LendingTree(US:TREE)2022-07-28 19:35Financial Data and Key Metrics Changes - The company acknowledged a slowdown in borrower, lender, and insurance carrier demand, impacting financial performance [9] - Segment-level profit excluding brand spend is expected to remain roughly flat in Q3 compared to Q2, indicating resilience in the business model [9] - Operating expense growth was limited to 3% year-over-year despite inflationary pressures, aided by a nearly 15% reduction in headcount since mid-2021 [9] Business Line Data and Key Metrics Changes - The consumer segment saw significant growth, with personal loans and small business loans increasing revenues by 68% and 81% year-over-year, respectively [11] - The insurance business remained relatively flat quarter-over-quarter, with expectations for material growth dialed back due to inflationary pressures [12] - The home segment is focusing on home equity loan products, with a 62% increase in consumer volume for quotes in Q2 [10] Market Data and Key Metrics Changes - The company is experiencing trough-like revenue in two of its three segments due to macroeconomic headwinds [10] - The insurance industry is facing challenges from inflation, impacting premium pricing and growth expectations [12][26] - The consumer segment is performing well, with lenders remaining active despite tightening credit conditions [20][34] Company Strategy and Development Direction - The company is committed to improving customer experience and brand awareness, even as competitors scale back [8] - A new omnichannel marketing campaign was launched to enhance customer engagement and capitalize on lower advertising rates [13] - The company is strategically investing in technology and product improvements to better position itself for future growth [69][73] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic volatility, drawing on past experiences [8] - The leadership team is focused on managing expenses and preparing for a potential recession, with adjustments made to forecasts [18][20] - There is optimism about future growth in the insurance segment once pricing stabilizes and consumer shopping increases [12] Other Important Information - The company has nearly $300 million in cash on the balance sheet and is exploring ways to deploy this capital, although stock buybacks are currently restricted [42] - The company is not expecting significant media spend in Q4 due to higher costs associated with holiday advertising [49][50] Q&A Session All Questions and Answers Question: Contextualize the earnings power of the business and the implications of a potential recession - Management acknowledged that while two segments are facing challenges, the consumer segment is performing well, and they are adjusting forecasts accordingly [20][21] Question: Are there tangible signs of improvement in the consumer segment? - Management noted that while there are signs of tightening credit, lenders remain active, and the consumer segment continues to perform positively [35][36] Question: Can you discuss the strategic decision to invest in brand and expected returns? - The company is investing in brand awareness due to favorable advertising rates and expects a return on investment over a six-month period [44][45] Question: What is the current mix of purchase versus refinance in the mortgage business? - Management indicated that refinance remains significantly larger than purchase but is expected to shift as market conditions change [58][60] Question: How should investors think about free cash flow moving forward? - The company expects to generate positive free cash flow in Q4, with adjusted EBITDA serving as a good proxy for cash flow [62][64]