Record-breaking revenue at the Charlotte-based parent company of the LendingTree mortgage-shopping site could be a sign that banks are looking for new business as the wave of refinancings begins to taper off.
Tree.com lost $2.7 million in the first quarter as expenses grew in preparation for a new marketing push. But executives pointed Tuesday to surging demand and growing revenue as a positive sign amid the company’s year-long repositioning.
Tree.com’s primary product, the LendingTree site, allows potential customers to enter their personal information and then shop for mortgages offered by numerous banks and brokers. Those firms pay Tree.com for the customer referrals, or leads. The company also operates portals comparing colleges and home improvement services.
The company had branched into mortgage origination, but has spent the past year transitioning back to a pure lead-generation business. It sold its mortgage origination unit to Discover Financial for about $56 million.
Those changes have weighed on the company’s earnings. The refinancing boom made mortgage originations much more profitable, while making leads less valuable to mortgage companies caught up in the same wave. In the first quarter of 2012, Tree.com earned $14.1 million largely on the strength of its home loan business.
But Tree.com executives told analysts on a conference call Tuesday that the company’s core business is strengthening.
Tree.com reported that the number of mortgage companies using its system grew 27 percent in the quarter, and said existing customers were spending more money with the company.
CEO Doug Lebda attributed that to banks needing to search for new business as fewer refinancings come through the door.
“As that volume abates, you have to keep your staff full,” Lebda told analysts. “So you have to go get those customers from somewhere. So you’ll increase your buy with us.”
Despite the record-breaking lead-generation revenue, the company lost money as sales and marketing expenses rose 62 percent ahead of Tree.com’s new advertising push.
Last week, the company announced a new marketing campaign that will put the LendingTree name out nationally in print, online, TV, radio, social media and through direct marketing. It’s aimed at making consumers less anxious about getting a mortgage in a period of record-low interest rates and a recovering housing market.
“I’m confident this campaign will re-energize our iconic brand and resonate with consumers in the months and years ahead,” Lebda said in a statement Tuesday.
Dunn: 704-358-5235; Twitter: @andrew_dunn
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