Q1 2021 LendingTree Inc Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the Lendingtree, Inc. First quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
If anyone should require assistance during the conference. Please press Star then zero on your Touchtone telephone.
As a reminder, this conference call is being recorded I would now like to turn the conference over to your host Mr. Trent Ziegler, Vice President of Investor Relations.
Yeah.
Great. Thanks, operator, and thanks, everyone for joining the call. This morning to discuss lending trees first quarter 2021 financial results.
On the phone with me today are Doug Lebda, Lendingtree, as chairman and CEO and J D. Moriarty currently our CFO.
As a reminder to everyone. We posted a detailed letter to shareholders on our Investor Relations website earlier today and for purposes of today's call will assume the listeners have brought that later on we will spend most of our time on Q&A.
Before I hand, the call over to Doug I also want to remind everyone that during the day call. We may discuss lendingtree as expectations for future performance any forward looking statements. We make are subject to risks and uncertainties and Lendingtree, Inc. Actual results could differ materially from the views expressed today.
Many but not all of the risks we face are described in our periodic reports filed with the SEC.
We will also discuss a variety of non-GAAP measures on the call today and I refer you to today's press release and shareholder letter both available on our website at investors that Lendingtree dot com for the comparable GAAP measures definitions and full reconciliations of non-GAAP measures to GAAP.
And with that go ahead Doug.
Thanks, Trent and thanks to everyone for joining the call today.
The first quarter's results demonstrate the core strengths of our business and the continued momentum we're seeing across all of our segments. We once again substantially exceeded our prior guidance.
And our perspective on the remainder of the year is improving as the economy continues to gradually reopen our homes segment posted record revenue in Q1 as consumers and lenders increasingly turned to the Lendingtree network to fill their mortgage needs are deep lender network World class marketing machine and product evolution have enabled.
To continue to scale, our mortgage business throughout market cycles.
Our insurance business continues to perform consistently well as a market leader at scale and is clearly less susceptible to macroeconomic conditions, we continue to diversify and strengthen our insurance business by expanding into new traffic traffic acquisition channels, expanding our carrier network and growing into adjacent categories further adding to the Durham.
<unk> of our business model as a whole.
And our consumer segment continues to show tangible signs of recovery one quarter. After another we see clear signs of returning demand from our network of lenders and it's only a matter of time before consumer demand begins to return to pre pandemic levels. The economy is reopening consumers are beginning to borrow and.
Spend and we're confident that our consumer businesses will continue to accelerate throughout the remainder of the year.
In aggregate, we feel really good about the overall health of our business.
In addition to the quarter's results.
We are also announcing this morning, a realignment of our executive team to further propel the business forward.
And I'd like to just touch on that briefly the breadth and scale of our marketplace across categories.
Undeniable asset in a core competitive advantage for Lendingtree.
And it's also become clear over the last several months, but in order to sustain the levels of growth that we've historically delivered certain aspects of our business deserve more focus and we are organizing the company accordingly.
You can all read about this in this morning's press release, so I won't spell it out in too much great detail.
But here is essentially what we're doing.
Neil salvage is going to continue to lead the core Lendingtree business, and we will endeavor to streamline those key assets.
Scott <unk>, who founded quote Wizard will continue to oversee all things insurance, which has different and unique end market dynamics than our other businesses.
Scott will begin reporting directly to me.
And I'm thrilled to announce that J D Moriarty will be moving into a bigger operational role leading what we are calling Lendingtree next this division of the company will encompass our more strategic initiatives, including our all evolving consumer experience my Lendingtree strategic partnerships enterprise sales corporate development and <unk>.
Our operations management.
And finally with Jd's transition Trent Ziegler, who you all know very very well will be assuming the role of CFO trend has held leadership positions throughout our finance team and F DNA Investor Relations and Treasury for the last eight years and this is a natural and well deserved progression for him.
These moves should should signal our commitment to investing in this company for the long haul while our core business is incredibly solid we recognize the need to focus on continued innovation and we are aligning our people to support those efforts.
To personally congratulate each of these leaders on their new roles I'd also like to thank our HR team our board of directors, who provide a great deal of thought leadership throughout our decision making process.
And with renewed energy focus and support I'm incredibly confident in our ability to scale. This company very long into the future and with that operator, let's open up for questions.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one on your Touchtone telephone. If your question has been answered all your was true.
Move yourself from the queue. Please press the pound.
T.
Your first question comes from the line of Jamie Friedman from Susquehanna.
Trent JD Scott Neil Congratulations.
New assignments I wanted to ask.
Maybe adjusted Doug.
So.
<unk> has seen the economy through many transitions over the years, whether it was the global financial crisis of the dotcom bubble before that.
I wanted to get your perspective in terms of COVID-19 and today's reopening themes, Doug would you say, you're a beneficiary of a reopening trade and if so which parts of the business and why thank you.
Reopening trading I'm going to leave the technicals of that to you all.
But I would say.
Here's where we think the future kind of recovery goes which is really along the consumer business you hit on it that we have.
Weathered many cycles.
This past year was probably the first time in Lendingtree history, where we were able to.
Where we didn't see lenders shutting us off as their volume.
Kicked up.
And so we didn't we're going to continue to grow in mortgage but.
But definitely in the consumer businesses, that's where.
We expect to see.
Our renewed growth the credit card company in the personal loan companies are starting to make loans again and then.
And then they move into the online channels, which is where they find lendingtree. So I think that's probably the.
The most likely clinical reopening J D. What do you think.
Yeah, Jamie it's a good it's a good question. It is I think there are two ways of looking at it obviously as you know there are a number of companies that are clear what I would call clear short term beneficiaries or clear company, they've got five years worth of brand awareness through COVID-19.
Without the marketing spend.
We're certainly not in that category. However, I think longer term, we are absolutely a beneficiary. If you think about overall marketing spend for our financial services partners in any of our categories, whether that's in home, whether that's in credit card personal loans or insurance.
This what we've just been through we think is going to move more and more of that spend online. It is going to force those who had not adopted to online channels of marketing keep so that's going to take some time now obviously we've been through.
The short term of it.
We think we're getting through the short term of it in our results are testament to that we're seeing signs of recovery there longer term. We think this is very very good for our business. So yeah.
Most times people use the term a reopening trade theyre thinking about a beneficiary in a one or two quarter way.
As the as the reopening of the economy as you see as you see things like New York City opening this morning Geez, what does that mean for Q3 Q4, I think we will benefit some eye care much more about the long term impact, which is more and more marketing spend is going to come online and that's been a benefit each of our segments.
So I do think so I don't think we're as obvious as some of the other ones, but I think longer term for sure.
Great I'll jump back into queue. Thank you.
Yeah.
Your next question comes from the line of Jed Kelly with Oppenheimer.
Great. Thanks for taking my questions two if I may.
Just J D or Doug can you talk about how we should look at the unit net unit economics or margin and sort of the consumer segment adds as products start to come back and particularly in credit card personal loans and then just just with the new management structure.
Doug.
How does this tie into my Lendingtree and some of that stuff you talked weighted at your last analyst day.
December 2019, thank you.
Yeah, why don't I take the second one first and then J D take unit economics.
So how this ties into the newer ties into my Lendingtree.
My Lendingtree and our post submit experience are going to be reporting into J D, where we're going to be doing a lot of experimentation and innovation.
As I said, we're going to have that inside of every one of our business units.
But that's where we're really going to focus on continuing to get that to ramming speed.
And the numbers are looking very very positive.
From that front and if you just think about what we're really trying to do it.
At a high level is basically.
Take one bucket, if you will of product and tech work and be able to split it up into three different.
Stream so the weekend.
Move assets around them too.
Priorities change.
So there's definitely.
The next group within Lendingtree is all about improving the unit economics, all of that improving conversion rates.
Hopefully getting step change improvements in NPS.
And then the powered by Lendingtree, which is co branding et cetera with partners that some jd's world.
And so I think it gave us a lot focus in that world and it's also going to get.
Neil and team a lot much more ability to focus there and we are calling internally, we're dividing and conquering.
Jay do you want to touch on unit economics.
Yes sure.
You can go ahead and talking about your new role too.
Yeah.
Well, that's okay, I'd, rather talk about unit economics.
<unk>.
Jed, we can obviously talk about that alignment.
At any net any length, but I think we're just excited to have dedicated focus on those things I look at each of the things in my World, That's really being an extension of those core marketplace assets at net how do we.
How do we use that competitive advantage to grow in an outsized way.
The thought process as it relates to unit economics.
Just stepping back from it and looking at.
Q1, a year ago and that is one of the ways that we look at our business.
Internally as well and they've got to remind everybody that each of those businesses within consumer.
Not yet back to 2019 capacity or when we do our projections for where there'll be the end of this quarter, we're happy to see that our home business is obviously dramatically ahead in our insurance business is meaningfully ahead.
But our small business personal and credit card are.
Literally 50, mid 50%, 54% for small business is our projection relative to where it was pre COVID-19.
COVID-19.
Personal loans 58 ish percent.
Credit card, 43% and that's on a revenue basis, so that ripples through.
Obviously on our margin profile as you as your question points out and so.
Year ago.
When.
The consumer business.
Was 42% of our.
Of our <unk>.
Revenue. It was also operating at a 36% margin.
And the aggregate margin.
Is still there.
Very healthy in consumer, but as we've talked about credit card is not.
So, let's just talk about the puts and takes in each of those because.
There are some things affecting both of them that are a little bit unique.
Personal loan.
<unk> remained healthy.
Issue with personal loans is volume on the consumer side. So the lender demand is absolutely there.
We have not yet seen a renewed.
Renewed consumer demand, we're starting to see signs of it which is great.
But obviously all the stimulus money out there has had an impact on that.
So the margin profile in that business, though remains very very strong for us. So we're happy with that.
The lender demand is there and as we see consumer demand come in with the return to consumers traveling building up credit card balances, we will absolutely see a return in that personal loan business and we're excited about that.
Our guide is conservative in this business in particular this in credit card.
We think for good reason, we've approached the entire year with conservatism around consumer because just calling the timing is extraordinarily hard.
Now when you look at unit economics and credit card.
Those are sub 10% right now okay in terms of Dms, so recognize that that is a drag.
We said this in the third quarter of last year, we said that when credit card returns and we're seeing net revenue growth revenue growth would would lead contribution growth.
And so what's going to impact that for us I think on the last call. I said you know, we're one aggressive issue were away from being able to garner some margin there and.
And that's kind of where we are we're getting their revenue per approval is moving up which is great.
But what else needs to move up approval rate, so that underwriting box that the credit card issuer.
Signing up for is improving but it needs to move up a little bit higher rate. So we're spending marketing dollars.
To direct it to redirect consumers too.
Our credit card issuer partners.
We're getting paid a certain amount per approval and the more that they approve.
That we will benefit.
Right now as we try to build back revenue and take market share in card were doing so with a very modest.
Mmhmm contribution sub 10%.
That's the rate strategy for the business.
As we try to get more issuer wallet.
And that's how we're going to rebuild the business and I would just.
Looking back on it it's a pretty it can be a very meaningful segment and so we think it's the rate strategy.
This is a segment, obviously $17 6 million of revenue in.
In Q1, but 51 in Q1, a year ago. We know the capacity is there we just got to take the steps to get back to that partner.
And that's what we're doing so as we look at the remainder of the year. We are we are conservative with respect to forecast. We think that margin is going to come back we're probably most conservative in card.
And then a little bit more positive on personal loan, but the timing of personal loans, it's just hard because we know that consumers.
We have not built up a great deal of credit card debt.
So that's it's the only business jet to your question on unit economics, it's the only business Thats really operating at a structurally different.
The margin profile.
And that is that's by choice as we build it back.
The drivers with respect to true home and why that's operating at a lower VNS at the moment.
But personal loan is exactly where it was.
Got it and then just one follow up and thanks for all the information is there any business.
On personal loans credit cards are small businesses.
Many of those longer term structurally impaired from COVID-19 or do you think they can all get back to their 2019 margin profiles the net.
<unk> 18.
Yeah.
J D go ahead.
Yeah, I don't think they are structurally impaired with respect to margin whatsoever.
Get some questions periodically where people want to focus on the buy now pay later space and is that stealing from credit cards.
And I guess I would remind everybody that a couple of things one that is that's out there and that is that that will be refinanced.
And then too.
That is indeed stealing from the credit card space and customer acquisition actually goes up in terms of priority rate, you're going to need to have credit card issuers going to need to grow their portfolios at some point.
And so competition for the consumer is actually ultimately a good thing for us.
So no I don't think any of them are structurally impaired and then in small business.
That's a business that continues to be really resilient.
Yeah.
And I think but on the other side of PPP when people understand.
Kind of the health of a restaurant the health of some of these small businesses I think youre going to see a new class of small business lenders emerge.
And so that will be a real a real benefit for us. So no I don't think any of them reset Shirley.
Impaired and I actually think that there could be better businesses on the other side of that.
Thank you Ben.
Totally agree I was going to say.
Not impaired.
To Jay's point of being better.
I think during the past year, we've just seen it in every category.
People are obviously more and more comfortable online and.
More and more of the consumer space is moving online consumer lending space.
So I think it is going to be better post COVID-19 than pre.
Thank you.
Yeah.
Your next question comes from the line of Youssef Squali with choice.
<unk> Securities.
Hey, sorry about that I had you guys on mute apologies so congrats all around so.
Two quick questions from me back on my Lendingtree can you maybe just speak to where you are in the integration of non personal loan products within within my Lendingtree. So where are you with credit cards with mortgage.
Insurance et cetera, and really what are the gating factors there because we've been obviously talking about my lendingtree for for a while.
And there are clear advantages to you guys.
Optimizing that business. So just maybe speak to that and then.
In terms of your guidance I was just hoping that you maybe.
Get a sense of what.
What you guys are baking in in terms of grew.
Growth by segment. So home is obviously doing really well the consumer business came in materially slower, but then again I think in the letter you guys flesh out what happened.
<unk> ended up strong so are we back to a 20% plus trajectory for that segment I'm sorry for the for the insurance business that is and you know.
Any kind of a directional.
Well I guess.
Any kind of quantification of.
What's your vacant for the consumer would be Super helpful. Thank you.
J D. You want you want to take that.
Yes, sure. So why don't I do this I will take let me start with the my Lendingtree question.
And let's give some context around that.
So a couple of things well, let me start with acquisition and we're going to get to the integration of other products.
From an acquisition perspective, we've been very happy with each of the last two quarters. Okay. So if you think about the fact that personal loans.
Our growth of the my Lendingtree base.
It has been driven by our existing competitive advantage, our existing and largely our personal loans funnel right and so just to level set for everybody and use it I think you get this but.
Personal loans is obviously the product that is most aligned.
For personal loans as a business to go through what it did.
In 2020.
And to be relatively dormant in Q4, and even in Q1 and for us to have this acquisition growth.
Yes.
That is the single best quarter, we've had in terms of new my LT users, we're thrilled with that that means that our acquisition.
Strategy to syndicate this platform to partners is working.
So we're really happy with that and that is the beginning of a little bit less reliance on personal loans now that's on the acquisition side. Your question has to do with revenue.
And clearly personal loans is still very much tied to.
<unk>.
Two to this business and we will continue to because people log in and they repeat users et cetera, but we made very good progress in the quarter in in mortgage now obviously when you look at the quarter that we had in mortgage is not surprising.
But quarter on quarter credit card just in terms of revenue contribution credit card was up 26% so that the alignment with other products is happening.
A lot of the work that went on last year you said it was.
Sort of infrastructure plan is sort of critical to that.
Tables, it's foundational to these other products. So one of them. The most obvious is insurance.
And quite literally just yesterday, we did launch a new integration in insurance. So we're chipping away at the strategy around getting insurance into my LT and having a differentiated offering there as well.
And so that is tied to our agency business.
Which we've talked about and we're trying to get Binder book quotes we want that experience in my LP to be.
A different experience for the consumer.
Then they typically yet and so that's why it takes some time, but if you look youre starting to see more and more insurance profiling within.
Within my LT and Thats when you look at our.
At our segments.
To get one of those one of the big segments really aligned.
Is going to be huge for my LT now so.
So we think we're making great progress recognized we went into 2020 with great reliance on personal loan and win that business tails off.
Youre going to see not only our revenue tail off but our sign ups tail off we think we have countered that with this acquisition strategy.
And we think you'll see meaningful progress in insurance in the back part of the year.
So.
<unk>.
That's that's the strategy, we've talked about a number of the initiatives within insurance.
My LT is core to that relative to.
The agency strategy as well as the.
The dealership App that we've talked about some Iot is going to is going to work hand in hand with that.
And we think it will be pretty impactful, but quarter would always we've got to get this user base up and so we're thrilled with the acquisition growth.
And the only partner with somebody.
The only thing I would accentuate onto that is.
Is this notion of new experiences.
As a member of my Lendingtree.
We obviously can push alerts to you for transactions as opposed to the consumer having to be self directed and thinking about it.
And as part of the New experience you also have credit improvement et cetera. So.
A my Lendingtree as.
Both tied with Lendingtree and.
Its own separate.
The flow in and its flow out J D said that.
So far we've been getting most of those users from other loan types.
Over time.
That starts to change and.
The numbers on my Lendingtree from the consumer standpoint from liking it from NPS and.
Saving consumers' money, it's definitely working.
Yeah.
Okay.
The second question was related to I'm, sorry, that's one.
<unk> per second question it was related to our guide and specifically consumer bumpy share.
Well, it's actually really to just get it sorry, it was insurance.
Sorry for insurance, but also would love to get your take on the on your views.
The strength in home and then kind of the.
The recovery slope in consumer.
Yeah, why don't I think trend is going to take that and then I can give additional commentary.
Yeah, Yeah, he used to have.
Did you just look at the guide for Q2 relative to what we did in Q1 I think they recognize that in Q1.
The home numbers were pretty extraordinary whether you look at it on a sequential growth basis, our year on year.
Some of that and this is hard to quantify but some of that is probably related to the rate moving up in the quarter and people getting off the fence with regard to refi activity.
So moving into Q2, we do assume that.
There is a little bit of a sequential decline in home.
Still very healthy and the declines are pretty modest but it.
Offsetting that decline as is.
<unk> insurance business, we said the early part of Q1.
We saw some challenges, but we exited March.
Growing north of 30%, we expect that to continue into the second quarter.
And then with regard to consumer we've talked a lot about kind of our perspective on where that's headed we you know for guidance purposes are continuing to be pretty conservative there, but we continue to expect.
You know kind of modest recovery across all the key businesses their card personal loans small business.
So that's kind of the revenue and marketing aspects of it from an opex standpoint.
It does imply a step up up $3 million to $4 million in opex, non marketing opex quarter to quarter.
We called this out in the letter, but about $2 million of that increase is related to very specific investments that we're making in the insurance business to support the build out of what we're trying to do on the Medicare Agency side.
So I think worth calling that out that will bear fruit later this year and for many years.
That's helpful.
We use it the only thing.
<unk> our largest <unk>.
Segment.
Insurance had an extraordinary March a difficult January and February but the business overall remains a far more consistent one.
And many of our other segments doesn't have quite the.
Tier two.
Macro factors.
So we're really happy with the performance in March and certainly the run rate in <unk>.
And so we have a lot of confidence in that business being the type of grower.
That we that we anticipated when we when we set our budget in December so that margin performance gives us all the confidence.
In that business.
The only other thing I should touch on is just this.
We talked about $2 million of expense in the quarter associated with Medicare That's an investment decision and one of the things that we're really happy with over.
Over the last couple of years at Lendingtree is.
In terms of not just our Corp, Dev and then acquisitions, but also our internal investments and this is a good example of one that we green lit in January.
So we'll continue to build out a Medicare agency business and that's a very seasonal business. So it will drag.
Just to give you a sense last year, we had on average about 15 agents in 2020.
We finished the year with being in January we were at about 27.
We have a plan to grow that by the end of the year or 250.
And so that's been a drag a bit in Q2, and Q3 and should pay off meaningfully in Q4.
And this is all part of that strategy of diversifying the insurance business.
And so.
We know the unit economics, we know it because we were in that business last year now that we are confident unique IMAX and the ability to execute we're going to press on the gas there.
And so when you look at that step up in Opex, just recognized $2 million for Medicare.
That 500 is from.
Payroll taxes on stock options. So two things that are just worth calling out of the Opex line.
Okay, a lot of insights thanks a lot.
Thank you.
Your next question comes from the line of Rob <unk> with autonomous.
Hi, guys.
Good morning.
Wanted to follow up on on the Opex you called out a good quarter in <unk> and then you mentioned a step up in <unk>.
I'm wondering what drove the improvement in the first quarter and then how youre thinking about.
The opex trajectory beyond the second quarter.
Let me just hit a slightly harder on but something that J D. Just said about internal investments we think that'll.
Talk about those when you when you see us investing.
And calling it out.
Generally means we've got a lot of confidence in that in the growth of that product and we don't make those investments lately and then I'll turn it over to you too.
Sure sure Rob.
Listen, we obviously last year as a company when when COVID-19 hit and we saw revenue compress and BMD compressor in certain of our businesses.
We pressed pause, but we didn't do a full.
We didn't do a whole higher increase because we wanted to be in growth mode and put ourselves in a position to grow. This year. We did go to a plan b. So we obviously grew opex last year as a company not as much as we had anticipated heading into 2020, but we grew opex.
We were going into 2021 with a basic internal rule two internal rules it needs to grow slower than BMD.
And we need to head back in the direction.
Of less than 20 per cent of revenue. Okay. Now obviously when revenue compressed last year that got out of whack, but we're trying to balance growth initiatives.
Opex and so.
Those are the true rules internally and we're monitoring it monthly and quarterly and trying to see where we invest and so Medicare is a good example of that.
And we're going to lean into things like that but then we're going to moderate the opex growth in the areas of that growth what I'm very happy about is that most of our expansion is in things like insurance that are growing really nicely.
So you should see in the subsequent quarters.
Growth, but slowing rate in Opex, that's our goal.
And so we think.
Ultimately care about is not any one given quarter, but the aggregate year and are we starting to deliver on those promises BMD growth relative top ex that.
That's the marching orders internally.
In terms of incremental things to pay attention to one thing worth, noting we were bearing incremental.
Lease expense, which we talked about.
Net.
Because we are moving into a new headquarters building in Charlotte.
And we had two leases we are out of the second lease in Charlotte.
As of January <unk>.
So that why.
You would think that'd be included in Q1. The reality is we do have some some opex that is tied to the relocation so it won't quite normalized for another quarter or so.
But we're just starting to normalize their from a lease expenses perspective.
Trent anything I missed there.
No I don't think I think specifically worth worth calling out.
Just the expenses of getting into the new headquarters, which we are we do intend to start bringing people back into the office.
In the summer and over the next few months or at least on an optional basis. So first so there there will be some some expenses associated with that but nothing major.
Yeah.
Got it thank you guys and congrats on the new roles.
Thanks very much.
Your next question comes from the line of John Campbell with Stephens, Inc.
Guys good morning.
And.
Yeah, I'd like to Echo the congrats also on the leadership changes and I think that's pretty exciting and a big congrats to trap that is a well deserved promotion for sure.
But you know I jumped on a little late here. So I apologize if you guys already covered this but you know when I see the term Lendingtree next I really.
We can't help to think that you guys, maybe hinting at eventual deeper move kind of into the asset side of the consumer balance sheet. So maybe if you guys can talk to.
Where you are in regards to that journey and then J D. If you could maybe provide a quick update on the stash investment and kind of how that relationship has progressed since the JV investment.
Yes, when you say the asset side.
What are you where are you thinking there.
Bringing in savings looking at more of maybe the wealth advisor role I'm showing leads into that just more just anything outside of the debt side for consumers.
So.
So yeah I wouldn't call the.
The next thing, saying that we are.
The.
It's not the reason the asset side is not the reason for the re org.
And we're going to continue to make inroads there.
The financial adviser relationships, we think is a natural.
<unk> extension and we think there are.
So, yes scan savings right now.
Also spending is sitting J D talked about the Plaid integration.
Seeing all that data, we can be much smarter about how we're talking to consumers about it and how and can do some basic budgeting and.
Encouraging people to save to achieve.
Whenever there underlying financial dollars Jay do you want to take it from there.
Yeah sure So John I guess I would just say.
It is.
The consumer side will be part of it for sure, but it's broader than that.
So my LT so.
Within what we're calling next if you think about each of these areas Theyre an extension off of our core marketplace assets. So my lendingtree.
It was an asset for us it's been built off of the.
Although the marketplace business, we need to take that to the next level and dedicate real focus for it okay. So that's.
My LT is part of it it is adjacent to what we call consumer experience and our consumer experience could include one making sure obviously that we take our marketplace consumers and get them to Reengage with my Lendingtree. That's one piece of it another is saying how do we reinvent it.
Even consumer experience from what we have today.
So today in you come in for home and we match you to multiple lenders what about other consumer experiences that we might want to explore and innovate.
Within the consumer experience of next.
Now another part of it is what we call powered by Lendingtree and the idea is and I mentioned this syndication.
As being part of the strategy of growing my L. T.
Powered by Lendingtree is a little broader than the net rate powered by Lendingtree for any of our partners could be you.
Want to you want.
US to power our financial wellness platform, you want us to power a managed marketplace.
You are a.
Financial services partner that wants to monetize through loan products that would be all in this partnership area.
So these are all things that are not in themselves in the marketplace assets, but they are extensions or growth off of that now also in there is corporate development and so we will continue to be acquisitive.
But it's going to be very much tied to the overarching strategy.
That would be tailing here, which is how do we get more how do we use our existing.
Marketplace assets how.
How do we.
Net higher level partnerships.
And then how do we use core corporate development to augment that now obviously you've mentioned stash.
Cash is something we love the company.
We invested in February of last year on a $700 million valuation.
And and they've done really well and they recently raised money at $1 three.
We there are things that we're already doing with them and we'll continue to try to partner and see how we can make both companies better.
And that will be part of rounding out the my LTE experience and how we interact with the consumer but to think about all of this is like a renewed focus on the consumer as well as a day.
An increasing focus on partnerships.
Way I would think about next.
Okay. That's a great rundown and then one more quick one here on insurance.
Guys can you, maybe just remind us just kind of broadly.
The mix of exposure to agents versus carrier spin and then maybe if you could characterize the behavior or maybe the level of competition in the space now.
Yeah.
I don't it's a great I don't know that we disclosed or have disclosed that specific mix.
So let me.
We can try to get you the numbers again, but I don't know that we've disclosed it.
We saw great progress with <unk>.
Agency throughout 2020, and actually the agent business.
Powered rate through COVID-19, I don't know that I have the exact mix.
Obviously anybody who's in the insurance business when you look at top customers the big carriers like per.
<unk> and others are going to be highly.
A huge part of your of your revenue next but so are the big agencies like state farm and Allstate farmers.
I don't know that we've disclosed that.
Yes.
Okay.
We disclosed it.
It's it's important but it's not.
It's not overly important from the standpoint that some carriers operate through local agencies and local agents and companies.
Operate more centrally.
And we couldn't do calls clicks data leads.
Our agency so we've basically got multiple ways to play with our clients.
However, it suits their business model.
Okay. That's helpful. Thank you guys.
Thanks, Ken.
Your next question comes from the line of my ex Tandon with Needham.
Hey, Hey, good morning, guys. This is actually <unk> <unk>, thanks for taking the questions.
Just wanted to touch on the insurance performance in the quarter, a little more and see if you guys could give any more color on kind of a technical.
Issue with one of your large partners.
Versus like did you guys see any impact from some of the sphere winter weather in Texas and some of the surrounding areas any additional color would be great.
Good day J D.
Sure.
Sure.
Had which I think we referenced in our in our letter we did have one carrier average for about five day did have an impact.
On us.
And so that was.
Not not an issue.
Relative to a couple of our carriers and weighted and specifically where they had call centers.
But but in terms of what we're calling out there was about a five day outage that did impact us.
Do I think that the.
The improved performance in March.
Was was more substantive obviously than anything like that interest improvement in the overall business and optimization.
But yes, there was there was definitely an outage that impacted us for about five days.
Yeah.
Got it and then I guess.
I just wanted to follow up and see if he did you guys notice any disruption or change in carrier demand during some of the winter storms kind of a net.
Towards the middle of the quarter that impacted like Texas and the surrounding areas.
Not so much carrier demand we did have we did have a.
We did have two partners who had.
Call centers, there so when we're routing our calls business.
And those were not staff because of the weather it did have impact.
But it was not.
It was not ongoing obviously, but it did have an impact so two of our partners did have less than full stack or unstaffed call centers.
Got it that's helpful and then I guess just one.
One quick follow up on the impact from stimulus. So you got it.
Called out that there's been some negative impacts on.
Personal loan and credit card kind of a stub preparation to it.
Did you guys notice.
Some of that demand started to pick back up as some of the stimulus has worked its way through the system kind of as you guys have progressed through.
For March and April here.
Yeah. So.
On the consumer side, we certainly on the personal let's start with personal loans.
You're referring to the consumer demand and that is actually what causes us to be fairly cautious with respect to guide it's not to say that it's not better it is but it's the stimulus dollars stimulus impact it's still pretty real.
And so when you look at our guide for the quarter, it's because we're being cautious on the consumer on the pardon me, we're being cautious in the consumer segment on the consumer demand for both credit cards and personal loans per.
All loans will typically even though that business is probably on balance healthier for us than credit card personal loans will trail credit card, meaning consumers will buildup credit card balances, we have not yet really seen that.
They want to build up credit card balances for there to be demand for personal loans right. That's the number one use case. So no. We have not had enough time passed to look at it and say that on the consumer side Theres a discernible change in terms of consumer interest in either credit card or personal loans. What has gotten healthier is the partner dynamic rate the credit card.
Sure in the personal loan lender are definitely desirous of growth.
And so as the consumer recovers, we will benefit from that for sure.
Our guide reflects some conservatism because calling the timing, it's just very hard in light of all the single cells.
Yeah.
Got it.
I would add is as.
As J D hit on it where the how the balances come back lender.
Lenders are lending.
A lot of the stimulus money, however, and up in bank accounts and savings and obviously in spending.
And but it is.
It is definitely coming back and I think it's good for the American consumer that they've got less debt more dry powder.
I think that sets us up well for for the next several years.
Okay. That's helpful. Thanks, guys.
Your next question comes from the line of Kunal.
<unk> with Deutsche Bank.
Hi, great.
Thank you for taking my questions.
Congratulations on all the management changes.
And.
Let's start with mortgage is one I understand.
You talked in your letter about how revenue per day kind of approved can be free disaggregate that into into purchase and refi and maybe understand gave quite a bit better in terms of how volumes kind of trended over the quarter.
They are now and how is pricing kind of getting.
Getting impacted by the volume trends.
Got it so let me talk at a high level.
Hand, it over to J D.
So mortgage.
Demand, obviously demand has been very very high from a consumer standpoint, and our lenders have been.
Doing very very well as well.
And then very possible the lenders work on our system very much the way we work inside of Google.
So they are bidding based on segments of consumers and giving us.
A volume that they're looking for.
RPM revenue per liter.
<unk> has been doing better just because as the refinance volume has tapered off then you have lenders, saying.
I'd like to keep my pipeline is full.
And so then they will they will expand their coverage.
And they'll ask for more volume.
Maybe reduce their alone their ltvs.
True.
And then that pushes up pushes thats why our P. L gets pushed up.
Jay you want to add onto that.
Sure So I mean.
We we went into 2021.
Knowing.
Knowing our cycle, knowing that we could push.
On our P&L.
And volume right.
And so you see this revenue strength as a percentage of.
Overall mortgage.
While purchase grew meaningfully from where it was well on a dollar basis purchase grew meaningfully from where it was in the last three quarters. Okay. So we're very happy with that.
It's still a little less it was a little less than 10 per cent of the aggregate and that's not surprising.
In a cycle like this rate with rates, where they are our lenders are going to focus on refinance.
Then we monitor.
Throughout the quarter.
And we definitely did see a step up and purchase in.
In March.
Some of that is seasonal right.
So but.
But we saw rpms expand meaningfully.
In in purchase and refinance throughout the quarter.
We would anticipate that in purchase season in the spring, we would anticipate purchase our pls to move up for there are.
Our guide.
Our guide for.
For Q2.
Is more cautious with regard to refi just because we have to monitor how much.
Potential refi volume is out there right. So there's this substitution effect between refi and purchase that.
We know very very well.
And so we monitor that and keep in mind, we're working with our with our lenders toward their mix as well so.
We're really happy with the progress in our Pls in Q1.
I think we've.
Guided for Q2, with some conservatism because of where rates moving that volatility in rates.
But the step up and purchase and in home equity is intended to offset some of that.
And so that's the that's kind of what you have to balance during this point in the cycle.
And the only thing I'd add on about the substitution effect. If you think of this from the perspective of a mortgage company you can underwrite and close any type of a home loan purchase or refinance.
Even though home equity loans.
But given your fixed capacity.
Youre going to go to the most profitable and easiest ones to close at a time.
High volume.
And so that so that's why that's why lenders will self select more into refinance.
During periods like last year, and then as their refinance volume starts to slow down then they open up their purchase filters.
And so.
So you see a movement across those loan types.
And at times in the past people will look at a.
We will look at our business day, Oh, My Gosh, we got a lot of refinance business will when that goes away.
Then you're going to be left with is purchased business and the reality is there's always still.
More refinance volume.
In the market because it's still small in terms of penetration.
And lenders make that move into into purchase into smaller loan types.
Random coverage and that improves our P. L. Overall.
Great.
One quick follow up and then a question on my Lendingtree. So as you look at like <unk> in New York projections for two true are you thinking that approaches also declined sequentially. The decline the sequential decline is basically just to be Frank.
No I just didnt in refi.
Okay, Great and then on the my Lendingtree side.
I completely get.
The revenue contribution of October you Wonder if you wanted to kind of engagement. So you've been I think.
<unk> added a significant number of new folks during the quarter.
What has been the engagement metric in terms of capital.
EBITDA, you or D E U.
Percentage of time that people are spending on the platform.
So I'm going to I'm going to defer a little bit on this one because I'm not quite sure what we are willing.
We're disclosing or not.
But.
Overhaul, what I would say is.
My Lendingtree continues to.
Meg penetration and so our engagement numbers have definitely been going up.
Clearly what we've noticed is a very large increase in engagement.
Once we link your your accounts to my Lendingtree.
And that is probably somewhat that the consumer experience better and it's also somewhat.
People, who are willing to take that step one of the more engaged.
But it's definitely improving.
We can definitely stairway to profitable marketing.
Just from that alone we're continuing to add new features sets inside of there.
And then my Lendingtree becomes very personal.
Mass personalization.
Of helping every individual consumer who signs up for it.
Jay you would talk on.
Anything to add to that.
Sure so when we close.
Yes, so we saw.
They use it.
It improved in.
In the quarter.
In the area of 10%.
And so we're happy with that.
So the engagement you can track we track engagement on a quarterly basis in terms of active users. We also track it with respect to retention.
And so and then perhaps most importantly, we track obviously NPS net.
It was a plus 50 in the month of March and we're very happy with that so the more that we put in feature sets.
I'll like Plaid and connected accounts.
We're getting proactive credit updates recurring expenses and subscriptions.
That's a big milestone for us.
In terms of our Plaid feature set and so we talked last year, a lot about predicting cash flow, but there is some engagement that comes with with those feature sets and so we're starting to see the benefit of that.
Okay, great, Thanks, and one last housekeeping.
Purchase mortgage you just mentioned that it was.
Just under 10% of revenue was under 10% of toolkit Lendingtree revenue at 10% of mortgage loans.
Mortgage mortgage mortgage revenue.
Okay. So back out back out so not not the home segment, but mortgage revenue so back out your non home equity and net.
So but relative to percentage of mortgage revenue.
Okay got it thank you.
Okay, and so to give you some sense, though it was in that area each of the last two quarters.
And it was.
It was 10 or less percent each of the last three quarters.
So it's it stepped up meaningfully.
Absolute dollar basis, but as a percentage of the overall mortgage business is still less than 10 per cent.
Got it thank you.
Your next question comes from the line of Melissa <unk> with <unk>.
J P Morgan.
Hey, most analyst.
Congrats to you on that right officer.
One of them.
Thanks Ryan.
Now the Lendingtree in that.
And the right way.
Thank you Erez.
So a component that you guys detailed in our letter of Lendingtree Nexstar.
Efforts that had been in place.
For a while as they talk about it.
So this seems like more of an emphasis.
So that charge growth.
Net.
With those efforts and adding perhaps a couple of new loans right.
Hi.
Yeah.
Should we expect incremental value.
Sizeable investment related to this.
And then can you.
It just started up marginally.
Sure. So I like to think of this as I said before is kind of a divide and conquer.
And to not have to have all of our executives sitting in the same.
You know sort of resource prioritization stuff across the organization and we can basically break it up into areas.
I think you would expect to see more investment, but the investment will come based on <unk>.
Very specific rois that are that that makes sense for us.
And that will be.
Be smart moves, Virginia, you talked about that process and that's working very very well. So that's where for example, the Medicare agency came from.
Through that process of somebody saying, here's an investment we like to make.
Look at Green light it.
And then and then track it after that.
J D.
Yeah, just the most I would think of it as yet.
Youre right that things like my Lendingtree are already well developed.
Things like powered by Lendingtree or less developed right and so what we're recognizing is that something like my lendingtree has gotten to a certain scale. It now it needs.
It needs real focus we're independent of our existing competitive advantage in our marketplace business, we might make some different decisions with respect to how you like for instance, how you market My LT.
You might.
Orient.
The marketing differently, you might actually not just looking at look at it as a.
More efficient marketing channel for the exchange for the marketplace business, but you might really taken orientation that says what's what is the consumer care about what is really going to drive engagement. So we are going to focus on that does that mean, it's going to need more dollars no not necessarily.
It's just going to be that's going to be a focus thing so to doug's point, where are we spending our time, we're going to be more efficient with respect to the focus on that and that consumer experience than they are on things like powered by where we think we can in a relatively efficient way.
Leverage our existing assets, meaning there are partners that we could from a BD perspective.
The folks that we can partner with whom we already have a pretty big backlog of of interested parties for whom we can power monetization we can power.
Our marketplace business.
And that's just a leverage and so that will be very beneficial to the aggregate margin profile of the company over time, there might be some upfront investment, but I don't think it's going to be huge it's going to be a more of a focus however on essentially be to be on that side of the business.
And so that's the way that I would think about it and then underpinning all of this.
It is.
Our focus on the consumer and what does that experience look like.
So that could be.
Redefining what the mortgage experience looks like.
But that needs real real focused independent of the existing marketplace business.
So a bit more product orientation on the consumer is the way I would describe it.
Okay. That's really helpful. Thank you.
Follow up question R&D home segment, I think I heard Trent.
<unk> revenue is coming off slightly into Q.
I'm not sure if I heard that rate.
Certainly, noting <unk> revenue.
Got it alright, but is it fair to assume that as you come off that that peak and one to the margin profile in that segment should also normalize and improve that.
Yeah.
Yes, that's exactly right.
<unk>.
We have managed that business for the <unk> gain.
But obviously operated in a in a in a revenue growth environment, we're operating in where the <unk> are going to be a little bit lower because ultimately we're just trying to get as much in DMD in the door as possible.
And so yes, as we look at the macro environment and say, Okay refi volume has probably come down here.
We've made assumptions about revenue being lower than the record revenue revenue that we experienced in Q1.
And yes, we should enjoy a better margin profile in Q2.
Great. Thanks, so much.
Thank you.
Sure.
I am showing no further questions at this time I would now like to turn the conference back to Lendingtree, Chairman and CEO Doug.
Yes.
Yeah.
Thank you very much and thank you all for joining our call today.
And thank you for your continued interest and attention for our company.
If I could recap the last 12 to 14 months I would say it was obviously very intense it was obviously incredibly interesting for our company.
And I think we came through it is a much better company that is much stronger.
Have a great balance sheet that is very well positioned for the future I think we're coming off of this with a much better team I think we've learned as a team we can work better together.
We've learned how are we going to be honest and candid with each other and worked through.
Really problems and put the best interest of the company are ahead of.
Any individuals' ourselves.
We've really focused a lot the past 14 months on operational improvements, which are helping us continue to scale.
We're incredibly well positioned vis vis competitors.
We feel very very good about where we're sitting in the industry and then the last thing I would say is as a founder of a company. It is incredibly gratifying and humbling to be able to work with the people that I get to work with every day and that we are able to promote from within.
It just gives me the thrill of a lifetime to see people do.
Doing great things with their careers at every level in the organization and I can't thank everybody at Lendingtree enough for that.
Lenders and we looked and thank you to our shareholders worked harder to talking to you in three months.
Have a great day.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation have a wonderful day you may all disconnect.
Okay.
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