Online loan marketplace LendingTree saw its stock jump after it defied headwinds to meet projections in its Q1 earnings report yesterday, even as the broader refinance and mortgage markets have been weighed down by inflation and rising interest rates.
With consolidated revenue of $283.2 million, a $10.8 million net loss and a 33% year-over-year decrease in its mortgage segment, LendingTree definitely was hit by the crunch in mortgage rates and home inventory, with CEO and chair Doug Lebda specifically citing a “dramatic decline” in mortgage refinancing.
But historically high mortgage rates and a significant slowdown in mortgage applications over the past couple months did not hit the company as hard as some feared, as Lebda added the company had prepared for the current environment and focused on customers and conversions going into the year.
“We made the conscious decision to focus intently on consumer quality at the beginning of the industry’s cyclical downturn last year, and we believe those efforts will continue to drive increased revenue and profitability for the business throughout 2022,” he said in a statement.
LendingTree stock was up more than 5% in early trading following the report and earnings call.
The “homes segment” of the company made up about one-third of its overall revenue this quarter, and other services, including personal loans and credit cards, rose significantly year-over-year. LendingTree still revised its full-year outlook, from projected revenue of $1.25 billion in 2022 down to $1.19 billion based at least partially on the tough mortgage environment.
“We remain in a position of strength to invest in our business, creating the premier customer financial shopping experience, while much of our competition struggle with profitability,” said LendingTree CFO Trent Ziegler in a statement. “We are leaning into this strength, maintaining the investment in our strategic priorities and the strength of our brand despite numerous macro headwinds. However, the persistency of inflation and its impact on our insurance partners, along with a significant jump in mortgage rates has to be acknowledged and reflected in our forecast.”
In a conference call, LendingTree executives also said they were monitoring ongoing layoffs in the mortgage industry along with other macroeconomic indicators, but that most of the data has fallen within the company’s expectations. With traffic to LendingTree’s platform still high, the company also was focusing on conversion rates, executives said.
In a letter to shareholders that was released along with the earnings report, Ledba and Zielger sought to further clarify the complex path forward, promising to remain “disciplined around non-marketing operating expenses” and highlighting “exceptional growth” from personal loan, home equity and small business products.
Home equity product revenue grew 112% year-over-year, according to the letter.
The letter also hinted at a “completely re-imagined mortgage experience” still in the early stages of testing, which will “ LendingTree as a true consumer advocate” and will seek to improve other underlying fundamentals for the company including conversion rate and customer loyalty.
“While the current macro headwinds have impacted our financial outlook for 2022, we are investing into this volatile period for the economy from a position of strength,” Ledba and Ziegler concluded.