Good day, ladies and gentlemen, and welcome to the LendingTree, Incorporated Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we will have a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s conference is being recorded for replay purposes. It is now my pleasure to turn the conference over to your host, Mr. Doug Lebda, Chief Executive Officer. Please go ahead.

Thank you, operator, and good morning to everyone joining the call today. I want to use my time with you to offer my thoughts on the business, run through the progress we’re making on key initiatives and provide some context on what we’re seeing in the broader market. J.D. will then cover the quarter’s financials and our updated guidance. Before we jump in, let me first provide the usual disclaimer. During today’s call, we may discuss LendingTree’s plans, expectations, outlooks or forecast for future performance. Forward-looking statements are typically preceded by words such as we expect, we believe, we anticipate 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 investors.lendingtree.com for the comparable GAAP measures, definitions and full reconciliations of non-GAAP measures to GAAP. With that, let’s get into it. Overall, I’m pleased to report that LendingTree once again delivered a record quarter in terms of revenue, variable marketing margin and adjusted EBITDA. I’m even more pleased with the strategic and operational successes we have had during this quarter. There are few key areas I would like to focus on today; one, the success of our diversification strategy; two, what we’re seeing in the mortgage market; three, our track record in M&A; and four, our progress on My LendingTree. First, let’s talk about the diversification of our product portfolio. Five years ago, we consciously set out to expand into new loan categories. Although we always had a variety of loan types…

Thanks, Doug, and thanks to everyone for joining this morning. With Doug having given his thoughts, I’d like to provide further color on our financial results and some additional context on our guidance for the remainder of the year. As Doug said, our third quarter results demonstrate many of the same themes we discussed in the second quarter. The macro pressure facing mortgage, and more specifically the margin pressure felt at our lender partners remains persistent. But despite the sustained pressure in mortgage, the overall business continues to perform incredibly well, as our non-mortgage categories scale. Margins expanded significantly and we once again grew variable marketing margin and adjusted EBITDA by more than 30%. Total revenue for the quarter of $197.1 million was up 15% year-over-year. While a 25% decline in mortgage revenue weighed on overall revenue growth, our collective non-mortgage revenue grew 45% to $141.8 million and now accounts for 72% of total revenues, and importantly, more than 80% of total variable marketing dollars. Several non-mortgage verticals produced standout performance in the third quarter. First, our personal loans business generated $38.6 million of revenue, up 52% year-over-year. While this is a category that is certainly benefiting from growth in the end market, the fundamentals of the business continue to improve as we see increasing demand among both the newer entrant non-bank lenders and traditional banks. Although we have seen reports of certain lenders sighting credit concerns and moderating their growth expectations, the aggregate demand among our lender network is as strong as ever. Second, you may recall that after a challenging second quarter, we indicated that we saw some signs that our credit card business was stabilizing. We’re happy to report that revenue and the contribution from cards rebounded nicely, growing 8% year-on-year and an impressive 10% sequentially to…

And with that, operator let’s open it up for questions.

Thank you. [Operator Instructions] Our first question comes from Mark Mahaney of RBC. Your line is now open.

Great, thank you. Two questions please. One, could you talk about the credit card segment looks like that recovered a little bit in Q2 -- in Q3 but talking about that going forward the sustainability of that recovery that you saw. And then in terms of the Q4 guidance, could you just say how much of that guidance increase is simply due to the acquisition of QuoteWizard or is it -- is the organic -- is there an organic reduction in revenue kind of offset by that increase? Just quantify the QuoteWizard contribution. Thank you.

Sure, Mark, it's J.D., I’ll start with credit card. As you recall last quarter we talked about some signs of stabilization and we in fact broke it down by month and we indicated that May was really the difficult month and that we saw some sign of stabilization in June and as we began the third quarter. Simply put, that played out. One of the things we talked about was we were getting closer with our issuer partners. We’re happy to report that not only have we gotten closer with many of them and seen expanding wallet share there, but we’re actually -- we’ve actually grown the issuer network in the third quarter as well. And then the economics have just improved. We have done a better job managing the marketing mix. Keep in mind there are two ongoing transformations since the CompareCards acquisition. One is the diversification of issuers, and the other is layering on different marketing channels into our card mix. And so, we’re seeing real benefit from both, it’s driven by both. We talked about the sequential growth; the contribution in the quarter, just the sequential contribution improvement was in excess of 30%. So, card really did deliver for the bottom line in the third quarter and we’re excited about that business go forward. Now that’s against the backdrop by the way where we talked about this whole mix between reward cards and balance transfer. It is not in the broader environment for card, we’ve not seen in the channel the balance transfer cards become prominent again. So, we’re executing in a somewhat challenging environment for card and the growth that we’re delivering, the sequential growth that we’re delivering is a function of execution not the external market. We’ve not yet seen the issuers come back with…

Okay. Thank you, J. D.

Thank you. Our next question comes from Nat Schindler of Bank of America Merrill Lynch. Your line is now open.

Yes. Hi, guys. Thank you. Can you help me out on the mortgage business; I mean the gap between you and the industry looks like it’s narrowed in this quarter. Was that conscious on your time and that you decided that it wasn’t worth as much to fight in refi if it wasn’t going to do as well so you shifted marketing dollars mid-quarter or is there something more fundamental going on?

Yes. So, it’s a great question. And everything we do is conscious. And we’ve talked before about the flywheel and this ultimately boils down to what we call CPL and RPL, our revenue per lead and cost per lead. And we just -- in the mortgage environment that we have where lenders are -- where there is not enough refinance volume as they are switching over to purchase, we adjust our marketing spend to be in tune with whatever those revenue per leads are. A purchase customer, if you remember monetizes about half of a refinance customer. So, you drive more purchase volume from organic sources, SEO and just people knowing about LendingTree TV, et cetera. And so, that’s really the switch over that we’re seeing. So, I wouldn’t take any alarm with it because we’re basically just maximizing our VMD every single day. And as I said, in October we’re seeing unit revenue improve, which is giving us a lot more confidence going into Q4. We're also seeing importantly the cost per lead is coming down as we always said there is two sides of this equation as mortgage companies increasingly focused on their most profitable channels. They're going to be doing more business with LendingTree and less direct marketing on search and other things so that helps out our marketing expense.

Great. And also just a quick follow up, can you break out the various growth rates between purchase and refi as you've done in the past if that’s possible?

It's possible, but I don’t know that we've done that. For JD, do we?

No we're not, yet. No, we're not breaking that down. We've talked about our revenue relative to the industry. But the actual refi activity.

But the decline in the mortgage business. But -- the top-line decline in mortgage is 100% refi driven. And offset by some growth in purchase.

As now I guess one of the things we've talked about already.

The purchase business is just it's a harder business we get paid less for it because of conversion rates as we talked about in the past. Right now we're in an environment where that refi activity is di minimis. And we're having to execute in a lower margin product effectively. Now just like we talked about at the end of Q2 in card. We're internally seeing some signs as Doug points out particularly in the cost side in mortgage, they're beginning to be encouraging. But that's against a backdrop where we're expecting a 38% decline in broader refi activity in Q4 coupled with Q1 being a tough comparison for mortgage. As you remember we were able to driver RPLs double-digits in Q1 that was the last quarter where we had RPL expansion. So we're seeing good signs internally in mortgage, but only internally. The cost equation is getting better and that's great. But we're going into a tough -- we're in a tough fourth quarter for refi. And we do have one difficult comparison ahead of us in Q1 of next year. But importantly those initial signs that the mix between RPL and CPL is improving are there.

And the only other thing I'd add increasingly overtime, we're going to be looking at the total platform revenue, the individual products are important. But as I said earlier, we're seeing a lot of crossover from mortgage where people traditionally might click on a mortgage add then they come in and they see there is no benefit. They pop over to a personal loan, et cetera. And then the other thing I would add is that the new mortgage experience completely changes the game on the conversion rates as we improve that monetization and just one encouraging sign we're seeing lenders locking loans at about 4 times higher clip on new mortgage experience than the current mortgage experience. And the net promoter scores are very, very high on that. So as we work to sort of automate the mind of the loan officer on the site and we get the monetization equal. Then that's going to really change the game in the mortgage business and hopefully give us a new leg of growth.

Great, thank you.

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

Hey, guys. Good morning.

Good morning.

Hey, John.

Hey. Doug, you mentioned a flipping of mortgage to about 20% of rev clearly you guys have the addition of QuoteWizard that's going to I guess push the mortgage mix shift a little bit lower. But just looking at the forecast, if we stuck with that, if we just kind of went with that 20% mix. I'm thinking you might have to see mortgage down again next year. I know you guys mentioned the tough comp in 1Q of 2019. And I'm sure you guys will talk about this more at Analysts Day. But am I thinking about the phasing of that mortgage rev right, I mean, is it pretty difficult to grow mortgage rev next year?

So we are definitely planning on growing mortgage next year. And the percentage mix just changes based on the individual growth rate some of the other businesses are growing faster, but mortgage we absolutely expect to grow significantly next year.

Okay, that's great to hear. And then on the broadcast spend. Can you just talk just kind of broadly how that looked year-over-year? And if you guys maybe intent on stepping accelerate a little bit more as you get into next year?

Yes, I'll hit it at a high level and then let J.D. come in as well. Our broadcast spend we've been testing. We have been running decent amount of TV. We're also running ads now increasingly on our non-mortgage products particularly credit card including some ads on the CompareCards brand, which are either running or they're in process. And so year-over-year marketing spend offline is down because of the mortgage environment you just don’t want to market into lower revenue per lead if you can’t do it profitably, but yes we have a -- we’ll talk more about in December we have a significant offline spend anticipated for next year and we expect to be able to do that very profitably.

Yes, John, all I would add is interestingly, I mean, clearly offline spend is down in 2018 it’s down in part because very intentionally as Doug points out in mortgage specifically the RPLs didn’t necessarily justify that TV spend. But it’s also down because we’ve been going through an evaluation of how we should be spending those dollars. We’ve got a new logo that you might have noticed, we as Doug points out are going to advertise not just broad LendingTree, but specific products. And in Q3 it was actually up meaningfully relative to Q2, because we were testing. And so that’s what we’re referencing we’re testing different add units in regional markets. So in Q3 it was actually up, but in a testing format we will roll that out more specifically at Investor Day what our intention is, but it should be up meaningfully.

And the only thing I’d add as well on the marketing slightly effect we have built over the last couple years a significant SEO business which is now tracking roughly 20% of our revenue and that’s from almost zero a few years ago.

That’s great color. Thanks, guys.

Thanks, John.

Thank you. Our next question comes from Jed Kelly of Oppenheimer. Your line is now open.

Yes, just following up on the advertising discussion. Online advertising I guess it continues to actually grow faster than your revenue this year. Does that become harder to leverage in 2019 as you start to comp some of the lower -- I guess the lower expenses or the lower spans you made in broadcast TV, I guess how should we think how you’re optimizing through online advantage spend?

So the online advertising spend is optimized in minute, if you will. So it’s in real time we’re constantly looking at the supply and demand equation and marketing up to the last profitable dollar anywhere we can find it. So you’re looking the demand from our lenders, looking at the availability of inventory making sure you can do it cost effectively and you optimize the online stuff in real time. The offline spend this year we’ve done a lot of analytics and data tracking, it does make money over the period of let’s say six months, but you sort of go negative and then you go positive from any amount of ad spend. And we can draw those curves out fairly precisely and it gives us a lot of confidence to be able to market into next year. Particularly as you’re getting increasing monetization from My LendingTree are buying multiple products that does nothing, but improve your lifetime value and gives even more juice to go market against.

And then on the digital mortgage can you give us an update just how consumer throughput is doing? And as we move through a purchase environment how much outreach is going to be -- have to be done on your part to educate lenders on how to manage leads and better drive leads on I guess on the product that’s how to convert as a longer sale cycle?

Yes. So on mortgage could you repeat your first question, Jed?

How is the consumer throughput on digital mortgages?

Okay. Yes, so the digital mortgage experience, so first off LendingTree in the new model takes a consumer from an enquiry, which is filling out the form I think of that like a search query, shows you the results and then LendingTree helps you make a selection. Once you select a lender you either deal with that lender manually even though manual today is very, very automated or there are some lenders better mortgage is a good example who have a non-human touch fully digitized experience once you fill out the actual application and then actually lock online. So the advent of the digital mortgage experience whether it’s the rocket mortgage of quick in loans, the things that Loan Depot and many others are doing and that technology is becoming more and more available, but it’s really sort of a click over to a fully digital application think of it like the personal loans product. It reduces a lot of friction and we’re helping lenders get increasingly automated. To your second point the notion of touch points, particularly on purchase. Think of a -- and you've heard me talk about the mind of the loan officer, the logged in experience of LendingTree needs to over time emulate what a loan officer would talk to you about. What are your goals, let's see what products we have, how long are you going to stay in that house, et cetera, et cetera. With purchase you layer on the fact you need to keep a realtor in the loop and the time lag between the time a customer comes in and the time they ultimately close could sometimes be as long as six months. During that period you need to incubate them. And we do that mostly through technology. We were -- we had to do this when we own LendingTree loan. So we're bringing those that muscle tone back so that we know how to interact with customers. But most of it we are not doing over the phone. Most of it's coming through text, email and then the online experience plus alerts telling you that rates are changing, et cetera, et cetera. So as that incubation process gets better and more automated we think -- we actually think that purchase will be easier in the new mortgage experience than refi because that similar -- because basically we'll be running the same incubation process across all of our lenders and we'll be doing that once as opposed to each of our lenders doing it five times.

Thank you.

Thank you. Our next question comes from Mike Grondahl of Northland Securities. Your line is now open.

Yes, thanks guys. Two quick questions, one is, how is the home equity business doing? And secondly, outside of mortgage, could you rank your sort of products from best visibility to maybe least visibility?

So let me comment on home equity. The home equity business is doing fine, but I would say it has not reached the ramming speed of several years ago. And I'll talk about why that is. But that's starting to change. Before 2008 you had lenders mostly banks doing home equity loans and keeping them on their balance sheets and they did it in a highly automated way with drive by appraisals and most of it done online very, very high conversion rates just like we see in personal loans. The banks have not yet brought that process back and there is not really a liquid secondary market for home equity like there used to be pre-crisis. So with that the home equity business is growing more slowly, but as technology automation happens and we've got some exciting things on the docket for next year then we get the RPL up and then we can market into that. The other thing I would say about home equity, you also get a lot of business where people come in for a home equity loan then they can get a full refinance on their home. So you also pick up some refinance business through home equity. But overall I would say we're waiting for and helping the automation home equity to happen, so that we can then market into it.

Yes, Mike, it's J.D. All I would say is we've traditionally called out home equity, but it wasn't about calling out home equity it was taking that non-mortgage category and away from those individual businesses like card and PL that are big enough that we need to identify the absolute dollar number or dollar amount. We obviously for competitive reasons we don't want to give individual business scale, but we do want to give you and investors a sense for what's driving the broad non -- increasingly broad non-mortgage category. And so we always highlight those that have contributed most and that's why we've in this quarter home equity just wasn't among the top three that we pointed out grew in excess of 100%. The business is fine, but the percentage growth rates are not as overwhelming, partially because a year ago that business was probably inflated by lenders who were buying home equity leads to convert them into a refi product.

And the only other thing I'd add on product visibility it's kind of interesting as we got ready -- as we're getting ready for a new TV ad campaign. Obviously we do a lot of research, consumers still think of LendingTree as primarily a mortgage business as a mortgage comparison shopping service and we are going to change that next year with our new ad campaign. And I think it's all upside, if people are thinking about us for mortgage and it's not a significant part of our business. Once they realize, oh, wow, LendingTree does all of that too we get much more enthusiasm about the brand and we can tell that story very easily through advertising.

It’ll be good to see that at the Investor Day. Thanks.

Thank you.

Thank you. Our next question comes from Michael Tarkan of Compass Point. Your line is now open.

Thanks for taking my question. Just a technical one here, I saw on the VMM calc on the back page you had a $3.6 million cost of advertising resold to third parties. Can you just provide a little color on that and if that flew through to revenue in some form or another?

Yes. No absolutely. So, we’ve talked in the past over the last year about business development partnerships. And so -- and the media side we own a good amount of inventory with CNN and MSN that we use for our own properties. And periodically we decide to resell that inventory. And so, rather than -- so, we classify that differently from the accounting perspective as cost of revenue rather than traditional classification for our own business. So, we’re just making -- drawing the distinction. So that’s when we sell it to a third party and it’s not a LendingTree sale, but sold to another publisher.

Is that -- sorry, go ahead.

And the way -- and conceptually if you think about it, basically we’ve done a partnership with a partner and instead of running LendingTree ads or units or rate tables constantly, you reach a point we’re out with the consumer and then we shift that inventory off to other ad buyers through all the ad networks in an highly automated fashion. So, it’s -- and over time as our other products -- as that inventory can be better spent on LendingTree products, we will simply do that.

Is that activity that we should expect to continue or is this sort of a one-time situation or just sort of temporary. How do we think about the sustainability of that?

It’s -- I would think about it in terms of just revenue because if we weren’t reselling that inventory, we’d be running a LendingTree ad and it would in LendingTree revenue. So, it will fluctuate up and down depending on those deals. But I would just -- it’s effectively taking revenue from one LendingTree product and sticking it in another one. So, I wouldn’t think of it is like a huge growth engine of the business. It’s more just a supplement or a substitution for other LendingTree product revenue.

Okay, great. And then a question on sort of pricing versus volume, in the past you’ve talked I think directionally about how mortgage -- you had pricing power and then you’re sort of flat now. Is that eroding a little bit on the pricing side? And then same question on personal loans, are you still able to take pricing up on your lender base?

Yes. Let me take mortgage, I’ll give J.D. personal loan. So, pricing power if you think about it really comes from lenders’ conversion rate. So, they put in effectively a bid or what they’re willing to pay for a given customer introduction or a lead and that’s where the pricing power comes from. And in October we’ve actually seen pricing move up with some of our significant lenders because conversion rates are better, they’ve worked through. Some of the switchover costs from refinance to purchase and they’re able to convert better. And because of that, they up their bids, because of that we can then market into it. So, we’re actually seeing pricing strengthen in Q4 a little bit.

Thank you.

And by the way the other nice thing about that that tends to stick as you go through another cycle. So, if you put yourself in the mind of a lender, you’re cutting every unprofitable marketing channel back. And your LendingTree channel, which is generally sustainable and very profitable for lenders and they can toggle the volume up and down that tends to be the last channel they turn off. And then not only does that help our revenue per lead but on the cost per lead side as I mentioned as lenders pull out a direct advertising that improves our economics online as well.

Thank you. Our next question comes from Youssef Squali of SunTrust. Your line is now open.

Thank you very much for taking the questions. Maybe you can just speak to your guidance or particularly what’s the implied VMM growth relative to revenue growth, looks like maybe at the midpoint it’s about $79 million that’s the VMM for Q4. Maybe you can just help us think through that. And also the contribution of QuoteWizard to VMM if you can help share that? Thanks.

Sure. We see an ongoing -- we obviously have reached a recent peak year in the third quarter with respect to VMM percentage at 39% as we pointed out. QuoteWizard operates at a very similar margin profile to LendingTree businesses. One of the things that attracts us to it we’ll get two months of it in the quarter. Our -- as I pointed out earlier we did -- the only number aside from QuoteWizard the only adjustment need was for mortgage revenue not for VMD in that guide and not for EBITDA. So we'll continue to see strong VMD and EBITDA. There shouldn’t be a huge differential in terms of that growth rate in Q4 and QuoteWizard's contribution is similar with respect to percentage.

I think on a percentage basis, at the midpoint it assumes some deterioration on the margin side. Is that just seasonal or what's going on there?

There is always a little bit of seasonal in there every quarter. That has nothing to do with QuoteWizard. And we're operating off of it, if you want to talk about sequential we're coming off of a 39% peak number there.

Okay. And then just too on the cost side, can you may be shed some more light on the cost of revenue jump in the third quarter? And how we should think about it going forward?

It’s what we just discussed on the advertising side. That Doug just went into detail on, that's the cost of revenue increase.

Got it, okay. All right. Thank you.

Thank you very much.

Thank you. Our next question comes from Stephen Sheldon of William Blair. Your line is now open.

Hi. Good morning. So you gotten a lot of questions on mortgage. But just given the degree of the decline this quarter. Just wanted to ask if anything has changed in your view within the competitive environment that has had any impact there?

No I don't think it has. We -- obviously we're in the same -- I would call it same competitive environment with the other aggregators. We believe we continue to take share from -- on the lender side. We continue to see great growth there. And so I have not seen -- we have not seen any significant competitive pressure. There is always innovation in the business, but the good news there is a tough mortgage market benefits LendingTree I would say disproportionately than others. Because we still have the ability to go out in market because of our deep lender network. And then as I said once we get our new mortgage experience up and running that's a game changer with respect to capacity. So for example our lenders will see roughly we'll see many fewer leads coming in the front door, but they will be much more highly qualified, which means they will open up the flood gates, increase demand and then we'll be able to market into that. And that's why we're putting so much effort on that new experience.

Got it. That's helpful. And then I know you'll provide more at the Investor Day. But just at a high level and more qualitatively, how are you thinking about adjusted EBITDA margins heading into 2019 kind of excluding the impact from QuoteWizard? Would you expect some pullback next year given the boost you've gotten this year from lower variable marketing expense as a percentage of revenue, which could go up next year in a potentially more favorable demand environment? Or will the leverage from headcount additions this year and marketing efficiencies maybe let adjusted EBITDA margins still trend up some next year? Thanks.

Yes. So Stephen it's a good question. I think we're certainly not -- we will definitely get some operating leverage, which will be great. As we pointed out we expect mortgage to grow. We -- this is not when you look at our margins being in excess of 20%. They may go up modestly, but that's not a deliberate strategy. You shouldn't -- we get asked the question all the time what's natural margin in the business. I don't think that what you're seeing this year is necessarily something that you should pencil out as an improvement into next year. We're still very much in market share gain mode. And so we're going to go after dollars as we’ve talked about that may not necessarily translates into -- that we're going to operate the business in the same EBITDA margins that we have for some time. So we get some operating leverage sure, but we will be in growth mode and our margins will be what our traditional margins have been. Part of this is that we’ve obviously made marketing decisions in light of the macro environment in mortgage. And so that is resulting in a year in which maybe the top line growth is not as strong, but the margin expansion is there. We look forward to getting back to an environment where we see top line revenue.

Great, thank you.

And by the way that is -- just to add on to that that is a -- you’ll see if you look at LendingTree over the years you will see some variation in margin percentages as the macro environment changes because you only -- because you market up so you’ll ask profitable dollar and however the VMM dollars and the EBITDA dollars keep climbing through that. So those are the numbers that I tend to look at because individual percentage margins can vary based on channel mix and individual demand and individual products.

Thank you. Our next question comes from Eric Wasserstrom of UBS. Your line is now open.

Hi, Eric.

Hi, how are you? Just one more question on mortgage, which is somewhat a question I asked last quarter, which is just about the relative depth of this transition for the lender base versus prior cycles. And I think your response last quarter was that it’s deeper and therefore maybe longer lasting and I just want to see if anything about that perspective has changed?

Yes, I don’t the longer lasting I'm not sure I would say this is definitely deeper given the static I put about consumer benefit. If you come in for refinancing you can’t save money either in a lower payment or I guess you can always -- most of the time you can save money lower payments stretch out your term probably not the best consumer idea. But if you don’t have a financial benefit obviously this doesn’t make sense to refinancing and those numbers have been way down. The good news though in mortgage and I’ve seen this play out over 20 years it’s not the absolute value of interest rates that drive refinance and purchase volume, it’s more the refinance, it’s the rate of change. So you can have low interest rates and when the tenure knocks down a little bit you get a flood of refinance volume because consumers can save money from the old -- from their high rates. So even historically low rates you can still get good refinance volume as those rates bump up and down and you just adjust your marketing mix. I’ve said before the mortgage business functions very much like the hotel business and travel lenders will fill up capacity they will -- they’ve got excess capacity inside of their shops, they want more volume, if they can’t do it profitably then they keep their bids down. But as they improve their conversion rates and their technology those bids move up as they’re doing in October and then as I said we market into it.

So just in terms of the ending of shake out what would your assessment?

The ending I mean timeframe or?

Yes, like the baseball reference to like which inning?

Good question, I have given up predicting interest rates. And so I think I'm going to maintain that I have absolutely no clue. All I know is that the playbook for us changes from one interest rate cycle to another and we can -- we flip the switch very strongly. But you’ve got to read on where rates are going please let me know because it -- advance warning always helps.

Eric the only thing I’d add to that is some of the new experiences we’re going through should change who on the lender side benefits and can operate on the network and thus we don’t have to call the bottom of the cycle for our traditional lender client. We should benefit from that network expansion before that occurs.

Right, got it. Yes my next question which was then what is it then that’s driving the expectation about next year? And it sounds like it’s more of the transition that you’ve put in place it’s not too much an expectation about a bottoming of the broader cycle is that correct?

That is correct.

Great, thanks very much.

We typically set our mortgage plan based on what the MBA looks like and we use that to set the numbers, but the VMM can grow through both cycles as long as we continue to make conversion rate improvements. And then to J.D.'s point that he just said to about new types of letters and broaden base. As we switch over the mortgage experience, it levels the competitive playing field on the network side and that's basically what you see is that these less automated lenders can actually compete against the quickens in the loan depots et cetera who have highly automated factories and doing this for 20 years. And then that helps to improve their conversion rates, which really improves aggregate conversion rates because it's very similar to the long tail effect that you saw with search engines and the more you can boost up the lenders who are in sort of that long tail. You then improve your union economics overall.

Got it. Great, thanks very much.

Thank you. Our next question comes from Kunal Madhukar of Deutsche Bank. Your line is now open.

Hi, thanks for taking the question. Question on My LendingTree and the growth there slow down or a quarter-over-quarter basis. And the comp was tougher, but the annualized revenue per My LendingTree account declined significantly sequentially. What's behind that, is there's some seasonality there or is that the promotions are not as attractive?

No, I think, I mean our growth rate declined from I think like 100% to like 70% sequentially and I think it's simply more of a factor of your -- we’re marketing less so therefore you've got less traffic flowing through the system. And a lot of our traffic -- a lot of the My LendingTree signups are coming through signups from the core LendingTree platform. And so that growth rate is -- we're incredibly happy with it and then as the monetization improves you can continue to do marketing. And as I said we've got a really, really robust pipeline of syndication deals and expect to hear more from that in the coming weeks and months. But no I'm very, very encouraged about the progress we've made with My LendingTree and I wouldn't sweat the growth rate difference.

Yes. And Kunal the only thing I'd add to that is just take a look at the thing that we're encouraged by is the app downloads and if you look at our presence in the app store that's improving, the downloads are improving dramatically, the quality overall of the people opting in. What we want this to ultimately be, it's not just a base of members, but also people engaging in the app. And so from a quality perspective, we think it improved dramatically in the quarter.

Great. Thanks. And a quick follow-up on the guide, and I know you've discussed previously. But by my math and my math maybe off I am getting like a mid-single-digit pro forma year-over-year revenue growth for the fourth quarter. Is that the trough that we should expect?

From a growth rate perspective? Yes, we don't -- we certainly do not -- that is that is up against a difficult comparison from the fourth quarter a year ago with a very robust mortgage business. We certainly are not operating that type of growth business we’re in aggregate. So in that respect, in terms of revenue growth, yes. It is a unique comparison both the third and fourth quarter are tough comparisons when you consider the change in the revenue base for the mortgage business.

Great, thank you so much.

Thank you. Our next question comes from Rob Wildhack of Autonomous Research. Your line is now open.

Hey, guys. J.D. from your commentary earlier, it sounded like we could infer the variable marketing dollars in mortgage were up year-over-year. Is that correct?

Very good marketing dollars year-over-year. No, we've seen some -- I'm not sure, which commentary you're referring to, I apologize. Which statement are you referring to?

I mean, I'd have to go back and check. But we can do that offline. Maybe more broadly, I wanted to ask about the sale of ad inventory. Do you consider that to be like a lever that you have when flexing marketing spend. If you do, how far down the list of options is a decision like this?

Yes. On the ad selling, I would -- again, that is a sort of a substitute/complement not really a lever. Basically, you do a syndication deal with let’s say a CNN where we’re going to put LendingTree rate table, widgets, app download opportunities et cetera, et cetera on a site like CNN. You put the LendingTree clickable units there until the last profitable dollar. And then whenever you can, and then whenever it’s not profitable, it’s easy to sell that excess inventory out to third parties. So, I wouldn’t see it as a lever. And quite frankly, it’s not something that I necessarily really focus on because over time as LendingTree monetization improves, those ad units will be absorbed by LendingTree.

Got it, thank you.

And Rob to answer -- to try to answer your first question just because we always want to do that. No, the dollars from mortgage in aggregate were certainly down, the percentage is flat from Q3 of last year.

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

Hi. Good morning. Could you talk about how fast you can onboard these acquisitions? Are they quickly generating traffic and revenue from coming on to your platform, or are they still on a standalone basis?

Hamed great question, I really appreciate that. And it’s something we probably should have focused on. We are able to for the most part predict what synergies we’re going to get before we even do the deal because we can see what either changing the brand name is going to do or for example we bought a one SEO business and those guys are now running SEO across the whole company. So, we’re seeing synergies happen very, very fast. And I got to go hats off to our team here who really, really digs in everywhere from HR to finance to operations. And we like to call it the entrepreneur without the headaches. Every time we bring one of these guys in, we say listen, we’ll handle your capital, we’re going to handle all those things that it takes to run a business from a corporate standpoint and all you got to do is go grow your business. And then we put people -- we have great integration teams and knock on wood all of these acquisitions have been very, very accretive for us. You can’t bet [ph] a thousand in the M&A world, but I’m just thrilled with the way our teams done it. And the synergies if anything I think we underestimated them in some of our earlier deals.

Okay. And then as far as just -- J.D. made a comment about the peak margin on VMM. Is it becoming dilutive being in so many different products that you have to advertise each of them individually and when do you start to do it in more of a platform setting?

Yes. You try to do both. So, for example, you might run an ad that features somebody buying a home or somebody getting a mortgage or somebody getting a credit card, but typically you try to also at the end talk about all of the loan types, so you can bring in traffic that way. But the more products you have, I like to call it the more marketable events you have. And the more marketable events you have, the more you can optimize where you place those events across the web or across TV, so the more products the better. And we do have some ads that run where we talk about everything and you can expect to see some more of that, but you just basically do whatever works and you try to mix in individual product spots to tell a specific story, but then also try to say hey, we’re also here for everything.

And Hamed, I’d actually say it’s kind of the opposite. All of these non-mortgage businesses are benefiting from draft traffic. And so, Doug made reference to it before in terms of somebody coming in for mortgage and going somewhere else. And like every internet company, we’re getting smarter in terms of tracking this and using data science to do that. So, what’s very advent to us is that all of these other businesses are benefiting from draft traffic from not just mortgage, but from each other. And that's a benefit of an acquired company coming on to the platform is that they get that traffic. And so the aggregate brand is contributing to them in a pretty material way. And I think we'll get smarter about this overtime. And obviously deals with attribution models and we've got to pencil it all out. But it's really exciting actually when you see what benefit they can get from being part of the platform.

So is your cost going up is that why you're using the word dilutive in your commentary, or peak?

No, no. When we said peak what we're referring to is the fact that the VMM at 39% was the highest since what the first quarter of 2015 that's all we're referring to. Now as you know we manage the business for dollars. And so that VMM percentage may range from the low 30s to the high 30s I'm simply referring to the fact that at 39% that was a high number relative to recent history.

Okay, thank you.

Yeah. No, I'm not saying it’s dilutive at all.

Thank you. Ladies and gentlemen that does conclude today's question-and-answer session. I would like to turn the call back over to Doug Lebda, CEO for any closing remarks.

Thank you operator and thank you all for joining today. And thank you for the really, really thoughtful questions. I just like to close with one comment, around LendingTree, we always talk about trying to make sure we all think and act like owners. And we don't need to just put ourselves in your shoes everybody here is an owner in LendingTree equity, and we think about it in the same terms that you do. And one of the things that I think about as an investor that I'm just thrilled with as I look over the years is the resilience of our business model. For those of you who've been around a long time. You remember when we sold our mortgage company we thought -- people thought, oh my god, the sky will fall on mortgage. We've had various mortgage rate changes over the years. You remember a few years ago, the personal loan business was going to completely evaporate and go away. We had pressures in card or worries about card. And through each and every one of those LendingTree has been able to grow through them all. Each time it gives us a lot more confidence in our business and in our ability to execute that we can not only survive, but also thrive through different macro environments. Our lender network is strong, our team is executing incredibly well. And I am very confident and optimistic about our future and I look forward to sharing our long range plans lots of new information at Investor Day in a little over a month. Thank you all very much and we'll talk to you soon.

Ladies and gentlemen, this does conclude today's conference. Thank you for participating. You may now disconnect. Everyone have a great day.