Executive Summary / Key Takeaways

• LendingTree has demonstrated a return to growth, driven by strong performance in its diversified marketplace across Home, Consumer, and particularly Insurance segments, following a challenging macroeconomic period.
• The Insurance segment is currently a primary growth engine, exhibiting significant revenue increases and high carrier demand, though management is focused on optimizing variable marketing margin as growth moderates.
• Targeted strategic initiatives in the Lending segments, such as investments in Home Equity and Small Business, are yielding positive results and positioning the company to capitalize on potential future improvements in interest rates and credit conditions.
• The company has significantly improved its balance sheet and reduced leverage, enhancing financial flexibility and aiming to lower interest expense and improve free cash flow generation.
• While macroeconomic risks persist, LendingTree's diversified model, operational discipline (including cost management), and focus on high-intent consumer traffic provide resilience and a foundation for expected continued Adjusted EBITDA growth in 2025.

Setting the Scene: A Diversified Marketplace Poised for Growth

LendingTree, Inc. operates as a leading online consumer platform, fundamentally designed to connect consumers seeking financial products with a diverse network of providers. Its core business model revolves around facilitating comparison shopping across a wide array of offerings, including mortgage loans, home equity products, personal loans, credit cards, small business loans, insurance, and more. This diversified approach, built over years of expanding its product portfolio, aims to serve consumers by providing choice and transparency, while simultaneously acting as an efficient, scalable customer acquisition channel for its Network Partners. The company's strategic evolution has been shaped by its belief in the ongoing fundamental shift towards online transactions in the consumer finance and insurance industries, mirroring trends seen previously in retail and travel.

Central to LendingTree's operational strategy is its proprietary technology platform, including the personalized Spring experience. This technology serves as the backbone of its marketplace, enabling the matching of consumer inquiries with relevant providers. While specific, quantifiable performance metrics for the core matching algorithm or platform efficiency relative to alternatives are not explicitly detailed, the technology is designed to enhance the consumer experience through tools like free credit scores and financial health monitoring, and to optimize the matching process for both consumers and providers. The company also leverages technology in its performance marketing efforts, including working closely with platforms like Google on AI-based bidding algorithms, aiming to drive high-intent traffic efficiently. R&D efforts are focused on developing new product offerings and enhancing existing features to improve user experience and operational effectiveness. This technological foundation is intended to provide a competitive moat by creating a more effective and engaging marketplace than less sophisticated platforms.

Within the competitive landscape, LendingTree operates alongside a variety of players, ranging from other online lending marketplaces like LendingClub (LC), SoFi Technologies (SOFI), and Upstart Holdings (UPST), to large financial institutions and specialized aggregators. While precise, directly comparable market share figures across all niche competitors are not publicly detailed, LendingTree positions itself based on the breadth of its product offerings and the depth of its Network Partner relationships. Its diversified model contrasts with more specialized competitors, offering resilience against downturns in any single product category. However, it faces competition on efficiency and technological innovation, particularly from fintechs like SOFI with integrated ecosystems or UPST with AI-driven lending models. LendingTree's strategic response involves leveraging its brand recognition, optimizing its performance marketing expertise, and building direct client distribution channels, especially notable in its Insurance segment.

Recent Performance: A Return to Growth Momentum

Following a period marked by significant macroeconomic headwinds, LendingTree has demonstrated a notable return to growth, signaling potential stabilization and recovery across its core segments. The first quarter of 2025 saw consolidated revenue increase to $239.7 million, a substantial rise from $167.8 million in the prior-year quarter. This growth was broad-based, with contributions from all three main segments.

The Insurance segment emerged as a primary growth engine, with revenue soaring 71% year-over-year to $146.7 million in Q1 2025. This impressive performance was fueled by both a 41% increase in revenue earned per consumer and a 22% increase in volume, reflecting strong carrier demand for new auto insurance customers driven by a favorable underwriting environment. While segment profit increased 16% to $38.7 million, the segment margin decreased to 26% from 39%, as the company strategically re-entered higher-cost marketing channels to capture the increased carrier demand, prioritizing variable marketing margin dollars over percentage in this growth phase.

The Home segment also showed encouraging signs, with revenue increasing 22% to $37.0 million in Q1 2025. This growth was largely driven by the Home Equity product, which saw revenue climb 24% to $25.8 million, propelled by a 50% volume increase. Despite a 17% decrease in revenue earned per consumer for Home Equity, the product's strong monetization and higher close rates contributed to a 37% increase in Home segment profit and an improved segment margin of 36% (up from 32%). The core mortgage business also saw a 16% revenue increase, primarily from the refinance product, albeit from lower levels.

The Consumer segment contributed to the overall growth with a 9% revenue increase to $56.0 million in Q1 2025. This was primarily driven by strong performance in Personal Loans (up 16% to $23.4 million, with volume up 36%) and Small Business Loans (up 48%). However, this growth was partially offset by significant decreases in Credit Cards (down 48%) and Other Credit products (down 31%). The segment profit decreased slightly by 1% to $27.1 million, and the segment margin declined to 48% from 53%, reflecting a change in product mix and lower revenue earned per consumer on certain offerings. Management noted that the credit card business remains particularly challenging due to high default rates in this unsecured debt category.

Operating expenses saw increases commensurate with revenue growth, with Selling and Marketing expense rising 60% to $172.8 million, largely driven by a 65% increase in online advertising. General and Administrative expenses increased 19% to $30.7 million, partly due to higher non-cash compensation. A notable expense in Q1 2025 was $15.2 million for litigation settlements and contingencies, primarily related to an accrual for the Mantha class action lawsuit settlement. Despite these cost increases, the overall variable marketing margin increased 12% to $77.7 million, demonstrating the company's focus on driving profitable volume.

Looking back slightly, the company finished 2024 on a strong note, exceeding forecasts with $32 million in Adjusted EBITDA in Q4 2024, driven by broad segment growth. This performance contributed to a 33% Adjusted EBITDA growth for the full year 2024 compared to 2023.

Financial Health and Capital Structure

LendingTree's balance sheet has shown improvement, with a focus on managing liquidity and reducing leverage. As of March 31, 2025, the company held $126.4 million in cash and cash equivalents, up from $106.6 million at the end of 2024.

The company's debt structure includes the remaining $95.3 million principal amount of its 0.50% Convertible Senior Notes due July 15, 2025. The company has been actively managing this maturity, repurchasing approximately $20.0 million of these notes in Q1 2025 for $19.7 million cash. Management intends to use cash on hand and future cash flows from operations to repay the remaining balance upon maturity.

Beyond the near-term convertible notes, the company has longer-term debt obligations, including $243.1 million outstanding under the 2021 Term Loan (maturing September 2028) and $162.5 million under the 2024 Term Loan (maturing March 2031). The company drew the remaining $50.0 million delayed draw on the 2024 Term Loan in March 2025, enhancing liquidity. An ATM Equity Program established in July 2024 provides the option to sell up to $50.0 million in common stock, which could be used for general corporate purposes, including debt repayment or maintaining covenant compliance.

Net leverage ended 2024 at 3.5x trailing Adjusted EBITDA, a significant improvement. The company expects this leverage ratio to continue trending lower as earnings grow and debt is reduced, which is anticipated to lower interest expense and improve free cash flow generation for shareholders.

Cash flow from operations was a net use of $0.2 million in Q1 2025, a decrease from $5.7 million provided in Q1 2024, primarily due to changes in working capital accounts. Investing activities used $3.4 million, mainly for capital expenditures on internally developed software. Financing activities provided $23.4 million, reflecting the proceeds from the delayed draw term loan partially offset by note repurchases and debt repayments. The increase in litigation accruals to $19.1 million in Q1 2025, including the $19.0 million for the Mantha settlement payable in installments through Q2 2026, represents a known future cash outflow.

Outlook, Strategy, and Competitive Positioning

LendingTree's outlook reflects confidence in its ability to sustain growth and improve profitability, underpinned by strategic focus areas and an expectation of continued momentum in key segments. The company is forecasting strong Adjusted EBITDA growth of 15% at the midpoint for 2025. This guidance is based on the expectation of continued revenue growth across all three segments, although management explicitly stated that this outlook does not bake in any material changes to the current macroeconomic environment, including interest rates.

The strategic rationale for this outlook centers on leveraging current strengths and positioning for future opportunities. In the Insurance segment, management anticipates incremental improvement from Q1 2025 levels, with the second half of the year expected to perform better. They view the market as still having significant runway, with high carrier demand expected to continue, although the pace of growth may normalize. The focus remains on optimizing the marketing mix and growing channels beyond internet search to improve segment margin over time, aiming for historical norms in the low to mid-30s in a stable environment. LendingTree believes its diversified distribution channels (clicks, leads, calls, agency) provide a competitive edge over more specialized competitors, allowing it to work with a wider range of carriers and capture market share. While top 3-4 carriers currently drive the bulk of spend, the company sees opportunity as more carriers return to historical spending patterns.

In the Lending segments, the strategy is to build on the momentum in Home Equity and Small Business. Home Equity is expected to see continued strong growth due to favorable consumer equity levels and strong lender demand. Small Business is projected to achieve record revenue in 2025, driven by the success of the concierge sales team and improved unit economics allowing for increased marketing investment. Management is also strategically positioning the Consumer segment to benefit from potential future loosening of credit conditions, which some lenders are beginning to discuss for late 2024/early 2025. This involves replicating the playbook used in insurance: driving high-intent traffic and gaining wallet share now, to be ready when lender underwriting standards broaden. While the credit card market remains challenging, the company is committed to the category and exploring product/tech enhancements. Compared to competitors like SOFI with integrated banking or UPST with AI-centric lending, LendingTree's strength lies in its broad marketplace and ability to connect consumers with multiple offers across diverse product types.

Operationally, the company remains committed to cost discipline, expecting expenses to modestly decrease after Q1 2025. The expense base is viewed as highly leverageable, meaning future revenue growth should translate efficiently into Adjusted EBITDA. The company's zero-based budgeting process has provided a detailed understanding of its cost structure, enabling quick reactions to market changes.

Risks and Challenges

Despite the positive outlook and recent momentum, LendingTree faces several pertinent risks and challenges that could impact its performance and the investment thesis. Macroeconomic conditions, particularly interest rate fluctuations and inflationary pressures, remain significant. High mortgage rates continue to suppress refinance and purchase activity in the Home segment, although Home Equity has provided a partial offset. While management's guidance does not assume a change in the rate environment, a prolonged period of high rates or further increases could continue to constrain the mortgage business.

Intense competition across all segments poses an ongoing challenge. LendingTree competes with a variety of online platforms and traditional financial institutions, and its non-exclusive relationships with Network Partners mean consumers have alternatives. Competitors with potentially lower operating costs or more advanced technological capabilities in specific niches (like AI-driven lending or integrated financial apps) could pressure LendingTree's margins and market share.

Regulatory and legal risks are also present. The company's business is subject to various regulations, and changes or interpretations (like the temporary impact of the FCC's one-to-one consent rule in Q1 2025) can affect operations and costs. Ongoing litigation, such as the accrued Mantha settlement, represents a financial liability and potential distraction. Dependence on third-party technology providers and risks related to online commerce security and fraud are inherent to the business model. While a recent data incident impacting a subsidiary's third-party provider is not currently expected to be material, such events highlight the ongoing cybersecurity risk.

Furthermore, the health of the U.S. real estate market and consumer spending patterns directly impact demand for LendingTree's products. A significant downturn in the economy or a shift in consumer sentiment could reduce transaction volumes across the marketplace.

Conclusion

LendingTree appears to be emerging from a challenging period, demonstrating a return to growth driven by the strength of its diversified marketplace. The core investment thesis hinges on the company's ability to capitalize on the ongoing shift to online financial services, leveraging its brand, technology, and Network Partner relationships across multiple product categories. The recent performance, particularly the robust growth in the Insurance segment and the strategic positioning in Home Equity and Small Business, provides a foundation for the expected Adjusted EBITDA growth in 2025.

While macroeconomic headwinds and competitive pressures persist, LendingTree's operational discipline, focus on high-intent consumer traffic, and improved balance sheet enhance its resilience. The potential for a future improvement in lending market conditions, although not explicitly factored into current guidance, represents a significant upside catalyst. Investors should monitor the company's execution on its strategic initiatives, particularly the optimization of marketing spend for margin improvement in Insurance and the successful capture of market share in lending segments as conditions evolve. The competitive landscape remains dynamic, and LendingTree's ability to maintain its technological edge and adapt its diversified model will be key to sustaining long-term growth and profitability.