LendingTree - Q3 2023

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to LendingTree Incorporated's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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. Please go ahead, sir.

Andrew Wessel (VP of Investor Relations)

Thank you, Norma, and good morning to everyone joining us on the call to discuss LendingTree's third quarter 2023 financial results. On the call today are Doug Lebda, LendingTree's Chairman and CEO, Scott Peyree, COO and President of Marketplace Businesses, and Trent Ziegler, CFO. As a reminder to everyone, we posted a detailed letter to shareholders on our investor relations website earlier today, and for the purposes of the call, we will assume that listeners 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. With that, Doug, please go ahead.

Doug Lebda (Chairman and CEO)

Thank you, Andrew, and thank you to all of you who are joining us today. We earned $22 million of Adjusted EBITDA in the third quarter, generating a 14% operating margin, which was at the high end of our forecast. We again generated strong segment margins in both consumer and insurance and continue to benefit from our focus on operating efficiency. We remain soundly profitable with a strong balance sheet, despite the significant revenue challenges we've been navigating over the last few quarters. We have made significant changes at the company, most notably, including our senior leadership positions. Our operating expenses have decreased by 30% from peak levels, thanks to proactive cost initiatives taken by management, which should generate strong operating leverage in a recovering revenue scenario.

We have redesigned our product function with dedicated project, project staffing and clearly defined quarterly goals by group that are tracked and published internally so that all employees can follow them. Finally, we focused our resources on optimizing our core marketplace business and removed distractions from our employees to accomplish targeted VMD improvements. For example, during the quarter, we identified areas where we could increase monetization of consumer traffic through more effective routing and cross-selling. Also, we began recently live testing with six credit card issuers for our redesigned TreeQual platform. It is the first service to offer full credit pre-qualification to unauthenticated consumer traffic with complete fraud protection, enabled by our partnership with a top credit bureau. TreeQual has received significant interest from top credit card issuers.

In combination with the margin enhancements we've seen from our Lightspeed implementation, we are quite optimistic about how our credit card business can improve going forward as we work and grow share in this very large market. Our outlook for insurance has improved significantly over the last quarter. We know from publicly available data that we are taking share from competitors. Over a year ago, our team committed to delivering the highest quality volume in the face of reduced demand from carriers. That focus on quality and meeting each one of our insurance partners where they needed us most drove those market share gains. Recent conversations with the marketing teams at large carriers reinforce that we are accounting for an increased portion of their budgets.

Carriers also have indicated that underwriting results are supportive of increased marketing for customer acquisition, which we expect will be in the very near term. We aim to continue increasing our share of their growing budgets, which would provide a material uplift to our earnings profile. We are also acutely aware of the pressure our July 2025 Convertible Note maturity has on our share price. The management team continues to explore a variety of paths to replace this debt with capital that is extended, that has an extended maturity profile, providing us with an additional time for our numerous actions to improve the business to take hold. And now, operator, I'd be happy to open it for questions.

Operator (participant)

Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. To withdraw your question, please press star one one again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster. One moment for our first question, please. Our first question comes from the line of Jed Kelly with Oppenheimer and Company. Your line is now open.

Jed Kelly (Managing Director of Equity Research for Consumer Internet)

Hey, great. Thanks for taking my question. Just two, if I may. Just digging into the consumer segment, I think personal loans were down. Can you just talk about the competition in that segment? I mean, one of your competitors, I think, reported last week, had pretty strong results in that product. If so, can you talk about the competition? And then just circling back to the convertible, can you talk about the cash flow profile? I think Q4 is typically your strongest free cash flow profile. How much cash you need to run the business? I think you said $50 million historically, and where we are in terms of wanting to, you know, get the debt refinanced. Thanks.

Doug Lebda (Chairman and CEO)

... We're gonna let Scott, if you could take the first one there, and then Trent, if you could take the second one.

Scott Peyree (COO and President of Marketplace Businesses)

Yeah, yeah, sure. Absolutely. Hi, Jed, how you doing this morning? So starting off, you know, on the consumer side, with the personal loans in categories or credit cards, small business loans. You know, over the past 18 months, credit criteria has tightened in our clients with our clients. Monetization has come down. We've done a good job of maintaining our traffic levels and controlling our marketing expenses to make equal to and often greater margins on the traffic. So I would say, you know, you would look at our consumer volume has generally remained fairly steady over that time period, and you've seen the drop in revenue tied to the monetization per consumer. So where we're focusing now is in improving that monetization per consumer. We've historically been a very specific product search-focused company.

Like, so when I say that, what I mean is, if you're searching for a personal loan, we're going to try really hard to get you a personal loan. We're now shifting to more of a solution-based model, where if you're looking for a personal loan, we're going to try to get you a personal loan, but maybe a home equity loan is a better option. Maybe you can't get a personal loan, but you can get a credit card. Maybe you're a debt relief candidate. If you own a car, maybe you get a cash out refi on your car loan, et cetera, et cetera. We, you know, we have a lot of ways to help solve the consumer problems, the problem being seeking, seeking money.

We have distinct advantages in the industry, being that we have direct client relationships and distribution in so many different financial industries. So we just need to be better at solutioning across the board and cross-selling into other products. And that will be a win-win-win across the board, which, you know, will provide, A, better options to consumers, B, more high-quality leads to our clients, and C, increased monetization, most importantly for us, which lets us crank up the marketing flywheel to start increasing the traffic coming through our network of sites. Which is, I think is maybe one of the big key gaps, is where there is a lot of consumer demand out there. We just need that marketing flywheel to kick back in to start driving more of those consumers to our sites, specifically.

Doug Lebda (Chairman and CEO)

Trent?

Trent Ziegler (CFO)

Yeah, Jed, and then I, you know, I guess on your, your question around cash flow, I mean, we, you know, obviously remain solidly profitable, right? In the zip code of $15, $20, $25 million of EBITDA every quarter. That EBITDA converts to, to cash flow at a, at a really healthy clip. I mean, save for, a little bit of, of capitalization expense and then obviously our ongoing interest burden, that EBITDA basically converts 1-for-1. And so we feel really good about our cash flow position, you know, and, and are optimistic that we're sort of at the bottom here and, and are positioned for things to get better as we head into next year.

Scott Peyree (COO and President of Marketplace Businesses)

Thank you.

Operator (participant)

Thank you. One moment for our next question, please. And our next question comes from the line of Ryan Tomasello with KBW. Your line is now open.

Ryan Tomasello (Managing Director)

Morning, everyone. Thanks for taking the questions. Was hoping you can put a finer point, just elaborating on the comments from your prepared remarks around what you're seeing from carriers regarding the 2024—their 2024 growth plans. Obviously, a recovery in the insurance business seems like the area you have most visibility around. So I guess it would just be helpful if you could provide some guardrails around the different scenarios for that business next year. How fast it could inflect, you know, the margin profile, whether that's sustainable as competition increases for that traffic, and just generally how you feel about the competitive positioning and the ability to take shares as wallets increase.

Doug Lebda (Chairman and CEO)

So I'll just hit the high level and then hand it off to Scott, who really, he and his team have just done a magnificent job. We think the margin profile can, while probably not, you know, stay at, you know. As your marketing flywheel starts going, you got to spend into demand. But our team's really done a remarkable job there. As I mentioned, we've had some carrier meetings that have given us some early indications. Scott, why don't you take the rest of that?

Scott Peyree (COO and President of Marketplace Businesses)

Yeah, sure. Yeah, I would say we've had a lot of good conversations, and there's definitely the winds are changing in the insurance industry. And really, over the past two or three months, we've gotten a lot of positive indications from a lot of our clients, including our historically largest client, that we're currently working on budget planning with for 2024. But, you know, the short of it is, they, they've made pretty clear the budgets are going to be increasing significantly starting in January and will continue. You know, the plan is they will continue to snowball as far as growth throughout the year. Not just them, though.

I mean, there's another big client of ours that, you know, two-three months ago, we thought there was going to be no budget until January, and now it looks like we're going to get a decent amount of budget for November and December this year. So that just shows the indication that these carriers are just feeling better and better by the day, and that they're more consistently profitable. You know, another four pretty big carriers of ours have all either increased budget and/or reopened states that they had previously shut down over the past three months. You know, nothing crazy significant at this point, but it just shows that overall macro trend shifting away from tightening up and shutting things down just to getting back in expansion mode.

You know, from a quality and market share perspective, we've gotten specific, very specific feedback from a number of carriers that we are outperforming, both from a market share standpoint and a quality perspective as far as the product we're delivering compared to competitors. So we're feeling really good about getting outsized pieces of budget as the money comes back.

Ryan Tomasello (Managing Director)

Great. Thanks for all that color. Then separate question on just typical seasonality, maybe for Trent. How are you thinking about that heading into the fourth quarter? Does the fourth quarter guidance assume that typical seasonality plays out? Or, you know, maybe some different assumptions, variables you're assuming, given just the nature of the current environment?

Doug Lebda (Chairman and CEO)

Yeah, thanks, Ryan. Yeah, look, I mean, the guidance assumes kind of typical seasonal patterns that we've, you know, that we've observed historically. You know, what I'd say is baked into the guidance for the rest of the year is kind of a stabilization in fundamentals, but it really is just those seasonal trends that we've seen kind of applied over the top. We've had a lot of debate internally about, you know, given where the trends have been, will the seasonality be as pronounced as it has been in prior years? You know, we obviously don't know the answer to that yet, but we've taken a pretty conservative stance with regard to what's baked into the guide for the rest of the quarter.

Ryan Tomasello (Managing Director)

Great. Thanks, guys.

Operator (participant)

Thank you. One moment for our next question, please. Our next question comes from the line of John Campbell with Stephens. Your line is now open.

John Campbell (Managing Director of Equity Research)

Hey, guys. Good morning.

Doug Lebda (Chairman and CEO)

Good morning.

Scott Peyree (COO and President of Marketplace Businesses)

Morning.

John Campbell (Managing Director of Equity Research)

Hey, for insurance, I want to touch back on Ryan's question there, just based on the channel commentary. I mean, it feels like the arrows are certainly pointing in the right direction for a recovery next year. But just on the segment VMM outlook, I'm thinking maybe we should think about it like a seesaw effect maybe next year. Like, you get the revenue rebound, and the VMM margin comes back in a bit, or alternatively, you know, rev remains somewhat sluggish, and then VMM kind of stays at current levels. Is that just generally the right way to think about it for next year?

Doug Lebda (Chairman and CEO)

I'm gonna let these other guys comment, too, but the way I like to think about it is in VMD, not as much on the percentage. And as your demand kicks in, you're able to go, obviously advertise, while your cost of acquisition might go up a tad as you, you know, let's just keep it simple, bid higher in search terms. That obviously might crimp a percentage margin, but it would drive a lot more dollars. Trent, Scott?

Scott Peyree (COO and President of Marketplace Businesses)

Yeah. Yeah, I'll jump in quick, too, and I would echo what Doug says. I mean, we look at total VMD. So as your clients' budgets start significantly increasing, you know, as you're spending into more traffic, your VMM margins will typically come down, but your overall VMD will go up pretty significantly. And so when we're in limited budget environments, it's easy to target the types of traffic, the high quality traffic, that the clients want and make good margin off it. As the budgets move more towards the, what you would call, like, you know, an unlimited budget at, like, CPA targets for clients, that's where you're more aggressively spending in the areas, trying to generate revenue and traffic. But, you know, at oftentimes lower VMM margins, but higher overall VMD.

John Campbell (Managing Director of Equity Research)

Okay, that makes sense. I appreciate that. And then to what extent you guys can, I'm hoping maybe you could run us through the strategic shifts in credit card. You know, while you're looking to partner, how that partnership economics work, maybe just at a high level, and then what you think that credit bureau partnership can do for the business in the years ahead?

Doug Lebda (Chairman and CEO)

Scott?

Scott Peyree (COO and President of Marketplace Businesses)

Yeah, I would say, you know, with this partnership, what I'm really excited about the partnership with third-party bureau is the consumer's ability to get pre-qual for subprime and near-prime cards. You know, from a business perspective, that's probably the most significant impact this will have, is where a lot of our card presentation right now on our sites focus on more prime consumers, which throws out, you know, a lot of consumers that don't qualify for those cards.

So now by doing this partnership and bringing more options to consumers, it allows us to onboard a lot more issuers and make for a very smooth and easy process for those consumers to get pre-approved for those cards that would be otherwise a little nervous about filling out a full application on a card. So it's a lot more consumer choice, means, you know, for every 100 consumers coming through the site, you're finding a solution for a lot more of them than we are today. And that's where I think, again, getting to that marketing flywheel will help us increase traffic a lot there.

John Campbell (Managing Director of Equity Research)

Okay, makes sense to me. Thanks, guys.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Cris Kennedy with William Blair. Your line is now open.

Cris Kennedy (Research Analyst for Financial Services and Technology)

Good morning. Thanks for taking the questions. Doug, you've seen a lot of cycles in this business over time. Can you just talk about your competitive position today relative to prior cycles and, you know, as the markets improve, the earnings... Talk about the earnings power of the business.

Doug Lebda (Chairman and CEO)

So I think our position is better in this one. If it were not for the debt refinancing that we're facing, I would say we're in a much stronger position. In the past several cycles that I've been to, really, that I've been through this, our monetization went down. We did not have the balance sheet that we had. And most importantly, we were concentrated in, you know, like 95% mortgage. This business, with the diversification that we've pulled off, certainly at a cost, has enabled us to weather the mortgage downturn, and then you can, you know, weather the personal loan downturn.

This is the first time that I've experienced where literally everything is pulled back at once in every category, and we've still been able to make a good amount of money. And that's what I think differentiates this one from all the others. From a competitive standpoint, from a competitive standpoint, I would only add that there's fewer competitors today. The LendingTree brand name is obviously very well known, and we got to improve our, our product that we bring to consumers, but that is underway. I'm thrilled that TreeQual has finally made it out of the gates after talking to you all about it for the last couple of years. And, you know, it's gonna be a knife fight among some of the competitors, but we're up for it and ready.

Cris Kennedy (Research Analyst for Financial Services and Technology)

Got it. Thank you. And then just, can you talk about the margin profile? You know, you've taken a lot of expenses out of the business, and as the macro improves, kind of talk about the long-term margin profile. Thank you.

Trent Ziegler (CFO)

Yeah, Cris, this is Trent. I'll, I'll hit on that one. Yeah, look, I mean, obviously, you've seen us take margins from mid to high teens EBITDA margin to, to mid-teens. I'm sorry, mid to high single digits to mid-teens, just over the course of the last year or so. You know, I think as we, as we've unpacked our cost structure and continued to chip away at it, right? We've, we've done a lot of really good work, and, and as we sit here today, you know, we feel like we are still perfectly well-resourced to continue to run this business and place, you know, a few focused bets, right? We're, we're not strapped for resourcing in such a way that we can't continue to innovate and drive, drive product improvement. We're, we're adequately staffed for that.

And as the, you know, as the macro continues to improve, there's not a lot of variable expense that we have to layer on top, right? And so we feel really good about our ability to, you know, maintain and improve upon kind of that mid-teen EBITDA margin profile that you're seeing today.

Cris Kennedy (Research Analyst for Financial Services and Technology)

Thanks for taking the questions.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Youssef Squali with Truist Securities. Your line is now open.

Youssef Squali (Managing Director and Head of Internet and Digital Media Research Group)

Awesome. Thank you so much. So one quick question for Doug and maybe one for Trent. So Doug, just as, as, as you look at the, the, the potential turnaround, in 2024 across the businesses, maybe what early indicators are you tracking to identify the reversion, maybe in underwriting standards by lenders across, but the, the consumer segment and home segment, not as much in insurance? I think you, you've discussed that. Then, Trent, can you just help us, think through the Q4 guide and what's implied across growth, across the three segments: home, consumer, and insurance, please?

Doug Lebda (Chairman and CEO)

So in terms of metrics, and Scott or Trent, feel free to add in. From a client's perspective, you need to look at their cost per funded loan. What is it costing them to, you know, get what they're looking for, which is a new loan? We look at that across all of our clients. You know, in mortgage, like prior quarters, that's been too high. That's merely because consumers don't get as much of a benefit from refinancing, obviously, at much higher rates. So you look at your cost per funded loan or your cost per policy in insurance. And then it's really the CPA, what's it costing us to get somebody to come and want a transaction?

And then your RPL, what is your revenue that you're getting from that introduction on the other side? And then that times volume is, is what drives the whole thing. And, that's, that's the marketing flywheel that, that Scott talks about. And then the only other thing I would add on top of that is, you know, with the launch of Spring on the web and with the upcoming launch of it. This is the new name for My LendingTree, with the launch of the app and we think in November, plus TreeQual, we think we can move those numbers up appreciably.

Scott Peyree (COO and President of Marketplace Businesses)

Yeah, and I-

Doug Lebda (Chairman and CEO)

Yousuf, and then, Go ahead, Scott.

Scott Peyree (COO and President of Marketplace Businesses)

Okay, yeah, just real quick. And another key metric, as I alluded earlier, that we're gonna be looking at is what I, you know, I like to call it the leaky bucket. But I, you know, at the end of the day, it's like-

Doug Lebda (Chairman and CEO)

Yeah.

Scott Peyree (COO and President of Marketplace Businesses)

Looking at consumers that are falling out of our funnel currently. A quick, easy example, if someone comes looking for a personal loan, they may be looking for a personal loan to go on a vacation to the Bahamas. You know, 18 months ago, you could get a $10,000 personal loan for that. Today, it's hard to get a personal loan for that. But they may be a homeowner with a, you know, good credit and perfect home equity candidate. So, like, really identifying how large is the leaky bucket and how good are we at matching them to other products that can get them the money they're seeking?

Trent Ziegler (CFO)

Yep, and then on the Q4 guide, Youssef, I mean, I guess just framing it up kind of sequentially relative to Q3, we expect insurance to be pretty stable, Q3 into Q4. We do expect some softness to come from both home and consumer. I mean, in consumer, that's, that's where we've typically seen the most pronounced seasonality historically. Volumes just tend to kind of drop off in Q4 and then begin to ramp back up in Q1. And then in home, right, I mean, we've all seen what's gone on sort of in the rate environment. We've seen home equity slow down a little bit as a source of strength, given the rate environment and just the conversion aspects of that product.

And so, you know, a little bit of weakness in both home and consumer, pretty stable in insurance.

Doug Lebda (Chairman and CEO)

The only thing I'd add is, over the last 25, 27 years, I think I've said this pretty much every year, that Q4, the consumer behavior on the lending side, in particular, is not in the borrowing mindset. They're more in a spending mindset, and then typically wake up in January and say, "Oh, shoot, what did I do?" And then they start to get their financial, you know, house in order, and that's when we see a resumption of, call it normalcy.

Youssef Squali (Managing Director and Head of Internet and Digital Media Research Group)

That's helpful color. Thank you all.

Operator (participant)

Thank you. One moment for our next question, please. Our next question comes from the line of Robert Wildhack with Autonomous Research. Your line is now open.

Robert Wildhack (Director and Equity Research Analyst for Consumer Finance, Fintech, and Payments)

Morning, guys. Wanted to go back to an earlier question. Can you speak to how the changes you're making to TreeQual will leave it positioned to, or positioned relative to competing products out there?

Doug Lebda (Chairman and CEO)

I'll let Scott chime in on some of the details of it and some of the stuff we're not going to want to give out for competitive reasons, but we think this will be as good and probably better than any of the competing products out there. The notion in credit card, as Scott referred to the leaky bucket, has a hugely leaky bucket because credit card companies, particularly in subprime and near prime, only approve about 1 in 10 of the people that we send them because they're self-grading their credit, and they don't always self-grade themselves accurately. So this is going to enable us to drive that number up in terms of the approval rate, but it also enables us to give the consumer a much, much better experience.

Scott, you want to talk about the competitive—like, where you think we stand versus competitors?

Scott Peyree (COO and President of Marketplace Businesses)

Yeah, I would say-

Doug Lebda (Chairman and CEO)

With TreeQual.

Scott Peyree (COO and President of Marketplace Businesses)

There's two things with our product that I would really highlight, which I think is advantageous for us. I mean, the first off, the fact that we're working through a third-party credit bureau, you know, which a lot of our clients would consider, you know, kind of an independent party in this transaction, that, by the way, all the issuers are already working with. So it A, makes integrations way easier, way easier to onboard with us if they don't have to onboard with a custom system that we've built in-house, you know, because we're both working with a mutual third party there. And B, there's that level of trust of, like, we're not necessarily going to, you know, take specific information from their credit boxes and underwriting criteria and use it for our own purposes.

And so I think at that level, it will allow us to bring on issuers at a really rapid pace, and they'll like this model and how to spend money with us. And then on the other side, it's, you know, this can be a live product. If someone just on the website, they can actively go through this. It does not have to be a logged-in user. It's definitely something that we can use for our logged-in users, and we will use for our logged-in users. But this is just a live preapproval in real time these consumers can get, which I feel is a really advantageous component to this product.

Robert Wildhack (Director and Equity Research Analyst for Consumer Finance, Fintech, and Payments)

That's great. Thanks. And then can you just give some more detail on the investment impairment in the quarter? What was that in relation to?

Trent Ziegler (CFO)

Yeah, Rob, it's Trent. So there were two. One was related to our investment in Stash. You know, there was an observable event that caused us to relook at that valuation, and that shouldn't come as a huge surprise to anyone if you've followed the consumer Fintech space at all, right? I mean, clearly, we marked that up very considerably when we sold a position of—sold part of our position, I think it was fall of 2021. And now multiples in that space have just come crashing back down to reality, and so that's what's being reflected in our mark. The other write-down was related to our carrying value of goodwill, and that is really just a function of kind of what we've observed in the market, right?

It's not really a call on our long-term outlook for any of our various businesses. It's really, does the stock price support the level of goodwill that you've got on the books? And, you know, in, in our scenario, unfortunately, it doesn't. And so we again, had a third party come in and look at, at the different segments. In this case, the impairment was attributed to the insurance business. That's largely because, you know, we built up goodwill as we did all those acquisitions from 2015 through 2019. When we moved from one reportable segment to three reportable segments, insurance got the brunt of, of the carrying value of that goodwill, and so it had a higher bar to, kind of justify the, the carrying value. And so again, we, we have to test that goodwill annually.

We went through that process with a third party, and took a modest write-down against the insurance segment.

Robert Wildhack (Director and Equity Research Analyst for Consumer Finance, Fintech, and Payments)

... Okay, thanks. Just on that last piece, is it safe to assume that the majority of the Goodwill Impairment didn't come from your long-term outlook or projections for the business, but more from maybe the comparables or discount rates, things like that?

Doug Lebda (Chairman and CEO)

That's right. So it's, there will be more details in the 10-Q when it comes out. But it's, it's like 50%, based on long-term outlook, 50% based on observable sort of market events, right? And as you pointed out, you know, clearly the discount rate has gone up, stock prices come down, multiples across the space have come down, and so that's really what's reflected.

Robert Wildhack (Director and Equity Research Analyst for Consumer Finance, Fintech, and Payments)

Got it. Thank you, guys.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Jamie Friedman with Susquehanna International Group. Your line is now open.

Jamie Friedman (Senior FinTech and IT Services Research Analyst)

Hi,

Doug Lebda (Chairman and CEO)

Hey there.

Jamie Friedman (Senior FinTech and IT Services Research Analyst)

Good morning. So it's helpful to have these comments, early comments on 2024 in insurance. I'm just looking through the letter, and it sounds like you're optimistic about potential growth in that segment. I was. I know it's early, but I was just wondering if you have any high-level comments on the potential for the other segments as well?

Doug Lebda (Chairman and CEO)

I don't think for 2024, anything that we're willing to reveal yet. However, I do think cards will be better, and Scott, you should add on, Trent, feel free too. Cards will be better because of TreeQual. Personal loans and the other ones will be better because of the cross-selling that Scott referred to. And that all obviously all depends on client demand, and you just heard, you know, the early stuff on about client demand. I'm not expecting much tremendous growth out of home as until the, you know, log jam in the home market, you know, really abates. You've got people who don't want to sell homes and people who don't want to buy homes.

Now, there's always a market to make, but in home, the consumer. There's just not as much of a consumer benefit, and/or they can't afford, you know, what they see. So you have a leakier bucket in home. That said, from a product standpoint, we've planned out our product pipeline through Q4 and Q1, and we are making some improvements that hope to grip, and doing a lot of testing around that product to come up with new consumer experiences. So, so that is, that is very hopeful for that one. Scott, what else would you add?

Scott Peyree (COO and President of Marketplace Businesses)

Yeah, I would just hit on, you know, two, two very large categories, SMB and personal loans, being I would start with, there's a lot of... There remains a lot of consumer demands for those products and a, and a high level of client demand, even though the credit criteria is tightened. You know, the loans they are writing, they're happy to write, and they're indicating they want to write more and more of those loans with us. So, like, as we get better at fixing that leaky bucket and cross-selling, effectively increasing our monetization, I think we can definitely see growth in those categories next year, just based off of high consumer demand for those products.

Jamie Friedman (Senior FinTech and IT Services Research Analyst)

Okay, thanks for that. And then, Trent, I was interpreting some of your prior comments about margin. So you've gone actually from the low single digits into the teens in terms of Adjusted EBITDA margin. Do you view that as this, as structurally sustainable for the company? Or asked another way, is there any reason why that, where you are now, would not be structurally sustainable?

Doug Lebda (Chairman and CEO)

We have no reason to believe that it's not sustainable. I mean, as I said, we've done a lot of thoughtful work on the cost structure. We've gotten it in a very good place, and then we think it's scalable as the top line kind of inflects and moves in the right direction as we get into next year.

Jamie Friedman (Senior FinTech and IT Services Research Analyst)

Got it. Okay. Thank you all.

Operator (participant)

Thank you. One moment. Our final question will come from the line of Melissa Wedel with JPMorgan. Your line is now open.

Melissa Wedel (VP of U.S. Equities Research)

Good morning. Thanks for taking my question today.

Doug Lebda (Chairman and CEO)

Good morning.

Melissa Wedel (VP of U.S. Equities Research)

Hi. Was hoping to circle back to some of your comments about TreeQual. You talked, I think Scott talked about expanding product offering to additional customers, providing a subprime and near-prime product or solution for customers through that TreeQual initiative. I just wanted to clarify, is that something that is entirely focused on subprime and near-prime, or would that extend into the prime offering as well?

Doug Lebda (Chairman and CEO)

Yeah. No, it's not entirely focused on subprime and near-prime. That's just where the biggest opportunity is, and let's call that the biggest leak in the credit card bucket.

Scott Peyree (COO and President of Marketplace Businesses)

Yeah, and I would add, you know, our prime customers are very, very interested in integrating with this. We've just kind of had to focus, like, you know, as we line people up, we want to get the subprime and near-prime in first because that's a new product offering for our customers. But prime customers definitely want to integrate with this. And I would also say a lot of our personal loan customers want to integrate with this as well for the personal loan product.

Melissa Wedel (VP of U.S. Equities Research)

Okay, that's helpful. And then you did-- I think the shareholder letter mentioned that it is being tested right now with a handful of partners on the platform. Could you give us a sense of what that testing timeline is like and when that might be rolled out more broadly?

Doug Lebda (Chairman and CEO)

... Scott, you want to take that?

Scott Peyree (COO and President of Marketplace Businesses)

Yeah, I mean, we're rolling it out. We have four clients on the initial rollout that is happening imminently here, and we will be doing a lot of testing throughout the fourth quarter. You know, our hope is, if all goes well, we start really expanding where, you know, all the places a consumer could potentially be seeing that it, as early as the beginning of the first quarter. And then it will just be a continual flow of onboarding new issuers as fast as we can. Again, one of the advantages of this product is it is pretty easy for issuers to onboard with this product. It's not a lot of work, which is great.

So we should be able to grow the number of issuers rapidly, and, again, assuming the testing goes fine in the fourth quarter, we should be exposing it to a lot more traffic in the first quarter.

Melissa Wedel (VP of U.S. Equities Research)

Okay, thanks for that. If I could follow up, on the rebranding and relaunch of My LendingTree or now Spring. I had always had the impression that that was particularly focused or particularly, had, had particularly good engagement with personal loan consumers. Is there something that we should be thinking about differently, with the relaunch of the app, that you're planning shortly?

Doug Lebda (Chairman and CEO)

No. So the hope with Spring is. So right now, the largest source of new members are people coming from our personal loan product. That's what you are referring to. But the hope with Spring is, as the product evolves, that we can actually have its own traffic, and that you can, you know, be advertising for downloading the app, and we just need to make our alerts much better. And one thing that I'm just thrilled with, and the change that's happened over the last three months, is our product organization. I referred to that somewhat, but you know, we have a completely redone way of doing product, and it's really starting to work.

So we're starting to see, much better and faster progress on the tech and product front.

Melissa Wedel (VP of U.S. Equities Research)

Thanks, Doug.

Operator (participant)

Thank you. I would now like to turn the conference back to Mr. Doug Lebda for closing remarks.

Doug Lebda (Chairman and CEO)

Thank you. I want to thank everybody on this call for your continued faith in our business. The outlook is beginning to turn positive, largely due to the operational improvements we've implemented, but also due to the inflection we expect in our insurance business. Our team is properly focused on the core of our marketplace, working on numerous discrete initiatives to drive additional VMD from our existing base of customers who come to us every day looking for the financial product that is right for them. We are leaning into our entrepreneurial culture by testing ideas quickly and inexpensively, and that helps to optimize the business. Our team is leaner and better, we are operationally faster, our client relationships are strong, and we are very optimistic about the future.