LendingTree, Inc. (TREE) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to LendingTree Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] 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, Investor Relations.

Thank you, Michelle, and good morning to everyone joining us on the call this morning to discuss LendingTree's Fourth Quarter 2022 Financial Results. On the call today are Doug Lebda, LendingTree's Chairman and CEO; J.D. Moriarty, President of Marketplace and COO; Trent Ziegler, CFO; and Scott Peyree, President of Insurance. As a reminder to everyone, we posted a detailed letter to shareholders on our Investor Relations website earlier today. And for the 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 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.

Thank you, Andrew, and thank you all for joining us today. We are excited to provide earnings results this morning. But first, I wanted to call attention to our launch of the LendingTree win card. Our first product introduction and the reimagining of the -- my LendingTree offering that was announced this morning. We believe the win card offered exclusively to -- my LendingTree members will improve user engagement as the 2% cash-back feature is only unlocked when cardholders log in into the LendingTree account. And because the win card is among the first cards to be integrated with our TreeQual product, we are expecting approval rates to be substantially higher, which will also improve our unit economics and customer satisfaction. We have many new features and products like this planned for introduction as we move through 2023 and beyond. The focus of all of this work is to combine our market-leading partner network with a best-in-class customer experience. We believe the innovative products, such as the win card, in addition to the planned enhancements we are hard at work on will make -- my LendingTree the leading destination for our customers to shop for all of their product needs. Moving on to our results. In the fourth quarter, our Insurance division posted excellent results. This can be attributed to initiatives that Scott and our insurance team put in place to focus on higher intent customer traffic to help our insurance partners improve conversion rates. Because of this, we were able to capture increased budgets from insurance carriers and at the same time, reducing marketing costs. The team did a tremendous job executing on all of these projects which led to margin improvements by a full 6 points from the third quarter. When carriers spend returns to normalized levels, we expect these initiatives will be rewarded with increased market share. Our Home segment, not surprisingly, faces a very challenging part of the interest rate cycle. The Fed's commitment to higher rates to subdue inflation will continue to have a negative impact on new mortgage loan demand. Additionally, lenders are seeing lower conversion rates because there is less benefit to refinancing as interest rate rates rise. A close integration with our largest partners helped us to quickly pivot to sourcing cash-out borrowers who are looking to tap the substantial amount of equity they enjoy as homeowners today. This year, we expect cash out transaction will remain the bulk of our revenue opportunity in home. However, our key growth initiative within the segment is to gain share in the purchase market by improving close rates for our partners. To the extent we see a pickup in purchase application rates as we move through the year, we believe this project will have a positive impact on our financial results. In our consumer segment, we saw throughout the second half of 2022, lenders tightened underwriting criteria due to higher interest rates and the slowing effect they have on our economy. A stricter credit environment generally leads to lower close rates for our lenders, which reduces our revenue. Despite the decline in fourth quarter consumer revenue, we were able to grow segment profit by relentlessly focusing on unit economics. Our growth initiatives in consumer include completing technology enhancements for our credit card business, which we believe will help to improve financial results going forward. In small business, we are also implementing technology solutions to automate capture of applicant financial data, which will help better segment our traffic for our lending partners to also increase close rates. Additionally, we remain intensely focused on our operating expenses. We recognize it is a key financial metric that is entirely within our control. The variable marketing model this company was built around is designed to avoid outspending the revenue opportunity available. And similarly, it is our job to properly manage our fixed costs based on our outlook for future revenue. We will invest in projects when we see an attractive risk-adjusted return. We are doing that currently to support the improved customer experience and our other key growth initiatives. However, we will also move quickly to decrease funding for parts of our business that are unable to meet return targets, evidenced by our exit from the reverse mortgage segment in the fourth quarter. This commitment to financial discipline will remain a key tenet of our day-to-day activities as a leadership team. And now operator, I'd be happy to open the call for Questions.

[Operator Instructions] Our first question comes from Youssef Squali with Truist.

So a couple of questions for me. One on credit card, Doug. Can you maybe talk about what you're seeing there? It seems like you may be losing a little bit of share there, yet you just talked about plan initiatives to kind of reverse that? Maybe can you speak through exactly what you're doing there to help reaccelerate that business in 2023. And then on this obligatory question about large language models and like ChatGPT and potential impacts on the business. So maybe can you at a high level, talk about how you're expecting that to impact both the search financial products, et cetera, so the demand side, but also on the content creation side, which could actually be a nice or potentially a good...

 ChatGPT.  So I got card and I got A1/ChatGPT, right? -- if I got that correct. So on card, and I'll let J.D. chime in here, I'll at the high level, high notes. -- with every credit card marketplace on the Internet, you typically have what we refer to as a click-out model. What we're trying to do there with both TreeQual and the win card is to have access to the real underwriting criteria of lenders so that we can improve close rates. On AI and ChatGPT, we're using more machine learning and AI right now, although it's something that we would potentially want to look at one of the key initiatives that we have is I talked a lot about close rates -- and if you dig into mortgage, which is a long-cycle product, we need to improve our communication with consumers post submit, while lenders are making phone calls, and we have a lot of things on the docket to address that. But I would say AI is not one of them yet. But as it develops, I can certainly see that helping us improve our communications with consumers, but we're not there yet. JD?

 Just Youssef, let me focus on the first credit card question, which is really with regard to our credit card marketplace. We have a tech platform migration going on right now. Internally, we call that to the Lightspeed platform. That will make our page load speed faster. It will make partners interacting with us easier. It will make compliance, which is a very important thing in the credit card world way more efficient. And so the benefit for us and for all of our partners. So we're excited that work is going on in Q1. We are on schedule with it, and it will probably finish sometime in Q2. Now that's not the only solution to the credit card business for us, and we've talked about this in the past. We are way too dependent on paid search. And so we need to grow other marketing channels. So we've got actually very good. We're very happy that far with the progress in both CRM for credit card and specifically for SEO for credit card. Those are 2 focus areas. -- for us in terms of expanding marketing. Why is that important? Because all of our partners in credit card need us to get to certain volume targets. And if we hit those volume targets, we get paid more. And it becomes prohibitally expensive to do that if you were very dependent on one channel. So that's what we're doing in part. The other very important part of becoming more integrated with our partners and delivering them more volume is TreeQual. And so we continue to add partners there. It has been admittedly slower than we projected at the beginning of last year, but we think we are on the right track with the solution because, ultimately, that is driving conversion rates, right? In a typical experience, a typical click-out experience, we redirect the consumer from our site to that of a partner, and it will get approved, I call it, low teens percentage rates. -- when we're talking about something that is pre-approved, it is being -- it is converting at an 80% approval rate, right? So that's the definition of higher conversion. That is what we're focused on with TreeQual. And there are different paths for TreeQual with every partner partners what we found, what we've learned over the last years partners want to work with us in different ways, all of which we view to be an improvement over the current status quo. And so card, as you look at our -- each of our big businesses, it is the one that needs the most work in terms of what I'll call the structural margin profile. As we fix that, we think we'll be able to take market share but take market share in a way that does not hinder our financial performance.

And the only thing I'd add to what JD said is on the SEO front, as you move from our -- from the primary domain name for SEO being CompareCards and you move that content over to LendingTree. We expect that you have to take a dip first on your SEO traffic. And then as that builds up, we think the LendingTree domain will yield much better performance in SEO over time.Â

Our next question comes from Jed Kelly with Oppenheimer.

 Going to insurance, I think at the end of your shareholder letter, you sort of gave a -- you gave an outlook for insurance sort of that you're waiting for the carriers to sort of come back, judging by how some of your competitors have reported. It seems like carriers spending is sort of accelerating. So can you just talk about the arc of the recovery we should be expecting? And then can you just help us around the unit economics with Win card?

This is Scott. I'll start on the insurance first and then throw it back to the rest of the team for the win card. But yes, -- on the recovery of insurance, what I would call it and what I've been calling it is we're in the very early innings of the recovery, literally like the first inning of the recovery. It is happening. Revenue is going up. There's one large carrier in particular, is spending more aggressively than the rest in general. A lot of the rest of the carriers are still proceeding with caution at this point, but the conversations are more and more optimistic. There's more conversations. There's discussions of when and how the spinner is going to go up. There's testing in certain states with the carriers. But -- it's -- we're seeing pretty good growth in our auto insurance segment quarter-over-quarter, going from Q4 to Q1. And as we've been talking about, we've been focused on the unit economics and the VNB of our insurance business instead of trying to over-deliver on budget, which our asking for, we're focusing on the quality of traffic we're sending to clients and the profitability of that traffic. I think we're doing a very good job of that. Because carriers in general, given the carrier that's gotten a lot more aggressive, at some level, they're still conservative and concerned about profit very concerned about profitability, and it's not just like pedal to the metal. So I do expect the recovery to continue going to probably take 9 to 18 months until for like the entire industry, be fully back at full board, but it is happening, yes.

  Jed, this is Trent. I'll add on economics on the win card. I guess what I'd say is the way that, that's going to work, obviously, we disclosed that we are doing that in partnership with Upgrade one of our partners. They will be managing all the balance sheet risk and the credit scoring, et cetera. We will get a substantial bounty for every card that we originate through our platform as well as an ongoing share of the interchange. But I guess as it relates to the financial impact of that, we obviously think it's positive, and it will be a contributor this year, but that is more than anything else as much about -- it is the first of many features that we think are differentiated and will help us continue to evolve the value prop for my lending tree and for our members and continue to drive engagement as we move forward. So expect more of these things as we progress throughout the year. And I would argue that that's -- that piece of it is as important, if not more important than the financial impact that we expect to see near term.

The only thing I would add to that is if you think about a normal credit card bounce in the industry, but then you can apply higher conversion rates to it, your unit economics should be higher. We believe we can actually market this as a separate[Indiscernible] proposition. And again, as part of -- my LendingTree as part of being part of -- my LendingTree, the 2% cash back, which I referred to as unlocked when you were logging in to My lendinTree tree once a month, where you're going to be seeing actions you can take to improve your financial life. And we think that will really help --MyLendingTree in total.

And just on a follow-up to Scott's comments about higher traffic. Insurance segment did have, I think, 38% VNM margins. I mean, is that the right way to look at the business in '23 then you're going to have the VMN margins above mid-30s?

Yes. I would say as we look at '23, we would like to keep those margins in the mid- to high 30s. When the entire industry starts getting more aggressive, and I'm talking about from a carrier standpoint, what everyone's back in and playing and you may start going a little higher fruit on the tree where you're trying to get for revenue that is at lower margins. But honestly, in a lot of scenarios right now, that revenue isn't always the highest quality traffic and you have to run it at lower margins and the carriers in today's market aren't really begging for it. So we're not trying to force it down the throat so to speak. Sorry, you mid- to high 30s forever, like if you get into serious like top end revenue growth mode or like all the carriers start getting really aggressive that might change, but I don't foresee that in the next 6 to 9 months.

And Jed, based on Scott's commentary, I'd say, implied in our full year guide is pretty modest revenue growth based on what we're seeing today, sort of in the mid-single-digit percent range, but we do assume that those margins hold in kind of the mid- to high 30s. Obviously, that can evolve as the market evolves throughout the year, but that's our baseline expectation.

Our next question comes from Chris Kennedy with William Blair.

Can you give us an update on your advertising initiatives that you started last year and kind of what your plans are going forward?

Sure. So the advertising we ran last year worked extremely well. It elevated our brand again to in the right direction across all of our metrics. One of the things that we're moving -- we're doing this quarter is implementing something we call multi-touch attribution, which uses data to allocate your marketing returns over the channels that you run. So right now, we're not looking at any significant brand investment because of the unit economics and where they are, it wouldn't make sense. However, with the win card, we do have Moly Shannon doing some fantastic video that we can do and put on YouTube and other sites. So we expect to use more of that and we can do that much more inexpensively than running big brand on TV. And that will happen as the unit economics get better and demand returns. But I'm guessing that's going to be when interest rates start to fall a little.

Okay. Very helpful. And then just an update on your capital allocation priorities for this year.

 Sure. So on capital allocation, so one thing that we're doing, first off, I don't see us doing any acquisitions. Trent can talk more about just other things. We are very, very focused on EBITDA, cash flow generation maintaining costs and then investing. One of the things that we've done is we've moved to a quarterly planning cycle where every 3 months, we are prioritizing initiatives based on where we expect the returns to be. And we're willing to make pivots inside of the quarter. And right now, we're working, as I said earlier, on improving conversion rates really across all of our products and all of our key initiatives, whether it be TreeQual, working to post-mortgage experience, the purchase initiative, the win card, those are all improving conversion rates, which improves customer satisfaction and it's more unit economic steel market against.

Yes, I'll just add on to that. As it relates to the balance sheet, I mean our primary focus is on delevering. Obviously, all the things Doug just hit on are focused on driving near-term cash flows, and that is obviously an important part of it. But we are looking at sort of opportunistic ways to retire some of the debt on the balance sheet.

Our next question comes from Ryan Tomasello with KBW.

In the mortgage business, I think investors are trying to understand where trough performance shakes out for the core purchase and refi products. So maybe you could discuss at a high level how you're thinking about the glide path for that business what type of environment we would need to see for it to stabilize and recover from here? And if that's solely dependent on rates moving lower to spur refi or if you think the business has a line of sight to thrive in an environment where refi remains structurally depressed. And on the home equity side, given how much more significant that business has become, it would be helpful to understand how sustainable you think that performance is? And perhaps how much more runway there could be for growth?

Ryan, it's J.D. Thanks for the question. It's a good one. Obviously, when we think about the year ahead, we want to be able to manage the business without making a huge projection on where the market will go. The point being, we obviously have been through an awful lot in terms of rate increases and our partners are going through a lot. So one of the things that we track is the behavior of our partners and we watch loan officer counts at each of our partners because there was a ton of capacity, loan officer capacity that was added in 2020 and 2021. And in the consumer direct channel, which is the majority of our partners, right, as opposed to retail, they tend to focus on refinance. In the environment like what we're -- what we went through in '22 and we continue to go through is really challenging in terms of getting the conversion rates that they need. And fundamentally, as you know, from all the MBA data, so there aren't that many Americans who would benefit from a refinance right now. So our assumptions are that refinance for all of '23 is de minimis. And that is why we are so focused on driving purchase. So how are we going to drive purchase? One of the things we've observed is that starting around the second quarter of 2020, our market share in purchase started to drop off. And it started to drop off largely because of the behavior of our partners, right? They were focused on refinance because it's converted and that was where they could make money. And so critically, we looked at ourselves last year and said, okay, we've got to regain share in purchase. That's hard to do because purchase has a longer journey from when the consumer comes to our sites when they actually convert. One of the things we're trying to do is get better information as to where that consumer is in their process, right? If they are late in the funnel, closer to buying a home, closing on a home, we want to know that and share that information with our partners that will make them convert better. So that is our fundamentally, that is our strategy and why we're so focused on purchase because we're assuming that refi does not come back anytime soon. We have been thrilled with the performance of home equity. Two years ago, I don't think anybody in our company thought that the home equity product could reach the scale that it has reached. And what we're encouraged by is that many of our lender partners are adding that product. And so we're getting to real home equity, right? Historically, we talked about the fact that we had lenders who would buy volume from us of consumers interested in home equity and try and convince them to do a cash out refinance. That still goes on. It's just a lesser percentage than it used to be, right? And so the health of the home equity product is quite good. We're really happy with the progress that we've made there as a replacement we obviously would love to see an environment where we're not so dependent on it. Now one thing we obviously focus on with home equity is it is -- they are smaller loan sizes than typical purchase or refi. And so are the unit economics there. And that's one of the things we've been watching closely. The flip side of that is many of our lenders who are recently adding dialogue with lenders who think they can close more quickly on home equity. So automation is helping the growth in that market, which is great. So as you think about our guide, we've been very conservative with respect to refi. We do think there's just some pure market share in purchase. Purchase is always weak in the beginning of the year, and it will start to lift in March and April. We want to be prepared for purchase even. And then we've assumed that we can hold the performance of home equity. And we're just trying to navigate this home segment right now. I will tell you I had a lender say to me in early to mid-January, these last week was our best week in 7, and we were thrilled. But obviously, we've seen rates jump even since then, and we have to kind of navigate this cycle with our partners. So when you see a little bit of a give back in rates, we're encouraged not because all of a sudden, there's some huge pool of refinance, but we know that it does help our lenders with respect to lender health. And that's what I think we're going to be in for that for the remainder of '23. And our guide on home, we're very conservative there. We think that it's going to be entirely mostly home equity throughout the year.

 And the only thing I'd add to what J.D. said, just put a finer point on a couple of things. So just think about consumer behavior, you're coming in, looking to refinance your entire $400,000 house, you've got a mortgage rate from 4 years ago. That's where the consumer benefit doesn't make sense to refinance, but your home value has gone up, so second mortgage makes a lot of sense. Then you flip to the lender side. The last time we had home equity growth like this was literally like 2001 to 2009  until the housing market had a major correction as we all know. And it wasn't until losses from lenders mounted in the second mortgage business until they pulled back. And now what we're seeing is a resurgence of that. As J.D. said, some of our consumer direct lenders are getting back into that business. It can be highly automated oftentimes doesn't require complete appraisals. So if that gets re-automated, we expect that to help us out as refinance refinancing your entire mortgage share makes up.

I appreciate all that color. And then second one for me on the expense side. Can you put a finer point around the additional levers you have to pull from here pending how performance trends throughout '23, perhaps you could quantify a range of the additional costs that you think you could theoretically remove from the system -- and also what type of environment we would need to see in order for those plans to start to be more seriously considered.

Yes, I'll start and then I'll let Trent put some details I doubt we're going to give you a range, but I can tell you that we're continually looking at things. As we move to a more project-oriented company with our quarterly cycles I talked about, you are investing on a variable basis on a few things that you think are going to move the needle and then everything else is[indiscernible] "fixed" and we're taking a continuous and very hard look at that. Trent?

Yes. I just sort of continue what Doug said, right? Look, we've obviously taken some actions throughout the last 12 months in the form of workforce reductions and otherwise. Really, when you get past advertising, which obviously we'll continue to look at and optimize the advertising line on it as well. But beneath that, the vast majority of our fixed expenses are people and our technology stack, right? And so some of those things are easier to move the needle on than others. But as Doug said, we sort of look at the body of work that we have going on and sort of the bets that we're placing and the discrete initiatives and we continue to kind of raise the hurdle rate as to what we fund and what we choose to invest in. And so relative to the commentary in the shareholder letter should unit economics in some of our core businesses continue to get tougher, we've got to raise that hurdle rate and draw a bit of a harder line as to what we're choosing to invest in. And so that's the approach that we're taking...

Our next question comes from John Campbell with Stephens.

Within Consumer, I mean, if we back out personal loans, credit cards and small business, I think that implied Consumer Other was up pretty sharp, I think, 28% year-over-year. That's now about 1/4 of the mix. So curious about what drove the strength there and how you're thinking about that other business within consumer for the rest of the year...

Sorry, John, Consumer x personal loans and what else, I'm sorry?

x Personal loans, credit cards and SMBs, just the ones -- the larger business you guys typically call out. I mean if I look at that kind of implied bucket of other, that's about a 28% growth rate. So really good results there. Just curious what drove that strength?

Yes. So we've seen... Kind of under the hood growth in 2 areas. One, unsurprisingly would be our deposits business, right? As interest rates continue to rise, there's more interest in shopping around yields on checking, savings and CD rates. So that the relative scale of that is not huge, but that continues to be an area from a macro standpoint that we continue to see opportunity. The other area is in our credit services business, right? So we have both credit repair and debt relief where folks come to us and express interest in a personal line or in another product, perhaps don't meet the criteria for those loans, we offer subsequent solutions to them in the form of credit repair net- release based on their needs. And that's been an area that has grown a little bit throughout the last year.

Okay. That's helpful. And then from a strategic standpoint, I guess also from a modeling standpoint, I saw you guys mentioned you're discontinuing the reverse mortgage business. I guess, first, why now? And then secondly, how much revenue did that contribute in 2022? And any kind of discussion on segment margin or VMM impact?

Yes, John, that business was one that we -- we stood up several years ago, and the opportunity there has been declining over the last several years. The regulatory environment for there is not particularly supportive. And to give you some sense, that was a business that was doing sub-$5 million in revenue for the last several years. So it's really not a needle mover. When you think about strategically sort of where we are in the business, we're really trying to simplify the business in many respects and focus in on the core value drivers, and that's one that relative to my comment earlier about raising the hurdle rate, they didn't quite need it, right? And so that's just a business where we can streamline focus and resources in the bigger priorities.

John, I just add, I think as Trent said, financially, it's not a needle mover, but what we're doing is looking at all of our businesses and saying, "Okay, what's the natural margin in this business? What's the opportunity in the business relative to the partner set -- and then what does it do in terms of burden on our fixed cost or impact on our fixed costs, right? So when we talk about our cost structure, these things are closely aligned, right? We're trying to make sure that we're in the right segments where we're getting maximum leverage off of our fixed costs. And if there is a cost -- a hidden cost aspect, right, associated with being in a business that's not delivering a big impact, we want to redeploy those fixed costs or cut them, right? And so it's obviously reverse in and of itself is not a big impact, but it's indicative of the scrutiny that we're putting into a whole business.

 Our next question comes from Rob Wildhack with Autonomous Research.

You called out some competitive factors on the credit card side. Obviously, a lot going on in that space, whether it's TreeQual or competing products, different business models. And now you even have a competitor paying out consumers who don't get approved. Bigger picture, can you just share how you think about the competitive landscape and positioning there and really the rationality of it all right now?

Rob, can you just -- could you repeat the last part of that question? I apologize it tailed off.

Oh, sorry. Yes. Just kind of curious how you're thinking about the competitive landscape in credit card and really the rationality of it with all these different offerings that are out there.

Sure. So at the end of the day, we're trying to -- we're coming at credit card where it is a small business relative to our portfolio of businesses relative to our competitors. And the competitor that you're mentioning is obviously Credit Karma, that's, I believe, what you're referring to when they talk about the guarantee where cards are assured. That's an extension of their lifebox preapproval. And they've just changed the birdie around it to assure somebody the degree of guarantee that they would actually get the card. Now why are we doing TreeQual? One, for consumers, we think it's a better outcome, right? We don't like a LendingTree consumer coming to our experience, clicking out and having effectively a 80-plus percent chance of being denied a card. That's not great for for us, and it's fine for our partners because they only pay us on approvals, but it's not great for customer experience. So TreeQual started from that perspective. Now ultimately, though, for our partners to want to deal with Credit Karma and NerdWallet ourselves and others, they need to get volume, right? There's no point in working with us if they can't get volume from us. So we are, from a marketplace perspective, embarking on a strategy to increase the volume we can get them at a reasonable price. And so we just need to diversify the marketing channels to do that. TreeQual is going to rely on our -- my LendingTree base, right, largely. And then there are opportunities to use TreeQual in our existing experiences that we're actually quite excited about. So for instance, a consumer could be coming in and looking for a given product, let's say, they're looking for a personal loan, but the size of the loan they're looking for, it doesn't really make sense for a personal loan, and we can show them a card that they are preapproved for that we think would be a good experience for the consumer, and it's another opportunity to drive volume. And we need to get better there. Now core to your question, is the competition in the card space. Interestingly, we're coming into this where it's a very small part of our overall business. So any incrementality is improvement, right? That is a business that is in the -- from a margin perspective for us, it's -- it operates in the team. So if we can take market share and even just hold our current margin profile, which obviously we want to improve over time, we can see great gains in credit card that are meaningful for us, perhaps less meaningful for some of our competitors who started from card. So that's our strategy. Now when we talk about the competition, we probably talk about that competition more than others because we feel it more than others because we're so dependent on search. As we diversify our marketing mix for the card business, -- it won't be quite as profound, right? But that's where we are today, and we've been very candid about that. We need to improve that. So there are a number of aspects to it. There's a tech aspect, that's the light speed migration. There's a marketing aspect that's developing in the other channels. And then there's a new product aspect, and that is TreeQual.That's the strategy.

And the only thing I would add to that, if you -- first off, we relate to the credit card business. And the reason was because we didn't like the approval rate dynamics that J.D. just talked about. However, we did add or with an acquisition, and we're in it now. And we're just -- and now we're just continuing to make it better. So when I think of the competitive environment, we've got one competitor that's better at us and card SEO and another one that's better better than us on approval rates because of light because of Carbon's white box. Our response to that is TreeQual, the win card the Lightspeed tech work that JD talked about and SEO on LendingTree. And the nice thing is with our competitors being public, we get to see the target of where we want to head, and we're very focused on it.

That's really helpful. Just a quick one. I think we have some at least qualitative commentary on insurance and home as it relates to 23. Can you just close the loop and share where you're thinking on growth in consumer and margin or growth in consumer and the margin there for 2023?

 Yes, I mean, our baseline expectation as we kind of outlined in the letter from a revenue standpoint, again, sort of mid-single digits from a revenue growth standpoint and then we assume pretty consistent margin relative to what we saw last year.

Our next question comes from Melissa Wedel with JP Morgan.

A lot of them have already been asked, but I thought it would be worth touching on -- following up on the consumer margin, definitely saw that nice pop in 4Q, your shareholder letter also referenced some organic growth from MyLendingTree there. So as we think about margin into '23, should we be thinking sort of mid-40s or a sort of a normalized run rate? Or are you looking at 4Q, given the current mix across products is something that's a more sustainable run rate?

Yes, I'd say, Melissa, sort of mid- to high 40s. And if you unpack the moving pieces within that, right, you've got -- the personal loans business is a business that's incredibly high margin for us. The current environment with everything going on in the macro sort of rates moving higher and the health of the lenders in that space or just the orientation of the lenders in that space such that they are sort of protecting their current portfolios as opposed to interested in massive origination growth. The unit economics and personal loans are -- they're harder, right? And so we have to be conscious of the impact of that on the margin profile. Obviously, that's a big driver of the segment. That said, there are other areas where we're seeing really good margins. All the work that we just talked about around the credit card business are clearly intended to improve the margins of that business because the margins there are not great today, but we're doing a lot of work that we think improves them. Small business is the other big driver within consumer. That's an incredibly high-margin business for us, and we think that is an increasing contributor to the segment as we progress throughout this year. And so to sum it all sort of -- I think we did 44% margins in consumer on the full year last year, we did 48% margins in the fourth quarter, somewhere between those 2 is our going-in expectation for '23.

Okay, that's really helpful. Thanks, Trent. And then I guess, the follow up on TreeQual, are you able to share with us just sort of on an aggregate partner basis what percentage of partners are now participating in the TreeQual platform and what portion do you have left to convert?

I am going to say deminimis as a percent of partners. It's in the single digit area right now. But it's actually not really how we're looking at it. We're looking at it as partners who can offer us broader coverage, right in terms of the cards that they represent, depending on whether that card is intended for super prime-prime, mid prime, or subprime. And so we want to be able to match up with partners who have an array of cards. That's why we're excited about getting upgrade onto the network, as mentioned in the letter, because they're bringing five cards to us. Obviously, over time we want to have all of our partners working on some form of TreeQual. And what we were excited about in the third and fourth quarter of last year, is the momentum in terms of just pipeline of dialogue with partners. We're getting more visibility as to how partners want to work with us. Right now, there's a path for TreeQual that is working with a third party, trusted third party that many of the card issuers work with today. They work with them on direct mail. And so that is kind of the easiest path and that was why we went down that path. Not all of our partners, however, want to work with us that way, some of us want to do embedded integrations with us without a third party involved. And so that takes more time to work on from a technology perspective on both sides with us and the partner. But it's obviously a good outcome when we get there. So I'd say that the dialogue has increased, we're happy about upgrade, and we're happy with the existing partners and the results that they're experiencing. But as we look at our -- let's put it this way, the financial impact of TreeQual will manifest itself in credit card potentially down the road in personal loans. It is not in our '23 guide in any material way. We look at this as a year of onboarding partners. And we know that we will have a healthier credit card business on the back of it. But our guide is not dependent on incremental revenue from TreeQual.

 Our next question comes from Mike Grondahl with Northland Capital Markets.

Hey, thanks guys. I wanted to dig into the strategy a little bit. I think the Tree branded Win Card is the first time you've put your name on a product. And you mentioned more products to come. Are you trying to put one of these Tree branded products in each vertical or how should we think about kind of the rollout in some of the new products that you said will be coming over the course of the year?

So I'll start and then I think J.D. will follow-up as well. So think of MyLendingTree, I've talked about this before as bringing the best customer experience to the consumer. And that's why we launched a branded card there as opposed to having our MyLendingTree members be clicking out to search for cards and not getting approved. We think it's a great product with a best in class, it is innovative. I've always wanted to do this but we hadn't found a set of offerings that we thought would be different in the industry. And now we think we have it and so this is -- so the Win Card can be another gateway to bring in MyLendingTree members. And it's also a way for MyLendingTree members to put a card in their wallet that we think is fantastic and that you could get approved that are very high rate for it. And in MyLendingTree you could expect us not necessarily to always do a single product offering but I would say that whatever we do on MyLendingTree, we want it to be the best in class product so that consumers come back to us again and again, without us having to be as dependent on paid marketing to continually drive people back into the marketplace. J.D., anything to add.

The only thing I would add Mike is we spent a lot of time last year doing consumer research on what specific financial jobs consumers would trust us with. And so, we've got, as Doug mentioned, it's kind of a multiyear approach. We've got 8 or so products that we would expect to launch over a multiyear period. So don't expect 8 this year. But effectively, the winning part is the first one and the theme is really the adjacency, to why somebody came to LendingTree in the first place, and what somebody's -- what problem they're trying to address. So I don't think it's specifically going to be a product for every vertical area that we have. We will roll these out really relative to what we think is the most adjacent thing. We don't want it to become a feature factory, we want it to be things that genuinely add value for the consumer and drive engagement. And I was thinking about it earlier, you think about historically we talked about pushing our consumers in MyLendingTree to connect their accounts. And you could come in and use product to connect your accounts. And there was obviously potential benefit for us in terms of the information that we were gathering. But there wasn't really anything on the other side for the consumer. And if you think about what we're doing with the win Card, we're saying, here are these financial behaviors where we know you will be better off on the other side. And if you come in log in and show engagement with us, you'll get your cash back. And we know that we're going to improve your credit score and your access to other financial products over time. Our research showed that that would resonate with our consumer base, and with the consumers who we want to be in MyLendingTree. So the win Card is indicative of how we're trying to position ourselves with consumers, which is access to more products over time because of good sound financial behavior. And so you can envision that we're going to be helping consumers over time, address their debt stack, address which debts they should pay off first, that sort of thing. And really be an advocate for the consumer. That's where we want, that's where we want to be. We talk often internally about being a digital ally, for the consumer and the win Card is the start of that.

Got it, got it, thanks. And I'm trying to understand is it kind of a pivot or the beginning of a big new direction for you guys, legacy was sort of when banks compete, you win. And now it's more of a, hey, you might have a financial need me, and we got a product to meet that need, I'm just trying to understand that evolution?

Yeah, so again, think of the marketplace in MyLendingTree, as you know, to as connected but also separate. So when you come to LendingTree, when banks can bring you in, you expect to see choice in comparison shopping, when you upgrade to MyLendingTree, you expect to get instantly approved, because we have all of your credit data, we've been giving you a free credit score probably for multiple months. And a lender integrated with us can do really interesting stuff on the underwriting side that you can't do in a click out model until TreeQual is fully there. And so MyLendingTree has just given you the best answer. And we've got a lot of really exciting things coming. And we think the Win Card is broad enough to cover really most of the credit spectrum, the approval rate aspect, improve the unit economics and the features of it are targeted to exactly what MyLendingTree is, which is a financial journey, an ally to help you improve your financial standing and get you the best offers at the lowest price.

And Mike just from a marketplace strategy perspective, one of the things we talk about internally is degree of authentication. So if you look at our personal loans vertical, our partners and we're delivering a highly authenticated consumer. That is true in mortgage as well. That is only true to an extent in insurance, that is not true in credit cards, that is not true in deposits, okay. Those are quick out businesses, where we're not really delivering a lot of information on the consumer. We are authenticated in small business. We spend a lot of time talking about how much value are we delivering to our partners in terms of the type of information on that consumer where they can make informed lending decisions. So that's the strategy within marketplace, our marketplace businesses, I should say. If you think about the strategy that Doug is articulating for MyLendingTree, it's very consumer centric. And historically we have been guilty of really thinking about MyLendingTree as more of a marketing channel. So if part of your question is, is this a pivot, I would say that this is a meaningful change in terms of how we think about MyLendingTree. And what you're seeing is the beginning of the work that's been going on for the last year, in terms of where we want to play on the MyLendingTree side, how we want to help consumers. And while marketplace may have a slightly different strategy that is very oriented towards partners, and what they want to see, you can understand how the two interact. At the end of the day TreeQual is all about authentication in the marketplace. The Win Card, but it's also on the consumer side about giving you an assured outcome, as opposed to a potential denial. The Win Card is about that as well. And so I actually think the two strategies work hand in hand quite well and that's actually the best approach that we could take.

Please stand by for our next question. Our next question comes from James Friedman with Susquehanna International Group.

Hi, good results in a difficult environment. I just wanted to ask if you could possibly Trent, double click on the assumptions on Page 8 in the shareholder letter. Especially or specifically, if you could with regard to the quarterly cadence. I realized we had the first quarter, we've got the year, but some of these segments have what looked like increasingly easy comps, so since we have to cauterize our models for this year, any call outs you could make on the segments by quarter? Thank you.

Yeah, totally fair question. Obviously, the Q1 guide, relative to the full year guide implies some improvement throughout the year. A couple of things going on there. I guess, in consumer, many of those businesses have a seasonal curve to them were things generally improved from Q1 to Q2 to Q3 and then slowed down a little bit in the fourth quarter. We see that in credit card generally, we see that in personal loans, for sure. And so that's driving some of the sequential improvement that's implied as we progress throughout the year. The other big one is obviously within Home and within mortgage in particular, given our increased reliance on purchase within that business, that's a business that clearly we expect to be better in the spring and summer home buying season than in the first couple months of the year.

I show no further questions at this time. I would now like to turn the conference back to Doug for closing remarks.

I'll make this brief. This company right now, as I characterize 2023 is really the year of discipline and execution. I want to also everybody to know that we're confident in our position, we have been through this twice before as financial markets have corrected. This is a longer one. And the diversification that we have put in place over the last few years has certainly helped bulwark the company in what's a very, very tough environment. And what I can tell you is this entire company doesn't like to lose, we love winning. We are very focused, teams are all working hard, we're getting stuff done at the lowest cost as fast as possible with new ways of working together and the team, the entire company is highly energized. We're trying to -- we're getting people back to the office post-COVID and we feel very, like very confident that we can win in a highly competitive market. Our brand is strong, our marketing is working well. We've got teams working on the key levers of the business with dedicated projects against them as we talked about and we look forward to working with you throughout the year and thank you for your support so far, and we're going to go get back to work and do the best we can. Thank you all very, very much.

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