LendingTree, Inc. Price & Performance (TREE)

Thank you, Lisa, and hello to everyone joining us on the call to discuss LendingTree's fourth quarter twenty twenty four financial results. On with us today are Doug Lebda, LendingTree's Chairman and CEO Scott Perrie, COO and President of Marketplace Businesses and Jason Bangle, our CFO. 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, assume that listeners have read that letter will focus on Q and A. [indiscernible] Before I hand the call over to Doug for his remarks, I'll 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, 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 will 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.

And with that, Doug, please go ahead. Thank you, Andrew, and thank you everyone for joining us today.

Are delighted to report the company finished 2024 on a very strong note. Generating $32,000,000 of adjusted EBITDA in the fourth quarter, which was well ahead of our forecast. Another quarter of terrific performance in our Insurance segment was the primary driver of this result. [indiscernible] while our Home and Consumer segments also generated strong year over year growth as well. Last year, we benefited from the beginning of a very strong cycle in auto insurance demand from both consumer and carrier perspective. I would like to call out the momentum we are generating several other parts of our business. In the fourth quarter, year over year revenue growth across some of our key product offerings included Homeowners insurance was up 175%. Home equity grew 48%. Small business grew 45%. Personal loans and auto loans both grew by 21%, Importantly, we expect double digit revenue growth will continue in each of these products in the first quarter of this year. The key message I would like to share our shareholders that the company has returned to growth after a prolonged period of difficult operating conditions. Our forecast for the year confirms our growth outlook with an adjusted EBITDA outlook calling for 16% annual growth at the midpoint of the range.

And we expect this result will be driven by revenue growth across all three of our reportable segments which is a testament to the value of the diversification of our business model. We have also maintained a laser focus on our variable marketing and fixed costs This discipline will help us generate positive operating leverage as we continue to scale our revenue base. Our balance sheet has improved significantly over the last year as well. With net leverage ending the year at 3.5 times trailing adjusted EBITDA. We expect leverage will continue to trend lower as earnings growth continues and we reduce our debt balance further with excess cash. We believe the substantial improvement in our credit metrics will allow us to lower our interest expense and our debt and improve free cash flow generation for shareholders. We entered this year with strong momentum exhibited in our fourth quarter results. Our business functions at its best when there is consistent demand from both sides of our market expect stable interest rates, a healthy consumer and an outlook for continued economic growth will drive accelerating demand from our customers as well as our lending and insurance carrier part. Partners. We are energized for the year ahead and look forward to continued creating value for our shareholders And now operator, we're happy to answer any questions.

We also ask that you please wait for your name and company And the first question will come from the line of Raymond Ryan Camasello of KBG. Your line is open.

Hi, everyone.

Thanks for taking the questions. I just wanted to start on insurance. I guess, if I simply annualize your second half revenue performance that would still imply pretty robust growth in 2025 over 2024. So I'm just trying to tie that back to your comments in your shareholder letter for more modest growth in 2025 which sounds like it's relative to the double digit growth you're expecting in your other segments. So anything I'm missing there or just trying to understand the nuances around what's going on with insurance this year? [indiscernible] I'm answering your question there. And I would say, everything you said is generally right. We are expecting more modest growth as the year goes on. We've still got compared to the first half of last year. Think we're looking at still strong growth in as the year continues on, there's going to be harder and harder comps against where we're at. But I would caveat that around almost all of our carriers are still in a growth position with us. And they've made that pretty clear to us. But they're going to be a little bit more diligent this year as far as being smarter with the marketing dollars and being closer tied to what are the most profitable areas for that is.

So definitely, we still expect insurance to be a really good story in 2025. As the year goes on, I think you're going to see that growth moderating. But for us as a company, we're also going to be very focused on returning our VMM margins back to more of our historical norms. And so I would say the story in '25 is more moderate overall growth with our margins starting to get back up to that low to mid-30s range.

Okay. Thanks for clarifying that. And then I was hoping you could elaborate on the opportunity to potentially take more price across the business, particularly in the insurance segment. And I guess tying that back to TCPA, understanding of that is now being vacated, but there any measures that you had teed up or had already put in place that you still might be fitting from in 2025 including price increases?

Yes, I would say we are it kind of depends on the different products we sell in insurance. Like our click product, which is our biggest product, is more of a market based pricing where people are paying to be in a certain ranking in the sort order on the page. And so you have more competition, as more carriers get in, that that creates those market pricing dynamics. The lead pricing, which will be more around the the one on one consent TCPA We had been communicating to our clients price increases that were going to be associated with that. That we for the large for the most part agreed to our clients when that went away that we weren't going to charge those price increases because that was no longer an issue we were dealing with. Obviously, over the long run, we always want in a perfect world, we want prices to our clients going up at similar rates to the cost of media.

Thanks for taking the questions. [indiscernible] Thank you. One moment for the next question. And our next question will be coming from the line of Jed Kelly of Oppenheimer. Your line is open.

Hey, great. Thanks for Good. Doing all right. Thanks.

Yes, just on insurance, I mean, I think we've seen strong results across the board from a lot of the marketplaces.

Just as we sort of go throughout the balance of the year, can we you kind of tell us how we should gauge on what companies are taking the most share and kind of what's how we should view sustained share gains? Once this upcycle ends? And then just my follow-up is, we're sort of seeing the new administration sort of targeting lower interest rates.

Can you just talk about how we should view rates in regards to your full year guide? Thank you. Yes. Scott, why don't you take the market share on insurance and then I'll take the integrated question.

Okay.

I would say just starting on market share, I would say I would just start in general with us and with our competitors. For the most part, you're seeing the big carriers that were really leaning in last year.

Are still the ones that are leaning in. We definitely have a number of other carriers smaller carriers that are starting to get in more and growing rapidly. But from a holistic perspective, it's really the top three or four carriers that are driving the market at this point. And if I was going to guess, it will still be those three or four carriers that will drive the market 25. Go ahead, Doug, on the interest rates.

Yes. On interest rates, any lowering of interest rates and I've noticed the treasury bonds bills have moved downward a little bit. That definitely helps our home business. It helps all of our businesses really Those businesses are based on obviously consumer interest, but that's really based on interest rate interest. And as interest rates fall, there's more consumer interest and the lenders have more flexibility to approve somebody because the payment is is lower and therefore they can get it approved with their income. So So it's better for everybody and even if you had a consumer that's not as strong, we would we obviously would prefer a low interest rate and from our insurance perspective a low inflation environment. And that's what was the double whammy over the last four years. Jon, I'll just add on to that. As it relates to the guide for home, we're not contemplating any material reduction in rates. We're kind of assuming basically the rate environment that we're in today. We're basically assuming in the guide is a continuation of the strength in home equity and where that's product that works [indiscernible] that strength of monetization in the RPL continues throughout the guide, but not benefiting materially from any rate decrease.

And what's cool about that is that's just consumers managing their balance sheet just like LendingTree is managing their balance sheet and they're going, okay, I've got equity in my home. Doesn't make sense to refinance the whole thing. But if I can tap this at a lower rate than my credit cards and my auto loan, then let's go for it. Thank you.

Thank you. One moment for the next question. The next question will be coming from the line of Youssef Sukweh of Truist. Your line is open.

Hey guys. [indiscernible] maybe a question for Scott and one for Doug. Scott, just doubling on the insurance question. I guess as you look at the business, beyond maybe 2025 and maybe because you're an insurance man, haven't been in the business for a long time. As you look historically, at like the steady state in a normalized environment of insurance, Can you maybe share with us where that steady state historically has been? Maybe a range and and any reason why we shouldn't be back to that kind of level? And then Doug, maybe on the Google outlook change, some of your competitors did suffer from some of the changes that we saw couple of times last year.

Guys clearly did not. Maybe remind us again about the strategy around SEO versus SEM, organic traffic versus not. How much of your traffic is actually organic? I'm assuming it's minority, but maybe just discuss that as a headwind to competitors that maybe not as much to you guys? Thank you.

Well, Scott, go ahead and talk I'll start on the insurance side, Yousef. I mean, I'll start by saying we're all already running at all time highs. So it's not a matter of getting getting back to a level. We're running at all time highs. If [indiscernible] I compare it to the last big downturn, which was in the 2016 timeframe, And first off, the downturn wasn't as severe as this most recent one, but after we got out of that downturn in the industry as a whole, there was a significant step up almost a doubling of the business from the previous highs before that, but before it reached a level where it kind of leveled out for a period of time. And it wasn't just us, that was the industry as a whole. And I think that's just generally when you come out of these downturns and a lot of these carriers reset their marketing budgets, every single time you see more orientation towards online performance marketing because that stuff bottom line just performs better than most other marketing categories. And I think you're seeing that same phenomenon happen this time around. Where there's more dollars are coming to companies like ours and our direct competitors.

I think it will be continuing to grow over the next eighteen to twenty four months. Because the carriers are in a very profitable position to the point where a number of them are already looking to give rate back in certain areas, which will create a whole another shopping cycle. When that starts to happen. So I think we've got higher highs in front of us. But then when it reaches that steady state, I mean, it's just it's really a matter of whether there's a huge impact like inflation coming out of nowhere, which as long as we can be in a steady state, [indiscernible] the business will run-in a steady state.

And on the SEO and organic traffic, call it 15% to 20% of our traffic is organic. SEO is a piece of that. The rest would obviously be people hearing us and typing us in, etcetera. But and in terms of the Google algorithm change, what I've noticed Google doing and I frankly agree with it is they are giving more credit to high quality unique content that really aids the consumer. So they did things like shutting down the market places in of new stapler sites because they basically were leveraging their credibility on the news to go sell jackhammers and screws or whatever and mortgages. But so we feel really good about it because our business has always been so I would say LendingTree has always been unabashed in the paid marketing camp and I've wanted our SEO side to work since 1999. I would say for the first time, it's really gripping. The team is really working well.

We've made a number of changes. And so we're coming from a small base and can grow into it. And we happen to have the place of having really high quality content. So as we leverage on that and use the LendingTree brand, integrate all these acquisitions that we've had, plus get the processes right, There's a lot more traffic to go after like 15% of of your volume still produces a heck of a lot of EBITDA. To three.

Ahead. And then just, yes, add on one thing to that. We're very happy with where we're at on SEO. Our SEO revenue in the fourth quarter was actually up 30%. Year over year. So to Doug's point, we're happy where we're at. We're happy with the trajectory of where it's going. But I'll also say our media practice has been very successful in a broad based fashion, whether it's paid search, whether it's SEO, whether it's social, the display, programmatic, all of our categories are performing very well.

Amen. That's great. Thanks a lot and congrats.

Thanks. [indiscernible] The next question will be coming from the line of John Campbell of Stephens. Your line is open.

Good afternoon. This is Oscar Nieves on for John. Congrats on the strong quarter and thanks for taking my question. So the consumer segment grew for the first time since 3Q 'twenty two.

You feel like you are in a position for sustainable growth? For at least the near to medium term? And as a follow-up to that, what do you view as the key swing factors determining your pace of growth over the near to medium term?

Scott, maybe take the consumer segment and I'll take maybe swing factors. Here with Jason?

Yes. I would say in the consumer segment, there's way more good than bad. The credit card business is still rough, which I think that's just an industry wide. I think you're hearing that from everybody. But I mean our small business is on a large growth trajectory. A lot of that is supported by we've been successful. We've got a very qualified sales force that we've been growing One of our top companies that we write originate loans through actually informed us in January that we were their number one originator of anyone they worked with. And we feel like there's a lot of growth from there, both from increasing our direct sales force, but then also more traffic from a lot more areas that we haven't even really tapped into yet. Personal loans, one has been growing well for us, grew 20%, it will be growing double digits in Q1 as well.

A phenomenon you've actually seen a lot of the public personal loan lenders have come out and expressed that they're growing and their financials are looking a lot better, which we love to hear being that these are all big clients of ours. That category is like the credit boxes are still pretty tight, but as long as you can find the consumers that meet those credit boxes, Our clients are very actively telling us bring them on. They want to write those loans and they're seeing very without getting into details, I'll just also say auto loans, think is another category that's been growing a lot that we have we feel there's a lot of momentum in the next year. On. So the consumer products in general, you've got interest rates are still a little higher, but you've got a lot of consumers out there that are lending options. And so as long as you're good at driving those consumers through our site and matching them to clients in a good way to give them solutions there's a lot of growth for the indefinite future even outside of interest rates going down.

And in terms of swing factors, I would say one is obviously not going to discount the market. If we get to raging inflation and insurance companies have to chase premiums again and high interest rates because the Fed shutting down the economy or shutting down LendingTree, then then that obviously gets a lot harder and the opposite is true, it gets a little bit easier for us. The second thing, which we really haven't baked into our numbers is a lot of is a lot of really anything from improving products or like any game changing [indiscernible] number of initiatives, and we just talked with our board last week about our strategy. And that would include AI, which we're kind of boring, which is operational excellence. We realized as we were looking at ourselves that, gee, like we've acquired a bunch of companies we've got a bunch of people, we now have a different sized company, and what do we need to do and a lot of it is really getting the operating system of the company right. So as we look at our strategy, it was very boring, but it was really around cost containment, exploring a few key things and then improving our operations.

And just making them as efficient as we can.

Great. Thank you very much. Very attainable and not that exciting, but I kind of like it.

All right. Perfect. Thank you so much.

Thank you. One moment for the next question. Our next question will be coming from the line of Mike Grendo of Northland. Your line is open.

Hey guys, thanks and congrats on a strong finish.

Two questions. The first one, you talk a little bit about the financial impact and benefit from winning the one to one consent And secondly, the step up we've seen in home equity is that primarily driven by just lenders willingness to engage and want those home equity loans more? Just trying to understand a little better what changed?

Okay.

Why don't you take home equity? And then I'll take the first All right. We'll start the last question on home equity. In home equity, there's there's a lot of tailwinds in home equity. And just around, I was first to start off, with our client base and our distribution of who we send all our consumer traffic to. I feel like they really reoriented themselves last year. Last year there was a lot of a lot of these businesses were very focused on refinancing. But then as the year went on and interest rates were staying high, they developed more and more skills around taking home equity leads and focusing on that business. And so we really thought of [indiscernible] really start to hit us in the second half of the year, really in the fourth quarter. Where the client demand on home equity really started going through the roof because they went from a product where, well, we'll take it if we have to because there's no refinance customers to please give us a lot of this product. This is a good we've we now have a sales force that's capable of working this traffic. Then from a consumer standpoint, I think it's also the scenario of what's very little buying and selling of homes, and with an equity that the consumers are sitting on, the homeowners are sitting on specifically just keep going up and up they're going to want to do remodels, they're going to want to consolidate debt, they're going to want to vacations.

And so it's like it's still the best interest rate. Product compared to all other lending products. So from a consumer demand standpoint, we've seen increases there. I think as people get more settled into the homes they're in versus thinking about whether they want to go look for a new home. Hopefully, that answers your question. Go ahead, Doug.

Yes. On the single [indiscernible] entity consent, Here's what I would here's what I'd say on that. Our initial our expectations first off, we spent nine months with a good bit of people optimizing what we were interpreting as this rule from this law that was passed years before and getting it right for the consumer and still being able to have a decent business model for and work with all of our partners. And we were very thrilled to see winning the court case and then the FCC pulling it back. I would say that what our expectations were is that initially we would have gotten a lot less revenue from both insurance and lending and specifically products. And it was also our expectation that that would recover. So for example, all of our lenders and insurance partners are bidding for the price of a lead to be based on their expectation of a conversion rate. If a given lead is going from three lenders or more insurance companies to 2.5 in that on average their conversion rate is going to go up by the same amount roughly. So we were expecting over time that that was going to off bunch of short term pain.

And obviously, that has gone away. But from a broader sense, what I would say is the the focus on, I don't want to say deregulation, but like call it common sense is really obviously it helped us with that. And I see just across industries like people are willing to give something a shot or talk about something we weren't able to talk about before before And our regulatory regime, we started in 1996, and all of this stuff is like interpretations of laws that are made up by these government agencies. So the less of that from my perspective, the better because we're just trying to do right by consumers. And there's a lot of old and outdated stuff out there. [indiscernible] Thank you.

Our next question is coming from the line of Melissa Woodall of JPMorgan. Your line is open. Thanks for taking my questions today. I wanted to start on consumer. And looking at the margin going forward. Obviously, [indiscernible] Seasonal in nature. Given the growth that you're expecting there, it seems like maybe there might be just a little bit of margin contraction in 'twenty five as you invest and sort of position for wallet share gains. Is that how you guys are thinking about it?

Yes. It's Jason. I can take that one. For For consumer we do as we look into 2025, we do expect that margin to normalize a little bit as we talked about historically to the mid to high 40s.

Going forward in 2025. But still delivering double digit revenue growth And that growth is going to be coming from small business, which which Scott talked about leaning into the concierge experience there. Just very strong unit economics that's very successful for us and that's a very high margin business.

YAL continues to do well.

Lender buybuy Xboxes haven't materially expanded. But within those buyboxes, lenders are driving origination growth pretty strongly. So those two things are going to keep driving revenue growth forward, but we do expect that margin to normalize a little bit from Q4.

Okay, great. And then just looking at the insurance segment, appreciate that that's been in a huge recovery cycle and it sounds like expecting normalization there at least to begin. I'm curious, given the impact potential impact of some policies on the potential impact of a dampening demand for auto, just on potentially higher price. What sort of impact would you expect that to have on revenue trends within the insurance segment?

Specifically.

You mean like tariffs on auto insurance parts that are auto parts that are worked their way through the insurance markets, Archie?

If there are just fewer people shopping for cars, car sales go down because of the higher costs from tariffs, yes. As a hypothetical.

Yes. I mean, that's definitely car shoppers are part of the group of consumers that are coming shopping for insurance. But I would say in general, that would be a minority of all the consumers. We just have there's so many the beauty of the property and casualty insurance market is like everyone a renewal every six months. So everyone is getting a bill in the mail every six months that's reminding them that they probably be shopping and checking rates for insurance. And And bottom line, all of these consumers have been getting huge rate increases I know I have, over the past couple of years. And so that drives a lot of shopping behavior. And I don't think that's slows down in 2025. When I look out to 2026, I think what will happen, which will be the next phase of the recovery is insurance carriers become profitable enough that they start [indiscernible] A lot of times they're legally obliged to reduce rates. And if they become too profitable and that will create another shopping cycle of where people know that they can get a better rate by shopping again.

Yes, we just make want to make it as simple as we can for people to comparison trap for these products and because there's always opportunities to refinance. And as your credit gets better or your situation changes or given insurance companies view on the market in a changes, well, might be able to save some room on it. Thank you. Thank you. And this does conclude the Q and A session for today. I would like to go ahead and turn the call back over to Doug Leggett, CEO for closing remarks.

Well, you guys are easy on us today.

We are thank you all very much. We are very happy to share the outstanding fourth quarter results today and we're energized for the growth opportunity ahead of us in 2025. After achieving 33% adjusted EBITDA growth last year, we expect to grow another 16% at the middle of our forecasted range in 2025. [indiscernible] incredibly proud of our team for persevering through a difficult period to began at the onset of the COVID pandemic. [indiscernible] None of us would have expected the fallout from both the direct and second order effects would have lasted as long as they did, Our company is has emerged stronger and more focused as a result. I look forward to updating you all on our progress in the quarters ahead. Thank you.

Thank you for joining today's conference [indiscernible]