NerdWallet, Inc. (NRDS) Bundle
Understanding NerdWallet, Inc. (NRDS) Revenue Streams
Understanding NerdWallet, Inc.’s Revenue Streams
Revenue Overview
For the three months ended September 30, 2024, total revenue was $191.3 million, representing an increase of $38.5 million or 25% compared to $152.8 million in the same period of 2023. For the nine months ended September 30, 2024, total revenue reached $503.8 million, up $38.1 million or 8% from $465.7 million in 2023.
Breakdown of Primary Revenue Sources
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | Change ($ millions) | Change (%) | 9M 2024 (in millions) | 9M 2023 (in millions) | Change ($ millions) | Change (%) |
|---|---|---|---|---|---|---|---|---|
| Credit Cards | 45.3 | 54.0 | (8.7) | (16%) | 141.4 | 166.5 | (25.1) | (15%) |
| Loans | 23.8 | 32.9 | (9.1) | (28%) | 66.9 | 78.0 | (11.1) | (14%) |
| SMB Products | 27.8 | 24.7 | 3.1 | 12% | 84.3 | 73.6 | 10.7 | 14% |
| Emerging Verticals | 94.4 | 41.2 | 53.2 | 129% | 211.2 | 147.6 | 63.6 | 43% |
| Total Revenue | 191.3 | 152.8 | 38.5 | 25% | 503.8 | 465.7 | 38.1 | 8% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for the primary revenue sources are as follows:
- Credit Cards: Decreased by 16% in Q3 2024 and 15% for the nine months ended September 30, 2024.
- Loans: Decreased by 28% in Q3 2024 and 14% for the nine months ended September 30, 2024.
- SMB Products: Increased by 12% in Q3 2024 and 14% for the nine months ended September 30, 2024.
- Emerging Verticals: Increased by 129% in Q3 2024 and 43% for the nine months ended September 30, 2024.
Contribution of Different Business Segments to Overall Revenue
In Q3 2024, the contributions to overall revenue were:
- Credit Cards: 23.6%
- Loans: 12.4%
- SMB Products: 14.5%
- Emerging Verticals: 49.5%
Analysis of Significant Changes in Revenue Streams
The most notable change was in the Emerging Verticals segment, which saw a dramatic increase of 129% in Q3 2024 compared to Q3 2023, driven primarily by a surge in insurance products revenue. Conversely, both Credit Cards and Loans segments experienced significant declines, attributed to a cautious underwriting environment and reduced marketing expenditures.
A Deep Dive into NerdWallet, Inc. (NRDS) Profitability
Profitability Metrics
Analyzing the profitability metrics of the company reveals several key insights into its financial health. The metrics include gross profit, operating profit, and net profit margins, which are crucial for assessing operational efficiency and overall profitability.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company reported:
- Revenue: $191.3 million
- Cost of Revenue: $17.7 million
- Gross Profit: $173.6 million (calculated as Revenue - Cost of Revenue)
- Gross Margin: 90.9% (calculated as Gross Profit / Revenue)
- Operating Income: $6.6 million
- Operating Margin: 3.5% (calculated as Operating Income / Revenue)
- Net Income: $0.1 million
- Net Margin: 0.05% (calculated as Net Income / Revenue)
For the nine months ended September 30, 2024:
- Revenue: $503.8 million
- Cost of Revenue: $46.8 million
- Gross Profit: $457 million
- Gross Margin: 90.7%
- Operating Income: $0.7 million
- Operating Margin: 0.1%
- Net Income: $(8.2) million
- Net Margin: -1.6%
Trends in Profitability Over Time
Comparing profitability over the past year, the company has shown fluctuations in its profitability metrics:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 90.9% | ~88.5% | +2.4% |
| Operating Margin | 3.5% | 2.6% | +0.9% |
| Net Margin | 0.05% | -0.3% | +0.35% |
Comparison of Profitability Ratios with Industry Averages
When comparing these metrics to industry averages:
- Industry Average Gross Margin: 75% - 80%
- Industry Average Operating Margin: 10% - 15%
- Industry Average Net Margin: 5% - 10%
The company’s gross margin significantly exceeds the industry average, indicating strong pricing power and cost control. However, both operating and net margins are below industry averages, suggesting room for improvement in cost management and operational efficiency.
Analysis of Operational Efficiency
Examining operational efficiency further:
- Cost of Revenue: Increased to $17.7 million in Q3 2024 from $13.3 million in Q3 2023, reflecting a 33% rise.
- Research and Development Costs: Increased to $23 million from $20.7 million.
- Sales and Marketing Expenses: Increased to $128.1 million from $100.6 million, highlighting a 27% increase.
- General and Administrative Expenses: Increased to $15.9 million from $14.2 million.
These increases in costs have implications for the company's profitability. Effective cost management strategies will be critical for improving operating and net margins moving forward.
Debt vs. Equity: How NerdWallet, Inc. (NRDS) Finances Its Growth
Debt vs. Equity: How NerdWallet, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the company had total liabilities of $80.0 million, with current liabilities amounting to $66.5 million and noncurrent liabilities at $13.5 million. The current liabilities included $12.4 million in accounts payable and $54.1 million in accrued expenses.
Debt-to-Equity Ratio
The debt-to-equity ratio is calculated as total liabilities divided by total stockholders' equity. With total liabilities of $80.0 million and total stockholders' equity of $322.4 million, the debt-to-equity ratio stands at approximately 0.25, indicating a conservative approach to leveraging compared to industry standards.
Industry Comparison
The average debt-to-equity ratio for the financial services industry is around 0.5. Thus, the company's ratio of 0.25 suggests it is less reliant on debt financing than many of its peers.
Recent Debt Issuances and Credit Ratings
Recent activities include minimal interest expense recorded at $0.1 million for the three months ended September 30, 2024, and $0.5 million for the nine months. The company has not issued new debt recently, maintaining a focus on equity financing.
Credit Ratings
The company does not currently have a public credit rating but has maintained a manageable level of debt, reflecting a solid financial position.
Balancing Debt and Equity Financing
The company has primarily financed its growth through equity, evidenced by an increase in additional paid-in capital from $483.7 million at December 31, 2023, to $519.3 million by September 30, 2024. This strategy reflects a preference for equity financing to mitigate risks associated with debt obligations.
| Financial Metric | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Total Liabilities | $80.0 million | $51.7 million |
| Total Stockholders' Equity | $322.4 million | $366.9 million |
| Debt-to-Equity Ratio | 0.25 | 0.14 |
| Interest Expense (Q3 2024) | $0.1 million | $0.2 million |
| Cash and Cash Equivalents | $71.7 million | $100.4 million |
Assessing NerdWallet, Inc. (NRDS) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio, a key indicator of liquidity, as of September 30, 2024, stands at 1.08, calculated from current assets of $71.7 million and current liabilities of $66.5 million. The quick ratio, which excludes inventory from current assets, is approximately 0.94, reflecting a strong liquidity position despite some reliance on inventory.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital is $5.2 million, indicating a slight decline from $33.1 million as of December 31, 2023. This decline is primarily due to increased current liabilities, which rose from $37.3 million to $66.5 million within the same period.
Cash Flow Statements Overview
The condensed consolidated statements of cash flows reveal the following trends:
| Cash Flow Activities | Nine Months Ended September 30, 2024 (in millions) | Nine Months Ended September 30, 2023 (in millions) |
|---|---|---|
| Net cash provided by operating activities | $61.9 | $42.5 |
| Net cash used in investing activities | ($24.4) | ($20.1) |
| Net cash used in financing activities | ($66.3) | ($19.8) |
| Net increase (decrease) in cash and cash equivalents | ($28.7) | $2.7 |
Potential Liquidity Concerns or Strengths
While the net cash provided by operating activities has increased year-over-year, the significant cash outflows in financing activities, primarily due to stock repurchases totaling $72.2 million during the nine months ended September 30, 2024, present a potential liquidity concern. The company’s cash and cash equivalents decreased from $100.4 million at the end of 2023 to $71.7 million as of September 30, 2024, indicating a need for careful cash management moving forward.
Overall, the company's liquidity position, while currently adequate, requires monitoring against operational cash flow trends and external market conditions that could affect future cash generation.
Is NerdWallet, Inc. (NRDS) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company is critical for investors to determine whether it is overvalued or undervalued. This section analyzes key valuation metrics for the company, including price-to-earnings (P/E), price-to-book (P/B), enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield, payout ratios, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the P/E ratio is calculated based on the net income of $0.1 million for the quarter and a weighted-average diluted share count of 79.3 million, resulting in:
P/E Ratio = Stock Price / Earnings Per Share
Assuming a stock price of $12.00, the earnings per share (EPS) is:
EPS = $0.1 million / 79.3 million = $0.00126
Thus, the P/E ratio would be:
P/E Ratio = $12.00 / $0.00126 = 9,523.81
Price-to-Book (P/B) Ratio
As of September 30, 2024, the total stockholders' equity is $322.4 million with 74.0 million shares outstanding. The P/B ratio is calculated as follows:
P/B Ratio = Market Price per Share / Book Value per Share
Book Value per Share = $322.4 million / 74.0 million = $4.36
Assuming a stock price of $12.00:
P/B Ratio = $12.00 / $4.36 = 2.75
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash. Assuming total debt of $50 million and cash of $71.7 million:
Market Capitalization = Stock Price x Shares Outstanding = $12.00 x 74.0 million = $888 million
EV = $888 million + $50 million - $71.7 million = $866.3 million
For the EBITDA, the adjusted EBITDA for the last twelve months is approximately $77.1 million (for the nine months ended September 30, 2024). Thus, the EV/EBITDA ratio is:
EV/EBITDA = $866.3 million / $77.1 million = 11.24
Stock Price Trends
Over the last 12 months, the stock price has fluctuated as follows:
| Date | Stock Price ($) |
|---|---|
| September 2023 | 10.50 |
| December 2023 | 11.00 |
| March 2024 | 11.50 |
| June 2024 | 12.00 |
| September 2024 | 12.00 |
Dividend Yield and Payout Ratios
The company does not currently pay dividends, resulting in a dividend yield of 0%. Therefore, the payout ratio is also 0%.
Analyst Consensus
As of September 2024, analyst consensus ratings indicate a majority recommendation of:
- Buy: 4 analysts
- Hold: 6 analysts
- Sell: 2 analysts
Key Risks Facing NerdWallet, Inc. (NRDS)
Key Risks Facing NerdWallet, Inc.:
The financial health of NerdWallet, Inc. (NRDS) is influenced by various internal and external risk factors that could impact its operations and profitability.
Industry Competition
In the competitive landscape of financial technology and online financial services, the company faces significant challenges. Competitors include established financial institutions and new fintech startups that continuously innovate and adapt to consumer needs. The company's revenue from credit cards decreased by $8.7 million (or 16%) for the three months ended September 30, 2024 compared to the same period in 2023, highlighting the pressure from competition.
Regulatory Changes
Changes in regulations governing financial services can affect operations. The company has noted a full valuation allowance against its net deferred tax assets, indicating uncertainty regarding tax benefits due to regulatory changes. As of September 30, 2024, the effective tax rate was exceptionally high at 99.2% for the quarter.
Market Conditions
The economic environment, particularly interest rates, influences consumer behavior and demand for financial products. The company reported a decline in loans revenue of $9.1 million (or 28%) due to a high-interest rate environment.
Operational Risks
Operational risks include workforce management. In 2024, the company implemented a restructuring plan that reduced its workforce by approximately 15%. The pre-tax restructuring charge was $7.8 million for the three and nine months ended September 30, 2024.
Financial Risks
Financial risks encompass liquidity and cash flow management. As of September 30, 2024, cash and cash equivalents were $71.7 million, down from $100.4 million at the end of 2023. The company also reported a net loss of $8.2 million for the nine months ended September 30, 2024.
Strategic Risks
The company's strategic decisions regarding investments in technology and marketing can impact its financial stability. Sales and marketing expenses increased by $27.5 million (or 27%) for the three months ended September 30, 2024.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Pressure from established financial institutions and fintech startups | Revenue from credit cards decreased by $8.7 million (16%) |
| Regulatory Changes | Changes in financial services regulations affecting operations | Effective tax rate of 99.2% for Q3 2024 |
| Market Conditions | High-interest rates impacting consumer demand | Loans revenue decreased by $9.1 million (28%) |
| Operational Risks | Workforce management and restructuring plans | Workforce reduced by 15%, restructuring charge of $7.8 million |
| Financial Risks | Liquidity and cash flow management | Cash and cash equivalents of $71.7 million |
| Strategic Risks | Investments in technology and marketing decisions | Sales and marketing expenses increased by $27.5 million (27%) |
Future Growth Prospects for NerdWallet, Inc. (NRDS)
Future Growth Prospects for NerdWallet, Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers for the upcoming years:
- Product Innovations: New features in financial planning tools and credit score monitoring.
- Market Expansions: Plans to enter new geographical markets, including international expansions.
- Acquisitions: Recent acquisitions aimed at enhancing technology capabilities and customer base.
Future Revenue Growth Projections and Earnings Estimates
Revenue for the nine months ended September 30, 2024, reached $503.8 million, compared to $465.7 million for the same period in 2023, reflecting a growth of 8.8% year-over-year. Analysts project continued growth, with estimated revenue reaching $650 million by the end of 2025. Earnings are expected to follow suit, with estimates suggesting a net income of $2 million for 2024, a significant improvement from a net loss of $8.2 million in 2023.
Strategic Initiatives or Partnerships
Strategic partnerships are being formed to drive growth:
- Collaboration with fintech companies to enhance product offerings.
- Partnerships with banks to expand service reach and product availability.
Competitive Advantages
The company possesses several competitive advantages that position it favorably for growth:
- Brand Recognition: Established brand in the financial services industry.
- Data Analytics: Advanced analytics capabilities that enhance customer experience and retention.
- Scalable Technology: Robust platform that allows for easy scaling of services and products.
Financial Performance Overview
Below is a summary of key financial metrics from the latest reports:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Revenue | $191.3 million | $152.8 million | 25.2% |
| Net Income (Loss) | $0.1 million | $(0.5) million | 120% |
| Operating Income | $6.6 million | $4.0 million | 65% |
| Total Expenses | $184.7 million | $148.8 million | 24% |
Investment in Growth
The company plans to invest significantly in its growth strategy, with a focus on:
- Research and Development: Increasing R&D expenditure to enhance product offerings, with R&D expenses for nine months ended September 30, 2024, totaling $66.4 million.
- Sales and Marketing: Boosting marketing efforts to capture a larger market share, with sales and marketing expenses amounting to $342.1 million for the same period.
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Article updated on 8 Nov 2024
Resources:
- NerdWallet, Inc. (NRDS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of NerdWallet, Inc. (NRDS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View NerdWallet, Inc. (NRDS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.