LendingTree, Inc. (NASDAQ: TREE) has demonstrated strong performance in the second quarter of 2024, particularly in its insurance business, which saw revenues more than double compared to the same quarter the previous year. The company anticipates this upward trend to persist into the third quarter.
With a strategic focus on generating positive incremental variable margin dollars and capturing high-intent consumers, LendingTree is poised to replicate its success in the insurance sector within the lending space. Despite a recent data breach at subsidiary QuoteWizard, the company reassures stakeholders of minimal impact on its operations. As the Federal Reserve contemplates a rate cut, LendingTree remains optimistic about its potential benefits to the mortgage business and overall financial performance.
Key Takeaways
- LendingTree's insurance segment revenue soared by 109%, with VMD growth of 47% year-over-year.
- The company expects to become the largest insurance aggregator in the US market.
- Sequential revenue growth was observed in the consumer segment (9%) and the home equity segment (6%).
- LendingTree is optimistic about the lending sector's growth once interest rates decline.
- The company welcomed Jason Bengel as the new CFO, succeeding Trent Ziegler.
- Executives believe the data breach at QuoteWizard will not materially affect LendingTree's business.
Company Outlook
- LendingTree forecasts continued revenue growth into the third quarter of 2024.
- The company aims to increase market share in both lending and insurance sectors.
- Strategy focuses on maximizing VMD and attracting high-intent consumers.
Bearish Highlights
- Acknowledgement of ongoing weakness in the credit card vertical.
- The immediate benefit of potential Federal Reserve rate cuts to the mortgage business may not be significant.
Bullish Highlights
- Strong growth in the insurance sector, with significant potential for further expansion.
- Anticipation of increased lending volume due to clients discussing the loosening of underwriting requirements.
- Expectation of entering a growth mode in lending once interest rates start to decline.
Misses
- No significant misses reported during the earnings call.
Q&A Highlights
- Executives discussed the negligible impact of the recent data breach on the business.
- They emphasized the company's commitment to being a valuable partner to clients and expanding its offerings.
- The company plans to leverage marketplaces to enhance business growth and compete with larger industry players.
LendingTree's second quarter of 2024 has set a positive tone for the company's trajectory. With its insurance business leading the charge and a strategic plan to bolster its presence in the lending market, LendingTree is gearing up for continued growth. The company's leadership remains focused on creating value for both consumers and partners, ensuring that LendingTree not only weathers the challenges but also seizes the opportunities ahead.
InvestingPro Insights
LendingTree's recent performance, marked by a significant revenue increase in its insurance segment, aligns with several optimistic metrics and InvestingPro Tips that suggest a continued positive trajectory. Here are some insights that could be valuable for investors and stakeholders considering LendingTree's future prospects:
InvestingPro Data shows a robust Gross Profit Margin of 94.76% in the last twelve months as of Q1 2024, indicating the company's efficiency in managing its cost of goods sold relative to its revenue. Additionally, the company's stock has experienced a strong 1 Year Price Total Return of 94.53%, reflecting investor confidence and market recognition of LendingTree's growth.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, suggesting that the financial community is acknowledging the company's potential for continued growth. Moreover, despite not being profitable over the last twelve months, analysts predict that LendingTree will turn profitable this year, which could be a pivotal moment for the company.
For investors looking to delve deeper into LendingTree's financials and future outlook, InvestingPro offers additional insights. There are currently 14 more InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/TREE. To enhance your investing strategy, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
Full transcript - Tree.com (TREE) Q2 2024:
Operator: Good day everyone and thank you for standing by. Welcome to LendingTree, Inc. Second Quarter 2024 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. [Operator Instructions] Please be advised that today's conference is being recorded. I will hand the call over to the Senior Vice President of Investor Relations and Corporate Development, Andrew Wessel.
Andrew Wessel: Thank you, Carmen, and good afternoon to everyone joining us on the call to discuss LendingTree's second quarter 2024 financial results. With us today are Doug Lebda, LendingTree's Chairman and CEO; Scott Peyree, COO and President of Marketplace Businesses; Trent Ziegler, our CFO; and Jason Bengel, our incoming CFO. As a reminder to everyone, we posted a detailed letter to shareholders on our investor relations website earlier this afternoon, and for purposes of today's call, we will assume that listeners have read that letter and will focus on Q&A. Before I hand the call over to Doug for his remarks, I 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 view 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 the shareholder letter, both available on our website for the comparable GAAP definitions and full reconciliations of non-GAAP measures to GAAP. With that, Doug, please go ahead.
Doug Lebda: Thank you, Andrew, and thank you to everyone for joining us this evening. Our company generated exceptional revenue growth this quarter, led by the insurance business more than doubling from the second quarter last year. Our overall revenue outlook continues to improve into the third quarter. As you all know, we operate the business on a day-to-day basis with a laser focus on generating positive incremental variable margin dollars. We seek to attract as many high-intent consumers to our marketplace as we can at positive unit economics while at the same time driving wallet share gains with our insurance and lending clients to both deepen our relationships and expand demand on the network. During the past two years in insurance, we successfully executed our plan to drive high intent traffic despite limited budgets to grow our share with carriers. Now is the time to execute the same strategy in lending. Ultimately, we expect this gain in share as -- at partners will be rewarded when interest rates decrease or lending conditions begin to loosen. We are also encouraged by the increased consensus forming that the Federal Reserve may be ready to lower its target rate at one of its next two meetings, although we do not assume any rate change in our financial outlook. Looking at segment performance, insurance grew revenue 109% and VMD grew 47% from the same time last year. Demand from carrier partners continued to build throughout the period. On one level, competition for market share has strengthened within the auto insurance category as very good underwriting results have allowed carriers to invest more into customer acquisition, and we expect that trend will continue throughout the rest of the year. But to put our insurance growth into context, two years ago, we were the third largest insurance aggregator in the US market. Today, based on comparable results, we are the second largest and believe our continued market share gains will propel us into first. Our partnerships of carriers are stronger than they have ever been, we could not be more excited for the future or more appreciative of those relationships. Our consumer segment grew revenue by 9% sequentially. We are still lapping a period of looser underwriting standards in the first half of last year, which resulted in a decline from a year ago. During the quarter, we leaned into stable lending demand at many of our partners with a particular focus on the personal loan business. Our strategy drove a 44% sequential increase in high intent consumer traffic, which helped to improve the number of loans we closed for our partners by 34%. The home segment performed as expected with higher mortgage rates and lower supply of homes for sale, limiting the number of consumers shopping for refi and purchase loans. Home equity continues to be the bright spot of the segment as revenue grew 6% sequentially. Finally, I'd like to extend my sincere gratitude to our CFO, Trent Ziegler. He started 12 years ago as an analyst in our finance department. In his time at the company, he's helped build our financial planning and analysis team, build an award-winning investor relations function by himself, and took on the role of treasurer as well. His work the last three years as our CFO helped us to improve our operating efficiency and recapitalize our balance sheet with a loan from Apollo we closed in March. Jason Bengel will be taking over the job from here. Jason is truly one of the most respected people at LendingTree and last year he partnered with Trent to remove over $60 million of fixed costs from the business. Jason has built out and led a team of professionals tasked with driving ongoing improvements in operating efficiency. He also co-led our internal strategy process which has resulted and are becoming a much more responsive and agile company. I am excited and thrilled for him to take over this expanded role. And with that introduction, Jason would like to say a few words as well.
Jason Bengel: Thank you, Doug. Trent and I have worked very closely over the last six years, and we've made huge progress fixing our balance sheet and right-sizing our expense base. So we're very happy with where we are. We now have an expense base that's highly leverageable. And going forward, my priority is going to be continuing to make strides and focus and discipline. Focus, not trying to do everything all at once, but placing thoughtful bets. And disciplined about resource allocation and disciplined about measuring our progress with KPIs and making sure we pivot where it makes sense. So I'm very excited about the opportunity LendingTree has before it and I'm also very excited about my new role in it. So, thank you Trent and thank you Doug. I really appreciate the opportunity here.
Doug Lebda: And with that, operator, we'll take questions.
Operator: Thank you so much. [Operator Instructions] One moment for our first question. And it comes from Jed Kelly with Oppenheimer. Please proceed.
Unidentified Analyst: Hi. Thanks for taking our call. This is Josh on for Jed. Thanks for taking our questions. I just had two. How much of the insurance margin compression is due to the higher demand versus some of the competition from other operators? And then, do you get concerned with how long this period of earning can continue going forward?
Scott Peyree: If I don't -- this is Scott Peyree, I'll answer that question. Yeah, I would say as far as the margin compression, I would start with by saying overall VMD dollars continue to increase and that's our primary concern as we grow with our clients to provide, a, the highest quality product to the clients as possible and at the same time grow VMD as much as possible. So the incremental revenue growth, which has been extreme right now, has come at a lot lower margins, but it has come at positive VMD margins. So, if I look at the long-term history of the insurance business, when you're in extreme growth mode, which we are right in the middle of extreme growth mode right now, you'd probably expect it to be as low as the high 20s, your margins. When you're in extreme downturns, like we were a year ago, with a lot of cap budgets, you would expect margins to be up in the low to mid-40s. Long-term normality, which honestly we haven't been at before COVID, but I think we could probably -- I think we'll be in extreme growth for a while now, but say a year from now things start normalizing, you're probably looking at low to mid 30s is our historical average margins in the insurance business, which that's where I would expect to level out once we reach more of a normal state in the insurance business.
Doug Lebda: The only thing I'd add to that is -- it’s Doug, is that as you're getting so much more demand coming into the marketplace, whether it's price, quantity, or volume and coverage, you want to go fulfill that because as you're growing your share and growing your revenue per lead, that share that you take from the market makes you that much more competitive in the auction-based advertising markets, particularly search. And the ability to drive that high quality, high conversion, high intent volume to customers is really where we differentiate.
Unidentified Analyst: Great, and then the last one for the personal loans, there was some good improvement there. Just trying to get an idea of how much is from better conversion versus better macro background and if there's any color you can give us on the consumer segment's benefit if the Fed does lower rates?
Scott Peyree: Yeah, I'll say I'll start at a high level just on consumer lending in general, overall lending in general, I would say as Doug mentioned at the top of the call, we've reached a level of stability for a while that we saw in Q2. Like, I would say Q1 was probably the trough as far as the tightening of underwriting standards from clients. And then it's kind of been a level of stability, and we were able to grow through that level of stability mainly by focusing on gaining market share in the high intent marketplaces, which we've done a very successful job of doing. So that drove revenue growth in personal loans. Whereas VMD was relatively flat overall on consumer quarter-over-quarter. We were able to grow revenue with high quality, high intent traffic and having better positioning in those marketplaces sets us up extremely well for when rates start coming down and more importantly our clients start opening up their underwriting criteria again which will be the biggest domino to fall, honestly, in the consumer lending segment when rates start coming down. So, that's eminently in front of us at this point, more clearly in front of us than it's been in years. So, I'm really, really happy personally with our positioning right now. We put a lot of focus on personal loans in Q2, but honestly, we did a lot of similar work in the mortgage space, which you saw revenue grow up there in high- intent consumers. Towards the end of the quarter, we started putting our efforts into small business, and our high-intent consumers are growing there. So I think we're showing lots of success across the board to drive more of those consumers in improving our mix, and that's going to set us up really well for when the lending market starts to turn in the near future.
Unidentified Analyst: Great. Thank you.
Operator: Thank you. One moment for our next question. And it's from Ryan Tomasello with KBW. Please proceed.
Ryan Tomasello: Hi, everyone. Thanks for taking the questions. I guess just taking a step back on the margin front, it looks like the revised guide for the years calling for EBITDA margins of around 10%, the second half implied guide is, I think, high single-digit margins. How should we think about all the moving pieces here, insurance being the biggest one near term around how that impacts the timing and your ability to get back to structural EBITDA margins closer to the mid to high teens that you've previously shown an ability to get to? Is that going to take this massive insurance cycle maturing a bit, and also seeing consumer come back? Just trying to understand the moving pieces around what drives the margin expansion on a consolidated basis. Thanks.
Doug Lebda: Yeah. So this is Doug. Let me just start off and echo something that Scott said earlier, which is, the entire laser focus of the company has to be maximizing variable margin dollars every single day. So if we can make an incremental $100 of margin of dollars and it costs us $97 to do it, we're going to do that at times when our clients are demanding more customers from us than we actually have. So then we're going out and trying to get more and more demand, and if that demand is building, that then enables us to invest in marketing. So we don't -- a percentage margin at the end of the day is more of an output than it is a target for us and marketing expense is fuel rather than an expense. And so, I think the revenue and the VMD is where we like to focus. And with that, I'll hand it over to Jason to talk about the numbers or Scott.
Jason Bengel: Yeah, it's Jason. I can frame out some of the assumptions in the guide here. And I think the easiest way to think about it is just relative to Q2. And so I'll go piece by piece here. So just starting with insurance, we expect continued strength in insurance the rest of the year. This market has a long runway, so we expect sequential growth in both revenue and VMD from here relative to Q2, but with some margin compression for all the reasons we just talked about. Again, focused on driving VMD dollars though. As it relates to insurance on the expense side, we are gradually investing in some headcount to drive some of that VMD and insurance. So as the unit economics work out and we're able to drive VMD, we'll see some increase in expense for the rest of the year. And then moving along home and consumer, really the guide is assuming just generally steady state from where we are with some normal seasonal decline in Q4. The big unknown obviously is rates. It seems like that's increasingly imminent that that will happen and we will benefit from it but we're not assuming any benefit in the guide for home and consumer at this point. So that's -- those are really the key assumptions to talk through.
Ryan Tomasello: Great. That's really helpful. And you already kind of touched on what was going to be my second question here, but maybe just help us unpack the magnitude and timing of the potential uplift that the business could see from Fed rate cuts. I mean, do you feel like the Fed finally getting on a cut, a trend of cuts here is more of an emotional type of response you'll see out of your network partners or it will take time for several rate cuts to actually play out in terms of benefiting -- loosening credit boxes and driving more volume on the consumer side and also mortgage [indiscernible] might take more time?
Doug Lebda: Yeah, I think you hit the word right with the word benefit. So, structurally the mortgage business right now, 70% of customers have rates that are 5% or below. So, the time when there's going to be a large change in consumer benefit is probably ways-off. However, the change in shopping behavior will be -- we think it's always been dramatic. And so we expect to see or we hope to see when that happens, we would expect to see a large, a decent increase in inflows just due to the market. And then we're going to have to work with our lenders to sop up all of that extra demand or all of that extra supply that we're going to have coming in. And the other thing I would note is that we're working right now on preparing for that, just because there will be a change in shopping behavior. So you call it, I think, more of a psychological change than a benefit change, but there will be that psychological change because it will be everywhere in the news that the Fed cut rates.
Scott Peyree: Yeah, this is Scott. I'll add on a few things. I mean, as Doug said, the first domino to fall would be consumer shopping behavior. The next domino will be loosening up of underwriting requirements. In all, I'll be honest without getting into any specific client negotiations, we've had multiple clients we're working with right now, not just like one, multiple clients that are talking already about loosening underwriting requirements and accepting more consumers from us, a wider swath of consumers across multiple product lines. And it echoes very similar to Q3 last year when insurance was in its trough. It was around Q3 last year when we started having similar conversations with carriers about them loosening their underwriting requirements and opening up geographies. And then it started actually happening in Q4 and then it started snowballing in Q1. So I would say a combination of increased shopping and then even the bigger domino of loosening underwriting requirements, it could really snowball the lending side, getting into early ‘25. And then the final domino, as Doug said, is when that rate benefit, especially for refinance, when that reaches that tipping point, refinance will probably skyrocket. That's probably going to be the third domino.
Ryan Tomasello: Great. Thanks for all the color, guys.
Operator: Thank you. One moment for our next question, please. And it's from the line of John Campbell with Stephens. Please proceed.
Unidentified Analyst: Hey guys, it's Jonathan on for John. I was wondering if you could give some more color on the trajectory of insurance revenue throughout the quarter. Did it sort of ramp up as more and more carriers got off the bench and increased marketing dollars? What did that look like and what was the trajectory like exiting the quarter?
Scott Peyree: Yes -- so yes, it continued ramping up throughout the quarter. And that's why our revenue beat was so significant on that versus what we estimated going into the quarter. I would say we had strong positioning going into the quarter, and then there was a significant step change at the beginning of June, which was basically, [due] (ph) give a lot of credit to my insurance team doing a lot of significant negotiations with our top clients in securing major budget increases from those clients. So we did a big step change in June and we have -- honestly heading in July, we've been running slightly hotter than we even were in June. So, I would argue our current Q3 revenue VMD forecasts are probably pretty conservative for insurance, the way the insurance market is going right now. Now, obviously, with this extreme growth, you want to be a little conservative, but it's just -- these carriers have, especially the ones that have reached rate adequacy, have an extreme appetite for bringing on consumers right now.
Unidentified Analyst: Okay. Thank you for that. And then as a follow-up, at this point, is it pretty broad-based, or is it still a couple players, are there still players on the bench? Any color you can provide there?
Scott Peyree: I would say yes to both of that. It is extremely broad-based. We're seeing very significant budgets from a number of carriers. Obviously, our revenue levels, we're seeing long-term clients spending way more than they ever have with us. That said, there are a few carriers that historically spend a lot more money with us that haven't even come back at any significant level yet. So that's still an opportunity. There are still certain geographies that have very limited coverage still. That's going to be that -- they will eventually open up. The home insurance industry has still not achieved rate adequacy as an industry. So that's pretty suppressed still. And that will open up with a lot of demand. So I mean, you just logically look at it. There's a lot of runway left in this growth phase of insurance.
Unidentified Analyst: That's great. Thank you for taking my questions.
Operator: Thank you. One moment for our next question. And it comes from the line of Youssef Squali with Truist Securities. Please proceed.
Youssef Squali: All right. Thank you. Trent, all the best for you in your new role. And Jason, congratulations. I'm looking forward to working with you. So maybe just…
Jason Bengel: Youssef, thank you.
Youssef Squali: A couple of follow-ups. I guess as you look at your prior guidance for the year relative to the new guidance, is it basically fair to assume that all of the revenue upside, and I think it was like $140 million of it at the main point, is from insurance? In other words, the other two segments, your expectations really have not changed. That's the first question.
Jason Bengel: Yeah, it's Jason, I'll take that. Yeah, that's basically right. It's primarily due to favorability in insurance just as Scott had outlined.
Youssef Squali: And then on the -- switching to the balance sheet, how much is left in the convertible note due July 2025? And what are the subsequent maturities after that?
Jason Bengel: So it's Jason, I'll take that one also. So the convert, we retired $161 million of the convert in Q2. So as of Q2, we have $123 million left. And then subsequent to that, we retired another $7 million. So we're down to $116 million. And so the strategy there is the same. We're going to buy those back at a price that's attractive to us. And then going forward, we'll use cash on hand, the $50 million delayed draw from the Apollo facility and future cash to address that maturity. The remaining maturities are several years out. So we're feeling pretty good about our capital structure.
Youssef Squali: Yeah. Can you quantify the subsequent -- $250 due out in 2028? Is there anything else we have outside of that?
Jason Bengel: So yeah, Apollo is 2031, so that’s -- that will be $175 million with a $50 million delayed draw. And then the original term loan is September 2028.
Youssef Squali: Yeah. Okay. And lastly, maybe Doug, there was a broad data breach out there that affected everybody including you guys. Can you just help us kind of, well, first provide any update to kind of what went on there and then how is this potentially impacting the business, if at all? Maybe it's not.
Doug Lebda: Scott, do you want to take that first? It kind of came from -- do you have any comments on that? And then I'll pick it up second.
Scott Peyree: I'll be honest, I have to read the statement. We can confirm that we use Snowflake (NYSE:SNOW) for our business operations and that we were notified by them that our subsidiary QuoteWizard was impacted by the Snowflake data incident. We immediately began an investigation upon hearing from Snowflake, we take these matters seriously and are currently working to conclude our investigation and address any related legal obligations. Based off our investigations, no consumer social security numbers or financial account information was affected and no LendingTree branded products or services were impacted.
Youssef Squali: Okay, so in other words, from a financial standpoint, you don't really see this as impacting the business, at least as of now, based on which.
Scott Peyree: No.
Doug Lebda: Yeah, we really can't comment on this. It's an ongoing investigation. What I can say is, we don't expect this. If it were material, we would have announced its materiality, and we don't believe it is.
Youssef Squali: Got it. Okay. That's helpful. Thank you, guys.
Operator: Thank you. One moment for our next question. And it comes from the line of Melissa Wedel with JPMorgan (NYSE:JPM). Please proceed.
Melissa Wedel: Good afternoon. Thanks for taking my questions. Also, just say congrats to both Trent on the new role and looking forward to working with the team going forward. Going back to the idea of replicating the sort of the insurance strategy of reducing margin to capture share. When we look at how -- probably it’s looking like a really great strategy right now that you're reaping the benefits of it and you've got a recovery on revenues and margin. But when we look at how long that took, that was really like sort of a five to six quarter commitment on reduced margin. It sounds like what you're saying, at least in consumer, is that you don't necessarily think that investment period or the period where you'll see that margin compression will necessarily be as long. Maybe as you saw in insurance, is that a fair interpretation of what your view is?
Doug Lebda: Jason? Scott?
Scott Peyree: I'll start, and again, I'll just repeat as I've repeated, like our goal is increasing total VMD dollars. So if I can do $3 billion of revenue at lower margins, but double my VMD, I'm happy with that. So I would say when you get into an extreme growth mode in lending, which we will be sooner rather than later, if our clients have high demand and want to be writing loans for 3x, 4x, 5x the amount of consumers than they do currently, we're going to do our best to service that because we want to walk in that budget, we want to show them that we can deliver on that budget, and if we need to do at a slightly lower margin, as long as we're making more VMD at the end of the day, our clients are happy and we're happy.
Doug Lebda: Yeah, the way I like to think of it in a two-sided marketplace is if you've got demand for customers from our clients, you have to go fulfill that. And you go take that, as much of that demand as you can, and then you go try to compete to fulfill that because not only are you making money in the first transaction, we're also making money in cross-sell and other revenue streams afterwards and the added effect of that and the positive effect that you're having even if it's that theoretically 0% margin, that budget is coming from somebody else and -- or it's coming from the market growing overall. And to the extent it's coming from somebody else, it's improving our revenue per litre, our RPL, our demand equation, and it's hurting somebody else's. And that's making us more positive in the auctions and we've always prided ourselves on dominating among that high-intent traffic and working with our clients because that's -- they want more efficiency and higher conversions and don't want to buy the trash. And so we partner with them. And the only reason we can do that is because we have more demand than others. And when you're in a growth mode, you want to capture all of that that you get.
Melissa Wedel: Yeah. Okay.
Jason Bengel: Hi, it’s Jason, I'll just…
Doug Lebda: Jason, go ahead.
Jason Bengel: I'll just tack on one more thing to that. When we think about home and consumer coming back, just going back to our expense base, we've been focused on making sure that we have a lot of leverage in that expense base. So when home and consumer come back, it's largely our current partners spending more with us. And so we’re going to -- we've been focused on making sure as much of that VMD as possible drops down to EBITDA. And so the activities when our current partners spend more with us aren't changing that much. We don't need to hire a massive number of account managers necessarily to support that growth. And so we're really focused on making sure it translates into EBITDA that comes back.
Doug Lebda: Yeah, that's a great point. Like, you're basically hanging on during these markets, but trying to use it to gain share.
Melissa Wedel: Yes. Okay. Wanted to also pull on the thread a little bit around your -- some of the partners within consumer talking about loosening underwriting standards, or at least starting to talk about that. I'm curious, is that -- you noted it's multiple partners. Is it within a particular, like, super prime part of the market? Is it geared at a particular type of customer?
Scott Peyree: Yeah, so I would say this is a -- absolutely, I can just tell you at generic high levels, some of the conversations were happening. Obviously, I won't specifically call out clients. But yeah, you're looking on, for example, like on small business and personal loans, like one thing that we're having a conversation around is like loan purpose is that that can be very like whether you get an inventory loan, going on vacation, like what is the purpose of your loan? That's one of the things they've gotten really restrictive on, that they're talking about opening up categories of loan purpose that they'll accept. Another category is just credit scores, like talking about, for example, lowering, well, we needed to be 720 above, now we'll start accepting 680 and above. But, that's the start of the snowball there. Like, I would say on the mortgage side, we've had a few clients that may have -- they’ve been [capped in] (ph) certain products like purchase mortgage that are now opening up that. So you're kind of seeing across the board in all lending categories to be honest.
Melissa Wedel: Okay, okay. And so I was asking my last question too was around small business. It seems like that had been obviously the performance there is by procuring from personal loan a little bit, but you're saying you're hearing that from lending partners too, expanding that credit box a little bit into the small business area?
Scott Peyree: Yep, yep. And I'll caveat it all with everything that's happening it's small. It's nothing as significant. But what is significant is the first time the winds have changed from restrictive to opening. And it's just like it happened in a short period of time. It starts very small. But then once the dam starts to break open, it can be a flood pretty quick.
Melissa Wedel: Okay. Thanks, everyone.
Operator: Thank you. One moment for our next question, please. And it's from the line of Madeleine Zhou with Susquehanna International. Please proceed.
Jamie Friedman: Hi. It was actually Jamie. So is home and consumer contemplated to grow in the second half of ‘24?
Jason Bengel: It's Jason, I'll take that. So it's, again I think the easiest way to think about it is relative to where we are in Q2 and relative to that it's generally steady state, some drop seasonally in Q4. When you look at it versus prior year, that comp is just much easier in the second half of the year because that's when most of the tightening happened. So, when you look at growth rates from Q1 to Q2 to Q3 to Q4, they will improve, but mostly because the comp is that much easier.
Jamie Friedman: Okay. Thanks for that, Scott. And then, or Jason, I'm sorry. And then, Scott, I'm surprised that you have these constructive comments about lending but it says in the shareholder letter there's ongoing weakness in the credit card vertical. So, could you help us, like, unpack when you say lending, is there a reason why, and I'm sure there is, I just don't understand it, separate behavior being exhibited between, say, personal lines, home equity and carded originations?
Scott Peyree: Yeah, it's accurate to say credit cards is still by far the toughest business in the -- and that would be the one category, as I didn't call out earlier. That's the one category we're not hearing a bunch of excitement about opening up. I think the credit cards in general has the riskiest unsecured debt category in lending, they've seen default rates spike significantly higher than most of the other lending industries have seen. To make a very general statement, I think you've seen in other lending industries, rates spike, the delinquencies spike as rates went up, but it's kind of leveled off over the past six months. And so even though it's at concerning levels, it's not at fire alarm levels, And they're feeling more comfortable that it's leveled and hopefully will go down when rates start to go down. I think the credit card business has been a little bit different where it's kind of spiked to alarm bell levels in the credit card business. And they're more in general in a mode of trying to get credit card balances off the books versus like adding more balances to the books. Does that answer your question?
Doug Lebda: Yeah, and the only thing I'd add is we're definitely committed to the category and see that, and it is a big financial services category, and we can do better there, and we want to be a really valuable partner for the major issuers and the minor issuers. And we've got a lot of stuff in the works on the product and tech front to hopefully address that and make it a great business for our partners so we can actually invest in sometime in the future.
Jamie Friedman: Got it, and lastly, let me just echo my congratulations to Trent. It's been a pleasure working with you over the years.
Trent Ziegler: Thanks, Jamie.
Operator: Thank you, and our last question, one moment please. Comes from the line of Mike Grondahl with Northland Securities. Please proceed.
Mike Grondahl: Hey, guys. Thanks. Kind of just a question at high level. How would you describe kind of the visibility -- the forward visibility, maybe in months or in quarters for insurance, personal loans and mortgage for each of those areas?
Doug Lebda: Scott, you want to take that?
Scott Peyree: Forward visibility as far as just revenue growth demands.
Doug Lebda: Budgets and buying.
Mike Grondahl: Trends in the business. I know you guys don't have [indiscernible] what do you see today?
Scott Peyree: I would say, I'll start with insurance. The terminology I would use is relentless growth in insurance. It just seems to be building and building versus leveling off. And we sure aren't getting much, if any, indications from our clients about pulling back. The general attitude is how can we get more, what can we do to get more? The lending, as Jason kind of said before, I would say lending, it troughs out in Q1, it's been in a steady state. I think we've been growing top line revenues slightly in that steady state with B&D largely staying the same. I would say as I look out and forecast out, it will probably stay generally in that state until rates start to decline. And then once rates start to decline, I think you're immediately in growth mode there. And so, like, we all hope that that will start to happen in September, right? I mean, odds are very high that that's when it starts. We don't know that. I mean, it's up to the Fed to make that decision, but that's how I would answer the lending category in general is you're probably in a steady state until the rates start to come down.
Doug Lebda: Yeah, and I don't want to get too optimistic, but if you just look at the size of the industry among the public companies, the just direct TAM there is probably -- is three to four times bigger than we are. And then when you look at direct marketing as a percentage of the total ad spend of the GEICO's, the Progressives, the Allstates, I don't think we're even making a dent in their total marketing budget. And we can show ROI until the cows come home. And so increasingly, we've always believed that marketplaces are going to help these guys really expand their businesses and that's proven to be the case. Now if they've gotten the rates right, just like we don't stop until the last profitable dollar, they don't want to stop until the last profitable policy they're putting on.
Mike Grondahl: Got it. Thanks guys.
Operator: Thank you. And as I see no further questions in the queue, I will pass it back to Doug Lebda for final comments.
Doug Lebda: Thank you so much, and thank you everybody for your questions. We are very excited about the opportunity ahead of us. Our outlook for continued year-over-year growth in revenue, VMD and adjusted EBITDA is the end result of many strategic decisions we have made over the last two years. Growth in our market-leading insurance segment remains robust. Our targeted strategy to increase wallet share with our lending partners is performing well and should put us in a great competitive position to grow revenue in VMD as interest rates begin to decline or credit conditions begin to ease. Thank you so much for joining us on this call and we look forward to connecting again when we report third quarter results.
Operator: And thank you all for participating in today's conference. You may now disconnect.
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