LendingTree, Inc. Q4 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the LendingTree, Inc. Fourth Quarter 2025 Earnings Call. 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. 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 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.

Thank you, Andrew, and thank you to everyone for joining us today to discuss our strong fourth quarter and full year 2025 results. I will first highlight some key points from our earnings release, and then I'll share our '26 strategy before we open the floor for questions. We had an excellent 2025, with VMD up 14% and adjusted EBITDA growing at an impressive 28%. Each of our three reportable segments achieved double-digit growth in VMD. Insurance led the charge once again, driven by strong carrier demand and our ability to capture market share from competitors, resulting in $174 million of VMD, which is a 10% increase from last year. While some of our peers have indicated a slowdown in demand from larger insurers in Q1, we are not experiencing that ourselves; our top carriers' budgets with us remain strong as they focus on our high-quality consumers. In fact, we anticipate that Q1 will be another record revenue quarter. The #4 through #10 insurers in our network saw a 65% revenue increase with us in '25 compared to the previous year, showcasing the strength of our marketplace partners. The insurance segment gained momentum throughout the year, finishing with record performance in Q4, surpassing last year’s records. This momentum has continued into '26, and we expect another record year for the insurance division. The consumer segment saw a 17% increase in segment profit last year, driven by a 60% revenue growth from our small business team. Just like the insurance segment, our consumer businesses gained strength over the year, with Q4 segment profit up 24% year-over-year and small business revenue increasing by an impressive 78%. Importantly, we maintained a stable segment margin of 51% for both the quarter and the full year while achieving this growth. As a reminder, we have consistently invested in expanding our small business concierge sales force, which helps us and our network lenders assist more business owners in finding the best loan options and navigating the often complex application process to funding. We plan to continue building this team in '26. The Home segment recorded a 6% year-over-year revenue growth in Q4, although rising media costs and lower conversion rates for our lender partners put pressure on segment margins. The national 30-year mortgage rate has just dipped below 6% for the first time since 2022, and we hope that lower rates will finally unlock a historically slow mortgage market. Our guidance does not currently factor in any further improvement in rates, which suggests our home segment forecast might be conservative. The pace of innovation in AI and AI-enabled search has continued to quicken. As I have mentioned in past calls, we see these new tools as excellent opportunities for our business and an essential part of our strategy to attract more high-intent visitors to compare and shop for financial products. We recognize investor concerns about the potential threat of disintermediation to our business model. However, there are numerous legal and regulatory frameworks in place that would make it challenging for disruptive AI solutions to succeed, along with our partners' incentive structures that would prevent such outcomes. Rather than defending against these unlikely scenarios, we are fully embracing this innovative technology. I am truly excited about the improvements we are implementing in our consumer experience through AI. We have already achieved significant results with AI voice technology in our call center, generating over $10 million in additional revenue per quarter over the last six quarters, while our OpEx has only increased slightly. Our marketing team has seen efficiency gains by utilizing AI-enabled technology to expedite design, ad testing, and funnel testing, resulting in a 17% year-over-year increase in overall conversions through our network in Q4, despite the challenges posed by legacy SEO decline. Our company’s guiding principle remains to be the top destination for shopping for financial products, and all our long-term initiatives are based on this goal. LendingTree has the widest network of financial partners compared to any consumer finance shopping site, enabling us to attract millions of visitors seeking the best deals. We will leverage these strengths to scale customer volumes and enhance outcomes through improved experiences, new tools, and better matching. Our strategic approach is structured around four pillars: first, accelerating the core business; second, improving the consumer experience; third, expanding product offerings; and fourth, rebuilding and repositioning our brand. I will briefly address each of these pillars today. First, to accelerate the core business, our initiatives target existing operations to sustain ongoing double-digit growth. We are focusing on driving more consumers to our network, offering more purchase options, and enhancing monetization of our traffic through our distribution channels. Current efforts include expanding our small business concierge sales force and lender network, developing a concierge sales force for auto lending, investing in technology and sales teams to quickly grow our media business capabilities, and upgrading our marketing tech stack. Second, we aim to improve the consumer experience. Our customer experience team is proactively addressing consumer challenges, often using AI technology. This involves simplifying the shopping process for often complicated financial products, catering to both those ready to transact and those simply exploring options. Our goal here is to be a trusted partner for consumers seeking financial products, thereby increasing return visits and referrals. We’re focusing on enhancing our logged-in user experience, applying insights from our Spring app to our website, making it easier to log in, customizing home pages for logged-in users based on their product interest, and simplifying the process to view previous offers. Additionally, we’re developing a personal loan rate table based on proprietary data from consumers on our network, allowing potential borrowers to see expected rates before applying. This feature will be available on our website, in our app, through our partnerships, and importantly, embedded within LLMs. The third pillar involves expanding our product offerings, aiming to include a wider array of financial products for consumers. Our long-term objective is to represent all types of financial products a consumer may seek, relying on partnerships with leading service providers rather than developing a shopping experience from scratch. Over the next 18 months, we plan to pursue partnerships in areas like commercial insurance, pet insurance, boat and RV insurance, wealth management, robo-advising, student lending, and more. Finally, the fourth pillar is about rebuilding and repositioning our brand. Although we have strong brand resilience in terms of aided awareness, we need to enhance our brand's unaided awareness. We aim to reposition our brand to be recognized as a go-to destination for a wide range of financial products beyond just mortgages. In Q1, we made key hires for our brand team and started redesigning our homepage, targeting brand spending in several large markets in the latter half of the year to introduce new customers to our updated experience. Thank you, everyone, for your attention. While that was a lot of information, I wanted to clearly lay out our North Star and strategic focus for all our investors. I appreciate your patience, and now I’ll pause and open the floor for your questions regarding our results, outlook, and strategy.

Our first question will be from 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 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. I just wanted to illustrate in that statement that we aren't solely dependent on the top 3 carriers; they also grew a lot year-over-year, but just the growth is broad-based. It's not purely based off the top 3 carriers. Even though our top 3 carriers still represent an outsized portion of our overall insurance revenue, I want to discuss the sustainability of the insurance marketplace right now. The bottom line is I would start with the insurance carriers themselves remain very profitable. They had a great year last year and have started the year well this year. After a few years of unprofitability and pulling back marketing spend, they are now all very aggressive in growing market share, especially the top carriers. Honestly, over the past 3 to 6 months, they've become more aggressive, if anything, in trying to fight for market share. We have a lot of high-quality, high-intent consumers coming through our network. 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 from our carriers, which will bring more consumers shopping into the marketplace. Carriers have continued to open up geographies. There are more geographies open today than were a year ago. And 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 more visible to a lot more consumers now than we were a year ago. Honestly, we look at our opportunities in front of us over the next year, and 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 stay visible basically as search transitions to a more 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 a small percentage of our overall consumer base but is continuing to grow. Some of the LLMs, like ChatGPT, are looking to start testing some advertising, which we're excited about participating in. I don't know how material to expect it to be in the calendar year 2026 as far as the number of consumers, but we are very good at paid advertising to get in front of consumers, so we're excited about the LLM starting to open that up. From a technology development standpoint, we've been working with our teams on using AI development, conversational funnels, and 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 earlier is an example. We're building our technical capabilities to leverage AI and LLM-style technology for front-end consumer products. There have been varying levels of success on the consumer engagement standpoint at this point, but we're getting better and better at building it. As 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 the investment levels. It's a critical part of our North Star strategy to be the #1 destination to shop for financial products. As we look at the landscape for our brand, we have a really strong brand, and we're very proud of what we've developed. However, we haven't invested a lot in our brand over the past few years. While our brand is strong in aided awareness, it’s not very good in unaided awareness. 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, many consumers think of us specifically in terms of mortgage and mortgage shopping. Our goal is to become one of the first companies that come to consumers' minds when they think about shopping for financial products. In the second half of this year, we want to roll out a redesigned homepage experience along with different messaging and types from a brand advertising perspective in large markets where we have solid positioning. We want to test different messaging and see what resonates well with consumers before rolling it out nationally. This will likely start happening from mid-Q3 to mid-Q4. Jason, do you want to touch upon the investment levels we're looking at?

Yes. Like Scott said, this is more targeted for the second half of the year. The amount that we spend will depend on our performance and how well the brand spend itself performs. If it performs and exceeds our expectations, we may wind up leaning into it more. The guidance does contemplate at least an initial investment as we roll this out and start doing some testing. Initially, the investment is 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. I'll talk through segment by segment, how we're thinking about the guidance. First, for the home segment, we're not assuming any real rate benefit for home. We have seen some rate decreases coming through, but we're not assuming any going forward. That would be upside to our guidance. Generally, home equity should have support with record home equity balances. However, there still aren't a lot of consumers out there shopping, and we've also seen some increase in competition leading to higher media costs. Margin-wise, I expect home to be roughly where it landed in Q4. We are investing in quality to win a prominent space in our marketing channels and are expanding our small lender network, which will provide some margin support. For the consumer segment, the main driver will be small business. The merchant cash advance market is growing. We've been investing in our concierge experience, staffing, and marketing channel placements to drive high-quality traffic. We expect all of that to continue into 2026. Regarding personal loans, record credit card balances provide a great use case for debt consolidation in 2026. However, we did see quite a bit of expansion in our buybox in 2025, which we do not expect to repeat in 2026. So we're taking a more measured approach to personal loan growth expectations. There we are focused on better matching consumers with lenders and exploring additional sources of traffic to feed those lenders. Margin-wise, it should be generally where we have been in Q4. For the insurance segment, the backdrop is very favorable for all the reasons Scott noted; carriers are becoming more competitive for market share and policies. Their profitability is strong, and selective rate decreases will spur additional traffic, supporting the CPL side of the house. We're focused on improving our margin and are making key investments in martech to achieve this. We've seen a significant increase in margin since Q4 and expect this to continue throughout the year. We're performing better than expected in Q1 in insurance. The backdrop remains favorable, and we don’t see indications of a slowdown, but we're also being cautious in our guidance because it's only been two months. We want to ensure we have room to spend on brand as it relates to our strategy. Hopefully, that provides some clarity on each piece.

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

Yes. In your shareholder letter, could you explain more of what is going on with these trigger leads and how that benefits? Additionally, taking the last comments around guidance, are we entering an environment where the insurance segment is more predictable and easier for you guys to forecast than it has been in the last 5 years? Then I have a follow-up.

I'll start by addressing the trigger leads, and then we can discuss insurance. The trigger leads, for those who don't know, refer to when we develop a lead and sell it to our mortgage providers, and then they perform a hard credit pull to provide a firm offer to the consumers. The credit bureaus then trigger this lead to sell it off to third-party buyers with whom we have no relationship. Essentially, a consumer who just got a hard pull from a mortgage company may receive many unsolicited calls. The long story short is Congress passed a bill that mandates this practice can no longer happen. This change will help enhance the quality of our traffic because clients won’t trigger multiple calls when making firm offers. This will vastly improve consumer experience and the quality of our leads. With the elimination of trigger leads, many companies will instead come to buy leads from us directly on the front end, which should enhance our monetization. Regarding your second question on insurance, I believe we are indeed entering a more predictable phase. There will always be fluctuations with carriers, but there has been more stability over the past two quarters than in the previous 8 quarters. I expect that to continue, as changes in geographic targeting and demographic targeting will likely exhibit fewer swings than in the past.

Yes, I would just add that the market will be less defined by a couple of carriers as we progress throughout 2026. As we noted, we saw strong growth not just from the top 2 carriers, but from the next 7 carriers. This increased competition should help us with predictability moving forward.

Can I just sneak one more in?

Sure.

We've seen a drawdown in valuations in most of the sector. Can you discuss how you plan to manage your debt, and if there are opportunities for acquisitions given falling valuations?

Sure. I’ll start on that. It is a priority for us to reduce our total debt load. We are focused on that as a multiple. With valuations coming down across the board, it makes potential opportunities more intriguing. However, it does involve a classic situation where sellers might feel their value does not reflect the market, making them less interested in pursuing M&A activity. Are we interested? Yes. Are we aggressively pursuing it at this time? No.

Yes. I would add that we recently had a call on our term loan, and we are now free to pay down debt at par. Given the uncertainty, we prefer to hold on to cash for now to maintain flexibility during this dynamic period.

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

Scott, could you discuss the visibility you have in the business today for revenue versus perhaps six months or a year ago?

Yes. The visibility for revenue in '26 is pretty solid. I don’t expect massive fluctuations. Our ability to drive more consumer traffic at an accelerated pace will continue to generate revenue growth. Our revenue is largely dependent on our ability to drive quality consumers to our network rather than solely relying on clients opening up their budgets. This shift ultimately creates more predictability in our revenue streams.

On the mortgage side, specifically the mortgage purchase and refinance market, how close are we to a tipping point? I think last quarter, you mentioned the rate of 5.75%. Where do you think we stand now?

Yes. It's encouraging to see a 5 handle on the 30-year rate right now. While this is a positive step, it’s still too high to drive enough consumer traffic, particularly on the refinance side. For home purchases, there are broader affordability issues at play beyond just the interest rates. Many homeowners are reluctant to buy new homes at rates around 6%. That said, 5.75% is where we typically start to observe increased momentum. The mortgage industry offers metrics that can reflect this, but we still have a way to go before seeing a major shift.

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 that partners were not incentivized to provide actionable quotes for automated bots, particularly in insurance. Can you expand on that, please?

I want to highlight insurance specifically, but there are several levels of disincentivization at play. Insurance companies could have made their actuarial tables available to platforms for years, but they've built significant brands around their proprietary rate information. They’ve consistently resisted any efforts—agentic or otherwise—to allow access to their rate information. The profitability is high, and they are extending their reach to consumers, making them less inclined to share that information with bots. Furthermore, many insurance carriers don't provide online rates. They often require direct consumer contact with agents or reps. These barriers indicate that employing agentic AI to fill out numerous forms won't address consumer needs anytime soon in these sectors compared to a market like real estate, where public information makes integration simpler.

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

Thank you, everybody, for joining, and 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.

And this concludes today's program. Thank you for participating. You may now disconnect.