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Lendingtree, Inc. (TREE) SEC Filing 10-K Annual Report for the fiscal year ending Friday, December 31, 2021

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TREE Annual Reports

Lendingtree, Inc.

CIK: 1434621 Ticker: TREE

 

Exhibit 99.1

 

LENDINGTREE REPORTS FOURTH QUARTER 2021 RESULTS

 

Outlook suggests strength in high margin Consumer segment and demonstrated recovery in Insurance

 

Consolidated revenue of $258.3 million

 

GAAP net income from continuing operations of $48.4 million or $3.57 per diluted share

 

Variable marketing margin of $88.5 million

 

Adjusted EBITDA of $24.7 million

 

Adjusted net loss per share of $(0.14)

 

CHARLOTTE, NC - February 25, 2022 - LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation's leading online financial services marketplace, today announced results for the quarter ended December 31, 2021.

 

The Company has posted a letter to shareholders on its investor relations website at investors.lendingtree.com.

 

"As a company, we are galvanized around the strategy we shared with you recently at our Investor Day,” said Doug Lebda, Chairman and CEO. “We know that connecting LendingTree’s industry-leading brand and deep partner network with an unparalleled customer experience will enable us to accelerate revenue and margin growth while making a meaningful difference in the financial lives of our customers. We’re already making substantive progress in designing and testing new experiences with complementary breakthrough marketing campaigns, and we look forward to sharing the results with you as we progress through the year."

 

Trent Ziegler, CFO, added, "We are pleased to affirm the fourth-quarter and full-year 2021 results we shared preliminarily at our Investor Day earlier this month, and reaffirm our previously released 2022 annual guidance. The Home and Consumer segments continue to perform well, helping offset headwinds in our Insurance business that we see as temporary. Our capital structure and balance sheet afford us flexibility we have not had since before the onset of the pandemic and allowed us to restart our share repurchase during the quarter. Given the rapidly changing landscape across our industry, we are prepared to capitalize on evolving opportunities."

 

Fourth Quarter 2021 Business Highlights

 

Home segment revenue of $96.3 million grew 8% over fourth quarter 2020 and produced segment profit of $33.8 million, up 5% over the same period.

 

Within Home, mortgage products revenue of $79.6 million declined 2% over the prior year period.

 

Consumer segment revenue of $96.4 million grew 102% over fourth quarter 2020 as the segment continues to rebound.

 

Within Consumer, credit card revenue of $26.4 million was up 122% year-over-year.

 

 

Page 2
Personal loans revenue of $36.2 million improved from $33.8 million in third quarter 2021.

 

Revenue from our small business offering grew 13% sequentially from the third quarter 2021.

 

Insurance segment revenue of $65.4 million declined 24% over fourth quarter 2020 and translated into segment profit of $20.8 million, down 38% over the same period.

 

Through December 31, 2021, 21.0 million consumers have signed up for MyLendingTree.

 

LendingTree Summary Financial Metrics
(In millions, except per share amounts)
                
   Three Months Ended December 31,  Y/Y  Three Months Ended September 30,  Q/Q
   2021  2020  % Change  2021  % Change
                
Total revenue  $258.3   $222.3    16%  $297.4    (13)%
                          
Income (loss) before income taxes  $60.2   $(13.2)   556%   (4.4)   1468%
Income tax (expense) benefit   (11.8)   5.1    (331)%       %
Net income (loss) from continuing operations  $48.4   $(8.1)   698%  $(4.4)   1200%
Net income (loss) from continuing operations % of revenue   19%   (4)%        (1)%     
                          
Income (loss) per share from continuing operations                         
Basic  $3.67   $(0.62)   692%  $(0.33)   1212%
Diluted  $3.57   $(0.62)   676%  $(0.33)   1182%
                          
Variable marketing margin                         
Total revenue  $258.3   $222.3    16%  $297.4    (13)%
Variable marketing expense (1) (2)  $(169.8)  $(140.0)   21%  $(191.5)   (11)%
Variable marketing margin (2)  $88.5   $82.3    8%  $105.9    (16)%
Variable marketing margin % of revenue (2)   34%   37%        36%     
                          
Adjusted EBITDA (2)  $24.7   $26.3    (6)%  $41.0    (40)%
Adjusted EBITDA % of revenue (2)   10%   12%        14%     
                          
Adjusted net (loss) income (2)  $(1.8)  $1.8    (200)%  $10.3    (117)%
                          
Adjusted net (loss) income per share (2)  $(0.14)  $0.13    (208)%  $0.75    (119)%
                          

 

(1) Represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses.  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.

 

Page 3
LendingTree Segment Results
(In millions)
                
   Three Months Ended December 31,  Y/Y  Three Months Ended September 30,  Q/Q
   2021  2020  % Change  2021  % Change
Home (1)               
Revenue  $96.3   $88.8    8%  $112.4    (14)%
Segment profit  $33.8   $32.3    5%  $41.5    (19)%
Segment profit % of revenue   35%   36%        37%     
                          
Consumer (2)                         
Revenue  $96.4   $47.8    102%  $100.0    (4)%
Segment profit  $40.8   $22.7    80%  $44.7    (9)%
Segment profit % of revenue   42%   47%        45%     
                          
Insurance (3)                         
Revenue  $65.4   $85.6    (24)%  $84.8    (23)%
Segment profit  $20.8   $33.4    (38)%  $26.6    (22)%
Segment profit % of revenue   32%   39%        31%     
                          
Other (4)                         
Revenue  $0.2   $0.1    100%  $0.2    %
Profit  $0.1   $(0.4)   125%  $0.1    %
                          
Total revenue  $258.3   $222.3    16%  $297.4    (13)%
                          
Total segment profit  $95.5   $88.0    9%  $112.9    (15)%
     Brand marketing expense (5)  $(7.0)  $(5.7)   23%  $(7.0)   %
Variable marketing margin  $88.5   $82.3    8%  $105.9    (16)%
Variable marketing margin % of revenue   34%   37%        36%     
                          
(1) The Home segment includes the following products: purchase mortgage, refinance mortgage, home equity loans, 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 includes marketing revenue and related expenses not allocated to a specific segment.
(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.

 

Page 4

Business Outlook - 2022

 

Today, the Company is providing revenue, variable marketing margin and adjusted EBITDA guidance for the first quarter of 2022 and maintaining guidance for full-year 2022, as follows:

 

For first-quarter 2022:

 

Revenue: $280 - $290 million

 

Variable Marketing Margin: $90 - $97 million

 

Adjusted EBITDA: $26 - $31 million

 

For full-year 2022:

 

Revenue is anticipated to be in the range of $1,200 - $1,250 million, representing growth of 9% - 14% over full-year 2021 results.

 

Variable Marketing Margin is expected to be in the range of $445 - $475 million.

 

Adjusted EBITDA is anticipated to be in the range of $160 - $180 million, up 19% - 34% over full-year 2021 results.

 

LendingTree is not able to provide a reconciliation of projected variable marketing margin or adjusted EBITDA to the most directly comparable expected GAAP results due to the unknown effect, timing and potential significance of the effects of legal matters and tax considerations. Expenses associated with legal matters and tax consequences have in the past, and may in the future, significantly affect GAAP results in a particular period.

 

Quarterly Conference Call

 

A conference call to discuss LendingTree's fourth-quarter 2021 financial results will be webcast live today, February 25, 2022 at 9:00 AM Eastern Time (ET). The live audiocast is open to the public and will be available on LendingTree's investor relations website at investors.lendingtree.com. The call may also be accessed toll-free via phone at (877) 606-1416. Callers outside the United States and Canada may dial (707) 287-9313. Following completion of the call, a recorded replay of the webcast will be available on LendingTree's investor relations website until 12:00 PM ET on Saturday, March 05, 2022. To listen to the telephone replay, call toll-free (855) 859-2056 with passcode #1665618. Callers outside the United States and Canada may dial (404) 537-3406 with passcode #1665618.

 

 

Page 5

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

  

Three Months Ended

 December 31,

 

Twelve Months Ended

 December 31,

   2021  2020  2021  2020
   (in thousands, except per share amounts)
Revenue  $258,285   $222,329   $1,098,499   $909,990 
Costs and expenses:                    
Cost of revenue (exclusive of depreciation and amortization shown separately below) (1)   14,448    13,558    57,297    54,494 
Selling and marketing expense (1)   184,847    153,275    773,990    617,404 
General and administrative expense (1)   38,546    34,825    153,472    129,101 
Product development (1)   13,723    10,384    52,865    43,636 
Depreciation   4,941    3,738    17,910    14,201 
Amortization of intangibles   9,771    12,475    42,738    53,078 
Change in fair value of contingent consideration       (2,384)   (8,249)   5,327 
Severance   6    105    53    295 
Litigation settlements and contingencies   32    40    392    (943)
Total costs and expenses   266,314    226,016    1,090,468    916,593 
Operating (loss) income   (8,029)   (3,687)   8,031    (6,603)
Other (expense) income, net:                    
Interest expense, net   (14,986)   (9,894)   (46,867)   (36,300)
Other income   83,200    369    123,272    376 
Income (loss) before income taxes   60,185    (13,212)   84,436    (42,527)
Income tax (expense) benefit   (11,753)   5,095    (11,298)   19,961 
Net income (loss) from continuing operations   48,432    (8,117)   73,138    (22,566)
Loss from discontinued operations, net of tax   (507)   (139)   (4,023)   (25,689)
Net income (loss) and comprehensive income (loss)  $47,925   $(8,256)  $69,115   $(48,255)
                     
Weighted average shares outstanding:                    
Basic   13,212    13,051    13,199    13,007 
Diluted   13,558    13,051    13,695    13,007 
Income (loss) per share from continuing operations:                    
Basic  $3.67   $(0.62)  $5.54   $(1.73)
Diluted  $3.57   $(0.62)  $5.34   $(1.73)
Loss per share from discontinued operations:                    
Basic  $(0.04)  $(0.01)  $(0.30)  $(1.98)
Diluted  $(0.04)  $(0.01)  $(0.29)  $(1.98)
 Net income (loss) per share:                    
Basic  $3.63   $(0.63)  $5.24   $(3.71)
Diluted  $3.53   $(0.63)  $5.05   $(3.71)
                     
(1) Amounts include non-cash compensation, as follows:                    
Cost of revenue  $408   $372   $1,639   $1,319 
Selling and marketing expense   1,897    1,809    7,480    6,240 
General and administrative expense   12,331    10,442    50,989    39,650 
Product development   2,115    1,874    8,447    6,524 

 

Page 6

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   December 31,
2021
  December 31,
2020
   (in thousands, except par value and share amounts)
ASSETS:          
Cash and cash equivalents  $251,231   $169,932 
Restricted cash and cash equivalents   111    117 
Accounts receivable, net   97,658    89,841 
Prepaid and other current assets   25,379    27,949 
Current assets of discontinued operations       8,570 
Total current assets   374,379    296,409 
Property and equipment, net   72,477    62,381 
Operating lease right-of-use assets   77,346    84,109 
Goodwill   420,139    420,139 
Intangible assets, net   85,763    128,502 
Deferred income tax assets   87,581    96,224 
Equity investment   158,140    80,000 
Other non-current assets   6,942    5,334 
Non-current assets of discontinued operations   16,589    15,892 
Total assets  $1,299,356   $1,188,990 
           
LIABILITIES:          
Current portion of long-term debt  $166,008   $ 
Accounts payable, trade   1,692    10,111 
Accrued expenses and other current liabilities   106,731    101,196 
Current liabilities of discontinued operations   1    536 
Total current liabilities   274,432    111,843 
Long-term debt   478,151    611,412 
Operating lease liabilities   96,165    92,363 
Non-current contingent consideration       8,249 
Deferred income tax liabilities   2,265     
Other non-current liabilities   351    362 
Total liabilities   851,364    824,229 
           
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; 16,070,720 and 15,766,193 shares issued, respectively, and 13,095,149 and 13,124,875 shares outstanding, respectively   161    158 
Additional paid-in capital   1,242,794    1,188,673 
Accumulated deficit   (571,794)   (640,909)
Treasury stock; 2,975,571 and 2,641,318 shares, respectively   (223,169)   (183,161)
Total shareholders' equity   447,992    364,761 
Total liabilities and shareholders' equity  $1,299,356   $1,188,990 

 

Page 7

LENDINGTREE, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited)

 

   Year Ended December 31,
   2021  2020  2019
   (in thousands)
Cash flows from operating activities attributable to continuing operations:         
Net income (loss) and comprehensive income (loss)  $69,115   $(48,255)  $17,828 
Less: Loss from discontinued operations, net of tax   4,023    25,689    21,632 
Income (loss) from continuing operations   73,138    (22,566)   39,460 
Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations:               
Loss (gain) on impairments and disposal of assets   3,465    1,160    (695)
Amortization of intangibles   42,738    53,078    55,241 
Depreciation   17,910    14,201    10,998 
Non-cash compensation expense   68,555    53,733    52,167 
Deferred income taxes   10,908    (9,628)   (8,555)
Change in fair value of contingent consideration   (8,249)   5,327    28,402 
Gain on investments   (123,272)        
Bad debt expense   2,472    1,785    1,697 
Amortization of debt issuance costs   5,992    3,474    1,974 
Write-off of previously-capitalized debt issuance costs   1,066        333 
Amortization of debt discount   30,695    19,570    12,016 
Loss on extinguishment of debt       7,768     
Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities   12,807    8,888    213 
Changes in current assets and liabilities:               
Accounts receivable   (10,289)   21,861    (22,457)
Prepaid and other current assets   (4,902)   (952)   (3,258)
Accounts payable, accrued expenses and other current liabilities   (1,537)   (8,013)   (2,322)
Current contingent consideration       (25,787)   (12,500)
Income taxes receivable   10,680    (10,598)   4,548 
Other, net   (921)   (2,002)   (88)
Net cash provided by operating activities attributable to continuing operations   131,256    111,299    157,174 
Cash flows from investing activities attributable to continuing operations:               
Capital expenditures   (35,065)   (42,149)   (20,041)
Proceeds from the sale of fixed assets           24,077 
Purchase of equity investment   (1,180)   (80,000)    
Proceeds from the sale of equity investment   46,312         
Acquisition of ValuePenguin, net of cash acquired           (105,578)
Acquisition of QuoteWizard, net of cash acquired           482 
Net cash provided by (used in) investing activities attributable to continuing operations   10,067    (122,149)   (101,060)
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   (14,423)   (3,910)   (8,406)
Purchase of treasury stock   (40,008)       (5,470)
Proceeds from the issuance of 0.50% Convertible Senior Notes       575,000     
Repurchase of 0.625% Convertible Senior Notes       (233,862)    
Payment of convertible note hedge on the 0.50% Convertible Senior Notes       (124,200)    
Termination of convertible note hedge on the 0.625% Convertible Senior Notes       109,881     
Proceeds from the sale of warrants related to the 0.50% Convertible Senior Notes       61,180     
Termination of warrants related to the 0.625% Convertible Senior Notes       (94,292)    
Net repayment of revolving credit facility       (75,000)   (50,000)
Payment of debt issuance costs   (6,385)   (16,568)   (2,518)
Payment of original issue discount on undrawn term loan   (2,500)        
Contingent consideration payments       (4,755)   (21,275)
Other financing activities   (31)   (184)   (9)
Net cash (used in) provided by financing activities attributable to continuing operations   (63,347)   193,290    (87,678)
Total cash provided by (used in) continuing operations   77,976    182,440    (31,564)
Discontinued operations:               
Net cash provided by (used in) operating activities attributable to discontinued operations   3,317    (72,730)   (13,255)
Total cash provided by (used in) discontinued operations   3,317    (72,730)   (13,255)
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents   81,293    109,710    (44,819)
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period   170,049    60,339    105,158 
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period  $251,342   $170,049   $60,339 
                
Non-cash investing activities:               
(Decrease) increase in capital expenditures included in accounts payable and accrued expenses  $(4,793)  $4,196   $(946)
Capital additions from tenant improvement allowance           1,111 
Supplemental cash flow information:               
Interest paid  $8,912   $4,741   $7,005 
Income tax payments   186    561    25 
Income tax refunds   10,503    60    4,743 

 

Page 8

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 "Lending Tree's Principles of Financial Reporting" for further discussion of the Company's use of this non-GAAP measure.

 

   Three Months Ended  Twelve Months Ended
   December 31,
2021
  September 30,
2021
  December 31,
2020
  December 31,
2021
  December 31,
2020
   (in thousands)
Selling and marketing expense  $184,847   $206,475   $153,275   $773,990   $617,404 
Non-variable selling and marketing expense (1)   (15,053)   (14,928)   (13,248)   (57,351)   (49,652)
Cost of advertising re-sold to third parties (2)                   1,086 
Variable marketing expense  $169,794   $191,547   $140,027   $716,639   $568,838 

 

(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.

 

Page 9

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  Twelve Months Ended
   December 31,
2021
  September 30,
2021
  December 31,
2020
  December 31,
2021
  December 31,
2020
   (in thousands, except percentages)
Net income (loss) from continuing operations  $48,432   $(4,406)  $(8,117)  $73,138   $(22,566)
Net income (loss) from continuing operations % of revenue   19%   (1)%   (4)%   7%   (2)%
                          
Adjustments to reconcile to variable marketing margin:                         
Cost of revenue   14,448    15,020    13,558    57,297    54,494 
Cost of advertising re-sold to third parties (1)                   (1,086)
Non-variable selling and marketing expense (2)   15,053    14,928    13,248    57,351    49,652 
General and administrative expense   38,546    40,126    34,825    153,472    129,101 
Product development   13,723    13,384    10,384    52,865    43,636 
Depreciation   4,941    4,808    3,738    17,910    14,201 
Amortization of intangibles   9,771    10,345    12,475    42,738    53,078 
Change in fair value of contingent consideration       (196)   (2,384)   (8,249)   5,327 
Severance   6    47    105    53    295 
Litigation settlements and contingencies   32    22    40    392    (943)
Interest expense, net   14,986    11,826    9,894    46,867    36,300 
Other income   (83,200)       (369)   (123,272)   (376)
Income tax expense (benefit)   11,753    (1)   (5,095)   11,298    (19,961)
Variable marketing margin  $88,491   $105,903   $82,302   $381,860   $341,152 
Variable marketing margin % of revenue   34%   36%   37%   35%   37%

 

(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.

 

Page 10

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  Twelve Months Ended
   December 31,
2021
  September 30,
2021
  December 31,
2020
  December 31,
2021
  December 31,
2020
   (in thousands, except percentages)
Net income (loss) from continuing operations  $48,432   $(4,406)  $(8,117)  $73,138   $(22,566)
Net income (loss) from continuing operations % of revenue   19%   (1)%   (4)%   7%   (2)%
Adjustments to reconcile to adjusted EBITDA:                         
Amortization of intangibles   9,771    10,345    12,475    42,738    53,078 
Depreciation   4,941    4,808    3,738    17,910    14,201 
Severance   6    47    105    53    295 
Loss on impairments and disposal of assets   814    1,251    474    3,465    1,160 
Gain on investments   (83,200)           (123,272)    
Non-cash compensation expense   16,751    17,074    14,497    68,555    53,733 
Costs of secondary public offering           863        863 
Change in fair value of contingent consideration       (196)   (2,384)   (8,249)   5,327 
Acquisition expense   430    227    (188)   1,796    2,217 
Litigation settlements and contingencies   32    22    40    392    (943)
Interest expense, net   14,986    11,826    9,894    46,867    36,300 
Income tax expense (benefit)   11,753    (1)   (5,095)   11,298    (19,961)
Adjusted EBITDA  $24,716   $40,997   $26,302   $134,691   $123,704 
Adjusted EBITDA % of revenue   10%   14%   12%   12%   14%

 

Page 11

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 (loss) income and net income (loss) per diluted share from continuing operations to adjusted net (loss) 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  Twelve Months Ended
   December 31,
2021
  September 30,
2021
  December 31,
2020
  December 31,
2021
  December 31,
2020
   (in thousands, except per share amounts)
Net income (loss) from continuing operations  $48,432   $(4,406)  $(8,117)  $73,138   $(22,566)
Adjustments to reconcile to adjusted net (loss) income:                         
Severance   6    47    105    53    295 
Loss on impairments and disposal of assets   814    1,251    474    3,465    1,160 
Gain in investments   (83,200)           (123,272)    
Non-cash compensation   16,751    17,074    14,497    68,555    53,733 
Costs of secondary public offering           863        863 
Change in fair value of contingent consideration       (196)   (2,384)   (8,249)   5,327 
Acquisition expense   430    227    (188)   1,796    2,217 
Litigation settlements and contingencies   32    22    40    392    (943)
Loss on extinguishment of debt                   7,768 
Income tax expense (benefit) from adjusted items   16,980    (4,687)   (3,402)   14,968    (17,880)
Excess tax (benefit) deficit from stock-based compensation   (2,046)   938    (51)   (9,401)   (2,033)
Income tax benefit from CARES Act                   (6,104)
Adjusted net (loss) income  $(1,801)  $10,270   $1,837   $21,445   $21,837 
                          
Net income (loss) per diluted share from continuing operations  $3.57   $(0.33)  $(0.62)  $5.34   $(1.73)
Adjustments to reconcile net income (loss) from continuing operations to adjusted net (loss) income   (3.71)   1.10    0.76    (3.77)   3.41 
Adjustments to reconcile effect of dilutive securities       (0.02)   (0.01)       (0.14)
Adjusted net (loss) income per share  $(0.14)  $0.75   $0.13   $1.57   $1.54 
                          
Adjusted weighted average diluted shares outstanding   13,212    13,707    14,163    13,695    14,150 
Effect of dilutive securities   (346)   439    1,112        1,143 
Weighted average diluted shares outstanding   13,558    13,268    13,051    13,695    13,007 
Effect of dilutive securities   346            496     
Weighted average basic shares outstanding   13,212    13,268    13,051    13,199    13,007 

 

Page 12

LENDINGTREE’S PRINCIPLES OF FINANCIAL REPORTING

 

LendingTree reports the following non-GAAP measures as supplemental to GAAP:

 

Variable marketing margin, including variable marketing expense

Variable marketing margin % of revenue

Earnings Before Interest, Taxes, Depreciation and Amortization, as adjusted for certain items discussed below ("Adjusted EBITDA")

Adjusted EBITDA % of revenue

Adjusted net income

Adjusted net income per share

 

Variable marketing margin is a measure of the efficiency of the Company’s operating model, measuring revenue after subtracting variable marketing and advertising costs that directly influence revenue. The Company’s operating model is highly sensitive to the amount and efficiency of variable marketing expenditures, and the Company’s proprietary systems are able to make rapidly changing decisions concerning the deployment of variable marketing expenditures (primarily but not exclusively online and mobile advertising placement) based on proprietary and sophisticated analytics. Variable marketing margin and variable marketing margin % of revenue are primary metrics by which the Company measures the effectiveness of its marketing efforts.

 

Adjusted EBITDA and adjusted EBITDA % of revenue are primary metrics by which LendingTree evaluates the operating performance of its businesses, on which its marketing expenditures and internal budgets are based and, in the case of adjusted EBITDA, by which management and many employees are compensated in most years.

 

Adjusted net income and adjusted net income per share supplement GAAP income from continuing operations and GAAP income per diluted share from continuing operations by enabling investors to make period to period comparisons of those components of the nearest comparable GAAP measures that management believes better reflect the underlying financial performance of the Company’s business operations during particular financial reporting periods. Adjusted net income and adjusted net income per share exclude certain amounts, such as non-cash compensation, non-cash asset impairment charges, gain/loss on disposal of assets, gain/loss on investments, restructuring and severance, litigation settlements and contingencies, acquisition and disposition income or expenses including with respect to changes in fair value of contingent consideration, gain/loss on extinguishment of debt, one-time items which are recognized and recorded under GAAP in particular periods but which might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded, the effects to income taxes of the aforementioned adjustments and any excess tax benefit or expense associated with stock-based compensation recorded in net income in conjunction with FASB pronouncement ASU 2016-09. LendingTree believes that adjusted net income and adjusted net income per share are useful financial indicators that provide a different view of the financial performance of the Company than adjusted EBITDA (the primary metric by which LendingTree evaluates the operating performance of its businesses) and the GAAP measures of net income from continuing operations and GAAP income per diluted share from continuing operations.

 

These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. LendingTree provides and encourages investors to examine the reconciling adjustments between the GAAP and non-GAAP measures set forth above.

 

 

Page 13

Definition of LendingTree's Non-GAAP Measures

 

Variable marketing margin is defined as revenue less variable marketing expense. Variable marketing expense is defined as the expense attributable to variable costs paid for advertising, direct marketing and related expenses, and excluding overhead, fixed costs and personnel-related expenses. The majority of these variable advertising costs are expressly intended to drive traffic to our websites and these variable advertising costs are included in selling and marketing expense on the Company's consolidated statements of operations and consolidated income.

 

EBITDA is defined as net income from continuing operations excluding interest, income taxes, amortization of intangibles and depreciation.

 

Adjusted EBITDA is defined as EBITDA excluding (1) non-cash compensation expense, (2) non-cash impairment charges, (3) gain/loss on disposal of assets, (4) gain/loss on investments, (5) restructuring and severance expenses, (6) litigation settlements and contingencies, (7) acquisitions and dispositions income or expense (including with respect to changes in fair value of contingent consideration), and (8) one-time items.

 

Adjusted net income is defined as net income (loss) from continuing operations excluding (1) non-cash compensation expense, (2) non-cash impairment charges, (3) gain/loss on disposal of assets, (4) gain/loss on investments, (5) restructuring and severance expenses, (6) litigation settlements and contingencies, (7) acquisitions and dispositions income or expense (including with respect to changes in fair value of contingent consideration), (8) gain/loss on extinguishment of debt, (9) one-time items, (10) the effects to income taxes of the aforementioned adjustments, and (11) any excess tax benefit or expense associated with stock-based compensation recorded in net income in conjunction with FASB pronouncement ASU 2016-09.

 

Adjusted net income per share is defined as adjusted net income divided by the adjusted weighted average diluted shares outstanding. For periods which the Company reports GAAP loss from continuing operations, the effects of potentially dilutive securities are excluded from the calculation of net loss per diluted share from continuing operations because their inclusion would have been anti-dilutive. In periods where the Company reports GAAP loss from continuing operations but reports positive non-GAAP adjusted net income, the effects of potentially dilutive securities are included in the denominator for calculating adjusted net income per share.

 

LendingTree endeavors to compensate for the limitations of these non-GAAP measures by also providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

 

One-Time Items

 

Adjusted EBITDA and adjusted net income are adjusted for one-time items, if applicable. Items are considered one-time in nature if they are non-recurring, infrequent or unusual, and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. For the periods presented in this report, there are no adjustments for one-time items, except for the $6.1 million income tax benefit from the CARES Act in Q1 2020 and the Q4 2020 expenses incurred in connection with a secondary public offering of our common stock by our largest shareholder, for which we did not receive any proceeds.

 

 

Page 14

Non-Cash Expenses That Are Excluded From LendingTree's Adjusted EBITDA and Adjusted Net Income

 

Non-cash compensation expense consists principally of expense associated with the grants of restricted stock, restricted stock units and stock options. Non-cash compensation expense also includes expense associated with employee stock purchase plans. These expenses are not paid in cash and LendingTree includes the related shares in its calculations of fully diluted shares outstanding. Upon settlement of restricted stock units, exercise of certain stock options or vesting of restricted stock awards, the awards may be settled on a net basis, with LendingTree remitting the required tax withholding amounts from its current funds. Cash expenditures for employer payroll taxes on non-cash compensation are included within adjusted EBITDA and adjusted net income.

 

Amortization of intangibles are non-cash expenses relating primarily to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as purchase agreements, technology and customer relationships, are valued and amortized over their estimated lives. Amortization of intangibles are only excluded from adjusted EBITDA, except for the $6.1 million income tax benefit from the CARES Act in Q1 2020 and the Q4 2020 expenses incurred in connection with a secondary public offering of our common stock by our largest shareholder, for which we did not receive any proceeds.

 

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

 

The matters contained in the discussion above may be considered to be “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Those statements include statements regarding the intent, belief or current expectations or anticipations of LendingTree and members of our management team. Factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following: uncertainty regarding the duration and scope of the coronavirus referred to as COVID-19 pandemic; actions governments and businesses take in response to the pandemic, including actions that could affect levels of advertising activity; the impact of the pandemic and actions taken in response to the pandemic on national and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; adverse conditions in the primary and secondary mortgage markets and in the economy, particularly interest rates; default rates on loans, particularly unsecured loans; demand by investors for unsecured personal loans; the effect of such demand on interest rates for personal loans and consumer demand for personal loans; seasonality of results; potential liabilities to secondary market purchasers; changes in the Company's relationships with network lenders, including dependence on certain key network lenders; breaches of network security or the misappropriation or misuse of personal consumer information; failure to provide competitive service; failure to maintain brand recognition; ability to attract and retain consumers in a cost-effective manner; the effects of potential acquisitions of other businesses, including the ability to integrate them successfully with LendingTree’s existing operations; accounting rules related to contingent consideration and excess tax benefits or expenses on stock-based compensation that could materially affect earnings in future periods; ability to develop new products and services and enhance existing ones; competition; allegations of failure to comply with existing or changing laws, rules or regulations, or to obtain and maintain required licenses; failure of network lenders or other affiliated parties to comply with regulatory requirements; failure to maintain the integrity of systems and infrastructure; liabilities as a result of privacy regulations; failure to adequately protect intellectual property rights or allegations of infringement of intellectual property rights; and changes in management. These and additional factors to be considered are set forth under “Risk Factors” in our Annual Report on Form 10-K for the period ended December 31, 2020, in our Quarterly Report on Form 10-Q for the period ended September 30, 2021, and in our other filings with the Securities and Exchange Commission. LendingTree undertakes no obligation

 

 

Page 15

to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results or expectations.

 

About LendingTree, Inc.

 

LendingTree, Inc. is the parent of LendingTree, LLC and several companies owned by LendingTree, LLC (collectively, "LendingTree" or the "Company").

 

LendingTree operates what it believes to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions. The Company offers consumers tools and resources, including free credit scores, that facilitate comparison-shopping for mortgage loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings. The Company primarily seeks to match in-market consumers with multiple providers on its marketplace who can provide them with competing quotes for loans, deposit products, insurance or other related offerings they are seeking. The Company also serves as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries it generates with these providers.

 

LendingTree, Inc. is headquartered in Charlotte, NC. For more information, please visit www.lendingtree.com.

 

Investor Relations:

investors@lendingtree.com

 

Media Relations:

press@lendingtree.com

 

 


The following information was filed by Lendingtree, Inc. (TREE) on Friday, February 25, 2022 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Ticker: TREE
CIK: 1434621
Form Type: 10-K Annual Report
Accession Number: 0001434621-22-000009
Submitted to the SEC: Mon Feb 28 2022 8:26:45 PM EST
Accepted by the SEC: Tue Mar 01 2022
Period: tree, Inc. (TREE) SEC Filing 10-K Annual Report for the fiscal year ending Friday, December 31, 2021
Industry: Loan Brokers

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