LendingTree, Inc.
Oct 29, 2010

Tree.com Reports Third Quarter 2010 Results

CHARLOTTE, N.C., Oct 29, 2010 /PRNewswire via COMTEX News Network/ -- Tree.com, Inc. (Nasdaq: TREE) today announced the quarter ended September 30, 2010, Adjusted EBITDA of $5.5 million, an improvement of $2.1 million over the prior quarter and a $9.0 million improvement over the third quarter 2009's loss of $3.5 million. Tree's third quarter 2010 revenue was $53.2 million, up from $45.8 million in the second quarter 2010. Tree reported GAAP net income of $0.16 per share on net income of $1.8 million, an improvement over the $0.07 GAAP loss per share on a net loss of $0.8 million in the prior quarter, and the $0.68 GAAP loss per share on a net loss of $7.4 million in the third quarter 2009.

Doug Lebda, Chairman and CEO of Tree.com stated, "Overall, I am pleased with our performance in the third quarter. We felt the benefit of a drop in interest rates which created an increase in refinance mortgage activity, and our results reflect that. Apart from the financial results, this is an important inflection point in the progress of the company. We are planning to grow our LendingTree Loans business, and with the announced new management and strategy in Real Estate, we are strongly reaffirming our commitment to provide the greatest value to our shareholders."

Tree.com SVP Tamara Kotronis added, "The positive impact we felt in Q3 from lower interest rates definitely contributed to our solid Q3 results with revenue growth in both the Exchanges and LendingTree Loans. In addition, the non-mortgage businesses within the Exchanges continue to gain traction and are accounting for a greater portion of the overall business, and we continue to invest marketing dollars to grow these non-mortgage businesses. All of this helped to offset continued softness in the Real Estate business, and deliver revenue growth, net income and positive Adjusted EBITDA in the quarter. As for guidance, we do expect a normal seasonal downturn in Q4, and as a result expect Adjusted EBITDA in the quarter to be between breakeven and $2 million".

     Tree.com Summary Financial Results
                            $s in millions (except per share amounts)


                                                     Q/Q
                        Q3 2010     Q2 2010       % Change
                        -------     -------       --------
    Revenue                   $53.2        $45.8         16%

    Cost of Revenue *         $14.5        $13.2         10%

    Operating Expenses*       $33.2        $29.2         14%
                              -----        -----

    Adjusted EBITDA **         $5.5         $3.4         62%
    EBITDA **                  $4.0         $2.0        100%

    Net Income/(Loss)          $1.8        $(0.8)       328%

    Net Income/(Loss)
     Per Share                $0.16       $(0.07)       329%
    Diluted Net Income/
     (Loss) Per Share         $0.16       $(0.07)       329%






                                               Y/Y
                            Q3 2009         % Change
                            -------         --------
    Revenue                    $50.7                 5%

    Cost of Revenue *          $18.7              (23%)

    Operating Expenses*        $35.5               (7%)
                               -----

    Adjusted EBITDA **         $(3.5)              257%
    EBITDA **                  $(4.7)              185%

    Net Income/(Loss)          $(7.4)              125%

    Net Income/(Loss)
     Per Share                $(0.68)              123%
    Diluted Net Income/
     (Loss) Per Share         $(0.68)              123%




    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 Q3 Results

Adjusted EBITDA increased $9.0 million year-over-year, primarily reflecting the revenue improvements at LendingTree Loans in addition to lower professional fees and employee costs.

Average 30-Year Fixed Mortgage Rate Recent Trends

(Photo: http://www.newscom.com/cgi-bin/prnh/20101029/CL91186 )

(Photo: http://photos.prnewswire.com/prnh/20101029/CL91186 )

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.

Information Regarding Intersegment Revenue and Marketing

During the third quarter of 2010, the company changed its policy of accounting for inter-segment revenue and inter-segment marketing expense between the LendingTree Loans and Exchanges segments. This change impacts the segment results only, and does not impact the consolidated financial results of Tree.com.

Marketing expense for the Exchanges is primarily the building and maintaining of the company's core brands, using both online and offline spending, and generating leads not only for the Exchanges but for other segments as well. Previously, marketing expense for LendingTree Loans was primarily comprised of inter-segment purchases of leads from the Exchanges. The Exchanges received inter-segment revenue for the sale of these leads, and that revenue and the related marketing expense at LendingTree Loans would then eliminate in consolidation of the total company results.

The company now uses a cost sharing approach for these marketing expenses, whereby LendingTree Loans and the Exchanges now share the marketing expense on a pro rata basis, based on the quantity of leads received by each segment. There is no longer inter-segment revenue or inter-segment marketing expense related to these leads. Management believes that this cost sharing approach more closely aligns the overall goals of the company with the goals of segment management, and will ultimately drive the company to better performance.

Segment reporting results for prior periods reflect the policy change noted above.

Business Unit Discussion

    LENDINGTREE LOANS SEGMENT
    -------------------------
                              LendingTree Loans Segment Results
                                                                $s in millions
                                                                --------------


                                                        Q/Q
                              Q3 2010     Q2 2010     % Change
                              -------     -------     --------
    Revenue - Direct Lending
      Origination and Sale of
       Loans                        $31.9       $24.0         33%
      Other                          $2.9        $2.6         11%
                                     ----        ----
    Total Revenue -Direct
     Lending                        $34.8       $26.6         30%

    Cost of Revenue *               $11.0        $9.4         17%

    Operating Expenses*             $11.3       $10.0         13%
                                    -----       -----

    Adjusted EBITDA **              $12.5        $7.2         73%
    EBITDA **                       $10.9        $7.1         53%

    Operating Income(Loss)          $10.5        $6.7         57%

    Metrics - Direct Lending
      Purchased loan requests
       (000s)                        69.0        67.1          3%
      Closed - units (000s)           3.3         2.8         17%
      Closed -units (dollars)      $721.9      $610.4         18%






                                                        Y/Y
                                   Q3 2009            % Change
                                   -------            --------
    Revenue - Direct Lending
      Origination and Sale of
       Loans                             $22.5               42%
      Other                               $1.6               80%
                                          ----
    Total Revenue -Direct
     Lending                             $24.1               44%

    Cost of Revenue *                    $11.7              (5%)

    Operating Expenses*                   $8.6               31%
                                          ----

    Adjusted EBITDA **                    $3.8              228%
    EBITDA **                             $3.8              188%

    Operating Income(Loss)                $3.0              252%

    Metrics - Direct Lending
      Purchased loan requests
       (000s)                             63.0                9%
      Closed - units (000s)                2.8               18%
      Closed -units (dollars)           $620.2               16%




    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
    Operating Income/(Loss) by Segment.


LendingTree Loans

Third quarter 2010 revenue increased 30% quarter-over-quarter on 17% higher closed units. The quarter again saw unprecedented lows in mortgage interest rates which in turn spurred another surge in refinance loan activity. Third quarter revenue increased 44% from the same period last year on 18% more closed loans and a 12% increase in the revenue generated per loan. Looking at the year-over-year revenue increase, the third quarter 2009 reflected a significant slowdown that followed the previously unprecedented refinance boom experienced earlier that year.

Operating expenses were $1.3 million higher quarter-over-quarter and $2.7 million higher year-over-year. The quarter-over-quarter increase was largely driven by higher personnel costs compared to the second quarter. The year-over-year increase in operating expense is due to higher personnel-related costs and higher marketing expense. The year-over-year increase in marketing is related to an 81% increase in refinance lead volume delivered from LendingTree and therefore a higher share of the marketing expense. Also in the third quarter, LendingTree Loans recognized $1.5 million expense for settlement of various legal and regulatory matters. While this did affect Operating Income and EBITDA in the quarter, it had no effect on Adjusted EBITDA.

    EXCHANGES SEGMENT
    -----------------
                      Exchanges Segment Results
                                                $s in millions
                                                --------------


                                                           Q/Q
                                Q3 2010     Q2 2010     % Change
                                -------     -------     --------
    Revenue - Exchanges
      Match Fees                     $12.9       $11.7           10%
      Closed Loan Fees                $1.7        $2.0         (18%)
      Inter-segment Revenue           $0.1        $0.0          188%
      Other                           $0.6        $0.8         (20%)
                                      ----        ----
    Total Revenue - Exchanges        $15.3       $14.5            6%

    Cost of Revenue *                 $1.3        $0.9           53%

    Operating Expenses*              $15.2       $13.2           15%
                                     -----       -----

    Adjusted EBITDA **               $(1.2)       $0.4        (418%)
    EBITDA **                        $(0.5)       $0.1        (437%)
    Operating Income(Loss)           $(1.3)      $(0.7)       (103%)

    Metrics - Exchanges
      Matched requests (000s)        311.1       271.1           15%
      Closing - units (000s)           9.2         8.4           10%
      Closing - units (dollars)    1,507.7     1,481.2            2%






                                                            Y/Y
                                        Q3 2009           % Change
                                        -------           --------
    Revenue - Exchanges
      Match Fees                             $12.4                3%
      Closed Loan Fees                        $5.3             (69%)
      Inter-segment Revenue                   $0.0           NM
      Other                                   $0.9             (30%)
                                              ----
    Total Revenue - Exchanges                $18.6             (18%)

    Cost of Revenue *                         $1.4              (7%)

    Operating Expenses*                      $15.6              (3%)
                                             -----

    Adjusted EBITDA **                        $1.6            (176%)
    EBITDA **                                 $1.5            (131%)
    Operating Income(Loss)                    $0.9            (247%)

    Metrics - Exchanges
      Matched requests (000s)                340.7              (9%)
      Closing - units (000s)                  12.1             (24%)
      Closing - units (dollars)            2,231.6             (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
    Operating Income/(Loss) by Segment.


Exchanges

Exchanges revenue in third quarter 2010 increased 6% quarter-over-quarter and declined 18% year-over-year. Match fee revenue increased both quarter-over-quarter and year-over-year. The quarter-over-quarter increase is due to 15% more matched consumer requests, which was fueled by lower interest rates in the quarter and by growing non-mortgage verticals like Insurance and Home Services.

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. The year-over-year decline in closed loan revenue is also partially due to 24% fewer closed loan transactions. For the third consecutive quarter, non-mortgage consumer services such as Education, Insurance, Auto and Home Services accounted for more than 50% of our total matched consumer requests.

Operating expenses increased $2.0 million quarter-over-quarter and decreased $0.4 million year-over-year. The quarter-over-quarter increase is primarily the result of increased marketing expense related to the production of TV commercial spots that aired in the quarter as well as increased variable spend for the non mortgage verticals. On a year-over-year basis, the lower operating expense was driven by lower marketing, which is the result of more leads being delivered to LendingTree Loans and therefore a greater share of the marketing cost to LendingTree Loans.

    REAL ESTATE SEGMENT
    -------------------
                        Real Estate Segment Results
                                                    $s in millions
                                                    --------------


                                                          Q/Q
                                Q3 2010     Q2 2010     % Change
                                -------     -------     --------
    Total Revenue - Real Estate       $3.2        $4.7       (32%)

    Cost of Revenue *                 $2.1        $2.8       (25%)

    Operating Expenses*               $1.6        $1.9       (16%)
                                      ----        ----

    Adjusted EBITDA **               $(0.5)      $(0.0)        NM
    EBITDA **                        $(0.7)      $(0.4)      (58%)
    Operating Income(Loss)           $(1.2)      $(1.3)        12%

    Metrics - Real Estate
      Closing - units (000s)           0.7         1.0       (31%)
      Closing - units (dollars)     $137.7      $200.0       (31%)
      Agents - RealEstate.com,
        REALTORS(R)                    787         804        (2%)
      Markets - RealEstate.com,
        REALTORS(R)                     20          20          0%






                                                          Y/Y
                                      Q3 2009           % Change
                                      -------           --------
    Total Revenue - Real Estate             $8.0             (60%)

    Cost of Revenue *                       $5.1             (59%)

    Operating Expenses*                     $3.5             (54%)
                                            ----

    Adjusted EBITDA **                     $(0.6)              16%
    EBITDA **                              $(0.8)              14%
    Operating Income(Loss)                 $(1.7)              31%

    Metrics - Real Estate
      Closing - units (000s)                 1.4             (51%)
      Closing - units (dollars)           $330.4             (58%)
      Agents - RealEstate.com,
        REALTORS(R)                        1,304             (40%)
      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
    Operating Income/(Loss) by Segment.

Real Estate

Third quarter 2010 Real Estate revenue declined $1.5 million, or 32%, quarter-over-quarter on 31% fewer closed units. This is a reflection of an industry-wide decline in the number of closed transactions. Real Estate revenue was down $4.8 million, or 60%, year-over-year, primarily due to continued declines in the number of total real estate transactions, down 51% year-over-year, and lower average home prices, down 15% year-over-year. Additionally, previous quarters' reductions in agent counts were largely curtailed in the third quarter, showing just a 2% decline from second quarter. The third quarter 2010 ended with 40% fewer agents year-over-year.

Adjusted EBITDA declined $0.5 million quarter-over-quarter and was up $0.1 million year-over-year. The quarter-over-quarter decline was driven by the lower revenue in the period. Operating Expenses were $0.3 million lower than the second quarter and $1.9 million lower than the third quarter 2009. 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
                              Q3 2010      Q2 2010     % Change
                              -------      -------     --------
    Inter-segment Revenue -
     elimination                    $(0.1)      $(0.0)     (188%)

    Cost of Revenue *                $0.0        $0.1       (69%)

    Inter-segment Marketing -
     elimination                     $0.0        $0.0        100%

    Operating Expenses*              $5.2        $4.1         27%
                                     ----        ----

    Adjusted EBITDA **              $(5.3)      $(4.2)      (25%)
    EBITDA **                       $(5.8)      $(4.9)      (20%)

    Operating Income(Loss)          $(6.1)      $(5.2)      (18%)






                                                           Y/Y
                                       Q3 2009           % Change
                                       -------           --------
    Inter-segment Revenue -
     elimination                             $0.0           NM

    Cost of Revenue *                        $0.5             (93%)

    Inter-segment Marketing -
     elimination                             $0.0           NM

    Operating Expenses*                      $7.8               33%
                                             ----

    Adjusted EBITDA **                      $(8.3)              37%
    EBITDA **                               $(9.2)              37%

    Operating Income(Loss)                  $(9.6)              36%




    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
    Operating Income/(Loss) by Segment.

Corporate

Operating expenses in the corporate segment increased $1.1 million quarter-over-quarter and decreased $2.6 million year-over-year. The quarter-over-quarter increase was largely due to higher incentive compensation expense and professional fees in the quarter. The year-over-year decreases in operating expense were primarily driven by lower professional fees and employee costs reflecting prior cost-cutting initiatives.

Liquidity and Capital Resources

As of September 30, 2010, Tree.com had $57.3 million in unrestricted cash and cash equivalents, compared to $62.9 million as of June 30, 2010. During the third quarter under the previously announced $10 million share repurchase program which began in February, the company repurchased 182,667 shares at an average price of $6.69 in open market transactions. Through September 30, 2010, the company has repurchased a total of 670,025 shares at an average price of $6.99 and has approximately $5.3 million of repurchase authorization remaining.

As of September 30, 2010, LendingTree Loans had two committed lines of credit totaling $125 million of borrowing capacity, plus an additional $25 million of uncommitted capacity. Per our recent filings, LendingTree Loans renewed its warehouse line agreement with JP Morgan Chase Bank, N.A., with a term running through October 29, 2011. As part of the renewal, borrowing capacity of this line of credit was increased from $75 million to $100 million. Effective with the renewal, borrowing capacity in the two committed lines is $150 million, plus $25 million of uncommitted 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 September 30, 2010, were $164.5 million and $140.1 million, respectively.

Earlier this quarter, we disclosed that on August 30, 2010, the company completed a share exchange, whereby our Chairman and Chief Executive Officer, Douglas R. Lebda, exchanged 2,902.33 shares of Series A Redeemable Preferred Stock of LendingTree Holdings Corp. with 534,900 newly-issued shares of Tree.com common stock. Details of the exchange were disclosed in a Form 8-K filed with the Securities Exchange Commission on September 1, 2010.

Conference Call

Tree.com will audio cast its conference call with investors and analysts discussing the company's third quarter financial results and certain other matters described herein on Friday, October 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             Nine
                                    Months            Months
                                     Ended             Ended
                                   September         September
                                       30,                30,
                                   ----------         ----------
                                 2010      2009      2010      2009
                                 ----      ----      ----      ----
                                         (In thousands,
                                        except per share
                                            amounts)
    Revenue
        LendingTree Loans     $34,760   $24,109   $87,147   $94,738
        Exchanges and other    15,204    18,610    48,013    52,662
        Real Estate             3,213     7,997    11,825    21,549
                                -----     -----    ------    ------
      Total revenue            53,177    50,716   146,985   168,949
    Cost of revenue
        LendingTree Loans      11,049    11,685    30,752    38,437
        Exchanges and other     1,346     1,949     3,654     6,054
        Real Estate             2,074     5,056     7,312    13,712
                                -----     -----     -----    ------
      Total cost of revenue
       (exclusive of
       depreciation shown
       separately below)       14,469    18,690    41,718    58,203
                               ------    ------    ------    ------
      Gross margin             38,708    32,026   105,267   110,746
    Operating expenses
      Selling and marketing
       expense                 17,830    17,435    55,035    45,149
      General and
       administrative
       expense                 14,035    17,515    39,263    50,929
      Product development       1,013     1,673     2,964     4,842
      Litigation settlements
       and contingencies        1,546        14     1,588       406
      Restructuring expense       321        78     3,363      (158)
      Amortization of
       intangibles                519     1,055     2,405     3,636
      Depreciation              1,523     1,698     4,539     5,049
      Asset impairments             -         -         -     3,903
                                  ---       ---       ---     -----
        Total operating
         expenses              36,787    39,468   109,157   113,756
                               ------    ------   -------   -------
        Operating income/
         (loss)                 1,921    (7,442)   (3,890)   (3,010)
    Other income (expense)
      Interest income               -         9         7        84
      Interest expense            (60)     (149)     (393)     (451)
                                  ---      ----      ----      ----
    Total other (expense),
     net                          (60)     (140)     (386)     (367)
                                  ---      ----      ----      ----
    Income/(loss) before
     income taxes               1,861    (7,582)   (4,276)   (3,377)
    Income tax (provision)
     benefit                      (42)      182      (850)     (121)
                                  ---       ---      ----      ----
    Net income/(loss)          $1,819   $(7,400)  $(5,126)  $(3,498)
                               ======   =======   =======   =======

    Weighted average
     common shares
     outstanding               11,023    10,844    10,993    10,413
                               ======    ======    ======    ======
    Weighted average
     diluted shares
     outstanding               11,163    10,844    10,993    10,413
                               ======    ======    ======    ======
    Net income/(loss) per
     share available to
     common shareholders
      Basic                     $0.16    $(0.68)   $(0.47)   $(0.34)
                                =====    ======    ======    ======
      Diluted                   $0.16    $(0.68)   $(0.47)   $(0.34)
                                =====    ======    ======    ======



         TREE.COM, INC. AND SUBSIDIARIES

           CONSOLIDATED BALANCE SHEETS


                                    September
                                        30,      December
                                       2010      31, 2009
                                   ----------     --------
                                   (unaudited)
                                       (In thousands,
                                          except par
                                          value and
                                       share amounts)
    ASSETS:
    Cash and cash equivalents          $57,294     $86,093
    Restricted cash and cash
     equivalents                        11,104      12,019
    Accounts receivable, net
     of allowance of $511 and
     $518, respectively                  7,799       6,835
    Loans held for sale
     ($163,319 and $92,236
     measured at fair value,
     respectively)                     164,460      93,596
    Prepaid and other current
     assets                             14,663      10,758
                                        ------      ------
      Total current assets             255,320     209,301
    Property and equipment,
     net                                12,543      12,257
    Goodwill                            12,917      12,152
    Intangible assets, net              55,221      57,626
    Other non-current assets               706         496
                                           ---         ---
      Total assets                    $336,707    $291,832
                                      ========    ========
    LIABILITIES:
    Warehouse lines of credit         $140,112     $78,481
    Accounts payable, trade              5,810       5,905
    Deferred revenue                     1,982       1,731
    Deferred income taxes                2,033       2,211
    Accrued expenses and other
     current liabilities                39,806      54,694
                                        ------      ------
      Total current liabilities        189,743     143,022
    Income taxes payable                    94         510
    Other long-term
     liabilities                        12,987      12,010
    Deferred income taxes               16,581      15,380
                                        ------      ------
      Total liabilities                219,405     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
     11,881,606 and 10,904,330
     shares, respectively, and
     outstanding 11,211,581
     and 10,904,330 shares,
     respectively                          119         109
    Additional paid-in capital         908,031     901,818
    Accumulated deficit               (786,143)   (781,017)
    Treasury stock 670,025 and
     -0-shares, respectively            (4,705)          -
                                        ------         ---
      Total shareholders' equity       117,302     120,910
                                       -------     -------
      Total liabilities and
       shareholders' equity           $336,707    $291,832
                                      ========    ========



         TREE.COM, INC. AND SUBSIDIARIES

      CONSOLIDATED STATEMENTS OF CASH FLOWS

                   (Unaudited)


                                              Nine Months
                                                 Ended
                                               September
                                                   30,
                                               ----------
                                              2010          2009
                                              ----          ----
                                                  (In
                                               thousands)
    Cash flows from operating
     activities:
    Net loss                               $(5,126)      $(3,498)
    Adjustments to reconcile net
     loss to net cash (used in)
     provided by operating
     activities:
      Loss on disposal of fixed
       assets                                    9           949
      Amortization of intangibles            2,405         3,636
      Depreciation                           4,539         5,049
      Intangible impairment                      -         3,903
      Non-cash compensation expense          2,840         3,060
      Non-cash restructuring
       expense                                 301           161
      Deferred income taxes                  1,023           393
      Gain on origination and sale
       of loans                            (79,301)      (89,701)
      Loss on impaired loans not
       sold                                      -           564
      Loss on sale of real estate
       acquired in satisfaction of
       loans                                   377            51
      Bad debt expense                          45           325
    Changes in current assets and
     liabilities:
      Accounts receivable                   (1,010)       (1,208)
      Origination of loans              (1,940,925)   (2,232,380)
      Proceeds from sales of loans       1,953,564     2,335,100
      Principal payments received on
       loans                                 1,200           781
      Payments to investors for loan
       repurchases and early payoff
       obligations                          (9,114)       (5,641)
      Prepaid and other current
       assets                                 (996)       (1,149)
      Accounts payable and other
       current liabilities                 (14,931)        3,580
      Income taxes payable                    (388)         (551)
      Deferred revenue                         109          (130)
      Other, net                             4,363         1,154
                                             -----         -----
    Net cash (used in) provided by
     operating activities                  (81,016)       24,448
                                           -------        ------
    Cash flows from investing
     activities:
      Acquisitions                             (50)       (5,726)
      Capital expenditures                  (4,999)       (2,200)
      Other, net                               765         3,253
                                               ---         -----
    Net cash used in investing
     activities                             (4,284)       (4,673)
                                            ------        ------
    Cash flows from financing
     activities:
      Borrowing under warehouse
       lines of credit                   1,374,460     1,964,237
      Repayments of warehouse lines
       of credit                        (1,312,829)   (1,973,294)
      Issuance of common stock, net
       of withholding taxes                   (575)        3,373
      Purchase of treasury stock            (4,705)            -
      Decrease (increase) in
       restricted cash                         150          (875)
                                               ---          ----
    Net cash provided by (used in)
     financing activities                   56,501        (6,559)
                                            ------        ------
    Net (decrease) increase in
     cash and cash equivalents             (28,799)       13,216
    Cash and cash equivalents at
     beginning of period                    86,093        73,643
                                            ------        ------
    Cash and cash equivalents at
     end of period                         $57,294       $86,859
                                           =======       =======



              TREE.COM, INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF OPERATIONS - BY SEGMENT

                        (Unaudited)


                                     For the Three Months
                                      Ended September 30,
                                             2010:
                                        --------------------
                                        (In thousands)
                                        --------------
                       LendingTree Exchanges     Real   Unallocated-   Total
                         Loans     ---------   Estate     Corporate    -----
                         -----                 ------     ---------
    Revenue                $34,760   $15,307    $3,213         $(103) $53,177
    Cost of revenue
     (exclusive of
     depreciation
     shown separately
     below)                 11,049     1,312     2,074            34   14,469
                            ------     -----     -----           ---   ------
      Gross margin          23,711    13,995     1,139          (137)  38,708
    Operating
     expenses:
      Selling and
       marketing
       expense               4,432    12,944       454             -   17,830
      General and
       administrative
       expense               6,714       669       951         5,701   14,035
      Product
       development             135       804        74             -    1,013
      Litigation
       settlements and
       contingencies         1,510         -        36             -    1,546
      Restructuring
       expense                 (14)       44       288             3      321
      Amortization of
       intangibles               -       294       212            13      519
      Depreciation             395       559       306           263    1,523
                               ---       ---       ---           ---    -----
      Total operating
       expenses             13,172    15,314     2,321         5,980   36,787
                            ------    ------     -----         -----   ------
    Operating income
     (loss)                 10,539    (1,319)   (1,182)       (6,117)   1,921
    Adjustments to
     reconcile to
     EBITDA and
     Adjusted EBITDA:
      Amortization of
       intangibles               -       294       212            13      519
      Depreciation             395       559       306           263    1,523
                               ---       ---       ---           ---    -----
    EBITDA                  10,934      (466)     (664)       (5,841)   3,963
      Restructuring
       expense                 (14)       44       288             3      321
      Non-cash
       compensation             94        73        28           583      778
      Litigation
       settlements and
       contingencies         1,510         -        36             -    1,546
      Post acquisition
       adjustments               -      (849)     (221)            -   (1,070)
                               ---      ----      ----           ---   ------
    Adjusted EBITDA        $12,524   $(1,198)    $(533)      $(5,255)  $5,538
                           =======   =======     =====       =======   ======

    Reconciliation to
     net income in
     total:
    Operating income
     per above                                                         $1,921
    Other expense,
     net                                                                  (60)
                                                                          ---
    Income before
     income taxes                                                       1,861
    Income tax
     provision                                                            (42)
                                                                          ---
    Net income                                                         $1,819
                                                                       ======



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; deficiencies in our disclosure controls and procedures and internal control over financial reporting; and our ability to successfully implement our strategic initiatives in the Real Estate and LendingTree Loans businesses. 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 Reports on Form 10-Q for the periods ended March 31, 2010, and June 30, 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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