Earnings Call Transcript - TREE Q4 2021

Operator, Conference Operator

Good day, and thank you for standing by. Welcome to the LendingTree, Inc. Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. 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, Vice President of Investor Relations. Please go ahead.

Andrew Wessel, Vice President of Investor Relations

Thanks, and good morning to everyone joining us on the call this morning to discuss LendingTree's Fourth Quarter 2021 Financial Results. On the call today are Doug Lebda, LendingTree's Chairman and CEO; J.D. Moriarty, President of Marketplace and COO; and Trent Ziegler, CFO. As a reminder to everyone, we posted a detailed letter to shareholders on our Investor Relations website earlier today. And for purposes of today's call, we will assume that listeners have already read that letter and we'll focus on Q&A. Before I hand the call over to Doug to give his remarks, I want to remind everyone that during today's 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 today, 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.

Doug Lebda, Chairman and CEO

Thanks, Andrew, and thank you to all of you who are joining us today. Following our recent Investor Day event, I'm going to forego some of the normal quarterly items and focus my comments on how we are positioning the company to become the ultimate consumer champion in the financial services space. The strategy process we completed in the second half of last year was a deeply meaningful exercise for LendingTree. We engaged employees from all levels of management across the organization, and the feedback from our team was clear. We want to create fantastic customer experiences that build trusted and lasting relationships with our customers throughout their financial lives. The fintech space has created a multitude of digitally enabled lenders and insurers. Established companies have responded with increased investment in digital fulfillment channels to defend their market share. Consumers clearly enjoy the convenience that these advances have generated. The ability to take care of all of their personal financial needs digitally has been well received, and the adoption curve has been swift. But the market lacks a shopping experience to differentiate between the ever-increasing number of financial products offered. There is no trusted digital adviser that leads with choice and best pricing for the consumer across the entire range of financial products in one easy-to-use experience. As we execute on our strategy, we are well-positioned to continue our leadership in the consumer finance space. We are harnessing the incredible power of our brand, with its consistently high levels of aided awareness, and combining it with our unmatched depth of partner relationships to be the ultimate resource for consumers wanting to take control of their financial lives. This is the next iteration of LendingTree, but it remains firmly rooted in the core reasons I founded the company 25 years ago. In that time, we've helped over 100 million customers shop and compare financial products and have facilitated billions in funded loans, yet we believe this is just the beginning. We're building on our legacy, strengthening our roots, and investing for growth. We are energized by the path we have ahead of us and 2022 will be a critical year as we execute on this vision. I look forward to sharing our progress with you in the coming quarters. Now, operator, we're happy to open up for questions.

Operator, Conference Operator

Your first question comes from Jed Kelly with Oppenheimer.

Jed Kelly, Analyst

Hey. Great. Thanks for taking my question. Just two, if I may. One was on insurance just going through the shareholder letter. Can you update us on the Medicare strategy? And then my second question goes into just on capital management short of measuring share buybacks. I saw you made an investment in a payment processing company. And then just given the valuations out there, how are you thinking about M&A? Thank you.

Trent Ziegler, CFO

Yes. Jed, I'll take the first one on Medicare. I mean, look we obviously invested a fair amount into scaling up the capability there on the Medicare agency throughout last year. I think, like many of the other players in that space, there was a fair amount of competitive pressure in the sense that you saw a lot of folks chasing that opportunity and you've got a lot of agents selling those policies where there's very little differentiation. And so there's some competitive intensity in terms of just getting to the customers. That leads to lower policy persistency, which does impact the revenue streams that you expect to collect on those policies. Now, in our case, we're uniquely positioned in that space. And that, a, we're not at the same level of scale and not nearly as dependent as many of our competitors on that product. But b, we're actually recognizing the cash flow from those policies upfront. And so we feel good about the progress we made certainly in that business. Obviously, the environment that we saw in the fourth quarter will inform how aggressively we intend to scale that business in 2022. Right now we're focused on kind of the unit economics in that business and how we think we can improve them. So don't expect us to scale that too aggressively in 2022. So that's kind of what we learned from the fourth quarter and how we're approaching it going into this year. That said, as you saw at the Investor Day, we think there is some opportunity to scale on the P&C side of the agency capabilities because that's really how you can improve the customer experience and ultimately tie that into My LendingTree and create kind of the holistic cross-sell opportunities that we're going after.

Doug Lebda, Chairman and CEO

And then do you want to talk about buybacks too and then J.D. can talk about M&A?

Trent Ziegler, CFO

Yes. So on the buyback front as you saw we did $40 million in the fourth quarter. We remain in the market as we said at Investor Day here in the first quarter. And so look for us to continue to be opportunistic with the buyback. We're fortunate that we've got $250 million of cash on the balance sheet. We continue to generate cash and we'll look for ways to return that to shareholders effectively. J.D., do you want to take the M&A piece?

J.D. Moriarty, President of Marketplace and COO

Yes. Jed, thanks. We're excited about our investment in EarnUp. EarnUp is a San Francisco-based fintech focused on payments. They have a borrower pay solution that enables a consumer to pay their mortgage and other debts, but initially mortgage, and they're transitioning to an enterprise model where originators and servicers can provide this for their consumers and thus be better tied to their consumers. So it's very consistent with our strategy to work toward a better consumer experience and a natural fit with our home business. So you could envision a consumer in My LendingTree down the road being able to pay their mortgage through LendingTree. And it removes a lot of the inefficiency when a mortgage transitions from the initial originator to another servicer. And so that's really the opportunity. We think it's great for the consumer and we think it can be great for our originator customers and servicers as well. So that's what we're excited about with EarnUp. Now more broadly on M&A, probably an undertold story over the last year is how much our balance sheet has improved. And so we find ourselves in a really good position both to execute on the M&A that you've seen us do over the last several years, but also buy back our stock. And so we're really happy with the refinancing that we did. We're very happy obviously with the convert that we did in 2020, the refinancing that we did over the last year, and where we find ourselves in terms of free cash generation. And quite obviously multiples have come down quite a bit. So we've been disciplined for the last two years, but it presents us with a very good opportunity to be acquisitive going forward. So that will remain a key part of our strategy and we're happy with the discipline that we've had over the last couple of years.

Jed Kelly, Analyst

Thank you.

Operator, Conference Operator

Your next question comes from the line of John Campbell with Stephens Incorporated.

John Campbell, Analyst

Hi, guys. Good morning.

Doug Lebda, Chairman and CEO

Good morning.

John Campbell, Analyst

Hey, on the combined credit cards like personal loans small business revenue that's moving along really nicely for you guys. I'm thinking that the bulk of that revenue is probably pretty similar to Credit Karma just overall and it looks like you grew that kind of at the same rate sequentially. And then on the credit card side, it looks like you're faring better than NerdWallet. There's obviously been some kind of share loss narrative out there with some investors. So I think, at least with this quarter, it seems that that seems to be defeated. But with all that said, can you guys talk to just kind of the main changes in the business that supported that type of recovery? And then maybe bigger picture, how you're feeling just where you guys sit competitive position wise versus your market peers?

J.D. Moriarty, President of Marketplace and COO

Sure. Each of the three verticals has a different story. Small business has been a strong performer for us, recovering well, and we're pleased with the solutions we offer to both small business owners and lenders. Personal loans and small businesses have benefited from the challenges of 2020, and our network has significantly improved since then. While we've previously discussed revenue progress, personal loans returned to pre-2019 levels in the fourth quarter, and small business surpassed those levels, although credit cards are still catching up but showing improvement. The main challenge in credit cards has been boosting margins to align with revenue growth. It's encouraging to see issuers back in the market, but competition is fierce on the cost side. We aim to enhance our credit card business through marketing successes and reduce reliance on paid search. We anticipate visible benefits in 2022 from these changes. Additionally, we want to strengthen the business by establishing barriers, which relates to our TreeQual initiative. TreeQual will significantly impact credit cards and personal loans by helping lenders acquire the right customers, not just any customers. This approach enhances the quality of our business, and we're excited about our partnerships. We're collaborating with Acxiom and credit bureaus to build a strong barrier to entry. Initially, TreeQual will benefit credit cards and personal loans, but it's applicable to other areas as well. Ultimately, our goal is to improve marketing efficiency for our partners while ensuring consumers using My LendingTree find credit cards suited for them without being rejected. TreeQual's prequalification and pre-approval process is central to our long-term strategy. If we outperform competitors like NerdWallet in the credit card space, that's great, but our focus remains on sustainable growth and improving the business, with TreeQual playing a key role in that effort.

John Campbell, Analyst

Okay. That’s very helpful.

Doug Lebda, Chairman and CEO

And the only thing I'd add to that from the competitive environment is, as you look at the fintech universe broadly the great thing that LendingTree has always been able to do versus competitors and I think it's showing itself more and more now, is the solidity, if you will, of the business model. If we were able to operate the consumer business profitably last year in a tough monetization environment, because of what our partners were going through, we can do obviously much better as things go forward, as you're already seeing. But at the end of the day, you need a business model that can, regardless of your product, can bring customers to you in a sustainable way that's actually lower than what your revenue is. And I think the LendingTree brand and our marketing execution has shown that and that gives us the ability to weather many different markets and still do it very profitably.

John Campbell, Analyst

Thank you, Doug. One more question about mortgages. I believe the industry refinancing was down about 50% year-over-year in the quarter. Our mortgage business was relatively stable, with a decline of around 2%. Revenue per lead, however, increased by over 50%, which is definitely helping us. I'm curious whether this growth is simply a result of coming off a low comparison or how it looks on a two-year basis. Additionally, looking ahead over the next few quarters or in the long term, how should we assess the potential for further increases in revenue per lead and your capacity to manage lower volumes?

Doug Lebda, Chairman and CEO

On the mortgage side, lenders increasingly rely on us as rates rise or when their volumes decrease. They adjust their strategies by increasing bids, expanding to more states, and taking on different types of volume, including home equity and purchases. These actions naturally increase our revenue per lead, allowing us to expand our market presence. At our recent Board meeting, we noted that we currently originate about 2% of the mortgages in the U.S., and we expect this percentage to grow in a more purchase-driven environment, which reflects what we are observing. We're also achieving client wins; during times like these, lenders are more open to innovating with us, which enhances our revenue per lead through improved conversion rates from leads to funding. We've discussed several initiatives at Investor Day that focus on boosting these conversion rates. As lenders enhance their conversion rates, their profitability increases, allowing them to bid even higher. Our goal is to navigate through this environment effectively. We're already outperforming the broader mortgage market by collaborating with our partners to help consumers close more loans, which in turn increases our revenue per lead and enables us to expand further into the market.

John Campbell, Analyst

Thank you, guys.

Operator, Conference Operator

Your next question comes from the line of Ryan Tomasello with KBW.

Ryan Tomasello, Analyst

Good morning everyone. Thanks for having me on the call today. I guess, just following up on the mortgage question. I mean, certainly understanding the counter-cyclicality that LendingTree can benefit from performance its lenders' partner to backfill these pipelines that are declining. But just looking at some of the recent results across the street, for example, Rocket recently indicated with its guidance that it's actually choosing not to chase volumes given uneconomic margins as gain on sale compresses. So I'm just trying to understand, how you're thinking through the puts-and-takes of the guardrails this year? And what data points you're really focused on for the mortgage business relative to the conviction in the guidance range? Thanks.

Doug Lebda, Chairman and CEO

I’ll begin, and J.D. or Trent can chime in. A mortgage company’s operations hinge on profitability and margins, as well as the efficiency of its loan officers and processors. It's more about marketing efficiency and pull-through than the end pipeline. Mortgage companies often operate close to break-even before they might go slightly negative, prompting them to reduce capacity. I liken it to airlines; if airfares drop too low, adding one more passenger may not be enough, and an airline would need to take a plane out of service. We monitor lender profitability, the cost to fund loans, and how these factors relate to our marketing efforts. The key point is that LendingTree has successfully navigated these situations before. Additionally, with millions of users visiting LendingTree, only a fraction complete the mortgage process, meaning there’s significant potential for growth. That 8,000 to 9,000 loans per month could increase to 15,000 with improved funnel conversion, which requires enhancing our strategy and implementing our marketplace CRM and TreeQual effectively. As we execute these improvements, we also find that lenders are more willing to adapt their processes to collaborate with us thanks to the current market dynamics. This gives us confidence that we can enhance conversion rates and monetization.

J.D. Moriarty, President of Marketplace and COO

No, no. Ryan, first of all good to have you on the call and good to have you as part of our coverage group. I guess the only thing I would add is we spend a lot of time talking about the cycle for our lenders and then our cycle and recognize that it's pretty dynamic and we have to work with them to understand cost per funded loan, as Doug pointed out if we can drive better conversion. So it's not unlike a credit card when I was talking about the right customer for them. Well that's about conversion, right? So if we can drive better conversion, we can manage that cost per funded loan effectively even in an environment where, as you say, they're not stretching. We acknowledge that this next 12 months for many of our refi-centric originators is going to be harder. What you're going to see us, and you've seen it already in the RPL for purchase, which we talked about at Investor Day, what you're going to see is more focused on purchase, more focused on home equity and more focused on us getting the right consumer efficiently. The other thing that you're going to eventually see is the cost for our marketing expense, our cost to acquire drop, right? And so we've been in a high RPL environment but you got to recognize that the way this cycle will play out we have to manage it on both the RPL side and the cost side. So that is the next leg of this and we have a lot of experience obviously navigating these cycles. When we go through these cycles, our goal is to help our lender partner but also just grow our business, right? And so if we look back at the last five years and you look at periods like 2018, which is the most recent comparable period where rates rose and lenders went through a difficult time with - and we're laying off loan officers, et cetera, we worked with them through that period and we grew our business. Right? So that's the way that we're going to manage it and we've planned for it this year. If you think about our numbers this year, they've already been set with an expectation that refi would be down and we're just executing through that period.

Ryan Tomasello, Analyst

Great. Appreciate that. And then I guess a follow-on question would be the 2022 guidance seems to imply a normalization in brand marketing expense by my math back to 2019 levels. So I guess as you continue to focus on the consumer-centric strategy including with My LT. Is there a way to put any guidepost around the time and amount of brand marketing spend that you think will be necessary to drive that next leg of brand awareness of the platform? And is any of that starting to come through at all in 2022 here?

Doug Lebda, Chairman and CEO

Let me start and then pass it over to Trent regarding the numbers. When we talk about brand, we are referring to TV advertising. It has the highest cost per customer acquisition, but it also has the longest-lasting impact. We evaluate TV advertising like any other ad source based on the cost to acquire a customer to take a specific action. We only invest in TV when our monetization and demand are sufficient. Over the past couple of years, our spending on TV has been quite modest due to lower monetization. As monetization improves, we expect to allocate some budget for TV advertising. This should yield results within a year, and historically, it's been around six months. We will certainly communicate any such plans. We have a solid understanding of this process. However, I would not anticipate seeing us on TV until we resolve certain consumer experience issues, which are central to our strategy. We aim to achieve a best-in-class consumer experience before we resume TV marketing, targeting high revenue per leads. I've mentioned to investors before that when we are on TV, it indicates that our monetization side of the business is very strong.

Trent Ziegler, CFO

Yes, Ryan, your assumptions are correct. We have factored in an increase in the brand budget compared to 2021, aligning it more with 2019 levels. However, we have a new Chief Marketing Officer who is only six weeks into the role. Therefore, we've included a placeholder in the budget, but we will remain flexible and purposeful in how we allocate those funds. The business will guide whether we increase or decrease spending from that point.

Ryan Tomasello, Analyst

Okay, great. Thanks for taking the questions.

Doug Lebda, Chairman and CEO

Thanks, Ryan.

Operator, Conference Operator

Your next question comes from the line of Rob Wildhack with Autonomous Research.

Rob Wildhack, Analyst

Good morning, guys.

Doug Lebda, Chairman and CEO

Good morning, Rob.

Rob Wildhack, Analyst

Just a quick question TreeQual. I know you're live with three credit card issuers. Are you live with anyone on the personal loan side or any new partners trialing that product on personal loans?

J.D. Moriarty, President of Marketplace and COO

We have some lenders testing it, but it isn't fully operational yet. However, it will be launched simultaneously and not in a phased approach with credit cards coming first and then personal loans. Some lenders are actually working on both.

Doug Lebda, Chairman and CEO

And J.D., you might want to comment on the presentment and re-presentment the fact that it's a little more complicated to get up and running here but it also creates a barrier.

J.D. Moriarty, President of Marketplace and COO

Yes, Rob, there are nuances in our collaboration with Acxiom and the bureaus, as each of our TreeQual partners prefers to work with different bureaus like TransUnion, Equifax, and Experian. We are coordinating with these bureaus to determine what is allowed regarding their data, specifically concerning their pre-approved customer lists at Acxiom. Additionally, we differentiate between initial and re-presentment offers to consumers, similar to what they receive through direct mail. There is some complexity involved, but I appreciate the effort because it deepens our partnerships, which is our main focus. Currently, we are launching this initiative with card and personal loan products for some of our lenders, and we have certain card issuers who prefer using their own APIs. The positive aspect is that there is widespread interest in our pre-approval concept, as it enhances marketing efficiency for our partners, and we are enthusiastic about the feedback we've received. As we look ahead to 2022, the market conditions in both personal loans and credit cards are favorable for presenting something fresh and appealing to our issuers, rather than a simple click-out model without thorough consumer qualification. We believe this presents a significant opportunity and expect to see positive outcomes in 2022, with success hinging on the engagement of lenders and issuers. Financially, the impact will be more pronounced in the following years, making this one of our key projects this year.

Rob Wildhack, Analyst

Thanks. That's really helpful. One more on the Medicare business too. How did the competitive intensity your results in the quarter and the results from some competitors, compare to your expectations when you set out and decided to invest and expand this business?

Trent Ziegler, CFO

Yes, Rob. I mean, to be totally transparent we came up a little bit short of kind of what we had modeled out going into the open enrollment period. It seems like we were not alone in being kind of surprised by the level of competitive intensity. Well, look, for us, like that was a bet that we were placing and we feel really good about the progress that we made there and kind of the infrastructure that we've built out that we can leverage across the rest of the business. So, that's going to inform us and make us smarter as we progress throughout this year.

Doug Lebda, Chairman and CEO

My comment on Medicare is that we've seen similar patterns in personal loans, where we created a marketplace after restarting our efforts there. In other businesses we've exited, creating a marketplace became challenging when underlying companies or the industry faced issues. Increased competition raises customer acquisition costs and complicates unit economics. In every business, we adjust accordingly. We're not making huge bets on Medicare; we're developing it gradually and have made cautious investments, believing it's still a viable business without risking everything on it. The key in insurance is to build lasting relationships with customers, whether for home, auto, or Medicare insurance. We aim to integrate lending and insurance, sharing data between those areas. For example, if you're securing auto insurance, you might also consider refinancing a car loan. Therefore, I view Medicare not as an isolated business but as a step toward LendingTree's agency model, which provides us a strong competitive edge in that sector.

Rob Wildhack, Analyst

Got it. Thank you for that.

Operator, Conference Operator

And your next question comes from the line of Melissa Wedel from JPMorgan.

Melissa Wedel, Analyst

Good morning, guys. I appreciate you taking the question today.

Doug Lebda, Chairman and CEO

Good morning.

Melissa Wedel, Analyst

I wanted to discuss the revenues, which I believe you didn't restate. It was more of a change in the methodology for attributing revenues to My LendingTree. When I look at the current methodology that includes transactions even when users are not logged into the app, it appears there is a significant amount of activity from users transacting outside of the app. I'm interested in your perspective on what might lead consumers to transact outside of My LendingTree and how you interpret that to shape your strategy moving forward.

Doug Lebda, Chairman and CEO

That's a really good question. When you consider the user experience, let's say you've signed up for My LendingTree and then you click on a display ad. Currently, when you enter, you might be looking for a refinance, and you get directed into our standard process. In the future, we hope to identify you as a My LendingTree user, but we need some initial information. As J.D. and Jorge have mentioned, My LendingTree will offer unique user experiences similar to how Amazon recognizes its Prime customers, making personalized recommendations. This change in our methodology and revenue indicates that people who have signed up for My LendingTree are engaging with it for various needs and wish to return for more services. It’s rewarding to see this repeat usage, which is our goal: to surround the customer with all necessary financial products so they don’t have to go elsewhere, as we can be trusted to find the best deals through our marketplace. If you're a logged-in user, the experience is even better.

J.D. Moriarty, President of Marketplace and COO

Melissa, it's J.D. Can you hear me? I apologize for the feedback issue. I want to suggest that we found it somewhat confusing to discuss two different numbers internally. So, we've simplified it by focusing on the revenue generated from our base of My LT users, and we're interested in their productivity. Historically, we tracked a metric called optimal revenue, which factored in the marketing cost required to reacquire a customer. We can still monitor that internally as part of our marketing efficiency goals. However, we're aiming to simplify how we assess the significance of these users to the overall platform, which will make it easier to track externally as well. Regarding My LendingTree, we’re pleased with the growth we saw in 2021, especially the increase in users from our mortgage funnel. Notably, about 70% of our current user base originated from our personal loans funnel, which has implications for consumer credit quality. As we expand our other funnels—one of our key objectives in 2021 to enhance My LT usage and membership—we expect to see a change in user credit quality, positively impacting our marketplace business. For instance, if our user base solely comes from personal loans, that affects our credit card business. As we diversify the sources of our user base, our credit card business will benefit from a broader My LendingTree foundation. Our goal in 2022 is not just to grow this base but also to diversify its origins. We have many opportunities to direct consumers from our marketplace to My LT, and while we don't do that uniformly right now, we plan to implement this strategy as the year continues.

Melissa Wedel, Analyst

Okay. That makes a lot of sense. As a follow-up question, you touched on the shareholder letter about getting some increased adoption with Plaid integration and getting some consumers to opt in to connecting bank accounts. Can you go over that piece of the strategy? How important that is given the higher conversion rates and how you can incentivize consumers to do that? Thanks so much.

J.D. Moriarty, President of Marketplace and COO

Absolutely. And Jorge Decastro presented at our Investor Day and one of the things he and I were just discussing actually just yesterday was, we've done the hard part of integrating Plaid. We don't have sufficient value prop to a consumer, to a My LendingTree user, for why they should do it, right? We've historically talked to the consumer and said, you want to see your cash flow. Well seeing your cash flow is great but what we're finding is that's not really engagement that people are excited about. So we need to transition from using that Plaid integration to deliver something of value, meaning, if you're spending a lot of money on groceries or gasoline, we want to present you with a credit card that is aligned with your spend. So it is going to be tied to something of value for the consumer from a shopping perspective, from a saving perspective, not simply looking at your cash flow. So we've had good success getting new My LT sign-ups to link their Plaid accounts. We've had frustrating times trying to go back to the existing base and give them a reason to link their accounts. We need to have a very clear value prop as to the why. And as we work on transitioning My LendingTree from a free credit score app to a digital adviser that is part of the strategy. It's all about that value prop and making sure that somebody understands what's in it for them to link their accounts. So it's going to be very much tied to what they're going to see.

Melissa Wedel, Analyst

That’s helpful. Thanks so much.

Doug Lebda, Chairman and CEO

I would like to add that the Plaid integration and the related foundational work are part of investments made in prior years. As J.D. mentioned, our current focus is on value propositions, marketing, and more consumer-oriented initiatives, which can be explored at a much lower cost compared to laying the groundwork and completing the foundational tasks. While we still have some groundwork to do, we have completed a significant portion of it.

Operator, Conference Operator

And your next question comes from the line of Mike Grondahl with Northland Securities.

Mike Grondahl, Analyst

Yes. Hey. Thanks, guys. At a high level, could you kind of talk about revenue visibility you have today versus sort of the historical visibility you've had for revenue? Has it changed much?

Trent Ziegler, CFO

Yes, Mike, I'll take that one. One of the things I would say is that the diversity and health of our network significantly enhance our visibility for each of our businesses. As we've experienced different cycles in the mortgage and consumer segments over the last couple of years, and now as we navigate a different cycle in insurance, the diversity of partners in our network and the absence of concentration risk in these businesses truly improve our visibility. We feel quite positive about this and have observed it consistently across those sectors as we go through these cycles. While there are macroeconomic risks and varying cyclical risks relevant to each segment that we need to be aware of, we take pride in the health of our network, which provides us with greater visibility and reduces volatility in our daily numbers.

Doug Lebda, Chairman and CEO

And in addition to that, the only thing I'd add is, the business has always been fairly predictable, at least in the short run, in the medium term. But the cash flow or EBITDA visibility, while your revenue can sometimes be volatile based on what's going on in the market, your marketing costs to acquire customers typically move in tandem, sometimes with a little lag, sometimes a little forward. But your customer acquisition costs also move with that, which enables the model to be very durable and resilient during whatever market we see.

Mike Grondahl, Analyst

Got it. And then, secondly, as you think about your outlook for 2022, what are the two items that maybe you have the most uncertainty about or that cause you a little bit of stress that something has to fall in place for it? Any two things stick out there?

Trent Ziegler, CFO

No, Mike. We've been conservative with our expectations regarding mortgages. The guidance allows for a decline in refinancing, as we anticipated. Our business will decline, but not as much as the market. We are confident in that. At the same time, we expect the purchase and home equity segments to help offset some of the downturn in the housing market, which gives us a positive outlook. Regarding the insurance business, we see some variability in its recovery speed, but we are noticing good trends in the first quarter. We expect that segment to recover nicely in revenue from the fourth quarter to the first quarter, so we are comfortable with our plan. Additionally, our consumer businesses continue to improve each quarter. I would emphasize that our guidance does not account for any significant improvements from the strategic initiatives we have discussed, which is where we are focusing our efforts. If we can get those initiatives to succeed, we believe there could be some positive surprises.

Doug Lebda, Chairman and CEO

Yes, Trent addressed the insurance comeback, and as we've examined it, we see it as a timing issue. It could potentially happen a bit later. When we discuss guidance, we recognize that the business remains very healthy and is on the rebound. The timing of this rebound—whether it occurs in one month, two months, or three months—largely depends on insurance carriers obtaining state approvals. However, the feedback we are receiving from the market and our carriers indicates that they are eager to resume partnerships with us as soon as their new rates are approved. Recently, we've experienced several significant client win backs in terms of volume, so we are already starting to see some progress. Ultimately, it is just a matter of time, but from a guidance standpoint, the timing is likely our greatest uncertainty.

Mike Grondahl, Analyst

Got it. Okay. Thanks for the insight.

Doug Lebda, Chairman and CEO

Thank you.

Trent Ziegler, CFO

Thanks, Mike.

Operator, Conference Operator

And there are no further questions.

Doug Lebda, Chairman and CEO

Great. So I'll just give some closing remarks and then we'll look to see you all next quarter. First of all, thank you all for your time and attention. We really appreciate and cherish the relationship with our shareholders and with our analysts. And we appreciate your support and we also appreciate your comments and you all pushing us. What I'd say is this, as I think about our quarter and where we are and particularly coming off of two years of COVID, I feel that our strategy is incredibly solid and sound. We took a lot of time doing it. We did a lot of research and we have a united company behind it. Second, the execution of that strategy is working. It's working at all levels. It's working all across the company from process to how we're changing the way we do things, to a commitment to the customer. Third, I'd say that our employees are energized. People are ready to get back to work. They're ready to continue to build great products. We're ready to see this market continue to evolve. We feel very confident in our leadership position and our employees are fired up. And then fourth, our brand is strong. I believe, it's never been stronger. And as we've seen other companies come and go over the years and we had another recent spat of those. It just shows you the strength of the LendingTree brand that's been built up over 25 years and billions of dollars in ad spend. All that adds up to us winning. And who are we winning for? We want to win for our partners to grow with us, to grow your business with us, to build an enduring business around us. We want to win for consumers to save money through us, to give you the right and quick answer to save you money, to help you build a better financial life. And if we do both of those things, we think there is tremendous shareholder value to be added for all of you and for our shareholders. Thank you very much for your time. We look forward to talking to you soon, and have a fantastic day.

Operator, Conference Operator

Thank you for participating in today's conference call. You may now disconnect.