sorry, to be, isn't there a way to be positioned well? And have you thought about, you know, data sharing and other stuff with some of these emerging LLMs? Thanks.
Yeah, it's a good question. I mean, I think if you think about the scenario where you're trying to do some form of agentic shopping or lms are trying to get more integrated uh there's kind of two obstacles you really need to think about so the first is uh regulatory for example you can't get an insurance quote from someone without an insurance license and so if you look across for example credit insurance mortgages and investing they require licensing institutions need deterministic and compliant outputs, not probabilistic answers. So that infrastructure isn't optional for any intermediary, whether it's us or some kind of agentic solution. And second, the financial institutions need to buy in and participate. So for example, an insurance company can easily refuse to quote an AI agent that is shopping around by inserting a multi-factor authentication step, right? The two-sided marketplace is really only work if lenders and insurers want to participate. They bear real costs to quote and service demand, and if agent-driven traffic hurts their margins or compliance posture, they can simply block it. So, I do think there will be changes in terms of how consumers engage, but in financial services, usefulness at scale requires both the licensing piece, that compliance infrastructure, and the institutional buy-in, not just, you know, So we think we're pretty well positioned to make do with all of that. Thank you.
Thank you. Our next question comes from Justin Patterson from KeyBank. Please go ahead.
Thanks, and good afternoon.
Could you talk a little bit more about how AI is being leveraged internally to improve just both products as well as just the underlying content?
Then I'll have to follow up after that.
Yeah, sure. Sure. I mean, we're leveraging AI pretty broadly. So I think, like you mentioned, there's two dimensions. There's the first, the internal operations. We're thinking hard about how we can use it to augment our existing workforce. And, you know, the born efficiency we can drive there, the more value we can deliver for consumers. So whether that's across, you know, coding or a back office or empowering our sales people to be more useful for our customers, that's a big initiative. And then in terms of the consumer-facing side, yeah, it definitely opens up more non-deterministic product flows. Like I mentioned earlier though, we really have to be careful about compliance there and auditability and, you know, but we do think we can provide a lot more service per, you know, agent or advisor, as well as some fully digital solutions in the future, and we're working hard on that.
Got it. Thanks. And then for the last question, you've had a really successful vertical integration strategy the past few years. You know, as you look at just your vertical coverage today, are there any other areas where you see opportunities to be go out in the market and just augment some of the services you offer today? Thank you.
Yeah, we do. There's a lot of different corners and a lot of different verticals. So, you know, we have a pretty decent effort in terms of mid-wallet insurance experts. So that's an area of focus for us. I think it can improve the user experience and improve the economics of the insurance marketplace as well. But there's others as well.
Thanks, Ken.
Thank you. as a reminder to ask a question please press star 1 1 and wait for your name to be announced one moment for our next question our next question comes from Justin Whitney from William Blair please go ahead hi it's a Ralph Shackard actually just quick question on traffic sources so you've been in the performance channel now for a while just kind of curious if you could take step back and and sort of frame you know what's working for you here you know What strategies and channels are really starting to, you know, contribute to overall platform? And then as you have worked with these channels for a while, can you help us think through the efficiencies you might be finding? Obviously, there's a different, you know, profitability profile between performance and organic. But just maybe speak to any efficiencies that you're finding and or working on.
Yeah, I'll take that. I mean, performance marketing has been working pretty well for us. we think our brand is a halo across all of our performance marketing efforts uh we think the uh the what we know about the consumer and our data infrastructure is a big part of enabling that as well um and then we also think our vertical by vertical expertise is also a factor that helps especially across channels like uh meta or uh you know crm in terms of driving improvements In terms of efficiencies, over time, we find that being a one-stop shop across many different products has advantages. So, we're thinking hard about how to use the various parts of our business to strengthen every other part of our business with internal cross-merchandising. And so, yeah, those things all start to work together well over time, and I think it's a big factor behind our success.
Okay, great. Thank you.
I am showing no more questions at this time. I would now like to turn it back over to management for close remarks.
All right. Thank you all for your questions today. As always, I'd like to give a huge thank you to the NERDS for their continued hard work over 2025. I'm looking forward to sharing our results in Q1 with you in a few months. Thank you.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.