LendingTree (NASDAQ:TREE) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
LendingTree reported strong Q3 financial results, surpassing guidance and projecting a 14% growth in adjusted EBITDA for the full year, despite challenges in the mortgage sector.
The company highlighted robust performance in its insurance division, with the new bidding platform rollout exceeding expectations and contributing positively.
Consumer lending showed strong lender performance and credit availability, while home equity and HELOC have grown as key areas less sensitive to interest rate fluctuations.
The company continues to focus on the North Star strategy, emphasizing return customers, logged-in user growth, and AI-driven consumer experience enhancements.
Management expressed optimism about the company’s competitive position in the age of AI, noting strategic investments in AI to improve shopping experiences and maintain traffic.
The company plans to continue paying down debt, having reduced it by $60 million this quarter, and intends to initiate stock buybacks in Q4 due to attractive free cash flow yields.
LendingTree’s insurance market share is expected to grow, with favorable conditions projected into 2027 and beyond, while SMB lending shows signs of recovery post-Q2 trough.
Full Transcript
OPERATOR (Moderator)
Good day, and thank you for standing by. Welcome to LendingTree’s third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a Q&A session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your first speaker today, Andrew Wessel, Head of Investor Relations. Please go ahead.
Andrew Wessel (SVP – Head of Investor Relations and Corporate Development, Treasurer)
Thank you, and hello to everyone joining us on the call to discuss our third quarter 2026 financial results. On with us are Scott Peyree, President and CEO, and Jason Bengel, CFO. This afternoon we posted a detailed letter to shareholders and our investor presentation on our investor relations website. For the purposes of today’s discussion, we’ll assume that listeners have gone through those materials and will 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 our expectations for future performance. Any forward-looking statements that we make are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Many, but not all, of those 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. And with that, Scott, please go ahead.
Scott Peyree (President & CEO)
Thank you, Andrew. Jason and I have a few opening comments before we get into Q&A. First off, we’re very excited to provide strong financial results in Q3 that handily beat guidance we put out, as well as our updated guidance for the full year that assumes adjusted EBITDA growth by 14% at the midpoint despite ongoing headwinds in the mortgage business. This result highlights the durability of our diversified business model. To hit very briefly on each of our main businesses, starting with insurance: the property and casualty industry cycle remains steady and very strong. We have multiple clients growing very quickly with us. A new bidding platform with our largest client that we were integrating with at the end of Q2 and beginning of Q3 went very well and rolled out faster than we fully expected to, and provided a benefit to our business there throughout the quarter.
On the consumer side, as we expected and communicated in the Q2 earnings call, Q2 was a trough in the performance of small business lending, and we did see strong sequential growth. We’re still on the path to getting back to our all-time records of Q4 of last year and Q1 of this year, but we’re feeling that the industry is in a much better position and we are tracking to continued growth. As a matter of fact, September and October were our two best SMB concierge sales months since January of this year, so we definitely think it’s heading in the right trajectory.
Just on the consumer lending side in general, we’re seeing strong— from our client perspective, we’re seeing strong lender performance. Credit availability remains very strong. Loan performance remains good. The unemployment rate, which is a big leading indicator a lot of the lenders look at, remains very low. So personal loans and the other consumer lending areas remain in a strong and healthy place. On the home side, long-term interest rates overall have definitely gone in the wrong direction this year, which has provided some headwinds. That said, even in those headwinds we provided strong year-over-year growth in both revenue and VMD, so we’re very proud of that. We feel like we’re taking market share there. We feel like a number of the investments we’ve done to grow consumer traffic have been effective. There still is very strong demand from clients in that space; it’s really a matter of finding those qualified consumers that are looking for the loans. But as we mentioned in the letter, home equity and HELOC have become a major part of that business, and that business is much less interest-rate sensitive than purchase or refinance mortgage. And so we believe heading into next year we can continue to see growth in the home equity side of that business.
On the North Star strategy, execution continued and stays strong. Just to remind everyone, our big focus is on return customers, referred customers, and logged-in user growth. On the logged-in user side, we’ve been building and rolling out a number of tools we’re excited about: debt management tools, AI-driven recommendations, scenario tools, analysis. We’re really looking forward to some of the things we’ll be rolling out over the next few quarters, and we’ve got a long list of features that we think will create a very sticky logged-in user base over the long run that will provide return consumers that we can proactively provide our financial and insurance product offering to without paying for those consumers to come through every time.
On the consumer experience, the shopping experience—the Suzy experience, as we call it internally, which is to transform and dramatically improve the Suzy experience—we’re very happy with improvements we’re making there. For example, voice and text AI we’re continuing to roll out in beta form on multiple fronts, where we’re bringing AI in to handle a lot of the shopping process on behalf of the consumer until they’re closer to application-ready before we hand them off to the client.
We’re seeing lots of positive signs on multiple fronts there and are really looking to more rapidly and aggressively roll that out as we head into 27. AI overviews that we’re providing mainly to our personal loans customers—right now we’ve rolled it out from just our logged-in users to now all of our branded LendingTree.com users. We’re looking to roll out new versions of it for personal loans that are even better and improved at helping when, you know, when you’re sitting on 30 to 50 offers, helping to understand which offer you should select based off of your personal situation.
We’re seeing a lot of engagement from the consumers there. Our plan is, as we get into 27, to early in 27 have versions of AI overviews for every product we’re offering to the consumers coming through our website. Moving on—just to hit briefly on, there’s been a lot of conversations that I’ve had; I’m sure questions will come up here, so I’ll just preemptively talk about it a little bit—just the AI threat, mainly the LLM threat to our business and our competitors’ business versus maybe the reality we’re all seeing right now. And I’ll start with: as we’ve looked at it, in all the consumers out there, we have the ability to generate way higher increases in traffic through social, business development, and publishers than we have the threat of losing traffic to LLMs in the near to midterm.
As we look at the marketplaces out there, we’re under-indexed in a lot of those categories. We’ve had a lot of success this year growing those categories. We’re actively investing heavier to grow at a faster rate in those categories. And then when you look at the LLMs, I mean they have been growing, they’re taking bigger share. But an analysis I was given a few months ago—if you really look at the overall bucket, and if you include search with LLMs as just like a pie of consumers—all of the LLMs added up together are 5% of the search bucket. And as we’ve seen, which gets a lot of media when new items come out like Muse, what we’re seeing is they’re taking share away from the other LLMs much more so than they’re taking share away from, like, a Google AI Overview search result.
So it’s still growing, we’re still actively involved, we’ve got a lot of resources committed to it—whether it’s we’re building apps for the LLMs, whether we’re making our content available for LLMs to access, whether we’re advertising on the LLMs. But I think it’s just fair to set the precedent that we don’t expect any sort of massive growth in traffic from the LLMs anytime in the near future, nor do we expect any major loss of traffic we’re getting from other sources to the LLMs anytime in the near future.
And we’re excited about the growth we know we can achieve from other areas where consumers are every day and shopping for products that we’re offering. To add to that, LendingTree’s carrier and lender network is a big structural moat. We have 700-plus carriers and lenders in our network. Roughly half to three-quarters of these only quote via back-end API access, not open online quoting. So this whole concept of an LLM agent just going and filling out forms on behalf of the consumer—yeah, that’s true to some extent, but it’s very limited in most of the industries we’re in where they could actually get a very good and quality set of comparison quotes.
That’s where we provide huge advantage. We feel that we can be an extremely useful platform in this world, not just from the breadth of offerings but also from a compute standpoint with the agents, to be a go-to source for financial product quoting via AI agents. For example, why would an LLM agent—e.g., Muse—burn compute hitting 20 separate personal loan sites when they could just come to our site and get the same 20 quotes by filling out one form through us?
And even when I say filling out a form, the protocols of the agents working together—it’s not even really that they need to fill out a form; they’re just communicating with our specialty agent that can provide that on their behalf. Our specialty agents can be on the phone to get other quotes that you can only get over the phone. We’re going to be building a lot of this stuff that the big LLMs just simply aren’t going to put the attention to anytime in the near future.
So just to round it out: we are very excited about the agentic AI capabilities we’re building to both improve the current shopping experience and transform the shopping experience in general—whether it’s consumers using our web-based platforms to shop, whether it’s LLMs or other agentic AIs accessing our specialty AI agents to shop, or whether it’s logged-in members that get the benefit of our agentic AI doing secret shopping and/or actively preparing updated offers in real time on their behalf.
We’re more confident by the day that we can provide huge value to the consumer in the age of AI. So with that said, before passing over to Jason for comments on the bigger picture of financial performance, I just want to reiterate our excitement about the growth we see ahead of us. The North Star is starting to really show real results for our consumers. We’ve done a lot of testing throughout 26 of millions of different things of how we can use AI and agentic AI to transform the shopping experience. We feel like we’ve identified a number of things that can be used across all of the industries we operate in, and we’ll be really investing heavily in rolling that all out on a broad, macro basis in 2027 and beyond.
So with that, Jason, go ahead.
Jason Bengel, CFA (CFO)
Thanks, Scott. And I think it’s useful just to take a step back, and when you look at the midpoint of our guide versus 2023, you’re looking at a 25% EBITDA CAGR. You’re looking at expenses with a 3% CAGR, you know, in line with inflation, essentially. You’re looking at net leverage moving from 5.3 to 1.7. So we’ve made tremendous progress over the last few years. And looking at 2026, we’ve had some headwinds in 2026, right. But we’re still growing EBITDA well into double digits, 14%, when you’re looking at the midpoint of the guide. That’s because we have a diversified portfolio like Scott alluded to. You’re looking at, within 2026, expenses growing, you know, around 3% at the midpoint. That’s the result of discipline and a focus on driving internal efficiencies. With the use of AI, we expect all that to continue into 2027.
And I think, you know, what’s also interesting is when you look at our cash flow, look at our Q3 LTM cash flow, free cash flow excluding litigation, it’s $100 million. So that’s a lot of cash available to return to shareholders. And so, you know, coming back to the diversified business point, you know, Insurance is performing extremely well and we expect it to continue to perform extremely well. Home is in a difficult environment. Mortgage is hard right now.
But when you look at that segment, you look at the mid-cycle earnings, just averaging the peak and the trough of Home, that’s about $50 million of VMM higher than where we are today. And a majority of that would drop to EBITDA. We just can’t really get confident that’s going to happen soon. But there is a massive potential there for that segment because we have a diversified, strong business with a great lender network. This quarter we paid down $60 million of debt. We saved $5 million in interest expense, bringing our gross debt down to $336 million, approaching pretty close to our $200 million longer-term goal. You’ll see in our financials we did take a non-cash goodwill impairment of $99 million in Home and Consumer, and that’s really involving testing for impairment where we had to consider our market cap on and around September 30th. That resulted in the charge.
This doesn’t reflect a change in our expectations for these segments, but it does reflect a market cap that implies a free cash flow yield ex-litigation north of 25%. So we see the attractiveness in these numbers. We see the attractiveness and the upside on our stock. And so in Q4 we’re going to be buying back stock, and we’re going to continue paying down debt. And so with that I’ll hand it over to the operator for Q&A.
OPERATOR (Moderator)
Thank you. At this time we will conduct the question and answer session. To ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jed Kelly from Oppenheimer and Company. Jed, your line is now open.
Jed Kelly (Analyst at Oppenheimer & Co.)
Great. Thanks for taking my question. Just diving into insurance, I think one of your competitors last night said they expect this soft market cycle or favorable profitability cycle to continue potentially into 28, 29. Are you seeing the same thing, and do you just have a good multi-year visibility into insurance over the next couple years? Thanks.
Scott Peyree (President & CEO)
Yeah, Jed, thanks for the question. I would generally agree with that sentiment you heard yesterday. And it’s a very stable industry at this point in the game. I would say long term it’s easier to look out and project continued long-term growth today than almost has ever been. Not that there can’t be a big turn where inflation goes way up again, which could affect the insurance companies, or, you know, they start giving some rate back to the consumers which affects their profitability.
But yeah, I think the industry is more stable now than it’s been in a long, long time. It’s very profitable. In general, we’re seeing, and I’m sure not just us, our competitors as well, more players get more aggressive with budget, which is very good for a marketplace business like ours where you have more competition for those consumer clicks. Yeah, I would say to ’28 and beyond, outside of some major shift, there’s a lot of continued growth I would expect in that industry.
Another interesting thing I would comment there is when we look at our market share versus the overall industry in insurance—in online performance marketing, which is essentially where we sit in insurance—we probably actually have a lower market share than just about any other industry we’re in. Even with as big as insurance is for our business, my guess is we are well below 20% market share just within our group. So there’s the whole industry that’s going to keep growing for the next few years, and then there’s the ability to grow our market share within that industry.
So yeah, I would have a very positive outlook for the insurance industry right now.
Jed Kelly (Analyst at Oppenheimer & Co.)
Great. And then, I think Jason, you mentioned expenses have grown about 3%. Just with AI, how do you feel relative to your competitors about your opportunity? How do you think you’re invested in AI? Do you think you can continue growing expenses at 3–4%, or do you think you’re going to have to invest more so you can kind of better harness this technology? Thanks.
Jason Bengel, CFA (CFO)
Yeah, I mean, we’re still in the 2027 planning phases, I guess, so it’s hard to put out a number at this point. But we’ve had a lot of success using tools that we have today to drive a lot of efficiency on the AI front. When you look at how we run marketing, and just using data agents, for example, within marketing, the amount that we’ve been able to upscale our marketing team by using agents to handle the data gathering and analysis part of their jobs allows them to become much, much more efficient marketers.
And so we’re using the tools that we have today with a lot of success, and we fully intend to keep doing that. It’s possible that as we move into 2027, we do wind up investing more in AI, but we would expect an outsized increase in productivity moving forward.
Jed Kelly (Analyst at Oppenheimer & Co.)
Thank you. And good quarter.
Scott Peyree (President & CEO)
Yeah, and I would just add in there, it’s a little bit of like, there’s areas we’re going to invest into. Data is a critically important area to have quality data infrastructure for AI to work effectively; logged-in experience, like I was saying. But you can get so much more done with fewer people in this age of AI. And at the same time we’re looking where AI can provide efficiencies. So it kind of levels out to some extent when you look at it that way.
Jed Kelly (Analyst at Oppenheimer & Co.)
Thank you.
OPERATOR (Moderator)
Thank you. Our next question comes from the line of Yousef Squally from Truist. Yousef, your line is now open.
Yousef Squally (Analyst at Truist Securities)
Great, thank you so much. Scott, I was intrigued by your comments about working with LLM platforms, at least in theory, to integrate some of your capabilities within the agent results. Are you actually talking to some of these platforms, and what kind of reception are you getting? And a follow-up,
Scott Peyree (President & CEO)
Yeah, we’re actively engaged in some platforms out there, more so than others. Honestly, these companies are growing so fast. They help you where they can; they give you directional information. A lot of the time they don’t even know how their systems work any more than anyone else knows how it works. So they’re trying to give you directional—here’s where we believe the AI is finding value and not finding value. There’s definitely a number of, and it’s more of a recent thing, Internet protocols starting to be developed that make it easier for AI agents to communicate with companies like ours. And so I think the fact that we’re making sure we’re building our platforms to be able to easily communicate with LLM agents—because not everyone’s going to be doing that, not that we’re the only ones doing it, but the group of us that are going to be front-end doing that will do it.
But yeah, I mean I would say all the major LLMs or just AI companies we’ve got relationships with. There’s only so much they know or they can tell you, but they can help direct you the way it should be going.
Yousef Squally (Analyst at Truist Securities)
Got it. Okay. And then maybe on the other two subsegments, Home and Consumer, it’s very encouraging to see that you guys still posted positive growth. As we look at 2027, can you maybe just share your initial outlook as to the potential growth prospects for these, and still the headwinds ahead, you know, ex maybe just rates, which God knows what’s going to happen there.
Jason Bengel, CFA (CFO)
Yeah, I’ll start and then Scott can chime in here. Like I said, we’re still a little early in our planning for 2027, so we’re not putting out guidance or numbers at this point. But just thinking about the backdrop, like Scott said, in Insurance we expect continued tailwinds for a while. Combined ratios are still very low. I think carriers are going to very carefully manage those combined ratios. Competitiveness is very high. And so I think we’ll have a very favorable environment in Insurance moving into 2027 and beyond.
Home, like you said, it’s a bit more challenging. Mortgage is in a hard spot. Home sales are at very, very low levels—I want to say 20-, 40-year low—so it’s hard to be excited about Mortgage. But at this point Home is really driven by home equity, and there are record home equity balances and people are renovating their homes. So there’s a real opportunity within home equity to drive growth. I guess I would say we’re really excited about the opportunity to drive traffic, and Scott touched on it, but we’re under-indexed in several channels that we fully intend to lean into in 2027 and beyond.
And our strategy is focused on driving organic traffic, and we think we can have a real impact moving into 2027 and beyond there as well. So it’s a little bit early to be putting out numbers, but I think the backdrop is generally favorable for Insurance. It’s a little bit complex with Home, but it’s going to be home-equity driven. Consumer, it’s really about SMB. We did see a lot of headwinds in SMB early in the year. That’s improved. It’s been improving. I think we expect it to continue to improve, but it’s hard to really guarantee that. So it’s really more about how are we going to execute to find additional traffic moving into 2027 and make those investments to keep driving growth.
Scott Peyree (President & CEO)
Yeah, and I would just add in briefly, small business—if it continues to recover, I mean that’s a big wildcard. If it gets back to where it was in Q4, Q1 this past year, which it very well could, that would be major growth in and of itself. So that’s something we’re excited about. And then, as I said before, a real focus on getting more and more users to sign up to become logged-in members of LendingTree and active users, which increases our long-term value and decreases our cost of acquisition over the long run.
Those are major metrics. So if we can start showing improvement in those metrics, that will have a significant impact not only on profitability but just ability to drive more consumers on top of the funnel.
Yousef Squally (Analyst at Truist Securities)
Got it. Thank you both.
OPERATOR (Moderator)
Thank you. Our next question comes from the line of Ryan Tomasello from KBW. Ryan, your line is now open.
Ryan Tomasello (Analyst at KBW)
Hi everyone. Thanks for taking the questions. Hearing a lot of comments about the focus on growing organic traffic and investing there and understand that makes sense over the long term. But just want to make sure we’re understanding that properly if there’s anything you’re telegraphing there around incremental investment next year and how should we think about the ability to continue to sustain double-digit EBITDA growth even if we do see some incremental investment in parts of the business like that.
Scott Peyree (President & CEO)
Yeah, I’ll hit on it. Basically two ways. We think there’s ability to grow a lot of organic traffic by a number of the things we’re building in the login experience and just being better about more proactively. We’ve already been doing some testing about more proactively getting consumers that are upfront shopping for whatever product they’re shopping for to get them to become login members. And I would say we’re pretty excited about our ability to onboard members.
And so then you got to create that long-term value that would be like the organic growth. But then we also feel that there’s a lot of growth just in areas where we’ve arguably been under-index compared to our competitors over the last number of years. And that would be social media, which is, you know, a massive world of consumers, business development, publishers. You know, we’ve been building a lot of ad tech around that over the past nine months and we’ll probably continue investing even more heavily in that to just really, really get to have really good platforms that get good ad tech where we can go and place our ads and have publishers and partners more easy to work with us.
We feel like that’s just a major, like I would almost call it, if you build it, they will come situation. Like we just got to build more of the stuff, onboard more partners, and that will just drive a lot more traffic there as well.
Ryan Tomasello (Analyst at KBW)
Great, appreciate that. And then follow-up on SMB, maybe Scott, if you can just put a finer point on how the recovery trajectory looked in that business coming out of the second quarter, whether or not you learned anything incremental on the drivers of the earlier weakness, what questions might still be out there, and how you’re thinking about that recovery progressing into next year.
Scott Peyree (President & CEO)
Yeah, I would say in Q2 the biggest drivers were you had bad, for at least early Q2, bad lender sentiment. And mainly because these lenders had written a lot of loans in the previous like six to nine months and they just kind of wanted to, you know, the Iran war started, etc. They just wanted to take a time out, just make sure the loans were performing. And then you had bad merchant sentiment, which a lot of it was gas prices and the Iran war stuff.
And I think small- to medium-sized businesses are probably, honestly, even more sensitive to that than consumer lending even is. And so when we got out of Q2 what we saw: the lender sentiment completely turned around where they’re like, okay, our loans are performing, everything’s going great, let’s get back to business. We’re offering loans at the same rate and term that we were a year ago. So that’s fully recovered. So that’s a really good part. The merchant sentiment has recovered, but not fully. That’s where we’re still seeing the take rates on loans are lighter than they were in our Q4/Q1 peaks and then the average size of loan is a little lighter.
And we just feel that that’s still just kind of a little bit of merchant sentiment, just concern on the macro economy and stuff. But I mean that’s something we fully, you know, once the sentiment turns around, we have a long-term history of what the take rate on loans generally is and what the average loan size really is. And no reason to believe we won’t be right back there.
Ryan Tomasello (Analyst at KBW)
Any way by how far below you are on those take rates and average loan sizes?
Jason Bengel, CFA (CFO)
I mean, I guess one way to look at it is comparing to our original budget, and if SMB was performing at the original budget, we would be north of 160 EBITDA this year.
Ryan Tomasello (Analyst at KBW)
Great. Thanks for the color.
OPERATOR (Moderator)
Thank you. Our next question comes from the line of Danny Pfeiffer from JPMorgan. Danny, your line is now open.
Danny Pfeiffer (Analyst at JPMorgan)
Hey, thanks for the questions. For the first, as you have discussions with insurance carriers, can you talk about what their mindset is as it relates to partnering versus blocking AI agents and where LendingTree might fit in that equation? And then on the second, on the topic of making progress on logged-in member experience, can you talk about your ambitions here and if you share any stats on the member base today in terms of like size, return frequency, or monetization?
Scott Peyree (President & CEO)
I’ll start with the first part of the question, just with the insurance carriers, and I would say like, yeah, insurance carriers historically, they just don’t want their rate tables publicly available to the world because they don’t want to start this downward spiral: everyone having to give a given rate and it’s like everyone has to lowball on the upfront rate. If you rewind the insurance industry like 30 years ago it was a similar problem where they, you know, they were more public with the rates but then it was just they had to lowball for the first six months and then jack everyone’s insurance rate up by 50% after six months.
Horrible consumer experience. Like, bad for insurance; they don’t want to get back to that world and they’ve made it very clear. So when they look at like some of these agents like amuse coming out and being able to scrape sites that provide rates publicly, which honestly is not a ton of carriers that do that, but there are some that do that. I think, like I was saying, in the market share of LLMs overall right now, the quantity of consumers actually using LLMs to shop for insurance, I don’t think they’re seeing the quantity that really concerns them yet. Now if they started all of a sudden seeing hundreds of thousands of unique rate requests a day, my guess is they would pretty quickly shut that down.
Now where they work with us, and as they’re working with us, getting back to the logged-in experience, we’ve had a number of carriers already tell us—we’re actively building with some—they’re like, okay, you’re logged in. We don’t want to show rates on your public-facing site, but your logged-in users that are yours, we’re more than happy to show rates and let you do secret shopping and provide a lot of value that way. And that’s a perfect example of where I think our platform as a specialty agentic AI platform in the insurance and financial services space will be much greater than what any LLM that has honestly much bigger fish to fry will accomplish. What was your second question?
Danny Pfeiffer (Analyst at JPMorgan)
Yeah, and maybe on the second, if you could provide any stats or anything on the logged-in user base in terms of anything like the size or return frequency or monetization.
Jason Bengel, CFA (CFO)
No, we’re not currently providing any stats on this front publicly.
Danny Pfeiffer (Analyst at JPMorgan)
Got it. Thank you.
Scott Peyree (President & CEO)
For compelling reasons.
OPERATOR (Moderator)
Thank you. Our next question comes from the line of Mike Grondal from Northland. Mike, your line is now open.
Mike Grondal (Analyst at Northland)
Hey guys. Thanks. A question on your 4Q guidance, Scott, would you say that that pretty much reflects seasonality, typical seasonality in the business, or is there, I don’t know, a weakness in a business line you hadn’t expected earlier in the year? Just trying to get a feel for how you’re thinking about that 4Q.
Jason Bengel, CFA (CFO)
Yeah, I can start and then Scott will chime in. I mean we’ll just go segment by segment, I guess. Like Home. Home is seasonally lower in Q4. It might be a little bit more low than normal seasonality just given the environment. Consumer is generally going to be flat sequentially Q3 to Q4 with sort of offsetting seasonality between personal loans and small business. Small business has a strong Q4. Personal loans tends to have a weaker Q4. The real uncertainty is with insurance.
The last few years we have gotten very large budgets towards the end of Q4. And so the guide isn’t assuming the sort of budgets that we’ve gotten in prior years. We are assuming we do get sort of a seasonal uptick in insurance budgets, but just less than we have in the prior years. We’re just being conservative there. So that is inherent in the guide. But no, there’s no single business that’s performing particularly poorly Q3 to Q4 to answer your question.
Scott Peyree (President & CEO)
And just to add, the only thing I would add on there is if you look year over year, the biggest driver probably is small business. So small business keeps improving from the Q2 trough. But again, I’ll reiterate, the Q4/Q1 were all-time highs last year for us. And so even though we’re improving and we’re coming back, there’s still a ways to go to get to those levels. And that’s probably the single biggest driver, if you look year over year.
Mike Grondal (Analyst at Northland)
Got it. That’s helpful. And then on the buyback it seemed like you signaled you’re going to be engaging in that here in 4Q. Is there one or two metrics? I mean, I imagine maybe it’s debt to adjusted EBITDA has gotten to a level where you’re comfortable. It seems like the cost structure you’ve got your arms around really tight with, you know, inflation growth. Help us think about your kind of appetite for buyback and, you know, amongst those metrics.
Jason Bengel, CFA (CFO)
Yeah, I mean, yeah, we’re looking at, you know, a lot of things. You know, our debt, we’ve declared our target debt levels $200 million and, you know, last quarter we were sitting on $397 million of gross debt in a rising interest rate environment relative to our 200 target. So we made a big dent in that debt and we’re going to continue paying down debt and returning money to shareholders that way. When it comes to the buybacks, when you look at where our stock is and has been compared to our free cash flow, it’s just pretty obvious that it is an attractive opportunity that we’re going to take advantage of. Like I said, we drove, looking back, trailing 12 months, $100 million of free cash flow. When you exclude litigation payments and you look at that relative to our market cap, it becomes pretty compelling pretty quickly. So that’s a big one that we’re looking at, as well as our EBITDA multiple.
And the growth implied in all points to a pretty easy decision to lean in and buy back shares in Q4.
Mike Grondal (Analyst at Northland)
Great. I know it’s taken a lot of hard work and a couple years to get there, but congratulations, guys.
OPERATOR (Moderator)
Thank you. This concludes the question and answer session. I would now like to turn it back to CEO Scott Peyree for closing remarks. Thank you. Just to close,
Scott Peyree (President & CEO)
We appreciate you all joining the call and asking the questions you asked. We’re just looking forward to continuing to execute and being able to report on continued improvements in the business next quarter. Have a good evening.
OPERATOR (Moderator)
Thank you for your participation in today’s conference. This does conclude the program and you may now disconnect.
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