Prepared remarks
Good day, and thank you for standing by. Welcome to the LendingTree, Inc. Second Quarter 2026 Earnings Conference Call. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Andrew Wessel. Please go ahead.
Thank you, Kevin, and hello to everyone joining us on the call to discuss LendingTree's second quarter 2026 financial results. On with us today are Scott Peyree, President and CEO; and Jason Bengel, CFO. This afternoon, we posted a detailed letter to shareholders on our Investor Relations website. We've also posted a new investor presentation that we would encourage everyone to look at. For the purposes of today's discussion, we will assume that listeners have gone through those materials and we'll focus on Q&A. Before I hand the call over to Scott for his remarks, I remind everyone that during this 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, 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, Scott, please go ahead.
Thank you, Andrew, and thank you, everyone, for joining the call today. We had a good quarter with strong growth led by insurance, our insurance business. Revenue was up 25% year-over-year, and our adjusted EBITDA was up 11% year-over-year. Also, I'd like to call out that our adjusted EBITDA as a percentage of VMD was up 225 basis points year-over-year to 40%, steadily moving toward our 45% to 50% long-term goal on that important metric. Stepping back for a second, from 2023 to 2026, we have roughly doubled our revenue and adjusted EBITDA, showing extremely consistent growth and consistency. Our diversity of product lines in this company has supported resilient and consistent growth regardless of certain industries such as mortgage being in a multiyear trough due to high interest rates. Insurance is the standout. Revenue was up 42% and segment profit was up 25% year-on-year on strong carrier demand. In our Home business, revenue was up 9% year-over-year and our segment profit was up 13% sequentially. I feel we are continuing to perform well in what remains near-trough earnings power from a macro environment with high interest rates, continuing to provide strong products to a strong client base and positioned well for long-term growth as that industry comes back. Our OpEx held flat year-over-year; both AI-driven efficiency and general operational efficiency are converting growth into earnings. We're sitting on very strong free cash flow, approximately $80 million after interest per year. Our net leverage improved to 1.9 from 3.0 a year ago. Whereas debt paydown does remain a strong focus of the business, we are now in a position and at comfortable levels from a debt ratio perspective where we are also looking at other strategic uses of our free cash flow. From a product and AI momentum standpoint, we're continuing to gain momentum on our North Star initiatives. In Q2 alone, we rolled out a ChatGPT app called the Home Loan Rate Confidence tool. We're offering six new products to consumers such as pet insurance, commercial insurance and financial advising. Our homepage and navigation redesign is proving an 11% performance increase in sessions and 18% form starts off of our homepage. Voice AI continues to roll out across multiple products. We've added AI overviews within our product offering pages to help consumers more efficiently choose the right offer, which is showing positive performance. Now hitting specifically on our Consumer segment and more specifically calling out our SMB lending business and the softness there. To start with, SMB has been a major growth engine for us over the past two to three years. We've had 40% year-over-year profit growth on average since early 2024. In Q2, as we alluded to in the last earnings call, we saw some headwinds coming in this industry due to Middle East tension, energy price spikes, et cetera, making small business owners more cautious in general. And in all honesty, demand came in softer than we forecast, which drove the miss. Softness was initially driven by both merchant sentiment and lender pullback. I will say the lenders have largely come back and are writing and offering loans at similar levels to early Q1, but merchant sentiment does remain soft. Looking back at the SMB business in general, we've made significant investments into our SMB business over the past few years. We've invested in growing the strongest sales force in the industry, growing our lender network and our internal platforms to make quoting more efficient for our sales team and our merchants, myriad AI efficiencies and growing traffic sources generating more and more high-quality merchants looking for loans. Those investments have generated significant profitable growth over the past two to three years, and we expect them to continue to provide profitable growth in the future. If you look at our original internal SMB budget we set at the beginning of the year, which, by the way, I'll call out in Q1 of this year, we actually outperformed that budget. If we had hit that original budget for the entire year, we would be performing at the high end of the previous guidance we set. We feel the merchant sentiment issues are temporary and macro-driven. They're not competitive or structural and we fully expect to be back to growth and setting revenue and VMD records in the near future. The long-term macro outlook for the SMB industry remains very strong in our opinion. We're seeing some encouraging signs already: improving closing rates, larger loan requests, favorable underwriting shifts. July will be our best sales month since Q1. Performance in July gives us confidence that Q2 was our trough, and we have entered the recovery period. Expect stabilization through the second half of the year, SMB to eventually recover and surpass our Q1 record levels. We'll keep monitoring and update investors as that trend develops. Moving to our strategy, which remains unchanged, to become the number one destination to shop for financial products. We have a massive focus over the next few years on return customers, referred customers and logged-in user growth. This will create an even stronger and more durable business over the long run for LendingTree. AI is a real structural tailwind to make this happen, not just efficiency, but consumer-facing tools such as the ChatGPT app, a rate confidence tool, AI for communication, be it voice or text or email, AI offer overviews, all driving increased engagement in applications, and we feel there is a laundry list of additional things we can build over the next few years that will create even better customer engagement. Internal AI tools such as AI agents we've built on our data infrastructure for marketing, sales and finance teams are actively compressing what was previously weeks' worth of work into real-time information, which is providing real efficiencies in the business. One of the key reasons OpEx grew less than 1% while our revenue grew by 25% year-over-year is AI and operational improvements. Our business model is highly cash generative and capital light. As I said earlier, approximately $80 million in annual free cash flow after interest with minimal CapEx. Our balance sheet is getting more and more flexible with our leverage down to 1.9x, which gives us capacity for debt paydown, buybacks and accretive M&A. Insurance remains a core strength. Again, SMB's softness is temporary and macro-driven, not structural. Bottom line, the long-term growth profile is intact. We've got a durable, high-margin, capital-efficient, increasingly AI-powered business. With that, I'll hand it over to Q&A.
Questions and answers
Our first question comes from Ryan Tomasello with KBW.
Apologies, still juggling a few things with the release here. But maybe just to start off, if you could put some guardrails around what the second-half guidance assumes across the various segments from both a revenue and variable margin standpoint? And then as a follow-up to that, regarding the lower variable margins specifically in the Insurance segment. If you could just elaborate on the specific drivers there and what you're baking into the second half on the margin front for insurance.
Yes, Ryan, it's Jason. I'm happy to talk through the guidance assumptions here. Like Scott said, if you take a big step back and look at the midpoint of our guidance, that does reflect us nearly doubling EBITDA in the last three years and growing 12% this year. As Scott said, if SMB had performed as expected according to budget, we would be at the high end of the prior guide. To be totally transparent, we beat budget by almost 15% in small business in Q1. So the trajectory was very, very strong for small business until the headwinds presented. Speaking about each segment: Home — rates have been going up, so that's a headwind. Margin has been down; it's below what we consider normal historically. That's a function of home sales being near 4 million units. There just aren't that many borrowers out there and the competition for those borrowers is very high. With Home, long term, there's still a lot of upside and margins would normalize when the market returns, but we're not contemplating any real upside in the guide for Home; margins are sort of where they are now. For Consumer, SMB had real headwinds. We talked about that on the call quite a bit, and we saw this coming, but it was much worse than we expected. Q2 definitely underperformed our expectations. There was a large drop in lender appetite and merchant demand, as Scott said. Loan size, close rate and volume were far below even our lowered expectations. We've seen signs of improvement: lender demand has started to recover. On the merchant side, it's still not where it needs to be; there's a long way to go in merchant sentiment. So the guide is only really looking at what we have line of sight into. We're really only contemplating the return of lender demand that we've seen today. That will result in sequential improvement in consumer revenue and VMD, but SMB won't be back to the Q1 levels we were seeing before. This was our growth engine; it was growing 40% a year on average. Now for this year, it looks like we might be flat to down. The good news is that should be temporary. There's nothing structurally wrong with the business. We operate very well in that business and the market opportunity is strong. So it will recover. With the guide, we're not assuming any real return beyond what we have direct line of sight into today. With Insurance, the backdrop is still very favorable. Carrier profitability is very strong and competition for policies is strong. That helps us in partner demand but pressures immediate costs, which is what you see in margin. We expect healthy growth in the second half for Insurance. We're very happy with how Insurance is doing and expect that to continue going forward.
Just to add on: As we've always been, our primary goal on Insurance is overall VMD growth, and that's what we plan to continue to see. It has been very strong in the first half of the year. We continue to see growth next year. Also, as we've talked about before, if you look at our Consumer segment from a margin perspective, small business within the Consumer segment is by far our highest margin business. So when that's suppressed, it will inevitably affect the overall margins in the Consumer business.
Appreciate all that color, guys. Double-clicking on Insurance, Scott — several-part question here. One, the mid-20s variable margins I think you posted in the quarter: is that a good assumption for kind of a new run rate here in this environment? And then as you look out to what you're seeing with carriers, how confident are you that the Insurance business can continue to grow VMD off of what you're assuming for the second half of this year into 2027? And then given the tenure you have in this space, Scott, can you talk about what leading indicators you tend to focus on for signs that the cycle may be peaking and when we might start to see those signals emerging?
I'll hit on a few of those. Starting with leading indicators from a macro level: first, look at the insurance industry profitability in general. There are a number of massive public companies out there, so you have a very good view into general profitability. It is a very stable, profitable environment. Secondary signals include trends of carriers changing pricing. From our perspective, when carriers adjust price — whether increasing or reducing pricing — that drives more shoppers to the network. Early in the recovery, insurers were just starting to offer policies to consumers; that's largely resolved and insurance is healthy with carriers offering policies broadly. Going forward, we'll look to see whether they start giving rate back to consumers, which would reduce prices and drive another shopping cycle. Today, the environment is extremely stable, and there is strong demand and competition over market share among top companies. I would call it very healthy and stable, and growth is largely dependent on us executing well as a company, driving active shoppers to our network, which I believe we're very good at doing.
Margin, VMM.
Regarding VMM margins: our primary goal is VMD. Some carriers' spend is growing so fast that the focus starts with overall VMD, and we want to ensure we're providing the best, highest-quality product to them. Since Insurance is still in growth mode, I would expect margins to be similar to Q2 with VMD hopefully growing a bit sequentially. When very high revenue growth levels out, we'll start leaning more into margin expansion, but we expect to see strong revenue growth for the rest of this year in Insurance.
Our next question comes from Jed Kelly with Oppenheimer.
Just circling back to the Consumer segment. We're trying to track the health of your small business product. Is it more sensitive to gas prices, or is it more interest-rate sensitive, or is it a combination? And then circling around your personal loans, some of the bank earnings we've heard and the health of the consumer — it seems pretty stable. Can you talk about where we are with personal loans? I have a follow-up after that.
I'll hit on personal loans briefly. Personal loans are fairly stable right now for us: similar revenue and consumer shopping compared to prior periods, not a lot of change year-over-year. On the small business side, I think it starts more at a sentiment level than an interest-rate sensitivity level. Many small and medium-sized businesses are on the front lines of consumer sentiment changes. If consumers cut back because of gas prices or other concerns, that translates to small businesses holding off on hiring or capital spending. Right now, there are fewer merchants requesting loans, average loan sizes requested are generally smaller than we historically see, and a lower percentage of people are accepting loan offers. I don't think this is primarily rate sensitivity; it's macro sentiment — merchants are more cautious and are often choosing to wait a few months. This is industry-wide: our large clients, lenders and competitors have seen similar softness in Q2. Everyone expects it to come back sooner rather than later.
On personal loans: sequentially, personal loans performed very well from Q1 to Q2. PL was a strong grower sequentially, so this environment hasn't held back PL moving sequentially.
Got it. And then as a follow-up, I see some news about Google arbitration. Can you give us an update on where you stand and how you view that arbitration process?
Yes. We're aware of lawsuits and arbitration claims against Google related to federal court rulings that the company illegally monopolized online search and search advertising. Advertiser customers of Google are actively joining together for arbitration and other proceedings, and we joined one such group. We initiated a request for arbitration this year and filed the group's demand motion on July 17. We directed about $2.8 billion to Google through the impacted period dating back about a decade, and we continue to pay Google for advertising today. That timeframe is what's used to assess damages through the arbitration process. 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. We are engaged with an expert economist to size potential damages. One important point regarding tax: there are many moving parts, but we do have tax attributes we expect to use to reduce tax liabilities on any future taxable income, including any possible recovery from Google. We have tax-affected NOLs, R&D tax credits and interest carryforwards. When looking at all these attributes together, we expect they can offset a substantial portion of federal income tax otherwise payable on future taxable income, which we estimate around $300 million. Hopefully that gives you an overview.
Our next question comes from Mike Grondahl with Northland.
Two questions on small business. That business has grown a ton and it's still within Consumer. Can you speak to what percent of revenue or adjusted EBITDA comes from that so we can size it better? Secondly, it sounds like lender demand collapsed, but it really wasn't customer demand — it was lenders pulling back hard. Am I hearing that right?
It's really two factors. It was both lender-side and merchant-side. On the lender side, lenders pulled back and tightened criteria: they would offer a higher rate for the same loan amount or tighten their buy boxes. That lender side has recovered. The merchant side presents as lower volume — fewer merchants shopping for loans — and lower close rates or booking rates. If you give a merchant an offer, they are less likely to take it. That's the merchant side we have yet to see recover. When it does, we expect significant upside and for small business to return to being a very strong growth driver. We don't disclose revenue specifically for small business, but the sequential decline is obviously driven by small business, and personal loans performed fairly well sequentially.
Got it. Got it.
To put a button on that: we could do significant loan growth in small business and the lenders would be more than happy to write those loans. Lender demand is there.
Looking at profit segment margins by major business, they appear softer and there are some challenges. Is any of that due to investments you're making, or would you attribute it to competition and challenges in the marketplace? How would you allocate between those two?
Good question. There's a bit of both. We have made investments — business development and traffic growth have been a big focus. We've grown business development partnerships and focused on building relationships and revenue in that channel, not much focus yet on VMM or VMD in that channel. We've had success bringing in many partners and doing a lot of business; partners generally tell us we outmonetize previous partners. We think that will be a big part of our business over the next couple of years and we'll likely focus more on VMD and margin in 2027 and beyond for that area. The other part is competitive pressure, such as in Insurance where competition is high and carriers themselves are advertising widely. Lower margins to some extent reflect everyone getting in front of consumers. Overall, we want our cost of traffic to grow at a smaller rate than the revenue on that traffic. It is fair to say marketplaces are more expensive today than a year ago.
Lastly, any learnings on the AI side over the last 90 days that you want to share?
There are two ways I look at AI: operational efficiency and consumer-facing AI. On operations, it's becoming more effective for us. One big learning is that for AI to be really effective internally, your data needs to be structured well. Naming conventions must be accurate, and you need to train AI agents to understand the vernacular business people use daily. We've spent a lot of time building and structuring our data, and we're starting to see significant benefits from that work. Another learning is cost: token usage costs are rising. We're a company that wants anyone with useful AI use to have access, and we've used multiple AI platforms. The key is to use the right model for the right task. We've found many internal operational uses do not require the most expensive frontier models; cheaper models can handle a large portion of internal tasks. We track usage and cost closely. If someone spends heavily on tokens, we flag it and assess the business case: if it's solid, we continue; if not, we find a cheaper model or stop. On the consumer side, we've learned several things. LLM chat tools as a primary shopping mechanism are less favored by consumers; many prefer a simpler funnel. AI overviews are highly effective: after a consumer fills a form and sees many offers, a short AI-generated paragraph summarizing key points (lowest rate, most money, lowest monthly payment) helps consumers choose offers with more confidence. Using AI as a communication tool with consumers is promising. For example, instead of sending a lead to multiple brokers who call a consumer repeatedly, have an AI agent engage first via voice, text or email to get more details, identify the best fit and then direct the consumer to one or two companies that match. That is a dramatically better consumer experience and a useful consumer-facing use of AI.
I'm not showing any further questions at this time. I'd like to turn the call back over to Scott for any further remarks.
In closing, we're very excited about where we're at for the business, both on operations in our current core business and with our North Star strategy. We put that North Star together at the end of last year and made organizational shifts in the first quarter to orient teams around producing along the North Star. I think Q2 was the first quarter where we really saw the velocity of long-term strategic and AI initiatives getting rolled out. We fully expect the velocity of that to keep increasing throughout the second half of the year. We're excited about transforming this business over the next few years and having much higher return customers, referred customers and active logged-in users. With that, thank you, and talk to you all next quarter.
Thank you. Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.