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LendingTree, Inc. (NASDAQ:TREE) - Benefiting From Insurance Rebound and Poised for Lending Resurgence
Published on September 24, 2024 | Ticker: TREE

LendingTree, Inc. (NASDAQ:TREE) is a leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions. The company operates in three reportable segments: Home, Consumer, and Insurance.

Business Overview

LendingTree has demonstrated resilience in the face of challenging market conditions, posting impressive results in the second quarter of 2024. The company reported revenue of $210.1 million, up 15.1% year-over-year, despite a decline in the Home and Consumer segments. This strong performance was driven by exceptional growth in the Insurance segment, where revenue more than doubled to $122.1 million, up 109% year-over-year.

The Insurance segment's success is a testament to LendingTree's strategic focus on gaining market share and building stronger partnerships with carriers. Over the past two years, the company has executed a plan to drive high-intent traffic to its platform, even with limited budgets. This strategy has paid off, as LendingTree is now the second-largest insurance aggregator in the U.S. market, up from the third-largest position two years ago. The company believes its continued market share gains will propel it to the top spot in the industry.

In the Consumer segment, revenue declined 32% year-over-year to $55.9 million, as the company lapped a period of looser underwriting standards in the first half of 2023. However, LendingTree has been able to drive a 44% sequential increase in high-intent consumer traffic, which helped improve the number of loans closed for its lending partners by 34%. The company remains focused on gaining wallet share with its lending partners, positioning itself well for when interest rates begin to decline or credit conditions ease.

The Home segment also experienced a decline, with revenue decreasing 23% year-over-year to $32.2 million. This was primarily due to higher mortgage rates and lower supply of homes for sale, which limited the number of consumers shopping for refinance and purchase loans. However, the home equity product continued to be a bright spot, with revenue growing 6% sequentially.

Outlook

Looking ahead, LendingTree's management is optimistic about the company's prospects. The Insurance segment is expected to continue its relentless growth, with no indications from clients of pulling back on their marketing budgets. In the lending business, the company anticipates a steady state until interest rates begin to decline, at which point it expects to see immediate growth.

The company's focus on maximizing variable margin dollars, rather than targeting specific margin percentages, has been a key driver of its success. LendingTree's proprietary systems allow it to make rapid decisions on the deployment of variable marketing expenditures, enabling the company to capture demand from its clients while maintaining positive unit economics.

Financials

LendingTree's financial position remains strong, with $66.8 million in cash and cash equivalents as of June 30, 2024. The company has been actively managing its debt, having repurchased $161.3 million in principal amount of its 2025 Convertible Senior Notes during the second quarter. Going forward, LendingTree plans to use cash on hand, available borrowings from its 2024 Term Loan, and future cash flows from operations to address the remaining $122.9 million in outstanding 2025 Notes.

The company's balance sheet flexibility and focus on operational efficiency have positioned LendingTree well to navigate the current market environment and capitalize on future growth opportunities. With a strong presence in the insurance and lending markets, the company is poised to benefit from the anticipated recovery in consumer demand as interest rates decline and credit conditions ease.

Conclusion

LendingTree's second-quarter 2024 results demonstrate the company's ability to adapt and thrive in a challenging market. The Insurance segment's exceptional performance, coupled with the company's strategic initiatives in the Consumer and Home segments, suggest that LendingTree is well-positioned to continue delivering value to its shareholders.

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