TREE - LendingTree Reports First Quarter 2021 Results

LendingTree Summary Financial Metrics

(In millions, except per share amounts)

Three Months Ended
March 31,

Y/Y

Three Months Ended
December 31,

Q/Q

2021

2020

% Change

2020

% Change

Total revenue

$

272.8

$

283.1

(4)

%

$

222.3

23

%

Income (loss) before income taxes

$

28.0

$

15.9

76

%

$

(13.2)

312

%

Income tax (expense) benefit

$

(8.7)

$

3.1

(381)

%

$

5.1

(271)

%

Net income (loss) from continuing
operations

$

19.3

$

19.0

2

%

$

(8.1)

338

%

Net income (loss) from continuing
operations % of revenue

7

%

7

%

(4)

%

Income (loss) per share from continuing
operations

Basic

$

1.48

$

1.46

1

%

$

(0.62)

339

%

Diluted

$

1.37

$

1.34

2

%

$

(0.62)

321

%

Variable marketing margin

Total revenue

$

272.8

$

283.1

(4)

%

$

222.3

23

%

Variable marketing expense ^{(1) (2)}

$

(183.8)

$

(184.9)

(1)

%

$

(140.0)

31

%

Variable marketing margin ⁽²⁾

$

89.0

$

98.2

(9)

%

$

82.3

8

%

Variable marketing margin % of revenue ⁽²⁾

33

%

35

%

37

%

Adjusted EBITDA ⁽²⁾

$

30.7

$

44.9

(32)

%

$

26.3

17

%

Adjusted EBITDA % of revenue ⁽²⁾

11

%

16

%

12

%

Adjusted net income ⁽²⁾

$

2.5

$

17.1

(85)

%

$

1.8

39

%

Adjusted net income per share ⁽²⁾

$

0.18

$

1.20

(85)

%

$

0.13

38

%

(1)

Represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses. Also includes the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties. Excludes overhead, fixed costs and personnel-related expenses.

(2)

Variable marketing expense, variable marketing margin, variable marketing margin % of revenue, adjusted EBITDA, adjusted EBITDA % of revenue, adjusted net income and adjusted net income per share are non-GAAP measures. Please see "LendingTree's Reconciliation of Non-GAAP Measures to GAAP" and "LendingTree's Principles of Financial Reporting" below for more information.

LendingTree Segment Results

(In millions)

Three Months Ended
March 31,

Y/Y

Three Months Ended
December 31,

Q/Q

2021

2020

% Change

2020

% Change

Home ⁽¹⁾

Revenue

$

128.1

$

79.2

62

%

$

88.8

44

%

Segment profit

$

39.0

$

35.9

9

%

$

32.3

21

%

Segment profit % of revenue

30

%

45

%

36

%

Consumer ⁽²⁾

Revenue

$

57.9

$

119.9

(52)

%

$

47.8

21

%

Segment profit

$

24.6

$

43.1

(43)

%

$

22.7

8

%

Segment profit % of revenue

42

%

36

%

47

%

Insurance ⁽³⁾

Revenue

$

86.6

$

82.7

5

%

$

85.6

1

%

Segment profit

$

32.8

$

30.5

8

%

$

33.4

(2)

%

Segment profit % of revenue

38

%

37

%

39

%

Other ⁽⁴⁾

Revenue

$

0.1

$

1.2

(92)

%

$

0.1

—

%

Loss

$

(0.1)

$

(0.3)

(67)

%

$

(0.4)

(75)

%

Total revenue

$

272.8

$

283.1

(4)

%

$

222.3

23

%

Total segment profit

$

96.3

$

109.2

(12)

%

$

88.0

9

%

Brand marketing expense ⁽⁵⁾

$

(7.3)

$

(11.0)

(34)

%

$

(5.7)

28

%

Variable marketing margin

$

89.0

$

98.2

(9)

%

$

82.3

8

%

Variable marketing margin % of revenue

33

%

35

%

37

%

(1)

The Home segment includes the following products: purchase mortgage, refinance mortgage, home equity loans and lines of credit, reverse mortgage loans, and real estate.

(2)

The Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products such as credit repair and debt settlement.

(3)

The Insurance segment consists of insurance quote products.

(4)

The Other category primarily includes revenue from the resale of online advertising space to third parties and revenue from home improvement referrals, and the related variable marketing and advertising expenses.

(5)

Brand marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses that are not assignable to the segments' products. This measure excludes overhead, fixed costs and personnel-related expenses.

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

March 31,

2021

2020

(in thousands, except per share
amounts)

Revenue

$

272,750

$

283,084

Costs and expenses:

Cost of revenue (exclusive of depreciation and amortization shown separately below) ⁽¹⁾

13,895

14,252

Selling and marketing expense ⁽¹⁾

197,462

195,538

General and administrative expense ⁽¹⁾

34,989

32,082

Product development ⁽¹⁾

12,468

10,963

Depreciation

3,718

3,378

Amortization of intangibles

11,312

13,757

Change in fair value of contingent consideration

797

(8,122)

Severance

—

158

Litigation settlements and contingencies

16

329

Total costs and expenses

274,657

262,335

Operating (loss) income

(1,907)

20,749

Other (expense) income, net:

Interest expense, net

(10,215)

(4,834)

Other income

40,072

—

Income before income taxes

27,950

15,915

Income tax (expense) benefit

(8,638)

3,061

Net income from continuing operations

19,312

18,976

Loss from discontinued operations, net of tax

(263)

(4,575)

Net income and comprehensive income

$

19,049

$

14,401

Weighted average shares outstanding:

Basic

13,070

12,957

Diluted

14,119

14,158

Income per share from continuing operations:

Basic

$

1.48

$

1.46

Diluted

$

1.37

$

1.34

Loss per share from discontinued operations:

Basic

$

(0.02)

$

(0.35)

Diluted

$

(0.02)

$

(0.32)

Net income per share:

Basic

$

1.46

$

1.11

Diluted

$

1.35

$

1.02

⁽¹⁾ Amounts include non-cash compensation, as follows:

Cost of revenue

$

397

$

242

Selling and marketing expense

1,802

1,156

General and administrative expense

12,171

9,123

Product development

2,066

1,396

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 31,
2021

December 31,
2020

(in thousands, except par value
and share amounts)

ASSETS:

Cash and cash equivalents

$

162,091

$

169,932

Restricted cash and cash equivalents

79

117

Accounts receivable

123,067

89,841

Prepaid and other current assets

28,638

27,949

Current assets of discontinued operations

8,556

8,570

Total current assets

322,431

296,409

Property and equipment

71,572

62,381

Operating lease right-of-use assets

81,622

84,109

Goodwill

420,139

420,139

Intangible assets, net

117,189

128,502

Deferred income tax assets

87,586

96,224

Equity investment

121,253

80,000

Other non-current assets

5,403

5,334

Non-current assets of discontinued operations

15,982

15,892

Total assets

$

1,243,177

$

1,188,990

LIABILITIES:

Accounts payable, trade

7,230

10,111

Accrued expenses and other current liabilities

113,442

101,196

Current contingent consideration

9,046

—

Current liabilities of discontinued operations

803

536

Total current liabilities

130,521

111,843

Long-term debt

619,502

611,412

Operating lease liabilities

97,352

92,363

Non-current contingent consideration

—

8,249

Other non-current liabilities

359

362

Total liabilities

847,734

824,229

Commitments and contingencies

SHAREHOLDERS' EQUITY:

Preferred stock $.01 par value; 5,000,000 shares authorized; none issued or outstanding

—

—

Common stock $.01 par value; 50,000,000 shares authorized; 15,797,177 and 15,766,193 shares
issued, respectively, and 13,155,859 and 13,124,875 shares outstanding, respectively

158

158

Additional paid-in capital

1,200,306

1,188,673

Accumulated deficit

(621,860)

(640,909)

Treasury stock; 2,641,318 shares

(183,161)

(183,161)

Total shareholders' equity

395,443

364,761

Total liabilities and shareholders' equity

$

1,243,177

$

1,188,990

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

March 31,

2021

2020

(in thousands)

Cash flows from operating activities attributable to continuing operations:

Net income and comprehensive income

$

19,049

$

14,401

Less: Loss from discontinued operations, net of tax

263

4,575

Income from continuing operations

19,312

18,976

Adjustments to reconcile income from continuing operations to net cash provided by operating
activities attributable to continuing operations:

Loss on disposal of assets

348

530

Amortization of intangibles

11,312

13,757

Depreciation

3,718

3,378

Non-cash compensation expense

16,436

11,917

Deferred income taxes

8,638

(3,061)

Change in fair value of contingent consideration

797

(8,122)

Unrealized gain on investments

(40,072)

—

Bad debt expense

516

880

Amortization of debt issuance costs

1,275

582

Amortization of convertible debt discount

7,346

3,111

Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities

7,132

(196)

Changes in current assets and liabilities:

Accounts receivable

(33,743)

(6,952)

Prepaid and other current assets

(915)

(1,430)

Accounts payable, accrued expenses and other current liabilities

7,154

(3,271)

Income taxes receivable

(89)

65

Other, net

(240)

(862)

Net cash provided by operating activities attributable to continuing operations

8,925

29,302

Cash flows from investing activities attributable to continuing operations:

Capital expenditures

(10,553)

(4,189)

Equity investment

(1,180)

(80,000)

Net cash used in investing activities attributable to continuing operations

(11,733)

(84,189)

Cash flows from financing activities attributable to continuing operations:

Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of
stock options

(4,801)

(5,087)

Net proceeds from revolving credit facility

—

55,000

Payment of debt issuance costs

(168)

(306)

Contingent consideration payments

—

(3,000)

Other financing activities

(31)

(6)

Net cash (used in) provided by financing activities attributable to continuing operations

(5,000)

46,601

Total cash used in continuing operations

(7,808)

(8,286)

Discontinued operations:

Net cash used in operating activities attributable to discontinued operations

(71)

(752)

Total cash used in discontinued operations

(71)

(752)

Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents

(7,879)

(9,038)

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period

170,049

60,339

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period

$

162,170

$

51,301

LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

Variable Marketing Expense

Below is a reconciliation of selling and marketing expense to variable marketing expense. See "LendingTree's Principles of Financial Reporting" for further discussion of the Company's use of this non-GAAP measure.

Three Months Ended

March 31,
2021

December 31,
2020

March 31,
2020

(in thousands)

Selling and marketing expense

$

197,462

$

153,275

$

195,538

Non-variable selling and marketing expense ⁽¹⁾

(13,760)

(13,248)

(11,772)

Cost of advertising re-sold to third parties ⁽²⁾

—

—

1,086

Variable marketing expense

$

183,702

$

140,027

$

184,852

(1)

Represents the portion of selling and marketing expense not attributable to variable costs paid for advertising, direct marketing and related expenses. Includes overhead, fixed costs and personnel-related expenses.

(2)

Represents the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties. Excludes overhead, fixed costs, and personnel-related expenses.

LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

Variable Marketing Margin

Below is a reconciliation of net income (loss) from continuing operations to variable marketing margin and net income (loss) from continuing operations % of revenue to variable marketing margin % of revenue. See "LendingTree's Principles of Financial Reporting" for further discussion of the Company's use of these non-GAAP measures.

Three Months Ended

March 31,
2021

December 31,
2020

March 31,
2020

(in thousands, except percentages)

Net income (loss) from continuing operations

$

19,312

$

(8,117)

$

18,976

Net income (loss) from continuing operations % of revenue

7%

(4)%

7%

Adjustments to reconcile to variable marketing margin:

Cost of revenue

13,895

13,558

14,252

Cost of advertising re-sold to third parties ⁽¹⁾

—

—

(1,086)

Non-variable selling and marketing expense ⁽²⁾

13,760

13,248

11,772

General and administrative expense

34,989

34,825

32,082

Product development

12,468

10,384

10,963

Depreciation

3,718

3,738

3,378

Amortization of intangibles

11,312

12,475

13,757

Change in fair value of contingent consideration

797

(2,384)

(8,122)

Severance

—

105

158

Litigation settlements and contingencies

16

40

329

Interest expense, net

10,215

9,894

4,834

Other income

(40,072)

(369)

—

Income tax expense (benefit)

8,638

(5,095)

(3,061)

Variable marketing margin

$

89,048

$

82,302

$

98,232

Variable marketing margin % of revenue

33%

37%

35%

(1)

Represents the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties. Excludes overhead, fixed costs, and personnel-related expenses.

(2)

Represents the portion of selling and marketing expense not attributable to variable costs paid for advertising, direct marketing and related expenses. Includes overhead, fixed costs and personnel-related expenses.

LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

Adjusted EBITDA

Below is a reconciliation of net income (loss) from continuing operations to adjusted EBITDA and net income (loss) from continuing operations % of revenue to adjusted EBITDA % of revenue. See "LendingTree's Principles of Financial Reporting" for further discussion of the Company's use of these non-GAAP measures.

Three Months Ended

March 31,
2021

December 31,
2020

March 31,
2020

(in thousands, except percentages)

Net income (loss) from continuing operations

$

19,312

$

(8,117)

$

18,976

Net income (loss) from continuing operations % of revenue

7%

(4)%

7%

Adjustments to reconcile to adjusted EBITDA:

Amortization of intangibles

11,312

12,475

13,757

Depreciation

3,718

3,738

3,378

Severance

—

105

158

Loss on disposal of assets

348

474

530

Unrealized gain on investments

(40,072)

—

—

Non-cash compensation

16,436

14,497

11,917

Costs of secondary public offering

—

863

—

Change in fair value of contingent consideration

797

(2,384)

(8,122)

Acquisition expense

29

(188)

2,180

Litigation settlements and contingencies

16

40

329

Interest expense, net

10,215

9,894

4,834

Income tax expense (benefit)

8,638

(5,095)

(3,061)

Adjusted EBITDA

$

30,749

$

26,302

$

44,876

Adjusted EBITDA % of revenue

11%

12%

16%

LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

Adjusted Net Income

Below is a reconciliation of net income (loss) from continuing operations to adjusted net income and net income (loss) per diluted share from continuing operations to adjusted net income per share. See "LendingTree's Principles of Financial Reporting" for further discussion of the Company's use of these non-GAAP measures.

Three Months Ended

March 31,
2021

December 31,
2020

March 31,
2020

(in thousands, except per share amounts)

Net income (loss) from continuing operations

$

19,312

$

(8,117)

$

18,976

Adjustments to reconcile to adjusted net income:

Severance

—

105

158

Loss on disposal of assets

348

474

530

Unrealized gain on investments

(40,072)

—

—

Non-cash compensation

16,436

14,497

11,917

Costs of secondary public offering

—

863

—

Change in fair value of contingent consideration

797

(2,384)

(8,122)

Acquisition expense

29

(188)

2,180

Litigation settlements and contingencies

16

40

329

Income tax expense (benefit) from adjusted items

5,699

(3,402)

(1,760)

Excess tax benefit from stock-based compensation

(32)

(51)

(1,054)

Income tax benefit from CARES Act

—

—

(6,104)

Adjusted net income

$

2,533

$

1,837

$

17,050

Net income (loss) per diluted share from continuing operations

$

1.37

$

(0.62)

$

1.34

Adjustments to reconcile net income (loss) from continuing operations to
adjusted net income

(1.19)

0.76

(0.14)

Adjustments to reconcile effect of dilutive securities

—

(0.01)

—

Adjusted net income per share

$

0.18

$

0.13

$

1.20

Adjusted weighted average diluted shares outstanding

14,119

14,163

14,158

Effect of dilutive securities

—

1,112

—

Weighted average diluted shares outstanding

14,119

13,051

14,158

Effect of dilutive securities

1,049

—

1,201

Weighted average basic shares outstanding

13,070

13,051

12,957