LendingTree, Inc. (TREE) Q4 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the LendingTree Fourth Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Alex Mandel, Chief Financial Officer. Sir, you may begin.

Thanks, operator, and thanks to everyone for joining us today for LendingTree's Fourth Quarter 2014 Earnings Conference Call. First, a brief disclaimer. During this call, we may discuss LendingTree's plans, expectations, outlook or forecasts for future performance. These forward-looking statements are typically preceded by words such as we expect, we believe, we anticipate, we are looking to or other similar statements. These forward-looking statements are subject to risks and uncertainties, and LendingTree's actual results could differ materially from the views expressed today. Many but not all of the risks we face are described in LendingTree's periodic reports filed with the SEC. On this call, we will discuss a number of non-GAAP measures, and I refer you to today's press release available on our website at investor.lendingtree.com for the comparable GAAP measures, definitions and full reconciliations of non-GAAP measures to GAAP. We are delighted to share with you our results for the fourth quarter and full year 2014 today. The fourth quarter was our strongest quarter to-date, since the sale of our former mortgage origination business. We made important strides in our business, achieved record performance across our key financial metrics and exceeded our prior guidance. Our mortgage products revenue in the quarter grew at 5% year-over-year to $33.2 million which also reflected sequential growth of 4% over the third quarter of 2014. Mortgage originations industry wide contracted by 18% year-over-year implying a 9th consecutive quarter of share gains for our mortgage products business. As part of this, we saw improvements in the monetization of our mortgage leads in the quarter through both efficiency of matching our lead volume with lenders, as well as pricing gains. I mentioned in last quarter's call, the lead quality we'd implemented in Q3 and the improved monetization in Q4 is a reflection of that initiative. Mortgage products revenue for the full year 2014 totalled $134 million up 9% over full year 2013. Revenue growth from our non-mortgage products accelerated. Achieving a record $10.7 million in the quarter up 128% year-over-year and marking the fourth consecutive quarter of triple digit year-over-year growth. Our non-mortgage products revenue now comprises a record 24% of total revenue up from 13% in the year ago quarter. In 2014, every one of our non-mortgage lending businesses grew revenue year-over-year in every quarter. This includes home equity, reverse mortgage, personal loans, auto loans and credit cards. Revenue from personal loans comprised over half of our non-mortgage products revenue in the quarter and grew by nearly ten-fold year-over-year. In the quarter, nearly all of our existing personal loan lenders increased or spend with us and we added new lenders to our market place. For the full year 2014, non-mortgage products revenue totalled $33.2 million representing growth of 114% over full year 2013. All in, consolidated revenue of $43.9 million in Q4 and full year revenue of $167.4 million were up 21% and 20% respectively over their prior periods and both exceeded our guidance ranges. From a profitability standpoint, the company achieved a record $17.5 million a variable marketing margin in Q4 reflecting a 40% margin. We maintained a more active investment approach to television media in the quarter compared with a year ago as we sought to drive awareness of our new My LendingTree free credit score offering and our personal loans market place. On a year-over-year basis reported VMM grew by 7%. However, you may recall I noted on last year's Q4 earnings call that VMM had benefited from an approximate $600,000 reversal of certain accruals at year end. If those reversals have not occurred, VMM would have grown approximately 11% year-over-year. On a sequential basis, we achieved growth in VMM while maintaining a consistent margin as we scaled. For the full year, we achieved VMM of $65.2 million reflecting year-over-year growth of 11% and a margin of 39%. Adjusted EBITDA of $6 million in the quarter was also a record and reflected a margin of 14%. This represents 2% year-over-year growth in adjusted EBITDA. However, Q4 2013 adjusted EBITDA of $5.9 million included the $600,000 VMM benefit I just discussed representing 10% of the Q4, 2013 comparable and this benefit obviously was not present in Q4, 2014. For the full year adjusted EBITDA totalled $21.8 million or 13% of revenue and reflected 17% growth. Our adjusted net income from continuing operations, which is reconciled in our earnings release and which excludes certain amount expensed under GAAP as well as certain one-time items, was $5.7 million or $0.47 per share. This metric reflects the favourable tax profile of our company presently. Relative to NOLs and other tax attributes, we do not anticipate the company will pay taxes at normalized rates prior to 2017, although it may be subject to certain states taxes and federal alternative minimum taxes in the interim. From a balance sheet perspective, we are very pleased to report that our working capital position which we calculate is current assets including unrestricted and restricted cash minus current liabilities including our loan loss reserve improved by $17.6 million or $1.46 per diluted share to $81 million at December, 31. This improvement was achieved in large measure by a material reduction of the loan loss reserve at our Home Loan Center subsidiary. During the quarter, we completed a global settlement with HLC's largest investor to which has sold loans while we were previously in the mortgage lending business. The settlement cover all existing and any future losses on loans sold to the investor. The impact on our estimate of the remaining loan loss exposure was to reduce our reserve by $19.6 million to $8.75 million at December, 31. Further, this settlement also removes uncertainty as to the ultimate outcome of this matter and triggers a contractual release of $12.1 million of our restricted cash in December, this year. In sum, we are very pleased to be able to report record results in our business as well as fortification of our balance sheet. I'd like to turn to Doug for him to share our progress on important business initiatives that we anticipate will drive continued growth in our business in 2015 and beyond.

Thanks Alex and thanks to everyone for joining the call today. Since Alex gave you the details on the financials, I'll share my perspective on the quarter's results briefly and spend some time on what we've accomplished in 2014, but most importantly give you an update on several key strategic initiatives and how they're doing for us and then obviously I'll also discuss our outlook for Q1 and the rest of the year. Put simply, the fourth quarter was hands down our best quarter since we sold LendingTree loans in Q2, 2012. We delivered our highest level to-date of revenue variable marketing margin and adjusted EBITDA and we dramatically strengthened our balance sheet by freeing up approximately $18 million of working capital, which is almost a $1.50 a share. In our mortgage business, we resumed year-over-year growth as revenue of $33.2 million was up 5% versus Q4, 2013 and up 4% sequentially in a market where industry wide origination were down 18% and 13% respectively. There are few notable factors helping drive that growth. First, is our increasing ability to serve different type of lenders other than call center based corresponded mortgage companies. As we stated previously, our local introduction product, our loan explorer product, which is our rate table and our call transfer product are enabling us to sign up lenders that haven't traditionally been able to work with LendingTree. These efforts are having enormous success. Of the top 50 mortgage originators in the United States 22 are current clients and another 12 are in discussions with us. We were able to deliver volume at scale and with very solid conversion rates and we see these companies allocating increasing budgets to LendingTree because quite simply our partnership works. And from a product perspective, we are not resting on the mortgage product either. We recently launched a completely revamped purchased mortgage product in Beta with several lenders. This product does several things that we believe will substantially improve conversion rates and customer satisfaction for people buying homes. What this product does is facilitates communication between the consumer, realtor and loan officer and also leverages the profiles of loan officers from our lender directory product, which by the way we believe can overtime become the TripAdvisor [ph] of the mortgage industry and we also integrate with an industry leading CRM system. So that we know the status of the borrower throughout the entire loan process up until closing, that data will be the foundation of alerts to lenders, consumers and realtors to help the consumer get through this very complicated transaction. Moving into our non-mortgage products. We continue to make great strides as we grew revenue from these products 128% versus the prior year as Alex noted and is our fourth consecutive quarter of triple digit growth rates. Our personal loans offering continue to scale and grew 56% sequentially versus the third quarter. The great thing about this business is, we said before is it unlike mortgage there is virtually zero capacity constraints and lenders can close loans at significant scale. As long as we can continue to expand lender coverage across the credit spectrum and profitability market into demand, there is plenty of runway ahead. We've added three new lenders to the personal loan network bringing us to a total of 14, a very robust sales pipeline. In autos, revenue was up 22% versus the prior year. As we added more lenders and thus we were profitably grow the consumer base. In credit cards, we are in the final stages of building and launching our own credit card search engine. Transitioning from the partner we've used for the last year. We've already signed five of the seven largest credit card companies to our market place and expect that business to scale meaningfully this year. In small business loans, it's still early but we're up to 13 lenders participating in our exchange more than double where we were in Q3. And in student loans, we've launched our own technology thereto instead of the partner solution that we've been testing with previously and will have two lenders live by the end of the week with more in the pipeline. All told on the lender front, we are showing the value of the LendingTree marketplace to lenders of all sizes and specializing in all types of loans. Whether our clients are a major national bank or a local loan officer, we are helping our clients materially improve their business by working with us. The trend of lenders moving online is only accelerating and when they want to do so, LendingTree is perfectly positioned because we've seen increases in lender demand and quantity, depth of coverage and pricing. Our monetization improved in Q4 and is doing so in to Q1. Given this, we were able to spend more marketing dollars in Q4, more profitably than prior year which helped us drive our great quarter. That trend continues in to Q1, where despite rates falling and volume increasing across the board. Our exchange has plenty of capacity, which is a key reason we can increase our forecast for Q1 and 2015 and our marketing machine continues to get more and more efficient across all channels from search to social media to TV. Importantly in marketing, we are starting to see real success with our syndication strategy, where publishers from small sites to very large ones can have a co-branded LendingTree experience integrated within their user experience. We've signed over 20 partnerships in the past year and now help power the lending experiences for sites including Yahoo Homes, CNN, Realtor.com and many others. We've proven to partners that we can help them monetize better than our competitors and we're winning business every single week that we used to lose. And finally bringing all together is My LendingTree. Since our update in November, we've grown our user base from approximately 200,000 users to more than 600,000 today and user growth continues to accelerate as we're now adding more than 5,000 users per day. We started marketing into this offering online in October and launched a free credit score with a brain TV spot in November. While the membership growth is important, what's even better is that our alerts are now being sent to consumers and they're working even in the early days. We send about 1 million savings alerts to consumers via email each month and see them opened at rate that's 60% higher than in email, that is more generic and the revenue from this alerts is double than more generic email. The My LendingTree brain will keep getting smarter as we roll out alerts across more products and as our new mobile app begins to scale. In summary, I'm thrilled with what we did in Q4. We're executing on marketing to drive new customers with lenders expanding our network materially, while continuing to strategically invest in product development to make our experience even better for consumers in lenders. Now moving into Q1 and the rest of 2015. The continued scaling of our business and decisions we made in 2014 around product and marketing have set us up exceedingly well in 2015, in both mortgage and non-mortgage products. We anticipate revenue in Q1 to be $46 million to $48 million, an increase of 15% to 20% over Q1, 2014. Variable marketing margin is anticipated to be $19 million to $20 million up 25% to 31% versus the prior year and adjusted EBITDA is expected to be between $6 million and $7 million representing growth of 24% to 33%. Clearly, low mortgage rates and result in increase in refinance volume are helping those results, but unlike years passed when we would see a reduction in monetization in lender capacity, we didn't see that nearly as much this time around. Lenders continue to expand their business with us and we believe it came at the expense of our competitors. Based on the trends we're seeing in Q1, we are also providing substantial upside to our full year outlook relative to our previous guidance. On the top line, we are now anticipating revenue to be $192.5 million to $200.8 million representing growth of 15% to 20% up from previous guidance of 12% to 15% growth. Variable marketing margins anticipated to be $76 million to $80 million up from previous guidance of $73 million to $77 million and adjusted EBITDA is now expected to be in the range of $27 million to $29 million, 24% to 33% ahead of full year 2014 figures and up notably from our prior guidance of $25 million to $26.5 million. With that, I'd love to turn it back to the operator to take questions.

Thank you, sir. [Operator Instructions] our first question comes from Kerry Rice of Needham & Company. Your line is now open.

Two questions, if I may? One on the personal loans. You had indicated that, lenders are spending more on the platform that you guys. I don't know if you could give any framework of thinking about kind of what levels those are maybe what levels, you think they can get to and I don't know if there is any unit economics you can provide and then on My LendingTree, you mentioned 600,000 enrolees now. How do I think about the monetization of that and when that kicks in and maybe any contribution in 2015? Thank you.

All good questions, on personal loans and unfortunately you're not going to be too happy with our disclosure on most of these because we want to keep some of the stuff pretty close to the vest. What I can say on personal loans is that, lenders will spend as much as they can up to whatever their normal cost per funded loan goal is for companies like Lending Club and Prosper that's actually publicly available and we can hit those guys cost per funded loan goals. And some lenders will pay more and some lenders will pay less. The real value though is, in adding new lenders where we can really increase coverage. In round numbers probably still 40% of more of consumers had very, very challenged credit and therefore we can't even get them offers. So as we can match people with more than one lender particularly in the subprime areas and then get wider coverage that's really what feels, the unit economics which then gives us the gas to be able to go market. On My LendingTree, what I can say on the monetization is we see it, generally speaking come in extra monetization with the first 45 days to 60 days and then it kind of achieves a normalized level. I can also say that our marketing cost to get those customers is more than paid for, in roughly first 60 days. So I would expect that we'll have a lot more on monetization of this at our Investor Day in March as we look to roll it out, but it's far exceeding our plans. In terms of how it bakes into this year, it's all baked in the cake of our guidance. So with additional free monetization from My LendingTree. It basically enables us to go spend more money on marketing to drive more volume to the extent we have capacity and capacity is not a problem right now.

Maybe, just one quick follow-up. You had mentioned that you have 14 lenders for the personal loans on the platform. Can you make sense or can you give us a sense of what's the population out there is there 30 lenders, is there 20 lenders, is there any way you can size at least the number of partners you could sign up on the platform for that type of product?

I would say, it's at least double, where we are now. We've got big major companies like Springleaf and OneMain, who are owned by Citi and Springleaf obviously an independent company or a public company. We've got all the new platforms like the Prospers and the Lending Clubs and then also really good ones like a AvantCredit based out of Chicago and interestingly, I think every venture capital shop on the planet is trying to launch another one of these. And so we're getting inbounds all the time. We're also starting to get inbounds from investors who have invested on some of these other platforms and put money to work on and they want to come directly and that's interesting as well too. So I think, you could easily double it. In addition to that, we are starting to see some early signs that the retail banks will come back into this. Really what's happened in personal loans is essentially new types of credit models other than FICO score and automated underwriting and processing. There is no reasons banks can't do that too. Banks haven't been in this product for several years, just because of the crisis, but ultimately the banks have the lowest cost of capital and they can automate and do underwriting as well as any start-up, can.

Great. Thank you very much.

Our next question comes from John Campbell of Stephens. Your line is now open.

Hi guys, this is Hayden sitting in for John. Just had a couple of quick questions. First on the My LendingTree platform. Are we starting to see any pull throughs there into the personal loan category from those guys, who have signed up for that credit monitoring service? And then what are the kind of the conversion rates looked like from the existing My LendingTree customers into the loans that they're applying for is that differing materially from just a customer, that you're acquiring another ways?

Very good question, I think it's safe to say, yes in My LendingTree and it's not necessarily. The effect is what you said it's not necessarily because of the market. I think it's more of what we're doing, it's very easy to get your credit card rates from your credit report and because of that, if we know we can get you a personal loan to consolidate those credit cards, that's an easy alert and not one of the first alerts we did. So right now personal loans is the largest source of monetization from My LendingTree and I can say that, anything converting out of My LendingTree is going have a higher conversion rate on average than leads to customers from other channels and the reason being very simply. There is extremely high chance that you can save money and you're opting in for it. So I think you're getting an email that says, Hayden we think we can save you $50 a month with a personal loan by paying off your credit cards. Would you like? You're clicking a button saying, yes. You don't need to fill in that information again and so yes and that conversion rate effect by the way, will help to drive the other parts of the business because if conversion rates go up on average for a lender, they're willing to spend more with us, across really all of their volume.

Got you. Thanks for that. And then I guess, secondly on the number of lenders that you're working with in the personal loan category. Are you finding that some of these new lenders are more specialized than say a Lending Club or a Prosper who are maybe more focused on that lower end of the credit spectrum or are people generally still looking for the higher quality customers and I guess kind of linked with that is, you said 40% more of your consumers have challenged credit, does that mean that you're not able to match 40% of the leads that are coming through or does that mean in general 40% of consumers have challenged credit and it's difficult to match them?

Yes, when I said 40% roughly those are people that we can't match at all. Credits, expectations that are or they've got credit that's lower than what lenders are looking for, that number we've obviously been chipping away at that number. There is going to be some amount that is, that we can just never do, but the neat thing is, more and more lenders are coming into this space doing more and more, who are willing to go down lower and lower segments. Obviously those rates are going be a lot higher and in some instances, you can pay 50%, APRs in some of these products, but sure as heck beats, 98% from your local check cashing place. So another really neat thing we're seeing in the personal loan space, which is just seeing a marketplace work. We're seeing that lenders are competing more aggressively. We'd seen the average spread between the low rate and the high rate in personal loans go from 500 basis points down to less than 100 basis points and we've seen the average rates that the consumers are getting also go down. So the consumers are getting a better deal and lenders are competing on price obviously as well as service, that's great for the consumer. Obviously it's good for the lenders that they can do it and as it also improves their conversion rates. In many instances, you can actually get lower rates on LendingTree than you can get on some of these individual sites, which we just think is great. In general, I would say most new personal loan lenders are still at the "higher end" of the credit spectrum. The higher end in personal loans is going to be lower than let's say mortgages and things like that because many times personal loan borrower is more of a credit seeker, but as I said we're getting new types of lenders with new types of credit models and the risk-based underwriting should help to give solutions to more borrowers overtime.

Got you. Thanks for the questions and congrats on the quarter.

Our next question comes from Hamed Khorsand of BWS Financial. Your line is now open.

First off, can you just talk about the competitive landscape. I mean, Lending Club is now talking about approaching banks as lenders more aggressively. How does that play into your business model as far as pricing goes, let's just start from there?

Yes, I think at least as I understand it, there are a number of companies that are basically going to the banks and saying, hey, why don't you leverage our technology to do your own loans and we think that's great because of the sooner, that an institution gets automated, if somebody uses Lending Clubs technology or third [ph] financial technology or anybody else's technology, that's another lender that's going to be looking for volume. And when they're looking for volume, we're going to be able to give it to them. So we think, we think that's a similar. We think that, there's - will be a similar theme to what's happened in let's say mortgage where you have where overtime lenders automated, the CRM systems and their underwriting systems and that just brought more lenders to the party and as LendingTree wants to be the search engine for money, the more lenders they're competing to get that customers business and the richer our marketplace is the better. So we think that's a great trend.

Okay and then, the other question as to, can you leverage the business any further? I mean, we're talking about partial basis point improvements in EBITDA margin and 2015 versus 2014 and you would think there will be greater scale given that non-mortgage is supposed to grow at a faster pace than mortgage revenue.

Yes and I would expect to see that, as I think you know we tried to balance our approach between EBITDA growth and continue reinvestment. We're not going to be a company that is going to tell you, we're not going to have earnings and we're going to just invests in product and marketing, that's not in our DNA. We'd like to have very robust earnings growth at the same time, we think it's strategic that any time we do have good news above a certain threshold. We're going to make opportunities to reinvest. So we're going to spend more money on marketing, we're going to test more types of marketing in those times. So that we deliver, what we promise to you and more, but then above that number we're going to reinvest back in the business and we like to call those things out, but for example looking at new TV spots right now. We're running new campaigns, we're looking at radio, etc. Now we're going to obviously always perform and I want that to be very clear, but we certainly are going to do our best, but we do look for reinvestments to speed the growth rate, if we can above that threshold.

Okay and then my last one, what change in your assumptions or in the business to make your assumptions changed for the guidance within four weeks?

Just becoming more and more confident in the trends that we were seeing. Obviously, Q4 we saw Q1 came out of the gates great and Q4 really built into Q1 and we wanted to see, whether late in the quarter some of these trends were going to stick or whether we were getting a momentary getting some wind at our back and it did call out some wind at our back, but we're just increasingly confident at everything we're seeing as we see lenders increasing budgets, we get very good things from the lenders as marketing and it's just all working and we're just, we see it, we're more confident.

Okay, great. Thank you.

Our next question comes from Jim Fowler of Harvest Capital. Your line is now open.

You ended this year, with mortgages as a percent of total revenue at about 75.6%, what do you think it will end 2015? If you look at the growth that you're projecting for mortgage and non-mortgage, what will mortgage be as a percentage of total revenue at fourth quarter, 2015?

Hi, Jim. It's Alex. Are you asking about the fourth quarter or sort of the full year picture over?

Well, kind of like the fourth quarter because I know we're going to have some level of heightened mortgage activity here in the first couple months of this year. Just like to see, what it's going to be at the end of the year?

Sure, I don't think we're giving very precise views of this metric on a guidance basis, but for sort of approaching a quarter of the business, at the end of the year. If we were in the [indiscernible] third of the of business, I think that would be meaningful and if we can do better than that, then that's great too.

Okay, non-mortgage about a third by the end of the year, is what I mean approximately what you would expect?

It's all in the year, but that feels right at this point.

And one thing, I would just want to highlight is, the supply and demand economics of these are both different. So obviously we're not trying to get to a certain percentage, nothing would make me happier, if mortgage does very, very well. If you think about all of these products from kind of percentage of transactions that we're doing. We're still doing less than 2% of all the mortgages in the US. So as we move, as we capitalize on the shift moving online. We hope that the mortgage business is going to grow very robustly as we gain share and obviously we hope the other ones are going to grow as well. And it's fun watching our sales people and our product people who focus on different products try to win the race against each other, if you will so particularly purchase mortgage if we see, if our new purchase product really starts to grip. We could see good growth in purchase mortgage as oppose to refinance and that would be great.

Yes, I was going to ask about two aspects of that. If it does hit a third by the end of the year. In that one-third, are you thinking that there is going to be a substantive change in being able to match the 40% of non-prime borrower now or is that third, not inclusive of any improvement in that non-prime borrower?

I would say, it's all sort of baked in the cake. We assume sort of the business every time we budget and make assumptions. We assume sort of steady progress, but very specific progress, but the other thing I can tell you is, we did our internal budgeting and planning in November. We already running ahead of that like we have to now have a monthly go setting process to keep raising the bar on ourselves just to keep hold ourselves accountable to ever increasing growth just because we're beating what we thought we'd be doing in November. So I think there will be some amount of monetizing, I'll call it 40-ish percent but the other thing to think about is, you get tremendous increases even economics by matching the consumer more. So in sort of mid-prime space you'd match maybe one or two times today. If we can match three and four times that obviously significant increases our revenue.

Got it and then just one last thing, if I might? I was interested in your comment, that investors are calling you directly. Could you clarify exactly what's happening there?

Yes, what we're starting to here rumblings of our money managers, asset managers who invest in these online platform and obviously there is some pretty substantial fees that go along with that where the intermediary takes that fee and we're starting to hear, that they're setting up entities to go originate consumers directly. If you think about that, really what you need to, you need a credit model and you need a servicing platform and you need a technology and increasingly there are companies that will sell you that technology and help you rent or develop a credit model. So that somebody who today, invest in buying whole loans could actually make those loans directly.

Great. Okay, thanks Doug. Congratulations. Bye.

Our next question comes from Josh Goldberg of G2 Investment Partners. Your line is now open.

Just a couple of things. I guess, first on My LendingTree obviously great improvement on the number of subscribers. I'm just curious embedded in your guidance. How much are you planning on spending on the marketing for My LendingTree and where is it in the income statement? I know you breakout exchange marketing to get to the VMM. I don't know if this is part of exchange marketing or a new product or maybe your new other marketing line.

No, it's absolutely in the exchange marketing and we will market up to, we don't really have an amount we'd spend on marketing because it's all based on how efficient the marketing is in the revenue. So for example, if we using and using hypothetical numbers. If we were getting $20 of monetization off of this under normal VMM thoughts, we'd probably spend half to maybe a little more on a unit basis to get that and if we can go ahead and get more, we'll go do it. So I hope, we spend a lot because anything we spend would by definition be profitable, but we don't have that specifically baked in and it's not working, but we don't break it out separately.

Right and the $20, whatever hypothetical number you mean is that, a yearly number are you looking at?

No, I'm not again.

No, it's not the number. I'm just saying.

Hypothetical, I was just trying to use that for illustration. We want to keep the monetization of My LendingTree very close to the vest for a period of time, while it develops for competitive reasons and then we'd look to reveal that sometime later in the year.

Okay, great and in terms of making it a little more robust offering in terms of credit card in other products. How far are we in terms of developing that?

Early days, I'd expect that over the next six months, we would have a lot more alerts and it would be a lot smarter.

Got it, but you'll only increase the monetization?

Absolutely. The other thing by the way, just you know highlighted for example. Credit card, working with a partner by definition. We're licensing somebody else's technology which means they got roughly 20% of the revenue. It made it difficult for us to go market to do paid marketing, when you're caught in somebody else pretty big slice of your revenue. Now that we've got direct relationships with the issuers, they pay us more and we'll pick up margin improvement in credit card which will start to free us up to go advertise that and obviously if you look at lots of the other competitors in that space, that is a very large comparison shopping business online and we think, we deserve to get our fair share.

Okay, just two more quickly, if it's okay. I guess, first is consistent with sort of Hamed's question. I mean you guys generally are very conservative and you know, continuity end of the year. Once you kind of see how the year is developing, you raise your guidance I followed you guys for a while, surprisingly you raise your guidance so early in the year. Is it something you're seeing both on the real estate and the non-mortgage side at what - some new customers have signed on, some commitments that you're getting a lot more confident about that gives you, visibility to be so positive so early for people. I know you guys I mean, you're very conservative in general. So even these numbers, I think you want to hit them pretty nicely so to raise your number so quickly. You know I'm just curious if there is something kind of underneath the hood that's going on, it's getting people excited at LendingTree?

So I guess a couple of things, I'd say and you can look at this both ways. I'd say in general, we're fairly conservative, but that gives us room to typically reinvest. Obviously as I mentioned low rate environment in Q1 has certainly helped a little bit because that's sticking, but at the same time from a confidence in the year. I mean, if I just sit here and look at where we think Q1 is and I take it times four, that's kind of where we said the year is and that's not, so I don't feel that it's that much of a stretch, give or take, but I think it gives us opportunity for reinvestment and we also hope to get more growth and we don't have there could certainly be upside. This is for us, I think the year of conversion rates any improvement in the consumer experience in conversion rates should show up directly and the lenders are willing to pay us and if that happens, that enables us to go to spend more in marketing so, we believe in our guidance. We think it's conservative at the same time. We would hope to be able to improve upon it like we always do, but I wouldn't take it to the bank.

Okay, last question just on the balance sheet. Obviously, great sign at the current assets minus capital has improved and you were buying stock this past year and you had view some of these agreements which cost you some cash. My hunch is that, you should generate a good amount of cash here in 2015. What will be some of things, hold you back from not generating the cash more towards your EBITDA would be in 2015? Thanks.

Generally speaking, over the long-term except for our accounts making it capitalize, some software clause over the long-term EBITDA and cash flow should converge.

Okay, so there is no other kind of settlements or earn outs or considerations that you feel have to be paid in the next four quarters?

I think, we might have a small earnout on a very, very little acquisition we did, it's not material. There is obviously law suits and thing, we've got a coupled it all litigation things that are kind of still hanging out there, but they're immaterial. You can read about them in the 10-Q and there is some, so yes, there is some legal stuff which will kind of hang around here a little bit, but other than those types, but yes, they'll start to trail off.

And Josh, it's Alex. Just to be clear any cash that's paid in respect of any potential settlements for the Home Loan Center business, for us discontinued operation cash flow. So when you look at our cash flow statement and you see cash flow continuing operations.

Right. Well, a last one from me, just so I make sure, I got that right. Did you say that, your personal loan business is of 56% sequentially in the fourth quarter?

Yes.

Okay, so obviously no signs of slowdown there, that's very encouraging.

Yes you can't do - you start lapping tougher comps, the next lag I think comes from conversion rates and new lenders. I can't grow 56% quarter-over-quarter forever, but we're going - we're doing our damn best.

Okay, great. Congratulations, guys.

Our next question comes from Howard Rosencrans of Value Advisory. Your line is now open.

I'd like to focus little bit more on the mortgage side, as oppose to the non-mortgage side. You certainly did a great job, but obviously the mortgage environment is a lot more challenging and refi [ph] not now, we'll soon be pretty much dead. What I'd like to understand is, I know your view is your continue to capture share on the mortgage side, but I did want to ask you, if you through you hat in a ring and just give some more comment generally on the mortgage market broadly, the credit environment is opening up, everybody is lending more aggressively on a personal basis, LendingTree, Prosper all the new institutions, all the stuff you've talked about. I'm curious on the housing side, whether or not you think that lending mortgage business, against with housing is the collateral will open up more so? Thank you.

Great, all very good questions. I think, there is a couple of things that will help the mortgage business continue. First off, the way a lender thinks about their business just like any really any company. They think about what is their marketing cost to get a deal closed and every lender is different. Some lender is target very low cost per funded loan, other lenders have higher cost per funded loans, bogies and it really depends on the type of products, they're going after and how broad there, so generally speaking as long as we're working for the lender. As long as the marketing cost is working for them, they'll do more and so that's fundamentally where it is, so that's how we can continue to grow. So over the long-term, by improving the conversion rates and the customer experience that lender is willing to pay more per lead or per match because their cost per funded cost is effectively going down. So lenders, when they want, they have to pay more round numbers. Couple things, though that are helping are obviously rising home value and I think we're still at the early days of seeing that, but one as your home value increases, obviously your loan to value goes down and therefore there is more room to actually borrow. So that helps and it also is going to start, we're going to talk about the green shoots in home equity, but they're starting to get greener and longer and the second mortgage product, which will open that up and then you're also starting to see some private securitization kind of starting to happen again in the non-QRM space and Fannie and Freddie and the FHA are making it little easier on lenders as well. By the way rising home value is not only just loan to values, but it gives lenders more confidence, so they're not going to have loan buybacks because the home is more valuable and so that further enables them to open themselves up. So as long as it's working for them, they'll keep doing it and we think there is a lot of just huge opportunity in mortgage particularly purchase and that's the biggest problem in purchase has always been lenders give you a quote, many times the consumer is 90 days or 120 days away from actually getting a transaction and that's why integrating with these CRM platform in the loan origination system, so important to us because we are now getting signals back, that let's say the consumer got approved for the loan or it went, got pushed into underwriting or maybe that they got denied for the loan and now we can, introduce them to another lender. So that ongoing communication dialog throughout the process we think could be a real game changer for purchase mortgage.

That was very helpful. Just a bigger picture question, if you wanted to speculate on the home market a little more, do you think the absence of housing starts, the absence of inventory is what's holding back home purchases because what you said there is, the environment is getting better for the home buyer? Do you think that's what needs to change in the question, I know this is a bigger picture than TREE specific?

Yes, I think, I will freely confess to not be a good or accurate prognosticator of the housing market itself. I don't think this is going to be - I think housing is going to continue to get better probably not at the rates it was but, if I could predict that. I could go be a real estate investor. I think for us, it's really about the unit economics of the mortgage for the lender and the lenders appetite to lend money. Basically, think of us like a search engine. If lenders want to lend money, we're here to help them lend it. If consumers want to borrow, we're here to help them borrow it and make a market. So I don't think we're index to the overall housing market in that way.

Okay don't go be a real estate lender or do anything else, stay right here Doug for us. We're real happy with it. Thank you.

I'll do it. Thank you.

Thank you and at this time. I'm not showing any further questions, would like to turn the call back to management for any further remarks.

Thank you all again for your time today. I think it's safe to say that we're sitting at a very, very interesting for online lending in general and LendingTree is obviously perfectly positioned to capitalize in it. Lenders of all types are coming online, the new targeted volume and we're the perfect solution for them. Consumer credit standards are loosening appropriately and thus we can facilitate more offers to more consumers, which improves our monetization. Our improvements in technology and product are making consumer experience better, which further increases conversion monetization. Although, this company is been around since 1998. I can honestly say, I've never experienced a time like this before where consumer behaviour, lender behaviour and technology have come together so perfectly for us and we plan to not only capitalize on these trends, but help to accelerate them. Thank you all very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.