Q1 2022 Lendingtree Inc Earnings Call

Good day and thank you for standing by welcome to the Lendingtree, Inc. First quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require a sister.

During the conference. Please press Star Zero I would now like to hand, the conference over to your Speaker today, Andrew Wessel head of Investor Relations.

Yeah.

Thanks, Andrea and good morning to everyone joining us on the call. This morning to discuss one increased first quarter 2020 to financial results on the call today are Doug Lebda rent increase chairman and CEO J D Moriarty president of marketplace, and CLO Trent Ziegler, CFO and Scott Perry President of insurance as a reminder.

Under to everyone. We posted a detailed letter to shareholders on our Investor Relations website earlier today and for the purposes of today's call.

The listeners to read that letter and we'll focus on Q&A before I hand, the call over to Doug to give his remarks I want to remind everyone that today.

During today's call, we may discuss <unk> expectations for future performance.

Any forward looking statements that we make are subject to risks and uncertainties and lendingtree as 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 are available on our website at investors Lendingtree dot com for the comparable GAAP definitions and full reconciliations of non-GAAP measures to GAAP and with that Doug. Please go ahead.

Thank you Andrew and thank you all for joining US today, our business again performed well in the face of a difficult macro environment. Our lending marketplace grew revenue in <unk> year over year, despite rapidly increasing rates improving demand and unit economics across purchase mortgage home equity personal and small business loans helped to offset shrinking demand.

You're right in terms of mortgage refinance.

Expected our mortgage lender partners are increasingly relied on us to provide them with new customers as the refinance wave receipts proving our pls across our other mortgage offering proves this business is resilient, helping us to outperform declines in overall origination volumes.

The consumer segment of our marketplace is continued strong growth is personal and small business loans performed tremendously well and the credit card business returned to pre pandemic Rps.

Insurance has begun when we project will be a robust recovery and its financial performance after dropping in the fourth quarter of last year I'm happy to have Scott join us on the call to explain how we differentiate ourselves from our competition and why we have a more positive outlook for the remainder of the year than others are.

Our updated guidance for 2022 acknowledges the rapid increase in mortgage rates that we've seen so far this year as well as continued inflationary pressure our insurance partners are navigating lowering our outlook, it's not something we take lightly but the economy has been more volatile than we predicted when we first issued guidance at our Investor day.

The underlying strength of our business model and our balance sheet position allows us to continue investing in our growth initiatives as well as our brand. We expect these investments to generate very attractive returns by driving increased value engagement loyalty and trust with our customers positioning lendingtree as the best digital consumer shopping.

For financial products in the market.

Founded the company over 25 years ago, and Lendingtree has continued to evolve and expand its product offerings to address almost every personal finance need a customer has harnessing the unmet unmatched depth of our partner network with an improved digital experience will delight customers, providing provide access to the broadest array.

You have offerings in the industry and.

And fonder foster lasting relationships with our customers.

Highlighting some of the progress on our strategy. We are now able to present embedded bind <unk> insurance quotes and pre qualified loan officers to my Lendingtree members digitally we have a solid pipeline of lenders and issuers looking to access our <unk> platform to acquire new borrowers the.

The improved conversion rates and unit economics from treat guar will help drive revenue and margin growth in our consumer segment and we look forward to further integrating our insurance agency and our mortgage partners as we move forward.

The team has rallied around our growth strategy and we're all excited to begin seeing the early results of all of that hard work.

Look forward to discussing our progress on this call as well as future ones now operator, we're ready for questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please stand by while we compile the Q&A roster.

Yeah.

Our first question comes from John Campbell with Stephens, Inc.

Hey, guys good morning.

Good morning, Hey by my math, just within the mortgage revenue you guys did I think as much purchase revenue in 2018 as you did last year and in 2020 combined. So I think you have proven you can get better yield out of purchase and.

Also in 2018, and it looks like you're facing.

Purchase origination level that is going to be probably lower both from this year and next year.

My question is.

Do you think you can get that purchase revenue back to kind of bounce past levels and what kind of changes you really need to make in the business to start flipping to that mix from from refi to purchase and kind of how long that process takes.

Okay.

I'll answer it in concept and then I'll, let others chime in on numbers, John It's great to talk to you.

So first off as I alluded to in my remarks, there is and we've talked about and a lot of shareholders by the way that youre picking up on something that is refi receipts and the Rps of refi, obviously everything works on supply and demand so lenders, obviously always demand refinance volume.

That's the demand side. Unfortunately, right now the supply side of that has pretty much gone away. So then what do you do you switch your capacity over to both home equity and purchase at the individual lender level and you also start to open up other filters what that does is it moves the RP all up in purchase which then.

<unk> enables us to go market against that.

What what we've seen so far I would say is the result of working with our lenders and J D and team have done a great job of that and getting them to expand filters. So we've had some sales wins, but lenders also do this very very naturally.

Then on top of that.

One of our initiatives in particular, one of our strategic initiatives marketplace 24 is working to drastically improve the communications with customers.

Submit when they're actually engaging with our lenders on the marketplace and.

We're going to start releasing that in pieces early in May and it's going to proceed through July but thats. One initiative, that's aimed directly at that and then as lenders see higher conversion rates than they bid up the value of a purchase lead ultimately they are all targeting a cost per funded loan JD anything to add on that well.

Yes, the only the only thing I would add Jon you've heard us talk about parsing the funnel more intelligently overtime and so I think if you were to look at it from the perspective of one of our lender partners. They would say not all purchase traffic is equal and we've sort of talked them that over the last couple of years. So we're selling early funnel.

Mid funnel and late funnel purchase late funnel is very well valued right. Now now why is early and mid less well valued it actually is very much tied to the lack of housing pardon me the lack of inventory in the market and the tightness of the purchase market overall, which is obviously well publicized so as that Lou.

<unk> is up which there's recent evidence that it is actually getting a little bit better that will better enable us to get paid for early and mid because it will convert at a higher rate.

So in a strange way, what's really happening is.

Over the last couple of years, our network has gotten healthier, meaning theres less inefficiency for our lender partners, because they're getting what they want but the disparity between what we get paid for early and mid versus late on a purchase is pretty significant.

We just need a little bit better housing market in terms of those consumers being able to find a home and get it and get a transaction completed.

And that will drive our purchase revenue.

The only thing I'd add to that.

In the parsing.

I know, we're going to get a question on insurance at some point in getting the right.

Consumers to the right partner.

Has been a source of value and the other thing I'd say is rps on purchase have moved up considerably.

Because because of that switching and what J D talked about so it's moving in the right direction and it'll continue that way.

That's great to hear and then one quick follow up on the guidance. It looks like you've got revenue growth assumptions are growing faster than the <unk> growth. So it looks like maybe a little bit of pressure on segment margins here and there, but maybe if you can unpack that I mean, it sounds like mortgages and a really good spot. Obviously, you grew that 500 bps or so.

I'll do all the stuff you just mentioned and then <unk>.

It looks like it's probably going be pretty heavily weighted in the first half and then get better in the second half and then just maybe some thoughts on consumer and then also on the brand spend side as well.

Yes, so I know like.

But trends, let me hit the hit in early and then I know one thing as you're recognizing marketing margin, so and we've talked in the past.

This quarter about home for example, while our Rps are doing well.

Customer acquisition cost.

While still very profitable, we're not seeing relief like we would normally see when rates go up we're still seeing a number of other parties that are in those auctions, keeping pricing up higher and Google and others.

And we're assuming that.

It gets a little bit better, but not as well as we thought.

And what else would you said.

Yes, I mean, it's a good that's a good point on mortgage John .

As we've seen in prior cycles as.

Competition starts to fade as the market.

<unk>, we would expect to see some relief on the customer acquisition side, we haven't seen that to doug's point to the degree that we expected and so that's sort of being reflected in the margin expectation for the rest of the year.

<unk>.

If I go back to your question on just on the outlook for the rest of the year.

If you go back and you look at the segment level guidance that we gave at Investor day.

We're still pretty well in line with with that outlook.

Perhaps trending toward the bottom end on several several of those measures.

The one caveat just being the outlook for margin in insurance.

A bit more cloudy I mean, obviously you saw where the margin profile of that business was in the first quarter at 26% we.

We expect that to obviously improve as we progress throughout the year.

But we're going to need that to improve and I think on the margin relative to the guidance that we gave in February .

Bit more cloudy.

Okay. That's all very helpful. Thank you guys.

Thank you. Thank you thanks John .

Our next question comes from Jed Kelly with Oppenheimer.

Hey, great. Thanks, Thanks for taking my question just circling back on insurance is is this a case of.

The carriers.

Calculating the inflationary impacts this.

Time around versus used car prices I guess, a couple of months ago and how.

How long will it take for them to get to like reset our rates and.

I guess just when when do you actually think today will be mark coming back in marketing and then I heard that Scots on the call. So could you actually discuss some of the differences between where you are in some of your competitors. Thank you.

Yeah, I'll start and then <unk>.

Hand, it over to Scott and by the way Scott. Thank you for being up at six o'clock in the morning on the West Coast.

Listen we I am very pleased with the with our insurance team is working.

And they're doing a really really good job.

The issue that we've talked about before Ed and Scott will address the underlying reasons as the carriers.

In general are not.

Wanting as much are not demanding back to supply and demand are not demanding as much volume.

At the same prices as they did several years ago.

However, it's trending in the right direction, we've got a number of sales wins, and we're certainly doing better than competitors and I'm really really proud of what the team's done Scott why don't you take that question.

Yeah sure Jonathan to answer your question about inflationary pressures in loss ratio and underwriting profit with carriers. It. It is a matter of I think the levels of inflation in the cost per incident that the carriers are dealing with is just much higher than anyone expected and disinflation wires.

Going.

They worked their models they were just not expecting it to keep running out of control like its like its happening and so and then when you submit rate increases to the states a lot of times, you're limited to how much the rate increase you can submit every six or 12 months. So they're just trying trying to keep pace and theyre, having a hard time doing it.

Im level now that said it depends on the carrier with weather at our major carrier just came out yesterday and made public comments that they feel they are largely done with all the rate increases and they feel like they are in a good spot, but but she also indicated that they're going to wait in a number of states that few months just to check on the profitability of the policies of the new rates.

Before they really start leaning into marketing.

All of that said I do feel like it's a it's a very turbulent market still certain carriers that are leaning in certain carriers are leading out but the overall trend that we're seeing in quote Wizard is a steady increase in demand and we're seeing growth we saw growth in Q1 over Q4 and we're expecting.

<unk> growth more growth in Q2, so we're seeing a general positive trend as far as the majority of our carriers are spending more today than they were spending last month, and we expect them to continue to spending more as the year goes on.

Can you.

Scott can you address like.

Why and we talked about it's our board meeting yesterday.

Some of the you don't need to go into names with the carrier wins and also <unk> question of why.

We seem to be doing better than competition.

Yes, sure happy to do it.

I would say we.

I will go back to the 2016, when we went through a very similar period in the insurance industry.

And we're largely doing the same playbook, there, where we as quote wizard or being paper vigilant on focusing on quality of consumers and what the carriers wanted they were throwing up red flags to us.

In the second quarter last year things were trending the wrong direction. So we.

Made a proactive decision to really lean into what our carriers needed.

Understanding that we were heading into a pretty rough waters in the industry. So honestly, we probably made some decisions that affected revenue for our company in the second half of last year, but I think we were viewed in a really positive light with our partners by making some of those moves and not trying to hold on.

Yeah.

To unnecessary revenue that they didn't want and I think that is paying off for us here in the first half of the year as they are coming back in and there's that trust level, we've gained significant market.

Market share, which was a big goal of ours, I think thats, a combination of taking market share from some of our competitors as well as just consumer shopping behavior in general is up.

So I think we've got a really good mix of traffic going to the carriers right now.

And that's why we're seeing them lean into us a little bit.

Great and then just just just a follow up I think you've always talked about having proper.

Probably better.

Paid search conversion better than your competitors.

Is that deteriorating just on more of your competitors.

In Google trying to acquire traffic on people shopping.

How should we think about the arc of the Vms margins sort of returning to those high thirty's.

Vms levels throughout the balance of the year. Thanks.

Yes, I mean, I would say, we're seeing generally a less competitive marketplace in the in the Google marketplaces, right now, but I would also say our carriers, our Rps theres still down year over year, and that's a lot to do with carriers, just hyper focusing on certain geographies and certain demographics on the most profitable.

Consumers.

Right now during these very turbulent times in the industry. So what will happen over time as these carriers I mean, they want to grow they want to grow their policies and so when they are feeling more comfortable about overall profitability of the policies that are running they're going to start opening up those demographics and geographics again and that's the.

Point, where we have better levers when we're making more monetization per consumer coming through our funnel and that gives us more leverage to increase margins.

Which we're already.

Looking and feeling our margins were going to increase a few points in Q2 yield and we feel that trend will continue on an upward trajectory over the next six to 12 months.

Thank you.

Thank you. Our next question comes from Ryan Tomasello with <unk>.

Hi, everyone. Thanks for taking the questions I guess.

Shifting to capital allocation can you give us an update on how youre thinking about the various outlets for an appointment for the rest of the year, obviously nice to see the share repurchase in the quarter.

Do you think you will continue to be active there and any updates on your thoughts around M&A and where you think that could save most nicely into the existing business. Thanks.

Yes, I'll start.

This is Trent.

Yes, I mean look we've been happy to be buying our stock back the way that we have over the last couple of quarters.

Having addressed about 5% of the float in between Q4 and Q1.

Certainly happy to be buying it with the stock trading where it was and even more so now.

<unk>.

Our primary goal and depo obligation is.

We obviously want to preserve the flexibility that we've built up to be able to execute on M&A when opportunities present themselves and we don't want to encumber that flexibility that said, we've got a business thats still generating cash every quarter and then so we can kind of use that as a.

As a proxy for how much we're willing to put into the buyback.

I need to think about it the same way there are some nuances coming up in Q2 with our the settlement of the convertible notes we have maturing in late May.

So we kind of need to get through that before we reevaluate our buyback plans.

But.

That's how we're thinking about it and certainly we've been active in the market and will continue to be.

Based on our on our relative stock.

The J D to talk a little bit about how we're thinking about M&A sure Hey, Ryan.

We're probably from an M&A.

From an M&A perspective, and just in terms of the things we're seeing we're as busy as we've ever been.

That's really because it's those.

These are coming to us from a wider range.

Thanks, right. So there are people who are in our traditional customer acquisition business. It obviously those multiples have come in dramatically. If you looked at any of that.

Public Comparables.

And then there are a number of fintech that had been incredibly well valued by the private markets over the last couple of years and those values have come in dramatically. So we have a wide range of things to look at and we're going to be selective, but obviously, we're always comparing.

Those opportunities.

She is buying back our own stock I think the really nice thing is we've been able to buyback our own stock in a significant way two quarters in a row.

And he's not impair our ability to be aggressive with M&A.

And we have.

<unk> been incredibly selective over the last couple of years.

We obviously had a multiple environment that we didn't really agree with relative to the.

Relative to the earnings power of many of the companies that were so so dearly valued that's coming back to Earth that will present opportunities for folks like us who generate real earnings.

So we're excited about the period in front of us.

Last couple of years have been frustrating from an M&A perspective, but that's okay.

But we're certainly seeing more in light of the way the funding market.

Both the private market has changed really in terms of the opportunities for many of the startups that were so well valued in the last couple of years, that's not the only thing we look at obviously.

There are some companies as I mentioned in our traditional space that will become very interesting here.

So I would expect that M&A continues to be core to our strategy for the next couple of years.

Great. Thanks, Thanks for that and I guess, the only thing I would add.

The thing I'd add to that we still have $97 million on an authorization from our board.

We are definitely still we still see very very attractive IRR was on our stock.

And subject to maintaining flexibility.

We think that's a good use of our cash.

Great. Thanks, Thanks for that and I know, we've already spent a good amount of time on.

The headwinds in mortgage, but I think it would be helpful.

If you could put more specific assumptions around what you're how you're viewing the market outlook. This year versus say, what you were thinking back in February I realize that there is no direct framework, but if it's possible to put any guardrails around the revenue and earnings sensitivity to worse or better than expected.

Conditions in that market, particularly purchase begins to fade given the affordability pressure that continues to build there. Thanks.

Yeah, So I'll hit the high notes and then move from there.

The interesting thing about mortgage and ill return to conversion rates, we have so much traffic even today coming through both purchase and refinance that the magic as long term shareholders of known is getting at the conversion rate from us sending a customer too.

Lender in there.

Burning it.

2% conversion environment, whether it's a purchase or refinance.

We still have 98 to go.

And our marketplace 24 and <unk>.

Initiative as I said earlier really aimed at improving our conversion rate. So there is we really don't need to go get more volume you mean at the end of the day, we're still only closing.

Couple of points of all the mortgages in the United States and when you have 20 or 30 times that on your site already who.

Who are shopping there, but just not closing here it presents an enormous opportunity.

And that's why we're working on fixing the customer experience because that has a direct impact on our.

On our revenue JD anything else that but by the other than that we assume the MBA statistics in the market just makes life a little bit harder.

And it's more related to lender profitability and lenders being able to profitably converted loans than it is necessarily the size of the market J D. What would you say yeah, Ryan I'd, just say every year, obviously as we as we map out the year ahead, we look at the MBA data, we look at Black Knight and others that published data on.

Affordability on.

Consumers, who would benefit from a refinance and obviously, we monitor that throughout the year. We also are very mindful of our cycle. So we're watching obviously affordability for the consumer will watching gain on sale for the lender and usually when we watch that gain on sale compress as we all know that it has this year fairly dramatically.

Watch for a loan officer employment indicators and so many of our many of our lenders many of our lender partners have announced layoffs of loan officers that is typically something that is followed by or four along with that is the cost environment for us.

To acquire traffic actually improved quite a bit so as we look at the year. The year in mortgage has generally played out on the volume side as we expected right, we expected volume to be down dramatically and refinance it has.

The cost environment has not come down as much we think that is still to come.

We need to shift to purchase and home equity we're doing that both of those businesses are doing well. So we actually feel reasonably good about our projections that we made in December I would say that from January to April it has been a bit more dramatic on the macro side than we would've expected.

About the affordability for the consumer that shift has been pretty dramatic.

If you think about.

Black Knight estimates the refi population in March at $2 million in January revised population that would benefit from a refinance at $2 million.

In January that was that was five 9% that's a pretty dramatic shift. So we have to acknowledge it is a little bit more dramatic than we anticipated in December that is actually part of our shift in guidance right. It's just acknowledging that but when we look at our performance across that backdrop, we're actually really quite pleased.

And we just have to continue to navigate an environment like this the piece that has not yet happened and we think will is the cost side of the equation. That's still in front of us while it will be tough to drive volume and things like refinance we should be able to drive better margin over time.

One one thing J D said to accentuate as the consumer benefit.

And it also ties to rates and refinance obviously it doesn't make sense, if you're not going to save money you Shouldnt do it and consumers know that.

But the key thing to focus on is that lending trees refinanced.

So on a day to day basis doesn't.

Work on sort of aggregate rate levels are rates higher low it really works on the rate of change and Youll see this in mortgage companies right now where some people are laying off but theyre all trying to hold on because they know someday rates are not going to they might go from five to four it might go from five to six and then somebody is going to say there is research.

And then they pop back to five and all of a sudden you get a refi flooding unless you have the loan officers in the technology, you can't do that but we will see that effect.

Mediately and Youre setting up little as rates go higher.

You can actually get more benefit.

Because rates can move lower there as well.

You're at two and go into like one in 700 eights.

There's not that much movement, but as they go a little higher than it is going to set us up for a refi boom lifts.

So just let it happen every day not every day, but every week or month.

But this year right now youre going through the adjustment period, which we always go through.

During the.

Switching over if you will.

Thanks, I appreciate the thorough remarks.

Thanks, Brian .

Thank you. Our next question comes from Rob <unk> from Autonomous research.

Good morning, guys.

Hey, Rob good morning.

Doug and Scott just to follow up on insurance and the decision you outlined to lean into what carriers need and delivering high quality consumers all of those things when do you expect you'll start to see those investments and decisions come through.

And market share gains.

Well I'll start and then let Scott go I think we're seeing them in market share gains right now and I think that's why we're doing.

Better than competitors and why.

Why carriers are increasing.

Buys with us.

And I'll, let Scott talk more.

Yes, I agree with Robert what Doug just said I think we're already seeing market share gains in this space and we're seeing it as as budgets very cautiously come back. We're one of the early winners of getting those budgets.

I would also add on some of the products new product growth, we focus on like inbound calls for our clients direct to click for our publishers.

The agencies are growing really rapidly.

Our health and home insurance industry has had a spectacular Q1.

So a lot of those internal initiatives.

Are really outperforming in performing at high levels that we were we were hoping they wouldn't that helps is the legacy business has been down over the over the past couple of quarters. So I think as that legacy business continues to come back which it is.

It bodes really well for the future.

Yeah, and we look forward to talking more about.

The agency in the future.

It's doing better than expected from an economic standpoint from a customer satisfaction standpoint, and the customer experience of being able to give you actually real binding quotes from multiple carriers.

Online with.

With a <unk>.

Person, who can also help you make that decision integrated inside of my Lendingtree like that.

That's where we are we're pointing in the direction of that ship and it's gone really well.

Okay. Thanks, just to follow up on that when you say that the budgets, we're cautiously coming back and you guys were seeing some early wins with that.

Where that was coming back throughout the first quarter or was that something that happened more towards the end of the quarter and into April .

Yes, I would say from our standpoint. It was it started in January and obviously did not balance as much as we wanted as we were hoping in January and that was just because of the carriers.

Didn't bounce back from a profitability standpoint as much as they want it but we've seen what I would call a gaining momentum every month throughout the year. We got the initial bounce up in January and then our momentum has been growing in February growing in March and April .

June is looking very I mean, im sorry may is looking very strong right now so I would say, it's just all in all there is up and down to the individual client level, but the overall level for insurances.

As a pretty steady growth year to date.

Yes, I had been looking at a business.

Here.

That is run rating very nicely and as having steady improvements weekly monthly.

And it's nice to see that.

So.

The aggregate number is reflected in the guidance, but the momentum.

Is what gives me a lot of excitement.

Okay. Thanks for all the color there.

Thank you. Our next question comes from Youssef Squali with tourists.

Good morning, guys, sorry about that.

Just wanted to go back to the to the consumer segment in particular, I guess, maybe trends starting with you relative to <unk>.

The expectations that you outlined at analyst day and whatnot.

How has.

That progressed throughout the quarter and particularly as you look forward to the rest of the year.

Has your expectation.

Because of rising rates and then I have follow up.

Yes.

I mean consumer relative to our outlook.

At the beginning of the year consumer.

The one segment that squarely on track I mean, obviously, we've talked about sort of the macro implications on both mortgage and insurance, but consumer remains pretty squarely on track.

As we highlighted in the letter both personal loans and small business are performing.

Exceptionally well.

Credit card continues kind of a steady recovery.

And the.

The end market backdrop, there like the health of the of the network the health of our partners in those businesses is really strong.

The market outlook for growth in personal loans as an asset class continues to improve.

We continue to have really productive conversations around our <unk> offering in both personal loans and card.

And so among the three segments, we feel we feel really good about the outlook in consumer.

Uh huh.

And on the competitive front there.

Some of your competitors have also.

Put out some pretty decent numbers for.

Our credit cards.

Personal loans and SMB loans et cetera.

Have you seen any kind of change material change just because of that that subsegment of <unk>.

Remains really healthy so I'm, assuming is attracting a lot of interest.

Let me I'll start and J D can pile on.

I mean, certainly the card.

The card category has been for a long time very competitive and we know that.

But I don't think theres been any dramatic change from a competitive standpoint, I think as you look at kind of our business and our relationship with our partners in those products.

The card business use of it's been a process of.

The personal loan business kind of came back before the card business did.

As <unk> points out.

First of all on network Health is really good one of the things that occurred in 2021 is the expansion of our lender base their card.

The desire on the part of the issuers is absolutely. There. We are we are gradually waiting for the desire the interest from the consumer in new cards to return it has gotten better.

It's still not quite back to 2019 levels now obviously.

The interest on the part of the issuers toward reward cards associated with travel given the backdrop.

<unk>.

Loosening of mass mandates et cetera, that's that's a very real thing that will benefit us, but I would say the card business is basically on par with our plan this year, but getting better each month that passes okay. So thats great to see personal loan business is very very strong we feel really good about it small business very strong.

Ahead of our expectations.

And so we're thrilled to see that the only business within consumer that is having some challenges students. That's because of the extension of the cares Act. So thats, a macro factor sort of beyond our control, but it's relatively small but as <unk> pointed out the consumer segment overall really strong now the competitive environment.

When businesses like personal loans.

Do well yeah, we've got a.

We've got a tough competitive environment that is not.

That is not causing any problems for us at present, and we're actually really excited about the traction that we're seeing with a bunch of our personal loan and credit card issuers, we've talked about <unk>.

That's a key part of our strategy to two <unk>.

Bed ourselves further with our partners in both credit card and personal loan and delivered.

The right borrowers to them right. So we're making great progress there so to the extent that you think about short term and long term. This year in consumer I think we're making great progress on both fronts short term those are businesses that are dramatically better than they were a year ago.

And long term product innovation, we're really excited about that.

Great. Thanks for that last one if I may my Lendingtree My LT.

Continues to grow.

Very nicely can you just give us an update as to kind of the engagement you are seeing their conversion from that channel and any kind of kpis that you can you can.

Sure there would be it would be really helpful. Thanks.

Yeah, no absolutely, it's J D I'll start.

We're really excited about the future of my LT as it relates to.

Things like <unk>, so as far as my LT grows and we're now over 22 million members.

Members are going to see real offers inside of my LT.

So engagement will be defined a little bit differently. It will not just be a function of coming to check your credit score it will be a function of actually coming.

And checking on your credit score, but also receiving an offer great receiving an offer for a credit card that's appropriate for you receiving.

A personal loan offer.

So we're making good progress towards things like that which I think will define better types of engagement and candidly for us.

Results in a much better economic proposition right.

So.

We've actually been through a very strategic.

Reduction in <unk>.

Traffic to our my Lendingtree base over the last year.

To be more selective with what we email the base.

And so that is often help people measure engagement did somebody read that email did they open that email.

We've actually reduced the noise in the channel to the base.

And we're really happy with the progress that we're seeing in my Lendingtree in terms of revenue contribution despite that because we think it leads to a better customer experience. We're trying to make sure that we don't spam our base.

With useful females, so I think the quality of the dialogue with the my Lendingtree member is improving and the economics continue to be consistent I think over the next year youre going to see more.

Behavior based offers.

You improve your credit score. This card is now available to you right. So the big thing in our strategy with my Lendingtree is true adjacency of a reward for the consumer and sort of a members only approach, which is not a paid product, but we're looking at it like.

From the mindset of what would the consumer paper, let's deliver that and find a way to do it on a free basis, that's the strategy.

Yeah, and the only other things I'd add to that and I thought that was a great answer is.

If you think about my lending tree.

And as the upgrade from you came into the marketplace you clicked on an AD you filled out a form you closed or you didn't close and then we're offering you.

The opportunity to say, Hey, you can set it and forget it and we'll just alert you whenever we can save you money, that's where JD is talking about the quality of the traffic.

The beauty of having all of these lenders network is that we can then deliver you through we can deliver you real offers III <unk> III qual. So we're only in my lending tree, we're putting the best customer experience first and then we're worrying about the monetization as a secondary basis.

So we've got that's why we want to have the insurance agency embedded in there. So you can get real offers treat qual senior real offers for credit card and personal loans and not have a click out.

Mortgage we're working on some enhancements there. So that's that's what that's the goal there and then really importantly from a business model standpoint. The goal then is that your recurring revenue every time that person needs to check their credit score et cetera that we can give them the best offering as J D said.

At the right time.

And we don't need to pay for you again to come through Lendingtree, a lot of our repeat traffic still comes from you clicking on an AD, which means we're paying for you twice so over time, our <unk> should do better as well in addition to improving the customer experience.

That's the only thing I would add now.

The only thing I would add on my LT.

Revenue.

Contribution from my LT users is up about 20%. So that's a good story now keep in mind that tends to track with personal loan. So obviously as our pls are higher those.

<unk> numbers are going to look better.

But revenue per engaged is one six times, so that's actually really good to see our.

Our base as we've talked about we've been able to build this base of 22 million users without a lot of basically no marketing spend against it.

What youre going to see US do over time is actually diversify that base.

Driving folks with a more from our mortgage funnel driving folks from other funnels insurance etcetera into my LT experience as that base Diversifies.

There will be all kinds of benefit for the marketplace business. So that's I just want to emphasize that's really the strategy.

To have to go hand in hand.

And then the last thing I would say is as you heard on Investor day, we have.

Internal project called digital adviser and.

And thats going very well.

<unk> is on track.

Good to hear thank you.

Thank you. Our next question comes from Melissa Wedel from Jpmorgan.

Good morning, Thanks for taking my questions today.

Wanted to follow up on some of your comments on for Paul.

And I'll clear, yes has the scope expanded on that in terms of incorporating more network partners into tree fall or has that is that stable and if so are you are you still on track to start to implement that across most of the states by year end.

So let me start and then I'll hand, it off to J D. I'll, just let me just for everybody describe again, what <unk> quality is and by the way that's an internal name.

In both the personal loan and the credit card business. There are slight nuances to fulfill the let's take credit card you've come to lendingtree or any credit card comparison. So you enter in some basic information. It gives you a list of credit cards and some potential rates in terms that you could potentially.

But you will probably be approved for and then you click on that you go to their website fill in the rest of the information and then a month later.

Issuer tells us whether or not you closed so imagine instead, if you come to Lendingtree, you're filling information and you're presented with tumor.

Two or three actual card offers that when you click on it the card goes in the mail and then in personal loans basically the same thing.

Lenders the initial lenders like this because it increases their conversion rates J D said earlier about getting the right volume, they're only seeing people who are clicking on an actual real live offer. So they are all getting they're all going to get approved it massively improves the customer experience and the customer satisfaction.

And it improves our unit economics on our monetization because we.

We're not sending 100 people over to a lender and getting.

Three closings back we're going to send 100 people over and get 95 back now, it's not going to be quite that stark.

But that's the that's treatable.

Melissa.

Right now we've got.

We've got three credit card issuers live on it today.

Metrics that we anticipated have all been at or actually better than what we anticipated when discussing it with the partners and testing. So it is actually returning better outcomes, mostly better outcomes than we anticipated. So that's great to see that.

What we would call the inventory side of it so what is the consumer.

We're about to launch our first personal loan partner.

And so that's really exciting.

And.

We've got I would say that pipeline of partners. There is some complexity to this because you have to work with a couple of third parties and work through it with the partner to onboard them.

But.

Second quarter I would anticipate we've got another handful of credit card and personal loan I'd say five or six in the pipeline whether they all get done in the second quarter or if it bleeds into the third that's kind of the timeline that I would think about and that's a dramatic change in both of those businesses as Doug pointed out.

What it will do for us and even some of our some of our partners in personal loans. We are anticipating that we could have we could maintain our existing business with them and that <unk> could actually.

Replicate and double it alright, so to give you some sense for how it enables you to take market share.

It's just a more efficient way to deliver them the consumer today that they want.

And we think it's a bit of a motor barrier to increase in both of those businesses. So I just keep telling.

Somebody said to me Keith It is really hard to implement at the heart is good part as a barrier to entry it's a quality of revenue issue.

And I think in both personal loan and credit card that's exactly what we're doing we're improving the quality of the revenue.

Yeah.

A functionality and shrink.

Certainly compelling I think.

One of the other things that jumped out to me.

I can tell you the letter this morning.

<unk> dramatically improved performance for those partners, who have been on boarded.

Hoping we can dig into that a little bit are there any I guess I'm wondering what metrics you're looking at.

They're looking at and then does that are you seeing already an increase in allocated budget.

Lendingtree versus others as a result of that or how would you see that filter through.

So in personal lines, particularly in personal loans.

You don't necessarily have the budget.

Occasions lenders one typically if there if there because it's so electronic that many times. They will they are able to run on cap. The challenge. The key metric you look at is the conversion rate from when we send a consumer to somewhere else than lendingtree.

And the percentage of those people, who actually come back with a closed transaction.

And that relates to the unit economics on your revenue per customer.

Directly.

Because most of those things are our credit cards or we get paid on a cost per issue.

Revenue per issue and the same thing is mostly true with personal loans, we get paid on a closed loans. So if we can make dramatic changes in the conversion rate.

Can make dramatic changes in the unit economics, and then that business will grow and the only other thing I would say when I started lendingtree the whole premise as you fill out a form and you get multiple real offers to compare and in and in credit card lessor in personal loans like that's not happening. So this is just this is getting you.

Actually be able to see real offers Jamie what else would you add.

Melissa I think in terms of like.

Translating into more budget in card that tends to be.

The payouts will not be different the efficiency will be.

And really on the marketing side for us so.

As payouts in for certain cards go higher it will just be able to deliver more approvals.

And garner more from our base. That's why it's so critical that we expand our my Lendingtree base as well that this is not exclusively tied to my lendingtree, but thats why the strategy as you show our show link I think in terms of impacting the margin profile in each of those businesses I don't think Thats, a 2022 thing.

I think thats something that we will start to ripple through in 2023.

And we're going to have to kind of look at all the data in terms of tree quality. This year as we assess our budget for next year.

And look at what it does for those two businesses.

I am very confident that we will garner more market share and wallet share with partners in those businesses that parts. That's not a debate. This is very much what they want from us.

<unk>.

What it means in terms of can it get big enough.

To dramatically change our margin structure in those businesses. That's a more open question that we've got to work through it just a matter of size and getting enough volume to them through it.

Got it very helpful. Thanks, so much.

Thank you.

Thank you. Our next question comes from Nat Schindler with Bank of America.

Hi, Doug and J D.

Yeah.

Can you just help me out a little bit because I saw very different behavior from some of the public bidding taxes players the personal loan space. Obviously, there's a lot of growth in the demand side from consumers I know that.

Demand and supply go backwards, I think you've called out supply.

But the consumer is more interested they have higher credit card balances and theres less stimulus checks people are spending money again.

But you saw also from.

A couple of the players.

On the Fintech providers that are public to very opposite stances cutting their credit box dramatically on one side and then another one that dramatically expanding the credit box as we.

Both are taking a different take on what's going to happen to the consumer in this changing inflationary environment potentially recessionary.

What would happen to your business and how would it affect you.

In either side of those is correct and where do you see the consumer coming out.

Longer term.

To move forward with these rising rates.

Yes, I'm not I won't speculate on where the consumer is going but I will say in personal loans in particular.

What you just described is what makes a marketplace and more lenders you have with the more diversity of their credit boxes means that on any given day, we can deliver the consumer the best deal in the market from whoever sees it that way and what I always like to say is that lenders are willing to lend and borrowers want to borrow we are able to make a marketplace in that particular.

Julian personal loan the time when the business gets tough as when those personal loan or any lender starts to see obviously huge defaults in mid may.

Then they cut it or are they seem to have a capital.

Can't get capital has happened in the personal loan market several years ago, and the air hose shuts off and then.

And then you wait it out but the nice thing for US as you reduce your marketing spend in this thing and it kind of balances out J D. O S. Again, where is the consumer going well I mean that I guess, it's what's going to happen.

Theres greater dispersion in.

Pricing for any of our products right now.

That environment right and so think about what our value add is as a marketplace.

Our marketplace based on comparison alternatives for the consumer.

Everybody is at the same price, there's not a great deal of value for the consumer.

If there is great if there is great.

Spread.

There is more value so in some respect in the interim that's not a bad thing for us in terms of the call to action to compare.

So that's kind of one way to look at it in terms of I don't think there's enough data out there yet in terms of where all of our vendor partners are going we're certainly seeing as we mentioned in consumer partners, who just very much want to grow I'm not hearing a ton of of credit box tightening discussions when we go out in <unk>.

Talk to our partners for the first time in a while in person there's not a whole lot of credit box tightening discussion going on right now so that's not reflected across our network today, you're hearing a couple of data points of that is that it's at a higher rate environment.

We actually think Thats, a good call to action for people, but to compare.

Great. Thank you.

Thank you.

Thank you. Our next question comes from Jamie Friedman with Susquehanna.

Hi.

J D.

Was wondering.

At least at a high level can you talk us through your thoughts on that.

Vms and especially the EBITDA margin contemplations.

Segment level, if you can for the remainder of the year.

Yeah, Jamie it's Trent again, I'd kind of point everybody back to the segment level guidance that we gave.

At the Investor day.

We said the home segment was probably going to be down 15% to 5%.

On a revenue basis in light of what we knew was coming in terms of higher rates and lower refi volumes.

You'll still like.

Still feel like the bottom end of that range is achievable and unlikely.

And we got it for our margin profile at 35%, 40%, we still feel like that definitely achievable as well.

You look at consumer as I already said.

Our outlook remains fully intact, and we got it for 45%, 55% growth totally achievable and certainly the trends from Q1 and into Q to support that.

Some are similarly on the margin profile something in kind of the mid Forty's.

Insurance is the one way or whether it is a little bit of a caveat I mean, we expected that business to be up 10% to 20% on the air.

Sitting here today, I think we're being cautiously optimistic that's probably more like a five 5% to 10% type grower.

And the margin profile of that business certainly the first quarter results suggests that we're trending a little bit beneath the segment level margin that we guided for there.

We're hopeful that that will recover as the year progresses.

And from.

In terms of how all of that translates into EBITDA margin.

I do want to point out that we've we've done a pretty good job being disciplined in our Opex, we clearly moderated the.

The rate of growth in our in our fixed cost structure in our non marketing cost structure.

Yeah.

The fixed cost in our business have remained relatively flat for the last three quarters and we're certainly doing our best.

Hold the line on that page.

Got it and then if I could just ask it in this call out in the shareholder letter about consumers specifically on credit card, where you call out that the revenue per approval increased 47%.

Is that because the revenue per approval.

Grew less than the card business I'm.

I'm, sorry, if I'm being slow thinking this through but is that a function of increased volume or are the origination.

Dollars smaller.

What why is that happening.

Yes.

Revenue per per approval as a function of.

A number of approvals that we deliver for our issuers in aggregate.

And what we get paid for that.

Increasing revenue per approval is it a function of increased.

<unk> from the issuers for.

For new originations for new issuance.

As Andy talked about earlier I mean, we're clearly seeing.

A healthy backdrop, there in terms of issuers.

Wanting to spend marketing dollars wanting to put on new new issuance, where we've been a little bit more challenged us on our ability to drive.

New consumers and new approvals to them.

The marketing backdrop, there has been more difficult it is competitive and remains competitive and so are our focus of that business is obviously to get more efficient <unk> wall as we onboard more partners, but also to look for other.

Other marketing outlets other sources of traffic.

And that's where we're focused in the garden business.

Got it thanks for that I'll jump back in the queue.

Okay.

Yes.

Actually Mr. Friedman Youre the only one left in the queue you conclude thank you.

Oh.

Alright, well.

Just trying to get ahead of a trend is that the revenue actually grew faster than the approval.

So is that because you.

I guess is it volume discounts because you had more approvals.

The number of approvals that we're delivering for our partners is up.

We're getting paid per approval is also up.

So, but why would the revenue in the segment grow faster than the revenue per approval I'm, sorry, Doug if I'm being exceptionally because the revenue sort of Jamie the revenue the revenue per approval would be.

A function of how the.

Issuers across our network, we will pay you X per approval.

They intend to us to deliver them volume, we succeed delivering them more volume.

It's just the math of a higher weight of higher price just like everything else is inflated over the last year and more volumes. So it's two metrics working in tandem.

But thats going to lead to a higher percentage is right.

We've got a multiplier effect of more volume across a higher base price.

Got it okay.

Alright. Thank you that's that's the extent of my questions.

Sure. Thank you.

Showing no further questions at this time I would now like to turn the conference back to Doug Lebda CEO .

Thank you very much and thank you all for listening and your great questions I.

I'd just close with this 25 years ago. When I started this company I first spend a little bit of money on advertising and with a simple website and had hundreds of customers filling out the first <unk> on the internet applying for loans when I turned to the lender side with my co founder and tow ready to build.

<unk> to every financials every financial institution. My first lender said can you fax. It to me. So we had to build a system that we could fax customers to the lenders who would then input that data back. Several days later as we sit here I never thought that it would take 25 years to get to the place that we are in <unk>.

'twenty, two where I believe that we are at the cost of finally, having fully digitized loans and fully digitized insurance.

And that we are a marketplace right now where you've got public companies in each of those areas who are lending is one of our questioners referred to in personal loans. We've got fully digitized at scale mortgage companies, who are on the Internet every single bank in the country is working towards the same goal of acquiring more customers.

<unk> over the Internet and we think that we are perfectly positioned in that future and here's why one we had a loan and an insurance marketplace machine that works every single day to produce substantial cash flows. We were one of the only companies that I know of that doesn't have a cut.

<unk> acquisition cost problem, our marketing is very very profitable too we have a brand thats very very well known and with our customer experience improving its going to get even better.

Three we have every significant financial services company in every single category plugged into our exchange and as a client of ours and as a real partner of ours and those partnerships are getting stronger, particularly now post COVID-19, where we can actually get to see each other again and really work together again.

Fourth we have our strategy in all of our key initiatives.

To revolutionize our customer experience and with that comes direct unit economic improvement and fifth and most importantly, we have what I believe is the best team we've ever assembled at Lendingtree is perfectly ready is digging in.

During COVID-19, making changes building the company in the future and it's a fantastic team to work with.

And we are fired up and excited to see where we can take this company from here. Thank you all very much.

This concludes today's conference call. Thank you for participating you may now disconnect.

Yes.

Great job guys. Thanks Charles.

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