LendingTree, Inc.

Good day and thank you for standing by. Welcome to the LendingTree second quarter 2022 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 1 on your telephone keypad. 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, Vice President of Investor Relations. Please go ahead.

Thank you, Liwei, and good morning to everyone joining us on the call this morning to discuss LendingTree's second quarter 2022 financial results. On the call today are Doug Levda, LendingTree'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 risks and uncertainties, and LendingTree's actual results could differ materially from the views expressed today. Many but not all the risks we face are described in our periodic report filed 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 definition and full reconciliations of non-GAAP measures to GAAP. With that, Doug, please go ahead.

Thanks, Andrew, and thank you all for joining us today. Current volatility in the economy has obviously caused pressure on consumer demand for loans and lender demand for new borrowers. Our company has operated through difficult stretches like this in the past and consistently emerged as a stronger and more profitable business. We are in a much better position today than ever before to manage our day-to-day business in this cycle and also be able to make strategic investments that we committed to earlier in the year, including to dramatically improve our customer experience, drive higher brand awareness, and draw new customers to our platform at a time when others are scaling back. Our updated guidance acknowledges the financial impact of a slowdown in borrower, lender, and insurance carrier demand. Despite these headwinds, we are forecasting that segment-level profit ex-brand spend will be roughly flat in the third quarter compared to the second quarter, which speaks to the resiliency of our business model. Our leadership team has remained focused on managing expenses, having reduced headcount since the peak of mid-2021 by nearly 15% through a targeted workforce reduction, a restricted hiring plan, and backfilling vacant positions sparingly when they occur. These actions helped limit operating expense growth to 3% over last year despite the current inflationary environment. This is a unique period for us as a company, when two of our three segments are generating trough-like revenue due to significant macroeconomic headwinds. However, we are managing the business with a focus on helping our partners when they need it the most, while taking purposeful steps to position ourselves to win on the other side of this cycle. For example, in our home segment, we are actively working with our largest mortgage partners to roll out home equity loan products that historically have not been a high priority for them. We know homeowners with historically high levels of equity today are looking to efficiently borrow against it. We see that desire in the 62% increase in consumer volume for quotes in the second quarter. By helping our partners pivot during a challenging point in the cycle, we're improving outcomes for both constituencies. The standout performer again for us during the quarter was the consumer segment, as personal and small business loans grew revenues 68% and 81% over the prior year, respectively. Our pipeline of new tree call partners continues to grow and we expect to have a few new partners to announce that are going live with us in the third quarter. The insurance business has been negatively impacted as carrier partners continue chasing inflationary trends with premium increases. While the business performed relatively flat quarter over quarter, based on ongoing discussions with our partners, we are dialing back our expectations for material growth through the end of this year. However, when insurance companies finally believe they've repriced their policies appropriately for the economic environment, we expect to see a super cycle of consumer shopping emerge. Historically, in such periods, our business tends to generate returns well above normal for a period of time. We thus remain very optimistic about the future at Quote Wizard. Finally, I'm very excited about our new omni-channel marketing campaign we launched recently. We chose this time to draw attention to the ongoing work of improving the customer experience as we laid out in our investor day. Our financial resilience has allowed for this investment, while the steep decline in advertising rates has allowed us to return to brand advertising at a time when it is much more efficient to do so. It is still early, but we're seeing promising signs of engagement driven by the campaign, and we look forward to benefiting from this investment in the months and quarters ahead. Now, operator, please open the line for questions.