Q1 2025 LendingTree Inc Earnings Call
Okay.
Operator: Good day, and thank you for standing by.
Speaker Change: Good day and thank you for standing by welcome to the Lendingtree, Inc. First quarter 2025 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's 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 tell.
Operator: Welcome to the LendingTree Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.
Speaker Change: Your phone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one 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 Wessel Senior Vice President of Investor Relations and corporate development.
Operator: I would now like to hand the conference over to your speaker today.
Andrew Wessel: Andrew Wessel, Senior Vice President of Investor Relations and Corporate Development. Please go ahead. Thank you, DeeDee, and hello to everyone joining us on the call to discuss our first quarter 2025 financial results. On with us today are Doug Lebda, LendingTree's Chairman and CEO, Scott Peyree, COO and President of our Marketplace Businesses, and Jason Bengel, CFO.
Speaker Change: Please go ahead.
Andrew Wessel: Thank you Debbie Hello, Evan.
Speaker Change: Everyone joining us on the call to discuss our first quarter 2025 financial results also with US today are Doug Lebda increased chairman and CEO, Scott Perry COO, and president of our marketplace businesses and Jason Bangle CFO as a reminder to everyone. We posted a detailed letter to shareholders on our Investor Relations website.
Andrew Wessel: As a reminder to everyone, we posted a detailed letter to shareholders on our Investor Relations website before the start of this call. And for the purposes of today's discussion, we'll assume that listeners have read that letter and will focus on Q&A.
Speaker Change: Before the start of this call and for the purposes of today's discussion will assume that listeners to 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 this call we may discuss <unk> expectations for future performance.
Andrew Wessel: Before I hand the call over to Doug for his remarks, I remind everyone that during this call, we may discuss LendingTree's expectations for future performance. Any forward-looking statements we make are subject to risks and uncertainties, and LendingTree's 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'll also discuss a variety of non-GAAP measures on the call, 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.
Speaker Change: Forward looking statements, 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'll also discuss a variety of non-GAAP measures on the call and I refer you to today's press release and shareholder letter both available on our website.
Speaker Change: For the comparable GAAP definitions and full reconciliations of non-GAAP measures to GAAP with that Doug. Please go ahead. Thank you Andrew and thank you all for joining us today for our first quarter update all three of our business segments generated solid revenue growth in the first quarter. Adjusted EBITDA. However came in just below our forecast driven.
Doug Lebda: With that, Doug, please go ahead. Doug Lebda, LendingTree Thank you, Andrew, and thank you all for joining us today for our first quarter update. All three of our business segments generated solid revenue growth in the first quarter.
Doug Lebda: Adjusted EBITDA, however, came in just below our forecast, driven by temporary regulatory headwinds in our insurance business and one-time expenses related to benefits and legal fees. We are now one month into the second quarter, and we are seeing improvements in those areas. As a result, we are still forecasting strong adjusted EBITDA growth of 15% at the midpoint of our annual outlook that we updated today. As we discussed last quarter, our insurance segment was impacted by the FCC's pending one-to-one consent. An appeals court rescinded that rule, and subsequent rulings have eliminated the possibility that it will be resurrected in the future.
Speaker Change: By temporary regulatory headwinds in our insurance business and onetime expenses related to benefits and legal fees. We are now one month into the second quarter and we are seeing improvements in those areas. As a result, we are still forecasting strong adjusted EBITDA growth of 15% at the midpoint of our annual outlook, we updated today.
Speaker Change: As we discussed last quarter, our insurance segment was impacted by the FCC's pending one to one consent.
Speaker Change: An appeals court rescinded that rule and subsequent rulings have eliminated the possibility that it will be resurrected in the future.
Doug Lebda: We expected a sharp recovery once we reverted back to our previous customer experience, but it has taken longer than anticipated. This disruption, combined with a marketing correction in the quarter from one specific carrier, led to a somewhat softer insurance performance than we had forecasted. Despite the challenges, insurance still grew revenue 71% year-over-year in the first quarter and we continue to forecast annual revenue and VMD growth for the second quarter. In lending, the consumer segment, again, benefited from growth in our small business and personal loan problems. Our investment in the concierge sales team for small business has delivered significant benefits to our unit economics.
Speaker Change: We expected a sharp recovery once we reverted back to our previous customer experience, but it has taken longer than anticipated. This disruption combined with a marketing correction in the quarter from one specific carrier led to a somewhat softer insurance performance than we had forecasted.
Speaker Change: Despite the challenges insurance still grew revenue, 71% year over year in the first quarter and we continue to forecast annual revenue revenue in BMD growth for the segment.
Speaker Change: In lending the consumer segment again benefited from growth in our small business and personal loan products our investment in the <unk> sales team for small business has delivered significant benefits to our unit economics conversion rates have increased and we have captured higher levels of renewal and renewal and lender bonus revenue as a result.
Doug Lebda: Conversion rates have increased, and we have captured higher levels of renewal and lender bonus revenue as a result. We expect small business will generate record revenue for us in 2025. Thanks to success in home equity lending, our home segment continues to produce great results in a difficult environment. Increased demand for home equity loans from both consumers and lenders is driving home segment performance. Prevailing high mortgage rates continue to suppress demand for new home buyers and refinancing. However, slower growth of home prices and an increase in inventory of homes for sale should be helpful for the housing market going forward.
Speaker Change: We expect small business will generate record revenue for us in 2025.
Speaker Change: Thanks to success in home equity lending our home segment continues to produce great results in a difficult environment.
Increased demand for home equity loans from both consumers and lenders is driving home segment performance prevailing high mortgage rates continue to suppress demand for new homebuyers and refinancing however, slower growth of home prices and an increase in inventory of homes for sale should be helpful for the housing market going forward.
Speaker Change: As I mentioned at the beginning of my remarks, we had some onetime items in operating expenses in the first quarter going forward, we have offset those expected caused unexpected costs with savings identified in the zero based budgeting process from last year.
Doug Lebda: As I mentioned at the beginning of my remarks, we had some one-time items and operating expenses in the first quarter. Going forward, we have offset those unexpected costs with savings identified in the zero-based budgeting process from last year. We remain committed to carefully managing our operating expenses while maintaining the ability to invest in specific growth initiatives, enabling us to produce positive operating leverage on future revenue growth.
Speaker Change: We remain committed to carefully managing our operating expenses, while maintaining the ability to invest in specific growth initiatives, enabling us to produce positive operating leverage on future revenue growth.
Doug Lebda: I know tariffs are on everyone's mind, so I want to address that here quickly. Obviously, we are a fully domestic company, and we don't expect tariffs to have any direct impact on our business. Obviously, there could be secondary effects with interest rates or significant inflation that may impact our business, but we stayed very close to our insurance and lending clients and we don't have any immediate concern.
Speaker Change: No tariffs are on everyone's mind, so I wanted to address that here quickly.
Speaker Change: Obviously, we are a fully domestic company and we don't expect tariffs to have any direct impact on our business. Obviously, there could be secondary effects with interest rates or significant inflation that may impact our business, but we stayed very close to our insurance and lending clients and we don't have any immediate concerns.
Operator: And now, operator, we're happy to answer any questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Speaker Change: And now operator, we're happy to answer any questions. Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Brian Thomas: And our first question comes from Brian Thomas <unk> of <unk>. Your line is open.
Ryan Tomasello: And our first question comes from Ryan Tomasello of KPW. Your line is open. Hi, everyone. Thanks for taking the questions. Doug, I wanted to start on that last point you made.
Brian Thomas: Hi, everyone. Thanks for taking the questions Doug I wanted to start on that last point you made.
Ryan Tomasello: If you could just elaborate generally what you're hearing from your carrier partners on potential headwinds to profitability from tariffs and obviously, you know, that I think the concern here is how that might impact demand for customer acquisition. And just given all that uncertainty, how you're thinking about the guidance here, what you're baking in, especially for the back half of the year.
If you could just elaborate generally what youre hearing from your carrier partners.
Potential headwinds to profitability from tariffs.
Brian Thomas: Obviously.
Brian Thomas: <unk>.
Brian Thomas: The concern here is how that might impact demand for customer acquisition.
Brian Thomas: And just given all that uncertainty how youre thinking about the guidance here, what youre baking in especially for the back half of the year.
Brian Thomas: Yes, im going to let <unk>.
Doug Lebda: Yeah, I'm gonna let Scott handle that. He's in Seattle. And I know he's closer to the insurance clients.
Scott Perry: Scott handle bodies in Seattle, and I know he's closer to the insurance lines Scott take it away.
Scott Peyree: So Scott, take it away. Yeah, sure, Ryan, to answer your question there. You know, we've we've been staying pretty close and having conversations with our major clients on the insurance side. There's definitely concern around tariffs and what they might do, but they generally, I would say generally all feel pretty good about where they're at today from profitability perspective, all of the work they've done over the past few years to get their rates in a good spot from the inflation work is that they're probably in a better profitability position today than they've been in the past three to five years.
Scott Perry: Sure Ryan to answer your question there.
Scott Perry: We've been staying pretty close to having conversations with our major clients on the insurance side, there's definitely.
Scott Perry: Concern around tariffs and what they might do but.
Scott Perry: Generally I would say generally all feel pretty good about where they're at today from profitability perspective, all of the work they've done over the past few years to get their rates in a good spot from the inflation, where I guess it probably in a better profitability position today than they've been in the past three years to five years. So they are kind of starting.
Scott Peyree: So they're kind of starting at a good point. They're monitoring closely. I think what you'll see out there is where a number of carriers might've started reducing rates for a lot of consumers this year. That's probably not going to happen as they take a more cautious approach. I feel like a lot of the carriers have told us they feel like they can get out in front of any potential inflationary impacts from tariffs. to maintain a good spot. So I'd say the general response from carriers has been they feel like they're going to be able to deal with the impacts of tariffs.
Scott Perry: And a good link on their monitoring closely I think what you'll see out there is word.
Scott Perry: A number of carriers might have started reducing rates for a lot of consumers. This year, that's probably not going to happen as they take a more cautious approach I feel like a lot of the carriers have told us they feel like they can get out in front of any potential inflationary impacts from tariffs.
Speaker Change: To maintain a good spot so I'd say the general response from carriers has been.
Speaker Change: They feel like Theyre going to be able to deal with the impacts of tariffs.
Scott Peyree: within enough time that it won't really affect their marketing strategy.
Speaker Change: And enough time that it won't really affect their marketing strategies.
Speaker Change: Okay.
Speaker Change: Great and then I guess, maybe just digging deeper into that and maybe expanding broadly what what you're kind of baking into the revised guidance.
Ryan Tomasello: Great.
Scott Peyree: And then I guess maybe just digging deeper into that and maybe expanding broadly, you know, what, what you're kind of baking into the revised guidance here, you know, your haircutting, haircutting the top line by about three points, it looks like. That's being offset by stronger variable margins. So just unpacking the moving pieces there, what you're baking in from a macro standpoint. just across the different pieces of the guidance. um you know consumer from from where it is the q1 q2 and q3 tend to be a stronger seasonal uh quarters for consumers so we do expect some improvement from from q1 moving into q2 and q3 and consumer um we're not again we're not expecting any we're not contemplating any macro change on the consumer side um that is that is something that we're going to watch On the insurance side, we do expect incremental improvement from where we are today.
Speaker Change: Guidance here your hair cutting.
Speaker Change: Hair cutting the topline by about three points it looks like.
Speaker Change: That's being offset by stronger variable margin so just.
Speaker Change: Just unpacking the moving pieces, there what youre baking in from a macro standpoint.
Speaker Change: Just across the different pieces of the guidance. Thanks.
Speaker Change: Yes, Jason I can take that one.
Speaker Change: Just just first of all on the macro on the macro point, we're not baking in anything one way or the other from a macro standpoint, that's just something that we're going to have to monitor were going to have to monitor delinquencies combined ratios on the carrier side consumer spending to make sure shopping remains stable, but like Scott said, we hadn't.
Speaker Change: Doug said, we don't have any indications today that there is that there is tightening happening.
Speaker Change: So as far as the guide goes that's just going to have to be something that we continue to monitor.
Speaker Change: And I can I can talk through each segment, a little bit to give some more color around the guide.
Speaker Change: Just just starting with home home, we expect strong continued home equity growth to continue that we've seen.
Speaker Change: On the right side rates have been moving around quite a bit we're not we're not expecting any change to the rate environment from where it is today in the homes segment.
Speaker Change: Consumer from where it is for Q1, Q2, and Q3 tend to be a stronger seasonal.
Speaker Change: Quarters for consumers. So we do expect some improvement from from Q1, moving into Q2, and Q3 and consumer.
Speaker Change: We're not again, we're not expecting any we're not contemplating any macro change on the consumer side.
Speaker Change: That is something that we're going to watch.
Speaker Change: On the insurance side.
Scott Perry: We do expect incremental improvement from where we are today, we're not expecting any impact from from tariffs like Scott said, but we do expect to improve better perform better from where we are we've had a lot of.
Scott Peyree: We're not expecting any impact from tariffs, like Scott said, but we do expect to improve better, perform better from where we are. We've had a lot of positive conversations with the carriers, and we're pretty optimistic that budgets are going to increase from where we are. So the back half of the second half of the year, the second half of the year should perform better than the first half of the year for insurance in particular. Expenses were a little bit high in Q1. We do expect them to modestly come down in Q2 and the rest of the year going forward.
Scott Perry: Positive conversations with the carriers and we're pretty optimistic that budgets are going to increase from where we are so the back half of the second half of the year. The second half of the year should perform better than the first half of the year.
Scott Perry: For insurance in particular.
Scott Perry: Expenses expenses were little bit high in Q1, we do expect them to modestly come down in Q2, and the rest of the year going forward. So that will provide a little bit more help in the back half as well.
Scott Peyree: So that'll provide a little bit more help in the back half as well. And generally speaking, you know, the business model is very resilient. With the two-sided marketplace, if, you know, there's a change in lender or carrier demand, there are marketing offsets to that, both up and down, as you guys know. So, you know, we can, we can weather volatility at the same time, unless there's a shock to the system, where either lenders aren't lending or, you know, carriers aren't writing policies, the company is, is in, is generally in good shape. And, you know, and if anything, some of this stuff could cause interest rates to move around.
Scott Perry: And generally speaking.
Scott Perry: The business model is very resilient.
Scott Perry: With the two sided marketplace.
Scott Perry: There is a change in lender or carrier demand.
There are marketing offsets to that both up and down as you guys know.
Scott Perry: So we can we can weather volatility at the same time.
Scott Perry: Unless there is a shock to the system.
Scott Perry: There either lenders arent lending or.
Scott Perry: Carriers aren't writing policies the company is in.
Scott Perry: It was generally in good shape and.
Scott Perry: And if anything.
Scott Perry: Some of this stuff could cause interest rates to move around.
Scott Peyree: And if they go up, then they'll go down. And if they go down, that's even better. And that'll certainly, you know, help the business and, you know, even weakening in the economy, weakening in the economy obviously helps rates. So, you know, there's, there's lots of different offsets. And, but unless there's a big shock, you know, we can adjust pretty easily.
Scott Perry: Go up then they will go down and if they go down that's even better and that will certainly help.
Scott Perry: The business.
Scott Perry: Even we can in the economy weakening in the economy, obviously helps right. So there's lots of different offsets and but unless there is a big shock.
Scott Perry: No.
Scott Perry: We can adjust pretty easily.
Scott Perry: Okay I appreciate all the color thanks, guys.
Ryan Tomasello: Okay, I appreciate all the color.
Operator: Thanks.
Scott Perry: Thank you.
Operator: Thank you.
John Campbell: And our next question comes from John Campbell of Stephens, Inc. Your line is open.
John Campbell: And our next question comes from John Campbell of Stevens, Inc. Your line is open. Hey, guys. Good afternoon. Hey, so I just want to touch, I guess starting here on S&B. If my math is right, I think you guys got to about 20 million or so in the quarter. You mentioned the shareholder letter, you expect the record S&B rep for the year. If I annualize that, I think it's going to be well above your record.
John Campbell: Hey, guys good afternoon.
Speaker Change: Good afternoon.
John Campbell: Hi, So I just wanted to touch.
John Campbell: Starting here on SMB.
John Campbell: My math is right I think you guys got to about $20 million or so in the quarter.
Speaker Change: Mentioned in the shareholder letter you expect.
John Campbell: F&B Rev for the year, if I annualize that.
Scott Peyree: So just remind us again, I guess, on the seasonality of that business, and maybe just more direct if you feel like you can hold near that quarterly level for the balance of the year. I'm seeing puzzled looks here on the faces of our finance geniuses.
John Campbell: I think it's going to be well above your records. So just remind us again I guess on the seasonality of that business and maybe just more direct if you feel like you can hold near that quarterly level for the balance of the year.
John Campbell: I am seeing puzzled glitzier administrators of our finance geniuses so.
Scott Peyree: So let's see who's talking about it, Scott, you hit it generally, while we make sure you have the numbers right. Yeah, so Jason can maybe hit on the specifics as far as like our revenue projections this year compared to our previous all-time highs. But, you know, hitting on the seasonality, there's definitely seasonality throughout the year on small business as you kind of go into like, for example, heading into the holidays, you'll have a lot of, you know, small businesses looking for inventory loans and whatnot. But I would say in general, there's so many different types of small businesses looking for loans for different types of reasons that it will smooth out in general throughout the year.
John Campbell: Let's see.
John Campbell: And I was talking about.
Scott Perry: Scott you hit a generally while we make sure you have the numbers right. Yes, so Jason can maybe hit on on the specifics as far as like our revenue projections this year compared to our previous all time highs, but hitting on the seasonality there is definitely seasonality throughout the year on small business as you kind of go into like for example.
John Campbell: Heading into the holidays, you'll have a lot of.
John Campbell: Small businesses looking for inventory loans and whatnot, but I would say in general there is so many <unk>.
John Campbell: Different types of small businesses looking for loans for different types of reasons. It will smooth out in general throughout the year.
Scott Peyree: And I would say just our growth, we've seen Growing our direct sales staff has been very successful. As Doug mentioned at the top of the meeting, the unit economics are much better when we write the business directly. We've at the same time been able to grow our consumer lead flow quite a bit, so there's lots of small businesses out there. There's a lot more today coming through our network than we had a year ago, and we plan on that continuing to grow over time. We're adding more lenders onto the network, so that should provide us more options to provide loans to the merchants and businesses as time goes on.
John Campbell: And I would say just our growth we've seen.
Speaker Change: Growing our direct sales staff has been very successful as Doug mentioned at the top of the mean the unit economics are much better when we write the business directly.
Speaker Change: We've at the same time been able to grow our consumer lead flow quite a bit. So there is lots of small businesses out there. There's a lot more today coming through our network and we had a year ago and we plan on that continuing to grow over time, we're adding more lenders onto the network. So that should provide us more.
Speaker Change: Options to provide loans.
Speaker Change: To the merchants and businesses.
Speaker Change: As time goes on so.
Scott Peyree: So, I mean, I think we've got a lot of tailwinds in the small business world. There's a little bit of concern around all of the political stuff going on as far as do small businesses kind of... you know, get a little bit more conservative. We're not seeing it that at a real macro level as of yet. Maybe the average loan size is slightly less than we would historically expect over the past 30 to 45 days, but the data is a little bit thin there. It's nothing significant enough that we would change any expectations going forward.
Speaker Change: I think we've got a lot of tailwind in the small business world.
Speaker Change: There is a little bit conservative around all of the.
Speaker Change: The political stuff going on as far as these small businesses kind of.
Speaker Change: Get a little bit more conservative.
Speaker Change: We're not seeing it that in a real macro level as of yet maybe the average loan size.
Speaker Change: Is slightly less than we would historically.
Speaker Change: Over the past 30 to 45 days, but the data is a little bit and there is nothing significant enough that we would change any expectations going forward I think I would say in general we're very happy with where we're at and where we're projecting the small business category to be over the next year plus.
Scott Peyree: I think I would say in general, we're very happy with where we're at and where we're projecting the small business category to be over the next year.
Doug Lebda: Yeah, my take on it would be we're still very small. We're growing. If you grow the lender network, you're going to grow your unit economics, which means you can go market more. And we're growing off such a small base.
Speaker Change: Yes, my take on it would be we are still very small we are growing.
Speaker Change: If we grow the lender network is going to grow to unit economics, which means you can go market more.
And we're growing at such a small base. This is the most probably complicated most complicated and opaque underwriting.
Doug Lebda: This is the most probably complicated, most complicated and opaque underwriting of all the products, loan products that there are, which means it's kind of the last to come online. It's kind of fun to have a small grower again, that's, you know, getting big to the 20 million a quarter.
Speaker Change: Of all the products at the loan products that there are which means it's kind of the last to come online and it's kind of fun to have a small grower again.
Speaker Change: Getting big.
Speaker Change: The $20 million a quarter guys I want to talk about that with numbers.
Jason Bengel: You guys want to talk about that numbers? Yeah, I mean, you know, generally, your math is right. And, you know, we do expect continued strength in this. We are leaning in, like Scott said, we're hiring, you know, concierge reps, as those unit economics work out. So I think the other thing to point out that this is a very profitable vertical of ours. So as it continues to grow, it should provide more and more margin support for us. So I mean, I think we're optimistic about the rest of the year performance around small business.
Speaker Change: Yes.
Speaker Change: Generally your math is right.
Speaker Change: We do expect continued strengthening as we are leaning in and like Scott said, we are hiring.
Speaker Change: <unk> reps as those unit economics work out so.
Speaker Change: So I think the other thing to point out that this is a very profitable vertical of ours.
Speaker Change: So as it continues to grow it should provide more and more margin and support for us. So.
Speaker Change: I think we're optimistic about the rest of the year.
Speaker Change: <unk> strong small business.
Operator: For more information visit www.FEMA.gov Okay, that's helpful.
Speaker Change: Okay. That's helpful and then on the mortgage marketplace I mean, obviously that used to be like the core business for you guys.
John Campbell: And then on the mortgage marketplace, I mean, obviously, that used to be like the core business for you guys. And, you know, it's been largely dormant, obviously, the macro has been incredibly tough. A couple years ago, I think you guys had 376 million in that business last year was 40 million. So those like that is a growth driver, one of these days.
Speaker Change: It's been largely dormant obviously the macro has been incredibly tough a couple of years ago. I think you guys had $376 million in that business last year was $40 million. So it sounds like that is a growth driver one of these days. So I'm just curious about.
Doug Lebda: So I'm just curious about, you know, what you guys are thinking about as far as like the, you know, a level of mortgage rates where you feel like that could start to unlock some values, maybe unlock a little bit of growth for you guys. I don't have a specific number, but you're definitely right. It should be a huge growth driver and is largely, you know, in many ways stuck from a refinance standpoint. That's why home equity is a great substitution product for lenders and consumers in this type of an environment. So you really need to look at it in total.
Speaker Change: What you guys are thinking about as far as like the.
Speaker Change: Our level of mortgage rates, where you feel like that could start to unlock.
Speaker Change: Some values, maybe I'll talk a little bit of growth for you guys.
Speaker Change: I don't have a specific number but you're definitely right it should be.
Speaker Change: Huge growth driver and is largely.
Speaker Change: In many ways.
Speaker Change: Yes.
Stuck from a refinance standpoint.
Speaker Change: That's why home equity is a great substitution product for lenders and consumers in this type of environment. So you really need to look at it in total.
Scott Peyree: You know, I don't know what the amount is. Scott, I don't know if any of you guys have a specific number, but, you know, it's going to happen. It's going to happen someday. And the good news is this time around, I think technology will enable more loans to go through the pipes, which will mean that, you know, you won't have lenders shutting down as much as they had to last time. I think the mortgage process become much less manual.
Speaker Change: I don't know what the amount is.
Speaker Change: <unk>.
Scott Perry: Scott I don't know if any of you guys have a specific number but yes.
Scott Perry: It's going to it's going to happen it is going to happen someday.
Scott Perry: And the good news is this time around I think.
Scott Perry: The technology will enable more loans to go through the pipes, which will mean that you won't have lenders shutting down as much as they had two last time I think the mortgage process become much less manual Scott, Yes, I'd just add it yes, you're 100% correct. When you say the combination of refi.
Scott Peyree: Scott? Yeah, I'll just add it. Yeah, you're 100% correct when you say the combination of refinance, cash out refinance, new purchase is a massive business for us in the good times that has been dormant over the past few years. Home equity is really the driver of the growth we're seeing right now. Even though our purchase and refinance business is growing, but it's coming off of, as you said, pretty low levels last year. You know, a lot of what I hear in the industry is if you get interest rates to a five handle, You know, if your 30 years starts with a five.
Speaker Change: As cash out refinance new purchase is a massive business for us in the good times that has been dormant over over the past few years home equity is really the driver of the growth we're seeing right now, even though our purchase and refinance business is growing but it's coming off of as you said pretty low levels last year.
Speaker Change: A lot of what I hear in the industry is if you get interest rates two a five handle.
Speaker Change: 30 years starts with a five.
Speaker Change: You're probably going to see a seismic shift in the industry with dramatic growth returning.
Scott Peyree: You're probably going to see a seismic shift in the industry with dramatic growth returning. So in the meantime, we just, we're growing and doing what we can and working hard with our clients and making sure we have a good distribution network. I mean, the demand for our product is very high. It's more just about the number of consumers that are looking for those products.
Speaker Change: So in the meantime, we just we're growing and doing what we can and working working hard with our clients and making sure. We have good distribution network I mean, the demand for our product is very high it's more of just.
Speaker Change: The number of consumers that are looking for those products right now.
Speaker Change: Okay. Thanks, guys.
John Campbell: OK, thanks, guys. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Jed Kelly of Oppenheimer <unk> Company. Your line is open.
Jed Kelly: And our next question comes from Jed Kelly of Oppenheimer and Company. Your line is open. Hey, great. Thanks for taking my questions.
Jed Kelly: Hey, great. Thanks, Thanks for taking my questions.
Jed Kelly: Um, just just back on insurance, can you kind of give us a sense how we should think about the BMM margin as revenue starts to normalize in that segment. And then just again on insurance, how should we view the home segment? I know auto is still the main portion, but it seems like homes are an attractive market as well. Thanks.
Jed Kelly: Just back on insurance can you kind of give us a sense, how we should think about the margin.
Jed Kelly: <unk>.
Jed Kelly: Revenue starts to normalize in that segment and then just again on insurance.
Jed Kelly: How should we view the home segment.
Speaker Change: I know auto is still the main portion, but it seems like homes at attractive market as well. Thanks.
Speaker Change: Yes.
Scott Peyree: Yes, Jed, starting on the VMM side, and I'll say today what I've said the past couple of earnings calls, is I think as things normalize over time, low to mid-30s is where we want to be on the VMM side. You know, we started, we had some good improvements in Q4. I think some of the points that Doug talked about at the top of the call, as far as like the SLC headwinds, we had some carrier budget shifts, so some new technology bugs that happened in our system. We had a little bit of a setback in Q1, but those were one-time events that we were working through and solving, and so we're going back to optimizing that.
Speaker Change: Jets, starting starting on the VM side, and I'll say today, what I've said in the past couple earnings calls is I think as things normalize over time low to mid <unk> is.
Speaker Change: Where do we want to be on the VM side.
Speaker Change: We started we had.
Speaker Change: Some good improvements in Q4, I think that some of the points that Doug talked about it at the top of the call as far as like the SLC headwinds, we had some carrier budgets shift.
Speaker Change: So there's some new technology bugs that happened in our system at a little bit of a step back in Q1, but.
Speaker Change: Those were one time events that we were working through and solving and so we're going back to optimizing that but low to mid <unk> is where we would expect to be long term at a normalized rate and I think it will be there.
Scott Peyree: But, you know, low to mid-30s is where we would expect to be long-term in a normalized rate, and I think we'll be there sooner rather than later.
Speaker Change: Sure.
Scott Peyree: And then just answering the question on home insurance, yes, that's absolutely. That's a very popular product. It's a growing product for us. And I even feel like the first quarter, there was even more growth there than we expected. As the carriers are getting more and more interested in driving growth via via Home Insurance. So, yes, that's correct. That's a good industry right now.
Speaker Change: And then just answering the question on home insurance, Yes, that's absolutely that's a very popular product, it's a growing product for us.
Speaker Change: I, even feel like the first quarter that there was even more growth there than we expected.
Speaker Change: As the carriers are getting more and more interested in driving growth.
Speaker Change: Via home insurance.
Speaker Change: So yes, that's correct that's a that's a good industry right now.
Jason Bengel: Thank you. And then Jed, maybe just to touch on the guy that, you know, we do expect, you know, like we said, insurance to improve from where it is today. We do expect margin to improve from where it is today. Not yet in the more normalized levels that Scott mentioned, but we do expect continued improvement. Thank you.
Speaker Change: Thank you.
Jeff: Jeff maybe just to touch on the guide.
Jeff: We do expect like we said insurance to improve from where it is today, we do expect margin.
Jeff: To improve from where it is today not not yet in the more normalized levels that Scott mentioned, but we do expect continued improvement.
Speaker Change: Thank you.
Jeff: Thank you.
Speaker Change: And our next question comes from Melissa <unk> of Jpmorgan. Your line is open.
Melissa Wedel: And our next question comes from Melissa Wedel of J.P. Morgan. Your line is open. Good afternoon. Thanks for taking my questions. I wanted to start on the home segment margin that came in a little bit stronger than we were expecting. And I guess the question would be, is there any reason to think that that would inflect lower or is this sort of the run rate, particularly with home equity demand right now? Yeah, I mean, you know, we are generally expecting that to be sustainable going forward, and home equity monetization is just really strong. And that's a function of, you know, this is a product that works really well for consumers, and it works really well for lenders.
Melissa: Hey, good afternoon. Thanks for taking my question I wanted to start on the home segment.
Melissa: Margin came in a little bit stronger than we were expecting and I guess the question would be is there any reason to think that that bled in flat to lower or is this sort of the run rate, particularly with home equity demand right now.
Melissa: Alright.
Melissa: We.
Melissa: We are generally expecting that to be sustainable going forward and home equity monetization is just really strong and thats a function of.
Melissa: This is a product that works really well for consumers and it works really well for lenders.
Doug Lebda: On the lender side, you know, true home equity, the loan amounts are lower, so that's a negative for lender-unit economics, but the close rates are just so much higher that the lender-unit economics really work, because that's a product that works for the consumer. So a lot of this margin improvement is just a function of the unit economics that we've attained building out that network, and we do expect them generally to be in that range going forward. There's been no intentional effort to expand margins. As Jason said, we're within a range we're comfortable with, works for us, works for our clients.
Melissa: The lender side true home equity in our loan amounts are lower so that that's a negative for lender unit economics, but the close rates are just so much higher that the lender economics really work because that's a product that works with the consumer.
Melissa: So a lot of this margin improvement is just it's just a function of the unit economics.
Melissa: That we entertain building out that network and we do expect them generally to be to be in that range going forward.
Melissa: Okay.
Melissa: Yes.
Melissa: Theres been no intentional effort to expand margins there.
Speaker Change: As Jason said, we're within a range, we're comfortable with Brooks for US works for our clients.
Melissa: Yes.
Doug Lebda: Yeah, if, uh, if, um, If demand for volume shot up tomorrow so much and we had to like step on the marketing gas, you'd see percentages decrease. But other than that, we feel good. Okay, appreciate that. You know, we've touched on this a little bit about the volatility that we've seen post quarter end, but it's been more from the perspective of where you're hearing from network partners. I'm curious if you're seeing anything different in terms of changes in consumer behavior and search on your platform in the last month. Any conclusions you can draw from that?
Melissa: <unk>.
Melissa: If demand for volume shot up tomorrow, so much and we had to like step on the marketing gas SEC percentages decrease but.
Melissa: Other than that we feel good.
Melissa: Okay I appreciate that.
Melissa: Yeah.
Speaker Change: You touched on this a little bit about the volatility that we've seen post quarter end, but it's been more from a perspective that is what are you hearing from network partners.
Melissa: Im curious if youre seeing anything.
Melissa: Different in terms of changes in consumer behavior and search on your platform in the last month any conclusions you can draw from that.
Doug Lebda: Thanks. I would say consumer demand across most of our products has remained pleasantly strong. We have not we have not seen a significant reduction in demand as a byproduct. of Consumer Sentiment, I would say that the one category that we probably have seen a little bit less demand is again, getting back to the mortgage, the purchase and refining. traffic that's that's that's a major product for consumers to purchase and I think there is. a little bit of cautionary approach that has affected the amount of consumers searching for those products over recent history. But as I was talking about earlier, that's already kind of at a low dormant point.
Melissa: I would say.
Melissa: Consumer demand across most of our products has remained wasn't really strong.
Melissa: We have not we have not seen a significant reduction in the band is a byproduct.
Melissa: Of consumer sentiment I would say the one category that we probably have seen a little bit less demand is again getting back to the mortgage the purchase and refinance.
Melissa: <unk>.
Melissa: That's a major product.
Melissa: Consumers are purchasing I think there is.
Melissa: A little bit of cautionary approach that has affected the amount of consumers searching for those products over recent history, but but as.
Melissa: I was talking about earlier thats already kind of at a low dorman point. So it's one of our lower consumer traffic areas right now all of our other product lines right now I would say the consumer volume is coming right in where we would expect it to be in normal times.
Operator: So it's one of our lower consumer traffic areas right now. All of our other product lines right now, I would say that the consumer volume is coming right in where we would expect it to be in normal. Yeah, and it's broad based. It's, you know, all loan types. Our marketing is working well on all channels. Our content strategy is working well, people are engaging with our content. You know, we're appearing well and you know, emerging AI results. So yeah, we we feel good about about where we are with the consumer. Thank you. And as a reminder, if you have a question, please press star 11.
Melissa: Yes.
Melissa: It's broad based it's.
Melissa: All loan types.
Melissa: Our marketing is working well in all channels.
Melissa: Our content strategy is working well people are.
Melissa: Engaging with our content.
Melissa: We're appearing well in emerging AI result, so yes, we feel good about where we are with the consumer.
Melissa: Thank you.
Speaker Change: Thank you and as a reminder, if you have a question. Please press star one one.
Speaker Change: And we have a follow up from Ryan Tomasello of K B W.
Ryan Tomasello: And we have a follow-up from Ryan Tomasello of KBW.
Ryan Tomasello: Hi, everyone. Thanks, again, I guess, just an entertaining more of the downside risk on macro.
Doug Lebda: Hi, everyone. Thanks again. I guess just entertaining more of the downside risk on macro. You guys have done a good job historically of managing to the bottom line by pulling some expense levers. I guess maybe you could just help us understand how much of those levers still remain to help, you know, protect earnings power to the extent macro does move against Yeah, I'll just, I'll start and then Jason can put a finer point on it. But we made, with everything possibly going against us, and, you know, and costs high, I think our worst year was $198.
Ryan Tomasello: You guys have done a good job historically of managing to the bottom line.
Ryan Tomasello: By pulling some expense levers.
Ryan Tomasello: I guess, maybe you could just help us understand how much of those levers still remain to help protect earnings power to the extent macro does move against us here.
Speaker Change: Yes, I'll just I'll start and then Jason can put a finer point on it.
Ryan Tomasello: Made.
Speaker Change: With everything possibly going against us and.
Ryan Tomasello: And costs I.
Ryan Tomasello: I think our worst year was 198 that was <unk>.
Doug Lebda: That was our truck, give or take. So that, that's, that, that was its worst. Um, as I think about the, you know, the puts and takes. you know the insurance inflation and when the insurance companies could like on the lending side um I don't know what could significantly change there that would make that business change in size downside dramatically. On the insurance side, you know, we had that in the issue of insurance companies chasing inflation. I mean, you'd have to have really rampant, long term inflation again to be doing that. And, you know, we hopefully we see it coming.
Ryan Tomasello: Give or take.
Ryan Tomasello: So that's.
Ryan Tomasello: That was its worst.
Ryan Tomasello: As I think about the puts and takes.
Ryan Tomasello: Insurance inflation and when the insurance companies quickly on the lending side.
Ryan Tomasello: I don't know what it could significantly change there that would.
Ryan Tomasello: That business change in size downside dramatically on the insurance side, we had that in the issue of insurance companies chasing inflation.
Ryan Tomasello: I mean, you'd have to have really ramp in long term inflation again to be doing that.
Ryan Tomasello: Alright.
Ryan Tomasello: Hopefully, we see it coming and then on the cost side, yes. There are always costs that you can do because.
Jason Bengel: And then on the cost side, yes, there are always costs you can do because. we're always investing. So like right now, you know, we're spending, you know, everybody here is working on things that are positive BMD projects. to keep the company going, but it lower unit economics. If, you know, your insurance is, you know, you're an economics bust or your home bust, then you don't do those projects and you pull back on those. And, and so there are, there are more levers.
Ryan Tomasello: We're always investing so like right now we're spending.
Ryan Tomasello: Everybody here is working on things that are positive BMD projects to keep the company going but at lower unit economics, if youre insurances.
Ryan Tomasello: Unit Economics Foster your home plus then you don't do those projects and you pull back on those and.
Ryan Tomasello: And so there are there are more levers Jason you could put a finer point on it if you wanted to and by the way.
Doug Lebda: Jason, you could put a finer point on it if you wanted to. And by the way, like. We don't think we have to. We feel like right now we've got a workforce that the fixed costs are fixed and the variable ones can float, and we know where the fixed costs are, and we know where everybody's working on. And the zero-based budgeting really, really helped with that. And then anything incremental from here is really going to be tracked.
Ryan Tomasello: We don't think we have to we feel like right now we've got a workforce that the fixed costs are fixed and the variable ones can float and we know where the fixed costs are and we know where everybody is working on them.
Ryan Tomasello: The zero based budgeting really really helped with that and then anything incremental from here is really going to be track Jason.
Jason Bengel: Jason? Yeah, I mean, yeah, like Doug said, I think we've invested in zero-based budgeting, I mean, across the whole management team. And so, you know, through that process, we've identified, you know, the core of the business that we absolutely need to generate DMD and, you know, satisfy legal and regulatory obligations. And, you know, we are then able to see very clearly above that, you know, where are we spending money? And, you know, are we happy with what we're getting in return for spending that money? And so, you know, should a push come to shove, I think we have a pretty detailed understanding of our cost base, and, you know, we should be able to react.
Ryan Tomasello: Jason Yes, yes, like Doug said, I think we've invested and zero based budgeting across the whole management team.
Ryan Tomasello: So through that process.
Ryan Tomasello: We have identified the core of the business that we absolutely need to generate DMD.
Ryan Tomasello: Satisfy legal and regulatory obligations.
Ryan Tomasello: We were then able to see very clearly above that where are we spending money and are we happy with what we're getting in return for spending that money and so.
Ryan Tomasello: Should push come to shove.
Ryan Tomasello: I think we have a pretty detailed understanding of our cost base and we should be able to react the name of the game as is being quick, especially in a business like this so to the extent that we see an opportunity out there to lean into our marketing channel or lean into more concierge reps in small business, we will do that.
Doug Lebda: You know, the name of the game is being quick, especially in a business like this. So to the extent that we see an opportunity out there to lean into a marketing channel or lean into more concierge reps in small business, we will do that very quickly and monitor it very closely. And then if it doesn't work out, then, you know, we'll react to that. But, you know, should things turn down, I think we should be able to respond well with expense savings. And also, you know, there is a significant part of our variable compensation in the cost base that will naturally decrease with decreasing top line.
Ryan Tomasello: Quickly and monitor it very closely and then that if it doesn't work out then we'll react to that.
Ryan Tomasello: But should should things turn down I think we should be able to respond well with expense savings.
Ryan Tomasello: And also there is a significant part of our variable compensation and the cost base, but all that will naturally decrease with decreasing topline. So.
Doug Lebda: So, you know, overall, I think we feel pretty good about our understanding and ability to execute any savings that we might need. And then obviously the ultimate lever if you, you know, don't have demand in one of your products is marketing spend. And then you you're pulling back marketing spend as your unit economics go down. And, you know, you could even go farther than that. You could do any paid marketing if you had to for a period of time and live off your organic and name recognition and and SEO. Like, you know, there's there's a lot of options in a in a horrible scenario.
Ryan Tomasello: Overall, I think we feel pretty good about our understanding and ability to execute any savings that we might need.
Ryan Tomasello: And then obviously the ultimate lever if you don't have demand in one of your products as marketing spend the menu you are pulling back marketing spend.
Ryan Tomasello: As your unit Economics go down.
Ryan Tomasello: And you can even go further than that and you could do any paid marketing if you add to for a period of time and live off your organic and name recognition and SCO like theirs.
Ryan Tomasello: A lot of options in a horrible scenario and.
Doug Lebda: And, you know, we've been we've been able to navigate those before. And, you know, each of the each of these individual products can be cyclical. But they're the two sides of the marketplace you always need to keep in mind. And there's always the marketing and they they generally work together.
Ryan Tomasello: We've been we've been able to navigate those before.
Ryan Tomasello: And each of the each of these individual products can be cyclical but they're.
Ryan Tomasello: The two sides of the marketplace, you always need to keep in mind and Theres always the marketing in a.
Ryan Tomasello: They generally work together.
Ryan Tomasello: Okay.
Jason Bengel: And then one more for me, regarding the quote wizard litigation, how much can you say just how much you have fully reserved for that after the 15 million you took this past quarter? and how confident you are that you know you're fully covered for the potential outcomes there. Thanks.
Ryan Tomasello: And then one more for me.
Speaker Change: Regarding the quote Wizard litigation, how much can you say just how much you are fully reserved for that after the $15 million you took this past quarter.
Speaker Change: And how confident you are that you are fully covered for the potential outcomes there. Thanks.
Speaker Change: Yes, Jason I'll take that one.
Jason Bengel: Yeah, it's Jason, I'll take that one. You know, we talked about this previously on other calls. And, you know, this is related to Mantha. QuiltWizard has reached a settlement in principle in the Mantha versus QuiltWizard matter, which involves class TCPA claims related to activity from 2019.
Speaker Change: We've talked about this previously on other calls.
Speaker Change: This is related to math quote Wizard has reached a settlement in principle and the math versus quote wizard matter, which involve.
Speaker Change: Class two CPA claims related to activity from 2019.
Jason Bengel: You know, the details of the settlement will be made public in the near term when the appropriate filings are made with the court. But to answer your question directly, we have a liability on the balance sheet of $19 million in this quarter. It's important to note that this $19 million is payable in three equal installments, the first being in Q4 of this year, the second in Q1 of 2026, and the final in Q2 of 2026. So we have reached a settlement with regard to this. It has to be confirmed.
Speaker Change: The details of the settlement will be made public in the near term when the appropriate filings made with the court.
Speaker Change: But to answer your question directly we are we have a liability on the balance sheet of $19 million.
Speaker Change: In this quarter.
Speaker Change: It's important to note that this $19 million is payable in three equal installments. The first being in Q4 of this year. The second in Q1 of 2026 and the final in Q2 of 2026. So so these we have.
Speaker Change: We reached a settlement with with regard to this it has to be confirmed with corp, but we have reached a settlement with it and the payments are due after we are due to repay the convert in July which I think is important to call out.
Jason Bengel: Of course, but we have reached a settlement with it and the payments are due after we are due to repay the convert in July, which I think is important to call out. Great, thanks for the detail. Thank you.
Speaker Change: Great. Thanks for the detail.
Speaker Change: Thank you.
Speaker Change: And we have a follow up from John Campbell of Stephens. Your line is open.
John Campbell: And we have a follow-up from John Campbell of Stevens. Your line is open. Hey, guys, thanks. Just one more for me. I've noticed in the annual filing, some commentary about the student loan business that you guys are potentially looking at options there. So maybe if we can get an update on that.
John Campbell: Hey, guys. Thanks, just one more from me.
John Campbell: Noticed in the annual filing some commentary about the student loan business that you guys are particularly looking to.
John Campbell: Yes.
John Campbell: <unk> there so maybe if we can get an update on that.
John Campbell: Yeah.
Doug Lebda: Yeah, yeah, the I mean, we've largely gotten out of the student loan business that's been a declining business for the past few years. So we are not doing any more direct marketing. into that business just based off of client demands. And obviously that could change if the, yeah, you know, if the student loan refi market comes back, that's easy to start marketing again and doing it. But right now we're just, we're not seeing low demand. Okay, on hold on hold for now. But any rough sense for revenue impact year over year, which you guys put up last year?
John Campbell: Yes, yes.
Speaker Change: We've largely gotten out of the student loan business has been a declining business for the past few years. So we're not doing any more direct marketing.
Speaker Change: Into that business, just based off of client demand.
Speaker Change: And obviously there are change of the.
Speaker Change: Yes.
Speaker Change: No.
Speaker Change: If the student loan refi market comes back that it's easy to start marketing again doing it but right now we're just we're not seeing demand for okay.
Speaker Change: Okay go on hold.
Speaker Change: On hold for now but.
Speaker Change: Any rough sense for revenue impact year over year.
Speaker Change: You guys put up last year.
Speaker Change: It was very small last year or so.
Jason Bengel: It was very small last year, so. I don't know, Jason, do you have any details on the revenue? Definitely not, definitely not material.
Speaker Change: I don't know Jason do you have any details on the revenues, but definitely not definitely not mature yet.
Operator: Yeah, I would say in the twinkle in my eye is that with the changes in the administration and people paying back their student loans with that business someday. return. It's not like we're, you know, like. Not like, you know, we can't have our student loan form and turn on the lenders. It's just that we're not actively marketing. Okay, makes sense. Thanks, guys. Thank you. I'm showing no further questions at this time.
Jason: Yes, I would say in the Twinkle in my eye is that with the changes in the administration and people paying back their student loans that that business someday.
Speaker Change: Yeah.
Speaker Change: Returns, it's not like we are.
Speaker Change: Right.
Speaker Change: Not like we cant have a student loan form and turn on the lenders. It's just that we're not actively marketing it.
Speaker Change: Okay makes sense thanks, guys.
Speaker Change: Thank you I'm showing no further questions at this time I would like to turn it back to Doug Lebda for closing remarks.
Doug Lebda: I'd like to turn it back to Doug Lebda for a closing remark. Thank you. We are definitely pleased that all three of our segments return to annual growth in the first quarter. Over the past five years, unexpected economic impacts and the pandemic and inflation have been significant with the company. And yet, we've been able to suppress them thanks to our diversified business model.
Doug Lebda: Thank you we are definitely pleased that all three of our segments returned to annual growth in the first quarter.
Doug Lebda: Over the past five years unexpected economic impacts from the pandemic and inflation have been significant with the company.
Doug Lebda: And yet.
Doug Lebda: Thanks.
Doug Lebda: We've been able to suppress them. Thanks to our diversified business model, we remain optimistic for the remainder of 2025 and look forward to updating you on our second quarter call. Thank you for joining us today.
Operator: We remain optimistic for the remainder of 2025 and look forward to updating you on our second quarter call. Thank you for joining us. This concludes today's conference call. Thank you for participating, and you may now disconnect.
Doug Lebda: This concludes today's conference call. Thank you for participating and you may now disconnect.
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