NerdWallet(US:NRDS)2023-10-25 16:00Part I: Financial Information Financial Statements The company reported a net loss of $0.5 million for Q3 2023, a decrease from a net income of $0.7 million in Q3 2022, with total assets slightly decreasing and total liabilities significantly decreasing due to contingent consideration payment, while cash and cash equivalents increased | Financial Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Balance Sheet (in millions) | | | | Cash and cash equivalents | $86.6 | $83.9 | | Total Assets | $420.8 | $425.7 | | Total Liabilities | $56.6 | $84.0 | | Total Stockholders' Equity | $364.2 | $341.7 | | Financial Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Income Statement (in millions) | | | | | | Revenue | $152.8 | $142.6 | $465.7 | $396.9 | | Income (Loss) From Operations | $4.0 | $(8.8) | $(1.0) | $(26.9) | | Net Income (Loss) | $(0.5) | $0.7 | $(9.5) | $(19.1) | | Diluted EPS | $(0.01) | $0.01 | $(0.12) | $(0.28) | - Net cash provided by operating activities for the nine months ended September 30, 2023, was $42.5 million, a significant increase from $4.9 million in the prior year period, driven by a lower net loss and favorable changes in non-cash charges and working capital22110 - Net cash used in financing activities was $19.8 million for the first nine months of 2023, compared to net cash provided of $60.3 million in the same period of 2022, primarily due to $70.0 million in proceeds from a line of credit in 2022 for the OTB acquisition and $12.1 million used for share repurchases in 202322112 Management's Discussion and Analysis (MD&A) Revenue grew 7% in Q3 2023 and 17% in the first nine months of 2023, primarily driven by strong performance in 'Other verticals,' especially banking, while credit card revenue saw a slight decline in Q3 due to cautious partner spending, and the company improved its operating income and significantly increased its Adjusted EBITDA to $26.7 million in Q3 2023 from $14.5 million in Q3 2022, maintaining a strong liquidity position - Average Monthly Unique Users (MUUs) grew to 24 million for Q3 2023, a 22% increase year-over-year, driven by strong engagement in travel, banking, and insurance, as well as the inclusion of the OTB acquisition66 | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue (in millions) | $152.8 | $142.6 | +7% | | Net Income (Loss) (in millions) | $(0.5) | $0.7 | - | | Adjusted EBITDA (in millions) | $26.7 | $14.5 | +84% | | Adjusted EBITDA Margin | 18% | 10% | +8 p.p. | - The company established a new $125 million senior secured revolving credit facility in September 2023, maturing in 2028, which replaces its previous facility, with no outstanding debt as of September 30, 202338105 Results of Operations For Q3 2023, revenue increased 7% to $152.8 million, driven by a 16% rise in both Loans and Other Verticals, which offset a 6% decline in Credit Cards, leading to an income from operations of $4.0 million, a significant turnaround from an $8.8 million loss in Q3 2022, while for the nine-month period, revenue grew 17% to $465.7 million, and the operating loss narrowed to $1.0 million from $26.9 million year-over-year | Revenue by Category (in millions) | Q3 2023 | Q3 2022 | % Change | YTD 2023 | YTD 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Credit cards | $54.0 | $57.4 | (6%) | $166.5 | $157.2 | 6% | | Loans | $32.9 | $28.4 | 16% | $78.0 | $86.7 | (10%) | | Other verticals | $65.9 | $56.8 | 16% | $221.2 | $153.0 | 45% | | Total revenue | $152.8 | $142.6 | 7% | $465.7 | $396.9 | 17% | - The 6% decrease in Q3 credit card revenue was attributed to reduced marketing spend by financial services partners amid cautious underwriting and balance sheet conservatism79 - The 16% increase in Q3 loans revenue was primarily due to a 51% increase in personal loans, reflecting optimization from the OTB acquisition, which offset a 33% decrease in mortgages revenue80 - Sales and marketing expenses decreased 2% in Q3 2023 due to an $8.6 million reduction in brand marketing, partially offset by a $5.6 million increase in performance marketing87 Non-GAAP Financial Measure: Adjusted EBITDA Adjusted EBITDA significantly increased to $26.7 million in Q3 2023 from $14.5 million in Q3 2022, and for the nine-month period, nearly doubled to $68.3 million from $36.1 million year-over-year, reflecting improved profitability and operational leverage with an expanded margin from 10% to 18% for the quarter and from 9% to 15% for the nine-month period | Reconciliation (in millions) | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $(0.5) | $0.7 | $(9.5) | $(19.1) | | Depreciation and amortization | $12.1 | $10.8 | $36.0 | $25.6 | | Stock-based compensation | $9.4 | $9.1 | $29.3 | $25.3 | | Income tax provision (benefit) | $5.2 | $(9.9) | $10.5 | $(8.5) | | Other adjustments | $(0.1) | $3.4 | $1.9 | $12.8 | | Adjusted EBITDA | $26.7 | $14.5 | $68.3 | $36.1 | - The increase in Adjusted EBITDA for the nine months ended September 30, 2023, was driven by a lower net loss and higher add-backs for depreciation & amortization ($10.4 million increase) and income taxes ($19.0 million increase), partially offset by a decrease in the add-back for the change in fair value of contingent consideration96 Liquidity and Capital Resources The company's principal sources of liquidity are cash from operations and its credit facility, with cash and cash equivalents at $86.6 million as of September 30, 2023, and it believes its current cash, future cash flow from operations, and access to its new $125 million credit facility are sufficient to meet its liquidity needs for at least the next twelve months, having repurchased $12.1 million of its Class A common stock during the first nine months of 2023 | Cash Flow Summary (in millions) | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42.5 | $4.9 | | Net cash used in investing activities | $(20.1) | $(94.3) | | Net cash provided by (used in) financing activities | $(19.8) | $60.3 | - On May 2, 2023, the Board authorized a $20 million share repurchase plan, under which the company repurchased 1.3 million shares for $12.1 million during the nine months ended September 30, 202346103 - The company paid $32.6 million during the first nine months of 2023 for the 2022 performance period related to the Fundera acquisition, consisting of $30.9 million of contingent consideration and the remainder as deferred compensation101 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks, primarily from fluctuations in interest rates and foreign currency exchange rates, with no material changes reported since the year-end 2022 report - The company's primary market risk exposures are related to interest rate and foreign currency exchange rate fluctuations115 - No material changes to market risk disclosures were reported for the nine months ended September 30, 2023116 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2023, with no material changes to the internal control over financial reporting identified during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023117 - There were no changes during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting118 Part II: Other Information Legal Proceedings The company is involved in various legal proceedings from time to time in the normal course of business, but management does not currently believe that the outcome of any pending litigation will have a material adverse effect on the company's financial condition or results of operations - The company is not currently a party to any litigation that it believes would have a material adverse effect on its business, operating results, or financial condition120 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022, and investors are advised to consider those risk factors - The report refers to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2022, and subsequent filings, indicating no new material risks have emerged121 Issuer Purchases of Equity Securities During the third quarter of 2023, the company repurchased a total of 1.209 million shares of its Class A common stock for approximately $10.8 million under its publicly announced repurchase plan, and following the quarter, on October 26, 2023, the Board authorized a new repurchase plan for up to $30 million of Class A common stock | Period (2023) | Total Shares Purchased (thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | July | 60 | $8.88 | | August | 299 | $8.94 | | September | 850 | $8.96 | | Total Q3 | 1,209 | - | - On May 2, 2023, the company announced a $20 million share repurchase plan, with approximately $7.9 million remaining available for repurchase as of the end of September 2023125 - Subsequent to the quarter end, on October 26, 2023, the Board of Directors approved a new share repurchase authorization for up to $30 million of the company's Class A common stock59125 Other Information On September 14, 2023, Kevin Yuann, the Chief Business Officer, terminated a pre-existing Rule 10b5-1 trading plan and adopted a new one, effective from December 15, 2023, to December 31, 2024, providing for the sale of up to approximately 390,755 shares of Class A common stock - Chief Business Officer Kevin Yuann terminated a trading plan adopted in December 2022 and adopted a new Rule 10b5-1 trading plan on September 14, 2023127128 - The new trading plan covers the potential sale of up to approximately 390,755 shares of Class A common stock from December 2023 through December 2024128