Q2 2023 LendingTree Inc Earnings Call
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Andrew whatsoever.
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That's pretty great and thank you for standing by and welcome to the Lendingtree Conference call. At this time all participants are in listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question and session you will need to press star one one.
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Advising your hand is raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Andrew Wetzler head of Investor Relations. Please go ahead.
Thanks, operator, and good morning, everyone joining us on our call to discuss lending tree second quarter 2023 financial results on the call today are Doug Lebda, Lendingtree as chairman and CEO , Scott Perry CFO and president of marketplace businesses I'm trying to figure out our CFO as a reminder to everyone. We posted.
A detailed letter to shareholders on our Investor Relations website earlier today.
The purposes of today's call will assume that listeners read that letter and we'll focus on Q&A before I hand, the call over to Doug for his remarks, I'll remind everyone that during today's call. We may discuss toiletries 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 those.
He has expressed today, many but not all of the risks. We face are described in our periodic reports filed with the SEC.
I'll 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 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 everyone for joining US today, we earned 27.
Adjusted EBITDA in the second quarter generating a 15% margin, which was well ahead of our forecast our outperformance was due to strong segment margin performance in consumer insurance combined with our laser focus on managing operating expenses.
Second quarter progressed credit markets broadly tightened across the banking and lending industries, causing demand for many of our lending partners to decline.
In home.
Several mortgage originators were forced to reduce their beds as cost per funded loan at reach levels that were no longer sustainable.
Personal and small business lenders broadly tightened their criteria lending further causing approval rates for our customers to decline.
<unk> carriers.
Work with where we work with we're continuing to decrease their marketing budgets as inflationary impacts will require further increases to auto and home premium rates.
This revenue degradation continuing into July and is baked into our into our updated financial outlook. We're providing this morning, that's the.
Bad news there.
Good news is that these macroeconomic headwinds should prove temporary we're encouraged that the fed is signaling. It's nearing the end of its campaign to tightening financial conditions with higher interest rates the pace of inflation continues to slow.
We also recognize that healthy labor market with historically low unemployment is a key component for lenders to expand their relationships with their customers one capital markets volatility and short term economic uncertainties subside.
We have faced we have made changes to adapt to the challenges. We're facing we've focused our management team to capture incremental revenue, while improving our expense profile. We have improved our product function and have identified key areas for potential addition, additional savings as a result for example.
Scott <unk>, our CTO has taken over personally our data initiative.
We've also brought back brought our people back to the office, which has helped to speed decision, making and reinforced the entrepreneurial culture that has made us such a successful company historically.
In the third quarter. The management team is focused on maintaining cost discipline and identifying areas of incremental revenue growth. Despite the various headwinds we've been facing.
We're going to release, our re imagine rebranded my Lendingtree platform and continue working on improving the customer experience and drive more engagement with our customers higher conversion rates and thus higher unit economics.
Before turning the call over to Scott for his comments I would like to thank J D. Moriarty for the impact. He has had his time at Lendingtree.
Ill lead our diversification strategy completing seven acquisitions in three years, which have helped us remained solidly profitable despite the.
The very difficult operating environment that we're facing.
Could not be more excited for Scott to assume the additional responsibilities of leading our lending marketplace businesses.
Our sales and marketing teams will also report directly to him is performance the founder and President quote Wizard has been exemplary through multiple cycles, including the current one.
Proven to be an exceptional operator, inspirational leader and truly embodies the entrepreneurial spirit of widening.
We are looking forward to the positive impact he is going to have on our own business moving forward Scott.
First off I'd like to say I'm really excited to take on these expanded responsibilities and looking forward to providing a larger impact to the overall organization.
I've spent the last few weeks, taking a real deep dive into all the components of the marketplace businesses and I'm excited to say that both the quality of the people in the number of near term opportunities that I believe exists in the core business I will be fully focused on improving the operational efficiency and growing the core business of lendingtree businesses of Lendingtree.
<unk>.
We want to build a more cohesive symmetry between the marketing and sales teams is critically important for the people developing the product to be working very closely with the people selling the product.
Similar to insurance instead of focusing on climbing every diamond revenue from customers that are already on a budget constraint will be focusing on providing the highest quality highest in 10 consumers and then focusing on monetizing efforts around those consumers.
Quote Wizard as we've seen even due to macro headwinds in the industry.
Currently driving the highest quality traffic at the highest <unk> margins in our company history.
We believe we can do that across the board in all of our business units.
In insurance, we are actually doing more of AMD year over year over significantly lower revenue as you can see in the numbers.
I'm, a big believer in having a maniacal focus on a small number of things that are the most impactful to the business is already becoming clear to me what some of those things and those items are and we are actively focusing our resources towards accomplishing those items to quickly get some lines on our board.
Finally.
We will have a relentless focus on operational efficiency velocity of decision, making turning big project in the small projects challenging long held assumptions focusing on understanding the sizes of opportunities before committing resources et cetera, et cetera, we will have an aggressive offensive stance going forward, which will have a big impact on our productivity. Thank you.
And now operator, I'd be happy to open the call for questions.
Right.
Great. Thank you.
Thank you we will now conduct the question and answer session. As a reminder to ask questions. Please press star one on your telephone.
<unk> for your name to be announced to withdraw your question Press Star One again, please standby, while we compile the Q&A roster.
Please standby.
Our first question comes from Ryan <unk> from <unk>. Please go ahead.
Good morning, everyone. Thanks for taking the questions.
Clearly the hope is that the revenue environment inevitably improves.
But given the importance of navigating the upcoming maturities, maybe you could provide a bit more detail on the different options you're thinking about for addressing the convert that goes current next year do.
Do you feel like the current free cash flow and EBITDA profile of the business can support that and I guess.
On the expense side are there additional levers you could pull if needed.
The scenario that the revenue environment doesn't go your way.
I'll open up broadly and then let.
Trend.
Give you the details.
Obviously, it isn't something that we are very very focused on.
We have.
A number of conversations internally, we have a number of options that we're exploring.
I don't know how much of the details we want to.
Talk about that to the extent of other levers the answer is yes.
We do have discretionary product investment that I've talked about that.
If things.
Do not bear fruit you can certainly make changes there. So yes. There are other cost levers you can do.
Sure.
Right now we want to maintain a balance between.
You focused a small.
<unk> initiative.
Into initiatives around data customer experience, because we think there.
The business with the same time, we're incredibly judicious with that but suffice it to say we.
We're very very very focused on that maturity.
And I would hope to be.
Refinancing.
Got it.
Yes.
<unk> covered it well, we're obviously laser focused on it we're exploring a bunch of alternative options available to us.
I think that the.
Good news is we take some awesome and the fact that there is we have four quarters left before that maturity comes current we've got.
Eight quarters left before it actually matures.
And so we're weighing all of our options relative to the performance of the business, obviously, the the options available to us and get a little bit better performance improve.
And I think we have some reason to believe that.
As we get a little bit more certainty around the macro.
Good reason to believe that the insurance.
Backdrop could turn a little bit as we head into next year, some stability and some of our consumer businesses should provide some upside.
So we're waiting we are weighing all of those alternatives relative to the performance in the business and the only thing I'd add is.
In an environment like this where.
Your unit economics on the revenue side, whether it's the cover.
Rice lenders want to pay that.
The amount of volume.
Or the coverage of how wide they are willing to go.
All of that has gone negative and we've gotten sharper and sharper and sharper on the marketing side, particularly in insurance and Scott just talked about bringing that to the lending side.
The business and the margin profile increases.
When you get any sort of tailwind on the other side, whether its a conversion rate increase through a product improvement whether it's.
Lenders expanding demand in some way.
That margin tends to stick.
So obviously some time in the next many quarters, we are going to have to be improving our financial profile. So that people are going to one one last money to us, but we are laser laser focused on that while trends also working on his financials financial.
Options as well.
Thanks, I appreciate all that color I guess on the guidance.
The revised guide looks like it implies second half EBITDA of around 30% to $40 million by our math round numbers.
$60 million to $80 million annualized and it looks like the implied <unk> EBITDA guide is at the low end of that range on an annualized basis.
Should we think about that as kind of the run rate EBITDA power as things stand here for the business today.
And are there key variables that could move the needle in the second half relative to the guidance that you would call out specifically.
And I guess, what's what's.
We're calling out relative to that would be obviously were.
Thanks.
Revenue challenges are a real and were seeing that and that's probably not a surprise to anybody given the headlines around.
You know more as the worst mortgage environment in 20 years, we've talked about home equity is a relative source of strength within that that's.
Starting to be a little bit more challenging as rates continue to go higher thats, becoming less attractive for consumers.
<unk>.
And so there's a lot of reasons why we had to pull down our revenue outlook for the rest of the year, what I would say is.
Our.
Forecasting similar seasonal declines in Q4 Q4 is always a seasonally much slower.
Period for Us and I think there is a little bit of uncertainty as to.
How much of that seasonal effect.
Show up in a year, where it's sort of the baseline is already beaten up a little bit and so we're certainly taking.
Taking a conservative stance with regard to.
Forecasting those trends through the rest of the year and in the fourth quarter in particular, yes, the way I just to add on a little bit I think of Q.
Q2 is.
Solid quarter.
Not where it historically has been call it fairly normal.
Q3.
As we've talked about you're seeing some pullbacks from lenders and we do not believe are.
<unk> in the market, it's not like our product doesn't work inside the buyers aren't there it's literally just that.
Just like we won't bid on Google search terms path to point on profitability lenders do the same thing with us. So we don't see that clearly is permanent.
Thing that wed.
We take some comfort in is when we talk to lenders about what they're doing with us and the competitors. We feel like we're generally speaking one of the last places that they turn off.
They pulled back on.
And then Q4 is trend said as seasonal seasonal downturn.
Typically in our industry people.
Consumers in general are not thinking about financial services in Q4.
Then they really think about it in Q1, so no I wouldn't take this as a as.
As the ongoing run rate.
Short answer to that question is I think Q3 is probably a better baseline to use as your run rate.
Q3 is a better baseline that in Q4.
What kind of how you model it into next year.
Great. Thanks for taking the questions.
Okay, Let me queue up the next question.
Our next question comes from Jed Kelly from Oppenheimer <unk> company.
Okay, great great. Thanks for taking my question just circling back on the insurance segment.
Should we expect this margin profile, you're seeing to continue as demand from the carriers.
Depressed and then just looking at the insurance marketing segment in General Scott.
There's quite a few of the marketplaces that participate in this business.
Are all of them going to be able to survive as this continues to get pushed out or do you see some type of consolidation.
Happening in the industry just can you touch on how you think.
<unk>.
These headwinds are going to affect some of your competitors. Thank you.
Thanks, Chad.
Start with the margin in a compressed market, we would expect our margins to remain high because just like I mentioned earlier, we're just focusing on the highest quality highest intent consumers for our clients with the limited budgets they have and honestly.
Our average.
Our competitors advertising is very suppressed our direct clients like they're not spending any money directly with a lot of places. They historically do so so the traffic.
Being that we're focusing we're not spreading our spend out and our monetization now like Mike butter like Republican right area. So we would expect our margins to stay.
Now on the budget started coming back in 'twenty, four and margins might be start getting compressed a little bit as the marketplace is getting more competitive but that said, we will be very conscientious about total DMD dollars going up significantly, which we think we're really well positioned for that at one the budgets start coming back, which I do expect them to start coming back in early <unk>.
24.
No.
That kind of leads into your final question.
Of the competitors and yes.
Long story short is there will be a number of players that don't survive. This.
Number of.
I would almost say start with its smaller marketing affiliates that maybe aren't as well known out there, but do you go out and kind of clogs up the market Micro places a little bit those guys has been hit really hard and some of them are.
Exited the market places.
<unk> marketplaces for example, I don't know if all of a comeback into those marketplaces.
Some of them will just disappear some of them might get consolidated.
And with some of the bigger players I don't know.
Any of the big players ourselves and Colgate.
Our outlook to actively look for by any of this without getting an apple screaming deal out of it.
But I do think when we get into next year similar to the 2016 downturn, there's going to be a lot fewer players in the marketplace, which does.
Create a goldilocks scenario.
Performance marketing company.
And then just as a follow up Scott.
What is the team looking at is.
Is it interest rates stabilizing supply chain stabilizing that gives you confidence that the carriers are going to get their profit underwriting profitability under control.
Insurance is not interest rates as much as it is inflation definitely insurance companies problems.
And so they need an inflation.
Because right now for the past 18 months, they have not been able to keep their rate increases at the pace of how inflation has been going and inflation as well publicized in the auto insurance industry. If the car repairs and whatnot has been even higher than the overall CPI.
And it still has quite a bit higher but that all said it is starting to cool down and there is positive signs.
Used car prices constant car repairs, it's starting to normalize.
And come down so that.
That equation, where they can't catch up to inflation is now starting to change where the rate increases inflation, starting to stabilize and the car insurance industry and the rate increases keep happening so sooner or later those lines will cross and they will get back to a profitable combined ratios scenario and so then you can mine.
So then the big help with a lot of these carriers is that they're feeling really good spot by the end of 'twenty three when the budget cycle switch to 'twenty four.
We're feeling that all of the policies are bringing on are profitable policies are bringing on and the resets at about this going into 'twenty four and based on their confidence level.
They can get aggressive really quick but the big driving factor is inflation stabilizer.
Yes, we were.
Talking about this yesterday, we're talking about this yesterday at our board meeting and Scott had Guaino drug combined ratio, but also that it varies state by state and the number of your large states.
Sure.
For example, California.
That.
State by state to where insurance carriers, theyre not going to make money.
Not going to go market to originate that policy for sure. The same thing you see.
With the lenders.
So.
When rates stabilize.
Inflation stable.
Some ways those are both intertwined.
We feel like we're going to be a much sharper company and.
And be ready to roll.
Thank you.
Thank you please standby.
Our next company. Our next question comes from Youssef Squali from <unk> Securities. Please go ahead.
Alright, good morning, guys. Thank you for taking our questions. So maybe a quick one for Doug and one for a trend so.
Doug obviously anybody looking at three right now Theyre looking past the.
In the second half of the year, they're looking at $2 24, and beyond knowing what you know today.
What kind of segments or what segments, sorry, do you see kind of coming back first.
And what are the kind of indicators are gating factors that you are kind of watching.
For that turnaround and then Trent.
Good job on the operating efficiencies that you've shown against a pretty tough top line, but how much of that operating cost efficient TV.
You can maintain.
Maybe into next year as revenues come back.
Alright.
I'll take the first one I would say and this order I think youll see insurance come back first.
I think youll see probably consumer come back.
And I think Youll see home come back.
And by the way.
I think as you think about it those are also in order of probably.
The most the biggest opportunity is as well for revenue and profit contribution.
The.
Insurance business Scott covered.
That's a fact of simply insurance companies being able to underwrite.
Get their rates higher so they can underwrite appropriately and profitably.
Consumer keep in mind that many of the personal loan lenders or most of them are.
Either marketplace lenders or correspondent lenders that are that are selling funds directly into the capital markets. So the capital markets are tighter, which the fed is doing that is going to hurt their but that air hose snaps back.
Capital markets have stepped on that air hose from time to time with us, but it always bounces back.
And then the home business.
Right now you've got.
Refinancing, obviously doesn't make sense for anybody.
And in the purchase market.
<unk> and selling is not what what it would be given.
Hi raids.
And buyers and sellers really kind of staring at each other in that market.
And then I would say underlying all of that as I was trying to improve our consumer experience, which improves customer, which improves conversion rates, which makes the whole business profitable, but I think insurance consumer and home and then other thing that we really monitor as I said before is that if we're gaining share or maintaining share versus competitors.
That's.
That's important to I won't say, it's perfect in every one of those but.
No that I feel really good.
From the standpoint.
Our partnerships.
The applicability of the efficacy of our model and lenders was wanted to do business with us and they're telling us. This.
It's an economic thing right now.
And.
They'll be back.
Yes, and then use up on the operating efficiency point I mean, I think what we've seen is we.
We've taken a lot of steps over the last 12 six to 12 months.
Simplify the business in many respects.
Doug noted earlier like candidly, we still have some discretionary investment going on right.
That we could choose to dial back.
Situation warranted.
No I mean, I think we've seen as a result of leaning out and getting more focused and efficient we're already operating better and faster.
More on fewer focused things right and so as the revenue opportunity comes back looking into next year, there's not a need to.
Because I need to staff up considerably against that revenue backdrop.
I don't see our opex growing materially at all as you look into next year.
I will tell you just walk out on the one change that we made internally, which is most companies you might set goals and <unk>. The beginning of the year probably due in November and then by January February and highlight changing environment and pretty much irrelevant.
Move to a quarterly cycle and the fewer points comment everybody in the company is responsible for three to five things that year or going to make sure that you deliver on.
And the next three months.
And in the last quarter, we did that with our how we do product. Although we've also brought on a lot of new management.
Made a lot of changes to make us sharper as well too.
But that quarterly cycle enables us to pivot.
<unk> enables us to look at each one of our initiatives.
Like.
This one is working that one's not this was behind our England ship personnel over here in the markets change was double down over there. So it's enabled us to be much more nimble.
And we're doing a lot more words.
With individualized focus teams that are cross functional that can make all their decisions. So as Scott was alluding to to just getting faster and a lot of that.
All of those into it we're really really trying to improve the way, we do operations and.
At this company.
Great. Thank you and good luck.
Thank you please standby.
Yeah.
Our next question comes from John Campbell from Stephens incorporated. Please go ahead.
Hey, guys good morning.
Hi, John .
And I think in the past you've talked to the belief that you can return the business back to high teens or kind of possibly 20% type EBITDA margins. You guys are obviously they are in the path.
Youre going to need.
A degree of a rebound in the top line I'm sure for that better leverage, but you've taken a lot of steep cost cuts it sounds like.
It can be a little bit more on that in the back half and I think you said that maybe very modest if any opex growth next year, but maybe if you guys can talk about how youre feeling about that margin target now and maybe what type of topline you think you might need to get back to those past margin levels.
Yes, no. Thanks.
John I mean look we had 15% EBITDA margins in the second quarter.
At the level that we haven't been out in quite some time and that's against a pretty bleak revenue backdrop. Obviously the revenue trend continues to work against us in the back half of this year, but I think we have reconfigured the cost structure of the business in such a way that.
Any rebound in the top line should result in us getting back to mid to high teens EBITDA margins in the not too distant future.
I don't think it would take much yes, all of that and there I mean, just for specific examples going to insurance is.
Some of our.
Largest clients, which we when they come back and they start spending significant budget again with us.
We don't have to hire a bunch of people or anything.
We have the same account management, we have the same marketers, we're just generating more revenue and <unk> over the same cost basis, so as Shane alluded to in an earlier question.
I believe across all industries. We're in we can see significant revenue in BMD growth without the need for opex growth for quite some time.
Yes, it makes a lot of sense and then on homes.
The shareholder letter you guys called out the 11% decline in HELOC and just kind of Triangulating that are at least on my math I'm showing that mortgage would be down maybe 15%, 20% or so sequentially.
The industry. It looks like was actually up 40%, that's just with seasonality I'm guessing you guys, maybe just kind of deemphasize that from the volume standpoint, so any kind of color you can provide there and then also.
I don't want put your feet to the fire but.
Is it potentially do you feel like this could be the trough for homes or maybe just mortgage with it.
<unk> results.
So.
<expletive> in the trough.
<unk>.
Whereas.
We hope so and at the same time.
Mortgage lenders are taking capacity from.
From an industry standpoint.
And in channel checks et cetera, it feels like.
Purchase is poised to do better.
The rates are going to then.
Mortgage rates seem to not be rising the flip side of that would be some lenders are taking and I think youll hear from it from public.
Some lenders are doing layoffs and pulling back on capacity so from the standpoint of.
No.
The price, they're willing to pay the quantity they want and the coverage and the demand equation.
Their capacity.
I want to make sure we're not going to see reductions in capacity.
Would reduce the demand equation now that said flip side of that as one of the things that we're going to do aggressively, particularly with Scott coming in here is.
Really get out and see our clients plan with them.
And be much more closer to them over this period of time.
Personally from both Scott and me.
And the rest of the team so.
Expect some.
The operational wins, there Scott anything to add I would add and also just I mean, you look at the refi market I mean, I would say that's a problem.
That has fallen off dramatically and I would say youre, probably at a trough, where we might be at the chopper, a little bit, but what I would add there is you think about it every month there is a lot of consumers out there purchasing homes at very high interest rates.
So I mean thats happening every month right now this year and so it does if you walk into early next year and you could theoretically see maybe some mortgage rates start to drop a little bit and so you have you will have this in grain user base of consumers. The bought homes. This year that will be actively looking to refi within.
Any drop in interest rates. It also so that could be.
Start up a little bit of a benefit next year.
From a.
Comparing to say it.
A company like ours.
A lot of sense.
The only other comment I'd make inside of our product development initiatives and Owen.
Doing a fantastic job.
<unk> taken over product we're focused on.
Purchase conversion rates now as many of you know thats been an age old challenge of Lendingtree at a crack that code, but we are working on it and hope to see some progress.
Great.
Please standby.
Our next question comes from Melissa from J P. Morgan. Please go ahead.
Good morning, Thanks for taking my questions today.
Firstly I wanted to follow up on the revised guidance and just kind of comparing EBITDA margins from the most recent quarter, which.
Trent.
In the mid teens.
Just sort of implied in the back half your guidance on margins in the low double digits. So a couple of hundred thats lower than <unk> levels.
Just trying to wrap my head around is it just sort of embedded conservatism in guidance driving that or something else that youre seeing.
No. It's just the magnitude of the kind of the compressed revenue in the back half of the year.
We assume that we have done most of the work on the cost structure in the first half of this year kind of a quarterly opex levels, we expect to remain relatively consistent feedback.
The year to where they were in Q2.
But obviously as your revenue trails off thats going to impact your EBITDA margin in the core gross margin <unk>, we actually do expect to see a little bit of improvement there.
In a couple of segments.
It's just not quite enough to offset the.
The magnitude of the decline in the revenue guide.
But one thing I would add on the margin front, we did a little.
Map calculation here for <unk>.
Prior question and how much would you need to get to 20% EBITDA margins were on Q2, it's roughly <unk> 10 more million dollars of DMV and if we can do that.
50% Dnm margin and a $20 million in revenue in the quarter, that's not a.
That is not a long part and.
I can't tell you when we're going to do it but I can tell you we're going to get there because I can tell you we've been there before and typically when the company has come back from the two other significant financial dislocations and come back back bigger and stronger with more with more share.
Okay got it thank you.
Follow up question on a couple of the categories within consumer if we're looking at things right. It looks like there is a little bit of a sequential increase and card in terms of revenue.
In card and personal loan and just wanted to understand it.
How you attribute that is it mostly.
Is there some seasonality in that number or are you starting to see sort of three call payout.
What's driving that.
Yes on card in particular, we talked last quarter about how we migrated to.
Sort of a new and improved foundational platform on which we operate that business that has enabled us to better leverage the lendingtree proper domain right. You recall, we acquired the compare cards business back in 2016, 2017 and that has been the primary.
Sort of.
Activity like most of the activity in the card business for US has run through that domain, there's a lot of value in us migrating some of that activity and some of that traffic over to lendingtree domain to capture E mails and repeat business and things like that and so we're seeing that bear fruit and so you saw a slight uptick in not only revenue.
But a relatively pronounced uptick in the margin profile of that business in Q2, and we expect that to continue.
Progress forward through the back half of the year, that's probably one of the bright spots within consumer.
And that continues to be an end market that is yes.
Sort of more healthy relative to some of the other businesses.
Is that an area that lightspeed.
Named the platform and migrating to two but that did have a significant impact on funnel throughput funnel performance conversion rates of our consumers.
<unk> have an immediate bump.
And marketing efficiency, but what I would add onto that I believe in the next few quarters. There is going to continue because we needed that new platform conversion to happen and now we're doing a lot of continued testing and increased.
Funnel optimization throughput and in optimizing results.
For consumers.
Better matches, and so I think theres a lot of opportunity in the credit card business for us.
Coming quarters, a big part of that was that platform migration that needed to happen.
Yes, I would only add.
Lightspeed is a great example of us having.
Having a team getting product right getting that up and running that helps our existing <unk>.
Credit card click ad business.
And you've mentioned <unk> I would say we've been.
Talking about trade wall and be very intrigued well for a long time.
Which I would say is something that we're all very mindful of the <unk>.
Flip side of that is.
We've made some pivots in the product and how we're working with lenders.
And so we hate to say, we expect that to bear fruit shortly.
Or soon in the future, but where we're getting more lender receptivity to it and then the biggest challenge you find is that we need the lenders work with us to so little bit of a catch 22 that you got to go to a major card issuers get them to work on a tech project with you.
When Youre also a small business for them, but we are.
We're slogging and having some success.
Now when that hits, we expected to have a big impact that that will be.
A one time event whenever we get it done.
Got it thank you everyone.
Thank you please standby.
Our next question comes from Chris Kennedy from William Blair.
Good morning, Thanks for taking the question just wanted to follow up on the.
Efforts to improve the conversion rates, Doug you just mentioned a few of them, but can you just dive a little bit more into the initiatives and how they are going relative to your expectation.
So mindful of competitive.
Things here, So let me hit it overall.
<unk>.
Obviously, we talked about three quality. So if you look at our conversion funnel in our performance marketing company you have to see where the biggest liggins and then we go try to plug the leak.
Credit cards is approval rate and that's because we don't gather a lot of your information and we look at it with you out.
And.
And there is a pretty lower approval rate on those you also have in that business with all of our competitors have the fact that people are seeking for credit seeking credit. So you have to get more preapproved data. So that you are making offers to consumers that they're going to get.
And I just talked about that one.
The other.
A series of teams are working on.
Close rates from lead the fund.
In the mostly in the mortgage space in the mortgage space.
And there what we're what Youre doing is.
For those who might be new when you think about the act of getting a home loan.
Or getting a small business loan.
That doesn't happen in one sitting.
And we need to enhance our CRM capabilities.
And.
Be more interactive with the lenders so that so that youre not just getting a onetime offer from lending tree and then getting barrage with phone calls.
We are working right the change that we've made and how we're working with lenders as we actually now leveraged our lender advisory council to have.
A smaller group of lenders that worked with us on a test basis and a managed marketplace, that's very very collaborative and co creating with them.
So I expect that to bear fruit.
Now the good news about these.
Yes.
While we're evaluating every quarter and we're pivoting that while over the last what I would say is my lending tree, which was important and there it's about improving engagement and our offers platform. So that we can.
So that we can give you much more personalized alerts and that work is underway.
Underlying a lot of this is a technical change that we have in what we call our offers platforms today.
If you are making changes to the pages, where you're seeing your offers and interacting with lenders it's very rigid.
We're moving that very shortly to a system that we've been working on for almost about a year.
I'd say, that's going to make that much more flexible and the last thing I'd say about all of this.
We don't need them to pay off tomorrow.
Any one of the that heads would have a change when it when it works.
And if they don't work as <unk> said, we got some.
Discretionary money that we're spending.
And as things like Lightspeed get done.
Then we can shift those resources to work on something else.
Yes, that's very helpful. And then just a follow up to that what type of timeframe are you kind of envisioning in order to make that ultimate decision, whether they are working or not thanks for taking the question.
Yes, so so in our new <unk>.
We're doing product now as I said, we've got a dedicated cross functional team on anything that we'd be in a tech product initiative.
And they have quarterly <unk> against each one of them.
And I'll tell you one of the other things that.
And.
Not everybody hits them every quarter, but you go through a review of product review process.
And we're making adjustments every quarter.
Sometimes it's Keith dull and you're hitting your marks sometime.
We need you to raise the bar, sometimes it's we need you to.
We're going to shut this thing down.
And that's just the way you do it with it we need lending tree to be a great product impact organization.
And with our leadership now Scott and I feel like.
I feel like we've really got it.
Yeah, and I'll just throw in one specific personal loans offers platform of which as we've seen the success on credit cards and we're now all hands on deck, we know theres a lot of opportunity in personal loans on getting that office platform converted.
<unk>.
What should happen sooner rather than later.
Honestly as we look at it since those are all essentially preapproved offers.
Turning to the consumers to having better algorithms for better matches and making sure like the top listings have a highest potential for a consumer getting a funded loan that theres a lot of good work, we can do that that will have.
And immediate.
And in it or a constantly continually improving impact on more revenue per consumer and at the same time, giving them better matches that are getting funded loans.
And an easier method so.
We're pretty excited that some of this stuff can have impacts sooner rather than later.
Great. Thank you.
Great. Please standby.
Okay.
Our next question comes from Rob Bottleneck. Please go ahead.
Hey, guys.
Home do you have a number in mind for how far mortgage rates would have to come down maybe its two 5% or four 5% before theirs.
Healthy refinance opportunity again.
No I don't and I would tell you to go look at the MBA forecast, but.
Almost 30 years of doing this.
They are directionally, right and sometimes hard to be precise so but the good news about what I will say, though that refinance is.
Is there is actually.
I would say almost always excepted times like this you do have a decent level of refinance activity you have people, who have adjustable rate mortgages coming due.
You have people, whose credit scores improve.
You have people, who values go up and they want cash out to go do something or pay off other debt. So all we are right now is just that.
The borrower benefit to a refinance isn't there, but like if you go get a mortgage at 7% or you get it at 9% because of credits not great.
When that gets to six and a half.
Savings inventory.
And.
So I think.
You just need to start seeing that tick down, but even really a stabilization I think.
Wed see more refinance business, but what I will tell you is.
Man Oh man.
<unk> doing mortgages.
As rates do come down.
Got it.
You've got a lot of refinance business stacked up and you and the industry in general has gotten more efficient. So I'd expect throughput to be better biggest technology improvements are happening in the background as everybody is trying to be as efficient as they can as efficiencies youre going to stick when.
When the market gets starts to grow.
Thanks.
Some of the some of the top line mortgage of towers right now are looking for a pretty healthy mortgage industry next year.
Yes.
Got it thanks, Doug and then maybe one more for Scott you mentioned earlier.
Insurance carriers getting profitable towards year end resetting budgets into 'twenty four can can we interpret that as the base case kind of outlook here. It takes carriers. Another three to six months before they can start thinking about growth again.
Yes, I would say that the base case scenario.
I think if I'm being completely honest a lot of the carriers are pretty much written off 23, and they are in survival mode 23, I mean, I feel like there has been stabilization not wanted to be very cautious.
Saying, it's completely at this point, but I mean.
Where I sit today I feel like kind of June was a low point, we've even had July .
Better than June , which was a positive and there are a number of carriers big consumer name brands.
Increased budgets with us in July not dramatically, but thats just a good sign that they are not continuing to cut they feel like there's a stabilization, but I think when you're talking about.
And yet they can't major increases in marketing budget is probably going to happen at the turn of the year when their annual budget cycles shift to a new a new calendar year.
Makes sense. Thanks.
Please standby.
Okay.
And our final question comes from Mike Grondahl from Northland. Please go ahead.
Hey, Thanks, guys, Doug you mentioned, some lenders pulled back in three <unk> or Thats, what youre seeing.
Which verticals did they pull back the most which ones did they pull back the lease.
So first off we werent talking <unk>.
We were talking about the end of Q2.
And in <unk>.
<unk> you want to take.
Most and least I would say in mortgage.
Got it.
Yes.
A select number of lenders who pulled.
Pulled back by reducing.
The price they are willing to pay so remember lenders set bids.
Bids in lending driven sediment Google.
And that obviously impacts the revenue profile and personal loans.
And we're a pullback isn't like I don't want and less volume, it's I need a tighter credit box.
To be able to sell those loans in terms of relative size Trent, Yes order of.
<unk> I would say.
Some of the price concessions or bid reductions that we've seen in home are probably the most pronounced we've seen a handful of smaller loans and personal loans.
He then.
In small business.
Got it and then <unk>.
<unk>.
Have you disclosed or kind of put brackets around what the discretionary spend bucket is in 'twenty three.
No not yet.
Yeah.
<unk>.
And the ZIP code of 5% to 10% of the cost structure.
Got it okay. Thanks, guys.
Thanks, Mike.
I'm showing no further questions at this time I would now like to turn the conference back to CEO . Please go ahead.
Thank you all very much for again for being here today. Thank you very much for your questions I just want to reassure shareholders.
No. This has been a a.
Long.
Dark winter during the Covid season, I want to know that we get the situation and we are on it and we are making changes at all levels is hopefully you can see to address it. Our company is now smaller leaner faster and we're more in person, that's making us operate more effectively.
Actively.
We're incredibly mindful of our balance sheet.
Not only as a management team, but I can also tell you is all of us being shareholders and meeting and significant shareholder we are in that boat with you and we're going to manage that.
And improve our improve our financial profile to make sure that can be handled we believe our market position is very solid.
As one of the leaders in this space.
It is much harder on smaller and smaller.
Marketplaces than it is on us.
And so we continue to improve our market position hopefully consolidated share.
Sharper in higher margin with.
With a better margin profile, so that we can capture any incremental revenue improvement with much more of it fall into the bottom line.
And our focus this quarter on just continuing to provide great value for our clients and Scott hit on across all of our segments.
That is the key on one side of the marketplace and on the other we talked about the initiatives underway to improve the relationship with our customers.
Those are hard problems to solve but we are making progress. Thank you very much for your belief in our company and we look forward to talking to you next quarter.
Okay.
Thank you this.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Yes.
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