LendingTree Reports Fourth Quarter 2020 Results

LendingTree Summary Financial Metrics

(In millions, except per share amounts)

Three Months Ended
December 31,

Y/Y

Three Months Ended
September 30,

Q/Q

2020

2019

% Change

2020

% Change

Total revenue

$

222.3

$

255.2

(13)

%

$

220.3

1

%

(Loss) income before income taxes

$

(13.2)

$

4.5

(393)

%

(32.7)

(60)

%

Income tax benefit (expense)

5.1

(3.1)

(265)

%

7.9

(35)

%

Net (loss) income from continuing
operations

$

(8.1)

$

1.5

(640)

%

$

(24.8)

(67)

%

Net (loss) income from continuing
operations % of revenue

(4)

%

1

%

(11)

%

(Loss) income per share from continuing
operations

Basic

$

(0.62)

$

0.11

(664)

%

$

(1.90)

(67)

%

Diluted

$

(0.62)

$

0.10

(720)

%

$

(1.90)

(67)

%

Variable marketing margin

Total revenue

$

222.3

$

255.2

(13)

%

$

220.3

1

%

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

$

(140.0)

$

(161.4)

(13)

%

$

(142.2)

(2)

%

Variable marketing margin ⁽²⁾

$

82.3

$

93.8

(12)

%

$

78.1

5

%

Variable marketing margin % of revenue ⁽²⁾

37

%

37

%

35

%

Adjusted EBITDA ⁽²⁾

$

26.3

$

45.9

(43)

%

$

21.7

21

%

Adjusted EBITDA % of revenue ⁽²⁾

12

%

18

%

10

%

Adjusted net income (loss) ⁽²⁾

$

1.8

$

16.3

(89)

%

$

(3.4)

153

%

Adjusted net income (loss) per share ⁽²⁾

$

0.13

$

1.12

(88)

%

$

(0.26)

150

%

(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

2020

2019

% Change

2020

% Change

Home ⁽¹⁾

Revenue

$

88.8

$

65.5

36

%

$

78.9

13

%

Segment profit

$

32.3

$

26.9

20

%

$

25.2

28

%

Segment profit % of revenue

36

%

41

%

32

%

Consumer ⁽²⁾

Revenue

$

47.8

$

113.4

(58)

%

$

48.4

(1)

%

Segment profit

$

22.7

$

43.3

(48)

%

$

21.6

5

%

Segment profit % of revenue

47

%

38

%

45

%

Insurance ⁽³⁾

Revenue

$

85.6

$

70.9

21

%

$

92.5

(7)

%

Segment profit

$

33.4

$

28.0

19

%

$

37.0

(10)

%

Segment profit % of revenue

39

%

39

%

40

%

Other ⁽⁴⁾

Revenue

$

0.1

$

5.4

(98)

%

$

0.5

(80)

%

Loss

$

(0.4)

$

(0.1)

300

%

$

—

—

%

Total revenue

$

222.3

$

255.2

(13)

%

$

220.3

1

%

Total segment profit

$

88.0

$

98.1

(10)

%

$

83.8

5

%

     Brand marketing expense ⁽⁵⁾

$

(5.7)

$

(4.2)

36

%

$

(5.7)

—

%

Variable marketing margin

$

82.3

$

93.8

(12)

%

$

78.1

5

%

Variable marketing margin % of revenue

37

%

37

%

35

%

(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 (LOSS)

(Unaudited)

Three Months Ended 

 December 31,

Twelve Months Ended 

 December 31,

2020

2019

2020

2019

(in thousands, except per share amounts)

Revenue

$

222,329

$

255,187

$

909,990

$

1,106,603

Costs and expenses:

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

13,558

16,728

54,494

68,379

Selling and marketing expense (1)

153,275

167,842

617,404

735,180

General and administrative expense (1)

34,825

27,456

129,101

116,847

Product development (1)

10,384

9,412

43,636

39,953

Depreciation

3,738

3,261

14,201

10,998

Amortization of intangibles

12,475

13,756

53,078

55,241

Change in fair value of contingent consideration

(2,384)

7,181

5,327

28,402

Severance

105

390

295

1,026

Litigation settlements and contingencies

40

140

(943)

(151)

Total costs and expenses

226,016

246,166

916,593

1,055,875

Operating (loss) income

(3,687)

9,021

(6,603)

50,728

Other (expense) income, net:

Interest expense, net

(9,894)

(4,863)

(36,300)

(20,271)

Other income

369

381

376

524

(Loss) income before income taxes

(13,212)

4,539

(42,527)

30,981

Income tax benefit (expense)

5,095

(3,073)

19,961

8,479

Net (loss) income from continuing operations

(8,117)

1,466

(22,566)

39,460

(Loss) income from discontinued operations, net of tax

(139)

392

(25,689)

(21,632)

Net (loss) income and comprehensive (loss) income

$

(8,256)

$

1,858

$

(48,255)

$

17,828

Weighted average shares outstanding:

Basic

13,051

12,921

13,007

12,834

Diluted

13,051

14,580

13,007

14,619

(Loss) income per share from continuing operations:

Basic

$

(0.62)

$

0.11

$

(1.73)

$

3.07

Diluted

$

(0.62)

$

0.10

$

(1.73)

$

2.70

(Loss) income per share from discontinued operations:

Basic

$

(0.01)

$

0.03

$

(1.98)

$

(1.69)

Diluted

$

(0.01)

$

0.03

$

(1.98)

$

(1.48)

 Net (loss) income per share:

Basic

$

(0.63)

$

0.14

$

(3.71)

$

1.39

Diluted

$

(0.63)

$

0.13

$

(3.71)

$

1.22

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

Cost of revenue

$

372

$

197

$

1,319

$

755

Selling and marketing expense

1,809

918

6,240

5,785

General and administrative expense

10,442

8,643

39,650

39,177

Product development

1,874

1,577

6,524

6,450

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

December 31,

2020

December 31,

2019

(in thousands, except par value
and share amounts)

ASSETS:

Cash and cash equivalents

$

169,932

$

60,243

Restricted cash and cash equivalents

117

96

Accounts receivable, net

89,841

113,487

Prepaid and other current assets

27,949

15,516

Current assets of discontinued operations

8,570

84

Total current assets

296,409

189,426

Property and equipment, net

62,381

31,363

Operating lease right-of-use assets

84,109

25,519

Goodwill

420,139

420,139

Intangible assets, net

128,502

181,580

Deferred income tax assets

96,224

87,664

Equity investment

80,000

—

Other non-current assets

5,334

4,330

Non-current assets of discontinued operations

15,892

7,948

Total assets

$

1,188,990

$

947,969

LIABILITIES:

Revolving credit facility

$

—

$

75,000

Accounts payable, trade

10,111

2,873

Accrued expenses and other current liabilities

101,196

112,755

Current contingent consideration

—

9,028

Current liabilities of discontinued operations

536

31,050

Total current liabilities

111,843

230,706

Long-term debt

611,412

264,391

Operating lease liabilities

92,363

21,358

Non-current contingent consideration

8,249

24,436

Other non-current liabilities

362

4,752

Total liabilities

824,229

545,643

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; 15,766,193 and 15,676,819 shares
issued, respectively, and 13,124,875 and 13,035,501 shares outstanding, respectively

158

157

Additional paid-in capital

1,188,673

1,177,984

Accumulated deficit

(640,909)

(592,654)

Treasury stock; 2,641,318 shares

(183,161)

(183,161)

Total shareholders' equity

364,761

402,326

Total liabilities and shareholders' equity

$

1,188,990

$

947,969

LENDINGTREE, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited)

Year Ended December 31,

2020

2019

2018

(in thousands)

Cash flows from operating activities attributable to continuing operations:

Net (loss) income and comprehensive (loss) income

$

(48,255)

$

17,828

$

96,499

Less: Loss from discontinued operations, net of tax

25,689

21,632

12,820

(Loss) income from continuing operations

(22,566)

39,460

109,319

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

Loss (gain) on impairments and disposal of assets

1,160

(695)

2,210

Amortization of intangibles

53,078

55,241

23,468

Depreciation

14,201

10,998

7,385

Rental amortization of intangibles and depreciation

—

—

630

Non-cash compensation expense

53,733

52,167

44,365

Deferred income taxes

(9,628)

(8,555)

(63,901)

Change in fair value of contingent consideration

5,327

28,402

10,788

Bad debt expense

1,785

1,697

880

Amortization of debt issuance costs

3,474

1,974

1,776

Write-off of previously-capitalized debt issuance costs

—

333

—

Amortization of convertible debt discount

19,570

12,016

11,397

Loss on extinguishment of debt

7,768

—

—

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

8,888

213

—

Changes in current assets and liabilities:

Accounts receivable

21,861

(22,457)

(16,820)

Prepaid and other current assets

(952)

(3,258)

(2,985)

Accounts payable, accrued expenses and other current liabilities

(8,013)

(2,322)

14,270

Current contingent consideration

(25,787)

(12,500)

(21,912)

Income taxes receivable

(10,598)

4,548

3,669

Other, net

(2,002)

(88)

(591)

Net cash provided by operating activities attributable to continuing operations

111,299

157,174

123,948

Cash flows from investing activities attributable to continuing operations:

Capital expenditures

(42,149)

(20,041)

(14,907)

Proceeds from the sale of fixed assets

—

24,077

—

Equity investment

(80,000)

—

—

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)

Net cash used in investing activities attributable to continuing operations

(122,149)

(101,060)

(383,038)

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

(3,910)

(8,406)

2,217

Proceeds from the issuance of 0.50% Convertible Senior Notes

575,000

—

—

Repurchase of 0.625% Convertible Senior Notes

(233,862)

—

—

Payment of convertible note hedge on the 0.50% Convertible Senior Notes

(124,200)

—

—

Termination of convertible note hedge on the 0.625% Convertible Senior Notes

109,881

—

—

Proceeds from the sale of warrants related to the 0.50% Convertible Senior Notes

61,180

—

—

Termination of warrants related to the 0.625% Convertible Senior Notes

(94,292)

—

—

Net (repayment of) proceeds from revolving credit facility

(75,000)

(50,000)

125,000

Payment of debt issuance costs

(16,568)

(2,518)

(583)

Contingent consideration payments

(4,755)

(21,275)

(27,588)

Purchase of treasury stock

—

(5,470)

(93,704)

Acquisition of noncontrolling interest

—

—

(499)

Other financing activities

(184)

(9)

—

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

193,290

(87,678)

4,843

Total cash provided by (used in) continuing operations

182,440

(31,564)

(254,247)

Discontinued operations:

Net cash used in operating activities attributable to discontinued operations

(72,730)

(13,255)

(13,236)

Total cash used in discontinued operations

(72,730)

(13,255)

(13,236)

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

109,710

(44,819)

(267,483)

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

60,339

105,158

372,641

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

$

170,049

$

60,339

$

105,158

Non-cash investing activities:

Increase (decrease) in capital expenditures included in accounts payable and accrued expenses

$

4,196

$

(946)

$

2,246

Capital additions from tenant improvement allowance

—

1,111

—

Supplemental cash flow information:

Interest paid

$

4,741

$

7,005

$

3,593

Income tax payments

561

25

541

Income tax refunds

60

4,743

5,678

LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

Variable Marketing Expense

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

Three Months Ended

Twelve Months Ended

December 31,

2020

September 30,

2020

December 31,

2019

December 31,

2020

December 31,

2019

(in thousands)

Selling and marketing expense

$

153,275

$

154,670

$

167,842

$

617,404

$

735,180

Non-variable selling and marketing expense ⁽¹⁾

(13,248)

(12,541)

(11,036)

(49,652)

(47,000)

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

—

—

4,557

1,086

22,755

Variable marketing expense

$

140,027

$

142,129

$

161,363

$

568,838

$

710,935

(1)

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

(2)

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

LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

Variable Marketing Margin

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

Three Months Ended

Twelve Months Ended

December 31,

2020

September 30,

2020

December 31,

2019

December 31,

2020

December 31,

2019

(in thousands, except percentages)

Net (loss) income from continuing operations

$

(8,117)

$

(24,809)

$

1,466

$

(22,566)

$

39,460

Net (loss) income from continuing operations %
of revenue

(4)

%

(11)

%

1

%

(2)

%

4

%

Adjustments to reconcile to variable marketing margin:

Cost of revenue

13,558

13,220

16,728

54,494

68,379

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

—

—

(4,557)

(1,086)

(22,755)

Non-variable selling and marketing expense ⁽²⁾

13,248

12,541

11,036

49,652

47,000

General and administrative expense

34,825

33,705

27,456

129,101

116,847

Product development

10,384

11,477

9,412

43,636

39,953

Depreciation

3,738

3,535

3,261

14,201

10,998

Amortization of intangibles

12,475

13,090

13,756

53,078

55,241

Change in fair value of contingent consideration

(2,384)

6,658

7,181

5,327

28,402

Severance

105

—

390

295

1,026

Litigation settlements and contingencies

40

13

140

(943)

(151)

Interest expense, net

9,894

16,617

4,863

36,300

20,271

Other income

(369)

—

(381)

(376)

(524)

Income tax (benefit) expense

(5,095)

(7,925)

3,073

(19,961)

(8,479)

Variable marketing margin

$

82,302

$

78,122

$

93,824

$

341,152

$

395,668

Variable marketing margin % of revenue

37

%

35

%

37

%

37

%

36

%

(1)

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

(2)

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

LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

Adjusted EBITDA

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

Three Months Ended

Twelve Months Ended

December 31,

2020

September 30,

2020

December 31,

2019

December 31,

2020

December 31,

2019

(in thousands, except percentages)

Net (loss) income from continuing operations

$

(8,117)

$

(24,809)

$

1,466

$

(22,566)

$

39,460

Net (loss) income from continuing operations %
of revenue

(4)

%

(11)

%

1

%

(2)

%

4

%

Adjustments to reconcile to adjusted EBITDA:

Amortization of intangibles

12,475

13,090

13,756

53,078

55,241

Depreciation

3,738

3,535

3,261

14,201

10,998

Severance

105

—

390

295

1,026

Loss (gain) on impairments and disposal of assets

474

134

424

1,160

(945)

Non-cash compensation expense

14,497

14,161

11,335

53,733

52,167

Costs of secondary public offering

863

—

—

863

—

Change in fair value of contingent consideration

(2,384)

6,658

7,181

5,327

28,402

Acquisition expense

(188)

205

14

2,217

211

Litigation settlements and contingencies

40

13

140

(943)

(151)

Interest expense, net

9,894

16,617

4,863

36,300

20,271

Income tax (benefit) expense

(5,095)

(7,925)

3,073

(19,961)

(8,479)

Adjusted EBITDA

$

26,302

$

21,679

$

45,903

$

123,704

$

198,201

Adjusted EBITDA % of revenue

12

%

10

%

18

%

14

%

18

%

LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

Adjusted Net Income

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

Three Months Ended

Twelve Months Ended

December 31,

2020

September 30,

2020

December 31,

2019

December 31,

2020

December 31,

2019

(in thousands, except per share amounts)

Net (loss) income from continuing operations

$

(8,117)

$

(24,809)

$

1,466

$

(22,566)

$

39,460

Adjustments to reconcile to adjusted net (loss) income:

Severance

105

—

390

295

1,026

Loss (gain) on impairments and disposal of assets

474

134

424

1,160

(945)

Non-cash compensation

14,497

14,161

11,335

53,733

52,167

Costs of secondary public offering

863

—

—

863

—

Change in fair value of contingent consideration

(2,384)

6,658

7,181

5,327

28,402

Acquisition expense

(188)

205

14

2,217

211

Litigation settlements and contingencies

40

13

140

(943)

(151)

Loss on extinguishment of debt

—

7,768

—

7,768

—

Income tax benefit from adjusted items

(3,402)

(7,361)

(4,087)

(17,880)

(20,694)

Excess tax benefit from stock-based compensation

(51)

(175)

(516)

(2,033)

(17,058)

Income tax benefit from CARES Act

—

—

—

(6,104)

—

Adjusted net income (loss)

$

1,837

$

(3,406)

$

16,347

$

21,837

$

82,418

Net (loss) income per diluted share from continuing
operations

$

(0.62)

$

(1.90)

$

0.10

$

(1.73)

$

2.70

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

0.76

1.64

1.02

3.41

2.94

Adjustments to reconcile effect of dilutive securities

(0.01)

—

—

(0.14)

—

Adjusted net income (loss) per share

$

0.13

$

(0.26)

$

1.12

$

1.54

$

5.64

Adjusted weighted average diluted shares outstanding

14,163

13,033

14,580

14,150

14,619

Effect of dilutive securities

1,112

—

—

1,143

—

Weighted average diluted shares outstanding

13,051

13,033

14,580

13,007

14,619

Effect of dilutive securities

—

—

1,659

—

1,785

Weighted average basic shares outstanding

13,051

13,033

12,921

13,007

12,834