Lendingtree Inc (TREE) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Tree.com fourth-quarter 2013 earnings conference call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's conference is being recorded. Joining us today are Alex Mandel, Chief Financial Officer; and Doug Lebda, Chairman and CEO. I would now like to turn the conference over to Alex Mandel.

Thanks, operator, and thanks to everyone for joining us today for Tree.com's fourth-quarter and full-year 2013 earnings conference call. First, a quick disclaimer. During this call we may discuss Tree.com's plans, expectations, outlook, or forecast 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 refer you to today's press release available on our website at investor-relations.tree.com for the comparable GAAP measures, definitions, and full reconciliations of non-GAAP measures to GAAP.

To put my remarks in context today, in the fourth-quarter total mortgage originations industry wide declined by 47% year over year and refinance share of total origination volume declined to 51% in the quarter, putting it roughly on par with purchase share as compared with 74% refinance share in the fourth quarter of 2012.

In contrast to this 47% decline in total industry origination, our mortgage products revenue in the quarter grew significantly by 49% to $31.2 million. This also marks our fifth consecutive quarter of company outperformance relative to the market.

In the fourth quarter, we generally saw a strong monetization trend, both in terms of the efficiency with which our lease matched with lenders as well as pricing. Our nonmortgage product revenue also grew year over year by 112% to a record $5.2 million in the quarter, benefiting specifically from the contribution of our reverse mortgage, home equity, rate table, and personal loans offerings as well as our auto business.

All in, consolidated revenue was $36.4 million in Q4, was up 52% over Q4 2012, and exceeded our prior guidance.

This top-line outperformance relates primarily to the month of December where our business did not decline to the degree anticipated thanks to continued interest in our offerings on the part of both consumers and lenders.

From a profitability perspective, the Company delivered $16.3 million of variable marketing margin representing the fifth consecutive quarter of new record levels. As a percentage of revenue, VMM improved notably to 45% from 40% in the preceding third quarter. VMM dollars and margin benefited from several factors including both strategically swallowing back our television ad spend in the quarter as well as the completion of the expensing of production costs for the new brand campaign early in the quarter.

We know, however, that the recently completed shooting a new set of TV spots, which are anticipated to air before the end of Q1. The airing of these new spots would likely trigger recognition of significant production expenditures in the quarter, as well as involve additional media spend, and these considerations are reflected accordingly in our guidance for Q1 VMM which calls for a sequential decline.

In addition to these media spend factors, there was an approximate $600,000 benefit to VMM in the quarter, attributable to the reversal of certain expense accruals at year end, a significant portion of which derive from third-party vendors reporting to us.

Adjusted EBITDA of $5.9 million in the quarter also reflected a new record for the Company and was up 115% year over year. Touching briefly on our discontinued operations, which primarily represent our former mortgage origination business, the loss of approximately $800,000 is largely comprised of legal fees related to the continued wind down efforts at HLC.

From a full year perspective, our business scaled significantly in 2013 with full-year GAAP revenue of $139 million, reflecting 48% growth over full-year 2012 adjusted exchanges revenue; and it's worth noting this growth was entirely organic or internally generated. At an adjusted EBITDA level, the company achieved $18.7 million in 2013, reflecting a margin of 13.4% and growth of 32% over 2012's adjusted exchange of EBITDA of $14.2 million.

We believe the increased scale of our business is helping to raise its profile and visibility in the marketplace. From a balance sheet perspective, our unrestricted cash grew to $91.7 million at year end, and our working capital position grew to $72.7 million, which we calculate as current assets including unrestricted and restricted cash minus current liabilities including loan loss reserves.

In conclusion, we believe our fourth quarter demonstrated strong performance as we exceeded prior guidance on all financial metrics, achieved record variable marketing margin and adjusted EBITDA results, and gained market share. That said, recognizing some of the contributing factors I noted along with our outlook for Q1's anticipated brand advertising efforts, our profitability guidance for Q1 reflects a sequential reduction, although we anticipate the investment to support continued top-line growth. I will now turn to Doug for his perspective.

Thanks, Alex. And thanks to everyone for joining the call. Having capped 2013 with yet another fantastic quarter, I'd like to touch on a couple of the Q4 highlights, reflect on our accomplishments throughout the year, and finally touch briefly on our Q1 expectations.

First, looking at Q4, we worked through seasonal challenges and a continuing declining mortgage market to produce our highest levels of VMM and adjusted EBITDA on record. That record profitability is a testament to a number of factors. First, in our mortgage business we were able to selectively dial back our marketing spend in certain channels with minimal impact on revenue. Additionally, our mortgage revenue benefited from improved monetization as demands for our leads continue to increase and lenders consequently bid up pricing. To put that into perspective, mortgage originations industry wide declined 26% quarter over quarter, while revenue from our mortgage products declined a mere 4% and our variable marketing expense was down 10%.

Second, and most importantly, we saw real gains in our nonmortgage products. Revenue from these products was $5.2 million, up 10% from Q3, and a remarkable 112% from the same period last year. Auto finance in particular continues to scale profitably, and revenues from our new and recently relaunched personal-finance offerings all saw impressive growth in the quarter.

And finally, as Alex discussed, we benefited from a one-time true up of accruals, which was largely driven by reporting of expenses to us by certain marketing partners. I caution you all to keep that one-time benefit in mind as we discuss our expectations for the first-quarter in a moment.

With that color on Q4, I'd like to reflect a bit on what we've accomplished in 2013. To help frame our performance, I'll give a few notes on what transpired in the mortgage environment this year. First, the inevitable increase in interest rates we all knew was coming began in earnest May of this year -- of last year. As a result, total originations dropped from $1.1 trillion in the first half to $700 billion in the second half, according to MBA, a decline of roughly 30%. The decline in refinancings was almost 50%.

As we discussed on the last few calls, we took several steps in 2012 and early 2013 to combat these trends, and I could not be happier with the foresight and execution of team to drive truly outstanding results in the face of these market pressures. First and foremost, the purchase mortgage strategy we laid out at the beginning of the year has absolutely paid off. The number of lenders on our network taking purchased leads has more than doubled since the end of last year, and our revenue from purchase mortgages in Q4 was up nearly 200% from the fourth quarter of 2012.

In addition to our purchase mortgage strategy, we launched a number of new and improved offerings and related personal-finance verticals. In Q1 we launched our reverse mortgage products which has contributed meaningful revenues since inception. We launched LoanExplorer, our rate table marketplace, which continues to scale as we at third-party publishers. In early Q3, we announced our revamped personal loans experience which has enabled us to partner with some of the industry leaders in that emerging space.

In other businesses, auto revenue grew by more than 75% and more than doubled its adjusted EBITDA contribution. And under new management, our home pros and education businesses each improved at an EBITDA level. Also extremely importantly was the launch of our national brand campaign in Q2 of last year. The LendingTree brand is without a doubt one of our biggest competitive advantages, and this year we took it upon ourselves to reinvest in the strength of our brand and in doing so establish a brand platform that we can leverage in the years to come. The campaign has yielded excellent results to date, and you can expect to see another round of fresh creative coming out soon.

In closing out 2013, all of this hard work resulted in annual revenue of $139 million. That represents growth of almost 50% over last year's adjusted exchange figures in a mortgage market where total originations were down 13% for the year. We converted that revenue into $18.7 million of adjusted EBITDA, up 32% over 2012, and we accomplished that remarkable growth while still managing to invest heavily in our product and in our brand.

With that, I'd like to briefly discuss our expectations for Q1, but first let me caveat our Q1 guidance by pointing out that we are we accelerating our brand investment, and similar to Q2 of last year, we will be expensing a good portion of the production costs associated with new commercials within the quarter. Additionally, unlike our digital channels the off-line effort generally takes some runway to begin materializing. So the upfront production expense, along with the ramp in off-line media placement in mid to late March, will likely weigh on our financial performance in Q1 but should set us up for continued growth in future periods.

That said, for revenue, we anticipate growth of 30% to 40% over first quarter 2013, continuing the trend of growth in the face of market contraction. Variable marketing margin is anticipated to be $14 million to $15 million in Q1, and adjusted EBITDA is projected at $4 million to $4.5 million. For the full year 2014, we are maintaining our previously provided guidance. Revenue growth is anticipated to be 10% to 15% over full-year 2013. VMM, we believe to be $62 million to $66 million, and adjusted EBITDA is expected to fall in the range of $20 million to $21 million. With that, let's begin questions and answers.

(Operator Instructions) John Campbell, Stephens Inc.

Hi, guys. Congrats on a great quarter and a great year. Could you guys just maybe help us out a little bit on with the growth trajectory of that nonmortgage revenue? Is that more of a slow grind upwards in 2014 or possibly a little sharper growth given the new products are still relatively new.

I don't think we've given guidance specifically in mortgage and nonmortgage, but I think we would expect that those businesses would grow faster than mortgage, as I think the trends have been over the last couple of quarters. And I think that that should continue. A number of those new products are starting to hit a good scale, and we are seeing some really positive results there. So I think growth rate there should continue to be faster than normal.

Okay. Great. Thanks for that. And then just second question here, just trying to maybe size up that purchase-related revenue. I mean, do you guys break out that mortgage revenue, by purchase versus refi?

We don't and there's a good reason for it. I can say that purchase is continuing to grow. It's continuing to grow both in volume and monetization. And refinance is definitely contracting, as the trends have been. So as lenders demand more purchase leads, as their refinance volume goes down, they bid up the price of purchase and we step on the marketing gas to produce it. I think the better way to look at the business is overall VMM, but I can say that anecdotally I feel that the risk of sort of being refinanced centric has passed us. And this is now a business where it's much more balanced between purchase refinance and then nonmortgage revenue.

Okay. Great. And maybe if I can just squeeze in one more in here. I know we are still very much in the early innings of the Tree story, but just given you guys are -- how quickly you are scaling the business and some of that OpEx should see some efficiencies over time, could you guys just give us just a general idea of where you think maybe adjusted EBITDA margins can go over time?

I'm looking at Alex and thinking about the -- I don't know that we've ever given specific guidance about that in the past, but I can say, and Alex should speak for himself to, that 20% or more north of that is not crazy. And I believe it should be in line with other Internet companies. Anybody in the media and tech space over time should see -- we should see margins that are comparable with the leaders in our category. Maybe adjusting for the fact that we do have a good bit of paid marketing expense or traffic acquisition costs, as it would be called at most Internet companies, but we should be on par with them and I would think over time north of 20% operating margins.

Okay. Great. Thanks for taking our questions, guys.

Shawn Rassouli, Needham & Company.

Hi, good evening, guys. It looks like another solid quarter -- congratulations. I had a few questions. Just thinking about your revenue guidance for 2014, on the mortgage side, appreciating how nonmortgage is expected to grow faster, but focusing on the mortgage side, can you give us a sense what assumptions you are making around volumes and pricing. Do your expectations for volume growth or lack thereof reflect industry-wide projections by Fannie, Freddie, and others, or are you forecasting better volume trends given the success you've had adding new lenders? I would assume it's the latter but would love to get more color on how you are thinking about volume growth in 2014.

So I think I hit on this on the last call. And I think it's important to note, and I've talked at -- I think I've said at investor conferences, if you look -- I think the best way to look at 2014 is off of the second half of 2013, which is -- I think Alex said it was $700 billion originations second half. And I don't have at my fingertips the MBA forecast for the full year, but I believe it's roughly consistent with that second half number annualized. I think the full year is $1.2 trillion forecast for 2014 and Q4 was $312 billion. So roughly the Q4 run rate is what the industry is currently saying all of next year is going to be.

So if you look at year-over-year numbers, you are certainly going to see mortgage originations going down in 2013 to 2014. However, if you look at the back half of 2013 as a run rate you are going to see the full year in 2014 not declining very much. And if you take Q4 as a guide and you believe the MBA, we are essentially where we are going to be. So I am feeling confident about 2014 in origination volume.

In terms of purchase and refinance, obviously purchase comes at a lower expected value because of the lower natural conversion rates on the Internet; and that's okay. We know that. And we know lenders are not going to bid up pricing to an unprofitable level, and because we have that closed loop of reporting, we are confident right now that are lenders are pricing our leads appropriately in the market. And we're seeing some really great signs there. And we're also working on a number of product improvements this year which I will be able to talk about on the next call. Essentially as we release them, that we will take that even further and help improve conversion rates as well as help drive volumes, which we have talked about before, that's not dependent on paid marketing.

I appreciate the color there, and I totally understand sort of the dynamics around industry-wide volumes. So, I'm assuming that the volumes you are seeing -- the volume trends you are seeing internally within the Company are kind of moving in lockstep with sort of industry-wide trends?

On the volumes, I think we are seeing a bifurcation of it. Certainly on the revenue side, we are definitely seeing higher revenue. As the industry declines, we are seeing on a revenue basis. But we are also seeing that on a volume basis, too. And that's not necessarily indicative because all volume is not created equal. I can produce a lot of volume that's, quote-unquote lower quality, but that's not our game. But we are definitely LendingTree gaining share on a volume basis. We are seeing the most significant gain on a revenue basis.

Okay. That's very helpful. And then in regards to the new regulations that went into effect earlier this year, namely QM and ATR, are you saying in the impact on your business, any sort of high-level sauce on the regulatory environment and how that's affecting your business?

I think so far it's actually been -- it was a big risk, and I think, though, it's a nonevent. QM was already big into lender guidelines well into last year and so that coming out hasn't really had an impact, and I think the regulations overall were more industry sensible then they really could have been. So I feel fine about the regulation front, and if anything, I'm starting to hear in the industry some signs of things that could give another boost. So, for example, lenders are starting to at least talk about doing some non-QM lines, and you are starting to hear a little bit more about private securitization. And some of the bank meetings I'm having and our sales team are having, we are starting to hear about home equity loans coming back, which used to be a real big profit driver for the Company but pretty much died in 2008. So, I'm feeling good on the regulatory front, and I'm feeling that it might actually be a little bit positive for us.

Okay. Great. And one must question for me. Going back to VMM, obviously it was better than what we were expecting and you were expecting in your guidance. And kind of excluding the impact of the $600,000 benefit you got as well as a sort of throttling back to television ad spend, in the traditional sort of channel, namely displaced search, can you call out -- can you talk about the trends you are seeing? Are using more efficiencies there, or how would you describe the pricing environment in search and display?

I wouldn't call out specific things because I think you've already always got any given month or quarter or even week or, quite frankly, day some channels outperform others. Sometimes it's because you catch tailwinds, sometimes it is because you've got to keep getting better at it. But I would say directionally all of the channels are showing improvement, and I'm not feeling pressure in any one channel or seeing that we are topping out. Now, again, a lot of that is because we are getting better at it. I think we will see in search, lenders start to do more of that directly. And we are seeing some signs of that but, we are also seeing that even though they are doing it, we can still bid very effectively, given a very high Google quality score and given our ongoing performance there.

The other thing I would say is in 2014 we are starting to push in social advertising for the mortgage and financial products, whereas before it was only really in our education vertical. So that's a whole new channel for us. It's early, but we think we will be a winner on social ads just like we are on other ad formats. And so that opens up a whole new avenue for us to get more growth.

Thank you so much. Congrats on a great quarter, and good luck.

Nick Zamparelli, Chartwell Investment Partners L.P.

Hi, guys. Thanks for taking the questions -- a few here. First, do you break out -- I guess not, so far -- but could you break out the EBITDA contributions from the nonmortgage lines of business?

We don't, but we do, sort of, in the 10-K and the Q. It's a little different take on it, though, so I caution you about that because it groups some of the other -- and this gets a little wonky -- but the way the SEC requires us to report in the Q is how -- in the segments is we are organized internally. And so, because all of our financial products including reverse mortgage and credit cards and the other products we've launched that aren't a mortgage, because they report up to our GM of mortgage, they are lumped in with mortgage.

And then the nonmortgage in the Q is only home services and education and auto. So you got to think through that a little bit, and I expect our Qs will start to change because the reality is, from an investor standpoint you care about mortgage concentration and then there's nonmortgage concentration. Investors don't really care if credit card reports to Gabe Dalporto or not. And unfortunately, the accountants make us show it that way. But long story short, we do track that in the Q.

Okay. And then the upfront ad production expense related to the new TV campaign in Q1, can you size that for us? Or how much should we have budgeted for that?

It's reflected in the guidance. Call it $0.5 million-ish of what will probably be expensed maybe up to $700,000. And part of the reason I can't give you a perfect answer on that is because you go produce, let's say, five spots, and you expense the production when you run the spot the first time. I'm not quite sure yet -- some spots cost more to produce than others -- I'm not quite sure yet which will be run. So, we are not exactly sure, but call it $500,000-$700,000.

Okay. And then in terms of return hurdles for your TV campaign, how do you guys think about that internally? What would mark a successful TV campaign from an unsuccessful TV campaign?

So we do track and have ways of doing what is known as attribution modeling. We track the VMM of not only every channel -- and off-line is a channel -- but also each ad and really each placement online and off-line. And we do that with some pretty sophisticated tracking technologies.

And we want to see positive VMM from off-line -- period, full stop. Now, you do start off every year -- for a few months you will be slightly negative VMM as the campaign builds and as what's known as the reach and frequency of an ad gets out there. So, it will start off a little negative, but then it gets very positive and we expect that those are on a dollar basis we look for every dollar of VMM. On a percentage basis, off-line would have a lower percentage VMM, but -- than an online ad, but you can run a lot more of them so you can go get a lot of dollars -- a lot more VMM dollars.

And really what we do is focus on the return on overall expense, but we do track VMM at a channel level and at an ad level. And we expect that to be -- expect off-line to be positive. And we expect it to produce a lot of variable margin dollars, and we expect that halo effect also through results of other -- on the digital channels as well.

Great. Thanks, guys.

Hamed Khorsand, BWS Financial.

Hi, guys. Just a clarification. Did you say you expect EBITDA growth of 20%?

I think we said $20 million to $21 million of EBITDA for 2014. That was our guidance which right now we are sticking with.

Okay. Do you think that's going to ramp anytime soon beyond 2014?

I think -- I will repeat what we did in 2013 and what we did the years before. It's always nice to beat your guidance. At the same time this is a business that now that we've got it right, it's very, very predictable. So what we always like to do is deliver very solid growth.

Quite frankly, since Q4 came in so strong, the growth of Q1 or 2014 probably looks lower than it did when we issued our guidance. We get that, and it's still early in the year, and hopefully that will continue to improve, as it's done in prior years. But at the same time because the business is so predictable, I like to give investors what they need in order to say, wow, they are performing very well. They are consistent. They can deliver. I can rely on them.

And then we reinvest above that back in the business. And we do that in product; we do in marketing; we do it in technology; and we do it in other ways. So right now, I'd do the same thing. So, I think you should see us in 2014 have revenue growth that's more robust than EBITDA growth, but that's because we are still taking a balanced investment approach.

You are never going to hear us like a lot of companies out there saying we are in major investment mode. We're not going to produce bottom-line results, but trust me, look at the top line. We like to put on very solid top-line growth, very solid EBITDA growth, but be very EBITDA positive and be very credible with you all, and so, you can actually see the result. And we still like to invest above and beyond that.

Okay. And you briefly touched on the changes in the mortgage rules. Do you expect that's going to have any positive or negative effects going forward?

I don't think it will have a negative effect because as I said the rules have been baked in and -- into all of the lenders guidelines. So there's not going to be any further tightening of what lenders want based on regulation, and I think -- what I would say, not specifically attributed to regulation but now that a qualified mortgage is defined, now that everybody knows the rules that they are playing with, you've got some lenders that are talking as I said about doing private securitization.

So, for example, QM put a real freeze over the private securitization market until it was actually known if there was going to be a safe harbor in those rules. Now that people know there is, people are going, okay, now I can maybe do a private securitization. It doesn't mean Fannie and Freddie guys might still be a qualified mortgage. Well, I now understand the rules for a nonqualified mortgage.

Maybe I'll do some non-QM origination and keep those on my portfolio. It's not as big of a deal as I thought. Maybe I can do some alt-paying stuff. Maybe I can even do, some -- God forbid -- some subprime stuff. We've seen great growth for example in the subprime auto space. It's been fantastic.

Personal loans is the other one where now people -- subprime is not so horrible in personal loans, as you're seeing all this institutional money come through the peer-to-peer platforms that are our biggest customers in personal loans, companies like Prosper and Lending Club and many more that are now coming into that market. So I think that now that regulations are settled people are willing to take more -- lenders are willing to take more appropriate risks inside those guidelines and outside the guidelines.

Okay. Thank you.

(Operator Instructions) Jim Fowler, Harvest Capital.

I just wanted to make sure that I call some of the details you were giving. Did you say that you think although at the upper end, the advertising spend that you expect in the first quarter could be in a range between $500,000 to $700,000; is that what I heard?

No. What I was calling out is the one-time expense from production in Q1. So we spent -- call it in round numbers, $800,000, $1 million to produce spot. And we expect to expense $500,000 to $700,000 of that production in Q1 with a little bit falling over to Q2, but it will depend on what ads actually run. I was only talking about the production starts.

Okay. Got it. Great. So if I assume it's $700,000 expenditure in the first quarter and your first quarter midpoint of VMM is 14.5 and if the incremental midpoint on the revenue I get to the core VMM of about 40.1%, and your guidance implies just under 41 for the full year -- any thoughts on how that goes throughout the following three quarters of the year? Or is it just going to be fairly stable around the 40% to 41%, or will it be something similar to last year where you had a big first quarter.

You mentioned the second quarter marketing campaign kind of up flattish, down third quarter, and then a big fourth quarter. How would you think about it for the ensuing three quarters?

I think Q1 is typically -- where Q2 last year we had the production expense and the start of the brand campaign; that's now happening late in Q1. So it is going to be a little bit different. So the short answer to your question I'm would expect that VMM percentages would be lower in Q1 than they would be on the next three quarters on a percentage basis. And maybe on a dollar basis, too, because of that one-time effect.

Now that said, the big media spend, the launch, the start will be in March, so we've got all of the production expense. But the advertising expense will really be fundamentally still a Q2 event, so you may not see huge growth Q1 or Q2. And quite frankly our Q1 earnings aren't so far away. So, I'll be able to give you really clear guidance on Q2 not too long from now.

But the only caveat, I'd say, to a lot of that is, again, keep in mind we can kind of land the plane where we want to land the plane, every quarter and for the year. So it wouldn't be out of character if in some future quarter if I said to you, listen VMM percentages or dollars are less than you might expect but that's because we launched a new social campaign and we really doubled down.

Or our lenders really demanded something so we let our percentages run lower. Or, God forbid, we screwed something up. The one thing you can always count on from us, though, is that we'll be honest about the call outs and the explanations of it. But just please know that managing this business, it's actually very intentional.

We're always thinking, do we step on the gas there or do we pull back? And a lot of it is due to lender demand. If lenders are demanding leads, we aim to get them for them at a profit, at a VMM-positive level. If they're really demanding them, you might see us step on the gas. Percentages would go down, but we would be able to explain it.

The flipside might be also true. In any given month quarter -- maybe people get worried about something in the macro environment -- mortgage rates fall, lenders get full again, and therefore, we have to pull back on marketing spend. Or it's normal in Q4 -- one thing I do want to mention, this so-called pullback of marketing spend; that's something that -- that's something we do every year. Like, you just have to because of the holidays and shopping, et cetera, so rates go back up for advertising. It costs us more.

And lenders don't want as much in Q4, because they're taking vacations too. And you end up with far fewer operating days. People take off for Thanksgiving; there's Christmas, holidays, et cetera, et cetera. So that's a normal Q4 event. The only change this year versus last year is really moving that -- in addition to just doing better -- is moving the production expense from Q4 -- from Q2 into Q1.

Yes. Thanks for that. And then last question, in the non-mortgage area, you mentioned a few of the products. I'm wondering, specifically relative to auto, we've seen a lot of increased competition across both prime and nonprime auto. How much is auto as a percentage of total nonmortgage in the fourth quarter -- or the growth rate, let's say. How much has it been more recently versus say the prior two or three quarters?

Well, you probably won't like my answer because I don't like to break them out; and here's why. If I start to say although is X percent, then not only are -- then people can start doing, oh, now, is that many millions of dollars and then they start to -- everybody's got their own model; and our competitors quite frankly do it, too.

What I can say, and I know people watch and listen to these calls very carefully and try to discern what's underneath. And by definition in the same way that you probably couldn't get out of Google what is Google's percentage of revenue on mortgage cost-per-click ads versus pharmaceuticals, we don't like to do that either because they vary. And it's also competitive intelligence.

What I can say to you is increased competition in autos is actually helpful to us because the competition isn't coming from loan aggregators in the auto space where you can get thanks to compete by filling out one form. It's coming from lenders moving into the mix and lenders willing to lend.

And so that is bringing more lenders onto the platform bidding up our pricing on auto in ways that it hasn't before, which enables us to then go to the paid marketing and drive it in. So what you are referring to as competition is actually very helpful to us.

That's what I would assume. I would assume that the increased competition amongst lenders looking forward to more of those loans would be helpful. So, okay. Well, great. Thanks a lot, Doug and Alex. Appreciate it.

Noah Steinberg, G2 Investment Partners.

Hey, guys, this is Josh Goldberg. Congratulations on the strong Q4. I think it's even more remarkable when you think about some of the other guys in the space -- some of your biggest competitors showing substantially down Q4 revenue numbers because of the weakness in the mortgage market.

I'm willing to believe you took a lot of share there. Just a couple of quick questions. It would seem to me like the beginning of the year you obviously faced your tougher comps. You know, the beginning of last year you have a much bigger mortgage market than you do at the beginning of this year. And we are at March 11 now, so you probably have pretty good visibility into the March quarter with the guidance of about 30% to 40% increase in your revenue.

It seems like you were expecting pretty big deceleration as you go on through the year, and I just wanted to understand, is that just conservatism and see how the year develops or anything kind of one timing -- or a one timer in the first quarter that makes you feel like you are growing your revenue at this pace but by the end of the year you won't?

I think -- I want to speak a little bit out of both sides of my mouth, and I think you know -- number one, we are conservative in our guidance because we tend to be that way. We like to put out a bar and beat it. I've also said that our internal plans on which we hold ourselves to are generally higher. But that's because we push ourselves and then not everything works perfectly. And then we give guidance less than that.

So that's the conservative point, but the other point I would say is what I said before which is, you know, we want to land the plane with very solid growth -- quarter over quarter, year over year, and the same quarter in the prior years. And I agree with your comps comment, and but quarter over quarter is going to get at some point harder to do. But at the very least year over year -- Q1 to Q1 I think things will be fine. And we do try to reinvest. So when I do my Q1 call, I will talk about all the great stuff that we have launched in Q1, and it's probably more product add than we -- would have been baked in when we did our plan six months ago because that's what we try to do.

And so, it's a little bit of conservatism, but it's also a little bit of want to give ourselves some flexibility to invest as need see fit. And I think you are getting exactly on the point. We are gaining significant share. This is a very competitive market, and guys like Zillow and Bankrate and others do good -- you know, they are competitive people. And we want to win. So it's great we are gaining a lot of share. It's great lenders still love us. It's great that we've got a very credible product, but we recognize in this industry if we don't keep making it better, it will stagnate. And I want to give ourselves some flexibility to keep making those types of investments.

Okay. Just two quick other things. If I remember correctly, your original guidance for 2013 was roughly around $110 million to $115 million, or about 15% to 20% growth. So obviously you did a good job of beating those early expectations. When you talk about your EBITDA as we go into the rest of the year, I guess how much do you think you are going to spend the second and third quarter just on TV advertising? I know the preproduction stuff will cost you in the March quarter, but do you expect a big increase just on the advertising side like you did last year in the June quarter?

I think it would be more Qs 1 and 2. I don't think it would be substantially less than last year, but I don't have the numbers right in front of me. And we don't think of it as TV to TV. We really manage to overall VMM, and then that supply and demand equation because lenders -- so I guess I would answer this way, if we see lenders continuing to increase in demand and begging us for leads more so than they have in the past, then you should expect that we are going to increase spending to get that. And you should also expect that in Q2. That's the spring purchased season, and so, like last year when we launched it in Q2 -- Q2 versus Q1 and Q3 and Q4, Q2 is always typically a heavier spend because we are trying to drive purchase volume than the other quarters. But year over year I'm not sure because I got to see what the demand is on that time -- at that time from the lenders. What I can tell you is that whenever we are buying ads, it's very, very flexible. So, we are constantly optimizing everything to just maximize VMM and make sure that we deliver the right amount of demand that lenders looking for.

I talked in past quarters about the travel industry, circa 2001. And I'll kind of make that point again, which is in 2001 after September 11 that's when online travel started taking off. Prior to that, the big hotel companies, the big airlines did not put their excess inventory on hotels.com, Expedia, Travelocity, and everybody else. But once they couldn't fill those rooms, boy did they put that inventory in there, and we had the next great decade of online travel that continues to this day.

I think we are in the very early innings potentially of something like that happening in lending. For example, our customers a couple of years ago were a lot fewer and were all correspondent lenders. Now, we have a lot more banks business in there, and we have a lot more banking interest coming on, in addition to our existing companies taking share -- our existing clients taking share. And I think it was Q3 -- might have been Q4, there was an industry report that started to show the big money center banks actually losing share for the first time. So our existing correspondents are taking share in their businesses, and the big money center banks are doing a really good job on LendingTree -- the ones that are there. And the ones that aren't there are talking to us, which is different than the past.

And the peak time where the advertisers really want to advertise on your site and others is the second and third quarter. That's the peak season for purchase, correct?

It is the peak season for purchase, but keep in mind, a lender wants leads through us when they can't get them for free themselves. So if you are a really great purchase lender and you've got loan officers scattered around branch offices all over the country, you might be able to keep your business full by going around and making relationships with realtors. And then you wouldn't have as much excess capacity, so you wouldn't be looking to buy as many lease from us than if you are getting them from your own. But generally, yes, I think -- but in those non-bank lenders, yes. They are not getting purchase volume on their own, so us driving purchase volume in -- particularly at that time is just matching the market.

Okay. Great. Last question just for Alex is, okay, obviously DSO is down nicely to 32 days and your cash balance went up nicely this quarter. You talked about the final month being stronger than you expected it. How come the DSO's came down so much?

Are you talking about receivables?

Day sales outstanding.

Funny, I haven't looked at that. I guess we did a better job getting paid is probably the answer, but let me -- let us give you a better answer and let you know. And anybody else who wants the answer to that. My guess is we did a better job at collecting receivables. I don't think it's any -- there's nothing that sticking in my brain that would have said, oh, we had a major initiative or we're seeing, you know, we were really -- there was nothing like that. Just normal variation.

Okay. So outside of that $600,000 accrual you had in the quarter, you still had your EBITDA number well above your initial guidance for the fourth quarter.

I should made that point myself, so thank you for making it. You are exactly right.

Okay. Thanks so much.

I am showing no further questions. I would now like to turn to call back over to Doug Lebda.

Thank you. I'll be brief. Appreciate all of your time and attention. Thank you for sticking with us. Thank you for all the support. And thanks to all of our employees and lender partners for their continued belief in us. We look forward to reporting Q1 very shortly, and hopefully, we will continue to put great performance on the board. And we hope to see you at an industry conference near you soon. So, as always, reach out to us any time with any questions or comments. We are always happy to engage with our shareholders and know what you're thinking and get feedback from you and answer any questions you have. So thank you very much.

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.