LendingTree, Inc. (TREE) Q2 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the LendingTree, Inc. Second Quarter 2026 Earnings Conference Call. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Andrew Wessel. Please go ahead.

Thank you, Kevin, and hello to everyone joining us on the call to discuss LendingTree's second quarter 2026 financial results. On with us today are Scott Peyree, President and CEO; and Jason Bengel, CFO. This afternoon, we posted a detailed letter to shareholders on our Investor Relations website. We've also posted a new investor presentation that we would encourage everyone to look at. For the purposes of today's discussion, we will assume that listeners have gone through those materials and we'll focus on Q&A. Before I hand the call over to Scott 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. With that, Scott, please go ahead.

Thank you, Andrew, and thank you, everyone, for joining the call today. We had a good quarter with strong growth led by insurance, our insurance business. Revenue was up 25% year-over-year, and our adjusted EBITDA was up 11% year-over-year. Also, I'd like to call out that our adjusted EBITDA as a percentage of VMD was up 225 basis points year-over-year to 40%, steadily moving toward our 45% to 50% long-term goal on that important metric. Stepping back for a second, from 2023 to 2026, we have roughly doubled our revenue and adjusted EBITDA, showing extremely consistent growth and consistency. Our diversity of product lines in this company has supported resilient and consistent growth regardless of certain industries such as mortgage being in a multiyear trough due to high interest rates. Insurance is the standout. Revenue was up 42% and segment profit was up 25% year-on-year on strong carrier demand. In our Home business, revenue was up 9% year-over-year and our segment profit was up 13% sequentially. I feel we are continuing to perform well in what remains near trough earnings power from a macro environment with high interest rates, continuing to provide strong products to a strong client base and positioned well for long-term growth as that industry comes back. Our OpEx held flat year-over-year, both AI-driven efficiency and just what I would call operational efficiency in general is converting growth into earnings. We're sitting on very strong free cash flow, approximately $80 million after interest per year. Our net leverage improved to 1.9 from 3.0 a year ago. Whereas debt paydown does remain a strong focus of the business, we are now in a position and at comfortable levels from a debt ratio perspective where we are also looking at other strategic uses of our free cash flow. From a product and AI momentum standpoint, we're gaining -- we're continuing to gain momentum on our North Star initiatives. In Q2 alone, we rolled out a ChatGPT app called the Home Loan Rate Confidence tool. We're offering 6 new products to consumers such as pet insurance, commercial insurance and financial advising. Our homepage and navigation redesign is proving 11% performance increase in sessions and 18% form starts off of our homepage. Voice AI continues to roll out across multiple products. We've added AI overviews within our product offering pages to help consumers more efficiently choose the right offer, which is showing positive performance. Now hitting specifically on our Consumer segment and more specifically calling out our SMB lending business and the softness there. Now to start with, SMB has been a major growth engine for us over the past 2 to 3 years. We've had 40% year-over-year profit growth on average since early 2024. In Q2, as we alluded to in the last earnings call, we saw some headwinds coming in this industry due to Middle East tension, energy price spikes, et cetera, making small business owners more cautious in general. And in all honesty, demand came in softer than we forecast, which drove the miss. Softness was initially driven by both merchant sentiment and lender pullback. I will say the lenders have largely come back and are writing and offering loans at similar levels to early Q1, but merchant sentiment does remain soft. Looking back at the SMB business in general, we've made significant investments into our SMB business over the past few years. We've invested in growing the strongest sales force in the industry, growing our lender network and our internal platforms to make quoting more efficient for our sales team and our merchants, myriad AI efficiencies and growing traffic sources generating more and more high-quality merchants looking for loans. Those investments have generated significant profitable growth over the past 2 to 3 years, and we expect them to continue to provide profitable growth in the future. If you look at our original internal SMB budget we set at the beginning of the year, which, by the way, I'll call out in Q1 of this year, we actually outperformed to that budget. If we would have hit that original budget for the entire year, we would be performing at the high end of the previous guidance we set. We feel the merchant sentiment issues are temporary and macro driven. They're not competitive or structural and fully expect to be back to growth and setting revenue and VMD records in the near future. The long-term macro outlook for the SMB industry remains very strong in our opinion. We're seeing some encouraging signs already, improving closing rates, larger loan requests, favorable underwriting shifts. July will be our best sales month since Q1. Performance in July gives us confidence that Q2 was our trough, and we have entered the recovery period. Expect stabilization, I'd say, through the second half of the year, SMB to eventually recover and surpass our Q1 record levels. We'll keep monitoring and update investors as that trend develops. Hitting on to our strategy, which remains unchanged, to become the #1 destination to shop for financial products. We have a massive focus over the next few years on return customers, referred customers and login user growth. This will create an even stronger and more durable business over the long run for LendingTree. AI is a real structural tailwind to make this happen, not just efficiency, but consumer-facing, such as the ChatGPT app, a rate confidence tool, AI for communication, be it voice or text or e-mail, AI offer overviews, all driving increased engagement in applications, and we feel there is a laundry list of additional things we can build over the next few years that will create even better customer engagement. Internal AI tools such as AI agents we've built on our data infrastructure for marketing team, sales team, finance team is actively compressing what was previously weeks' worth of work into real-time information, which is providing real efficiencies in the business. One of the key reasons OpEx grew less than 1%, while our revenue grew by 25% year-over-year. Our business model is highly cash generative and capital light. Like I said earlier, approximately $80 million in annual free cash flow after interest with minimal CapEx. Our balance sheet is getting more and more flexible with our leverage down to 1.9x, which gives us capacity for debt paydown, for buybacks and accretive M&A. Insurance remains a core strength. Again, SMB's softness is temporary and not macro -- sorry, temporary macro, not structural. And bottom line, long-term growth profile is intact. We've got a durable, high-margin, capital-efficient, increasingly AI-powered business. With that, I'll hand it over to Q&A.

Our first question comes from Ryan Tomasello with KBW.

Apologies, still juggling a few things with the release here. But maybe just to start off, if you could put some guardrails around what the second half guidance assumes across the various segments from both a revenue and variable margin standpoint? And then as a follow-up to that, regarding the lower variable margins specifically in the Insurance segment. If you could just elaborate on the specific drivers there and what you're baking into the second half on the margin front for insurance.

Yes, Ryan, it's Jason. So I'm happy to talk through the guidance assumptions here. And like Scott said, if you take a big step back and look at the midpoint of our guidance, that does look at us doubling -- almost doubling EBITDA in the last 3 years and growing 12% this year. And like Scott said, if SMB had performed as expected according to budget, we would be at the high end of the prior guide. And to be totally transparent, we beat budget by almost 15% in small business in Q1. So the trajectory was very, very strong for small business until the headwinds presented. So just talking a bit about each segment here. Home, rates have been going up. So that's a bit more of a headwind. Margin has been down. It's -- I would say it's below what we consider normal historically. And that's just a function of home sales being 4 million units. There just aren't that many borrowers out there and the competition for those borrowers is just very, very high. So with home, I think long term, there's still a lot of upside in home. And I think margins would normalize when the market returns, but we're just -- we're not contemplating any real upside in the guide with home. Margins sort of where they are now. Consumer, like we said, SMB had real headwinds. We talked about that on the call quite a bit, and we saw this coming. It was just much worse than what we expected. So Q2 definitely underperformed our expectations. There was just a large drop in lender appetite and merchant demand, like Scott said, things like loan size, close rate, volume were just far below even our lowered expectations. But we've seen signs of improvement there. So lender demand has started to recover. But on the merchant side, it's still just not where it needs to be. It's -- there's a long way to go in merchant sentiment. And so the guide is only -- is only really looking at what we have line of sight into. And so we're really only contemplating that return of lender demand that we've seen today. And so that will result in sequential improvement in consumer revenue in VMD, but it's just not -- it's not back to sort of SMB won't be back to Q1 levels that we were seeing before. This was our growth engine. Like I said, it was growing 40% a year on average. And now for this year, it's looking like we might be flat to down. The good news is that should really be temporary. There's nothing structurally wrong with the business. We operate very, very well in that business and the market opportunity is really strong. So that will recover. Once merchant sentiment returns, that will return to being a very, very strong growth driver for us. We're very optimistic with small business. But with the guide, we're just -- we're not assuming any real return from what we have direct line of sight into today. With insurance, the backdrop is still very favorable. Carrier profitability is very strong. Competition for policies is very strong. So that helps us in the partner demand, but it does pressure immediate costs. And so that's kind of what you see coming through in margin. So we do expect, I would say, healthy growth in the second half for insurance. I think we're very happy with how insurance is doing, and we expect that to continue going forward.

And this is Scott. Just to add on. As we've always historically been, our first goal on insurance as growth is like overall VMD growth. And that's -- and that's what we plan to continue to see through. It's been very strong in the first half of the year. We continue to see growth next year. And also, as we've talked about before, if you look at our Consumer segment from a margin perspective, small business is within the Consumer segment is by far our highest margin business. So when that's suppressed, it does -- it will inevitably affect the overall margins in the consumer business.

Appreciate all that color, guys. And maybe just double-clicking on insurance, Scott, I guess several-part question here. One, the mid-20s variable margins, I think you posted in the quarter, is that a good assumption for kind of a new run rate here in this environment? And then as you look out to what you're seeing with carriers, how confident are you that the insurance business can continue to grow VMD off of what you're assuming for the second half of this year into 2027? And then just given the tenure you have in this space, Scott, if you can just talk about what leading indicators you tend to focus on for signs that the cycle may be peaking and when we might start to see those signals emerging?

Okay. I guess just to hit on a few of those. I mean, I would start like -- starting with like the leading indicators from a macro level. I mean, you would first start at the top level, just the insurance industry profitability in general. And there's a number of massive public companies out there. So you have a very good outlook into like what the general profitability of the business is. And it is a very stable, profitable environment. And then the secondary signals below that, I would say if you're seeing trends of carriers either increasing pricing giving rate or taking rate, which is essentially either giving pricing, increasing pricing or reducing pricing. Because from a company like ours, where we're very shopper dependent, we want shoppers coming through the network, when you have environments where pricing is changing for policies, that drives more shoppers, obviously. So as I said in earlier calls, a bit -- the early part of the recovery was all about our insurers even willing to offer insurance policies to consumers. That's largely -- we're now to the point where insurance is healthy and they're offering insurance policies to everyone. So now we'll be looking at indicators of coming up in the next year or 2, are they going to start giving rate back to the consumers, which means they're reducing pricing, which will drive another shopping cycle. But I would say, as we look at the environment today, it is an extremely stable environment from an insurance industry standpoint, and there is strong demand and fighting over market share from some of the top companies in the industry. So it's -- I would call it very healthy and stable and growth is largely dependent on us executing well as a company, driving a lot of active shoppers to our network, which I think we're very good at doing.

Margin, VMM.

And then the VMM margins, yes, I would say, like I said, first, our primary goal is VMD. Like some of these carriers the dollars they're spending are so high and growing so fast. You're starting with overall VMD and you want to make sure you're providing the best highest quality product to them. So I would say as we look at this -- since this is just still in such a growth mode as we're looking through the second half of the year, yes, I would expect margins to be probably similar to where they were at in Q2 with VMD hopefully growing a little bit sequentially. And yes, and again, I think it's kind of when that super high revenue growth levels out is when you really start leaning into more of the VMM growth. But I think we're going to see strong revenue growth throughout the rest of this year in insurance. Hopefully, that answers all your questions.

Our next question comes from Jed Kelly with Oppenheimer.

Just circling back to the Consumer segment. We're kind of trying to track the health of like your small business product. Is it more -- are they kind of more sensitive to gas prices? Or is it more interest rates? Or is it a combination? And then just circling around your personal loans, some of the bank earnings we've heard and the health of the consumer, it seems pretty stable. So can you just talk about where we are with personal loans? And then I have a follow-up.

Okay. Yes, Jed. I'll just -- I'll hit on personal loans briefly. I would say, yes, I would echo that sentiment. Personal loans is a fairly stable business right now for us. A similar amount of revenue and consumer shopping for personal loans and whatnot. Not a lot of change there year-over-year. On the small business side, I think specifically on that, I would say, I think it starts more at a sentiment level than an interest rate sensitivity level. And I think there's a lot of these -- and I'm pontificating here a little bit, but like a lot of these smaller and medium-sized businesses, they're kind of on the front lines of when you're seeing consumer sentiment change and people complaining about gas prices and maybe tightening their wallets on stuff they might spend with a lot of small businesses. And then that translates into a small business for example, saying like, I was going to hire those 4 people that maybe I won't or I was going to spend $100,000 on that capital equipment that maybe I won't or at least I shouldn't say won't just like hold off on. That's why we call it temporary because I think it's just a lot of right now, there's a smaller number of merchants like requesting loans. And then you look at the average loan size, the loan size they're requesting is generally smaller than we historically see. And we've been doing this for a long time. So we've got good history here. And then I would say -- and then there's a general lower percentage of people then accepting the loan offers they're getting. And I don't think that's rate sensitivity as much as just macro sentiment of like maybe I'll just hold off -- maybe I'll get a little bit less money or just hold off for another few months before I do this, just make sure we don't earn in some major war, et cetera, et cetera. So that's where I say that's where we have -- I mean -- and this isn't just us alone. This is like all of our big clients, lenders in the small lending space, some of our competitors/frenemies. I mean I think everyone has seen a lot of the softness in Q2, but everyone just believes it's going to come roaring back here sooner rather than later.

Okay. And then...

Sorry, I was just going to tack on with PL. We -- in this environment, sequentially, PL performed very well. PL was definitely a strong grower from Q1 to Q2. So it's not like this environment has really held back PL moving sequentially.

Got it. And then just as a follow-up, I see some news about Google this arbitration, Google case. Can you give us an update on where you stand and how you kind of view that arbitration process?

Yes. So with Google, we're aware of lawsuits and arbitration claims against Google related to federal court rulings that the company illegally monopolized online search and search advertising. Advertiser customers of Google are -- they're actively joining together for arbitration and other proceedings. And we joined one such group. We've initiated a request for arbitration this year, and we filed the group's demand motion on July 17. And we directed about $2.8 billion to Google through the impacted period dating back about a decade, and we continue to pay Google for advertising today. And that time frame is really what would be used to assess the damages through the arbitration process. And so we believe Google's overcharge accounted for a significant portion of our overall spend during the relevant period, which would be the basis for our right to damages. So we're currently engaged with an expert economist to size out the potential damages. And I think one other important call out is with regard to tax. With the tax, there's a lot of moving parts, very complicated, but we do have tax attributes. You can see in the 10-K that we expect that we can use to reduce tax liabilities on any future taxable income, including any possible recovery amount from Google. We have tax-effected NOLs. We have R&D tax credits, interest carryforwards. When you look at all these attributes together, we expect them to be able to offset a substantial portion of federal income tax otherwise payable on future taxable income of around $300 million. So hopefully, that gives you an overview.

Our next question comes from Mike Grondahl with Northland.

Just 2 questions on small business. That business has grown a ton. It's still within consumer. But can you speak to just like what percent of revenue, what percent of adjusted EBITDA comes from that, just so we can size it a little bit better? And secondly, related to that, it sounds like lender demand -- I don't know if the word is collapsed, but lender demand was really, really weak. It really wasn't customer demand. It was just the lenders pulled back hard. Am I hearing that right?

Yes. So it's really 2 factors that happened. It was both on the lender side and on what we call the merchant side. So the small business is looking for cash, we call those merchants. So what really happened was lenders pulled back and they tightened their criteria. They would offer a higher rate for the same loan amount or just tighten their buy boxes. That we have seen recover. The other end of that is merchant, call it, the merchant demand. And that presents in the form of volume. There's just fewer merchants shopping for loans out there today and also in the form of close rates, so we call it booking rates. So if you give a merchant an offer, they're just less likely to take it. And so there's just less appetite out there in the form of close rate and volume. And that's the merchant side of it. That's the piece of it that we have yet seen to recover that should provide. And when it does, we fully expect that it will. And when it does, there should be significant upside, and we expect small business to be -- to return to being a very, very strong growth head for us. We don't disclose the revenue for small business, but that sequential decline is obviously driven by small business, and we had PL performing fairly well sequentially.

Got it. Got it.

Yes. So just to put a button on that, we could do significant loan growth in small -- and the lenders would be more than happy to write those loans. The lender demand is there.

That's recovered. Got it. And then -- just looking at profit segment margins kind of by major business and as you break them out, they're softer. There's some challenges out there. Is any of that due to investments you're making? Or would you attribute it to competition and challenges in the marketplace and whatnot? How would you allocate between those 2?

I would say -- good question. I appreciate it. I think there's a little bit of both. I would say there is investments. Like we are -- I'll start with business development traffic has been a big focus area of ours. And we have -- I don't have the exact stats in front of me. We have grown that quite a bit, but our focus in 2026, it's really just about growing the relationships and growing the revenue on our business development partnerships. We have not been focused much at all on the VMM or VMD perspective on the business development front. We've had a lot of success on bringing in a lot of good partners and doing a lot of business and our partners are telling us that we generally outmonetize other partners they were previously using. So we're very excited about that. And we think that will be a big part of our business over the next couple of years. We'll probably focus more on VMD and margin in '27 and beyond in that area. So that's definitely a big part of it from the margin -- overall margin profile. And then the other part of it is, yes, there's definitely like insurance, for example, there's really high competition out there right now. And it's not just our competitors, it's like the carriers themselves are advertising everywhere. So -- it is a reflection -- lower margins at some level are a reflection of everyone's out there getting in front of consumers. And it's like -- are just -- overall, we just want our cost of traffic to grow at a smaller rate than the revenue on our traffic at the end of the day. But yes, it is fair to say Google marketplaces, for example, are more expensive today than they were a year ago.

Got it. Lastly, any learnings on the AI side over the last 90 days that you want to share?

Can you be a little more specific with that question? I'm just asking because there's always -- there's all sorts of routes we can go with AI.

I guess what's most meaningful for you over the last 90 days? There's a couple of -- you got a bunch of slides on it, educate us a little bit.

Yes. I would say there is -- is there -- look -- kind of the 2 ways that I look at AI is you've got operational efficiency and you've got consumer-facing AI. And so from operational efficiency, the lots -- I mean, I don't know if I would say learnings, I mean, it's becoming more and more effective for us. We've learned a lot, like one of our learnings, for example, which was a big focus of the first 6 months of the year, is for AI to be really effective for internal operations, your data really has to be structured in a really good way. And your naming conventions have to be right. You need to really train the AI agents to understand all the vernacular like a business and business people use on a day-to-day operations of a specific business. And so we have spent a lot of time building and structuring our data in the right way and committing a lot of energy and effort to doing that right. And now we're starting to see really significant benefits out of making sure we structured our data in the right way for the use of AI agents. That's been one big learning there. Another big learning, and you probably have heard this on a macro level is just the cost of AI, the cost of token usage is going up and up. Like we -- and we're a type of company where we want anyone and everyone within the company that has useful use for AI to be able to use it. We've probably used 4 or 5 different AI platforms that people have access to. One of the learnings, though, I think we've learned use the right model for the right thing, right? And that's where we track use and cost and expense. And we found like there's a lot of things that maybe you're using an expensive frontier model on that you could be using a much cheaper model. Like my head of technology, we were talking like theoretically, like 90-plus percent of internal operational efficiency you could be using a much cheaper like AI model that you don't need the really expensive frontier models on. So that's a learning, and we've got good dashboards where we track it. And like if someone's spending a lot of money on tokens, I mean, it throws a flag up to like at least have the conversation of like what's the business case of this usage and -- and if it's a good case, like let's keep doing it. If it's not a good case, it's like let's either find a cheaper model or not do it. So that's one example. On the consumer side, there's been -- there's lots of learnings we've had. Like, for example, we've learned that like LLM chat tools as far as a way to like have the consumer shop. Consumers honestly don't like engaging with that. This is more a simple funnel. We've learned the AI overviews, like I talked about earlier, highly effective of like, okay, you fill out with your form, maybe you're sitting on 30 or 40 personal loan offers. But let me just give you a paragraph at the top that just gives you the high level of like, okay, this company has the lowest interest rate, this company will offer you the most money. This company will give you the lowest monthly payment because it will still give you the longest term loan. And that makes it just easier for the consumer to have more confidence of the type of companies they want to apply for. And then the final thing I'd hit on, I don't want to drag this on forever, but like I think using AI as a communication tool with the consumer is very exciting. So for example, like we developed a lead instead of sending that lead out 5 times and having 5 different brokers call a consumer bunch, like first have that -- whether it's voice or text or e-mail, have that AI agent engage and communicate with the consumer a little bit first to get a little further detail on, okay, what exactly are you fitting for? What's the right fit for you and then directing that person to the 1 or 2 companies that are the best fit. And that's a dramatically better consumer experience, and it's a really useful way to use AI from a consumer-facing perspective.

I'm not showing any further questions at this time. I'd like to turn the call back over to Scott for any further remarks.

All right. Just in closing, we're just -- we're very excited where we're at for the business, both just operations on our current core business and also our North Star strategy. We put that North Star together at the end of last year, did a lot of organizational shifting in the first quarter to make sure that our teams were oriented around being able to produce along the North Star. I think Q2 was really the first quarter where we really saw the velocity of long-term strategic initiatives, AI initiatives getting rolled out. We fully expect the velocity of that to keep increasing throughout the second half of the year. So we're really excited about transforming this business over the next few years and having much higher return customers, referred customers and active logged-in users. With that, thank you, and talk to you all next quarter.

Thank you. Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.