Nerdwallet Inc
NASDAQ:NRDS
Earnings Call Analysis
Q3-2023 Analysis
Nerdwallet Inc
NerdWallet, a company that provides financial guidance to a broad audience, has demonstrated impressive growth, particularly in user engagement. The company reported a 22% year-over-year increase in monthly unique users, driven by strong performance in various sectors such as travel, banking, investing, and personal loans. They expect monthly unique user growth to surpass revenue growth for the remainder of the year. Despite pressures on monetization in the short term, NerdWallet anticipates accelerated growth when demand from financial service providers rebounds.
For the fourth quarter of 2023, NerdWallet forecasts revenue between $136 million to $140 million, which represents a moderate 3% decline from the previous year. This decline takes into account a higher-than-usual seasonal dip from Q3 to Q4, especially in banking, as consumer demand starts to moderate. However, despite this projected decline, the company expects an overall revenue growth of approximately 12% for the full year 2023, highlighting a strong annual performance.
The expected adjusted EBITDA for Q4 stands at $30 million to $33 million, or about 23% of revenue at the midpoint, indicating a 1-point increase over the prior year. NerdWallet anticipates a higher adjusted EBITDA margin in Q4 compared to earlier quarters due to reduced brand spending. An annual adjusted EBITDA margin of approximately 16.5% is projected, along with a non-GAAP operating income margin of roughly 4.5% for the full year 2023. These figures underscore the company's flexible business model and its ability to improve margins even amid revenue deceleration.
Looking at long-term margin expansion, NerdWallet expects the trend of consistent annual margin accretion since its IPO in late '21 to continue into 2024. The company has achieved high incremental margins due to a significant portion of its traffic arriving through organic channels. The expectation is to reach and possibly exceed the adjusted EBITDA margin levels of 2019, gaining leverage on fixed costs and capitalizing on already made investments, such as brand spend, which has already hit a logical ceiling, and becoming public, which initially increased G&A expenses.
NerdWallet has upsized its credit facility to $125 million, thus enhancing its financial flexibility for future growth initiatives. Additionally, $10.8 million worth of Class A shares were repurchased during the quarter at an average price of $8.95 per share. Post-quarter, the company completed the repurchase under the previous authorization and has announced a new $30 million buyback program. This reflects a strategic and data-driven approach to capital allocation, balancing between different options amidst economic uncertainties.
The company remains committed to long-term strategies that prioritize consumer trust while enhancing and diversifying product experiences. With growing consumer mindshare evidenced by strong traffic and brand signals, NerdWallet is poised to capitalize on the eventual macroeconomic recovery and compound its value over time.
NerdWallet is extending its reach to include subprime consumers, a strategic move consistent with its mission to serve a diverse consumer base. This approach is expected to help consumers understand their qualifications and build better credit. The company has also raised its non-GAAP operating income margin expectations from mid-single to mid- to high single digits, a signal of confidence even in the face of current economic uncertainty.
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Good day, and thank you for standing by. Welcome to the NerdWallet Third Quarter 2023 Earnings Call. [Operator Instructions] 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. And each quarter, I've 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 3-year CAGR of approximately 23%. Meanwhile, NerdWallet?s share in this growing market has also increased, with a 3-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 of 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've seen us growing aggressively over the past year is a variable cost and at a relatively lower incremental margin. However, we are in-quarter profitable on the 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 of MUUs 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, or a single platform where consumers and SMBs can learn, shop and make decisions about their finances. More specifically, our nerds have focused their efforts within our 3 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 MUU 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 in 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 sub 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, grew our registered user base 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 [NerdAI] 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 cash back 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 now 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 have 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 1-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 a 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 and 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 nerds for their money questions. We provided trust ready 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. On to 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 1 point increase versus prior year. The majority of our brand spend occurred during the first 3 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 3 quarters of this year, though 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 OI 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 OI 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.
[Operator Instructions] Our first question comes from the line of 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, call it, 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?
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 kind of to the nature of the products they qualify for and the LTV of those products to the issuers, lenders, insurers, et cetera.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 helping them build credit is just kind of a natural extension of our mission. And so very excited to dive deeper into that through both products like NerdUp, but also more matching oriented credit card flows.
Great. 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 get to 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 will return to and eventually surpass 2019 levels for the adjusted EBITDA. And we'll get 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 use of Squali with Truist.
So maybe, Tim, can you maybe just tell us, in your conversations with card issuers, and there aren't that many basically have done -- kind of control the market. What are you hearing from them? What are the signals that they're waiting to see before they can reaccelerate the spend? I think you talked about maybe particular cards or balance transfers that were not as much in favor. So maybe just fill us in on some color there.And then with regards to AI, can you maybe just help us understand how you guys are leveraging AI, both in terms of as a cost mitigant for your internal operations and maybe content creation, but also in terms of improving marketing efficiency, particularly on the performance marketing side of things? Thank you.
So on the insurer side, we continue to see headwinds. We're seeing a pretty similar environment to last quarter, with some marginal puts and takes in terms of positives and negatives from the issuers. The general sentiment is credit quality is doing okay. It's normalizing towards pre-pandemic levels, kind of as expected. But banks have some unknown unknowns they're worried about and continue to be conservative in terms of managing their balance sheet.So for example, Basel III endgame is looking pretty onerous as currently proposed in terms of increased capital ratio requirements, and there's just some uncertainty about what higher-for-longer rates could break in the financial system. So on balance, it's looking pretty 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 issuers go back to more normalized customer acquisition patterns. And as we take a step back, we really think about being single-digit market share in overall [carders?] nations and seeing ample opportunities to grow that by doing things like registering users, [reintegrating] them and increasing conversion rates. And yes, on the AI question, you raised 2 pretty important drivers there. I'd say on the efficiency side, that's certainly something that we're looking at across every function of our business. I'm sure every business out there is looking at different ways to use AI to increase productivity. And so it's pretty broad reaching. There's a lot of experimentation and learning going on. And then, in terms of actually delivering better user experiences, that's pretty exciting for us, as well. It's actually helping us to both register and engage more users. We recently incorporated registration prompts into our NerdAI chatbot to funnel consumers to membership offerings related to their questions. These embedded registration fronts allow for more personalized conversations and tailored guidance while creating unique revenue and engagement opportunities for us. The NerdAI Chabot is also doing a better job of getting users to the most relevant user experience on NerdWallet. So AI is already helping us register more users and engage more users, and there's going to be more 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 that you've called out. Verticalization sounds like a pretty big unlock within the credit card segment, rolling out the OTB product there. That's also dovetailing with some really just healthy monthly traffic growth to the site. So I would love to hear a little bit more about just how you envision what seems like a faster cadence, so just product updates on the company, really influencing traffic growth the next few years and, in turn, positioning you for growth whenever market conditions do stabilize. Thank you.
Yes. So I always would point to Page 2 of our shareholder letter as a reference point around our growth pillars and kind of how we think about our product initiatives buckets. I'd say, for example, with user registrations, we've been prioritizing user registrations as a focus area. We're making good headway and are growing 38% year-over-year in terms of our cumulative registered users.And unsurprisingly, we see that personalization drives engagement. The key to driving personalization is first-party data, and a major factor in capturing first-party data is registration. So from a product perspective, where we're consistently improving registration on-ramps throughout the site. I just talked about adding them into our NerdAI 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, like banking or taxes. Yes, you got to catch the fish while they?re biting. And so we're adding even more relevant and personalized reasons to register, and we've seen improvements in registration rates when we do this. So really still in early days of building out the ecosystem, but trying to build as much velocity as we can across all 3 growth pillars in our product initiatives, including things like NerdUp, is kind of how we're thinking about it.
Yes. Maybe I'll just add a quick comment. Yes, we're very excited about the Q3 MUU growth that we saw. A lot of that strength comes from verticals where we see high consumer intent as well as product improvements. And similar to areas where we see revenue growth, we saw growth in MUUs, like banking. And we also saw consumer interest in areas like investing and traveling.And linking that back to your question around product initiatives, remember, people come to us to learn, shop and manage, which means not all visits are going to result in a monetizing event. But part of that is to reengage users, build the trust and continue to build that relationship so that, when they are in the market for a financial product, they'll think of NerdWallet first.
And if I can just slip in a quick follow-up, NerdUp is obviously a very different product than what you've had historically. Are there any economic considerations we should be thinking about just for this affecting the model, going forward?
Yes. So first and foremost, we think hard about the fact that trust and objectivity underpins our brand's value. So we thought really hard about this before launching NerdUp.So in terms of the economic model, it really is something to speak to, right? Traditionally, credit card issuers make money on swipe fees, annual fees, late fees and by charging interest on revolving balances. And we're taking a pretty different approach to this business. We want 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 just focus on helping a broad base of consumers improve their credit scores. So this really 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. And that?s really the win-win-win that I think we?re uniquely positioned to offer. Our consumers build that credit, card issuers get access to this pool of qualified candidates, and we?ve got a larger base of engaged users. And I think, as we think forward about other products, we?d really be thinking the same way about 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 is 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 the overall other segment is going to be declining? Just any clarity there.And then, Tim, the MUU growth combined with this sharp decel in performance in the negative 6% year-on-year for sales and marketing as a total, you talked a little bit about that, but does that more reflect the demand environment being tough in that, when that demand environment picks back up, we plan on leaning in? Or is there new-found efficiency or some kind of new philosophy that we might not need as much performance marketing intensity, go forward, because all these other things like new categories and nudges and better registrations, et cetera, are finally kicking in? Any thoughts just philosophically on that?
All right. 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 of 2022. And then maybe, to clarify, I'll just reiterate our guidance and maybe explain that a little bit more in some of the drivers.So the Q4 guidance is $136 million to $140 million, which, at the midpoint, declined 3% year-over-year. And maybe some context. From Q3 to Q4, we tend to see normal seasonality of high single-digit decline quarter-over-quarter, which in a normal year is driven by credit cards, student loans and mortgages. Last year, we did not see the normal seasonality, though, for 3 big reasons: one, there was a smaller seasonal decline in credit cards as pricing recovery continued from the low of 2020. Banking was benefiting from stronger-than-normal deposit demand during the rapidly-rising interest rate environment. And the third dynamic is that insurance picked up from better macro dynamics as well as some of the internal product changes we've made. So this year, what we called out is that our Q3 to Q4 seasonal decline implied by our guidance is actually a little higher than usual, driven by the pressure in banking as consumer demand starts to moderate, given the stabilizing interest rate environment.
Yes. And in terms of the sales and marketing getting more efficient year-over-year while MUUs are still growing nicely, I mean I'd say, big picture, our consumer demand is strong. I think we're really seeing headwinds around the ability to monetize that demand for some of the reasons we mentioned.I think one area particularly we're double-clicking into from a sales and marketing perspective is brand marketing. We're down year-over-year in brand marketing. And I'd say there's really 2 reasons. First, it's a tough macro for monetization. And so, when it's tougher to monetize, we pull back a bit because we're trying to maintain discipline around payback hurdles on that brand spend. And second, we're still getting better at this. We're relatively new to this. With 2022 being our first full year of spending on brand campaigns, we've learned a few things, and that means we're going to get smarter about our creative and where we spend and when we spend so we can get a bigger bang for buck. I'm really excited, though, that despite that, we're exiting this quarter with record brand awareness levels and our highest ever quarter of MUUs, along with that 38% growth in cumulative reg. So that's all despite lower spending.
Our next question comes from the line of Ralph Schackart with William Blair.
First question, maybe you could provide some color, if you could, please, 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 sort of what's driving that performance or what you expect that technology to do, or just any more color more specifically how that's helping drive loans. Thank you.
Yes. I'll speak broadly about pricing. I mean our ability to monetize is most impaired right now in insurance and I'd say some parts of cards that are more balance sheet intensive. So those are kind of the primary areas to think about. I mean, of course, we've got headwinds in other areas, driven by increasing rates, but that's more a consumer demand impact rather than the ability to monetize impact. And with the OTB performance, yes.So as we fully integrate OTB, we're getting better and better at essentially asking people questions, and then registering them and then matching them to the right loan product. And so you can imagine that this could apply to a lot of different verticals, not just within personal loans. We're certainly seeing the benefit in personal loans first. But this quarter, we launched that product in credit cards that uses that same technology platform to really match people better. And I'd say the biggest impact is there are more in the near-prime, subprime area where people are unsure if they qualify and what products they qualify for.
[Operator Instructions] Our next question comes from the line of Pete Christiansen with Citi.
Tim, I was just wondering if you talk about the impressive share gains that you've had in traffic this quarter. Is that actually influencing any behavior of your partners in terms of more campaign activity, more offers, just more deeper penetration in the platform overall? And then 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.
Sure. In terms of the share gains, look, it certainly makes it easier to have conversations around integrating. It takes [worth] on both sides, in some cases, to do things like prequalified matching, et cetera. So the larger our scale and the longer our history of sending over highly qualified referrals that perform well over time, the more financial institutions have to work with us on some of these initiatives.On the personal loan side, for us I think it's more a reflection of NerdWallet-driven activities rather than the macro. The macro is really tough right now. I think it's not that different than the past couple of quarters. We see some of the initiatives we're doing really having a positive benefit there year-over-year. So I can't speak to the macro implication of that.
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 monetization 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 there, Tim, I appreciate the comments on just the composition of your sales and marketing investments and the incremental margins there. Do you think the 50-50 mix between fixed and variable costs 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.
Sure. On NerdUp, I described it simplistically is, on the credit card product itself, don't make a ton of money because we're essentially paying rewards, offering no annual fees, et cetera. Now, if people's credit improves and they now qualify for an unsecured credit card, we do have our normal referral channels that we can refer them through, and we could potentially make money there, right? So that's more of our traditional business model. So that's kind of the exciting win-win.On the sales and marketing mix between fixed and variable, I'd say a bit of it depends. The way we look at it, you've got positive incremental margins on both the paid and organic side, right? The paid side is kind of more dependent on how competitive we are in some of these paid channels versus others. We certainly think long-term about this. If you can have a great registered user experience and generate higher LTVs, then you get more and more competitive. So that could definitely be a durable advantage. Even investments in brand can help you convert. People are familiar with you and trust your brand. That can really give you an advantage there, that's structural. And then, of course, the organic side is kind of a separate threat, right? It's going to grow at its own rate based on some of the investments we make, both in our core products as well as registration and reengagement. So we'd love to see growth on both sides. It's all positive incrementally. But the exact mix is going to depend on idiosyncratic 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. So we've got continued strength of our reach and brand and our focus on relentlessly improving consumer experiences, and that really positions us to capture even more mind share and fuel our business for long-term growth.I wanted to give a huge thanks to the nerds for their hard work this quarter to help more people in more ways. And 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. And with that, we'll see you next quarter.
This concludes today's conference call. Thank you for participating. You may now disconnect.