Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LendingTree Inc (TREE, Financial) reported a 23% increase in adjusted EBITDA, reaching $27.27 million for the third quarter.
- The insurance segment showed impressive growth, with revenue increasing by 210% compared to the previous year.
- The consumer business experienced a third consecutive period of sequential improvement, with revenue growing by 6%.
- Home equity now accounts for two-thirds of the home segment's revenue, showing a 5% growth from the prior year.
- LendingTree Inc (TREE) has successfully expanded its concierge sales group, improving customer satisfaction and loan close rates.
Negative Points
- A small number of carriers are driving the bulk of spending on the network, indicating a lack of diversification in the insurance segment.
- The home segment is operating at trough levels due to macroeconomic factors such as higher mortgage rates and a suppressed home sale market.
- There is a limited pool of refinance borrowers, affecting the mortgage segment's performance.
- The company is not planning any significant brand spending until revenue per lead improves substantially.
- LendingTree Inc (TREE) faces SEO headwinds from Google changes, impacting traffic sources.
Q & A Highlights
Q: Can you provide a roadmap for the insurance industry over the next 18 months and how LendingTree compares to other players?
A: Scott Peyree, COO and President of Marketplace Businesses, explained that the insurance industry is in a strong position and expects continued growth over the next 18 months. While the growth rate may not match the recent quarters, demand remains high. LendingTree differentiates itself with a diverse range of products and a broad client base, allowing it to generate revenue and offer consumer options effectively.
Q: How is LendingTree handling SEO headwinds from Google changes and AI developments?
A: CEO Douglas Lebda stated that LendingTree aims to be independent of traffic sources, including Google's SEO rankings. They focus on maintaining a balanced view of customer acquisition channels and improving their SEO strategies. Scott Peyree added that LendingTree partners closely with Google on paid search, leveraging AI-based bidding algorithms, and is not experiencing traffic headwinds.
Q: What is the outlook for variable marketing margins (VMM) in the insurance segment?
A: Douglas Lebda noted that as LendingTree increases marketing spend to drive volume, the cost of acquiring the next leg of volume will be higher. Scott Peyree added that Q3 was likely a trough for VMM, and they expect margins to improve slightly in Q4. Long-term, they aim for low to mid-30s margins in a stable insurance environment.
Q: How should we think about sequential changes in revenue and segment margins for Q4?
A: CFO Jason Bengel explained that the home segment is expected to offset typical seasonal declines due to strong home equity performance. Consumer segment margins are expected to hold, with normal seasonal declines in revenue. Insurance margins are expected to be flat to slightly improving, despite typical seasonal declines.
Q: Are there any updates on the mortgage front, particularly regarding refinance opportunities?
A: Douglas Lebda mentioned that as interest rates normalize, the pool of consumers benefiting from refinancing will increase, improving unit economics. While there is no large-scale consumer rush yet, the market is healthy and expected to return to normal interest rates and refinancing activity next year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
