Key Stats (all QOQ)
Revenue down 4%
Net Income down 45%
Adjusted EBITDA down 16%
EPS: $0.68 vs analyst expectations of $0.95 (a 28.4% miss)
Insurance revenue down 6%
Home category revenue up 12%
Insurance remained 67% of revenue
Product and Dev costs down 13%
Cash on hand was up 30%
Five Observations
1. Insurance Remains the largest category
While not new, many would be surprised to learn that Insurance is their largest category; over two-thirds of their revenue in Q2 came from the Insurance segment (66.77%). Their acquisition of QuoteWizard in 2018 seems to have been a good one. In their PR around the purchase, Tree consistently mentioned diversification as a reason for the acquisition. Eight years later, insurance is driving the business while Mortgage falters.
Key Takeaway: Diversification is critical for companies subject to big swings due to outside events, like interest rates.
2. Home category was up 12% QOQ
This is primarily due to increased HELOC revenue. HELOC is up 15% YOY. This is likely a result of increased rates keeping refinance volume down and those consumers leveraging lines of credit instead of resetting their entire mortgage.
Home segment revenue peaked in 2021 at $442MM, driven by the low interest rates and real estate frenzy of the COVID era. This quarter, Home revenue was pacing to 40% of that peak.
Key Takeaway: Mortgage refinance is still in the doldrums and not expected to change anytime soon.
3. Tree dropped revenue guidance for the year
The company dropped its revenue guidance for the full year to 1.1%, from $1.33 billion to $1.31 billion at the midpoint. Hard to draw big conclusions from a small decrease, but to me this seems to signal Tree is expecting to see things stay pretty similar through the rest of the calendar year.
Key Takeaway: LendingTree expects current market conditions to continue. That likely means no big improvement in the economy for at least the next two quarters.
4. Analysts are digging into why SMB is shrinking
On the Earnings Call, Jed Kelly of Oppenheimer asked if the SMB product health is related to sensitivity from gas prices or interest rates.
I found the answer from CEO Scott Peyree interesting:
“That’s why we call it temporary because I think it’s just a lot of right now, there’s a smaller number of merchants like requesting loans. And then you look at the average loan size, the loan size they’re requesting is generally smaller than we historically see. And we’ve been doing this for a long time. So we’ve got good history here. And then I would say -- and then there’s a general lower percentage of people then accepting the loan offers they’re getting.”
From the Press Release:
“Last quarter we called out an expected sequential decline in Consumer, driven by suppressed borrower demand in our small business segment. This demand trend continued to deteriorate throughout the quarter.”
Key Takeaway: SMB is seeing fewer loan requests, for smaller loans, with a lower acceptance rate. If you work in SMB lending, you’d be smart to expand to other categories.
5. They initiated an Arbitration request against Google
Filed on July 17th seeking damages What’s interesting is that Tree revealed they spent $2.8 billion on Google over about the last decade. That parses out to an average spend of $23.3MM per year.
Jason Bengel, CFO clarified:
And so we believe Google's overcharge accounted for a significant portion of our overall spend during the relevant period, which would be the basis for our right to damages.
Key Takeaway: If someone as large as Tree feels Google is overcharging them, it’s likely even more important for smaller companies to audit their spend.
Misc.
The stock got pummeled
Tree’s stock tumbled about 20% after the earnings announcement. While it was a fairly small miss on overall revenue, analysts seem to be concerned about the reduction in the SMB category specifically.
Tree is touting its investment in AI
They launched a ChatGPT plugin. From CEO Scott Peyree:
“We launched several new consumer-facing AI capabilities such as our ChatGPT app, expanded our marketplace into six new verticals, and we are continuing to see strong results from our homepage redesign.”Share repurchases have been minimal, with just over $500K in Q2 and none in Q1. Tree has $96.7MM authorized to repurchase, though they do note that 2025 credit facility limits share repurchases.
They have a $75 million debt facility they announced in 2025 with a maturity date of 8/21/30.
Performance against target
Revenue: $313.4 million vs analyst estimates of $315.6 million (25.3% year-on-year growth, 0.7% miss)
Adjusted EBITDA: $35.16 million vs analyst estimates of $39.01 million (11.2% margin, 9.9% miss)
Guidance
Q2 Guidance was for $305-325 million in revenue, and they hit north of $313 million.
Guidance for Q3 is up an additional 4% at $325-335MM.
EBITDA guidance for the full year is $148.5 million at the midpoint, below analyst estimates of $157.9 million.
