LendingTree, Inc.
Q2 2014 Earnings Call Transcript

Published: 6 Aug 2014

[Operator:]

Good day, ladies and gentlemen, and welcome to the Tree.com's Second Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference call, Mr. Alex Mandel. You may begin, sir.

[Alexander Mandel:]

Thanks, operator, and thanks, everyone for joining us today for Tree.com's Second Quarter 2014 Earnings Conference Call. First, a brief disclaimer. During this call, we may discuss Tree.com's plans, expectations, outlook or forecasts for future performance. These forward-looking statements are typically preceded by words, such as we expect, we believe, we anticipate, we are looking to or other similar statements. These forward-looking statements are subject to risks and uncertainties, and Tree.com's actual results could differ materially from the views expressed today. Many, but not all, of the risks we face are described in Tree.com's periodic reports filed with the SEC. On this call, we will discuss a number of non-GAAP measures, and I'll refer you to yesterday's press release available on our website at investors-relations.tree.com for the comparable GAAP measures, definitions and full reconciliations of non-GAAP measures to GAAP. I have begun the last few earnings calls discussing the mortgage market backdrop against which we have been operating as there have been a common theme of industry originations dropping where our mortgage products revenue had grown. Continuing in that vein, in the second quarter of 2014, industry originations declined by 45% year-over-year while our mortgage products revenue grew by 5% over the same period to a record $34.7 million. Our non-mortgage products revenue continue to demonstrate strong growth year-over-year, up by a 105% in Q2 to a record $7.5 million in the quarter. This rate of year-over-year growth was similar to the first quarter's performance in which non-mortgage revenues grew by 108% year-over-year. I note that non-mortgage revenues now represent a record 18% of total revenues, up from 10% in Q2 of last year. Also of interest relating to our non-mortgage products revenue is that contribution to this growth came from all of our non-mortgage product lending categories, including home equity, reverse mortgage, personal loans, auto loans and credit cards. We believe this attests to the broader array of loan and credit-based offerings we have worked hard to launch or enhance over the past 6 quarters. Looking ahead, we anticipate strong growth to continue in our non-mortgage revenue relative to momentum we are seeing in the market at this point in the quarter. All in, consolidated revenue of $42.1 million in Q2 was up 13% over Q2 of 2013, representing a record level and falling squarely within our prior guidance. From a profitability standpoint, the company delivered $15.8 million of variable marketing margin, ahead of our previous guidance. As a percentage of revenue, VMM of 37% in the quarter was consistent with last year's Q2, albeit slightly behind the preceding Q1 due to investment in our brand campaign as we previously discussed. Adjusted EBITDA of $5.5 million in the quarter exceeded the high end of our previous guidance range and was up 64% year-over-year as we experienced some operating leverage with the total costs between VMM and EBITDA remaining relatively flat year-over-year, while revenue and VMM grew over that time frame. Our reported net income from continuing operations for the quarter of $2.7 million or $0.23 per diluted share, reflects a significant reduction in legal expenses over both the year-over-year and previous quarter periods, as well as the limited tax expense incurred due to utilization of our significant NOLs. You will also note in our earnings release that we began to report a new non-GAAP metric, which we refer to as adjusted net income and the corresponding per share figures, which, as detailed in our earnings release, exclude certain amounts expensed under GAAP, as well as certain onetime items, which we believe offers a relevant perspective on the underlying performance of the company's business. From the standpoint of this metric, the company reported $4.6 million of adjusted net income from continuing operations or $0.39 per diluted share. Touching briefly on our discontinued operations. The loss of approximately $2.9 million, primarily relates to a reserve established for a legal matter concerning the former Home Loan Center business. From a balance sheet standpoint, our unrestricted cash ended the quarter at $87.6 million, and our working capital position was $63.1 million, which we calculate as current assets, including unrestricted and restricted cash, minus current liabilities, which includes loan loss reserves. Following the expansion of our stock repurchase program in May, we began buying stock back in the open market, and during the quarter, we've purchased a total of 59,000 shares for approximately $1.5 million. In sum, the company produced record revenue and exceeded profitability guidance. We skillfully navigated and took share in a challenging mortgage market and continued to make significant progress across our full suite of loan-based comparison shopping offerings, reflecting our strategic focus on diversifying the business by leveraging and extending our core competencies into additional revenue streams. I'll now turn to Doug for his comments.

[Douglas R. Lebda:]

Thanks, Alex, and thank you, everyone for joining the call today. As Alex pointed out, our financial results in this quarter were terrific. We produced record revenue of over $42 million and comfortably exceeded our bottom line guidance. With that, I'll briefly discuss our results, but more importantly, I'd like to share some thoughts on our new product initiatives. Looking at the top line in Q2, our core mortgage products revenue of $34.7 million grew 5% over the second quarter last year, while the market was down over 40%. The fact that we're able to sustain growth in our mortgage business, despite market headwinds, is truly remarkable. Origination volumes in the broader market are poultry, and lender profitability is on the decline. Our growth is a testament to the relationships we have with our lenders. Relationships that demonstrate were seen not only as a high-quality, cost-effective source of customer acquisition but also as a trusted strategic partner. Perhaps, most importantly, revenue from our non-mortgage products of $7.5 million was up 105% year-over-year and 29% sequentially. This has been and continues to be a huge strategic focus for us, and it's clearly paying dividends. In particular, our personal loans business, which launched with renewed focus in the third quarter last year, has shown tremendous upside and, in the month of July, eclipsed $1 million in revenue. The emergence of new lending platforms and vast sources of capital in the personal loan space are driving tremendous industry growth, and the biggest challenge for lenders in this space is customer acquisition, which is where LendingTree comes in. By partnering with these new breed of lenders and leveraging the LendingTree brand, we feel that we are just scratching the surface of this opportunity. In fact, the team has been hard at work in recent weeks, developing a new personal loan-focused TV commercial, which you can expect to see on air in the next week or 2. This aligns perfectly with our continued effort to establish the LendingTree brand as more than mortgage. In addition to that, recently, we also launched a small business loan product, which is now live on our site. It's still very small, but it's also showing tremendously great progress, and that market is going to track very similarly to personal loans. Continuing along these lines, I'd like to take a moment to discuss our new My LendingTree initiative, which went live in June. We feel strongly that this is our most significant product innovation since we created the concept of the online loan marketplace nearly 2 decades ago. In addition to empowering consumers to take control over their financial lives, this offering gives us the ability to increase the lifetime value to us of our relationships with those customers. And previously, our engagement with consumers has been limited to the extent that consumers were actively shopping for loans. In the case of a mortgage, that interaction is very infrequent as you might imagine. What we have now is the ability to monitor our consumers' credit profile and proactively serve potential cost savings opportunities across all of our loan and credit categories without incurring the marketing costs to reacquire that consumer. It's truly a win-win situation for the consumer and LendingTree, as well as the lenders who participate on our various exchanges. The early feedback on this initiative has been extremely positive, and I look forward to sharing more with you in the quarters ahead, but in summary, this is a game changer for LendingTree. This is LendingTree becoming the, comparison-shopping engine of a kayak, where you will compare multiple offers with the personalization and repeat business of an Amazon. Moving back to the numbers and addressing the bottom line. We delivered $5.5 million of adjusted EBITDA in the second quarter, well ahead of our prior guidance. As Alex mentioned, we have begun to demonstrate some operating leverage within the business, and you should expect to see that as we continue to scale. Now looking to the rest of the year. We've maintained our full year guidance as indicated in the press release. Getting a little more specific on the third quarter, we anticipate revenue in the third quarter to increase 8% to 13% over the third quarter of 2013. VMM is anticipated at $16 million to $17 million and adjusted EBITDA at $5 million to $6 million as we continue to invest in product and marketing, particularly around our new initiatives. To wrap up, I'm extremely pleased with our results in this quarter and the accomplishments we have delivered to date. The mortgage market continues to produce headwinds for us, but we're laser-focused on execution in that business, even as we continue to enhance our product offerings, further optimize our marketing machine and add new significant lender relationships at scale. Our strategic focus on non-mortgage verticals is already yielding traffic results, but we're not letting up. The transformation taking place in the personal loans category is parlaying itself into other categories, like small business loans and student loans. And with the launch of the student loan product in Q2 and our first convergence of small business loans in July, we're extremely well-positioned to be in front of those markets as well. With that, we're on track to deliver exactly what we promised in 2014. With that, I'll take Q&A.

[Operator:]

[Operator Instructions] Our first question comes from Hamed Khorsand with BWS Financial.

[Hamed Khorsand:]

Just a couple of questions. One is can you talk about the new marketing initiative for the personal loans? Are you taking that -- any dollars away from the mortgage business?

[Douglas R. Lebda:]

No, we're not. The way we operate every one of our loan marketplaces is each one of them has to balance supply and demand inside of that market. So we've got -- so we'll do as much marketing as long -- in each of our verticals as long as it's, a, profitable and b, we're not going to overproduce flow to the lenders. The great thing about the personal loans space and, quite frankly, the small business loan space as well, right now, you've got unlimited capital that is flowing to those lenders, and all they need are customer relationships. We've got over 10 lenders on the personal loan network and more being added all the time. And all of those lenders are asking us and begging us for more volume, increasing the pricing of those leads. And now that we've got the demand for volume, we're going to step on the marketing gas and that -- in July, that marketing -- the marketing that we have done so far, which is all online, has been extremely profitable.

[Hamed Khorsand:]

Okay. And do you have any metrics that would be in any way reasonable? I know you guys only launched My LendingTree in June, but do you have any metrics to share?

[Douglas R. Lebda:]

Not yet, but I think we will in the next couple of months. But suffice it to say that -- so let me first tell you a little bit about it. Everybody coming through LendingTree, applying for a loan, gets an offer that they can see their free credit score. This is very similar to a company called Credit Karma and a product that they have who is also a partner of ours. You can get your free credit report, not just your score, your entire report, and we also then give you recommendations to improve your credit, and then we monitor it on a monthly basis. The beauty of it is, is that not only do consumers then not have to apply for another loan, but we also start to give them recommendations on ways that they can save money. That's essentially one-click shopping for your next loans. So you might come in for an auto loan, and you know what, you click over and you can see credit card shopping without having to go refill in a whole form. It's basically everybody in America should have a LendingTree account just like most people have an Amazon ID. But we're definitely seeing an uptick in not only a lot of credit scores being displayed, but a lot more repeat businesses than we've ever seen. I think this is -- honestly, this is the original vision of LendingTree, and it's finally coming to fruition 18 years after we started.

[Hamed Khorsand:]

Okay. My last question is what kind of pricing trends are you seeing on the mortgage side? And is it really just being volume-driven?

[Douglas R. Lebda:]

Mortgage is interesting, and it bounces around. I think the long-term trends in mortgage are very good. I would say pricing is stable, but what we did see at end of the quarter, and this is natural, lenders -- if lenders can have their organic volume and rates went down, lenders will pull back a little bit on LendingTree. So it's -- we did well compared to the market, and lenders still love our leads. But just like we have seen pricing go up in prior months, where pricing, I should say, demand increases from lenders as the market got worse, when the market got a little bit better, that went the other way. So blended, it's fine. I would say it's stable, but the beauty of where we are seeing significant pricing leverage is as we change the mortgage product. So for a call center-based mortgage correspondence doing refinancing, you probably -- you have stable pricing. But what we're seeing is in the purchase market and in the local introduction market specifically, where we're getting new lenders at scale, major banks, major mortgage originators, who are branch-based and have local loan officers, we're seeing significant price increases there. And so as that market grows to overshadow refi, that's really the future of the mortgage business.

[Operator:]

Our next question comes from John Campbell with Stephens Inc.

[N. Hayden Blair:]

This Hayden Blair sitting in for John. Congrats on the $1 million on personal loans in July. What sort of run rate is that going to imply for the rest of 2014? And then can you kind of help us size up market opportunity and penetration for '15 and '16, if you can?

[Douglas R. Lebda:]

'15 and '16, I don't think I can do yet, but if I just -- I'll give you a couple of reference points on personal loans. Since we redid the product, that $1 million run rate is roughly a high-20s, low-30% month-on-month compound growth rate since we launched it in the third quarter. So it's growing tremendously well, and it's been fast took a while to get it going. In terms of market penetration, I think it's extremely big. I hate to say it's nearly unlimited. Most people are taking out these loans because there are better rates than they're getting on their credit cards. And as people realize the implied interest rates in the credit cards after you get all the fees, people can save a lot of money. Instead of putting money on a card, they can take out a loan from one of our lenders and still have lenders compete. And if you look at some of the others, a lot of chatter in this market, about a couple other private companies, but their numbers are all public, and we're roughly 2.5x the size on a revenue basis of one and roughly the same size on a revenue basis as the other one, and both have raised capital at multi -- over $1 billion valuations. So we just feel great about this business, and I think what you're going to see over time, and we're already seeing, is the value of our leads are going to go up. New entrants are absolutely going to come into this market and probably drive down the pricing for the consumer, which is even better, because that's what we want to do at LendingTree. And then we're going to step on the marketing gas, and I think this has huge run rate. And by the way, the same thing is true in small business, and the same thing is true in student loan, particularly, student loan refinance, which is something we're working on right now. So I feel fantastic about it, and even better, the great thing -- the reason personal loans didn't work as well 18 years ago or 15 years ago or 2 years ago is because these loans were being done mostly by consumer-financed companies, underwritten very slowly and underwritten offline. These new-age lenders are underwriting and approving very much similar to what we saw with home equity 8 or 9 years ago, which is it's entirely automated and the money shows up the next day roughly. And because of that, you get much better conversion rates for the consumer. Consumers are delighted, and we love that.

[N. Hayden Blair:]

Got it. And then on the -- just share repurchases going forward, are you guys going to really be looking for more opportunistic or structured buying? I know you just had an extra authorization here in June, I believe it was.

[Douglas R. Lebda:]

I think we -- I think as bullish as we feel about the business, I would say we expect to continue to be in the market, repurchasing stock, and we still are. In the quarter or in the start of the third quarter, we relook at our program and our parameters every time our trading window opens, and we set those parameters in place. But I see no reason why we wouldn't continue to buy back stock at these levels, considering the revolution that, quite frankly, is going on in consumer finance right now, and our very unique position with millions of customers flowing through our system.

[Operator:]

Our next question comes from James Fowler with Harvest Capital.

[James J. Fowler:]

I wanted to ask you just a detailed question. To start, 2 quarters ago, you had made mention that you were going to start a marketing campaign and that we should think about total expenditure of about $1 million, with $700,000 in the first quarter and $300,000 in the second quarter. Can you update as to how much of those have been expended? And then when you're talking about marketing for the new products, is that incremental? And if it is, could you give some more context around how you think you might be spending and the periodicity in which we might see it in the financials?

[Douglas R. Lebda:]

Sure. So we -- and we're going to test TV before we just rock and roll. I think what you're referring to was the production costs, and those were expensed in -- mostly in Q1 and a little bit in Q2. Those were for a couple of commercials that are running now that while they talk about the other products, they're mostly mortgage-focused. And I got to thank you because I think you actually planted the seed of really starting to advertise personal loans, and we actually accelerated the -- we put the personal loan ad ahead of the -- doing the broader LendingTree message. So we're going very specific and very direct with a personal loan ad. It's finalized. It's actually out there on YouTube already, and we expect to be about on air. The production costs of that were very small, so they haven't been expensed yet, but it was a rounding error. And we're working right now with our agency on a slate of new ads that will be much more focused on not only -- it will essentially be the all new LendingTree. It will talk about money center. It will talk about taking control over your financial life, and we'll feature all of our products. So expect us to see that what you're going to be running more and more of is a very targeted, direct message on personal loans and more of a branded -- and more of a relaunch of the LendingTree brand to the United States as we are here for mortgage, home equity, auto, personal, credit card, small business, student, and I probably missed a few.

[James J. Fowler:]

And then just -- and so the $1 million largely spent on personal loan, not much expenditure but we could expect some incremental to -- for marketing for the entire product set at some point here?

[Douglas R. Lebda:]

Yes, there'll be some small production on that, but we're being very smart on production cost even on that one and on those. And I do want to emphasize, that is production cost. We spend significant amount of money in television. Wherever we have -- listen, here's the great thing about TV from a marketing standpoint. TV, first off, I'll touch on the brand. To spend money on TV profitably, you need to have a great brand, and we do. The reason a lot of -- when most Internet companies start, they do as much as SCO as they can, then they go to SCM until that caps out. Then they -- or until it's too competitive and not profitable. Then maybe, they can get their way over to Display channel. And then social came along, and then there's advertising there. You don't see companies doing a lot on TV who are predominantly online, unless they have a way to monetize it. And in personal loans and in non-mortgage, too, but we have significant monetization capability, and it's huge. So -- and the market is huge. The nice thing about TV, you can get very broad reach. It's just very expensive to make it profitable, and LendingTree is very, very lucky that with our brand, we started in TV. We were not good online marketers until our marketing machine -- until Gabe Dalporto came on and rebuilt our marketing machine a couple of years ago and that was critical to do. But we're one of the -- I believe, we're the only company in this category that can do TV at scale and profitably, and we plan to -- Credit Karma is doing some of that, and we plan to scale the brand significantly. So it's -- but I just want to clarify that $1 million-ish was production cost and not media spend.

[James J. Fowler:]

Now I perfectly understood. And then one last question, if I might. I fully appreciate the comment on year-over-year change in market, in the mortgage market. But I'm wondering if you look at the focus in the production expenditure in the first quarter for the second quarter. And if I think about the mortgage market sequentially in the first quarter, second quarter, a big increase, 30% increase in volumes in the second quarter versus the first, but the mortgage product revenue was flat sequentially. Anything you need to say there in terms of why the sequential improvement in the mortgage market wasn't necessarily seen in the mortgage revenue, mortgage product revenue?

[Douglas R. Lebda:]

Sure, and I alluded to this somewhat before. Let me just try to be a little more specific. What you see in the mortgage market right now is, I would say, a bifurcation between call center-based, mostly refinanced shops where -- that are very capacity-constrained. And so as you said, origination, it's the opposite effect among those customers that you saw before, which is when their volumes drop, they buy more in LendingTree, they pump up, they widen their filters and they increase the price. But when the volumes go up and they have got free volume, they will buy proportionately less, particularly in refinance, and slow down their spend with us. But at the same time, on the other side of the mortgage market, where I am thrilled, is the growth area of the business. And for us, that is purchase, which we're seeing a lot more purchase activity, and that continues to grow substantially in both price and increasing buys. And that's happening because we've changed the product to be able to plug in, to have big banks and big mortgage originators that have never been able to operate on LendingTree before, but now they can. And we're doing that with call transfers, so we get -- we create inbound calls directly to their call center, and it's done with what we call local lender where we're putting leads in the hands of local loan officers, and both are tremendous. And so we've got that up and running with 2 lenders now. And we've got a long sales pipeline. And the beauty of that is -- and the reason they were not as effective on LendingTree years ago is because they didn't have these high-volume call centers with highly trained salespeople, where they get the guy on the phone in 5 seconds. But now that we're creating inbound calls, we are getting into them faster, and we're doing that some through Loan Explorer and some through -- just through the good old LendingTree. And the second thing we're doing is this local introduction, where we've worked with these lenders to actually get in the hands of those lenders, and they have phenomenal conversions. And so we're seeing pricing in the future of the -- be just fine. And as we roll out more lenders there, that'll become even more evident.

[Operator:]

Our next question comes from Josh Goldberg with G2 Investment Partners.

[Josh Goldberg:]

Just a couple of quick questions. I guess, first on the personal loan side. Obviously, $1 million a month is a nice start. I'm just curious, I assume it's roughly negligible this quarter last year or so, up, what, about 1,000% year-over-year?

[Douglas R. Lebda:]

It's give or take. Year-over-year, it's a growth rate of about 18%, and from the time we relaunched it, which was late last year, the growth rate has been, month-on-month, over 30%.

[Josh Goldberg:]

Okay. And when you look at that number, I mean, obviously, a company like Lending Club has around a $5 billion valuation. How can we get comfortable that how important you are to a company, like Lending Club or Prosper, in terms of the leads you generate versus direct mail or TV ads and stuff that they have?

[Douglas R. Lebda:]

So I won't -- for confidentiality reasons, I won't talk about the specifics. But what I -- suffice it to say that both of those companies and a lot of others are asking us -- right before this call, I was on the phone with a major company in the space who is on the network, and we're talking about how they want to scale up. When it's falling very similar to mortgage, which is, of course, you're always going to want to do your own originations, you're going to have your own websites, but you're obviously going to go do other marketing through companies like us. I mean, we're a media company. We just happen to price on a per-lead basis, so we are significant, but at the same time, they're obviously significantly growing on their own. We -- the key for them is consistent -- for them to get growth, their key constraint is customer acquisition. So they're going to go get all the customers they can, as long as they can do it profitably, and they can with us because personal loan is just like everything else, high-quality, filtered to your credit bands, at prices that -- and a real strategic partner. So they need -- their key is customer acquisition, and I -- we are significant already, but I expect we're going to become more significant as this -- as we generate even more volume because we haven't really begun marketing it yet. We had to build the network out first, and now the marketing begins in earnest. And so I think I would suspect we'll become more significant. And I also love the fact that not only are they very significant partners of ours and they're great companies, but there's more of them coming, and there's more being invented every day. We're getting more and more calls on this. Venture capitalists all now want to have a big hit, too. And what I think they're going to see for LendingTree, as the loan market place, maybe think about it as -- I hate to give huge analogies, but think of it like Google. In the early days of Google Search across each category, you had companies that were start-ups, and they became very successful, and they could do it. But over time, more and more people plowed into doing search advertising as they knew it worked. Their revenue per query went up significantly, and then their volume went up significantly as they syndicated that out. Now they didn't do TV advertising, but I would suspect that's the case. And then I come to Money Center, which is our repeat business machine, and the other -- I'll give you another opportunity for personal loans, too. Because we have all the loan types, we have people coming in for auto loans, and they see that -- and they flip over, and they see if they can also get a personal loan. And one of the other opportunities for us that we're going to start working on, there is no reason you can't get -- if you came in for an auto loan, we can show you a personal loan option right in that. So we have a lot of levers to drive the personal loan business, and we're going to do it. I don't want to miss small business. I don't want to miss student loan refi, it's -- and also, the beauty of this is a lot of these companies, which we haven't really tapped yet, they do multiple products. So we've got companies in the mortgage space that also do personal loans, and they also do auto loans. And we might have a small relationship with somebody in the auto loan space, but then we've never actually got them on personal loans yet. We are going in, at this most senior levels, of all of those organizations with a very focused sales effort to become a major source of volume for them.

[Josh Goldberg:]

Okay, great. A question on the Money Center. Obviously, Credit Karma recently did around at $2 billion or holding on to the $2 billion with Google. And I'm just curious, are you going to be able to provide over time -- number of members, number of people that actually use Money Center and kind of the velocity of how often they come back? Is there something you'll start providing for investors?

[Douglas R. Lebda:]

Yes, and while I would suspect our Money Center numbers aren't Credit Karma's yet, we are seeing very, very significant -- there's 2 things that we have. There are several things, I think, we have going for us. And Credit Karma, again, great company, very well-managed. We've got several advantages in that space, too. Number one, we have people flowing through our system all day. We don't just say to you, "Come, get a free credit report," which, by the way, you can go just get a free credit report. But we've got people streaming through our system every day, who are already applying for loans, and it's a very natural thing to say, "Would you like a free credit report?" So we will say, "Come, get a free credit report." And now that we're starting to -- as we -- to get the revenue economics, we will start marketing free credit reports, just like we market all of our other products online. And then at some point, as we know it, we'll then move to offline. So -- but we've got the brand, so we're going to pull great in advertising for just that product. We've also got, as I said, people flowing through to -- already to come for other products. And then the most important thing we've got is we've already built the lender networks ourselves. So other companies in this space, and there's one like, Credit Sesame, they don't have their own networks of mortgage companies. And they do have credit card products -- we've partnered with Credit Karma on credit card -- but they haven't built the networks of lenders in some of these other products. So our monetization is going to be better. And I think all of those things we've got -- it was funny. I was sitting here today, and I was thinking of all the attributes of LendingTree, and I was comparing them to some of those companies. And LendingTree has the brand, the paid marketing capability, the lender network that we've got. We now have the ability to credit monitoring. We've got the lifetime value of Money Center. Credit Karma and others, they've got the credit monitoring, and they've got the lifetime value machine, but they don't have those other things. Prosper and Lending Club have credit analytics and Wall Street sales, which is awesome, but they don't have a lot of the other attributes that we have. And then the last thing I would say is mobile as well, which we think all these products are great for mobile. Mobile is now over half our traffic, and that scaling significantly. So I, as I said, never felt better about our position in the market. And the fact that there are all these other companies out there with significant market caps, they're going to be spending significant amounts of money, not only they make great clients for us, but they're also going to help increase the total addressable market because they're going be on air. I mean, who knew you could get a personal loan? Not many people in the world unless you had lousy credit. Now you actually can. By the way, it's the last point I want to make on the huge opportunity. We're seeing more and more lenders coming into the space, in the subprime area. Our personal loan volume, as it does in the market, skews subprime. So there's a lot of unfulfilled leaves there that we are going to start to monetize very, very effectively.

[Josh Goldberg:]

And just last one. Obviously, your purchase business, it says in your results, was up 70% year-over-year, your purchase mortgage business. So obviously, your mortgage business was highly refi-ed last year. As you transition away from refi into more purchase, which was strong for you in June, it just seems to me like you shouldn't be much lower than here. Or I mean, granted 4.5%, 5% growth isn't great, but to me, it would seem like as interest rates rise, you shouldn't see a degradation from here in terms of your mortgage business and then your non-mortgage business can provide a substantial growth opportunity. I just want to make sure I'm looking at that correctly.

[Douglas R. Lebda:]

And you absolutely are right, and I think I was a little -- and you said it better than I did. If you think about what's going on, more refinanced leads sell for multiples of what purchase leads sell for. So as our refinance business has lowered, we've had to replace it with leads that monetize at 1/3 of the rate. So underlying whatever 5% growth in mortgage, and I alluded to this before, is the fact that we're transitioning into a business that today has much lower price point than what refi had. So refinance is going down. If we've sold a refi lead, now you've got to sell 3 purchase leads just to keep it flat, roughly, round numbers. But the purchase pricing is starting to go up as we bring on more purchase lenders, and we do local introductions, et cetera. So I think you'll start to see -- I think we can -- question is how fast refi goes away before we can bring some of these new lenders on. So I -- but I agree with your premise, but the signs in mortgage that are very, very encouraging are these new lenders coming on, having great success, big brands, people that we've never been able to land business before. And now they're all calling us, and they all want to start doing business with us because our product is right for them, and they really need to grow their purchase business.

[Operator:]

I'm not showing any further questions at this time.

[Douglas R. Lebda:]

I'll just wrap up and say thank you, all, again. Something I said to our company yesterday at our -- one of our most enthusiastic all-company meetings. I really feel that LendingTree is in the right place, at precisely the right time, with precisely the right team. If you can go back years that we've got we have got -- we now are sitting in a situation where in mortgage, lenders need us. We're sitting in a situation where consumer credit is changing, where there are new platforms coming out who really need volume. We're seeing lenders who are in multiple categories, and we've now got all the loan types, and we've got Money Center. And as consumer credit continues to flow, we've got the best brand in the space. Our marketing machine is working. Our sales machine is working, and now the product is right. And that was basically how we achieved this turnaround, and now I think it's off to the races. The -- we fixed sales and we fixed pricing 6 years ago. We fixed marketing, call it, 2.5, 3 years ago. We got out of the origination -- mortgage origination business as a direct originator, and now we've got the product right and the right leadership and team killing it on the product. And so we're going to be operating, I believe, on all 3 cylinders, and it's happening at a time that we're going to start catching tailwinds in consumer credit. And the market, I think, is actually going to recognize it. So thank you, all, very much, and we'll talk you next quarter and expect to see some other announcements coming out in the coming days and weeks about some of these other things we just talked about.

[Operator:]

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.