NerdWallet, Inc. (NASDAQ:NRDS) Q4 2022 Earnings Call Transcript

NerdWallet, Inc. (NASDAQ:NRDS) Q4 2022 Earnings Call Transcript February 14, 2023

Operator: Good day and thank you for standing by. Welcome to the NerdWallet, Inc. Q4 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker 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 Caitlin MacNamee, Head of IR. Please go ahead.

Caitlin MacNamee: Thank you, operator and welcome to the NerdWallet Q4 2022 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. With that, I will now turn it over to Tim Chen, our Co-Founder and CEO of NerdWallet.

Tim?

Tim Chen: Thanks, Caitlin. Here at NerdWallet, our 2023 plans are well underway. We started the year on the right foot, ready to capitalize on new opportunities, grow our business, and help more people in more ways, and this is thanks to the hard work Nerd’s put in throughout the last year. In that spirit, today, I am proud to share a strong finish to 2022 as we exceeded our revenue and adjusted EBITDA guidance in Q4. We achieved this in the face of continued tightening in underwriting across lower credit bands during the quarter. Some of our resilience is driven by the fact that our revenue skews towards consumers with prime credit, but it is also a testament to our investment in building a brand that is trusted across a diverse set of consumer and SMB verticals.

Our brand’s appeal across multiple verticals has an important follow-on benefit. It becomes easy for us to land-and-expand into more verticals and many of those verticals are inversely correlated to each other, allowing us to grow even during challenging environments. For example, the rising rate environment has created a tailwind in our banking vertical offsetting headwinds in mortgage refinancing. Whereas during the COVID-19 pandemic, we saw a massive increase in unemployment over a very short timeframe, creating headwinds in credit cards, but driving tailwinds in verticals that benefited from fiscal and monetary stimulus. These results are great in and of themselves, but I also value them because they reflect a concerted effort across NerdWallet to execute on our strategy.

With progress every quarter in our land-and-expand vertical integration and registration and engagement growth pillars, we ended 2022 several steps further in our journey towards building a trusted financial ecosystem or a single platform where consumers and SMBs can learn, shop, and manage their money. In Q4, we continued to benefit from our diversified business as well as our investments in building a trusted brand. We now reach consumers not only in the US but also the UK, Canada, and as of early Q4, Australia. While we are still early in our land-and-expand efforts in Australia, we have confidence in our playbook. Our sustained investments in established verticals have also continued to pay off. After years of a low interest rate environment, our banking vertical has surged with the rate hikes in Q3 and Q4, delivering another quarter of triple-digit year-over-year growth in Q4 and as we help consumers shop for high-yield savings accounts and more.

While the insurance vertical has faced on certain industry-specific headwinds over the past several quarters, the team has been hard at work preparing for a return to a more normalized environment building and optimizing a new in-house auto insurance marketplace. This gives NerdWallet more control over these consumer experiences. As a result of this work and the normalizing environment, insurance drove 43% year-over-year growth in Q4. The team plans to extend this success to our life and home insurance marketplaces. Similarly, we feel confident in our ongoing vertical integration initiatives. Our SMB vertical continued to outperform, with 94% year-over-year growth as the team invested in growing their organic and paid reach, while continuing to help our installed base of SMBs meet their financial needs.

We have primarily integrated On the Barrelhead, or OTB with our loans verticals. We are facing headwinds across loans verticals, including our organic and acquired business, broadly in line with the industry as interest rates rise and lenders continue to tighten underwriting in anticipation of a slowdown. As with our insurance vertical, the loans team remains committed to investing in customer experiences in advance of the macro recovery. In Q4, we saw positive signals from the continued vertical integration of OTB’s loan matching technology and the improvements have helped us double our match rate when users are directed through the updated personal loans flow. These improvements position us well for an eventual macro recovery, and we look forward to the continued enhancements that further integration will bring in 2023.

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We also continue to make strides in our registration and engagement efforts that will help power our trusted financial ecosystem by enabling us to drive repeat visits, collect data, and nudge our users with relevant personalized insights. Through content and personalization optimizations, we drove improvements in click-through rates for NerdWallet e-mail campaigns. Within our registered user dashboard, we also launched courses, which provide registered users with curated content on financial topics they’re interested in. These have also seen strong engagement and the team plans to expand the catalog of courses to provide our registered users with relevant trusted guidance. Our consumer trust competitive advantage underpins all of our achievements this past quarter.

Consumers and SMBs increasingly know, trust and prefer NerdWallet. We have invested thoughtfully in building this trust, particularly through our brand marketing. Our prior brand campaigns continued to deliver durable results. In Q4, a quarter where we typically pulled back on brand campaigns, we achieved our highest ever brand awareness measures, and we are building on this with our newest national brand campaign, which launched in late December as well as new tactics, including sports sponsorships. As discussed last quarter, we plan to continue with our recent cadence of running large-scale brand campaigns during the first three quarters of the year. And while we will increase our investment in brand, given the results we’ve seen so far, you should expect the growth in that investment will be less than in 2022.

Financial institutions also continue to recognize the value we provide consumers, and they make decisions accordingly. In Q4, our content team revised our star rating for a financial institution when they changed their deposit account offering. Knowing the weight our ratings have with consumers, the institution ultimately reversed course and will continue to offer a competitive product for all consumers. These results speak not only to the tremendous value we provide consumers and SMBs, but also to the strength of the business we’ve built, and I look forward to sharing more in the months to come. In the meantime, I’ll pass it to Lauren St. Clair, NerdWallet’s CFO, to share more about our financial performance in Q4.

Lauren StClair: Thanks Tim. We’re proud of the execution we delivered throughout this past year exceeding our financial commitments in every quarter and expanding our adjusted EBITDA as a result of our incremental margins and maturing cost base. We delivered Q4 revenue of $142 million, up 43% year-over-year and above the high end of our guidance. We finished the year with $539 million in revenue, a 42% increase versus 2021. While the focus of today’s commentary will be on our fourth quarter performance, we are encouraged by the full year growth we’ve been able to achieve highlighting years’ long success in areas such as credit cards and SMB as well as strength in our banking vertical, offsetting the pressure we saw in mortgages.

We know that certain macroeconomic factors will impact individual areas of our business from time-to-time, but we remain confident that our level of diversification and our continued ability to expand on that in the future will provide growth tailwinds for us for years to come. Now, let’s take a deeper look at the revenue performance during the quarter within each category. Credit cards delivered Q4 revenue of $53 million, growing 52% year-over-year. Our credit cards vertical has shown resilience and sustainable growth in Q4 and also reflects what we believe is a normalized seasonal cadence. While the market still feels in good shape, we continue to monitor consumer health. Our focus on providing the guidance and products that are most important to our site and are keeping our eye on key metrics, such as unemployment, to help inform where the industry might trend in the near-term.

For the full year, credit cards delivered $210 million of revenue, growing 70% year-over-year. Loans generated Q4 revenue of $22 million, declining 24% year-over-year. Our mortgage vertical saw another quarter of increasing pressure from the heightened interest rate environment, but offsetting that decline was growth in personal loans due to the addition of our recent acquisition of OTB. As Tim mentioned, we continue to make investments in key areas of our loans verticals and that may not immediately drive outsized revenue gains in the current landscape, but will set us up to take market share when the macro environment recovers. For the full year, loans delivered $109 million of revenue, declining 14% year-over-year. Finally, other verticals finished Q4 with revenue of $66 million, growing 90% year-over-year.

Our SMB vertical grew 94% year-over-year and we are proud of the team’s ability to showcase that our vertical integration strategy has immense opportunity. Banking grew over 280% year-over-year as we saw an acceleration in consumer interest, driven by the rising interest rate environment and were able to effectively capture high-intent consumers. In fact, the growth we saw in banking was nearly twice the corresponding decline in mortgages. And after a year of decline due to a pressured macro environment, our insurance vertical delivered revenue growth during Q4 due to a record quarter in auto insurance following the launch of our revamped marketplace and industry recovery. For the full year, other verticals delivered $219 million of revenue, growing 70% year-over-year.

Moving on to investments and profitability. During Q4, we earned $31 million of adjusted EBITDA at a 22%margin. For the full year, we earned $67.1 million of adjusted EBITDA at a 12% margin, a five-point increase versus 2021 as we were able to deliver leverage across all areas of our business. In the fourth quarter, we had GAAP net income of $8.9 million, which includes $0.6 million of the final contingent consideration expenses related to our 2020 acquisitions. The associated cash outflows are expected to happen in the second quarter of 2023. 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 Nerds for their money questions. We provided trustworthy guidance to 20 million average monthly unique users in Q4, up 9% year-over-year.

Growth was a result of the impact of our acquisition of OTB, combined with strength in many areas across NerdWallet such as banking and travel. We’re still seeing the same headwinds as earlier in the year, with pressure from mortgages and investing given the current macro environment. Our outlook includes investments in top of funnel through brand and performance marketing to drive increased user growth, but as we double down on engaging acquired users, we expect that revenue growth will continue to outpace MUU growth. On to our financial outlook. As we look forward to 2023, we know that the uncertainty we weathered last year remains. We plan to continue providing quarterly guidance and will also provide qualitative commentary for full year expectations.

For the first quarter, we expect to deliver revenue in the range of $165 million to $170 million, which at the midpoint represents 30% growth year-over-year. We expect to see continued growth contribution from credit cards, insurance and banking during Q1. For the full year, despite the uncertain macro environment, we expect to deliver strong revenue growth, though not to the levels of what we saw in2022. Let me provide some more context. First, the credit cards vertical is still experiencing a healthy environment, but growth rates will begin to decelerate versus 2022 levels as we are no longer lapping the easier comps related to COVID recovery. Second, we will face headwinds in loans during Q1 as we lapped the toughest comps from last year.

And while we don’t expect macro factors to materially change in the near term, the mortgage comps will be a bit easier as we move throughout 2023. And third, as our SMB vertical scales, we expect that growth rates will drop below triple-digits this year, so we will continue to expand our current offerings and deliver sustainable growth. Moving to profitability. We expect Q1 adjusted EBITDA in the range of $17 million to $19 million or approximately 11% of revenue at the midpoint, a four-point increase versus prior year. Consistent with what we’ve mentioned previously, we anticipate that the cadence of our brand spend will be similar to 2022, where the majority of spend will occur during the first three quarters with minimal brand spend during the fourth.

As a result, we expect relative adjusted EBITDA margins to be roughly similar during the first three quarters compared to a higher margin in Q4, all the while increasing our annual margin for yet another year. We plan to deliver increasing margins as a result of slowing growth in our cost base. We expect 2023 to be a continuation of our journey to get back to and eventually exceed 2019 adjusted EBITDA margin levels while strategically investing in our long-term vision. We entered this year clear eyed and pragmatic on the current macroeconomic environment, knowing we have the responsibility to consumers to help them navigate their financial questions, all while being optimistic about our opportunities to deliver profitable revenue growth. With that, we’re ready for questions.

Operator?

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Q&A Session

Operator: Thank you. And I show our first question comes from the line of Ross Sandler from Barclays. Please go ahead.

Ross Sandler: Hey guys. Congrats on a good quarter. Can I ask two questions? First is on just overall engagement of registered users compared to regular users. How is that trending? And is the 38% growth in registered users a decent kind of proxy for or a leading indicator for what you tend to see on the revenue side? It kind of seems like those two are converging. And then similarly on that, why do you think your growth rates overall are diverging so much from Credit Karma of late? What do you think the biggest factors are that are allowing you guys to outperform them so significantly? So, that would be the first question. The second question is just the obligatory performance marketing. That was up another triple-digits in the fourth quarter running ahead of revenue. How do you think about that as we move through 2023? Thanks a lot.

Tim Chen: Yes, I’ll take the first one. Throughout this past year, we’ve been prioritizing user registration as a focus area, and that’s really helped us to drive growth there, ending the year with 14 million cumulative registered users, which is up 39% year-over-year. We’re also starting to see the benefits of the OTB integration and driving even more registrations. So, what we’re seeing is that, unsurprisingly, personalization drives engagement and the key to driving personalization is first-party data. And so that’s all about registration. And so from a product development perspective, we’re improving registration on ramps throughout the site, improving on those personalized nudges, and we’ve launched things like courses during Q4, which provides registered users with curated content on financial topics they’re interested in.

So, yes, I think the growth in registered users is going to continue and we really think about that in relation to our registered user revenue growth, which was up 80% year-over-year in 2022. There can be some puts and takes there, but we expect that to continue outpacing registered user growth. In terms of the divergence with Credit Karma or other people in the industry, we really have two factors going on. One is that our revenue mix skews upmarket relative to some others. We’re more prime and super prime. And then I guess the second factor is that we’re pretty diversified across a wide variety of verticals. And some of them are inversely correlated to the credit cycle like our banking business.

Lauren StClair: And I’ll take the second part of that question regarding performance marketing. So, just taking a step back and as a reminder, 70% of our traffic comes through organic channels, which over time has allowed us to diversify into other channels like performance marketing and brand. We’ve always thought about performance marketing as a variable expense that we can dial up or down depending on the returns. And when we see better conversion or pricing, we’re able to lean in with more efficient spend. I think more importantly, we view performance marketing as a means to an end as part of our registration and engagement initiatives. And as we create more seamless registration experiences, starting to connect more first-party data, we’re able to proactively nudge our users to make smart money moves.

In Q4, we were able to continue that recent pace of investing and growing users through these channels. And where we see similar opportunities during 2023, you should expect us to continue to lean in.

Operator: Thank you. And I show our next question comes from the line of Justin Patterson from KeyBanc. Please go ahead.

Justin Patterson: Great. Thanks. Two if I can. Just building off of personalization, I know with the OTB acquisition, one of the key levers there was to improve personalization across the rest of the portfolio. I just would love to hear an update on just how that integration is proceeding? And whether we’ve seen that conversion benefit take place yet? And then secondarily, there’s been a lot of talk about chat out there. So, I’m curious whether trust the bot becomes a potential threat or even opportunity for NerdWallet over time? thank you.

Tim Chen: Yes, I’ll take that one. So, as a reminder, our general M&A thesis is that we can pair our top-of-funnel brand and reach with these best-in-class shopping experiences like OTB. So, the key components of the acquisition thesis look very promising. So, most notably, we’re seeing conversion from integrating their technology where, as I mentioned, we’re seeing double the match rate now for consumers coming through our improved personal loans flow. And we’re serving a larger audience, and we’re registering a lot more people than we were previously. That gives us a lot more to work with in terms of those personalized nudges going forward. That said, yes, the macro for loans is more challenging than we anticipated going into the second half of 2022.

So, we’re still working through certain components of integration as well. So, that’s kind of a headwind. But taking all that into consideration, super positive about what OTB will contribute to NerdWallet in the long-term, especially as we go into more of a recovery. Yes. In terms of the chat AI question, we see both risks and opportunities for NerdWallet. There are some obvious benefits in terms of using chat AI as a productivity tool for teams like content and engineering. I think more relevant to NerdWallet is how chat AI affects the future of search engines. And we really think about that by stepping back and thinking about what consumers are trying to do. So, today, you might go to a search engine to find a quick factual answer or you might also be looking for a more nuanced answer.

So, for quick answers, like what’s the temperature outside, the search engine gives you an answer immediately. For those more nuanced answers, there’s often subjectivity involved and more data needed. And that’s why you might seek out a brand you know and trust first and then turn to a search engine if you don’t have a go to. And then you got to really think about the dynamic of Internet marketplaces too. So, for example, if you’re looking for a loan and the bank increases rates on Tuesday at 9:00 A.M. that needs to be factored into the marketplace instantly. And that’s not something a machine learning model it can do in real time, right? So, now if we look forward to the futuristic part of this, I think about chat AI as being able to extend what search can do.

So, for example, it’s not a great website for wrap songs about 529 plans because nobody has a commercial incentive to create that web page because nobody searches for that. So, these bespoke and frequently asked questions are where you’ll get a much better result from chat AI than a search engine, especially if there’s a good training set to work off of. And so as we think about the opportunity for NerdWallet. Today, you need to have hundreds of thousands of dollars in investable assets to justify a financial adviser’s time one-on-one, it’s expensive. And so a chat AI trained on NerdWallet’s first-party data or marketplace data or house views, it can have an opinion, and it can provide a response at a much lower cost than a human and this lower cost can drive democratization of very personalized and bespoke money question help, right?

So, all-in-all, I’d say it’s very early days, and we see this as an opportunity to serve our audience in new ways.

Justin Patterson: Great. Thank you.

Operator: Thank you. And I show our next question comes from the line of Youssef Squali from Truist. Please go ahead.

Youssef Squali: Great. Thank you very much. A couple of questions here. First, can you maybe just elaborate a little more on what you’re seeing on the insurance business. I think you’ve actually turned the corner there. I think it was up 43% year-on-year in Q4. You talked about launching a new house marketplace. Can you expand on kind of your experience there so far? And kind of within insurance, what are kind of the bright spots that you’ve seen, is it kind of across the board or just one or two products. And then on the credit card revenues were down sequentially. Can you maybe speak to the level of credit tightening out there? And maybe just how much of that may be seasonal versus just softening demand? Thank you.

Tim Chen: Yes. Okay. I’ll take the first one. Yes. So, we spent the past year or so facing all the same headwinds in insurance that you’ve heard about from others, inflation and supply chain issues, making it more expensive to fix a car or replace or fix a house, right? But during that time, we launched this enhanced marketplace experience. And we’re going to soon follow-up with marketplaces in home and life insurance. That was all about improving the user experience, giving more personalized responses and increasing conversion rates. So, that was successful, and that drove the success here. So, really excited about the investments we made during the downturn and how that will help us as things recover — things are looking strong going into 2023.

Lauren StClair: Yes. Maybe I’ll comment on sort of the credit card performance quarter-over-quarter. And then Tim, if you want to maybe add more color on just the environment right now and what you’re seeing for credit cards overall. We’ve talked about credit cards performing incredibly well over the course of 2022. And we talked about two things. One was the pricing recovery from the lows of COVID. And the second piece that we’ve talked about has been conversion improvements that we’ve made within our product. And so the expectation around credit cards is that, that pricing improvement and the growth that we are getting from the pricing improvement is going to level off as we move into this year and a little bit as we talked about in of 2022. But again, we still expect lots of headroom there, lots of opportunity, and we will continue with those product improvements.

Tim Chen: In terms of seasonality, yes, Q4 traditionally is seasonally weak in credit cards, so no surprises there. And yes, I’d say more broadly, it’s a healthy environment out there for prime and up, and there’s a pretty broad expectation from loan officers about unemployment increasing 100 basis points throughout the course of 2023 as kind of a low case scenario. And so assuming we don’t go too far beyond those levels, we’re expecting to be kind of in line with our expectations.

Youssef Squali: Okay, great. Thanks and contrast.

Operator: Thank you. And I show our next question comes from the line of James Faucette from Morgan Stanley. Please go ahead.

Michael Infante: Hi Tim and Lauren, it’s Michael Infante I’m for James. Congrats on the quarter. Lauren, I know you mentioned Q1 being the toughest mortgage comp, but what are your general perspectives on the extent of the recovery we may potentially see in 2023 in mortgage specifically, particularly given some of the bank executives has started to note that a lot of the excess capacity has already been drained from the system?

Lauren StClair: Yes, I’ll maybe reiterate some of my commentary from my prepared remarks, and then I’ll also hand it over to Tim to give his perspective. So, yes, as we said, in Q1 of this year, we expect this to still have really tough comps relative to a year ago when the environment was not quite as bad. We’re not expecting any massive change in sort of the macro environment around mortgages for the rest of this year.

Tim Chen: Yes. And I guess I’d just add, it’s a challenging macro environment for both refi and purchase, volumes are low, interest rates are high. So, we’re really using this slowdown as an opportunity to invest in our home equity marketplace. It’s a really small part of our business today, but in the spirit of landing and expanding, we’ve launched new comparison tools here and continue to onboard partners. And so our longer term outlook really incorporates the view that it’s going to be challenging, as Lauren mentioned. So, yes.

Michael Infante: Understood. Thanks for that. And secondly, I know Ross asked earlier about the relative outperformance vis-à-vis is one of your competitors, but I wanted to dig in a little bit deeper you’ve seen an acceleration in partners that perhaps previously, we’re allocating marketing dollars across a variety of financial marketplaces but now maybe sort of consolidating that spend on your platform just given the quality of the user base that we’ve talked about previously.

Tim Chen: Yes. So, I’d characterize the primary driver is just the deterioration in really near-prime has been — and sub-prime has been just much more accelerated than prime. I think that’s probably something you would typically see in a normal credit cycle and that’s probably driving a higher beta. Yes, of course, like, we ‘reinvesting in our experiences and the OTB integration, I think, has really leveled up our product experience in our personal loans search, for example. But the first one is probably the major driver.

Michael Infante: Great. Thanks guys.

Operator: Thank you. And I show next question comes from the line of Jed Kelly from Oppenheimer. Please go ahead.

Jed Kelly: Hey, great. Thanks for taking my questions. Just going back to insurance. You mentioned the new consumer experience. I mean I think insurance has always typically been a product that’s hard to sell and probably some of your competitors, it’s a lot of phone calls. So, can you just touch on like where you’re sort of disrupting you think the consumer experience in insurance. And do you see that becoming a big enough segment where you could break that out separately one day?

Tim Chen: Yes. So, great question. I mean, of course, that’s something we think about all the time in terms of user experience. And so internally, the conversation is often, can we do better than that user experience while leveraging our brand and our brand trust to drive parity in terms of things like conversion rates, right? And so — without getting into specifics, those were a lot of the iterations we’re trying to drive with an in-house experience. And yes, I mean, the results have been pretty promising.

Lauren StClair: Yes, I’ll take the second part of that question around breaking it out. As you know, we have three revenue categories with increased disclosure. It’s credit cards. We have loans, and we have the other verticals. Insurance today within that other verticals. For right now, that is the plan that we will continue to provide that level of disclosure, but we are always looking at sub verticals and making sure that we are disclosing the right information externally. And so we’ll continue to evaluate that.

Jed Kelly: Thanks. And then just a follow-up. You’ve obviously generated a lot of synergies with your past acquisitions On the Barrel being the most recent. Can you give us an update on any potential acquisition opportunities or products you would want to add to the NerdWallet platform?

Tim Chen: Sure. Yes. Just a quick reminder, general M&A thesis has been match our brand and reach with these better converting user experiences, right? So, where you tend to find opportunities is areas where there is complexity, where you see humans like advisers, agents and brokers trying to help people through transactions and so we’re looking at quite a wide variety of things. Just trying to be opportunistic and disciplined from a capital allocation perspective about what we take on next.

Jed Kelly: Thank you.

Operator: Thank you. And I show our next question comes from the line of Ralph Schackart from William Blair. Please go ahead.

Ralph Schackart: Good afternoon. Thanks for taking the question. Just on Australia launch, I know it’s very, very early, but just curious what are the signs that you’re seeing there? And how would that compare to other markets, similar launch stages? And just more broadly, how are you thinking about the opportunity compared to other markets? And then I’ll have a follow-up.

Tim Chen: Yes. So, just to level set, I mean, the US is our ordinary priority, right? It’s just a huge market. We feel like we have so much room to land-and-expand within the US and vertically integrate given our existing reach and traffic and brand trust. In terms of Australia, it’s really early. We’re excited to see, hopefully, a repeat of Canada. It feels like running a similar playbook. It’s something we’re very familiar with and just feels very familiar to, for example, the early days of the US market. And we’ll keep giving you updates as we progress in these areas. But yes, the real priority is the US market.

Ralph Schackart: Great. And then just on the loan segment, you talked about on the call about investing in consumer experience before an improving — or potentially improving macro. And I think you also talked about some positive signals in the shareholder letter. Just curious if you could provide some more color there. What are the positive signals there that you’re seeing?

Tim Chen: So, to be clear, we’re — yes, we have a pretty muted outlook for 2023 in terms of the macro. We expect unemployment to keep on rising throughout the year. We think that’s largely what loan officers are pricing into both their underwriting models and their pricing. So, not baking in much optimism about a recovery there. Yes, if we deviate from those expectations, then we could see upside or downside on the margin. But I think we’re a bit lower beta with regards to others, given just the skew towards prime.

Ralph Schackart: Okay. Thank you.

Operator: Thank you. And I show our next question comes from the line of Nicolette Radomski from Citi. Please go ahead.

Nicolette Radomski: Hi, this is Nicky Radomski for Peter Christiansen, Citi Research. Thanks for taking my question. Have you — do you expect to see an impact from Goldman’s removal of markets in the personal lending space? Any details regarding timing or quantity would be helpful. Thank you.

Lauren StClair: Could you repeat the question? We didn’t — it didn’t come across very clearly.

Nicolette Radomski: Sorry. Have you or do you expect to see an impact from Goldman’s removal of markets in the personal lending space? Any details regarding timing or quantity would be helpful.

Tim Chen: Right. Yes. Okay, got it. Yes, so we do see lenders pulling out of the space and going into the space. pretty frequently, right? I think the way I would think about personal loans is there’s a few players competing in the different bands — credit bands within that market. So you typically have two, three, four, five lenders in the, for example, super prime and or the near prime, et cetera. So, any one lender pulling out or coming in doesn’t tend to have a huge impact on the marketplace overall. We really tried to just make sure we’re presenting the right options and the set of options to the consumer and balance that.

Nicolette Radomski: Makes sense. Thank you.

Operator: Thank you. I’m showing no further questions in the queue. At this time, I’d like to turn the call over back to management for closing remarks.

Tim Chen: All right. Thanks all. Before we wrap-up, I want to be sure to thank the Nerds for their hard work which made these results possible. As I reflect on this past year and our plans for 2023, I’m really encouraged by the progress we’ve made, the financial performance we’ve achieved, and the opportunities available to us as a result. Looking ahead, we know this financial environment will continue to challenge our consumers and SMBs and we plan to meet this moment with ingenuity, focus, and meaningful investments, specifically around driving engagement, iterating quickly, and providing clarity for all of life’s financial decisions. Thankyou.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.