Q1 2020 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin momentarily. Please continue to standby. Thank you for your patient.
[music].
[noise], ladies and gentlemen, thank you for standing by and welcome to the lending tree incorporated first quarter 2000, It 20 earnings conference call.
At this time all participants are in a list and only mode.
After the speakers presentation, there won't be a question and answer session to ask a question. During this session you will need to press star one on your telephone please be advised to today's conferences being recorded if you require any further assistance. Please press start zero.
Oh, but now like to hand, the conference over to your Speaker today Trent Ziglar head of Investor Relations. Thank you. Please go ahead Sir.
Oh, great. Thanks for Cal good morning, and thanked everyone to drawing the call. This morning to discuss planting trees first quarter 2020 natural results.
I'm joined on the call today by many trees, chairman N.T.L. Dot Lambda and C.F.O.J.D. Moriarty.
Beforehand to call over to dog I'll, just remind everyone that during today's call. We may discuss planting trees expectations for future performance fees forward looking statements are subject to risk and uncertainties Atlantic trees actual results could differ materially from the views expressed today.
Many but not all of the rest we face are described to my name trees periodic reports filed with the L.C.C.
We will also discuss a variety of nongaap measures on the call today and I refer you to today's press release and shareholder letter both available on our website and investors Dot Lendingtree dot com for the comparable gap measures definitions and full reconciliations nongaap measures to gap.
And with that during the dog.
Thanks, Trenton. Thanks every one for joining the call to there.
I hope you and your loved ones remain safe and healthy during these difficult times.
Or we get started I want to point out that were adjusting the format of our call you hopefully seeing we publish the detailed shareholder letter to our Investor Relations website earlier this morning.
Linked to it from our press release, we think the letter provides a better platform for us to share our thoughts and make our conference calls more efficient predominantly focused on QNX. So with that I'll get some brief opening remarks and won't get right into your questions.
First I'm incredibly proud of our first quarter results, particularly in light of everything that's gone on.
Or team has responded quickly and decisively to the rapid changing conditions that we have all experience over the last several weeks, enabling us to meet our original adjusted EBITDA our guidance.
This is a testament done only two or to the strength of our team, but to the resiliency and strength of our business model.
Accessibility of our model and the diversification, we put in place enable us to strengthen partner relationships <unk> salaried product innovation and drive market share games.
Encouraging our team to remain on the offensive and look for opportunities to further strength are competitive position in the quarters in years ahead.
I'm, particularly happy with the progress we made against two critical strategic initiatives.
Involving our mortgage experience in scaling mylendingtree.
We've discussed these in more detail in our shareholder and the case of mortgage the progress is very Evan in in our results.
We're going to <unk> I, just add that in our 24 plus years is a company. We've successfully managed through periods like this time and again, while it doesn't necessarily feel good in the moment times like these always create opportunities and they always drive change and they separate the winners from losers I'm as competent and as I.
Ever been set our business model was proven and that will emerge from this period, a better struck a company and without operator, we can open line for questions.
As a reminder to ask a question you when he depressed star one on your telephone to withdraw your question press the pound key please stand by well we compiled acuity roster.
Your first question cutting the line of Eric lots of Shrum, but U.B.S.
Great. Thank second can you hear me okay.
Can you get German.
We can your yes, yes, we can here okay great.
Great. Thanks.
Thanks, very much due to just two questions.
No.
Gee you could you give us maybe a a quick update on.
On what you're still in terms of of lender health. If it's you know change at all versus what you highlighted him.
In the show shareholder letter a particularly in.
Small business and.
Personal encarta any changes in conditions and know that market.
J why why don't you take a personal cardinal talk small business.
Sure so.
Eric I guess, what it taste, we'd highlighted three businesses that are most profoundly affected here, obviously card personal small business.
Personal one small business.
Put this in context in in personal loans, we'd gotten the height thirties number of lingers on the network and.
Those lenders like small business and dug we'll touch on small business like small business. They.
In many cases rely on access to capital markets to to make ones.
And so.
Right away in March when when the capital markets activity starting to become challenging for them. They started to seize up. So we had we had it quicker reaction from personal loan winters and from small business lenders than we did from credit card, having said that card issuers have pulled back as well so.
Different than what's in the letter no. It's a little bit of a different driver right. If you think about the incentive for a card issuer to issue a new card where do they after the one they want obviously know that it's a good credit, but too they want to consumer who's going to spend.
And so right now is you know all too well right. So they they they are not enthusiastic about either so the underwriting standards in card will go up but their desire to acquire new customers is diminished because the spend simply just not there now in personal loans.
We have blenders, who don't have access to capital so that one side of the marketplace is impaired as we talked about and we've referred to 60% to 80% reduction in the winter capacity in those businesses.
In that remains the case, that's lender capacity now interestingly, we also in personal loans don't have as much interest on the part of consumers, which might not sound intuitive you would think in this environment people need money, but think about the reasons why people take out a personal loan.
There's an event in their life, where they're going on vacation or they're doing a home repair all those things that are positive economic things that people just aren't focused on today. So if you Google Lendingtree personal loan index, you'll see some great data, we publish on a regular basis about the personal loan industry.
It's very useful encouraged to do it and we'll show you one weekly basis.
The desire of consumers to take out personal loans, we're just not seeing it right now because because it'd be economic situation that will come back as the economy comes back and we hope that the lender side of the equation will as well in the case of credit cards, and they said they need to see a positive borrow why from from issue and a new card to a consumer and.
So we've seen the card issuer stuck to the sidelines. Initially we saw some issuers using it as a period of time, where they thought they could take market share in card. Some of that has has tapered off.
So again them card, we see a real diminishment of very diminished capacity.
And so that's really the driver there I'll, let dug address it with respect to smoke.
With respect to small businesses, it's a similar story too personal ones and if you think overall about the marketplace again, we're basically balancing supply demand. So first of all the high level. The fact that were diversified not depended on credit card or not not mortgage et cetera. It helps.
We are always in business until the capital Air hose gets closed off.
When that happens the good news is we don't have to do marketing so both things balance out.
In terms of lender health no in card, obviously card issuers are healthy, they're just being appropriately.
Oh and in the range, a little bit personal own lenders.
There are capital sources comeback will be healthy they sell all their loans. Obviously, we saw that accompanies the doing weight loss in that area, but no expect bit as capital comes back they're healthy and on small business. The issue not the issue our lenders were non S.B.A. <unk>.
I'm doing mostly working capital won Swift capital that comes from investors.
As that capital goes away that goes away. The pivot there was we opened up A.M.S.G. eight marketplace signed up several vendors and.
We're using that as an opportunity to further further expand their so overall I think lenders are healthy and they're making appropriate.
Which I liked it may get appropriate decisions to pull back in time too.
How much an underwriting uncertainty.
And if I can just couldn't follow up on the on the optics point that you just mentioned how should we think about the the sort of the kingdom of operating expense over the next three quarters.
The two guidance would imply that it's it's maybe coming down but at the lesser pace than the contraction of revenue, but how can we think about oh, you're thinking about.
You know discretionary and strategic investment and sort of the key then so be amendment you bit die over the remainder of this year. If you can give us an end points of guidance on that.
Judy you and a hit that first.
Yeah, Yeah, absolutely so Eric we obviously go into the year with quite a few hires that we're going to make throughout the year.
And we refer to those as you know strategic cards that we're going to play in our business and so we each business puts forward how they tend to grow the business. Obviously some of the costs associated with that his head when we go through a period like right now we re evaluate that but we're we're very mindful to make sure that we're not simply saying.
<unk> hiring because this is exactly the time when we want to play some of those cards. The cards are going to be different the strategic initiatives are going to be different based on the this environment, but we're actually going through a process right now where we've gone back out to each business owner and said, okay. What's the rate strategic move right now we actually want.
Take advantage of our competitive position and in some in some areas were gonna press on the gaps now is that going to drive IBEX now, it's the it's going to be gain on the relative to what our plans were for sure. We're cognizant of the revenue opportunity.
But we are strategically investing in certain business as Doug points out. The nice thing is we can do the right thing for 2021 in this environment and that to everybody's mandate. How can you think about how AAPEX comes in I think.
First of all we're into good position too.
I have 75 per cent of our cost structure be variable and so in all these businesses were revenue has come in.
Come down the revenue opportunities come down the good news is that the.
That the cost to acquire customers is actually dropped dropped faster which is great.
So that's the first cost that we're able to address and that's just the healthy thing about the model then there's outback and we're reevaluating all of the incremental hiring for this year and adjusting it for the most strategic priorities. So what you'll see is what typically happens.
For us as objects steps up in Q1, as we talked about and then it kind of its level throughout the year I think what you'll see you'll probably you'll see it come down it won't come down as much as revenue because candidly, we're making those hires the head count piece of it for 2021 2022 and to build a business.
The aggressive we go into this period relatively underlevered and able to do that and we're thrilled that we are.
But then pretty much take my question.
Sure.
Your next question <unk> Kelly with Oppenheimer.
Mmm great. Thanks for taking my question can you hear me okay.
Yes, they get how are ya.
Good hope everyone safe just a couple of questions first on the insurance segment can can you kind of talk about.
Demand trends, it's sort of trendy lately versus March and your ability to stimulate demand to to get consumers to think about shopping and then on this stashing best that.
Any reason why you chose to invest in one platform versus.
Creating a marketplace for for all the challenger banks that are ending industry.
Okay do you want take the first one second.
Yeah.
So.
Just the first question on insurance you have to kind of looking at timeline.
And as I think trained pointed out if you looked at January and February insurance with doing great. You typically have a period of time.
In insurance industry, which is tax refund season, right. So for people who are getting a tax refund.
They file quickly you get that money back into typically result in some car purchase activity and insurance tends to correlate with that somewhat.
This year that was a short with period typically that would be from mid February two mid March that was a short period this year.
It ended somewhat abruptly up you look at auto sales in and around March 5th.
And so I think the way that you would characterize it in terms of.
The consumer the consumer was.
To steal from our from our insurance game imitated the the view of the carrier was at the ensure the the consumer was looking but that didn't have height, okay and that's because there wasn't a lot of auto so activity going on and showed the carriers were reluctant to spend a lot for that traffic if it didn't have high intense.
We've seen in improvement in there.
The kind of mid March late March period, and so we're happy would be improvement.
And we're also cognizant of the environment in insurance, which is you know obviously, you've seen the headlines around all state and others returning.
Money to consumers and now much can be made of that <unk>.
In some cases those are policies that are based on obviously driving activity driving activities down there returning money et cetera, but we're also conscious of the fact that accidents are down because of the diminished economic activity. So claims are done in so if d. carriers are making money in this period longer term, we're hopeful that.
That will be very good for what we do.
But you know it so I guess I would I would tell you. It is certainly improved from March.
And we're happy with that what we can do to stimulate activity in interest you know that's candidly, they're a few areas. The error rate, we obviously right a lot of valuable content Uninsureds. That's one area in Inacio, where we we write content around what you need.
Know about insurance, we're also doing a good job one of these were happy with it actually talk to you about the integration that insurance with my lending tree.
And that's something that we were happy with in the quarter as well. So there are things that we can do on the execution side, but they they are probably dwarfed by the macro trend, which is auto sales. So we're going to continue to execute and being a good position for when the carriers want to find new customers in a more aggressive.
In a more aggressive more normalized way as alisha characterize it the second question around stash, all turned to Doug and he can turn to talk about this I I guess I would just say before we do.
Part of it.
The stashed team that we were so impressed with and so there's obviously strategic questionnaire, which is you know why one provider versus a marketplace approach.
And I'll I'll, let Doug comment on them.
Yep.
So [noise].
First off with staff. In addition to the team what we really like about the company is multiple revenue streams.
When we second thing is an amazing customer experience and then the third thing third thing really is them plus sauce. So stash as a user base of members and they would like to improve their bond is Asian, obviously and improve their customer experience and they can do that through alerts with loans hopefully for us.
Lending tree contacts the same thing applies which was right now you're a member of Mylendingtree, you're getting alerts on all your loans.
It'd be great. If you also had functionality to stash has where you can also say this and invests in budget.
And a very lightweight and we think that they're consumer experience and we also like the revenue model and then it's not such a trading model. It's not just assets under management miles actually very very pro consumer, making the right decision <unk> and we thought it was the right thing to do at the right time.
And doing a met a in a mylendingtree context. Once you already have number we don't.
Has to do that.
We would still retain that option, however, but we we really think that.
These two products integrated will be great for the customer great for lenders, obviously very profitable for us.
Only other thing I would add it to stash investment would be back to Eric's comment.
If you think about how things get done at lending free.
Gee do you talked about the variables h. and all that.
Everything comes through as a project or an investment and if we can invest.
$100 to make $200. We're gonna continue to do that however, given as you know if you think about just what happens to be.
Economic environment in each of our businesses.
Some of them lenders aren't demanding things. So you pulled back on some of those investments right. Because your mind decision is down some of them are doing better. So you push into those but overall you know your as as the economics into business change.
The the profitable projects some of the prosody projects cross drop away and that's where you see this.
Slow ring of operating costs, and just natural with the business just the way the business Roms.
No way, we do it and and stash is basically the same things that runs through the same process.
I can with partner and made the decision here to do this and strategically you couldn't get the.
The right products integrated with each other we didn't get Samara.
Thank you.
Your next question concerning the line of Mark Mahaney, what our B.C.
Thanks dug could you talk about what the curve of the recovery could look like and I I know you can't I know you know I'm, an economic forecasts, but if you assume that we do have a a slow jacket recovering the backup.
<unk> sometime in the first half of 21, we get back to kind of regular G.D.P. a growth, but you know we're talking about a solid nine nine months, maybe 12 months recovery, which of the segments do you think in in that kind of outlook, which of the segments. Do you think we're covers fastest and which which will be leading which will be lagging thing.
<unk>.
Let's see.
Well I'm going to a treaty add onto that because it's and I'll comment a little high level, it's going to be wherever the capital is.
The good news for us in this environment is that a were profitable wherever you think bribery about our competitors many of them or not.
Any of their not diversified.
And and many of them are hurting so as long as lenders land Wonderland and borrowers want to borrow.
We'll do just fine I'm sitting in the middle of those things.
And you need to make sure obviously, the consumers healthy enough or.
So I would.
It would be my expectation that personal loans would probably.
Credit card will come back as bank balance sheets are fine and.
Card companies want to put on more if yours, which I would think as long as there.
Businesses are solid they're going to want to be doing that and then the personal one lenders, which are more of the online players.
Yeah, you guys would know that business almost better than me, but as a you know the hedge funds and other people, who who invest in those platforms blending club and.
Prospers and you know the same thing in small business, then I would be expecting met.
It does come back as that capital comes back and when that happens is anybody's guess, but the good news is.
We're better position than everybody else in our market.
And quite frankly in some ways the longer it goes.
More our competitors hurt and the more share we can gain.
So from that standpoint, it's probably pretty good for us.
JT what are you in Mark Yeah, I I would just to mark the our numbers assume no recovery in capacity.
Okay in the in the affected businesses that we'd highlighted we've really assumed no recovery in capacity until late in Q3.
Okay, and so if lenders have paused we've <unk>.
Presumed that they are pause day now why late Q3, well it to the extent that you get some recovery in Q. for Indian 2021 to your point.
We would anticipate there should be some enthusiasm on the part of winters to begin stepping back yet we're not assuming that they come back Oh, I see and you know in September and queue for its gradual but that's when we've assumed that there's some recovery in class.
In terms of the business is <unk> I think hard.
You have to think that car is the one that comes back quicker and I stayed up just because those balance sheets are in there and they're going to anticipate span as people leave their homes and start going to dinner again in planning trips et cetera, So I would think card.
I think then personal alone, but again, you've got the wonder health issue. There. So it's gonna take a little longer for those balance sheets to be locking available now longer term, we we really do like the small business lending business and I think regardless of administration, you're going to have a very.
Friendly environment for small business.
<unk>.
It doesn't I mean, it's very very likely that you see a lot of private capital.
Go in the direction of lending too small business because of that.
<unk>.
The from the government so much like where it is private capital flock post the financial crisis, No wait I would imagine that there's a lot of private capital that will become available to small business over time, and so that the business that we we like whether it comes back quickly into you know fourth quarter and early 2021, it's different question.
But we think there'll be a whole new group of small business focus blenders.
And incidentally busy so we want to lead into.
Okay. Thanks, G.D. thinks Doug.
Yeah.
Air next question comes to line of John Campbell with Stephen think.
Hey, guys. Good morning, I congratulate establishment, Hey, you morning on the fashion restaurant, you guys have talked a little bit about that that seems like a really kinda compelling long term opportunity. If you guys I mean, it sounds like.
You can be a good investment even if it doesn't do a single thing for that when you drink core, but the dog. It I mean, obviously it sounds like pitch. There is some integration work in the days ahead.
If you could maybe talk to us about how that might look within my meaning tree and then higher level. If you can maybe help us frame up the synergies over time.
Yeah, if you.
Their their company in our companies are so aligned about the about being.
Focused on.
Helping the consumer with wherever the consumer has a need to make make a decision.
And also believes that little changes can add up to a lot of big change in your life. The integration ahead. If you think about it is.
And and we're going to work through this piece by piece, we have some ideas about going to say a lot because competitive. Thanks overall, if you think of.
Lendingtree has a.
Membership service. If you will that gives you free credit reports and alerts on all of your loans and help you improve your credit score. So that you can access the credit markets.
They have something which helps you.
Save.
Good.
And invest in which is really obviously the asset side of it and you put those two things together and you and then you throw in insurance and a couple other things and you've got a product that good surround the customer.
And help them.
Achieve whatever goals.
I was getting a car retiring truly bits whatever it is they they've got a platform that can do that and the other platform called Mylendingtree. They you can do then platform blending tree, where you can do that and then over on staff on their brand where they've got exactly the flip side, they've got an amazing product personalization.
Around investing saving et cetera, and what they know now.
Well so there.
People are going to want it their customers and we'll get mortgages person ones credit cards that makes sense and save the money and they'd love to get free credit scores et cetera, and as we add products into there.
Area. They obviously, they're monetizations goes up.
And then they could market into it and the other thing I would say that we really like about them versus a lot of the other fintech companies is that they've got.
The same philosophy around.
We invest in our business and it produces returns and it's not just a you know throw money at things and they're very very disciplined and they're very very smart and they kind of see the world and the same way, which a lot of other start ups you know one valuations et cetera don't necessarily.
That way and so all of those things for philosophically product et cetera, just it's a great said.
Okay that makes it a lot of since I've got to do a lot more work on stashed, but do they have.
I guess platform, so to speak or well I.
I guess well some of those users people to come over to my money tree is is it a three point as well.
It definitely is a fine line increases so please get download the stash out.
And so staff has a you have a subscription.
So you're paying a subscription to which were access you to a bank account and the debit card and investment advice as well as fractional investing. So for example every time you make a purchase basically rebate some of the interchange back in fractional shares.
And so then you're constantly always sort of building up this.
This portfolio is even go through your day and then they've got some light budgeting on top of bad to tell you get help you with your budgeting, but the nice thing about misses the difference when you look at the so called Neo banks are new banks or whatever you want to call. They many of them are using the banking to make money stash using it to see.
Activity and make recommendations to you more than they are doing it too you know trying to make interchange fees or try to get assets under management and US we liked that model much much more I think it's better for the consumer and better for the providers.
It makes sense last one for me quick question again on my mini tree.
A lot of that wrap comes from personal loans and credit cards. It looks like you grew mylendingtree revenue.
And a little bit better rate in those products I, obviously, you're.
Seen gains out of other products on the platform or maybe you're just seeing a assure shift to more that personal loans and credit cards revenue going on them I mean, Teresa what how would you characterize kind of that that better growth.
So my it's interesting until you should add onto this too. So most of the revenue from my money tree does come from personal loans.
And and a lot of those people are somewhat subprime and there for you know that that gets harder. However, my lending trees now over 20% I believe bar total revenue or even daughter company.
And continues to scale and our unit economics, if you think about just us versus competitors there.
Are you in economics, we now, but very good very solid going out we have a lower member base because it's more of a high intent thing. That's you know you've you've come through it mostly through the Lendingtree channel.
You know at a high in 10 purchase we're not just.
Coming in to get a free credit scoring <unk>, let's just see what happens here and then we try to sell your credit card. So we're gonna have a lower member base. However, our monetizations good indoor better and.
And now actually we've shifted some bar marketing into marketing that and and we're we're now at a place where we can marketing continued product growth that we've done so I'm I'm thrilled with our progress I wish it would have happened sooner as I always do but the the model is is solid and now we can lead into.
Yeah.
And your mean that's.
If I look at what you should anticipate with Mylendingtree in this period.
We have this great you know, it's one of the reason twice the personal and business assess strategic radius and feed it feed my my way to train to give everybody.
Tax write in any given period, 55% to 60% of our my L.T. read news personal loans. So obviously in this environment, that's going to challenge my wedding tree and at.
The good news is the integration points of my winning tree to consumer experience everything else all that <unk> ahead of schedule. This year the integration with insurance has gotten off to a nice start similar to some of the.
Third party integrations like I need identity theft, and that sort of thing that we're very happy with so they're a lot of really good things going on under the Hood with my wedding tree and then what you're also seeing as we've talked about you know.
My Lady who should benefit card and mortgage and insurance and work and we're executing I best friends.
Okay. Thanks, guys.
Thank you <unk>.
Yeah and a question comes in a line of my intent then like meet him.
Thank you out good morning, Doug or.
A little bit more about the insurance segment in terms of the Cork request volumes that you're seeing versus demonetization rates, you're trying to see how that is gonna trend line. The next several quarters and also speaking of just the add spend one would think that you'd get a nice benefit given that the at market has softened maybe just talk about the profitability as well.
Shore inside.
Take the at peace person doesn't treat each to go on on the outside absolutely Nazi natural product of what happens these markets typically again back to the marketplace thing you'll see.
Yeah, whatever loan type if if there's lender demand is typically.
Going down on average whether price quantity or coverage that tip that typically also means that those same wonders and or marketplaces are not advertising on Google et cetera.
And we pulled back or advertising, but we still <unk> market to the last profitable dollar.
So yes, there is definitely benefit on nee as as there is a detriment on the lender supply side.
Where that decreases there is a benefit on need marketing side.
And typically they even out.
Over the years.
Sometimes they go better so it's for example in the new than a mortgage right now.
We are seeing and this is fantastic I think for US we are seeing that.
Overall blender demand.
Is still we're getting more of a benefit from wondered we're getting less of a detriment from lender demand.
And we're getting a bigger benefit from the marketing sided mortgage right now.
And that means that lenders, who would typically be advertising directly inside of Google anywhere else on line.
Are pulling that that.
And they're not pulling back there add spend on lending tree is they're they're buys from lendingtree as much.
So that's very very good sign for so if I'm, a lender idol right <unk>, where am I, making money big guys. They go well Google is that this margin we're spending this much money on Google today, but over here at Lendingtree, we're spending as much per liter clothes on or whatever it is in our airline over there is better than over here, Okay pullback, Google keep lendingtree on <unk>.
And so they they market to the last profitable dollar to they're making the same marketing decisions that we are and when they decide to leave lending tree on instead of something else, but basically shows is that the market strong but not businesses strong.
Mmm.
<unk>.
<unk> second part to your question Yeah, Yes.
It does I just want to.
Remind me the second part of a question on holiday.
Sure.
By trying to dive into a little bit of news for inside in terms of what you're seeing in terms of the Cork requests versus the monetizations rates.
So far sure I'd expect that trend line over the next few quarters.
Yeah, we've seen it well one of the nice things that occurred during this period of time is our agent business has done well. So you know you worry about.
I work from home environment, what happens to businesses that are show.
People intensive right and what we've seen is actually a strong demand for our product to their agents.
So that's been a nice highlighting shirts in terms of traffic.
As trend pointed out you know in in the monkey.
Mark It was obviously down with auto sales being.
Problematic.
Carriers reacted to that we've seen some one of her recovery in terms of <unk>.
Schumer interest we don't publish a specific start ourselves. Obviously, you can look at Google data with respect to keywords around auto insurance and that sort of thing and you can see what those trends are but we've seen recovery in a month of April and our carrier demand has increased with that.
Before you know.
Here's will be reluctant to pay for traffic that they need to be lookers, which is you know you look at our other businesses, we talk about levels of intent how serious isn't the consumer about converting about you know actually meeting a new policy switching or auto insurance or being a new auto insurance customer so carers need.
You get confidence that the consumer today once that.
And as we get a little stronger economic environment as people get back to work I think you'll see the carriers come back on line. They are rightly being cautious about beating up in our market place.
They don't think that the consumer intent is there the traffic twins would suggest to you that that intent is coming back.
Got it.
It's helpful. Thank you so much.
Sure.
Yeah next question.
The line of my.
I'm, sorry, my Cronto wet Norplant securities.
Yeah, I think just the follow up on insurance.
What percent of that business is from new and used car purchases.
Then.
We the 50 million of brand investment that you're kinda reevaluating how much of that was spent in one q. and what sort of embedded in your two q. guidance.
Sure.
So and then I'll comment a little yeah.
Yeah, So Mike in insurance.
It's about 80 per cent auto I don't it I can give you a specific as to what's new versus used but it's about 80 per cent on.
And.
With respect to brand was about 8.3 million in Q1.
And we have so you should basically assume of the 50, we wind up spending I think this year.
You know roughly 50 per cent of what we call it set up a year or two.
Spend to spend 8.3 and you can.
Excuse me and will.
We spent 8.3 in Q1, and we will judiciously spend.
You know roughly 25 throughout the year.
Okay, great. It in I guess on the insurance <unk>, sorry, and just pause there real quick if you think when we say brand.
That is still moneymaking advertising for <unk> you can't track. It is precisely however, it's a it's a it's a moneymaking proposition for us not always quarter, but definitely use you spend a dollar you get more than a dollar back.
Thank you <unk>.
And then he just to follow up on the new and used car purchases I was a little bit more curious.
I I know auto insurance is 80 per cent of your insurance area do you know what percent of that 80 comes from new and used car purchases.
No I know some so I can't give no and number on that I can I can track that down seven separately I don't don't have number on that okay.
Okay, My guess I understood.
We'll get her mother number but yeah.
My guess is it's it's people who are not buying a car, but who already have a car into her <unk>, who are shopping for new new insurance based on.
You know saving money and the nice thing and that product is that.
On T.V., if you look at all the carriers independently they're all.
Advertising against each other and in that you know obviously just translates on to the out so it raises the profile consumers mine, but hey, maybe I should go try to save money on insurance.
<unk> okay.
Okay. Thank you.
[noise] Your next question <unk>.
Great. Thank you very much the morning. Thank you guys for this year old.
Helpful dug in that letter talked about how <unk>, obviously make any improvement to the mortgage products in the mortgage experience, which has helped upset some of the weakness was wondering if you can be a little more specific.
As to what changes and and have have have helped and kind of how that differentiates you guys from from peers and then he he had just want to dig a little deeper into your queue to guide to we're halfway into a quarter.
I was wondering and considering.
Commentary you provided.
Home around insurance negative commentary provided around the consumer if you can help us maybe parse out the two kind of what's baked into your queue true guidance as far as growth rate 43 different segments are concerned.
Considering the the the the the year on your decline in the high thirties, what I'm trying to really get to it how realistic potentially it to see maybe at home and insurance segments that are.
Somewhat flatish on your on your basis.
This is coming from the consumer segment any color there would be super helpful.
Let me take the first ones really can do the second on the.
The mortgage experience we've spent the last several years.
Hocking about and experimenting with changes in our mortgage product. If you think about Lendingtree mortgage you know one point, though it is filling out a form eight k. a search query us running some analytics internally credit filters et cetera, and then sending you to four to five lenders and then having those.
<unk>.
Respond back to you with offers on our website as well as phone calls from those lenders directly to you.
What we've done over the past couple of years is figure it out.
After you fill out that form and by the way those forms very a little bit based on very smart data analytic. So really the data is help the drive so that the forms Barry.
And then.
On the results page the results page is always the same however, but generally the same however, one of the things that we've learned is that so called exclusive leads to a lender, which we had known.
If you give transparency in price end you reduce the.
That's five lenders need to go do the exact same thing to try to barrage each other to get this borrower, we clean that up so that the when the the consumer is basically hearing from the best.
Lender in many instances and either they selected or we're saying hey, obese here the five but among this one you should take this one and that is showing improvements in conversion rate. It's also showing improvements in the lender efficiencies because they're not.
Do it the the sales the competitiveness. If you will is happening on the website as opposed to on the telephone.
And therefore, the lenders are more efficient their conversion rates are going up there profitability is better and then the volume.
That we can send them sticks, a little better so that's the biggest change.
In addition to that it's just ongoing personalization ongoing C.R.M. to really focus on how we can help lenders improve conversion rates because they focus on costs for fun as well and.
Versus competitors, which was the second part of that.
I don't know any other company that has the depth and quality.
Lender relationship they'd go back years, and what we're seeing in the mortgage business is the lender shut us off last.
And that is tremendously helpful for us.
You said your second question with regard to the three segments.
Let me just give us a framework because we obviously suspended our full year guide and we did so because it is in this environment.
Obviously.
Pull your guide is only valuable if you can do it with great accuracy, and we want to be able to convey as much as we can now for q. too, but recognize that when we did that we were cognitive in the fact that the consumer business. Yeah. I gave you were what we assume in terms of when we.
Start to get some recovery there and we think that's probably not until through the summer in September it starts to come back a little bit.
<unk> you know the we also did hair cut our expectations.
Or.
For home and insurance just in light of a recessionary environment.
Yeah. The good news is that thinks we did that.
Both of those businesses are printing better than we would have expected we were thrilled with mortgage on the performance in March.
Despite a really difficult backdrop.
And and insurance and and and home.
Are performing very well here in April.
Now the consequences, obviously with consumer flagging because of the athlete issue that we've talked about.
We are more dependent on those businesses for sure.
So in terms of the growth rate in them implied in we're monitoring that on a daily and weekly basis and our guidance reflects some of the strength, but mostly reflects the fat.
That we.
We did hair cut those projections for the remainder of the year internally.
In light of a recessionary environment right. We're we're given we're we're trying to give you as much of a real time assessment of cute too.
But we're not giving up full year projection because the environment obviously.
It's incredibly clearly right.
Okay.
Yeah.
And again, if you think about it and I think trentman of comments say you're too but.
The each of these reacts minute by minute day by day and you got you've got the the the the lender.
If you if you're the lender dynamics in the consumer dynamics and as lenders want to land.
Then, they're gonna, but they're going to get customers from the platforms that are.
Most easy for them right. So the first one is your existing customers. The second one is going to get new customers see my shore up you're just in customers buying a new ones as long as they want to go get new customers.
And as long as consumers want to borrow will be fine and then when we're not.
We're still winning but it's just smaller because the markets gotten smaller but as long as we're getting walcher and market share, which we're seeing in mortgage.
Big Walcher gains among our lenders and.
And that's when in the game and and that's Okay. That's actually great.
Because that volume that capacity sticks to for example, if you've got a lender that goes from.
<unk>, 20% of their revenue or their add expense on.
On lending tree to 40% on lending tree during this time, because they're getting smart about their channels too.
That.
Increasing ads in spend on us typically stick as volume comes back. So now we're getting 40% of a bigger pie is that comes back.
And then that further.
That improves our economics or modernization berserk competitors, which enables us to go out and market I get to which is why Wilson.
<unk>.
Make your comment about but.
You'd made earlier about this area and mortgage.
Your.
Oh.
In word sorry, specifically.
Oh go ahead.
Sorry, no you're 840% sorry.
Yeah, you said if I understand your question you were just trying to try and get like one of the the breakdown of the segments within the queue to guide.
Yeah, Yeah exactly.
Yeah, Yeah, Yeah, if you kinda pieced together comments right we had.
<unk> basically 40 per cent of our business right, which is.
Credit cards personal lines and small business landing.
40% of our rather now if you lose somewhere between 60 to 80 per cent on that right you're you're starting point is sort of down 30, and then you know as our cue to guide implies we've got you know the midpoint 40 per cent.
You're you're decline that leaves somewhere in person softness in.
The home segment outside a mortgage because that segment has yeah. Most of our lenders are focused on refinance right now and so things like purchasing and.
Home equity are are going to be a little bit softer.
But then when you moved down to the B.M.M. line, obviously, we've got pretty significant margin expansion. It goes along with that right and so even though there's a little bit of or had went on the top line and mortgage.
Abilities is pretty strong.
Not all not all hangs together to answer your question.
Okay.
[noise] Your next question <unk> <unk>.
Hi dug in your prepared remarks, you talked a little bit about the changing mix in S.N.B. and you talked about.
Haven't previously had nonbank investors and now you have signed up some S.B.A. lenders I was just wonder about that are those.
Wonders qualified for P.P.P. distributions.
Banks, that's the first one I'll just do the second one too.
Mortgage side, you know a couple of your competitors and called competitive but companies in the ecosystem I've talked about the rise of credit unions in mortgage in this environment I was just wonder if you had any perspective on that like the the credit unions more meaningful you're seeing them at all so the first on that shouldn't be in the second on.
Mortgage thanks.
Yes, Oh, great. So first crush on small business, yes, these new lenders R.P.P.P.
Related so what we did is when we saw this happening and we put out a number of <unk> announcements about this too. We saw this this was both helping people and helping our business, which which is what we always try to do so typically having F.B.A. lenders on the market.
Place D.S.B.A. process is pretty.
Not that efficient.
With P.P.P., they've obviously made it more efficient so we did as we pretty much immediately stood up A.P.P.P. marketplace.
Started signing up blenders I think we have three or four we have to look on the site I know we've got a lie vote for example, which was the largest.
And they're doing great and we've already gotten a lot of customers flowing in what we were seeing in the market, which is well publicized on T.V. is that the P.P.P. loans were going to people with two.
<unk> small businesses many of them with four or 500 600 employees.
Getting millions of dollars, whereas the corner.
Deli wasn't getting it yet and we wanted to step into that breach, but also use it as a way of sign up small business lenders that will help US you know going forward and I think and so that's been in the last time I checked integrated over $50 million in one's just in the first few days that you know that people would had requested.
And and we're working that through so that's I I was really.
It's not going to be a huge revenue driver, but I was really thrilled with our company people, particularly in a small business reacted so quickly to get up and running and it's a short run not that much effort, but long run yeah, we've got a whole new marketplace now which is.
Letters, so it's a it's great on credit unions.
There is there.
I don't think today.
They they would have the chops to like banks would to market to their existing customers and mortgage, but they're not going to have A.B.C.R.M. and customer relationship jobs to compete with legs would be lending trees on depots windows.
Et cetera et cetera.
So there there however, you know the the lenders who lived in.
Operating on the Internet for Awhile would would still do a lot better.
So the answer that one is no I don't I don't see credit unions, I'm gonna major impact, particularly and refinance mortgage payment purchase mortgage but I don't we don't we don't see a lot, but it's there.
Got it thank you for the call it.
Your next question comes from a line as Rob Wild Heck with economists research.
Parting guys you touched on a little earlier some of the friction in the mortgage market. During March can you just give us a bit more detail on what happened there how you and your lenders reacted and then how that looks today. It was the up coming behind the mortgage business.
Do you want to talk about what what <unk> when you talk about friction in March.
Secondary referring to the secondary market.
Okay.
<unk>.
Well your third good the secondary market, which in March.
For all of our winters.
And you know.
Oh God difficulty Yeah go ahead.
So what you had it in March free very very brief period in time.
Keep in mind that most mortgage lenders, our correspondents, they're selling our lawns and they have to when they walk in alone they have to hedge their pipeline for the 30 60 90 days before that one closes.
And so you're basically shorting the mortgage market when treasury started to to buy in inside of the the mortgage backed securities market It drove up.
The value this parks wrecks securities and.
Mortgage lenders were met with a temporary.
Cash flow problem, where they had originated a whole bunch of new loans.
As they close and get sold off we'll have tremendously high value, but their existing pipelines because the.
Treasury buying a mortgage backed basically had <unk> lenders getting millions and millions and millions and tens and sometimes hundreds of millions of dollars margin calls on their address.
Treasury.
See we're slowed that down in that corrected itself very very quickly, but there was a.
A few days in March where.
We were going Oh, my gosh like this may have unintended with the with the government tried to do may have unintended consequences and the good very very good news is they fixed it right away and it corrected itself and mortgage companies right now are incredibly healthy.
That's great really help that's one of the N.
Oh, well you put that in context for your Rob that's when we refer to capacity and each of our markets in mortgage we would probably or that we probably in the month March we're operating without half the capacity that we were limber capacity in January and February because some of the weaker.
Ranneberger weaker smaller right they couldn't deal with that cash flow issue right and so they were less likely to take our new customers or look for new customers in like a bit is concerned.
Well, we've seen in April with some of that actually come back on line and so that's been that's been really encouraging.
That's really helpful. I'm, just hoping you could also square up a couple of numbers for us on my landing tree.
Press release called out 14.7 million sign up to this quarter I think that was 14.3 million last quarter, but I'm also mentioned 887000 users added this quarter is that just a net gross different tint and if so is that attrition rate normal.
He.
One second to play of discrepancy in those numbers 14.7. It certainly the end of curious number that I know yeah I didn't read the story is not normal.
<unk>.
Yeah, I was going to say, Rob we we have historically.
Given that number like as M.B. announcement date, discord and we moved to hasn't B. and of the period just to try to bring more standardization to it.
So I think that might might be German discrepancy, we can connect on it <unk>.
Okay no problem. Thank you.
Any other questions operator.
[noise] My apologies. Your next question comes in a line as Melissa why don't with J.P. Morgan.
Right.
I think.
Oh first of all I wanted to read Harry Cranky and he managed to hold her lover.
Cool.
That's the only thing <unk> and do just one of them marking trends that were seen pregnant level.
Right way <unk> is it fair to say that anybody back unless the year over year friends emergency started first yeah.
Similar to what we're going to want to this here last year.
[laughter] sort of persistent <unk> the rabbit recovery.
You're going into next year.
Yeah, I think there's a little bit of noise in here in consumer in particular with respect to margin and I say that because recognize that one of the businesses that we were operating a sinner margin last year than normal is our card business.
And that was largely strategic to grow that card business. We're happy to make it you know 200 and north of 200 million dollar revenue business last year.
As you know and the fourth quarter and this persisted in the first quarter. We did have some marketing challenges in cards, specifically than so that does away on the margin profile within consumer yeah eating aggregate, even though you're seeing you know.
The segment profit of 36 per cent that was mostly within card now I do think absent Kobe than these capacity changes.
You think we'd remedied those marketing challenges for card.
We're in a <unk> in that process of doing so in quarter. When all this shit. So I think there's a little bit of noise within consumer.
<unk>.
<unk>, So I think you're year with your your comparisons are candidly a little bit challenging I can barge inside partially because we're also going through this nice benefit of.
Reduced cost of acquisition in in many of our businesses. So like it does trenches pointed out within home, we've obviously see our ability to acquire customers accelerate in this environment and so I I think there's just there's some noise in there when you look year over year, that's going to Miss what's going.
In the background.
Oh.
<unk>.
The only thing I've, I, I would add to that which.
At least loud always look at the business.
Margin percentages.
In my opinion aren't very addictive and we could debate that.
However, V.M.
The M.D. variable margin dollars.
The test of the business because in every one of these marketplaces every product you market to the last profit.
And so you could have the situation for example, where.
Wonder where you have very low lender demand.
And therefore, we're not marketing at all and we're just taking free traffic and you would have extremely high margins percentages, but very low dollars.
What time is you could have.
Lender demand being enormous.
And therefore, you go market into it.
And you know my favorite example used to be if I spent a billion dollars on marketing I got $100 million at P.M.D.
100 million dollar that would be a good investment or whatever.
At a 10% margin and so I I always encourage people to look at the the M.D. dollars line and to see where that's trendy and then underneath that it's basically the supply and demand dynamics at each level.
Yeah I understand.
Yeah.
Yeah.
Okay.
I guess followed by some few around okay.
I know you guys.
Oh and opportunistic <unk> and curious about how you think about the attack inaccurate scares now too.
<unk> opportunity.
Okay.
Yep.
Let me just say, we we obviously haven't were were.
Generally thrilled with when we've been able to buy back our stock during periods of volatility.
[noise]. We've also though we have to consider always what our cash balance is we obviously have if you look at our our balance sheet as I mentioned before relatively Underlevered <unk>, we our company who has been acquisitive.
We did that for a period of time have are considerable cash balance after we get the convert in 2017.
<unk>.
And we're constantly evaluating potential acquisitions, we've acquired you know nine companies since 2016.
While we didn't do anything in 19, but not because we weren't looking at things closely and always considering what we might do so that does factor into it not I I wish it were obviously were.
Obviously, we are evaluating buyer on stock versus inorganic opportunities in acquisitions.
And I wish it all played out you know real time as a given quarter in looking at it and say okay. They bought their stock they think it's cheap.
We always have to preserve that option value, that's particularly true.
When we don't have a huge cash balance we we're we're very happy with our.
Our utilization of our revolver as a reminder, we use cash on hand in the revolver to bike what was your devalue Penguin right at the end of 18 in early 19, and we paid that down a very very well and then we just use a revolver again make the stash investment.
So we're constantly evaluating acquisitions and being mindful of what our potential balance sheet might look like if we go through with one of them that does influence how we.
Think about buying back our stock as much as we'd like to be opportunistic we have to consider.
We have to consider or.
Flexibility and to sometimes that factors into it and it doesn't give you quite as pure of a read as to whether we think are stock is cheap or not.
But we were constantly evaluating it relative to those other alternatives.
Fortunately for us in this environment as a company that being acquisitive, we're very conscious of the fact that a number of interesting opportunities are going to come our way.
And there probably it'd be cheaper than they would've been six months ago, and we want to have the flexibility to do that.
Yep I was going to say something very similar and this environment.
Particularly well, we've seen before where where we're on profitable business models, which could be profitable as part Abbas.
And maybe can't raise capital.
We need we need dry powder to be able to be opportunistic they're more than I think we need to be opportunistic on stock now that could change a month by month quarterback order, but that's good we evaluate them all in right now we want to keep some.
Drypowder around that doesn't mean.
But we don't think our stocks attractive we just think there's <unk>, there's other opportunities versus that at the moment.
Thank you huh.
Thank you.
[noise] gear next question comes in a line of Chris <unk> with Compass point.
<unk> good morning, everyone out most of my question to ask.
One of the clarifying point on how you think about my Lendingtree yeah.
He noted there's personal loan challenges from call you know investment dollar pass it on the other side, but it doesn't seem like you're changing any have your thoughts on the longer term you know leaning and building ecosystem. So I just wanted to clarify that you know in the near term you're kind of willing to give them something I profitability for a longer term vision or or you know <unk>.
My comment if I Miss you know, what you're saying yeah.
Well, there's definitely not a short term sacrifice.
And we are absolutely committed to continue to build ecosystem because we we see the net promoter scores of Mylendingtree users need any anybody who's a member of blending tree.
C.D.N.P.S. very high.
Obviously, the parking costs extremely low.
And the alerts continue to get better so no change in the Lendingtree posture, except we are more and more confident about our product our positioning.
And our ability to win.
Market, where you're trying to acquire consumer and then surround them with all the products to help them make smartfinancial positions and we think we're on our way no change about except maybe going a little faster.
Alright, thank you.
[noise]. Your next question <unk> with like two bank.
Thanks for taking the first <unk> like good one with regard to insurance Wonder during this time for the auto insurance how much of thought that should be Christmas. So people coming back in you know shopping for but for different mug for different.
White or get some savings and what have you. So how much of the revenue typically is as a defeat.
Yes, yes, I have this one but this the on site once we get some color in terms of how you're seeing the market with regard to you know both capacity as well does this type of died and how that dumps dance into some other industries that are more heavily affected by cool, but say you know.
Strong theaters bars, what percentage of yard it everybody comes from these kinds of businesses and how would it be kind of you know oh, what kind of support lovers out they going to really get ultimate kicks will be S.B.A. initiatives.
Thanks.
Let me take the S.B.A., one and then trend interjet he could do the <unk>.
On the S.B.A. side dishes.
And we put out a survey to this result, we're not seeing.
Just in the market money flow into the types of businesses that you talked about.
So we're hoping to rectify that just as a public policy in it [laughter]. However are.
We're just for doing good. However, it also helps us in the longer term because we can sign up those S.P. eight letters.
Terms of risk appetite.
Those S.B.A. lenders aren't thinking about that really because.
The risk is being born by the federal government. So under the P.P.P. program lenders basically make very nice origination fees I believe it's foreign basis points for originate <unk> alone.
But the government takes all the risk.
That's that is merely how made you process through the system.
And then for the other you know the online platforms they'll take as much risk as their capital providers wanted to take risks.
But on the S.B.A. side, they're not thinking about risk or just thinking about capacity.
The if you think about it from a lender perspective on just like a mortgage you make more money on a bigger mortgage the smaller mortgage so if you're a lender you're going to do your existing customers first because they can bert you're going to do your bigger loans first because they're more profitable then unfortunately, you move to smaller and smaller.
Lots and that's what's creating hey, you know challenge in the U.S. economy, I think and we hope to play a small part in helping direct.
It's an answer your question.
And then J.D. wouldn't repeat customers insurance.
Yeah.
Oh I wish I had a statistic for you I just don't 18 insurance recognize that we're not.
This is actually some of the value of integrating it into my Lendingtree will start to get more of a way anything to that and we'll get more information as to somebody's current insurance.
But right now no we don't I don't I don't have a statistic for you in terms of what percentage of the customers that come through quote wizard or repeat customers.
We don't we don't publishes that nor do I have one on top of my head.
That's cool thanks, thanks, Thanks it.
Thank you.
I am showing no further questions at this time I would like to turn the call back to dot glad that C.C.E.O. four close talking mikes.
Thank you all on thank you for for being here during a very interesting times in our in our world what I always like to say during times like these is when the tide goes out you see what's left under the water and sometimes you got Roxy got shells, he got trash and sometimes there's some treasurer.
Two.
What we're going to what I believe we're going to see coming out of this is the change in behavior multiple lover levels I think we're willing we're able to capitalize on it.
The consumer is going to change.
In my opinion, they're going to spend less they're gonna be more conscious about money.
They're going to be more conscious about savings and were uniquely positioned there. We think lenders are gonna changes I've talked about already received lenders, making smart decisions trust that they've done in the past about getting the right types of customers that they can approve they can underrate easily et cetera. We're also seeing when their behavior change in terms of adopting techno.
Allergies being more open to technology, because that release of their capacity constraints.
Then the next one is we're going to see change and competitors, if you've got a money, losing business model, you're going to see people pulling their pulling their orange back in you're going to see.
We're going to see their weaknesses and we're going to see their strength and we already are.
In the last one is internally things change internally, we've been able to change our processes are bonus process. The way, we evaluate employees putting in.
New processes to be more disciplined and in the last thing I would say is that <unk>.
Blending trees, so well position, but instead of having to raise capital like many companies are having to do today to shore up businesses that are losing money.
We have d. unique opportunity to invest our positive cash flow.
Back into profitable projects and initiatives.
During this time when most of our <unk> most of our competitors cannot.
That is a major strategic competitive advantage and we intend to use this time to double down and create those opportunities. So his behavior changes across each of those areas. We think we're better position than anybody else to capitalize on it and we intend to do so thank you all very much we look forward to talk and use it.
[noise] next ladies and gentlemen, it's concludes today's conference call. Thank you for participating you may not disconnect.
Yeah.
[music].