Tree.com Reports Second Quarter 2010 Results
CHARLOTTE, N.C., July 29, 2010 /PRNewswire via COMTEX News Network/ -- Tree.com, Inc. (Nasdaq: TREE) today announced second quarter 2010 Adjusted EBITDA of $3.4 million, an improvement of $2.6 million over the prior quarter and a $4.8 million decrease from the second quarter 2009. Tree's second quarter 2010 revenue was $45.8 million, down from $48.0 million in the first quarter 2010. Tree reported a GAAP loss of $0.07 per share on a net loss of $0.8 million, an improvement over the $0.56 GAAP loss per share in the prior quarter on a net loss of $6.1 million.
Doug Lebda, Chairman and CEO of Tree.com stated, "Overall, I am pleased with our performance in the second quarter. Both the Exchanges and the LendingTree Loans segments each reported another quarter of positive Adjusted EBITDA. In addition, our real estate segment was virtually breakeven after posting Adjusted EBITDA losses in the last two quarters. While clearly our results in Q2 were strong, we expect the second half of 2010 will be more challenging as we face the likelihood of rising interest rates in the latter part of the year."
Tree.com SVP Tamara Kotronis added, "We continue to focus on disciplined spending throughout the enterprise, and this along with the unanticipated drop in interest rates contributed to our solid results. Given the impact of an anticipated increase in interest rates by late 2010, coupled with a normal seasonal downturn in Q4, we expect our Adjusted EBITDA to be between breakeven and $4.0 million in the second half of 2010."
Tree.com Summary Financial Results
----------------------------------
$s in millions (except per share amounts)
-----------------------------------------
Q/Q
Q2 2010 Q1 2010 % Change
------- ------- --------
Revenue $45.8 $48.0 (5%)
Cost of Revenue * $13.2 $14.0 (6%)
Operating Expenses* $29.2 $33.2 (12%)
----- -----
Adjusted EBITDA ** $3.4 $0.8 309%
EBITDA ** $2.0 $(2.9) NM
Restructuring $0.4 $2.6 (83%)
Net Income/(Loss) $(0.8) $(6.1) 87%
Net Income/(Loss) Per Share $(0.07) $(0.56) 88%
Diluted Net Income/(Loss) Per Share $(0.07) $(0.56) 88%
Y/Y
Q2 2009 % Change
------- --------
Revenue $61.0 (25%)
Cost of Revenue * $21.3 (38%)
Operating Expenses* $31.4 (7%)
-----
Adjusted EBITDA ** $8.2 (58%)
EBITDA ** $4.3 (53%)
Restructuring $(1.1) NM
Net Income/(Loss) $0.7 NM
Net Income/(Loss) Per Share $0.07 NM
Diluted Net Income/(Loss) Per Share $0.07 NM
NM = Not Meaningful
* Does not include non-cash compensation, depreciation, gain/loss
on disposal of assets, restructuring, amortization, impairment, or
litigation settlements and contingencies.
** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP
Net Income/Loss.
Information Regarding Q2 Results
- Second quarter 2010 revenue was down 5% quarter-over-quarter and down 25% year-over-year. The primary contributor to the revenue decline quarter-over-quarter was a decline in the Exchanges, due to fewer loan inquiries being matched to lenders. The Real Estate segment, however, grew revenue quarter-over-quarter with stabilizing home values and an expected seasonal lift in the number of closed transactions. The year-over-year decrease in revenue is due to fewer matched leads and loan transactions in the LendingTree Loans and Exchanges segments, when compared to the unprecedented refinance activity of second quarter 2009.
- Despite lower revenue quarter-over-quarter, second quarter 2010 Adjusted EBITDA improved $2.6 million, with the LendingTree Loans, Real Estate, and Corporate segments each contributing to the quarter-over-quarter improvement. Overall, marketing spend was $3.1 million lower quarter-over-quarter, primarily on the Exchanges as well as lower loan origination cost at LendingTree Loans. Adjusted EBITDA decreased $4.8 million year-over-year, reflecting both lower revenue and the return to normalized levels of advertising spend in second quarter 2010 compared to the prior year, when we significantly curtailed marketing spend and achieved higher revenue because of a market driven surge in refinance activity.
(Photo: http://www.newscom.com/cgi-bin/prnh/20100729/CL42418 )
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Source: Freddie Mac: Primary Mortgage Market Survey
Freddie Mac's Primary Mortgage Market Survey consists of the average of 125 lenders' rates who contributed rates to Freddie Mac. The rates are based on 30-year fixed rate mortgage with 20% down and 80% finance over the life of the loan.
Business Unit Discussion
LENDINGTREE LOANS SEGMENT
LendingTree Loans Segment Results
$s in millions
Q/Q
Q2 2010 Q1 2010 % Change
------- ------- --------
Revenue - Direct Lending
Origination and Sale of
Loans $24.0 $23.4 3%
Other $2.6 $2.3 10%
---- ----
Total Revenue -Direct
Lending $26.6 $25.7 4%
Cost of Revenue * $9.3 $10.2 (8%)
Operating Expenses* $12.7 $12.7 (1%)
----- -----
Adjusted EBITDA ** $4.6 $2.8 67%
EBITDA ** $4.5 $2.6 73%
Operating Income(Loss) $4.1 $2.1 92%
Metrics - Direct Lending
Purchased loan requests
(000s) 67.1 59.2 13%
Closed - units (000s) 2.8 2.7 4%
Closed -units (dollars) $610.4 $608.5 0%
Y/Y
Q2 2009 % Change
------- --------
Revenue - Direct Lending
Origination and Sale of
Loans $34.4 (30%)
Other $1.9 33%
----
Total Revenue -Direct
Lending $36.3 (26%)
Cost of Revenue * $14.0 (33%)
Operating Expenses* $10.1 25%
-----
Adjusted EBITDA ** $12.2 (62%)
EBITDA ** $13.2 (66%)
Operating Income(Loss) $12.4 (67%)
Metrics - Direct Lending
Purchased loan requests
(000s) 66.5 1%
Closed - units (000s) 4.0 (30%)
Closed -units (dollars) $898.0 (32%)
NM = Not Meaningful
* Does not include non-cash compensation, depreciation, gain/loss
on disposal of assets, restructuring, amortization, impairment, or
litigation settlements and contingencies.
** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP
Net Income/Loss.
LendingTree Loans
Second quarter 2010 revenue increased 4% quarter-over-quarter on slightly higher closed units. Second quarter revenue decreased 26% from the same period last year on 30% fewer closed units. This year-over-year decline was expected as the second quarter of 2009 was highlighted by extraordinary levels of refinance loan activity that was not anticipated to repeat in 2010.
Operating expenses were virtually flat quarter-over-quarter and $2.7 million higher year-over-year largely driven by increased marketing spend. The increase in marketing over second quarter 2009 is the result of greater lead volume and a higher transfer price for leads purchased from the Exchanges. The increase in Purchased Loan Requests, both quarter-over-quarter and year-over-year, was the result of a greater portion of Exchanges volume being sent to LendingTree Loans. Also contributing to this increase was a late-quarter spike in refinance volume as interest rates continued to decline to record lows as seen in the rate chart above.
EXCHANGES SEGMENT
Exchanges Segment Results
$s in millions
Q/Q
Q2 2010 Q1 2010 % Change
------- ------- --------
Revenue - Exchanges
Match Fees $11.7 $14.2 (18%)
Closed Loan Fees $2.0 $3.3 (39%)
Inter-segment Revenue $7.5 $7.7 (3%)
Other $0.7 $0.9 (16%)
---- ----
Total Revenue - Exchanges $21.9 $26.1 (16%)
Cost of Revenue * $0.9 $1.1 (16%)
Operating Expenses* $18.0 $21.3 (15%)
----- -----
Adjusted EBITDA ** $3.0 $3.7 (19%)
EBITDA ** $2.8 $3.2 (14%)
Operating Income(Loss) $2.0 $2.6 (24%)
Metrics - Exchanges
Matched requests (000s) 271.1 337.1 (20%)
Closing - units (000s) 8.4 9.1 (8%)
Closing - units (dollars) 1,481.2 1,663.4 (11%)
Y/Y
Q2 2009 % Change
------- --------
Revenue - Exchanges
Match Fees $9.9 18%
Closed Loan Fees $6.4 (69%)
Inter-segment Revenue $3.7 102%
Other $0.6 26%
----
Total Revenue - Exchanges $20.6 6%
Cost of Revenue * $2.0 (53%)
Operating Expenses* $15.3 17%
-----
Adjusted EBITDA ** $3.3 (8%)
EBITDA ** $2.7 4%
Operating Income(Loss) $2.4 (16%)
Metrics - Exchanges
Matched requests (000s) 333.2 (19%)
Closing - units (000s) 13.6 (38%)
Closing - units (dollars) 2,750.5 (46%)
NM = Not Meaningful
* Does not include non-cash compensation, depreciation, gain/loss
on disposal of assets, restructuring, amortization, impairment, or
litigation settlements and contingencies.
** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP
Net Income/Loss.
Exchanges
Exchanges revenue in second quarter 2010 declined 16% quarter-over-quarter and increased 6% year-over-year. Match fee revenue declined 18% quarter-over-quarter but grew 18% year-over-year. The quarter-over-quarter decline is largely due to fewer matched loan requests on the lending exchanges. While there was a spike in consumer demand late in the second quarter, driven by reductions in interest rates, those same low rates caused lower lender demand for leads. The Exchanges also saw quarter-over-quarter reductions in matched consumer requests in our non-mortgage verticals. This decline is partially due to a reduction in marketing spend on our Home Services vertical and fewer transmitted leads in the Education vertical. The quarter-over-quarter decline in Education transmits was due to in part to normal seasonality and increased competition in the marketplace; however, we expect this volume to grow as we test new avenues for lead volume.
The year-over-year increase in match fees reflect pricing action taken in late 2009, which increased the emphasis on match revenue by increasing match fees and decreasing the average closed loan fee paid by lenders. Consequently, both the quarter-over-quarter and year-over-year decline in closed loan revenue is due primarily to the same pricing action. Despite lower revenue quarter-over-quarter, our non-mortgage verticals continue to be an important part of the company's diversification strategy. For the second consecutive quarter, non-mortgage consumer services such as Education, Auto and Home Services accounted for more than 50% of our total matched consumer requests. Inter-segment revenue increased significantly year-over-year reflecting higher volume sold and a higher transfer price (cost plus margin) charged to LendingTree Loans.
Operating expenses decreased $3.3 million quarter-over-quarter and increased $2.7 million year-over-year. The quarter-over-quarter decrease is primarily the result of lower marketing expense on both the lending exchanges and the non-mortgage verticals. On a year-over-year basis, the higher operating expense reflects higher marketing spend when compared to the very low levels in second quarter 2009 as a result of the market-driven surge in refinance activity. Also year-over-year, the latest quarter reflects operating expenses in the new non-mortgage verticals that did not exist in second quarter 2009.
REAL ESTATE SEGMENT
Real Estate Segment Results
$s in millions
Q/Q
Q2 2010 Q1 2010 % Change
------- ------- --------
Total Revenue -
Real Estate $4.7 $3.9 21%
Cost of Revenue * $2.8 $2.5 13%
Operating
Expenses* $1.9 $2.3 (17%)
---- ----
Adjusted EBITDA ** $0.0 $(0.9) 98%
EBITDA ** $(0.4) $(1.0) 56%
Operating
Income(Loss) $(1.3) $(1.9) 30%
Metrics -Real
Estate
Closing -units
(000s) 1.0 0.8 23%
Closing -units
(dollars) $200.0 $164.6 22%
Agents -
RealEstate.com,
REALTORS(R) 804 910 (12%)
Markets -
RealEstate.com,
REALTORS(R) 20 20 0%
Y/Y
Q2 2009 % Change
------- --------
Total Revenue -
Real Estate $7.8 (40%)
Cost of Revenue * $4.8 (42%)
Operating
Expenses* $3.7 (47%)
----
Adjusted EBITDA ** $(0.7) 98%
EBITDA ** $(4.6) 91%
Operating
Income(Loss) $(6.0) 78%
Metrics -Real
Estate
Closing -units
(000s) 1.5 (32%)
Closing -units
(dollars) $332.4 (40%)
Agents -
RealEstate.com,
REALTORS(R) 1,365 (41%)
Markets -
RealEstate.com,
REALTORS(R) 20 0%
NM = Not Meaningful
* Does not include non-cash compensation, depreciation, gain/loss
on disposal of assets, restructuring, amortization, impairment, or
litigation settlements and contingencies.
** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP
Net Income/Loss.
Real Estate
Second quarter 2010 Real Estate revenue increased $0.8 million, or 21%, quarter-over-quarter on 23% more closed units. This is a reflection of an anticipated seasonal increase in the number of closed transactions, and is a welcome change to what had been several quarters of decline in both closed units and average home prices. Despite the second quarter uptick, Real Estate revenue was down $3.1 million, or 40%, year-over-year, primarily due to continued declines in the number of total real estate transactions, down 32% year-over-year, and lower average home prices, down 11% year-over-year. Additionally, second quarter 2010 ended with 12% fewer agents quarter-over-quarter and 41% fewer agents year-over-year. Recruiting and retaining quality agents is a priority. This reduction in gross agent count is primarily due to field managers' focus on retaining agents best able to take advantage of our warm transferred internet leads, online lead management, training, and transaction systems.
Adjusted EBITDA improved $0.9 million quarter-over-quarter and $0.7 million year-over-year. The quarter-over-quarter improvement was driven by the higher revenue in the period. The primary driver of the year-over-year improvement in Adjusted EBITDA, despite lower revenue, is lower operating expense which decreased $1.7 million year-over-year. The reductions in operating expense were across marketing, as well as general and administrative, reflecting prior cost cutting initiatives.
CORPORATE
Unallocated Corporate Costs and Eliminations
$s in millions
Q/Q
Q2 2010 Q1 2010 % Change
------- ------- --------
Inter-segment
Revenue -
elimination $(7.5) $(7.7) 3%
Cost of Revenue * $0.1 $0.3 (63%)
Inter-segment
Marketing -
elimination $(7.4) $(7.6) 3%
Operating
Expenses* $4.0 $4.3 (7%)
---- ----
Adjusted EBITDA
** $(4.2) $(4.7) 11%
EBITDA ** $(4.9) $(7.8) 37%
Restructuring $0.1 $2.5 (95%)
Operating
Income(Loss) $(5.2) $(8.2) 36%
Y/Y
Q2 2009 % Change
------- --------
Inter-segment
Revenue -
elimination $(3.7) (102%)
Cost of Revenue * $0.5 (76%)
Inter-segment
Marketing -
elimination $(3.7) (101%)
Operating
Expenses* $6.1 34%
----
Adjusted EBITDA
** $(6.6) 37%
EBITDA ** $(7.0) 31%
Restructuring $- NM
Operating
Income(Loss) $(7.5) 31%
NM = Not Meaningful
* Does not include non-cash compensation, depreciation, gain/loss
on disposal of assets, restructuring, amortization, impairment, or
litigation settlements and contingencies.
** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP
Net Income/Loss.
Corporate
The eliminations both in revenue and in marketing principally represent the elimination of inter-segment transfer pricing charged from Exchanges to LendingTree Loans for leads. Operating expenses decreased $0.3 million quarter-over-quarter and decreased $2.1 million year-over-year. The quarter-over-quarter decrease was largely due to lower employee costs and lower professional fees in the quarter. The year-over-year decreases in operating expense were primarily driven by lower employee costs reflecting prior cost-cutting initiatives.
Liquidity and Capital Resources
As of June 30, 2010, Tree.com had $62.9 million in unrestricted cash and cash equivalents, compared to $73.1 million as of March 31, 2010. During the second quarter under the previously announced $10 million share repurchase program which began in February, the Company repurchased 408,568 shares at an average price of $6.86 in open market transactions. Through June 30, 2010, the Company has repurchased a total of 487,358 shares at an average price of $7.12 and has approximately $6.5 million of repurchase authorization remaining.
As of June 30, 2010, LendingTree Loans had two committed lines of credit totaling $125 million of borrowing capacity. Borrowings under these lines of credit are used to fund, and are secured by, consumer residential loans that are held for sale. Loans under these lines of credit are repaid from proceeds from the sales of loans held for sale by LendingTree Loans. The loans held for sale and warehouse lines of credit balances as of June 30, 2010, were $111.9 million and $91.1 million, respectively. Per our recent filings, LendingTree Loans renewed its warehouse line agreement with Bank of America, with a term running through June 29, 2011. As part of the renewal, the tangible net worth requirement was reduced from $44 million to $25 million. Additionally, on July 22, 2010, LendingTree Loans amended the existing warehouse line agreement with JPMorgan Chase Bank, NA, to lower the tangible net worth requirement to $25 million.
Conference Call
Tree.com will audio cast its conference call with investors and analysts discussing the Company's second quarter financial results on Thursday, July 29, 2010 at 11:00 a.m. Eastern Time (ET). This call will include the disclosure of certain information, including forward-looking information, which may be material to an investor's understanding of Tree.com's business. The live audio cast is open to the public at http://investor-relations.tree.com/.
QUARTERLY FINANCIALS
TREE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three
Months Six Months
Ended June Ended June
30, 30,
----------- -----------
2010 2009 2010 2009
---- ---- ---- ----
(In thousands, except
per share amounts)
Revenue
LendingTree Loans $26,649 $36,257 $52,387 $70,629
Exchanges and other 14,435 16,923 32,809 34,052
Real Estate 4,713 7,793 8,612 13,552
----- ----- ----- ------
Total revenue 45,797 60,973 93,808 118,233
Cost of revenue
LendingTree Loans 9,348 14,003 19,502 25,859
Exchanges and other 1,057 2,531 2,509 4,998
Real Estate 2,783 4,792 5,238 8,656
----- ----- ----- -----
Total cost of
revenue (exclusive
of depreciation
shown separately
below) 13,188 21,326 27,249 39,513
------ ------ ------ ------
Gross margin 32,609 39,647 66,559 78,720
Operating expenses
Selling and
marketing expense 17,059 13,892 37,205 27,714
General and
administrative
expense 12,526 17,115 25,228 33,414
Product development 585 1,561 1,951 3,169
Litigation
settlements and
contingencies 26 (3) 42 392
Restructuring
expense 432 (1,078) 3,042 (236)
Amortization of
intangibles 943 1,318 1,886 2,581
Depreciation 1,507 1,687 3,016 3,351
Asset impairments - 3,903 - 3,903
--- ----- --- -----
Total operating
expenses 33,078 38,395 72,370 74,288
------ ------ ------ ------
Operating (loss)
income (469) 1,252 (5,811) 4,432
Other income
(expense)
Interest income - 27 7 75
Interest expense (167) (151) (333) (302)
---- ---- ---- ----
Total other
(expense), net (167) (124) (326) (227)
---- ---- ---- ----
(Loss) income before
income taxes (636) 1,128 (6,137) 4,205
Income tax provision (163) (386) (808) (303)
---- ---- ---- ----
Net (loss) income $(799) $742 $(6,945) $3,902
===== ==== ======= ======
Weighted average
common shares
outstanding 11,240 10,706 11,039 10,194
====== ====== ====== ======
Weighted average
diluted shares
outstanding 11,240 11,034 11,039 10,354
====== ====== ====== ======
Net (loss) income
per share available
to common
shareholders
Basic $(0.07) $0.07 $(0.63) $0.38
====== ===== ====== =====
Diluted $(0.07) $0.07 $(0.63) $0.38
====== ===== ====== =====
TREE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June December
30, 31,
2010 2009
----- ---------
(unaudited)
(In thousands,
except par
value and
share amounts)
ASSETS:
Cash and cash equivalents $62,877 $86,093
Restricted cash and cash
equivalents 10,202 12,019
Accounts receivable, net of
allowance of $528 and
$518, respectively 7,073 6,835
Loans held for sale
($110,427 and $92,236
measured at fair value,
respectively) 111,910 93,596
Prepaid and other current
assets 14,117 10,758
------ ------
Total current assets 206,179 209,301
Property and equipment, net 12,721 12,257
Goodwill 12,152 12,152
Intangible assets, net 55,740 57,626
Other non-current assets 654 496
--- ---
Total assets 287,446 $291,832
======= ========
LIABILITIES:
Warehouse lines of credit $91,067 $78,481
Accounts payable, trade 8,534 5,905
Deferred revenue 1,714 1,731
Deferred income taxes 2,033 2,211
Accrued expenses and other
current liabilities 38,852 54,694
------ ------
Total current liabilities 142,200 143,022
Income taxes payable 561 510
Other long-term liabilities 16,254 12,010
Deferred income taxes 16,216 15,380
------ ------
Total liabilities 175,231 170,922
SHAREHOLDERS' EQUITY:
Preferred stock $.01 par
value; authorized
5,000,000 shares; none
issued or outstanding - -
Common stock $.01 par
value; authorized
50,000,000 shares; issued
11,321,775 and 10,904,330 113 109
shares, respectively, and
outstanding 10,834,417 and
10,904,330 shares,
respectively
Additional paid-in capital 903,495 901,818
Accumulated deficit (787,962) (781,017)
Treasury stock 487,358 and
-0-shares, respectively (3,431) -
------ ---
Total shareholders' equity 112,215 120,910
------- -------
Total liabilities and
shareholders' equity $287,446 $291,832
======== ========
TREE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months
Ended
June 30,
--------
2010 2009
---- ----
(In
thousands)
Cash flows from operating
activities:
Net (loss) income $(6,945) $3,902
Adjustments to reconcile net
(loss) income to net cash
used in operating
activities:
Loss on disposal of fixed
assets 9 949
Amortization of intangibles 1,886 2,581
Depreciation 3,016 3,351
Intangible impairment - 3,903
Non-cash compensation
expense 2,062 1,993
Non-cash restructuring
expense 181 161
Deferred income taxes 658 -
Gain on origination and sale
of loans (47,441) (67,206)
Loss on impaired loans not
sold - 290
Loss on sale of real estate
acquired in satisfaction of
loans 377 77
Bad debt expense 92 243
Changes in current assets
and liabilities:
Accounts receivable (331) 864
Origination of loans (1,218,901) (1,612,556)
Proceeds from sales of loans 1,252,103 1,658,128
Principal payments received
on loans 530 627
Payments to investors for
loan repurchases and early
payoff obligations (4,685) (4,141)
Prepaid and other current
assets 82 (623)
Accounts payable and other
current liabilities (17,276) (1,888)
Income taxes payable 84 123
Deferred revenue (134) 236
Other, net 4,360 1,003
----- -----
Net cash used in operating
activities (30,273) (7,983)
------- ------
Cash flows from investing
activities:
Acquisitions - (1,000)
Capital expenditures (3,534) (1,404)
Other, net 1,667 581
----- ---
Net cash used in investing
activities (1,867) (1,823)
------ ------
Cash flows from financing
activities:
Borrowing under warehouse
lines of credit 950,007 1,402,823
Repayments of warehouse
lines of credit (937,421) (1,385,887)
Issuance of common stock,
net of withholding taxes (381) 3,807
Purchase of treasury stock (3,431) -
Increase in restricted cash 150 (875)
--- ----
Net cash provided by
financing activities 8,924 19,868
----- ------
Net (decrease) increase in
cash and cash equivalents (23,216) 10,062
Cash and cash equivalents at
beginning of period 86,093 73,643
------ ------
Cash and cash equivalents at
end of period $62,877 $83,705
======= =======
TREE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - BY SEGMENT
(Unaudited)
For the Three Months
Ended June 30, 2010:
--------------------
LendingTree Exchanges Real Unallocated- Total
Loans --------- Estate Corporate -----
----- ------ ---------
(In thousands)
Revenue $26,649 $21,906 $4,713 $(7,471) $45,797
Cost of revenue
(exclusive of
depreciation
shown
separately
below) 9,348 941 2,783 116 13,188
----- --- ----- --- ------
Gross margin 17,301 20,965 1,930 (7,587) 32,609
Operating
expenses:
Selling and
marketing
expense 7,974 16,116 394 (7,425) 17,059
General and
administrative
expense 4,916 1,471 1,557 4,582 12,526
Product
development (132) 674 34 9 585
Litigation loss
contingencies
and settlements 25 - - 1 26
Restructuring
expense - (58) 364 126 432
Amortization of
intangibles - 295 635 13 943
Depreciation 425 495 293 294 1,507
--- --- --- --- -----
Total operating
expenses 13,208 18,993 3,277 (2,400) 33,078
------ ------ ----- ------ ------
Operating income
(loss) 4,093 1,972 (1,347) (5,187) (469)
Adjustments to
reconcile to
EBITDA and
Adjusted
EBITDA:
Amortization of
intangibles - 295 635 13 943
Depreciation 425 495 293 294 1,507
--- --- --- --- -----
EBITDA 4,518 2,762 (419) (4,880) 1,981
Restructuring
expense - (58) 364 126 432
Loss on disposal
of assets - - 5 - 5
Non-cash
compensation 74 297 35 562 968
Litigation loss
contingencies
and settlements 25 - - 1 26
--- --- --- --- ---
Adjusted EBITDA $4,617 $3,001 $(15) $(4,191) $3,412
====== ====== ==== ======= ======
Reconciliation
to net loss in
total:
Operating loss
per above $(469)
Other expense,
net (167)
----
Loss before
income taxes (636)
Income tax
provision (163)
----
Net loss $(799)
=====
About Tree.com, Inc.
Tree.com, Inc. (Nasdaq: TREE) is the parent of several brands and businesses that provide information, tools, advice, products and services for critical transactions in our customers' lives. Our family of brands includes: LendingTree.com(R), GetSmart.com(R), RealEstate.com(R), DegreeTree.com(SM), HealthTree.com(SM), LendingTreeAutos.com, DoneRight.com(R), and InsuranceTree.com(SM). Together, these brands serve as an ally for consumers who are looking to comparison shop for loans, real estate and other services from multiple businesses and professionals who will compete for their business.
Tree.com, Inc. is the parent company of wholly owned operating subsidiaries: LendingTree, LLC and Home Loan Center, Inc.
Tree.com, Inc. is headquartered in Charlotte, N.C. and maintains operations solely in the United States. For more information, please visit www.tree.com.
TREE.COM'S PRINCIPLES OF FINANCIAL REPORTING
Tree.com reports Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), and adjusted for certain items discussed below ("Adjusted EBITDA"), as supplemental measures to GAAP. These measures are two of the primary metrics by which Tree.com evaluates the performance of its businesses, on which its internal budgets are based and by which management is compensated. Tree.com believes that investors should have access to the same set of tools that it uses in analyzing its results. 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. Tree.com provides and encourages investors to examine the reconciling adjustments between the GAAP and non-GAAP measure which are discussed below.
Definition of Tree.com's Non-GAAP Measures
Adjusted EBITDA is defined as EBITDA excluding (1) non-cash compensation expense, (2) non-cash intangible asset impairment charges, (3) gain/loss on disposal of assets, (4) restructuring expenses, (5) litigation loss contingencies and settlements, (6) pro forma adjustments for significant acquisitions, and (7) one-time items. Adjusted EBITDA has certain limitations in that it does not take into account the impact to Tree.com's statement of operations of certain expenses, including depreciation, non-cash compensation and acquisition related accounting. Tree.com endeavors to compensate for the limitations of the non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure.
Pro Forma Results
Tree.com will only present EBITDA and Adjusted EBITDA on a pro forma basis if it views a particular transaction as significant in size or transformational in nature. For the periods presented in this report, there are no transactions that Tree.com has included on a pro forma basis.
One-Time Items
EBITDA and Adjusted EBITDA are presented before one-time items, if applicable. These items are truly one-time in nature and 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 one-time items.
Non-Cash Expenses That Are Excluded From Tree.com's Non-GAAP Measures
Non-cash compensation expense consists principally of expense associated with the grants of restricted stock units and stock options. These expenses are not paid in cash, and Tree.com will include the related shares in its future calculations of fully diluted shares outstanding. Upon vesting of restricted stock units and the exercise of certain stock options, the awards will be settled, at Tree.com's discretion, on a net basis, with Tree.com remitting the required tax withholding amount from its current funds.
Amortization and impairment 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.
Other
REALTORS(R)--a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS(R) and subscribes to its strict Code of Ethics.
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 the Company 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: our ability to operate effectively as a separate public entity following our spin-off from IAC in August 2008; additional costs associated with operating as an independent company; volatility in our stock price and trading volume; our ability to obtain financing on acceptable terms; limitations on our ability to enter into transactions due to spin-related restrictions; adverse conditions in the primary and secondary mortgage markets and in the economy; adverse conditions in our industries; adverse conditions in the credit markets and the inability to renew or replace warehouse lines of credit; seasonality in our businesses; potential liabilities to secondary market purchasers; changes in our relationships with network lenders, real estate professionals, credit providers and secondary market purchasers; breaches of our network security or the misappropriation or misuse of personal consumer information; our failure to provide competitive service; our failure to maintain brand recognition; our ability to attract and retain customers in a cost-effective manner; our ability to develop new products and services and enhance existing ones; competition from our network lenders and affiliated real estate professionals; our failure to comply with existing or changing laws, rules or regulations, or to obtain and maintain required licenses; failure of our network lenders or other affiliated parties to comply with regulatory requirements; failure to maintain the integrity of our systems and infrastructure; liabilities as a result of privacy regulations; failure to adequately protect our intellectual property rights or allegations of infringement of intellectual property rights; changes in our management; and deficiencies in our disclosure controls and procedures and internal control over financial reporting. 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, 2009, our Quarterly Report on Form 10-Q for the period ended March 31, 2010, and in our other filings with the Securities and Exchange Commission. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results or expectations.
Contacts:
Investor Relations
877-640-4856
tree.com-investor.relations@tree.com
SOURCE Tree.com, Inc.
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