Q2 2020 LendingTree Inc Earnings Call

Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily and so that's on your line do remain on musicals. Thank you for your patience.

[music].

Ladies and gentlemen, thank you for standing by welcome to the Lendingtree Inc. second quarter 2020 earnings Conference call.

All participants are in listen only mode.

After the speakers presentation, there will be a question and answer session.

You asked a question during this session you would need to press star one on your telephone.

Please be advised that today's conference is being recorded if you report any further assistance. Please press star Zero I would now like to hand, the call over to your speaker today Trent Ziglar head of Investor Relations. Please go ahead Sir.

Great. Thank you Ursula and thanks, everybody on the call for forget on this morning to discuss Lendingtree second quarter 2020 financial results I'm on the call with me. This morning, our Doug Lebda Lendingtree is chairman and CEO.

Dirty Moriarty Chief Financial Officer.

Before I hand, the call over all quickly remind everyone that during today's call when I discuss lendingtree is expectation for future before.

Forward looking statements are typically preceded by words, such as we expect we believe we anticipate rather similar statements. These forward looking statements are subject to risks and uncertainties and Lendingtree is actual results could differ materially from the views expressed today.

Many but not all of the rest we face are described in Lendingtree is periodic reports filed with the FCC.

We may also discuss a variety of non-GAAP measures on the call today and I refer you to todays press release and shareholder letter both available on our website at investors that Lendingtree Dot com.

Comparable GAAP measures definitions and full reconciliations of non-GAAP measures to GAAP.

And with that I'll turn a dog.

Thanks, Trent and thank you to everyone for joining the call as a reminder, as last quarter. We took a new approach to managing these calls we published a detailed letter to shareholders on our Investor Relations website and you start time on the conference call to address your questions. We've received positive feedback on that approach. So we're doing the same approach this morning.

As Troy mentioned or letter to shareholders was posted on our IR website earlier. This morning, I'd like to give just a few comments and we can get right. Your questions [laughter] first I'd been consistently amazed at how well our team has executed in this challenging.

Like material headwinds in certain product categories, and the difficulties or the remote work environment. Our team remains especially focused on optimizing every aspect of our business in the near term, while continuing to innovate and drive better outcomes for consumers and our partners over the long haul.

In addition, a terrific execution or better than expected quarter over quarter results are a testament to the flexibility of our model and the durability of this company and.

And with the recent financing activity, we just completed in July.

Balance sheets parts here, particularly strong, leaving us well position to capitalize on the accelerating evolution of consumer finance and with that operator, operator, we can open the lines for questions. Your Nick Your first question comes from Yosef Scully, which released.

[noise] Hi, guys. Good morning, sorry, I had you on mute.

So just a couple of questions on the.

Consumer segment looks like most of the the card issuers are back that's basically what we've been hearing from some channel checks and I think even your linear Larry kinda talks about that but their level of spend is still obviously very depressed one what kinda cpis are they kind of waiting for to kind of increases their spend is it just really.

Just all macro and second anything you can do on your end to kind of.

Sweeten the deal so to speak to too much to maybe get them to commit more more spending and lastly, what have you seen so far in July just in terms of demand for you know the three key components of the business refiners credit insurance. Thank you.

Let me hit some of that and then and then.

Treaty definitely trying and we should also wall, so talk little bit about astute here in Q3 two.

The card issuers are definitely back.

Spend is definitely lower.

And our focus is.

Good on winning and so we want to make sure that we've got more budget than our competitors.

We're doing marketing better than our competitors, but our business is better than competitors.

And we believe could it is based on everything that we've seen and based on our conversations with the credit card companies.

Their spend will come back what were hearing is it's not as much macro as much as it is more micro which is they need to understand what the performance of their current loan losses, our loan portfolios are before they're going to materially take on new ones and I would say that that is if you think about it.

Overall theme of were Lendingtree is right.

Which is where marketplace for between consumers, we're looking for money and small business looking for money and lenders who are looking to lend it for all types of loans right now.

Unless it's a government backed loan which is why mortgage.

The other.

In the private lending market those areas are challenged and we're winning and they're going to come back.

Like the personal line market is not going to be dead forever.

The private student loan market is not going to be dead forever, which is a big Q3.

Business for Us and we're you know we're doing current so in this environment what he told US we said last quarter is.

Actually the people or say our people are safe.

Business is safe and then later and then look for opportunities and that's not to would do.

When you enter.

Sure. So you said I guess I would just say incurred we're encouraged that issuers are back okay, now and T. In your channel checks are reflecting that what your channel checks don't reflect is when they have a reduced payout or tightened underwriting but were.

We're happy that they're back ended the major issuers are dipping their toe in the water now so that's great I don't know that the.

Then then getting more committed spend will be a function of capex is in our network as much as it will be confidence Ian.

Consumer spend right thinking about wider issuing a card would they care about when they when they issuing new card obviously, the credit <unk> credit worthiness of that consumer but also.

I want to spend they want a return for it so as we see consumer spend consumer spending increase which it has been unfortunately and I'm with you saw the article on the journal yesterday talking about what consumers have seemingly done with the stimulus money. That's out there that actually does create a good backdrop for them, but when we think about how we're.

Planning for the remainder of the year, we're not entities.

Surgeons, we think it's going to take some time, if we're pleasantly surprised that it's better.

We're encouraged there on the network now what can we do to.

Induced them to spend more.

We're thinking about that in a very long term way right right. So we're using this period of time to try to test new experiences with issuers.

And to try to take market share in wind as Doug said, so do those things manifest themselves in Q3 in Q4, no probably not a there are things that help us when next year.

And they probably drag a bit in Q3 and Q4 in that anticipation is reflected in the way that we guided for the consumer business were what we have in our forecast for the consumer business for the rest.

So that's cards you weren't we're certainly encouraged that they're back but it's you're back.

In a very small way I'd, rather more then be back in a small way than having to be isolated to one or two issuers. The good news is somewhat broad in terms of them coming back.

You asked another question, which is as we start the third quarter here, how does the trend line feel in each of you know refinancing card in insurance and I would say that in insurance. We've had very good acceleration, which were thrilled with that that in July we're certainly does.

Well digit to mid teens growth in insurance, which we're very happy with.

Into really thrilled with the performance there another standout in the second quarter was refinance.

We did enjoy extraordinary margins in the beginning of the quarter those had normalized in b in that in June.

And we've seen steady improvement in July.

But I don't we're not anticipating when you look at our guide, we're not anticipating that that margin environment.

Resumes in refinance at all we're we're being somewhat conservative with that would that aspect.

We just want to take market share as Doug said card we've touched on.

The other areas of consumer worth noting.

You know effectively we projected when we went out in May and we said, 60% to 80% in consumer it ended up being 71% we've largely.

Prepared for the remainder of the year for that consumer business to be slow to come back the only other one worth noting it student and and so when you look at our guide you have to recognize that.

Student was a huge.

When a year ago in the third quarter that was a business where revenue grew 64% year on year.

And given everything that's going on with fall semester enrollment deferment.

And and reduced tuition spend that market is going to be down 30% and we have prepared for our business to be that more than that.

Because we just don't have as many lenders looking for new student borrowers, so thats worth, noting as well as we take about a third quarter.

Well.

Okay Super helpful. Thanks, guys.

Your next question comes from phenomenon, but do car with Deutsche Bank.

Hi, great. Thank thank John Thanks for taking the question. Good morning, I think questionable get space and you mentioned, a number of new products and new innovations and new initiatives that you were doing that's really resonated with a with the with the lenders can you talk about that and can you talk about how that.

Improved yup yup market shut it down so the talking loans that pass through your system works is that because define what do you is that happened in the marketing Jim. Thanks.

I'll take the second one first so market share declines in this type of environment.

However in this type of environment in mortgage however, in this type of environment. The market is growing substantially and all your and what you're trying to do.

Is make sure you're growing wallet share that while your lenders are they are staying with you.

And continuing to bid with you and hopefully shutting off or decreasing on your competitors.

And that's what we're seeing.

And the new experiences the reasons, we've been able to do that.

Dan as we've improved our college CRM capabilities.

And we are having more interactions with the consumer on our own. We're then able to call it cure rate.

Particularly with my Lendingtree and be able to deliver a quote unquote exclusive lead to a lender.

Still getting choice there is still in there, but it's after they are able to make up more of a selection and were able to Benson one.

Into one lender, while still getting choice.

Lenders and because of that lenders are able to have higher conversion rates through their clogs systems.

So in mortgage as many shareholders have heard me talk about before you've got.

A somewhat people do while you've got in mortgage all the capital you want right now because its government backed.

Conforming space, you get clogs in a refund environment around your just customers coming back to you and other people coming in for free if your lender.

And the Great news this year as we were able to.

More of that volume stick with us, which has enabled us to have.

An outsized Q2, and the flip side of that while we were having a great underperformance JT alluded to.

Our marketing costs went down dramatically because those lenders and our competitors pulled out of the.

Online AD marketplaces, and so our cost of acquisition went down.

It was JD said, we're seeing we're assuming that that normalizes going forward.

However, the great news is that wallet share typically coming out of a situation like this complete.

And so.

As we're talking to personal loan lenders, we want to make sure those guys are with us more in there with our competitors same thing in mortgage same thing card same thing and student same thing.

In terms and a pretty keep growing the wallet share keep getting that percentage the spend about helps on the mark.

[laughter] Katy you have anything you want to.

No I don't want to add I mean, I think you know, we're really happy with the product innovation, it's everything from exclusive leads to.

A product that we're really happy with that is a mid year launch, which is a local loan officer product.

It's all under this theme of CRM of greater identification at the top of the funnel as to where that consumer should go.

In product the efficacy like that is going to manifest itself could better wallet share in a period like this market share is never going to look great because you're just so much organic all lenders so.

So you've got a denominator problem there when you look at market share and we're focused on from execution perspective is wallet share, we're really happy with that.

And so that's the strategy in mortgage and really the strategy across across all product. It just so happens at the product innovation in mortgage and insurance has been really extraordinary.

Great. Thanks, guys. Thanks Judy.

Thank you.

Your next question comes from Nat Schindler with Bank of America Merrill Lynch.

Yes, hi, guys.

Two questions one quickly on the insurance product.

You mentioned insurance been affected basically by market dynamics of people not buying cars and that's taken you down from growth to basically flat year over year.

A competitor in the space that is predicted fairly high growth in this category. This quarter, obviously that ported but this is there anything else going on by dynamic and how're you doing versus competitors and the second question is you're calling for EBITDA guidance next quarter of with the margins are roughly half what they were.

This quarter is there anything other than mix that is really driving that change.

Sure Jeff do you want take both us.

Yes sure in terms of insurance I think recognized immediately in March when Cobot first started we certainly saw some impact from declining interest in new cars in turn new insurance et cetera, and it has been a gradual climb back.

Through the quarter through the second quarter, and we're thrilled with the recent performance.

Some insurance now as it relates to competitors.

We approached the insurance business much the way, we do all our businesses which is.

Wallet share in gains we are carriers right and so.

When you look at year over year gains you got to realize we're we're operating off of a pretty big base and we're happy with the growth in not only the growth in revenue, but the absolute profitability of our insurance business, we're particularly happy in insurance with the product innovation Thats going on there. So I don't spend too much time worrying about.

Our absolute growth rates I worry about the health of the business and in that respect, we're really happy with insurance.

So I think we're going to get to the end of 2020 and say that we have.

Not only a bigger business, but a healthier Warren and great prospects for 2021. So that's that's insurance as it relates to the margin.

In Q3, you got to recognize we're not getting contribution from our consumer business.

And one of the businesses in there one of the big businesses and there is personal loans, which as we've always talked about is.

One of our highest margin big businesses, because it's so tied to my Lendingtree and so recognize win win personal loans.

Is diminished.

For all the obvious reasons that we're experiencing.

That is going to factor into Q3. So it did that is mix and that is most of it.

I mentioned skewed so thats just a tough comp issue and then we've assumed normalized margins in mortgage now there are a few things in there.

To to Q3 on the Opex line that are worth noting.

We did.

Some of it is hiring we paused hiring in Q2 briefly and we asked our teams to come back with a plan b.

And that mandate on plan B was that hires that are made in the back part of this year.

Has to be within Lorraine, obviously to 2021 of the opportunity there and.

And so we're actually very happy to people came forward with.

Aggressive plan beats and so we will have.

Some lift in hiring in Q3, which is reflected in our guide.

There is also net worth noting.

A fairly meaningful pickup in rent expense in Q3, we are moving next year in Q1, we will move to our new headquarters, but from an accounting perspective that.

That rent expense needs to be recorded as soon as to the building is technically available.

And so that is embedded in here and that is.

So these expenses the new headquarters is 1.6 1.65 million of expense in Q3.

Hiring is about 1.5 do I think there'll be some favorability there likely and then there is.

Some technology spend associated with the new headquarters as well.

Tech expense ends up being.

Spoke new headquarters and some some.

What I will call scaling expense on the tech side, that's about 1.2.

The one notable thing we do have about 350 of expense in there we expanded benefits for employees around cobot.

And also added to work from home sites and all things we were happy to do for our employees. So there are some some things in there on the Opex line that are worth calling out but most of it.

And I think conservatism around what we think margins could be in in mortgage.

We.

When we spoke to you in May and we gave our one look one quarter forward guide, we were conservative and we're going to continue to take that approach, but I'd be.

Just quickly a JV with those expenses, we should see assume those expenses continue indefinitely. So this new barge and level should be other than mix shift changes should be a new normal but you grow from.

Oh, well not everything in there is going to be definitely recognize the deep facilities expenses heightened in these two quarters and it will start to normalize next year right. We're we're paying for more facilities for a short period of time that we need. Furthermore, the technology minded more onetime sorry.

Good.

Oh, yeah and on the facilities and keep in mind right now security. So from an accounting perspective, we're literally paying for a building that is theoretically available to us, but it's still being constructed.

So it's we're duplicating expenses worst we've still got.

Facilities in Charlotte, where.

People will be able to go back to and from an accounting perspective riding on another expense from a building that still being constructed so that's the.

The double count there so that definitely goes away from the only thing other thing I'd add is as these loan types come back.

As these product categories come back that nothings returned to the.

Normal hopefully plus additional.

Wallet market share.

Great. Thank you.

Your next question comes from Jed Kelly with Oppenheimer.

Great. Thanks for taking my question just to kind of follow up on the non variable.

Marketing expenses are your operating expenses.

They're not that different.

From what you initially laid how at your Investor day back in December so.

So does that mean like can you believe.

You can get back to that revenue, let Brent level. The next 18 to 24 months or just how should we be thinking about the overall recovery and when can you get back to your original guidance that you laid out.

At the beginning in 2020.

You do you want to start no.

Yeah, Yeah yeah.

Good.

There were there not dramatically lower when we went to people and said plan B, we didnt say give us your bare minimum we said.

Really think about don't think about the annual budget think about the needs for the business over the next 18 months and so we are staging that hiring he did the hiring piece of it is lower.

[music].

The.

It is lower it is not dramatically lower and it is absolutely reflecting the fact that we do see that revenue opportunity coming back we wouldn't be enabling plan b if we didn't.

So you're just seeing a different timing of that hiring relative to us pausing a bit in Q2 and then.

Staging the hiring a little bit differently in light of the changed environment.

And the only thing I'd add is [noise].

This is all.

Project and financially driven so if you started the bottoms up you have a certain amount of fixed cost to run the company.

Do you need to finance Department, you need to you.

You need.

Headquarters if you will.

And then after that a lot of the costs are driven variable variably.

Which are obviously the cost nothing's variable in the short run, but they are variable in the long run.

And even Pennsylvania call Center, and marketing, obviously, which is the biggest variable, but even inside of technology.

Those projects are still done even though over a longer term basis on an IR are.

Focused way so what you're seeing as if we're holding for example.

Cost constant that means the underlying those costs or projects that they're working on that are going to make us money and we have confidence.

So while we didn't.

Well, we laid off the gas pedal because in order to do that because underlying that pulling off the gas pedal is that your unit economics are changing in the midst of coated and you are not sure where they're going to be and then once you get confidence in those.

Okay go back on.

And in this.

Our third financial crisis.

We.

Really did try to lean in.

Once we knew that our employees were saved in the business was safe and that the business was going to be solid and then as we said, we're just focused on winning and so there are still great things that we're doing and so the work in product attack and front in mortgage for example from last year came home this year.

Workover doing last year and product in tech would have come home and some of these other line small business, however that market might away the market comes back.

Businesses, I think better but it was before so.

I'm thrilled with the resilience of the sounds.

Business and the fact that we're not.

Losing money in a period like this I mean, if you go back in time and you look at.

How things have another financial crises they were.

Very very very very difficult.

And instead.

We're making money.

We're beating our competitors and doing very well.

And able to access the capital markets M&A market is gonna be.

Very interesting and we'd get to go now hunt for opportunities as opposed to being a defensive.

Okay, and I guess, just a follow up on the M&A commentary Doug.

Is there anything new that you're looking at with the additional capital or is it still looking at opportunities on the asset side of the consumer balance sheet or anything else sets.

You've seen because of this pandemic thats more interesting.

JD Ken.

Comment more weird.

What we always have a very robust pipeline and we're always looking out and we're always between strategy and finance trying to make sure that.

No we're doing the right things.

And now we've got a lot of dry powder biggest change that I've seen our valuations coming down as you would expect.

That's what we're experiencing.

Smaller companies experiencing however, its massively more magnified because they don't have the brand awareness in the history with prior customers and ought to protect already bill.

Necessarily et cetera, et cetera, et cetera, So you start to see valuations coming back into a realistic mode rather than.

[noise] 50 times revenue three years out kind of things.

Good.

The only thing I would add yeah doing I would add Jed is that we get asked you know we commonly get asked the question like our more things coming your way because yes.

The answer is yes, more more interesting companies are coming our way, but not all for the same reason.

It's not a scenario that everybody being distressed.

In fact in some respects this period of time has actually.

Demonstrated the attributes of some of our target companies or the companies that we just tracked over the years and so you know in some cases some of those companies are experiencing.

A greatly diminished.

Cost to acquire customers.

And so thats actually giving them more runway.

And so we've got to analyze is that a sustainable dynamic or non right. We've experienced didn't some of our businesses. So we have good experience with it onto it it's changed a little bit what I would say is the volume of things that are coming over to us is increasing certainly if somebody is narrowly dip.

Pendant on one or two areas like credit card a personal loans. Those are companies that are having trouble right now for the most part.

The our focus areas continued to be the same generally the asset side is interesting we've mentioned small business in the past that continues to be interesting. We think that category will be very interesting longer term.

And so now the categories are still the same and I'd say, we're busier and we're really encouraged.

Thank you.

Thank you.

Your next question comes from Mark Mahaney with RBC.

And Mark.

Thanks the.

I think a two questions one is that.

Lendingtree revenue contribution was a little on the lower side I think thats, just largely due to the weakness in personal loans I know, that's a big MLP categories. So just if you could confirm that and then the other question was the variable marketing margin was.

Unusually high this quarter.

Or anything that you could pull from that that could make it sustainable going forwards or at least you'll pull up that VMM from where it was historically or is this just a a cyclical reality of where the businesses and and its natural to expect that to kind of flowed back down to those mid thirtys levels. Thanks a lot.

Let me start and then I'll, let Judy out on on my Lendingtree, Yes, affirm personal loans when you sign up for my Lendingtree, you're getting alerts to save you money typically.

Also improve your credit and these things credit card consolidation for other debt consolidation personal.

And with personal loan lenders pulling back.

There are fewer savings opportunities. So you just.

I can't say as many people money.

And that's okay, because we only want to send the right message to the right person right time their lives.

Mmm piece it was obviously unusually harsh high on a percentage basis this quarter because of the very low payout the very low.

Cost of acquisition mortgage that I talked about before things that we would learn from this period going forward would be.

The continued emphasis an effort on.

Recurring revenue.

And the gets again for your first transaction awesome.

And keep you here for the rest of your life.

Exceptional and that's where we're continuing to focus on that.

And as JB set on the M&A side, that's where as you look at thanks.

Outside brings in more customers more.

Ways, you can save them money more interactions more waste engagement and that hopefully over time, not hopefully it will means less dependent on.

Paid marketing now, but other thing I would add though.

Is can you know those from.

Other internet companies is if you're.

VMM dollars matter, where more and more.

Outerwear more to us than VMM percentage, because we'll market up to the last profitable Bauer.

And that changes intraday intra week and the more products you have the more you can also got across products as well too if you've got your marketing analytics, right, which which we've got pretty well now.

JD.

Yeah, that's I mean with and that's the part Mark that may gains during the first part of the question Doug. It's mostly just person, it's personal loans and as that business opportunity at revenue opportunity goes away that contribution my Lendingtree is going to go away and Furthermore, and we called this out in May acquisition in my Lendingtree consumers is going to be somewhat diminished.

Because of PL interest diminishing.

And so as that comes back you will see my Lendingtree is contribution come back the second question.

Thing that makes it hard to answer is we're always going to go after the opportunity.

And so they're going to be period. The time, when we are going to be able to enjoy great margins with no degradation to the revenue opportunity. We just experienced that in mortgage for a period of time and had great great margins.

But ultimately what we're trying to do is take wallet share and go after the dollars and so you know.

There's a range there on margin.

Pardon Nats question before was what is the new normal we're most focused on is.

Is that we are able to navigate.

Whatever environment comes our way.

Because we have one product that's struggling for obvious reasons something else is picking up the slack and executing head to.

To to make up the difference that's what we're thrilled with and that's how we're going to Miss.

Okay. Thanks, Doug Thanks, Judy.

Your next question comes from John Campbell with Stephens, Inc.

Hey, guys good morning again.

Hey, that's my Lendingtree, just really good user growth. Despite the market pressure I don't know if you guys can talk about your approach to kind of capturing more users and as best you can tell how much of that growth is kind of simply organically driven versus maybe more direct marketing spend and then any plans kind of pull harder on that lever I guess is the backdrop firms up again.

So I'll start in the JT going on right now.

It is mostly organically driven through interest from our other.

Loan products coming in for filling out Q ups.

And we we had plans.

And there are still there that as the unit economics come back we absolutely want to lean into marketing.

That.

The good news a coke is it's given us more time to get the product even better we've got some really exciting product launches now in the back half a year on that and.

And everything underlying it really comes down to the unit economics, So as you've got more work that you're able to send out your revenue per customers going to go down and or therefore, you can't go to the marketing go do the advertising so that is doing extreme.

Well, our organic growth and we've gotten better and better ads.

Getting often there so.

That's a that's where that is it.

I'm actually really really pleased to because the product is very good people love it.

The users are growing and the economics will come back and.

For everybody and even on mortgage I'm, a little bit of Mark on Mark's question The unit economics underpin.

Everything you do so in mortgage for example, and underlying unit economics for lenders is really their conversion rate from a quote unquote lead or call or click into a funded loans. So as we help lenders improve their conversion rates.

By those better user experiences by understanding more about our customer.

Then they improved their bids so in mortgage for example, we were able to retain.

Yeah.

Retain better than we otherwise would've bids because of the movement of our product where we were.

And so then our unit economics in mortgage were better on the revenue side on the cost side, we're also better.

Downside and then you just basically marketing against capacity.

And and how much lenders can handle.

And because of exclusive they can handle more so that helped but obviously or you're still bumping up against their other organic capacity and same thing it's true my lendingtree. So.

Users continue to grow satisfaction continues to grow the product gets better.

As the lenders come back that things are going to saying.

Even laddered Americas.

Okay that makes sense I appreciate that Doug and then last one for me I know it's still early.

But any new findings are kind of developments with stash and then maybe how you guys you're thinking about kind of integration roadmap and how it's going to weave into my lendingtree over time.

Yes that we are.

Integrating and we've got teams working on it and I'm going ask JV to comment more can be sitting on the board there and.

And we are.

Excited about where we're headed with them.

And I'm going to leave at that and handed over to Judy.

Sure.

So.

We.

John We're we're really excited about it I think you're going to see some things roll out I'm not sure if there will be totally evident.

Via channel checks, but you'll see some things roll out probably starting in September and through the end of year.

And there will be a few different categories, one will just be pure marketing partnerships, meaning.

How do we migrate somebody from a lendingtree experience to attach experience from marketing perspective.

We're trying to do that with being true to kind of the consumer experience right make sure now make sure that were not.

Screwing up that that experience brighter consumer right.

The I think you'll start to see some of that now one of the interesting thing happened is in this environment for stacks I mentioned earlier that that a number of companies have seen their cost to acquire customers go down.

That has made it.

A little bit more of a moving target can make it work for for them and for us.

And so we're working through that but I think you'll see something in September there now the thing that we're really excited about however is the opportunity for us to bring.

Some of Lendingtree is capabilities to them keep in mind, when we talked about them very product centric.

The company with a great user experience, what they've not had or any credit products. So what you're most likely to see first is them their consumers have access to personal loans.

And that's something that when they've done consumer surveys that something that's of interest there as well as their consumers have access to essentially the my Lendingtree platform.

And we were calling powered by Lendingtree, which is essentially credit score plus our intelligence stack. So everything we built in my Lendingtree rolling through to their customers.

And those are probably the first two real applications of product between the two companies over time, what we'd like to get to is to say, okay, let's take that stash product and make it available to the my Lendingtree consumer.

But we're going we're going slowly so we do it right and we're really excited about everything that we can do with them.

Okay. Good update thanks giddy.

Thank you Jim appreciate it.

Your next question comes from Eric Wasserstrom, what the B S.

That's fair.

Hello, how are you.

A couple of questions. Please yeah. The first is.

We've touched a lot on.

On elements of the of the cost structure, but Doug I just wanted to revisit.

Maybe the philosophy around investment.

Historically, there's been a you know with call. It access revenue as a lot of that has gone into to driving future growth and so I'm just curious to understand how you're thinking about the medium term growth opportunity at this particular point given.

But there is so it's such an unusual market condition and there may be in fact, some you know some permanent destruction too.

To lending capacity and certain a vertical.

Great question.

As I said everything is ROI based and so you've got a pause and then you got to go back and make sure our wise right and this is you know speaking from your CEO, who is also an accountant. So these things really matter me.

And.

So once this however, if there are still positive you got to go do it.

And.

How can I believe the opportunity around CRM is so fantastically great.

And when I say CRM, our new unit in the true sense and customer relationship management, not only what I'd just alluded to in terms of getting a repeat usage.

But in addition, and you've followed us forever.

The conversion rates and you can just take one example.

We can take the mortgage refinance conversion rate from 2% to 234 wherever it is today, okay, because I want to give exact numbers to the 10 fifteens when it was in 2567 now.

Very very different market than where everybody could obviously got alone.

However, technology has advanced.

And we still see for example over.

Half of the customers, who are coming to lendingtree or even tire kickers, they're actually going and getting loans, sometimes from people on around network and obviously doing the same old thing they've always done which is using lendingtree shops and we.

If somebody else.

Totally fine and by the way in a declining rate environment that gets even more exacerbated because you go get a 3% rate on Lendingtree today, and then when you show up at your other bank, it's two and a half tomorrow or are they moving from a 30 year fixed or five one arm. So as we are more interactive inside of the log.

And experience of Lendingtree.

Those conversion rates move up the bids move up and an opportunity.

Just inside of our network is astounding.

And I could move over to personal loans too and we could talk about approval rates and our level of integration with our lenders.

And the fact that a whole bunch of those people go under served that could go served if as we have better integrations with our markers and we've got some really exciting things going on there.

When you move over to credit card and you start to.

Talk about the same types of things would be able to get preapproved offers and when you look at an easy way to say it is leakage.

If you just converted to people who are on our site.

We're touching us today.

Yes.

Slightly more effective way.

You.

Grow the business dramatically without even factoring in that your marketing is now more efficient and that's why the product investment continues because.

Still positive.

And pulling back on it would be.

The wrong way to go.

At least from my perspective, as a shareholder and from our other shareholders, who sit on the board and we're.

In the fact that we're doing it.

I seem to shows our confidence in it because when the stock.

Thank you everybody was worried the easiest thing to do would be to go through.

Throw out a bunch of stuff, but the good news is that we had tracks laid down last year between financing strategy, we're able to that.

No.

We're able to nortech capacity better and.

And the projects still made a heck of a lot of sense so until they don't.

We're going to doing now inside of that.

I will also say that when the time goes out internally you also see process, but need six areas that you were to true bureaucratic areas, where you're not moving fast enough and all of that get sticks too. So that's a great opportunity for our employees I told them that now see opting to fix everything that was bugging you lendingtree.

And could opportunity of fixed contract process and all the internal things that actually make the business runs new there and that's all happening to and part of that is because the specter of Lendingtree you, losing your job not having something interesting to work on et cetera.

Is is not hang over here.

And so you know your health as a from their job is safe and now you're still doing interesting work and just doing it.

I mean, that's our posture.

Yes, thanks, Thanks for that and just maybe a couple of follow ups.

Doug are you seeing any.

Any creation of capacity in the mortgage space through this to this refresh cycle.

Yes.

Absolutely that is definitely so the the move to exclusives definitely helping us and lenders streamlining technology is.

Is absolutely, helping so you can look at a quicken loans in the rocket mortgage technology, which is less a human [laughter].

Necessary.

And.

That.

That then their technology providers, who are providing that across.

Two other lenders as well and all of that automation. So you can look at the Black Knight's you can look at the optimal blue et cetera, and we work with all of these companies and you can.

And then the Ellie mae's of the World.

And then the internally built systems as well is definitely making.

Originations easier to do and removing some of that capacity constrained.

If we get to the day were mortgage is money constrained not human constrained.

I see you could see.

Then you would see liquidity in the housing market.

Mortgage market that would be.

Really really interesting.

Except for the cost to do.

Right.

I'm sorry go ahead.

Eric Some of your question is like are there new lenders emerging it's not so much that we see new we're obviously going through good cycle, where they're making money.

Doug's point isn't important one which is all the innovation around it enables them to have greater processing efficiency et cetera, so that that benefit to us right in general.

What we're seeing is actually some of those lenders who had been.

Further down the stack for us in terms of activity getting more accurate. So you know when lender used to be never tenant network is now number three on the network and things like that which is reflective of added capacity right. They are using that automation, they're using that technology to scale.

And thus, becoming a and then they're able to be a bigger player on our network as a result of that add capacity.

Thats, a matt no so much new entrants yeah.

And that's actually a really interesting point because that to the is really talking about the long tail effect and as.

Smaller lenders can compete with the big guys.

You get less revenue concentration, which is we always generally of revenue concentration in side of individual loan products is the winners when however, the winners typically change.

And that's what you're seeing but seeing lenders, who historically have not been able to compete with the bigger guys, who can now compete inside of the marketplace, we help them and they help themselves and we really worked with them that is.

It really really good signal for me because that has been historically a challenge that you had really a bifurcated.

Marketplace in mortgage we've got.

Absent the have nots in the have nots have been.

Living off of what the have either don't want to do or can't do for the last few years now.

It's getting much more equal and it's really interesting.

Great and then just last one for me.

JV can you comment a little bit about.

How you're thinking about the the balance sheet position going forward and your thoughts on on leverage and you know if there is continued room to to maybe optimize leverage.

Some of those for some of the.

Financial condition issue.

Yes, absolutely so listen we've had a good fortune of.

We if you think about the last few years, we we issued a convert in may of 17.

Yes, and their balance sheet that cash enabled us to add cash can coupled with our revolver enabled us to do the acquisitions that we did in in late 17 and through 18, and then ultimately when we acquired quote Wizard and value Penguin, we utilized our revolver.

And our revolver that showed best very well.

And we.

New that we had at cash generative business, we'd pay that revolver down quickly and it was very efficient, but we did operate through 2019.

And until recently with.

Less cash on hand than I wouldn't necessarily like it wasn't a problem is we had revolver capacity.

We paid off prior to our investment is actually we had paid off 165 million in a revolver.

And but we were operating with a at any given time 75 to 100 of of cash and for a company of our scale that this acquisitive as we are that's not really where I want to be.

And so the recent financing enabled us to do a number of things it enabled us to deal with near term maturities right. We bought in 130.

The existing convert with the with the proceeds from the new.

We obviously have a bullish view on our stock because the equity outcome.

For us on that convert will not occur until north of $700 to share and so we're able to tap the convert market again.

We were able to pay off our revolver.

And in terms of leverage we're pretty comfortable with.

We will be comfortable with taking on leverage I think we.

In this scenario, we find ourselves now with.

The ability to maneuver from an M&A perspective, we have cash on hand, we can look at acquisitions of great scale will continue by the way I think very effectively to continue to do the small acquisition Derek that you've seen us do and make grow faster those are still things that can really contribute for us, but the financing enables us.

To really have a lot of flexibility to look at bigger affects.

You look back at quote Wizard at that point it was our largest acquisition at $370 million and it had a huge contribution 27% of last year's revenue.

And performing great. This year. So we wanted to be even in a position to affect things like that and not have it'd be contingent upon financing and that's what I'm. You know the recent refinancing that we did will enable us to to be acquisitive.

To take on leverage.

And and be aggressive, but she is what we should be doing right now.

Okay. Thanks, so much law that.

Thank you.

Your next question comes from Rob Walt Heck with Autonomous research.

Good morning, guys I wanted to jump back to the mortgage discussion in the product development you highlighted there.

Big Picture do you think that these innovations are something that can permanently reduce the impact that changes in capacity can have on your business.

Yes.

Yes.

Yep.

No no I'm, sorry, I didn't know very short answer the short answer is yes.

Mortgage market has Dan.

Over watching this now for 25 or so years.

The mortgage market because it has been from a lender perspective, so cyclical by the way we've removed the cyclicality by the way, we do pricing et cetera as has been under invested in from a technology perspective, because resign from lenders are.

Chalk fall and just trying to make as much money as they can and when it flips their poor and losing money I'm trying to figure it out and user business and so it makes them very difficult for them to plan for the long term and so it's taken for better for worse.

25 years from when I thought it would have thought it actually existed.

And it's getting kind almost there, but if you go back in time, you'll see like go online loan applications from mortgage dotcom and like 1999, I think and usually it didnt agree.

Microsoft was doing something in 2000, and withstand with Freddie Mac or we were part of and basket. So.

Yes.

Thing now and as you've seen in areas like personal loans with companies like prospering lending club et cetera that market, we were able to sort of Hawaii and have it take off very quickly because it was less sensitive to credit cycles and.

So we thought and and you had people there who were online from the beginning as opposed to offline moving online.

And you don't necessarily need.

Tends to talk you through I get a personal loan like you do with a mortgage so.

Cancer is the long back to the short answer absolutely.

Thank you.

Saga.

No no she's going to.

Yes, as one way to think about it is as we add products and make it said that it's not one solution, we increase our odds of.

Expanding our addressable market right there are winders, whether their bank lenders or mortgage brokers for that matter 14. The lendingtree solution has not historically worked.

As we innovate the product and give it a different feel for different types of of use cases.

Our odd of expanding.

Base of lenders.

Increases and that will diminish the volatility just by definition.

No that takes a long time, but some of the things that have occurred this past year that are largely directed or at our existing lender base should actually be very extensible to a broader base of lenders brokers banks et cetera. That's that's what we're excited about.

And I'll give you. One example, there and that's a broadening of the lender base.

[music].

One example, there is many lenders operate with decentralize locks.

As opposed to having them and call centers.

And we've developed a solution now we had a rudimentary solution for years ago, but now lenders who have that.

We can manage that the challenge of managing bats is you're not managing capacity at the entity level.

So you're not saying lender ex once.

A thousand new customers today, you have to say they want a thousand new customers I mean, you distributed.

Five to this person in des Moines.

Six in New York City to that person seven over here six over there you got to manage that at the local level and managing that the local level is.

Gets you into more of a.

Homeadvisor like management, which is which requires.

More analytics more liquid gets more complicated and.

We've got that now so that enables us to expand the lender base as well, but yes, the one and the lender technologies, just continuing to get better citizens structurally different.

That's really helpful. Thank you.

Sure.

Your final question comes from Josh Lamers with William Blair.

Okay. Thank you just two quick ones from me.

First for a couple of quarters now you guys have noted that work from home.

Element has been benefiting the insurance agent segment, while carriers, probably remain a bit reluctant.

I'm, hoping you could expand a bit on that a bit and why that's the case and then second I was hoping you could touch on the progression with a publisher platform.

You know last December when you were talking about that it sounded like a fairly large incremental opportunity that could take hold in the second half of 2020.

Although I recognize that koeppen, maybe impacting that's great. Thanks.

You want to take that.

Sure.

Yeah, what we've seen.

I wouldn't say that it's fair game reluctant what I would say is what we've seen.

In Egypt behavior.

During this cobot period. He is a more more interest in our services. So our agent business is doing very very well and perhaps agents working from home or being a more more aggressive more commercial but we've just seen a big uptick in the agent business I wouldn't necessarily characterize it as.

Reluctance and carrier.

And Weve entered into we broadened our base of agents and that's one of the best performing businesses. The publisher platform has been has been excellent for us.

And one of the really exciting things there is that that whole.

Orientation of having the publisher platform has enabled great synergy between Lendingtree and quote Wizard arm as you think about we can refer publishers, who have a relationship with lendingtree into that funnel.

To be served by quote Wizard.

And we've seen we've seen a lot there that we're excited about so.

The publisher business continues to do well the agent business continues to do well.

It's just it's an execution story really at what we hear that with Robert.

Okay.

And I have I was perfect I have nothing to add ons.

Big Let me just one thing I would say in ensuring that just fanatic interesting thing when when we quote Wizard.

Did an excellent job penetrating.

Certain carriers and it was generally would one product.

If you look at the success story there in the last year. It is in getting a carrier with whom you have a great relationship in nearby clicks to then say, okay clicks and leads were clicks and calls so it's really a product attach rate story.

And so they continue to innovate.

With products.

That will expand the opportunity to can you just keep doing that.

And so when I say to execution story, Thats really the strategy and that there were really happy with.

Well.

Any more questions.

Operator, there no further questions I'll turn the call back over to you for closing remarks.

Great well I just want to thank everybody for being here today and I've said this already today, but I just want to reiterate it at the start of.

Okay, and I told our team make sure people are safe that make sure our business is safe and when those two conditions are head lean.

No everybody else is freaking out six the stuff you always want to fix look for companies that we wanted to buy look for great people, who want to hire and help our community and help our customers and that's what we did so today, where a much stronger company. We're tighter as a team we use this crisis to hit the capital markets perfectly to raise more money and.

We are now spending at judiciously in a world of opportunity.

Lendingtree is stronger than the Lendingtree ecosystem is stronger and we feel great about where we are going heading forward and I want to thank you all for your continued support.

So our shareholders and we look forward to talking to you in a few more months. Thank you.

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