Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  July 25, 2019
 
LendingTree, Inc.
(Exact name of registrant as specified in charter)
 
Delaware
 
001-34063
 
26-2414818
(State or other jurisdiction
 
(Commission
 
(IRS Employer
of incorporation)
 
File Number)
 
Identification No.)
 
11115 Rushmore Drive, Charlotte, NC
 
28277
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code:  (704) 541-5351
 
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 par value per share
 
TREE
 
Nasdaq Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o






Item 2.02.     Results of Operations and Financial Condition.
 
On July 25, 2019, LendingTree, Inc. (the “Registrant”) announced financial results for the quarter ended June 30, 2019.  A copy of the related press release is furnished as Exhibit 99.1.
 
Item 9.01.  Financial Statements and Exhibits.
 
Exhibit No.
 
Exhibit Description
 
 
 
99.1
 






SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: July 25, 2019
 
 
 
 
LENDINGTREE, INC.
 
 
 
 
 
By:
/s/ J.D. Moriarty
 
 
J.D. Moriarty
 
 
Chief Financial Officer






EXHIBIT INDEX

Exhibit No.
 
Description
 
 
 
99.1
 


Exhibit


Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13021591&doc=3
LENDINGTREE REPORTS RECORD 2Q 2019 RESULTS


Record Consolidated Revenue of $278.4 million; up 51%% over 2Q 2018
GAAP Net Income from Continuing Operations of $13.0 million or $0.87 per diluted share
Record Variable Marketing Margin of $93.8 million; up 39% over 2Q 2018
Record Adjusted EBITDA of $46.3 million; up 25% over 2Q 2018
Adjusted Net Income per share of $1.18

CHARLOTTE, NC - July 25, 2019 - LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation's leading online loan marketplace, today announced results for the quarter ended June 30, 2019.
“LendingTree's results in the second quarter were solid once again with revenue and variable marketing margin growth of 51% and 39%, respectively," said Doug Lebda, Chairman and CEO. "The insurance and credit card businesses continued their strong growth trajectories, and we achieved our stated goal of returning the mortgage business to sequential growth, with mortgage revenue up 19% from the prior quarter. Our revised outlook for the year reflects a continuation of strong top-line trends while we're choosing to pull forward some investments in key strategic initiatives as we see pockets of opportunity across many of our businesses."

J.D. Moriarty, Chief Financial Officer, added "As we manage our portfolio of businesses, we will inevitably have challenges in one business or another from time to time. As growth in our Personal Loan business has slowed, there is pressure on our overall margin profile. That said, we don't want a slowdown in one business to hold back other businesses where we see tremendous opportunity to gain market share. These market share initiatives typically come at a lesser margin in the short term, but we are managing for the long term. Our amended guidance for full year 2019 reflects this long term orientation."
   
   
Second Quarter 2019 Business Highlights
Insurance revenue of $71.9 million, representing growth of 73% over second quarter 2018 on a pro forma basis.
Credit card revenue of $56.0 million grew 45% over second quarter 2018.
Mortgage revenue of $54.6 million resumed sequential growth, increasing 19% compared to the preceding quarter.
Revenue from personal loans of $41.1 million grew 14% over second quarter 2018.
12.4 million consumers have now signed up for My LendingTree. The revenue contribution from My LendingTree grew to more than $20 million and the platform accounted for more than 21% of all addressable LendingTree leads.






LendingTree Selected Financial Metrics
(In millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Y/Y
 
 
 
 
Q/Q
 
 
2Q 2019
 
2Q 2018
 
% Change
 
 
1Q 2019
 
% Change
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
Mortgage Products (1)
$
54.6

 
$
66.9

 
(18
)%
 
 
$
46.0

 
19
 %
 
Non-Mortgage Products (2)
223.8

 
117.2

 
91
 %
 
 
216.4

 
3
 %
 
Total Revenue
$
278.4

 
$
184.1

 
51
 %
 
 
$
262.4

 
6
 %
 
Non-Mortgage % of Total
80
%
 
64
%
 
 
 
 
82
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) Before Income Taxes
$
7.3

 
$
15.1

 
(52
)%
 
 
$
(7.2
)
 
NA

 
Income Tax Benefit
$
5.7

 
$
29.7

 
(81
)%
 
 
$
7.8

 
(27
)%
 
Net Income from Continuing Operations
$
13.0

 
$
44.8

 
(71
)%
 
 
$
0.6

 
2067
 %
 
Net Income from Cont. Ops. % of Revenue
5
%
 
24
%
 
 
 
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income per Share from Cont. Ops.
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.01

 
$
3.61

 
(72
)%
 
 
$
0.04

 
2425
 %
 
Diluted
$
0.87

 
$
3.17

 
(73
)%
 
 
$
0.04

 
2075
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Marketing Margin


 


 


 
 


 


 
Total Revenue
$
278.4

 
$
184.1

 
51
 %
 
 
$
262.4

 
6
 %
 
Variable Marketing Expense (3) (4)
$
(184.6
)
 
$
(116.4
)
 
59
 %
 
 
$
(169.9
)
 
9
 %
 
Variable Marketing Margin (4)
$
93.8

 
$
67.7

 
39
 %
 
 
$
92.5

 
1
 %
 
Variable Marketing Margin % of Revenue
34
%
 
37
%
 
 
 
 
35
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA (4)
$
46.3

 
$
37.1

 
25
 %
 
 
$
43.0

 
8
 %
 
Adjusted EBITDA % of Revenue (4)
17
%
 
20
%
 
 
 
 
16
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net Income (4)
$
17.6

 
$
20.8

 
(15
)%
 
 
$
15.6

 
13
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net Income per Share (4)
$
1.18

 
$
1.47

 
(20
)%
 
 
$
1.10

 
7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Includes the purchase mortgage and refinance mortgage products.
(2)
Includes the home equity, reverse mortgage, personal loan, credit card, small business loan, student loan, auto loan, home services, insurance, deposit and personal credit products and income from the re-sale of advertising to third parties.
(3)
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.
(4)
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.













Second Quarter 2019 Financial Highlights

Record consolidated revenue of $278.4 million represents an increase of 51% over revenue in the second quarter 2018.
GAAP net income from continuing operations of $13.0 million, or $0.87 per diluted share.
Record Variable Marketing Margin of $93.8 million represented grew 39% over second quarter 2018.
Record Adjusted EBITDA of $46.3 million increased 25% over second quarter 2018.
Adjusted Net Income per share of $1.18.
After borrowing an initial total of $215 million against our revolving credit facility to fund acquisitions, we have since re-payed $115 million, bringing total revolving debt down to $100 million as of July 24, 2019.

Business Outlook - 2019
LendingTree is introducing Revenue, Variable Marketing Margin and Adjusted EBITDA guidance for third quarter 2019 and revising full-year 2019 guidance, as follows:

Third quarter 2019:

Revenue is anticipated to be in the range of $290 - $300 million.
Variable Marketing Margin is expected in the range of $104 - $109 million.
Adjusted EBITDA is anticipated in the range of $55 - $60 million.

Full-year 2019:
Revenue is now anticipated to be in the range of $1,080 - $1,100 million, up from prior range of $1,060 - $1,090 million.
Variable Marketing Margin is expected in the range of $390 - $405 million, compared to prior range of $400 - $415 million.
Adjusted EBITDA is anticipated in the range of $195 - $205 million, compared to prior range of $210 - $220 million.

LendingTree is not able to provide a reconciliation of projected Variable Marketing Margin or Adjusted EBITDA to the most directly comparable expected GAAP results due to the unknown effect, timing and potential significance of the effects of legal matters, tax considerations, and income and expense from changes in fair value of contingent consideration from acquisitions. Expenses associated with legal matters, tax consequences, and income and expense from changes in fair value of contingent consideration from acquisitions have in the past, and may in the future, significantly affect GAAP results in a particular period.

Quarterly Conference Call
A conference call to discuss LendingTree's second quarter 2019 financial results will be webcast live today, July 25, 2019 at 9:00 AM Eastern Time (ET). The live audiocast is open to the public and will be available on LendingTree's investor relations website at http://investors.lendingtree.com/. The call may also be accessed toll-free via phone at (877) 606-1416. Callers outside the United States and Canada may dial (707) 287-9313. Following completion of the call, a recorded replay of the webcast will be available on LendingTree's investor relations website until 12:00 PM ET on Thursday, August 1, 2019. To listen to the telephone replay, call toll-free (855) 859-2056 with passcode #4977548. Callers outside the United States and Canada may dial (404) 537-3406 with passcode #4977548.





LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands, except per share amounts)
Revenue
$
278,421

 
$
184,101

 
$
540,811

 
$
365,136

Costs and expenses:
 

 
 

 
 

 
 

Cost of revenue (exclusive of depreciation and amortization shown separately below) (1)
16,310

 
6,043

 
33,980

 
11,739

Selling and marketing expense (1)
191,629

 
123,946

 
366,520

 
249,990

General and administrative expense (1)
27,951

 
24,759

 
59,068

 
47,573

Product development (1)
10,175

 
5,967

 
20,341

 
12,227

Depreciation
2,559

 
1,633

 
5,041

 
3,304

Amortization of intangibles
14,280

 
3,964

 
27,707

 
7,927

Change in fair value of contingent consideration
2,790

 
(167
)
 
17,382

 
(908
)
Severance
403

 
3

 
457

 
3

Litigation settlements and contingencies
8

 
(170
)
 
(199
)
 
(192
)
Total costs and expenses
266,105

 
165,978

 
530,297

 
331,663

Operating income
12,316

 
18,123

 
10,514

 
33,473

Other (expense) income, net:
 

 
 

 
 

 
 

Interest expense, net
(5,095
)
 
(2,924
)
 
(10,563
)
 
(5,912
)
Other income (expense)
71

 
(71
)
 
139

 
(37
)
Income before income taxes
7,292

 
15,128

 
90

 
27,524

Income tax benefit
5,689

 
29,721

 
13,441

 
53,182

Net income from continuing operations
12,981

 
44,849

 
13,531

 
80,706

Loss from discontinued operations, net of tax
(763
)
 
(2,302
)
 
(1,825
)
 
(6,635
)
Net income and comprehensive income
$
12,218

 
$
42,547

 
$
11,706

 
$
74,071

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
12,805

 
12,416

 
12,762

 
12,254

Diluted
14,908

 
14,147

 
14,622

 
14,527

Income per share from continuing operations:
 

 
 

 
 

 
 

Basic
$
1.01

 
$
3.61

 
$
1.06

 
$
6.59

Diluted
$
0.87

 
$
3.17

 
$
0.93

 
$
5.56

Loss per share from discontinued operations:
 

 
 

 
 

 
 

Basic
$
(0.06
)
 
$
(0.19
)
 
$
(0.14
)
 
$
(0.54
)
Diluted
$
(0.05
)
 
$
(0.16
)
 
$
(0.12
)
 
$
(0.46
)
Net income per share:
 

 
 

 
 

 
 

Basic
$
0.95

 
$
3.43

 
$
0.92

 
$
6.04

Diluted
$
0.82

 
$
3.01

 
$
0.80

 
$
5.10

 
 
 
 
 
 
 
 
(1) Amounts include non-cash compensation, as follows:
 
 
 
 
 
 
 
Cost of revenue
$
197

 
$
79

 
$
350

 
$
137

Selling and marketing expense
2,283

 
1,433

 
4,032

 
2,934

General and administrative expense
11,686

 
8,490

 
21,907

 
17,229

Product development
1,816

 
1,176

 
3,746

 
1,987






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

 
June 30,
2019
 
December 31,
2018
 
(in thousands, except par value and share amounts)
ASSETS:
 

 
 

Cash and cash equivalents
$
51,332

 
$
105,102

Restricted cash and cash equivalents
58

 
56

Accounts receivable, net
139,778

 
91,072

Prepaid and other current assets
12,440

 
16,428

Assets held for sale

 
21,328

Current assets of discontinued operations
2,227

 
185

Total current assets
205,835

 
234,171

Property and equipment, net
28,874

 
23,175

Goodwill
419,984

 
348,347

Intangible assets, net
209,592

 
205,699

Deferred income tax assets
93,014

 
79,289

Other non-current assets
20,033

 
2,168

Non-current assets of discontinued operations
3,266

 
3,266

Total assets
$
980,598

 
$
896,115

 
 
 
 
LIABILITIES:
 
 
 
Revolving credit facility
$
115,000

 
$
125,000

Accounts payable, trade
17,447

 
15,074

Accrued expenses and other current liabilities
130,323

 
93,190

Current contingent consideration
29,548

 
11,080

Current liabilities of discontinued operations
15,809

 
17,609

Total current liabilities
308,127

 
261,953

Long-term debt
257,582

 
250,943

Non-current contingent consideration
20,671

 
27,757

Deferred income tax liabilities
711

 
894

Other non-current liabilities
19,620

 
8,360

Total liabilities
606,711

 
549,907

Commitments and contingencies
 
 
 
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; 15,603,806 and 15,428,351 shares issued, respectively, and 12,967,718 and 12,809,764 shares outstanding, respectively
156

 
154

Additional paid-in capital
1,154,174

 
1,134,227

Accumulated deficit
(598,776
)
 
(610,482
)
Treasury stock; 2,636,088 and 2,618,587 shares, respectively
(181,667
)
 
(177,691
)
Total shareholders' equity
373,887

 
346,208

Total liabilities and shareholders' equity
$
980,598

 
$
896,115






LENDINGTREE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 
Six Months Ended June 30,
 
2019
 
2018
 
(in thousands)
Cash flows from operating activities attributable to continuing operations:
 

 
 

Net income and comprehensive income
$
11,706

 
$
74,071

Less: Loss from discontinued operations, net of tax
1,825

 
6,635

Income from continuing operations
13,531

 
80,706

Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations:
 
 
 
(Gain) loss on impairments and disposal of assets
(1,729
)
 
1,889

Amortization of intangibles
27,707

 
7,927

Depreciation
5,041

 
3,304

Rental amortization of intangibles and depreciation

 
396

Non-cash compensation expense
30,035

 
22,287

Deferred income taxes
(13,624
)
 
(56,197
)
Change in fair value of contingent consideration
17,382

 
(908
)
Bad debt expense
1,282

 
513

Amortization of debt issuance costs
970

 
865

Amortization of convertible debt discount
5,929

 
5,623

Changes in current assets and liabilities:
 
 
 
Accounts receivable
(48,396
)
 
(26,841
)
Prepaid and other current assets
(190
)
 
(787
)
Accounts payable, accrued expenses and other current liabilities
28,192

 
(3,970
)
Current contingent consideration
(3,000
)
 
(21,900
)
Income taxes receivable
4,388

 
2,522

Other, net
357

 
(165
)
Net cash provided by operating activities attributable to continuing operations
67,875

 
15,264

Cash flows from investing activities attributable to continuing operations:
 
 
 
Capital expenditures
(9,769
)
 
(6,747
)
Proceeds from sale of fixed assets
24,062

 

Acquisition of ValuePenguin, net of cash acquired
(105,578
)
 

Acquisition of QuoteWizard, net of cash acquired
447

 

Acquisition of Ovation, net of cash acquired

 
(11,683
)
Acquisition of SnapCap

 
(10
)
Other investing activities

 
(1
)
Net cash used in investing activities attributable to continuing operations
(90,838
)
 
(18,441
)
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
(7,646
)
 
895

Contingent consideration payments
(3,000
)
 
(25,600
)
Net repayment of revolving credit facility
(10,000
)
 

Payment of debt issuance costs
(31
)
 
(84
)
Purchase of treasury stock
(3,976
)
 
(47,101
)
Net cash used in financing activities attributable to continuing operations
(24,653
)
 
(71,890
)
Total cash used in continuing operations
(47,616
)
 
(75,067
)





Discontinued operations:
 
 
 
Net cash used in operating activities attributable to discontinued operations
(6,152
)
 
(4,224
)
Total cash used in discontinued operations
(6,152
)
 
(4,224
)
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents
(53,768
)
 
(79,291
)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
105,158

 
372,641

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
$
51,390

 
$
293,350







LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

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
 
June 30,
2019
March 31,
2019
June 30,
2018
 
(in thousands)
Selling and marketing expense
$
191,629

$
174,891

$
123,946

Non-variable selling and marketing expense (1)
(12,079
)
(12,305
)
(7,571
)
Cost of advertising re-sold to third parties (2)
5,053

7,336


Variable Marketing Expense
$
184,603

$
169,922

$
116,375

(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.







Below is a reconciliation of net income from continuing operations to Variable Marketing Margin and net 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
 
June 30,
2019
March 31,
2019
June 30,
2018
 
(in thousands)
Net income from continuing operations
$
12,981

$
550

$
44,849

Net income from continuing operations % of revenue
5
%
%
24
%
 
 
 
 
Adjustments to reconcile to Variable Marketing Margin:
 
 
 
Cost of revenue
16,310

17,670

6,043

Cost of advertising re-sold to third parties (1)
(5,053
)
(7,336
)

Non-variable selling and marketing expense (2)
12,079

12,305

7,571

General and administrative expense
27,951

31,117

24,759

Product development
10,175

10,166

5,967

Depreciation
2,559

2,482

1,633

Amortization of intangibles
14,280

13,427

3,964

Change in fair value of contingent consideration
2,790

14,592

(167
)
Severance
403

54

3

Litigation settlements and contingencies
8

(207
)
(170
)
Interest expense, net
5,095

5,468

2,924

Other (income) expense
(71
)
(68
)
71

Income tax benefit
(5,689
)
(7,752
)
(29,721
)
Variable Marketing Margin
$
93,818

$
92,468

$
67,726

Variable Marketing Margin % of revenue
34
%
35
%
37
%
(1
)
Represents the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties. Excludes overhead, fixed costs and personnel-related expenses.
(2
)
Represents the portion of selling and marketing expense not attributable to variable costs paid for advertising, direct marketing and related expenses. Includes overhead, fixed costs and personnel-related expenses.






Below is a reconciliation of net income from continuing operations to adjusted EBITDA and net 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
 
June 30,
2019
March 31,
2019
June 30,
2018
 
(in thousands)
Net income from continuing operations
$
12,981

$
550

$
44,849

Net income from continuing operations % of revenue
5
%
%
24
%
Adjustments to reconcile to Adjusted EBITDA:
 

 
 
Amortization of intangibles
14,280

13,427

3,964

Depreciation
2,559

2,482

1,633

Severance
403

54

3

(Gain) loss on impairments and disposal of assets
(2,196
)
218

1,797

Non-cash compensation expense
15,982

14,053

11,178

Change in fair value of contingent consideration
2,790

14,592

(167
)
Acquisition expense
60

119

625

Litigation settlements and contingencies
8

(207
)
(170
)
Interest expense, net
5,095

5,468

2,924

Rental amortization of intangibles and depreciation


194

Income tax benefit
(5,689
)
(7,752
)
(29,721
)
Adjusted EBITDA
$
46,273

$
43,004

$
37,109

Adjusted EBITDA % of revenue
17
%
16
%
20
%







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

 
Three Months Ended
 
June 30,
2019
March 31,
2019
June 30,
2018
 
(in thousands, except per share amounts)
Net income from continuing operations
$
12,981

$
550

$
44,849

Adjustments to reconcile to Adjusted Net Income:
 
 
 
Non-cash compensation
15,982

14,053

11,178

(Gain) loss on impairments and disposal of assets
(2,196
)
218

1,797

Acquisition expense
60

119

625

Change in fair value of contingent consideration
2,790

14,592

(167
)
Severance
403

54

3

Litigation settlements and contingencies
8

(207
)
(170
)
Income tax benefit from adjusted items
(4,663
)
(7,811
)
(3,639
)
Excess tax benefit from stock-based compensation
(7,723
)
(6,003
)
(33,667
)
Adjusted net income
$
17,642

$
15,565

$
20,809

 
 
 
 
Net income per diluted share from continuing operations
$
0.87

$
0.04

$
3.17

Adjustments to reconcile net income from continuing operations to Adjusted Net Income
0.31

1.06

(1.70
)
Adjusted net income per share
$
1.18

$
1.10

$
1.47

 
 
 
 
Weighted average diluted shares outstanding
14,908

14,186

14,147







LENDINGTREE’S PRINCIPLES OF FINANCIAL REPORTING

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

Variable Marketing Margin, including Variable Marketing Expense
Variable Marketing Margin % of revenue
Earnings Before Interest, Taxes, Depreciation and Amortization, as adjusted for certain items discussed below ("Adjusted EBITDA")
Adjusted EBITDA % of revenue
Adjusted Net Income
Adjusted Net Income per share


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

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

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

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

Definition of LendingTree's Non-GAAP Measures

Variable Marketing Margin is defined as revenue less Variable Marketing Expense. Variable Marketing Expense is defined as the expense attributable to variable costs paid for advertising, direct marketing and related expenses, including the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties, and excluding overhead, fixed costs and personnel-related expenses. The majority of these variable advertising costs are expressly intended to drive traffic to our websites and these variable advertising costs are included in selling and





marketing expense on the company's consolidated statements of operations and consolidated income. When advertising inventory is re-sold to third parties, the proceeds of such transactions are included in revenue for the purposes of calculating Variable Marketing Margin, and the costs of such re-sold advertising are included in cost of revenue in the company's consolidated statements of operations and consolidated income and are included in Variable Marketing Expense for purposes of calculating Variable Marketing Margin.

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

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

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

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

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

One-Time Items

Adjusted EBITDA and Adjusted Net Income are adjusted for one-time items, if applicable. Items are considered one-time in nature if they are non-recurring, infrequent or unusual, and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. For the periods presented in this report, there are no adjustments for one-time items.
 
Non-Cash Expenses That Are Excluded From LendingTree's Adjusted EBITDA and Adjusted Net Income

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

Amortization of intangibles are non-cash expenses relating primarily to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as purchase agreements, technology and customer relationships,





are valued and amortized over their estimated lives. Amortization of intangibles are only excluded from Adjusted EBITDA.






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

The matters contained in the discussion above may be considered to be “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Those statements include statements regarding the intent, belief or current expectations or anticipations of LendingTree and members of our management team. Factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following: adverse conditions in the primary and secondary mortgage markets and in the economy, particularly interest rates; default rates on loans, particularly unsecured loans; demand by investors for unsecured personal loans; the effect of such demand on interest rates for personal loans and consumer demand for personal loans; seasonality of results; potential liabilities to secondary market purchasers; changes in the Company's relationships with network partners, including dependence on certain key network partners; breaches of network security or the misappropriation or misuse of personal consumer information; failure to provide competitive service; failure to maintain brand recognition; ability to attract and retain consumers in a cost-effective manner; the effects of potential acquisitions of other businesses, including the ability to integrate them successfully with LendingTree’s existing operations; accounting rules related to contingent consideration and excess tax benefits or expenses on stock-based compensation that could materially affect earnings in future periods; ability to develop new products and services and enhance existing ones; competition; allegations of failure to comply with existing or changing laws, rules or regulations, or to obtain and maintain required licenses; failure of network partners or other affiliated parties to comply with regulatory requirements; failure to maintain the integrity of systems and infrastructure; liabilities as a result of privacy regulations; failure to adequately protect intellectual property rights or allegations of infringement of intellectual property rights; and changes in management. These and additional factors to be considered are set forth under “Risk Factors” in our Annual Report on Form 10-K for the period ended December 31, 2018, in our Quarterly Report on From 10-Q for the period ended March 31, 2019, and in our other filings with the Securities and Exchange Commission. LendingTree undertakes 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.

About LendingTree, Inc.
LendingTree (Nasdaq: TREE) is the nation's leading on line marketplace that connects consumers with the choices they need to be confident in their financial decisions. LendingTree empowers consumers to shop for financial services the same way they would shop for airline tickets or hotel stays, comparing multiple offers from a nationwide network of over 500 partners in one simple search, and can choose the option that best fits their financial needs. Services include mortgage loans, mortgage refinances, auto loans, personal loans, business loans, student refinances, credit cards, insurance and more. Through the My LendingTree platform, consumers receive free credit scores, credit monitoring and recommendations to improve credit health. My LendingTree proactively compares consumers' credit accounts against offers on our network, and notifies consumers when there is an opportunity to save money. In short, LendingTree's purpose is to help simplify financial decisions for life's meaningful moments through choice, education and support.

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

Investor Relations Contact:
Trent Ziegler
trent.ziegler@lendingtree.com
704-943-8294

Media Contact:
Megan Greuling
megan.greuling@lendingtree.com
704-943-8208