LendingTree Reports Fourth Quarter 2019 Results

LendingTree Selected Financial Metrics

(In millions, except per share amounts)

Three Months Ended
December 31,

Y/Y

Three Months Ended
September 30,

Q/Q

2019

2018

% Change

2019

% Change

Total revenue

$

255.2

$

202.7

26

%

$

310.6

(18)

%

Income (loss) before income taxes

$

4.5

$

(1.6)

—

%

26.4

(83)

%

Income tax (expense) benefit

(3.1)

1.9

—

%

(1.9)

63

%

Net income from continuing operations

$

1.5

$

0.3

400

%

$

24.5

(94)

%

Net income from continuing operations 
% of revenue

1

%

—

%

8

%

Income per share from continuing operations

Basic

$

0.11

$

0.02

450

%

$

1.90

(94)

%

Diluted

$

0.10

$

0.02

400

%

$

1.67

(94)

%

Variable marketing margin

Total revenue

$

255.2

$

202.7

26

%

$

310.6

(18)

%

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

$

(161.4)

$

(124.1)

30

%

$

(195.0)

(17)

%

Variable marketing margin ⁽²⁾

$

93.8

$

78.6

19

%

$

115.6

(19)

%

Variable marketing margin % of revenue ⁽²⁾

37

%

39

%

37

%

Adjusted EBITDA ⁽²⁾

$

45.9

$

39.4

17

%

$

63.0

(27)

%

Adjusted EBITDA % of revenue ⁽²⁾

18

%

19

%

20

%

Adjusted net income ⁽²⁾

$

16.3

$

16.7

(2)

%

$

32.9

(50)

%

Adjusted net income per share ⁽²⁾

$

1.12

$

1.22

(8)

%

$

2.25

(50)

%

(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
December 31,

Y/Y

Three Months Ended
September 30,

Q/Q

2019

2018

% Change

2019

% Change

Home ⁽¹⁾

Revenue

$

65.5

$

63.3

3

%

$

77.3

(15)

%

Segment profit

$

26.9

$

21.6

25

%

$

28.1

(4)

%

Segment profit % of revenue

41

%

34

%

36

%

Consumer ⁽²⁾

Revenue

$

113.4

$

98.2

15

%

$

151.9

(25)

%

Segment profit

$

43.3

$

47.8

(9)

%

$

65.2

(34)

%

Segment profit % of revenue

38

%

49

%

43

%

Insurance ⁽³⁾

Revenue

$

70.9

$

31.3

127

%

$

74.8

(5)

%

Segment profit

$

28.0

$

11.3

148

%

$

30.0

(7)

%

Segment profit % of revenue

39

%

36

%

40

%

Other Category ⁽⁴⁾

Revenue

$

5.4

$

9.9

(45)

%

$

6.6

(18)

%

(Loss) Profit

$

(0.1)

$

0.8

—

%

$

0.4

—

%

Total revenue

$

255.2

$

202.7

26

%

$

310.6

(18)

%

Total segment profit

$

98.1

$

81.5

20

%

$

123.7

(21)

%

     Brand marketing expense ⁽⁵⁾

$

(4.2)

$

(3.0)

40

%

$

(8.1)

(48)

%

Variable marketing margin

$

93.8

$

78.6

19

%

$

115.6

(19)

%

Variable marketing margin % of revenue

37

%

39

%

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 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
 December 31,

Twelve Months Ended
 December 31,

2019

2018

2019

2018

(in thousands, except per share amounts)

Revenue

$

255,187

$

202,672

$

1,106,603

$

764,865

Costs and expenses:

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

16,728

13,822

68,379

36,399

Selling and marketing expense (1)

167,842

125,901

735,180

500,291

General and administrative expense (1)

27,456

30,666

116,847

101,219

Product development (1)

9,412

8,123

39,953

26,958

Depreciation

3,261

2,186

10,998

7,385

Amortization of intangibles

13,756

9,840

55,241

23,468

Change in fair value of contingent consideration

7,181

9,591

28,402

10,788

Severance

390

21

1,026

2,352

Litigation settlements and contingencies

140

94

(151)

(186)

Total costs and expenses

246,166

200,244

1,055,875

708,674

Operating income

9,021

2,428

50,728

56,191

Other expense, net:

Interest expense, net

(4,863)

(4,132)

(20,271)

(12,437)

Other income (expense)

381

96

524

(10)

Income (Loss) before income taxes

4,539

(1,608)

30,981

43,744

Income tax (expense) benefit

(3,073)

1,859

8,479

65,575

Net income from continuing operations

1,466

251

39,460

109,319

Income (Loss) from discontinued operations, net of tax

392

(3,551)

(21,632)

(12,820)

Net income (loss) and comprehensive income (loss)

$

1,858

$

(3,300)

$

17,828

$

96,499

Weighted average shares outstanding:

Basic

12,921

12,700

12,834

12,504

Diluted

14,580

13,622

14,619

14,097

Income per share from continuing operations:

Basic

$

0.11

$

0.02

$

3.07

$

8.74

Diluted

$

0.10

$

0.02

$

2.70

$

7.75

Income (Loss) per share from discontinued operations:

Basic

$

0.03

$

(0.28)

$

(1.69)

$

(1.03)

Diluted

$

0.03

$

(0.26)

$

(1.48)

$

(0.91)

Net income (loss) per share:

Basic

$

0.14

$

(0.26)

$

1.39

$

7.72

Diluted

$

0.13

$

(0.24)

$

1.22

$

6.85

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

Cost of revenue

$

197

$

118

$

755

$

378

Selling and marketing expense

918

(943)

5,785

3,568

General and administrative expense

8,643

8,708

39,177

34,325

Product development

1,577

2,098

6,450

6,094

LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

December 31,
 2019

December 31,
 2018

(in thousands, except par value
and share amounts)

ASSETS:

Cash and cash equivalents

$

60,243

$

105,102

Restricted cash and cash equivalents

96

56

Accounts receivable, net

113,487

91,072

Prepaid and other current assets

15,516

16,428

Assets held for sale

—

21,328

Current assets of discontinued operations

84

185

Total current assets

189,426

234,171

Property and equipment, net

31,363

23,175

Goodwill

420,139

348,347

Intangible assets, net

181,580

205,699

Deferred income tax assets

87,664

79,289

Other non-current assets

29,849

2,168

Non-current assets of discontinued operations

7,948

3,266

Total assets

$

947,969

$

896,115

LIABILITIES:

Revolving credit facility

$

75,000

$

125,000

Accounts payable, trade

2,873

15,074

Accrued expenses and other current liabilities

112,755

93,190

Current contingent consideration

9,028

11,080

Current liabilities of discontinued operations

31,050

17,609

Total current liabilities

230,706

261,953

Long-term debt

264,391

250,943

Non-current contingent consideration

24,436

27,757

Deferred income tax liabilities

—

894

Other non-current liabilities

26,110

8,360

Total liabilities

545,643

549,907

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; 15,676,819 and 15,428,351 shares
issued, respectively, and 13,035,501 and 12,809,764 shares outstanding, respectively

157

154

Additional paid-in capital

1,177,984

1,134,227

Accumulated deficit

(592,654)

(610,482)

Treasury stock; 2,641,318 and 2,618,587 shares, respectively

(183,161)

(177,691)

Total shareholders' equity

402,326

346,208

Total liabilities and shareholders' equity

$

947,969

$

896,115

LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Year Ended December 31,

2019

2018

2017

(in thousands)

Cash flows from operating activities attributable to continuing operations:

Net income and comprehensive income

$

17,828

$

96,499

$

15,578

Less: Loss from discontinued operations, net of tax

21,632

12,820

3,840

Income from continuing operations

39,460

109,319

19,418

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

(Gain) Loss on impairments and disposal of fixed assets

(695)

2,210

840

Amortization of intangibles

55,241

23,468

12,992

Depreciation

10,998

7,385

7,085

Rental amortization of intangibles and depreciation

—

630

1,474

Non-cash compensation expense

52,167

44,365

23,361

Deferred income taxes

(8,555)

(63,901)

(6,370)

Change in fair value of contingent consideration

28,402

10,788

23,931

Bad debt expense

1,697

880

195

Amortization of debt issuance costs

1,974

1,776

1,032

Write-off of previously-capitalized debt issuance costs

333

—

90

Amortization of convertible debt discount

12,016

11,397

6,385

ROU asset amortization, offset by change in operating lease liabilities

213

—

—

Changes in current assets and liabilities:

Accounts receivable

(22,457)

(16,820)

(11,381)

Prepaid and other current assets

(3,258)

(2,985)

(5,358)

Accounts payable, accrued expenses and other current liabilities

(2,322)

14,270

31,108

Current contingent consideration

(12,500)

(21,912)

—

Income taxes receivable

4,548

3,669

(1,104)

Other, net

(88)

(591)

(160)

Net cash provided by operating activities attributable to continuing operations

157,174

123,948

103,538

Cash flows from investing activities attributable to continuing operations:

Capital expenditures

(20,041)

(14,907)

(8,040)

Proceeds from the sale of fixed assets

24,077

—

—

Acquisition of intangible assets

—

—

(5)

Acquisition of ValuePenguin, net of cash acquired

(105,578)

—

—

Acquisition of QuoteWizard, net of cash acquired

482

(297,072)

—

Acquisition of Student Loan Hero, net of cash acquired

—

(59,483)

—

Acquisition of Ovation, net of cash acquired

—

(11,566)

—

Acquisition of SnapCap

—

(10)

(11,886)

Acquisition of DepositAccounts

—

—

(25,000)

Acquisition of MagnifyMoney, net of cash acquired

—

—

(29,504)

Net cash used in investing activities attributable to continuing operations

(101,060)

(383,038)

(74,435)

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

(8,406)

2,217

1,602

Contingent consideration payments

(21,275)

(27,588)

—

Net (repayment of) proceeds from revolving credit facility

(50,000)

125,000

—

Acquisition of noncontrolling interest

—

(499)

—

Proceeds from the issuance of 0.625% Convertible Senior Notes

—

—

300,000

Payment of convertible note hedge transactions

—

—

(61,500)

Proceeds from the sale of warrants

—

—

43,410

Payment of debt issuance costs

(2,518)

(583)

(10,486)

Purchase of treasury stock

(5,470)

(93,704)

(19,901)

Other financing activities

(9)

—

—

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

(87,678)

4,843

253,125

Total cash (used in) provided by continuing operations

(31,564)

(254,247)

282,228

Discontinued operations:

Net cash used in operating activities attributable to discontinued operations

(13,255)

(13,236)

(4,807)

Total cash used in discontinued operations

(13,255)

(13,236)

(4,807)

Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents

(44,819)

(267,483)

277,421

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

105,158

372,641

95,220

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

$

60,339

$

105,158

$

372,641

Non-cash investing activities:

Capital additions from tenant improvement allowance

1,111

—

—

Supplemental cash flow information:

Interest paid

7,005

3,593

1,327

Income tax payments

25

541

20,359

Income tax refunds

4,743

5,678

133

Three Months Ended

Twelve Months Ended

December 31,
 2019

September 30,
 2019

December 31,
 2018

December 31,
 2019

December 31,
 2018

(in thousands)

Selling and marketing expense

$

167,842

$

200,818

$

125,901

$

735,180

$

500,291

Non-variable selling and marketing expense ⁽¹⁾

(11,036)

(11,580)

(6,985)

(47,000)

(30,343)

4,557

5,809

5,184

22,755

8,812

Variable marketing expense

$

161,363

$

195,047

$

124,100

$

710,935

$

478,760

(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.

Three Months Ended

Twelve Months Ended

December 31,
 2019

September 30,
 2019

December 31,
 2018

December 31,
 2019

December 31,
 2018

(in thousands, except percentages)

Net income from continuing operations

$

1,466

$

24,463

$

251

$

39,460

$

109,319

Net income from continuing operations % of revenue

1

%

8

%

—

%

4

%

14

%

Adjustments to reconcile to variable marketing margin:

Cost of revenue

16,728

17,671

13,822

68,379

36,399

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

(4,557)

(5,809)

(5,184)

(22,755)

(8,812)

Non-variable selling and marketing expense ⁽²⁾

11,036

11,580

6,985

47,000

30,343

General and administrative expense

27,456

30,323

30,666

116,847

101,219

Product development

9,412

10,200

8,123

39,953

26,958

Depreciation

3,261

2,696

2,186

10,998

7,385

Amortization of intangibles

13,756

13,778

9,840

55,241

23,468

Change in fair value of contingent consideration

7,181

3,839

9,591

28,402

10,788

Severance

390

179

21

1,026

2,352

Litigation settlements and contingencies

140

(92)

94

(151)

(186)

Interest expense, net

4,863

4,845

4,132

20,271

12,437

Other (income) expense

(381)

(4)

(96)

(524)

10

Income tax (benefit) expense

3,073

1,889

(1,859)

(8,479)

(65,575)

Variable marketing margin

$

93,824

$

115,558

$

78,572

$

395,668

$

286,105

Variable marketing margin % of revenue

37

%

37

%

39

%

36

%

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.

Three Months Ended

Twelve Months Ended

December 31,
 2019

September 30,
 2019

December 31,
 2018

December 31,
 2019

December 31,
 2018

(in thousands, except percentages)

Net income from continuing operations

$

1,466

$

24,463

$

251

$

39,460

$

109,319

Net income from continuing operations % of revenue

1

%

8

%

—

%

4

%

14

%

Adjustments to reconcile to adjusted EBITDA:

Amortization of intangibles

13,756

13,778

9,840

55,241

23,468

Depreciation

3,261

2,696

2,186

10,998

7,385

Severance

390

179

21

1,026

2,352

Loss (gain) on impairments and disposal of assets

424

609

224

(945)

2,210

Non-cash compensation

11,335

10,797

9,981

52,167

44,365

Change in fair value of contingent consideration

7,181

3,839

9,591

28,402

10,788

Acquisition expense

14

18

4,851

211

6,303

Litigation settlements and contingencies

140

(92)

94

(151)

(186)

Interest expense, net

4,863

4,845

4,132

20,271

12,437

Rental depreciation and amortization of intangibles

—

—

76

—

630

Income tax (benefit) expense

3,073

1,889

(1,859)

(8,479)

(65,575)

Adjusted EBITDA

$

45,903

$

63,021

$

39,388

$

198,201

$

153,496

Adjusted EBITDA % of revenue

18

%

20

%

19

%

18

%

20

%

Three Months Ended

Twelve Months Ended

December 31,
 2019

September 30,
 2019

December 31,
 2018

December 31,
 2019

December 31,
 2018

(in thousands, except per share amounts)

Net income from continuing operations

$

1,466

$

24,463

$

251

$

39,460

$

109,319

Adjustments to reconcile to adjusted net income:

Non-cash compensation

11,335

10,797

9,981

52,167

44,365

Loss (gain) on impairments and disposal of assets

424

609

224

(945)

2,210

Acquisition expense

14

18

4,851

211

6,303

Change in fair value of contingent consideration

7,181

3,839

9,591

28,402

10,788

Severance

390

179

21

1,026

2,352

Litigation settlements and contingencies

140

(92)

94

(151)

(186)

Income tax benefit from adjusted items

(4,087)

(4,132)

(5,917)

(20,694)

(17,208)

Excess tax benefit from stock-based compensation

(516)

(2,816)

(2,417)

(17,058)

(77,608)

Adjusted net income

$

16,347

$

32,865

$

16,679

$

82,418

$

80,335

Net income per diluted share from continuing
operations

$

0.10

$

1.67

$

0.02

$

2.70

$

7.75

Adjustments to reconcile net income from continuing
operations to adjusted net income

1.02

0.58

1.20

2.94