LendingTree, Inc. (TREE) Q2 2025 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the LendingTree, Inc. Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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, Senior Vice President of Investor Relations and Corporate Development. Please go ahead.

SVP of Investor Relations & Corporate Development: Thank you, Didi, and hello to everyone joining us on the call to discuss LendingTree's Second Quarter 2025 Financial Results. On with us today are Doug Lebda, LendingTree's Chairman and CEO; Scott Peyree, COO and President of Marketplace; and Jason Bengel, CFO. As a reminder to everyone, last week, we preannounced a summary of our quarterly results and our initial financial outlook for the third quarter and updated our 2025 outlook. This evening, we posted a detailed letter to shareholders on our Investor Relations website. And for the purposes of today's discussion, we will assume that listeners have read that letter and we'll focus on Q&A. Before I hand the call over to Doug for his remarks, I remind everyone that during this 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 of the risks we face are described in our periodic reports filed with the SEC. We will also discuss a variety of non-GAAP measures on the call, and I refer you to today's press release and shareholder letter, both available on our website for the comparable GAAP definitions and full reconciliations of non-GAAP measures to GAAP. And with that, Doug, please go ahead.

Thanks, Andrew, and thank you to everyone for joining us today for our second quarter update. Overall, I am absolutely thrilled with how the company is performing. In Q2, we delivered another strong quarter marked by double-digit growth across all of our 3 business segments. Profitability is up for the fifth consecutive period of year-over-year revenue growth for the company. In short, we are on a roll. Revenue for the quarter came in at $250 million, representing 19% year-over-year growth. Adjusted EBITDA of $31.8 million was up 35% from last year. What's causing LendingTree to continue its momentum this quarter is simply being operationally excellent across the board. This has been a key tenet of our 2025 strategy, and it has taken shape in initiatives across the company that improved everything from how we build products, to streamline decision-making to building cost controls into the system. Delving into the specific segments. First, Consumer delivered 12% revenue growth with segment profit increasing 19%. Notably, small business loan revenue grew 61% and personal loan revenue grew 14%. Personal loan lenders have shown some signs of widening their buy box, but improved execution is the larger driver there. In small business, we made a strategic investment to grow our sales force, and it has paid off in more business and more efficiency. I think the small business can be a real growth driver for us. In Home, revenue climbed 25%, driven by a 38% increase in home equity revenue. We have a strategic focus this year on adding more small lenders to the network to fill in gaps and provide better coverage for consumers, and that is starting to pay off. I'm really pleased to see Home doing so well despite any macro tailwinds. In Insurance, the results are awesome. Since the beginning of the year, we have been focused on increasing quality and conversion rates for our clients, and that is paying off in higher bids and more budget. Be at 21% year-over-year, particularly against an awesome Q2 last year is great momentum for our insurance business. Now, AI and its impact on our business has certainly also been top of mind. 18 months ago, I told our Board and our company that we are going to be an AI-first company. And today, effectively all of our employees are using AI in their day jobs, including having enterprise GPT for everyone. And our multiyear investment in data and Snowflake couldn't have come at a better time. As we connect AI to our internal data, we expect to see a lot more efficiency of the company. In marketing, in particular, we are very focused on the future of paid search, organic search and most importantly, LLM answers. We believe we are well positioned in whatever the future may bring and early data is very, very encouraging. We are also implementing AI in several of our key product initiatives with the aim of providing the right guidance to our customers to make smart decisions. AI unlocks potential that has never existed for us before. Since the founding of the company, we recognize that getting a loan or an insurance policy, as Scott recognized is not just a transaction. It's a highly considered purchase that usually involves conversations over as long as several months. I believe and we believe that AI will enable us to more easily guide customers through these complicated transactions, which I will -- which I expect will continue to -- will improve close rates and thus unit revenue and thus revenue and profits for the company overall. For sure, there are still risks out there. At the moment, I believe the opportunities are far greater than the risks. I also believe that the deep relationships and integration with our clients isn't easily disintermediated. And in a world with exploding choice, our trusted brand and history with consumers is more relevant than ever. And now operator, we're happy to take questions.

[Operator Instructions] And our first question comes from Ryan Tomasello of KBW.

Last quarter, I think you alluded to -- last quarter, you alluded to experiencing some friction, I believe, with one of your carrier partners. So I was hoping you can give us an update on how that's going and if you feel comfortable maintaining historical levels of wallet share there.

Yes, I wouldn't say friction, but we definitely had to go through a period of adjustment as we talked about. And Scott, why don't you talk about that?

Yes, sure. Ryan, this is Scott Peyree. Yes, as we headed into the first quarter last year, and we were dealing with the single lender consent issues, there wasn't as much friction with the carriers. We had introduced some technical errors in our system that was affecting our traffic and monetization. I mentioned that in the last earnings call that we were working through some of those issues. We largely solved the technical issues late Q1, early Q2 and started reinvesting into traffic and growing revenue getting more in mid- to late Q2. And so we exited Q2 with great, really high revenue levels. Q3 will be a record revenue for the insurance division. Our carriers are very happy. Almost all of our conversations with carriers right now are how do we drive more traffic, not the opposite. So the insurance industry is in a very good spot for us.

Great. And then dovetailing off the prepared remarks, Doug, I was hoping you can just elaborate on how the company is assessing the evolving search landscape with generative and now GenTech AI. How do you envision Tree playing a role in customer acquisition as consumer behaviors change? And do you view that as more of a risk or an opportunity? And what are some of the initiatives underway there?

Yes. So as you can imagine, we're -- this is something at the top of our agenda. Scott, I know you're close to this in marketing. So why don't you take that one? And then I'll be happy to add comments, too.

Yes, sure. I mean, to be honest, Ryan, I would call all the GenAI and the LLMs. It's -- I would call more of a huge opportunity than any sort of risk for us. A few big reasons I'd put there. First, as the GenAI competitors grow in popularity and receive more consumer usage, we'll see the benefit of a new source of traffic. We're actually -- we're already seeing a tangible number of high- quality consumers being referred to LendingTree from the likes of ChatGPT, for example. And they're very high quality, very high- intent consumers coming through. We're being referenced in their results, and that's why we're getting the traffic. We're also seeing a significant increase in direct type- in traffic to the website, which we believe one of the big drivers of that is our presence in AI overviews across the Internet. So -- and then our SEO team, obviously, as Doug said in his prepared remarks, is very focused on making sure all of our content is built and able to be used very well in AI overviews across the Internet as those are growing in popularity. And then obviously, as GenAI companies look to advertising to support monetization of their platforms, we'll, of course, be an aggressive first mover there. Second, I would say Google themselves, they're a clear leader in the Gen AI space. And obviously, we have a very close relationship with Google and drive a lot of traffic from them. And as Google themselves even said, their search queries have gone up very significantly since they've been introducing more and more AI overviews. And as a reflection of that, we've seen an increase in clicks, both paid and SEO clicks coming to our site. And I think a benefit of that is a lot of these clicks are coming through much higher intent than they were before because I think the consumers with AI assistance with these LLMs are getting more of their early questions answered. So by the time they're coming to us, they're ready to transact, which is great. Third and the final point I'd make, and this is more of a long-term point is I'm a big believer that GenAI will create more overall comparison shoppers in the marketplace. Products like insurance and financial products are at the end of the day, complicated products, and it's hard for a lot of consumers to understand these products. I believe GenAI is and will continue to do a good and better job of helping to democratize to explain these products to consumers. And because of that, consumers going to be -- are going to become more active shoppers of these products. Whereas today, we have a lot of consumers that will just go to the insurance agent they know or go to their local bank branch for these products. I think as it's easier for them to get questions answered and understand these products better, there'll be more active shoppers of which we'll be a direct beneficiary of. Hopefully, that answers your question.

Yes. The only thing I'd add to that, which Scott excellent answer is because we don't today have versus our competitors, such a dependence on SEO, traditional Google-based SEO, it enables us to take -- to do more testing and find more opportunities in the early, early days of LLMs. And at the same time, because we have enough content, enough history in our brands and our reputation, particularly including the acquisitions that we made, we've got a lot of domain authority. And so we're finding ourselves showing up more than we would have expected compared to traditional SEO in LLM results.

And our next question comes from Jed Kelly of Oppenheimer & Company.

Two, if I may, then I have a follow-up. Just on the personal loans, can you discuss what's driving the strength there? And what happens if we potentially get an interest rate cut? And then just on the AI topic, can you talk about what it can do to your expense base? And is there ability to sort of reduce that $200 million in expenses lower?

Scott, why don't you take the first? And Jason, you take the second, and I'll add on.

All right. Sounds good. Yes, Jed, on personal loans, it's a combination of things. I would start with saying it's an absolutely excellent job of executing over the past year plus and with a lot of growth. We've really broadened the network of where we're getting consumers shopping. So we've just -- we've done a really good job of increasing the number of consumers shopping for personal loans through our network. It remains a very popular product out there. And I think we've got a lot of growth opportunities in the future. I mean there is a lot of green shoots we're seeing in different areas where we feel like we can continue significant growth for the foreseeable future. And then secondly, I'd say on the industry standpoint, more and more optimism coming from the lenders. Even one quick anecdote for you is we track internally the number of actions our lenders take to expand the swath of demographics they're willing to offer loans to versus contracting. And in Q2, there was 37 expansions compared to 4 contractions and opening up the number of loans they're willing to offer to people. So I think that just shows you like in general, the industry, they have a strong desire to write more quantities of loans, more total value of loans, and they're starting to be willing to accept more risk while they're writing those loans. And that's happening outside of interest rates dropping. So if interest rates drop, that would only accelerate that.

And so Jason?

Yes. Jed, I can comment on the expense point. I'm personally really excited about AI. As you know, like the expense base and using zero-based budgeting to break it apart and make sure we're happy with all the pieces of it has been a big priority. This is going to take all the work to another level. And so we are getting, like Doug said, we're getting -- everyone in the company will have a ChatGPT license. And it's pretty amazing what you can do. When you think about a custom GPT, what you're able to do with it, it's almost like having your own personal developer. And so when you think about the work that can be automated, it's pretty expensive, and it's pretty exciting. And so I think we're really excited internally to point ourselves at a goal of just becoming way more productive in our expense base. And so we're trying to work through the details of all that. But the goal here is really to get everyone trained on it, so they know how to use it. We may even have like a competition for the best use case to really drive adoption. And then we're going to set ourselves a goal internally to make sure we become more productive with all the work that's happening today, sort of upskill people to stop doing lower skilled labor, let's automate that and let's free up people to work on sort of the higher-skill labor that they'd like to do, but they don't have time to that's going to add a whole lot more value.

Yes. And the way I'd add on is to say, if we expected our business to be the same size, AI could probably have us run the business with a whole lot fewer people and a whole lot less expense. And it can also enable us to do with the same expense base and/or drifting and/or coming down as it has to do 10x more work and run 50x more tests and get products in market much faster and know what works much faster and be able to develop stuff at much lower cost. And it's just the speed at which I've seen us move just even product development over the last few months and how it's just accelerated since we started on this journey has just been incredible. So we want to keep our employees motivated on just increasing productivity and anything you can automate and then you go do the higher-level work that only you can do. And let's do -- let's use this as an opportunity to do a lot more work and do a lot more business and make us a lot smarter.

And then just as a follow-up real quick. I think there was a local competitor that lost a contract. It was like, call it, 10%, 15% of their EBITDA. Are you having that same impact? Or was that just your competitors' issue?

Yes, it's Jason. I can take that one, too. We're familiar with the situation. And as you know, like a value that we provide is on- demand customer acquisition. So we don't really have longer-term contracts or any longer-term committed spend. That's not really our business model. So whatever the specific issue is, it's not affecting us. And I think you can see in the results how well we're performing and how strong our guide is. So that's not -- it's definitely not an issue for us.

Our next question comes from Luke Horton of Northland.

This is Luke on for Mike Grondahl. Congrats on the quarter. Just wanted to touch here on the kind of raised guidance sort of puts and takes either from a macro standpoint, kind of the assumptions baked in here? And any sort of trends to call out across the business here in the month of July?

Yes, it's Jason. I can take that one, too. Yes, I'm happy to take that one. I can kind of go segment by segment like I usually do. Hopefully, that's helpful. Home, the big question is rates and are they going to decrease. We're not assuming any change in rates in the current guide. So we're assuming basically continued strength in home equity, which like we've talked about, is performing very, very well. Margin may normalize a little bit upward from where it was in Q2, but generally, where we are in Q2 forward. We do expect a seasonal decline in Q4 in the guide. This is a little bit of a departure from Q4 last year, where we had home equity ramp up to the sort of the current levels in Q4 last year. So we do expect a little bit of a decline in Q4 this year, whereas last year in Q4, you can see like it actually increased. We don't expect that to repeat. Consumer, Scott talked about PL. It's pretty exciting what we're seeing where lenders are growing all this year within their credit boxes, they've been growing originations double digits. Now, we're starting to see them sort of creep out of their credit boxes. That's very encouraging. If credit can start to open, that would be fantastic for the consumer segment. We're not contemplating that in the guide. We're sort of assuming generally current performance forward with a normal seasonal decrease, but I think those macro indications are very encouraging there, I would say. Insurance is one area where, as Scott mentioned, we do expect a significant step up. And we're seeing that in July. And this is the July actuals where we're run rating significantly higher than where we were in Q2, and this is based on the quality investments that Scott outlined, and we're seeing real results coming through in July. So we do expect a step change in Q3. Margin may be slightly less than where it was in Q2 as it is a competitive environment. Like Scott said, carriers are intent on acquiring customers. So it is a pretty hot market, and we expect it to continue to be hot. But we do expect strength going forward and significantly higher than Q2. Expenses generally kind of see in the guide is generally where we are Q2 forward. So hopefully, that outlines things for you.

I'm showing no further questions at this time. I'd like to turn it back to Doug Lebda for closing remarks.

Thank you all so much. In closing, I am just really proud of our second quarter results and thrilled that they reflect the strength of our business model and the consistency of our execution and the strategic investments we've made to position LendingTree for long-term growth. We're delivering measurable value to our partners. We're expanding share across core verticals and driving innovation through thoughtful integration of AI. As we look to the second half of the year, we forecast the strong momentum in our financial results will continue. Thank you again for your continued support and partnership, and I look forward to talking to you again in 3 months.

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