After reporting its Q1 results this morning, LendingTree (TREE) was up early in the session but it is now trading roughly flat.. Over the past several years, TREE has been making some big changes. It's best known for its online loan marketplace where consumers can do comparison shopping for loans.
While mortgages have been TREE's main business, it can be boom-bust. So, TREE has been aggressively expanding into non-mortgage credit categories: home equity loans/lines of credit, personal loans, credit cards, auto loans, and student loans. More recently, it has been getting into the insurance game.
Also, TREE has been active in terms of M&A, illustrating the company's goal of diversifying away from the mortgage business. It recently acquired QuoteWizard.com, one of the largest insurance comparison marketplaces in the growing online insurance advertising market. It later announced it acquired ValuePenguin.com, a personal finance website.
Turning to the Q1 results, adjusted EPS was flat yr/yr at $1.10, which was below market expectations, as analysts had been expecting at least some EPS growth. Revenue was a better metric as it jumped 45.0% yr/yr to $262.4 mln, which was much better than prior guidance of $235-245 mln. The revenue guidance was quite robust as well since TREE expects Q2 revenue of $260-270 mln, which is much better than expected. Full year revenue guidance was also increased.
So, what accounted for the revenue upside? A few things. First, its mortgage business has been struggling lately. Mortgage revenue declined 37% yr/yr to $46.0 mln. However, TREE showed some stabilization in its mortgage business as it declined only a modest 1% on a sequential basis from Q4. This was a welcome sign for investors.
Second, non-mortgage revenue jumped 101% yr/yr to $216.4 mln. To be fair, a decent amount of this growth came from acquisitions. However, its insurance segment grew by 63% on a pro forma basis to $67.1 mln. Other major non-mortgage areas include credit cards, this segment grew 18% yr/yr and 43% sequentially to $54.5 mln. Also, revenue from personal loans grew 25% yr/yr to $32.5 mln. In addition, "several other non-mortgage categories experienced year-over-year revenue growth of more than 100%, including student loans, credit services, and small business loans."
Overall, this was another good quarter for TREE. It really illustrates why the company's decision to diversify away from just mortgages was a smart move. The other highlight was just how strong the insurance business was. This is a new area for TREE, so it was good to see that doing so well.