TREE - NASDAQ

Good day, and thank you for standing by. Welcome to the LendingTree, Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Andrew Wessel, Head of Investor Relations. Please go ahead.

Thank you, Tanya, and hello to everyone joining us today to discuss our fourth quarter 2025 financial results. On with us are Scott Peyree, President and CEO; and Jason Bengel, CFO. This afternoon, 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 will 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. And with that, Scott, please go ahead.

Thanks, Andrew, and thanks to everyone joining us today as we discuss our very strong fourth quarter and full year 2025 results. I will first touch on some of the highlights from our earnings release, and then I'd like to take everyone through our '26 strategy before opening it up for questions. First off, we had a fantastic 2025. VMD was up 14%. Adjusted EBITDA grew at double that pace, 28%. Each of our 3 reportable segments grew VMD at double-digit rates. Insurance again led the way as very strong demand from carriers, combined with our ability to take market share from competitors, generated $174 million of VMD, a 10% increase over the previous year. We have heard some of our peers call out slowing demand from the largest insurers in Q1. I just want to tell everyone, we are not seeing that at all ourselves as top carriers budgets with us remain robust as they're targeting our high-quality consumers. In fact, we expect Q1 to be yet another record revenue quarter. The #4 through #10 insurers on our network grew revenue by 65% with us in '25 from the previous year, a testament to the strength and breadth of partners in our marketplace. Insurance gathered strength as the year progressed, finishing with record performance in the fourth quarter that was just ahead of our previous record, the year ago period. The momentum has carried through the start of '26, and we expect another record year from the insurance division this year. Consumer segment -- consumer grew segment profit by 17% last year, anchored by a 60% revenue growth from our small business team. Similar to the Insurance segment, our consumer group of businesses strengthened throughout the course of the year, with segment profit increasing 24% in Q4 from the prior year and small business revenue growing a remarkable 78% year-over-year. Importantly, we have not sacrificed margin to generate this growth as segment margin for both the quarter and full year was stable at 51%. As a reminder, we have continually invested in additions to our small business concierge sales force, allowing us as well as lenders on the network, allowing us to help a greater number of business owners find the best loan options for them while guiding them through the often complex process of completing their application through to funding. Continuing the build-out of this team is in our plans for '26. The Home segment recorded 6% year-over-year in revenue -- growth in revenue for the fourth quarter, although increasing media costs and lower conversion rates for our lender partners pressured segment margins. The national 30-year mortgage rate just dipped below 6% for the first time since 2022. We are hopeful lower rates will finally start to unlock what has historically been -- which has been a historically slow mortgage market. The guidance we published today does not assume any continued improvement in rates. So we hope this means our home segment forecast will end up being conservative. The pace of AI and AI-enabled search innovation has continued to accelerate. As I have said on previous calls, we view these new tools as fantastic opportunities for our business and are a key component of the strategy we have developed to increase the number of high-intent visitors to our sites to compare and shop for financial products. We understand investor fears around the threat of disintermediation to our business model. There are many legal and regulatory structures in place that will make it difficult for Agentic AI to overcome, not to mention our own partners' incentive structures that would negate the outcome. Instead of focusing on playing defense, though against these low probability outcomes, we are embracing this innovative technology. I cannot be more excited about the AI-powered improvements that we are making to our consumer experience. We have already driven results with our use of AI voice in our call center. As mentioned in the letter, we've seen significant revenue growth to the tune of $10-plus million in revenue growth per quarter over the last 6 quarters compared to OpEx growth of a few hundred thousand dollars per quarter over the last 6 quarters in our call center operations. We've also seen efficient improvements that our marketing team has generated using AI-enabled technology to speed up design, ad testing and funnel testing. This is shown with a 17% increase in overall conversions coming through our network year-over-year in the fourth quarter, and that is with the headwind of legacy SEO coming down. Our North Star as a company continues to be -- I'm sorry, the North Star of our company is to be the #1 destination to shop for financial products. Everything that goes into forming our long-term initiatives is based on this aspiration. We have the right to win as LendingTree has the broadest network of financial partners of any consumer finance shopping site, sourcing millions of visitors who are in the market for these products and want the best deal is our core competency. We will use these strengths as the bedrock to scale customer volumes and improve outcomes with enhanced experiences, new tools and better matching. Our North Star strategy has 4 strategic pillars: number one, accelerate the core business; number two, improve the consumer experience; number three, expand product offerings; and finally, number four, rebuild and reposition our brand. I'd like to briefly hit on each of these pillars for the investors today. Number one, accelerate the core business. Initiatives in this growth area focus on our existing businesses, to support ongoing double-digit growth. These strategic initiatives support driving more consumers to our network, providing more purchase options to consumers and increasing monetization of our traffic via our distribution networks. Examples of areas we're focusing on now include the continued expansion of our SMB concierge sales force and network of lenders in SMB, the development of a concierge sales force in auto lending, investments into tech product and sales teams for rapid expansion of our media business development capabilities and tech investment into major upgrades of our marketing technology platforms. Number two, improve the consumer experience. In this pillar, the CX team is systematically resolving consumer pain points, often with the use of AI technology. Initiatives in this pillar focused on making shopping easier for what are often complicated financial products. We are seeking to serve both consumers looking to transact as well as consumers who are just window shopping. The goal of this pillar is to become a trusted partner for the consumer when seeking financial products to drive an increase in return visits and referrals. Examples of this area of focusing on -- that we're focusing on now include improving our logged-in experience, taking learnings from our Spring app to our website, such as making it easier to log in and customizing the homepage for logged in users based on products they are shopping for, also simplifying the process to find and review offers they had previously received. Second, develop a personal loan rate table using our proprietary rate data we gather from millions of consumers shopping for loans on our network, which will allow consumers to know what rates they should expect before applying. This tool can be provided on our website, in our app, it can be embedded with our business development partners and importantly, embedded within [ LLMs ]. Third pillar, expand our product offerings. This pillar focuses on the addition of categories of financial products offered to consumers. Our long-term strategic goal is to provide a representation of all financial products that consumer could want. We do not have to manufacture a shopping experience for some products when we can instead identify and partner with industry-leading service providers. The focus over the next 18 months is to sign partnerships in areas such as commercial insurance, pet insurance, boat and RV insurance, wealth management, robo-advisers, student lending and others. Finally, our fourth pillar, rebuild and reposition our brand. We have strong brand resilience with aided awareness but need to rebuild the brand from an unaided awareness perspective. We also are focused on repositioning our brand to be a destination to shop for a wide variety of insurance, lending and other financial products where historically, we've been associated more specifically with mortgage products. In Q1, we made key brand hires and have begun the redesign of our homepage. Our goal is to target brand spend in several large geographic markets in the second half of this year, introducing new customers to our redesigned experience. So thank you, everyone. I know that was a lot, but I thought it was important with our North Star and our new strategic focus to really lay it out for all of our investors. It was a little long-winded there. So thank you for bearing with me. And so with that, I'll pause there and open the line to your questions about our results, outlook and strategy.

[Operator Instructions] Our first question will be coming from the line of Youssef Squali of Truist Securities.

Congrats on the strong quarter. Scott, maybe can you talk a little bit about the sustainability of growth in insurance? And really just trying to understand what the main drivers are. I think you talked about how 4 out of the 10 insurance partners grew revenues, I think, by 60% or 65%. Maybe can you peel that onion one more layer and just kind of describe exactly what's going on that's driving all that growth? And then I have a follow-up, please.

Yes, sure. No problem, Youssef. Thanks for the question. And just to clarify, what I was talking about with the insurance providers is our carriers 4 through 10. So like after our top 3 carriers, the next 7 carriers combined grew by 65% year-over-year. And I just wanted to illustrate in that statement how it's just -- we aren't solely dependent, but the top 3 carriers also grew a lot year-over-year, but just the growth is broad-based. It's not just purely based off the top 3 carriers. Even though our top 3 carriers, I mean, it's fair to say they still represent an outsized portion of our overall insurance revenue. So just to discuss on the sustainability of the insurance marketplace right now. The bottom line, I would start with the insurance carriers themselves remain very profitable. They had a great year last year. They've started the year well this year. And after many years of -- a few years of unprofitability and pulling back marketing spend amongst all other spends for a long time, they are now all very aggressive in growing market share, especially the top carriers. And it is -- and honestly, I would say, over the past 3 to 6 months, they've become more aggressive, if anything, of trying to fight over market share. And we have just a lot of high-quality, high-intent consumers coming through our network. And the carriers know that our network is an extremely cost-effective way for them to get their insurance products in front of targeted high-intent insurance consumers. As the year goes on, we expect to start seeing some rate decreases more aggressively from our carriers, which will bring more consumers shopping into the marketplace. Carriers have continued to open up geographies. They're getting very open at this point, but that is -- I mean more geographies are open today than were a year ago as a general statement for carriers being willing to offer consumers product. And then finally, just internally, as I mentioned with our marketing strategy, we've just done a very good job of increasing consumer traffic coming through our site. We're out there, and we're in front of a lot more consumers now today than we were a year ago. And honestly, we look at our opportunities in front of us over the next year, we are very excited about continued growth in consumer traffic coming through our site for insurance products.

That's very helpful. And then on the AI disintermediation topic, how are you currently working or integrating with some of these LLMs to try to stay visible basically as search transitions to more of a conversational kind of interface?

Yes. I would say there's a number of fronts we're working on there. There's obviously the SEO front where you're getting referenced by the LLMs, driving consumers to our site. We continue to focus on that, and it continues to grow. It's very high-intent consumers, as I've mentioned on previous calls. I would say materially, it's still a pretty small percentage of our overall consumer base, but it's continuing to grow. Some of the LLMs, ChatGPT being an example, are looking to start testing some advertising, which we're excited about participating in. Again, I don't know how material to expect it to be in the calendar year 2026 as far as quantity of consumers, but it's -- being that we are very, very good at paid advertising to get in front of consumers, we're excited about the LLM starting to open up that. And just from a technology development standpoint, we've been working at our teams on using AI development, conversational funnels, agentic AI bots to help get documentation necessary to finish application processes, developing comparison tools that helps consumers compare their offers apples-to-apples. The personal loans rate table, I mentioned in my opening statements as an example, I mean we're building our -- a lot of technical chops on how to use AI and LLM style technology for front-end consumer products. I would say that there's been varying levels of success on the consumer engagement standpoint at this point. But I mean -- but we're getting better and better at building it. And as that consumer behavior starts to change, I think we'll be a leader in that space.

And our next question will be coming from the line of Ryan Tomasello of KBW.

This is Juan on for Ryan. Can you talk about the targeted brand investments in the second half of the year? What's driving that decision? And if you could size the amount of the investment relative to 2025?

Yes. I'll just start at a high level, and Jason, you can throw in like the level of investments. I want to -- if you want to talk about that. But that was -- it's just a critical part of our North Star strategy is to be the #1 destination to shop for financial products. And as we look at the landscape in our brand, we've got a really strong brand, and we're very proud of the brand we've developed. The 2 -- we haven't invested a ton on the pure basis of our brand over the past few years. And so whereas our brand is very good on an aided awareness perspective with consumers, it's not very good on an unaided awareness. So we feel it's important to get out there, especially now that we want to reposition ourselves as a destination for all financial product shopping, whereas historically, a lot of consumers really associate us specifically with mortgage and mortgage shopping. So we want to -- the goal is at the end of the day to really get to the point where an average consumer on the street, we are one of the first companies that comes to their mind as they're thinking about shopping for financial products. And that's really what we want to start. And so we want to go in the second half of this year with the redesigned homepage experience, a couple of pages with different messaging, some different types of messaging from a brand advertising perspective and go into some large markets where we have good positioning with all of our financial products, some geographic markets where we can test different messaging and see what sticks and lands with the consumers well before we really roll it out on a national basis. And so that will probably start happening kind of mid-Q3 to mid-Q4. Jason, do you want to hit on just the investment levels we're looking at?

Yes. That's -- like Scott said, this is probably more in the second half. And the amount that we spend is going to be a function of how well we're performing, I guess, is one and then also how well that brand spend itself is performing as well. So if it performs and exceeds our expectations, then we may wind up leaning into it. And the guidance does contemplate at least an initial investment where we're starting to roll this out and starting to do some testing. But the investment itself is at least initially probably less than $10 million as we're thinking about it in guidance.

Got it. That's very clear. And just a quick follow-up. In terms of the outlook, can you provide a bit more granularity at the segment level for revenue and VMD growth as well as VMD margins?

Yes, sure. Happy to. So yes, I'll just talk through segment by segment, how we're thinking about the guide. So first, home, the backdrop for home, we're not assuming any real rate benefit for home. We've seen some rate decreases coming through, but we're not assuming any going forward. That would be upside to the guide. Generally, home equity should have support with record home equity balances. But at the end of the day, there's still not a lot of consumers out there shopping, and we have seen some increase in competition with causing media cost to increase. So margin-wise, I would say we expect home to be roughly where it was landing in Q4. We are investing in quality to win a prominent space in our marketing channels, and we are investing in expanding our small lender network, which will provide some margin support. Going on to consumer. Consumer, the real driver is going to be small business. The merchant cash advance market is a strong market that's growing. We've been investing in our concierge experience, the staffing, the marketing channel placements to drive high-quality traffic. We expect all of that to continue into 2026. That's a model that's really working well for us. Personal loans, we move on to personal loans. Record credit card balances provide a great use case for debt consolidation in 2026. But 2025 did see quite a bit of expansions, buybox expansions, which we're not expecting to repeat in 2026. So we're being maybe a little bit more measured when it comes to PL growth expectations. And there, we're focused on better matching consumers with lenders and finding additional sources of traffic to feed those lenders. Margin-wise, it's generally where we have been in Q4, I think, is probably fair. It will bounce around, but I think Q4 is generally a decent starting point. And then insurance, when it comes to insurance, that backdrop is very favorable, like for all the reasons Scott said, carriers are becoming more competitive for market share and policies. They really want to grow policies. Their profitability is extremely strong. And with selective rate decreases coming through, that should spur additional traffic, which should support the CPL side of the house, the cost per lead. So the backdrop is really strong. Things we're doing, we're really focused on improving our margin. We're making some key investments in martech to make sure we grab more margin. And we're seeing a lot of that come through already in January and February in Q1. We've noticed a material increase in margin from where we were in Q4, and we expect that generally to continue throughout the year. And so I think just candidly, we are running hotter than we expected in Q1 in insurance. And so the backdrop is favorable. We have no indications that it's going to slow down, but it's -- when it comes to the guide, we're also being a little bit cautious. It's only been 2 months. We kind of -- we don't want to bake in this very, very strong performance for the rest of the year yet. So to be totally candid, we are pulling that down a little bit and being a little bit more conservative just to be prudent when it comes to the insurance segment. And then like we said, we do want to allow ourselves room to spend in brand as it relates to the strategy. So I mean I think that's generally some color on each of the pieces there. Hopefully, that's helpful.

And our next question will be coming from the line of Jed Kelly of Oppenheimer & Co.

Yes. Just -- can you just -- in your shareholder letter, can you kind of explain more of like what's going on with these trigger leads and how that benefits? And then kind of I'm kind of taking the last comments around the guidance, are we kind of coming into an environment when the insurance segment is just now a lot more predictable and easier for you guys to forecast than it has been in the last 5 years? Then I have a follow-up.

All right. I'll start with hitting on the trigger leads, Jed, and then we can go to the insurance. So the trigger leads is -- for those that don't know the trigger leads, the very basic version of that is when, for example, when we develop a lead and sell to our mortgage providers and then they do a hard credit poll to provide a firm offer to the consumers, then the credit bureaus will send -- it will trigger them. That's why they call it trigger leads. They'll be triggered to sell it off to a bunch of like third-party buyers that we have no association with, our clients have no association with, but it's basically saying like, hey, this consumer just got a hard pull on their credit from an insurance -- from -- I'm sorry, a mortgage company. So maybe you might want to call them to see if -- so it turns into a really horrible consumer experience where like they're about to close a mortgage and then all of a sudden, they're getting another 50 or 60 calls from -- who knows who. So the long story short is Congress passed a bill that basically said that can no longer happen. And that's coming in, Jason, Andrew, I don't know the exact date. It's quick, this week that's coming out. So it helps us on the front end of the quality of our traffic because now you don't have our clients when they're giving their firm offers to the consumers, it's not triggering like 50 calls on the back end. So like that will really help the consumer experience and the quality of our leads to our direct clients. Secondly, how it helps us, there's a lot of buyers of these trigger leads that will no longer be able to buy these leads. And so we think that will drive many companies to come to buy these consumers on the front end from the likes of us, which should help our monetization. And I'm sorry, Jed, what was your second question around insurance?

Just are we kind of entering this period, like the predictability following like last 5 years of a decent amount of volatility?

Yes. I think the short answer there is yes. It seems not that there is -- I mean there will always be some level of carriers leaning in and leaning out, and that's why we manage a large network and keep all of that. But I do feel like the past 2 quarters has been -- there's been a lot more stability than maybe the previous 8 quarters were, and I expect that to continue. And I expect the changes in geographic targeting, demographic targeting, total ad spend to be a lot -- a lot lower swings than they've been in recent history. Jason, do you have anything to add to that?

Yes. Yes, I agree. I would just add on like the market will be less defined by 2 carriers, I think, as we progress throughout 2026. As we said, we saw a lot of strong growth from the next 7 carriers. And so as it becomes more competitive, as more carriers really start to come into the market and play a more prominent position in our market, we'll be less defined by a smaller number of carriers. So that should help with predictability.

And can I just sneak one more in?

Sure.

Just we've had a drawdown in valuations in most of the sector. Can you just talk about -- I get wanting to get your debt down below $200 million and potentially maybe do buybacks. But can you talk about just potentially the acquisition landscape where you've seen valuations come in quite a bit with what's been going on over the last couple of months?

Sure. I'll start on that. And Jason, you can feel free to add in. I mean there's -- it is a big priority for us to bring down our total debt load and especially as a multiple. So we are very focused on continuing to do that and looking at that. Jed, as you said, with valuations coming down pretty significantly across the board, there's no denying that, that makes opportunities out there become a lot more interesting. Now it's always the classic. It takes 2 to tango, right? You deal with a scenario where some others out there view that their value is way below where it should be, and that makes them less interested in M&A sort of activity, which I totally understand personally. But yes, that could -- yes, could potentially drive -- because if it sustains over a longer period of time, could it potentially drive consolidation? I think absolutely, it could. Are we interested in it? Yes. Are we aggressively pursuing it at this point in time? No.

Yes. I would just tack on our soft -- we had one-on-one soft call on our term loan. That was up in February. So we are free now to pay down debt at par. But kind of like we're saying here, like the uncertainty is significant out there. So right now, when you have that much uncertainty, like let's just hold on cash. And let's -- for at least the short term here, like let's -- we're not going to pay down debt, we're going to accumulate cash and maintain flexibility, just given how dynamic things are at the moment.

Our next question will be coming from the line of Mike Grondahl of Northland.

Scott, if you could -- could you maybe talk about the visibility you have in the business today for revenue versus maybe 6 months or a year ago?

Yes. Yes, sure. I mean I think the visibility for revenue in '26 is pretty solid. I mean I don't expect massive pendulum swings. I mean I do think our ability to drive more consumer traffic at an outsized pace will continue to drive revenue growth because I think I would say pretty much every industry we're in right now, if we have the ability to drive more quality consumers at the existing monetization levels, our clients will keep buying those consumers and wanting to get their products in front of those consumers. So it's -- I would almost argue our revenue is much more dependent now on our ability to continue driving more and more consumers to our network than it is on clients opening up a lot more budget. And so that does go to like creating more predictability in the revenue.

Got it. And on the mortgage side, not home equity now, but sort of mortgage purchase and refi, how close are we to a tipping point? I think last quarter, you talked about maybe 5.75%. Just kind of what's your thoughts there? How should we handicap that?

Yes. I mean it's still -- it's nice seeing a 5 handle on the 30-year rate right now. I mean that feels good. it's still too high to really drive a lot of consumer traffic on specifically the refi side, home purchase -- home purchase can be a lot more around just there's a lot bigger affordability issues more than just pure interest rates. But I mean, there's still like -- when people are stuck -- when people sit on a 2.5%, 3% interest rate, it's hard to convince them to go and buy a new house at a 6% rate or 5.98% or whatever it is. But I do think 5.75%, as we've mentioned on previous calls, that is where you really start to see the snowball start to build, where -- and there's -- the mortgage industry has lots of metrics that you can look at as well. But like the 5.75% is really where you have more and more homeowners "in the money" on a cash out refi. And then 5.5 -- at 5.5%, it really starts to build. And then if you get below 5%, it can really start being a tidal wave. But I mean I think we're a ways away from that. So hopefully, that answers your question.

And our next question is a follow-up. from the line of Youssef Squali of Truist Securities.

Scott, I think in the letter you mentioned something to the effect that partners were not incentivized to provide actionable quotes for automated bots. And I think you singled out insurance. Can you maybe just expand on that a little bit, please?

I mean I want to just -- I mean insurance is a big one. I want to just single out insurance. I think there's a number of levels where there's incentivation to do it and then I would also say there's capability to do it. Starting on the incentivation front, and it's like you don't need AI or agentic AI for like these insurance companies, for example, they could have made their actuarial tables available as a commodity 20 years ago to Google if they wanted to. There was nothing stopping it from being embedded, but they've just -- they've built big brands. They consider their rate information probably the most proprietary thing that they have as a company. And so they have always been always, not just recently, extremely resistant to any sort of bot, agentic or not, like coming in and accessing their rate information. And they -- all indications in our conversations is they -- I mean, they're very profitable. They are offering rates direct to consumers that they want to and writing a lot of policies and there's no real incentive or desire for them to really open the kimono there at the end of the day. And then there's a lot of insurance carriers that just simply aren't -- you go to their website today, you could not get a rate online. I would say the majority of carriers are that way. Those basically say like, hey, we're going to connect you to an agent or a call center rep, but you got to talk to someone over the phone or in person to get a rate. And a lot of that's just simple capabilities, technical capabilities of providing rates. And I -- and you go into the lending world, there's a lot of similarities in the lending world. A lot of our -- like small business lenders, for example, they don't even write direct to merchants. They write loans through brokers like us. So it's like deep API logged-in access we have to get their loan information, like these consumers won't even know that these companies exist outside of talking to us to get a loan. So I mean -- so there's a bunch of hurdles from that side where I just don't think agentic AI overlay on going out and filling out a bunch of forms is really going to solve any consumers' problems anytime soon. in these industries specifically. you take like real estate, there's a lot of publicly available information there. So it's a little easier to implement like a ChatGPT app there.

And I'm showing no further questions. I would now like to turn the conference back to Scott for closing remarks.

All right. Thank you, everybody, for joining, for all of your questions today. I hope we've given you a helpful context around some of the incredible opportunities we're working on to enhance the marketplace. We're very excited about our path ahead and look forward to connecting with you again soon when we report our first quarter earnings.