LendingTree, Inc.

Thank you for standing by. Welcome to the LendingTree, Inc. First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require assistance during the conference, please press star 0. I would now like to hand the conference over to your speaker today, Andrew Wessel, Head of Investor Relations.

Thanks, Andrea, and good morning to everyone joining us on the call this morning to discuss Running Tree's first quarter 2022 financial results. On the call today are Doug Lebda, Running Tree's chairman and CEO, J.D. Moriarty, president of Marketplace and COO, Trent Ziegler, CFO, and Scott Puri, president of insurance. As a reminder to everyone, we posted a detailed letter to shareholders on our investor relations website earlier today. And for the purposes of today's call, we will assume that listeners have read that letter and will focus on Q&A. Before I hand the call over to Doug to give his remarks, I want to remind everyone that during today's call, we may discuss LendingTree's expectations for future performance. Any forward-looking statements that we make are subject to risk 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 with the SEC. We will also discuss a variety of non-GAAP measures on the call today, and I refer you to today's press release and shareholder letter, both available on our website at investors.lendingtree.com, for the comparable GAAP definitions and full reconciliations of non-GAAP measures to GAAP.

And with that, Doug, please go ahead. Thanks, Andrew, and thank you all for joining us today. Our business again performed well in the face of a difficult macro environment. Our lending marketplace grew revenue in VMD year over year despite rapidly increasing rates. Improving demand and unit economics across purchase mortgage, home equity, personal, and small business loans helped to offset shrinking demand for rate and term mortgage refinance. As expected, our mortgage lender partners have increasingly relied on us to provide them with new customers as the refinance wave recedes. Improving RPLs across our other mortgage offering proved this business is resilient, helping us to outperform declines in overall origination volumes. The consumer segment of our marketplace has continued strong growth, as personal and small business loans performed tremendously well, and the credit card business returned to pre-pandemic RPAs. Insurance has begun what we project will be a robust recovery in its financial performance after dropping in the fourth quarter of last year. I'm happy to have Scott join us on the call to explain how we differentiate ourselves from our competition and why we have a more positive outlook for the remainder of the year than others. Our updated guidance for 2022 acknowledges the rapid increase in mortgage rates that we have seen so far this year, as well as continued inflationary pressure our insurance partners are navigating. Lowering our outlook is not something we take lightly, but the economy has been more volatile than we predicted when we first issued guidance at our investor day. The underlying strength of our business model and our balance sheet position allows us to continue investing in our growth initiatives as well as our brand. We expect these investments to generate very attractive returns by driving increased value, engagement, loyalty, and trust with our customers, positioning LendingTree as the best digital consumer shopping experience for financial products in the market. I founded the company over 25 years ago, and LendingTree has continued to evolve and expand its product offerings to address almost every personal finance need a customer has. Harnessing the unmatched depth of our partner network with an improved digital experience will delight customers, provide access to the broadest array of offerings in the industry, and foster lasting relationships with our customers. Highlighting some of the progress on our strategy, we are now able to present embedded bindable insurance quotes and pre-qualified loan officers to MyLendingTree members digitally. We have a solid pipeline of lenders and issuers looking to access our TreeQual platform to acquire new borrowers. The improved conversion rates and unit economics from TreeQual will help drive revenue and margin growth in our consumer segment, and we look forward to further integrating our insurance agency and our mortgage partners as we move forward. The team has rallied around our growth strategy, and we are all excited to begin seeing the early results of all that hard work. I look forward to discussing our progress on this call as well as future ones. Now, operator, we're ready for questions.

Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from John Campbell with Stevens, Inc.

Hey, guys. Good morning.

Good morning.

Hey, by my math, just within the mortgage revenue, you guys did, I think, as much purchase revenue in 2018 as you did last year and in 2020 combined. So I think you've proven you can get better yield out of purchase. And, you know, also in 2018, it looks like you're facing, you know, a purchase origination level that's going to be probably lower both from this year and next year. So my question is, do you think you can get that purchase revenue back to kind of those past levels, and what kind of changes do you really need to make in the business to start, you know, flipping that mix from refi to purchase and kind of how long that process takes? Yep.

I'll answer in concept, and then I'll let others chime in on numbers. John, it's great to talk to you. So first off, as I alluded to in my remarks, and we've talked about, and a lot of shareholders, by the way, have missed this. You're picking up on something that is refi receipts and the RPLs of refi. Obviously, everything works on supply and demand. So lenders obviously always demand refinance volume. That's the demand side. Unfortunately, right now, the supply side of that has pretty much gone away. So then what do you do? You switch your capacity over to both home equity and purchase at the individual lender level, and you also start to open up other filters. What that does is it moves the RPL up in purchase, which then enables us to go market against that. What we've seen so far, I would say, is the result of working with our lenders, and JD and team have done a great job at that in getting them to expand filters, so we've had some sales wins. But lenders also do this very, very naturally. Then on top of that, one of our initiatives in particular, one of our strategic initiatives, Marketplace 24, is working to drastically improve the communications with customers post submit when they're actually engaging with our lenders on the marketplace. And we're going to start releasing that in pieces early in May, and it's going to proceed through July. But that's one initiative that's aimed directly at that. And then as lenders see higher conversion rates, then they bid up the value of a purchase lead. Ultimately, they're all targeting a cost per funded loan. J.D., anything to add on that? Well, yeah, the only thing I would add, John, you've heard us talk about parsing the funnel more intelligently over time. And so I think if you were to look at it from the perspective of one of our lender partners, they would say not all purchase traffic is equal. And we've sort of taught them that over the last couple years. So we're selling early funnel, mid funnel, and late funnel purchase. Late funnel is very well valued right now. Now, why is early and mid less well valued? It actually is very much tied to the lack of housing, pardon me, the lack of inventory in the market and the tightness of the purchase market overall, which is obviously well publicized. So as that loosens up, which there's recent evidence that it is actually getting a little bit better, that will better enable us to get paid for early and mid because it will convert at a higher rate. So in a strange way, what's really happening is over the last couple years, our network has gotten healthier, meaning there's less inefficiency for our lender partners because they're getting what they want, but the disparity between what we get paid for early and mid versus late funnel purchase is pretty significant. We just need a little better housing market in terms of those consumers being able to find a home and get a transaction complete, and that will drive our purchase revenue. The only thing I'd add to that is in the parsing, I know we're going to get a question on insurance at some point, and getting the right consumers to the right partner has been a source of value. And the other thing I'd say is RPLs on purchase have moved up considerably because of that switching and what JD talked about. So it's moving in the right direction, and it'll continue that way.

Okay, that's great to hear. And then one quick follow-up on the guidance. It looks like You've got revenue growth assumptions, you know, are growing faster than VMM growth. So it looks like maybe a little bit of pressure on the own segment margins here and there. But maybe if you can unpack that. I mean, it sounds like mortgage is in a really good spot. Obviously, you grew that 500 bips or so due to all the stuff you just mentioned. And then, you know, insurance looks like it's probably going to be pretty heavily weighted in the first half and then get better in the second half. And then just maybe some thoughts on consumer and then also on the brand spend side as well.

Yeah, so I know, like, I'll let Trent, let me hit it early. And then I know one thing is we're recognizing marketing margins. So, and we've talked in the past, in this quarter about home, for example, while our RPLs are doing well, the customer acquisition costs, while still very profitable, we're not seeing relief like we would normally see when rates go up. We're still seeing a number of other parties that are in those auctions keeping pricing up higher in Google and others. We're assuming that gets a little bit better, but not as well as we thought. Trent, what else would you say? It's a good point on mortgage, John. As we've seen in prior cycles, as as competition starts to fade, just as the market shrinks, we would expect to see some relief on the customer acquisition side. We haven't seen that to Doug's point to the degree that we expected, and so that's sort of being reflected in the margin expectation for the rest of the year. You know, going back to your question on just on the outlook for the rest of the year, if you go back and you look at the segment-level guidance that we gave at Investor Day, We're still pretty well in line with that outlook, you know, perhaps trending toward the bottom end on several of those measures. The one caveat just being the outlook for margin and insurance is a bit more cloudy. I mean, obviously you saw where the margin profile of that business was in the first quarter at 26%. We expect that to obviously improve as we progress throughout the year, but we're going to need that to improve, and I think on the margin relative to the guidance that we gave in February, that's a bit more cloudy.

Okay, that's all very helpful. Thank you, guys.

Thank you. Thank you. Thanks, John. Our next question comes from Jeb Kelly with Oppenheimer.

Hey, great. Thanks for taking my question. Just circling back on insurance, is Is this a case of the carriers not calculating, you know, the inflationary impacts this time around versus used car prices, I guess, a couple months ago? And how long will it take for them to get to, like, to reset the rates? And I guess just when do you actually think they will be coming back and marketing? And then I heard that Scott's on the call. So can you actually discuss some of the differences between between where you are and some of your competitors. Thank you.

Yeah, I'll start and hand it over to Scott. And by the way, Scott, thank you for being up at 6 o'clock in the morning out in the West Coast. Listen, I'm very pleased with how our insurance team is working, and they're doing a really, really good job. The issue that we've talked about before, and Scott will address the underlying reasons, is that carriers – in general, are not demanding, back to supply and demand, are not demanding as much volume at the same prices as they did several years ago. However, it's trending in the right direction. We've had a number of sales wins, and we're certainly doing better than competitors. And I'm really, really proud of what the team's done. Scott, why don't you take that question?

Yeah, sure, Jeff. To answer your question about, you know, inflationary pressures and loss ratios and underwriting profit with carriers, it is a matter of, I think, the levels of inflation and the cost per incident that the carriers are dealing with is just much higher than anyone expected. And, you know, just inflation where it's going, they work – They worked their models. They were just not expecting it to keep running out of control like it's happening. And then when you submit rate increases to the states, a lot of times you're limited to how much the rate increase you can submit every six or 12 months. So they're just trying to keep pace, and they're having a hard time doing it to some level. Now, that said, it depends on the carrier with where they're at. A major carrier just came out yesterday and made public comments that they feel like they're largely done with all their rate increases, and they feel like they're in a good spot. But she also indicated that they're going to wait in a number of states a few months just to check on the profitability of the policies of the new rates before they really start leaning into marketing. All of that said, I do feel like it's a very turbulent market still. Certain carriers are leaning in, certain carriers are leaning out, but the overall trend that we're seeing at QuoWizard is a steady increase in demand, and we're seeing growth. We saw growth at Q1 over Q4, and we're expecting more growth in Q2. So we're seeing a general positive trend as far as the majority of our carriers are spending more today than they were spending last month, and we expect them to continue to spending more as the year goes on.

Scott, can you address, like, you know, why, and we talked about this at our board meeting yesterday, but some of the, you don't need to go into names, but the carrier wins and also Jed's question of why we seem to be doing better than competition.

Yes, we're happy to do it, Doug. I would say we, and I'll go back to the 2016 when we went through a very similar period in the insurance industry, and we're largely doing the same playbook there. We as Quilt Wizard are being hyper vigilant on focusing on quality of consumers and what the carriers wanted you know they were throwing up red flags to us probably in the second quarter last year that things were trending the wrong direction and so we made a proactive decision to really lean into what our carriers needed um understanding that we were heading into pretty rough waters in the industry so Honestly, we probably made some decisions that affected revenue for our company in the second half of last year, but I think we were viewed in a really positive light with our partners by making some of those moves and not trying to hold on to unnecessary revenue that they didn't want. And I think that is paying off for us here in the first half of the year as they're coming back in and there's that trust level We've gained significant SEM market share, which was a big goal of ours. I think that's a combination of taking market share from some of our competitors as well as just consumer shopping behavior in general is up. So I think we've got a really good mix of traffic going to the carriers right now, and that's why we're seeing them lean into us a little bit.

Great. And then just on a follow-up, I think you've always talked about having probably better, paid search conversion better than your competitors. Is that deteriorating just on more of your competitors in Google trying to acquire traffic on people shopping? And, you know, how should we think about the arc of the VMM margins sort of returning to those high 30s VMM levels throughout the balance of the year? Thanks.

Yeah, I mean, I would say we're seeing generally a less competitive marketplace in the Google marketplaces right now. But I would also say, you know, our carriers, our RPLs are still down year over year. And that's a lot to do with carriers just hyper-focusing on certain geographies and certain demographics on the most profitable consumers right now during these very turbulent times in the industry. So what will happen over time is these carriers, I mean – They want to grow. They want to grow their policies. And so when they're feeling more comfortable about overall profitability of the policies they're writing, they're going to start opening up those demographics and geographics again. And that's the point where we have better levers where we're making more monetization per consumer coming through our funnel. And that gives us more leverage to increase margins, which we're already looking at. working and feeling our margins are going to increase a few points in Q2, and we feel that trend will continue on an upward trajectory over the next six to 12 months. Thank you.

Thank you. Our next question comes from Ryan Tomasello with KBW.

Hi, everyone. Thanks for taking the questions. I guess shifting to capital allocation, can you give us an update on how you're thinking about the various outlets for deployment for the rest of the year? Obviously, nice to see the share of purchase in the quarter. You know, do you think you'll continue to be active there? And, you know, any updates on your thoughts around M&A and where you think that could fit most nicely into the existing business? Thanks.

Yeah, I'll start. This is Trent. Yeah, I mean, look, we've been happy to be buying our stock back the way that we have over the last several quarters. you know, having addressed about 5% of the float in between Q4 and Q1. You know, certainly happen to be buying with the stock, you know, trading where it was and even more so now. You know, our kind of primary goal in capital allocation is We obviously want to preserve the flexibility that we've built up to be able to execute on M&A when opportunities present themselves, and we don't want to encumber that flexibility. That said, we've got a business that's still generating cash every quarter, and so we can kind of use that as a proxy for how much we're willing to put into the buyback. And so we'll continue to think about it the same way. There are some nuances coming up in Q2 with the settlement of the convertible notes that we have maturing in late May. So we kind of need to get through that before we reevaluate our buyback plans. But that's how we're thinking about it. And certainly we've been active in the market and will continue to be, you know, based on our relative view of the stock. Maybe I'll take it to JD to talk a little bit about how we're thinking about M&A. Sure. Hey, Ryan. We're probably from an M&A perspective and just in terms of the things we're seeing, we're as busy as we've ever been. But that's really because those opportunities are coming to us from a wider range of things, right? So there are people who are in our traditional customer acquisition business, and obviously those multiples have come in dramatically, if you look at any of the public comparables. And then there are a number of, you know, fintechs that have been incredibly well valued by the private markets over the last couple years, and those values have come in dramatically. So we have a wide range of things to look at, and we're going to be selective, and obviously we're always comparing those opportunities versus buying back our own stock. I think the really nice thing is we've been able to buy back our own stock in a significant way two quarters in a row and not impair our ability to be aggressive with M&A. And we have been incredibly selective over the last couple of years. We obviously had a multiple environment that we didn't really agree with relative to the relative to the earnings power of many of the companies that we're so dearly valued. That's coming back to earth. That will present opportunities for folks like us who generate real earnings. And so we're excited about the period in front of us. The last couple of years have been frustrating from an M&A perspective, but that's okay. But we're certainly seeing more. in light of the way the funding market, both the private market has changed, really, in terms of the opportunities for many of the startups that were so well-valued over the last couple of years. That's not the only thing we look at, obviously. There are some companies, as I mentioned, in our traditional space that will become very interesting here. So I would expect that M&A continues to be core to our strategy for the next couple of years.

Great. Thanks for that.

The only thing I'd add... The only thing I'd add to that, we still have $97 million and an authorization from our board. We are definitely still – we still see very, very attractive IRRs on our stock. And subject to maintaining flexibility, we think that's a good use of our cash.

Great. Thanks for that. And I know we've already spent a good amount of time on the headwinds in mortgage, but I think it would be helpful – if you could put more specific assumptions around how you're viewing the market outlook this year versus, say, what you were thinking back in February. You know, I realize that there's no direct framework, but if it's possible to put any guardrails around the revenue and earning sensitivity to, you know, worse or better than expected conditions in that market, particularly if purchase begins to fade, given the affordability pressure that continues to build there. Thanks.

Yeah, so I'll hit the high notes and then move from there. The interesting thing about mortgage, and I'll return to conversion rates, we have so much traffic even today coming through both purchase and refinance that the magic, as long-term shareholders have known, is getting at the conversion rate from us sending a customer to a lender and them converting it. In a 2% conversion environment, whether it's a purchase or a refinance, we still have 98 to go. And our Marketplace 24 initiative is, as I said earlier, really aimed at improving that conversion rate. So we really don't need to go get more volume. At the end of the day, we're still only closing – Couple points of all the mortgages in the United States and when you have 20 or 30 times that on your site already Who are shopping there, but just not closing here. It presents an enormous opportunity and that's why we're working on fixing the customer experience because that is a direct impact on our On our revenue JD anything else that but by the other than that we assume the MBA statistics and the market is just makes life a little bit harder. And it's more related to lender profitability and lenders being able to profitably convert loans than it is necessarily the size of the market. J.D., what would you say? Yeah, Ryan, I'd just say every year, you know, obviously as we map out the year ahead, we look at the MBA data, we look at, you know, Black Knight and others that publish data on affordability, on consumers who would benefit from a refinance. And obviously, we monitor that throughout the year. We also are very mindful of our cycle. So we're watching, obviously, affordability for the consumer. We're watching gain on sale for the lender. And usually, when we watch that gain on sale compress, as we all know that it has this year fairly dramatically, we watch for loan officer employment indicators. And so many of our lenders, many of our lender partners have announced layoffs of loan officers. That is typically something that is followed by or along with that is the cost environment for us to acquire traffic actually improves quite a bit. So as we look at the year, the year in mortgage has generally played out on the volume side as we expected, right? We expected volume to be down dramatically in refinance. It has. The cost environment has not come down as much. We think that is still to come. We need to shift to purchase and home equity. We're doing that. Both those businesses are doing well. So we actually feel reasonably good about our projections that we made in December. I would say that from January to April, it has been a bit more dramatic on the macro side than we would have expected. You know, if you think about the affordability for the consumer, that shift has been pretty dramatic. If you think about, you know, Black Knight estimates the refi population in March at 2 million. In January, the refi population that would benefit from a refinance at 2 million. In January, that was 5.9. That's a pretty dramatic shift. So we have to acknowledge it is a little bit more dramatic than we anticipated in December. That is actually part of our shift in guidance, right? It's just acknowledging that. But when we look at our performance across that backdrop, we're actually really quite pleased. And we just have to continue to navigate an environment like this. The piece that has not yet happened and we think will is the cost side of the equation. That's still in front of us. While it will be tough to drive volume in things like refinance, we should be able to drive better margin over time. One thing JD said to accentuate is the consumer benefit, and it also ties to rates. In refinance, obviously, if you're not going to save money, you shouldn't do it, and consumers know that. But the key thing to focus on is that LendingTree's refinance business on a day-to-day basis doesn't work on sort of aggregate rate levels or rates high or low, it really works on the rate of change. And you'll see this in mortgage companies right now where some people are laying off, but they're all trying to hold on because they know someday rates are not gonna, they might go from five to four. They might go from five to six and then somebody's gonna say there's a recession, then they pop back to five and all of a sudden you get a refi flood. And unless you have the loan officers and the technology, you can't do that, but we'll see that affect immediately and, you know, you're setting up little, as rates go higher, you can actually get more benefit because rates can move lower. There's, you know, when you're at two and going to like one and seven eighths, it's, you know, there's not that much movement. But if they go a little higher, it's going to set us up for refi boomlets and busts just like happen every day. Not every day, but every week or month. But this year, right now, you're going through the adjustment period, which we always go through during the switchover, if you will.

Thanks. Appreciate the thorough remarks. Thanks, Brian.

Thank you. Our next question comes from Rob Wildack from Autonomous Research.

Good morning, guys.

Hey, Rob. Good morning.

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

Well, I'll start and then let Scott go. I think we're seeing them in market share gains right now, and I think that's why we're doing better than competitors and why carriers are increasing more buys with us, and I'll let Scott talk more.

Yeah, I agree with Rob with what Doug just said. I think we're already seeing market share gains in this space, and we're seeing it as budgets very cautiously come back. We're one of the early winners of getting those budgets. I would also add on some of the products New product growth we've focused on, like inbound calls for our clients, direct-to-click for our publishers. The agencies are growing really rapidly. Our health and home insurance industry has had a spectacular Q1. So a lot of those internal initiatives are really outperforming and performing at high levels that we were hoping they would, and that helps as the legacy business has been growing. down over the past couple quarters. So I think as that legacy business continues to come back, which it is, it bodes really well for the future.

Yeah, and we look forward to talking more about the agency in the future. It's doing... Better than expected from an economic standpoint, from a customer satisfaction standpoint, and the customer experience of being able to give you actually real bindable quotes from multiple carriers online with a person who can also help you make that decision integrated inside of MyLendingTree. That's where we're pointing the direction of that ship, and it's going really well.

Okay, thanks. Just to follow up on that, when you say that the budgets were cautiously coming back and you guys were seeing some early wins, were those coming back throughout the first quarter, or was that something that happened more towards the end of the quarter and into April?

Yeah, I would say from our standpoint, it started in January. It obviously did not balance as much as we wanted, as we were hoping in January, and that was just because of the carrier's didn't bounce back from a profitability standpoint as much as they wanted. But we've seen what I would call a gaining momentum every month throughout the year. You know, we got the initial bounce up in January, and then our momentum has been growing in February, growing in March and April. You know, June's looking very, I mean, I'm sorry, May's looking very strong right now. So I would say it's just all in all, There's ups and downs at the individual client level, but at the overall level for insurance, it's a pretty steady growth year to date.

Yeah. Yeah, I've been looking at a business here that is run rating very nicely and is having steady improvements weekly, monthly, and it's nice to see that. So the aggregate number is reflected in the guidance, but the momentum is what gives me a lot of excitement.

Okay. Thanks for all the color there.

Thank you. Our next question comes from Yusuf Squally with Truist.

Morning, guys. Sorry about that. I just want to go back to the consumer segment in particular. I guess maybe Trent, starting with you, relative to kind of the expectations that you outlined at Analyst Day and whatnot, how has that progressed throughout the quarter and particularly as you look forward to the rest of the year? Has your expectation changed just because of rise in rates? And then I have a follow-up.

Yeah, Yusef, I mean, consumer, relative to our outlook at the beginning of the year, you know, consumer is the one segment that's squarely on track. I mean, obviously, we've talked about sort of the macro implications on both mortgage and insurance, but consumer remains pretty squarely on track. You know, as we highlighted in the letter, both personal loans and small business are performing, you know, exceptionally well. Credit card continues kind of a steady recovery. And the end market backdrop there, like the health of the network, the health of our partners in those businesses is really strong. You know, the market outlook for growth and personal loans as an asset class continues to improve. We continue to have really productive conversations around our TREQOL offering in both personal loans and card. And so, you know, among the three segments, we feel really good about the outlook in consumer.

And on the competitive front there, I think some of your competitors have also put out some pretty decent numbers for credit cards and personal loans and SMB loans, et cetera. Have you seen any kind of change, material change, just because that subsegment remains really healthy? So I'm assuming it's attracting a lot of interest.

I mean, I'll start and JD can pile on. I mean, certainly the card category has been for a long time very competitive, and we know that. But I don't think there's been any dramatic change from a competitive standpoint as we look at kind of our business and our relationship with our partners in those products. No, the card business, Yusuf, you know, it's been a process of the personal loan business kind of came back before the card business did. As Trent points out, first of all, network health is really good. One of the things that occurred in 2021 is the expansion of our lender base there. Card, the desire on the part of the issuers is absolutely there. We are gradually waiting for the interest from the consumer in new cards to return. It has gotten better. It's still not quite back to 2019 levels. Now obviously, The interest on the part of the issuers toward, you know, reward cards associated with travel, given the backdrop and the loosening of mask mandates, et cetera, that's a very real thing that will benefit us. But I would say the card business is basically on par with our plan this year, but getting better each month that passes. Okay, so that's great to see. Personal loan business is very, very strong. We feel really good about it. Small business, very strong. ahead of our expectations. And so we're thrilled to see that. The only business within consumer that is having some challenges is student. That's because of the extension of the CARES Act. So that's a macro factor sort of beyond our control, but it's relatively small. But as Trent points out, the consumer segment overall, really strong. Now the competitive environment, when businesses like personal loans do well, yeah, we've got a... We've got a tough competitive environment. That is not causing any problems for us at present, and we're actually really excited about the traction that we're seeing with a bunch of our personal loan and credit card issuers. We've talked about TREQUAL. That's a key part of our strategy to embed ourselves further with our partners in both credit card and personal loan and deliver deliver the right borrowers to them, right? So we're making great progress there. So, you know, to the extent that you think about short-term and long-term, this year in consumer, I think we're making great progress on both fronts. Short-term, those are businesses that are dramatically better than they were a year ago. And long-term, the product innovation, we're really excited about.

That's great. Thanks for that. One last one, if I may. My land entry, my LT continues to grow very nicely. Can you just give us an update as to kind of the engagement you're seeing there, conversion from that channel, any kind of KPIs that you can help share there would be really helpful. Thanks.

Yeah, no, absolutely. It's JD. I'll start. We're really excited about the future of MyLT as it relates to things like TreeQual. So as MyLT grows, and we're now over 22 million members, members are going to see real offers inside of MyLT. So engagement will be defined a little bit differently. It will not just be a function of coming to check your credit score. It will be a function of actually coming and checking on your credit score, but also receiving an offer, right? Receiving an offer for a credit card that's appropriate for you, receiving a personal loan offer. So we're making good progress towards things like that, which I think will define better types of engagement and, candidly for us, will result in a much better economic proposition, right? We have actually been through a very strategic reduction in mail traffic to our MyLendingFree base over the last year to be more selective with what we email the base. And so that is often how people measure engagement. Did somebody read that email? Did they open that email? We've actually reduced the noise in the channel to the base. and we're really happy with the progress that we're seeing in MyLendingTree in terms of revenue contribution despite that because we think it leads to a better customer experience. We're trying to make sure that we don't spam our base with useless emails. So I think the quality of the dialogue with the MyLendingTree member is improving and the economics continue to be consistent. I think over the next year you're going to see more behavior-based offers, because you improved your credit score, this card is now available to you. So the big thing in our strategy with My Lending Tree is true adjacency of a reward for the consumer and sort of a members-only approach, which is it's not a paid product, but we're looking at it from the mindset of what would the consumer pay for? Let's deliver that and find a way to do it on a free basis. That's the strategy. Yeah, and the only other things I'd add to that, and I thought that was a great answer, is if you think about MyLendingTree and as the upgrade from you came into the marketplace, you clicked on an ad, you filled out a form, you closed or you didn't close, and then we're offering you the opportunity to say, hey, you can set it and forget it, and we'll just alert you whenever we can save you money. That's where JD's talking about the quality of the traffic. The beauty of having all these lenders networked up is that we can then deliver you through, we can deliver you real offers through TreeQual. So we're only, in my lending tree, we're putting the best customer experience first and then we're worrying about the monetization as a secondary basis. So that's why we want to have the insurance agency embedded in there so you can get real offers. TreeQual so you can get real offers for credit card and personal loans and not have a click out. Mortgage, we're working on some enhancements there. So that's the goal there. And then really importantly from a business model standpoint, The goal then is that your recurring revenue, every time that person needs to check their credit score, et cetera, that we can give them the best offering, as JD said, at the right time. And we don't need to pay for you again to come through LendingTree. A lot of our repeat traffic still comes from you clicking on an ad, which means we're paying for you twice. So over time, our VMMs should do better as well, in addition to improving the customer experience. The only thing I would add on MyLT, revenue or contribution from MyLT users is up about 20%. So that's a good story. Now, keep in mind, that tends to track with personal loans. So obviously, as RPLs are higher, those MyLT numbers are going to look better. But revenue per engaged is 1.6 times. So that's actually really good to see. Our base, as we've talked about, we've been able to build this base of 22 million users without a lot of, basically, no marketing spend against it. What you're going to see us do over time is actually diversify that base, driving folks from our mortgage funnel, driving folks from other funnels, insurance, et cetera, into the MyLT experience. As that base diversifies, there will be all kinds of benefit for the marketplace business. So I just want to emphasize that's really the strategy. The two have to go hand in hand. And then the last thing I would say is you're on Investor Day. We have an internal project called Digital Advisor, and that's going very well and is on track.

Good to hear. Thank you.

Thank you. Our next question comes from Melissa Weddle from JP Morgan.

Good morning. Thanks for taking my questions today. I wanted to follow up on some of your comments on TreeQual. I'm unclear if, has the scope expanded on that in terms of incorporating more network partners into TreeQual or has that Is that stable, and if so, are you still on track to sort of implement that across most of the space by your end?

So let me start, and then I'll hand it off to JD. Let me just, for everybody, describe again what TreeQual is. And by the way, that's an internal name. In both the personal loan and the credit card business, there are slight nuances. to fulfill the – let's take credit card. You come to LendingTree or any credit card comparison site. You enter in some basic information. It gives you a list of credit cards and some potential rates and terms that you could potentially – that you will probably be approved for. And then you click on that. You go to their website, fill in the rest of the information, and then a month later the issuer tells us whether or not you closed. So imagine instead you come to LendingTree, you fill in information and you're presented with two or three actual card offers that when you click on it, the card goes in the mail. And then in personal loans, basically the same thing. And the initial lenders like this because It increases their conversion rates. JD said earlier about getting them the right volume. They're only seeing people who are clicking on an actual real live offer, so they're all going to get approved. It massively improves the customer experience and the customer satisfaction, and it improves our unit economics and our monetization because we're not sending 100 people over to a lender and getting – three closings back. We're going to send 100 people over and get 95 back. Now, it's not going to be quite that stark, but that's treacle. So, Melissa, right now we've got three credit card issuers live on it today. Metrics that we anticipated have all been at or actually better than what we expected. anticipated when discussing it with the partners in testing. So it's actually returning better outcomes, mostly better outcomes than we anticipated. So that's great to see. That's what we would call the inventory side of it. So what does the consumer see? We're about to launch our first personal loan partner, and so that's really exciting. You know, we've got, I would say, that pipeline of partners. There's some complexity to this because you have to work with a couple third parties and work through it with the partner to onboard them. But, you know, second quarter, I would anticipate, you know, we've got another handful of credit card and personal loan, I'd say five or six, in the pipeline. Whether they all get done in the second quarter or if it bleeds into the third, that's kind of a timeline that I would think about. And that's a dramatic change in both of those businesses. As Doug points out, what it will do for us, I mean, some of our partners in personal loans, we're anticipating that we could maintain our existing business with them and that TreeQual could actually replicate and double it, all right? So to give you some sense for how it enables you to take market share. It's just a more efficient way to deliver them the consumer that they want. And we think it's a bit of a motor barrier to entry in both of those businesses. So I just keep telling the team, you know, somebody said to me, this is really hard to implement. Hard is good. Hard is a barrier to entry. It's a quality of revenue issue. And I think in both personal and credit card, that's exactly what we're doing. We're improving the quality of the revenue.

Yeah, no doubt the functionality of TreeQual is certainly compelling. I think one of the other things that jumped out to me in looking through your letter this morning was that you noted dramatically improved performance for those partners who have been onboarded. So far, I was hoping we could dig into that a little bit. Are there any, I guess I'm wondering what metrics you're looking at or they're looking at, and then does that, are you seeing already an increase in allocated budget to LendingTree versus others as a result of that? Or how would you see that filter through?

So in personal loans, particularly in personal loans, You don't necessarily have budget allocations lenders want typically if they're... It's so electronic that many times they're able to run on cap. The key metric you look at is the conversion rate from when we send a consumer to somewhere else than lending tree and the percentage of those people who actually come back with a closed transaction. and that relates to the unit economics on your revenue per customer directly because most of those things are credit cards. We get paid on a cost per issue or revenue per issue, and the same thing is mostly true with personal loans. We get paid on a closed loan. So if we can make dramatic changes in the conversion rate, we can make dramatic changes in the unit economics and then that business will will grow and the only other thing i would say when when i started lending tree the whole premise is you fill out a form and you get multiple real offers to compare and in and in credit card less so in personal loans like that's not happening so this is just this is getting you to actually be able to see real offers jd what else would you add yeah i well let's i think in terms of like It's translating into more budget. In card, that tends to be month to month. The payouts will not be different. The efficiency will be really on the marketing side for us. As payouts for certain cards go higher, we'll just be able to deliver more approvals. and garner more from our base. That's why it's so critical that we expand our My Lending Tree base as well. Now, this is not exclusively tied to My Lending Tree, but that's why the strategies are so linked. I think in terms of impacting the margin profile in each of those businesses, I don't think that's a 2022 thing. I think that's something that will start to ripple through in 2023. And we're going to have to kind of look at all the data in terms of this year as we assess our budget for next year and look at what it does for those two businesses. And I'm very confident that we will garner more market share and wallet share with partners in those businesses. That part's, that's not a debate. This is very much what they want from us. What it means in terms of can it get big enough to dramatically change a margin structure in those businesses. That's a more open question that we've got to work through. It's just a matter of size and getting enough volume to them through it.

Got it. Very helpful. Thanks so much.

Thank you.

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

Yes, hi. Doug, JD, and... Can you help me out a little bit because I saw very different behaviors from some of the public fintech players in the personal loan space. Obviously, there's a lot of growth in the demand side from consumers. I know that demand and supply go backwards. I think you call that supply. But the consumer is more interested. They have higher credit card balances, and there's less stimulus checks. People are spending money again. But you saw also from at least a couple of the players in the fintech providers that are public to very opposite stances, cutting their credit box dramatically on one side and another one dramatically expanding the credit box, both taking a different take on what's going to happen to the consumer in this changing inflationary environment, potentially recessionary. What would happen to your business and how would it affect you if either side of those is correct? And where do you see the consumer coming out longer term as we move forward with these rising rates?

Yeah, I won't speculate on where the consumer is going, but I will say in personal loans in particular, what you just described is what makes a marketplace. And the more lenders you have with the more diversity of their credit boxes means that on any given day we can deliver the consumer the best deal on the market from whoever sees it that way. And what I always like to say is if lenders are willing to lend and borrowers want to borrow, we are able to make a marketplace in that, particularly in personal loan. The time when the business gets tough is when those personal loan or any lender starts to see obviously huge defaults and then they, you know, then they cut it off or they see they have a capital, they can't get capital. It's happened in the personal loan market several years ago and the air hose shuts off and then, you know, and then you wait it out. But the nice thing for us is you reduce your marketing spend and it kind of balances out. J.D., what else would you add? Where's the consumer going? Well, I mean, Matt, I guess what's going to happen, there's greater dispersion in pricing for any of our products right now in that environment, right? And so think about what our value add is as a marketplace. In a marketplace based on comparison alternatives for the consumer, If everybody's at the same price, there's not a great deal of value for the consumer. If there's great spread, there's more value. So in some respect, in the interim, that's not a bad thing for us in terms of the call to action to compare. So that's kind of one way to look at it. I don't think there's enough data out there yet in terms of where all of our lender partners are going. We're certainly seeing, as we mentioned, in consumer partners who just very much want to grow. I'm not hearing a ton of credit box tightening discussions when we go out and talk to our partners. for the first time in a while in person, there's not a whole lot of credit box tightening discussion going on right now. So that's not reflected across our network today. You're hearing a couple data points of that. If that, and in a higher rate environment, we actually think that's a good call to action for people to compare.

Great. Thank you. Thank you.

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

Hi, Doug, J.D. Trent. I was wondering, at least at a high level, can you talk us through your thoughts on the VMM and especially the EBITDA margin contemplations at a segment level, if you can, for the remainder of the year?

Yeah, Jamie, it's Trent. Again, I kind of point everybody back to the segment-level guidance that we gave at the investor day. We said the home segment was probably going to be down 15% to 25% on a revenue basis in light of what we knew was coming in terms of higher rates and lower rebuy volumes. We still feel like the bottom end of that range is achievable and likely, and we got it for a margin profile of 35% to 40%. We still feel like that's definitely achievable as well. You look at consumer, as I already said, our outlook there remains fully intact. We got it for 45% to 55% growth. Totally achievable, and certainly the trends from Q1 and into Q2 support that. Similarly on the margin profile, something in kind of the mid-40s. And then insurance is the one where there is a little bit of a caveat. I mean, we expected that business to be up 10% to 20% on the year. You know, sitting here today, I think being cautiously optimistic, that's probably more like a 5% to 10% type grower. and the margin profile of that business. You know, certainly the first quarter results suggest that we're trending a little bit beneath the segment level margin that we guided for there, but we're hopeful that that will recover as the year progresses. And from a, you know, in terms of how all that translates into EBITDA margin, I mean, I do want to point out that we've done a pretty good job being disciplined in our op-ex. We've clearly moderated the the rate of growth in our fixed cost structure, in our non-marketing cost structure, you know, the fixed costs in our business have remained relatively flat for the last three quarters. And, you know, we're certainly doing our best to hold the line on that piece of it.

Got it. And then if I could just ask in this call out in the shareholder letter about consumers specifically on credit card, where you call out that the revenue per approval increased 47%. Because the revenue per approval grew less than the card business. I'm sorry if I'm being slow thinking this through, but is that a function of increased volume, or are the origination dollars smaller? Why is that happening?

Yeah, revenue per approval is a function of the number of approvals that we deliver for our issuers in aggregate and what we get paid for that. So increasing revenue per approval is a function of increased demand from the issuers for new originations, for new issuance. As J.D. talked about earlier, we're clearly seeing a healthy backdrop there in terms of issuers wanting to spend marketing dollars, wanting to put on new issuance, where we've been a little bit more challenged is on our ability to drive new consumers and new approvals to them. The marketing backdrop there has been more difficult. It is competitive and remains competitive, and so our focus in that business is obviously to get more efficient through TreeQual as we onboard more partners, but also to look for other other marketing outlets, other sources of traffic, and that's where we're focused in the card business.

Got it. Thanks for that. I'll drop back in the queue.

Actually, Mr. Friedman, you're the only one left in the queue. You can continue.

Oh, all right. Well, what I was trying to get at, though, Trent, is that the revenue actually grew faster than the approval. So is that because you – is it volume discounts because you had more approvals?

The number of approvals that we're delivering for our partners is up, and the amount we're getting paid per approval is also up.

But why would the revenue in the segment grow faster than the revenue per approval? I'm sorry, Doug, if I'm being exceptionally slow.

Because the revenue, so Jamie, the revenue per approval would be a function of how the issuers across our network say, we will pay you X per approval. They incent us to deliver them volume. We succeed delivering them more volume. It's just the math of a higher rate, a higher price, just like everything else is inflated over the last year, and more volume. So it's two metrics working in tandem. So that's going to lead to a higher percentage, right? We've got a multiplier effect of more volume across a higher base price.

Got it. Okay. All right. Thank you. That's the extent of my questions.

You're welcome. Thank you. I'm showing no further questions at this time. I'd now like to turn the conference back to Doug Loebda, CEO.

Thank you very much, and thank you all for listening and your great questions. I'll just close with this. 25 years ago when I started this company, I first spent a little bit of money on advertising with a simple website and had hundreds of customers filling out the first QFs on the Internet applying for loans. When I turned to the lender side with my co-founder in tow ready to build interfaces to every financial institution, my first lender said, can you fax it to me? So we had to build a system that we could fax customers to the lenders who would then input that data back several days later. As we sit here, I never thought that it would take 25 years to get to the place that we are in 2022, where I believe that we are at the cusp of finally having fully digitized loans and fully digitized insurance. And that we have a marketplace right now where you've got public companies in each of those areas who are lending as one of our questioners referred to in personal loans. We've got fully digitized at scale mortgage companies who are on the internet. Every single bank in the country is working towards the same goal of acquiring more customers over the internet. And we think that we are perfectly positioned in that future. And here's why. We have a loan and an insurance marketplace machine that works every single day to produce substantial cash flows. We are one of the only companies that I know of that doesn't have a customer acquisition cost problem. Our marketing is very, very profitable. Two, we have a brand that's very, very well known, and with our customer experience improving, it's going to get even better. Three, we have every significant financial services company in every single category plugged into our exchange and as a client of ours. And as a real partner of ours and those partnerships are getting stronger, particularly now post-COVID where we can actually go see each other again and really work together again. Fourth, we have our strategy and all of our key initiatives to revolutionize our customer experience. And with that comes direct unit economic improvement. And fifth and most importantly, we have what I believe is the best team we've ever assembled at LendingTree, who's perfectly ready, has been digging in during COVID, making changes, building the company of the future. And it's a fantastic team to work with. We are fired up and excited to see where we can take this company from here. Thank you all very much.

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