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LendingTree: Consumers Seek Loans but Credit Availability Has Contracted

LendingTree continued to be affected by high interest rates and consumers having difficulty accessing credit in the third quarter.

During the quarter ended Sept. 30, the online lending marketplace’s revenue totaled $155.2 million, down 35% from the same quarter a year earlier, according to a shareholder letter released Tuesday (Oct. 31) in conjunction with the company’s quarterly earnings call.

This is the latest of several quarters in which the firm’s revenue has been negatively impacted by the current economic backdrop, in which successive Fed rate increases have tightened financial conditions, LendingTree Chairman and CEO Doug Lebda and Chief Financial Officer Trent Ziegler wrote in the letter.

“Consumers have remained consistent in their search for financial products, but the availability of credit has contracted,” the executives wrote. “Lenders are less inclined to make loans in an environment with high inflation and a significantly increased cost of capital.”

The marketplace’s consumer traffic levels have remained steady but its revenue from monetization per user has dipped as their access to personal loans and small business loans has declined due to credit criteria being tightened, LendingTree Chief Operating Officer and President of Marketplace Businesses Scott Peyree said during the company’s earnings call.

In response to this challenge, LendingTree has moved beyond just trying to deliver a personal loan to consumers who search for a personal loan, Peyree said. Now the platform may also suggest other options available from the different financial industries with which it has relationships.

“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,” Peyree said during the call. “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, etc.”

Peyree added that there is a still a lot of demand for personal loans and these other options.

Looking ahead, LendingTree lowered its revenue outlook for full-year 2023 to a range of $670 million to $680 million from the prior range of $680 million to $700 million, according to a Tuesday press release.

“Our team has responded by reducing expenses, driving efficiencies to improve segment margins, narrowing our growth initiatives to the most high conviction projects, and maintaining a significant cash balance to help address future debt maturities,” Lebda and Ziegler wrote in the shareholder letter. “Ultimately, we expect the benefit from this work will show up when the cycle turns through improving margins and higher revenue growth rates.”