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LendingTree Reports Record 3Q 2017 Results; Increasing Full-Year 2017 Guidance

"We're incredibly proud to report our record third quarter financial results which marks LendingTree's 9th consecutive quarter of record adjusted EBITDA and an all-time quarterly record in non-mortgage revenue, representing 57 percent of total company revenue," said Doug Lebda, founder, chairman and CEO. "While we continue to diversify the business, we're also seeing secular growth in mortgage despite industry headwinds, further accelerating market share gains. We believe the momentum in the third quarter sets us up well for exceptional growth and profitability in 2018 and beyond."

"With 81 percent revenue growth and record adjusted EBITDA, the third quarter's results significantly exceeded expectations across the board," said J.D. Moriarty, LendingTree's Chief Financial Officer. "We are achieving real scale in new areas, offering additional growth opportunities while further reducing interest rate exposure and other macro-economic risks. Given the strength of our business, we are increasing our outlook for the year."

Third Quarter 2017 Business Highlights

  • Record revenue from mortgage products of $73.8 million represents an increase of 38% over third quarter 2016 driven by strong growth in both purchase and refinance revenues at 87% and 24%, respectively. According to Mortgage Bankers Association, originations industry-wide were down 16% in the comparable period.
  • Record revenue from non-mortgage products of $97.7 million in the third quarter represents an increase of 138% over the third quarter 2016 and increased to 57% of total revenue compared to 43% one year ago.
  • Home equity revenue growth accelerated, increasing $9.0 million, or 176% over third quarter 2016, and marked the eighth consecutive quarter of year-over-year growth exceeding 100%.
  • Personal loans revenue of $25.4 million grew 44% over third quarter 2016 and grew 24% sequentially.
  • Revenue from our credit card offerings grew to $39.4 million in 3Q compared to just $6.6 million in 3Q 2016. On a proforma basis, giving effect to the CompareCards and MagnifyMoney acquisitions as if they had occurred on January 1, 2016, credit cards revenue grew 43%.
  • More than 6.5 million consumers have now signed up for free credit scores and savings alerts through My LendingTree, and the volume of new enrollments accelerated. Revenue contribution from MyLendingTree grew 96% in the third quarter compared to the prior year period as new features and smarter savings alerts are driving increased engagement.

LendingTree Selected Financial Metrics

(In millions, except per share amounts)


















Q/Q





Y/Y



3Q 2017


2Q 2017


% Change



3Q 2016


% Change


Revenue by Product












Mortgage Products (1)

$

73.8



$

71.5



3

%



$

53.5



38

%


Non-Mortgage Products (2)

97.7



81.3



20

%



41.0



138

%


Total Revenue

$

171.5



$

152.8



12

%



$

94.6



81

%


Non-Mortgage % of Total

57

%


53

%





43

%
















Income Before Income Taxes

$

14.4



$

7.9



82

%



$

14.0



3

%


Income Tax (Expense) Benefit

$

(4.3)



$

0.1






$

(6.7)





Net Income from Continuing Operations

$

10.1



$

8.0



26

%



$

7.3



38

%


Net Income from Cont. Ops. % of Revenue

6

%


5

%





8

%
















Net Income per Share from Cont. Ops.












Basic

$

0.84



$

0.67



25

%



$

0.62



35

%


Diluted

$

0.74



$

0.59



25

%



$

0.57



30

%














Selling and Marketing Expense












Variable Selling & Marketing Expense (3)

$

112.4



$

104.4



8

%



$

58.2



93

%


Non-variable Selling & Marketing

6.1



4.7



30

%



4.6



33

%


Selling and Marketing Expense

$

118.5



$

109.1



9

%



$

62.8



89

%














Variable Marketing Margin (4)

$

59.1



$

48.3



22

%



$

36.3



63

%


Variable Marketing Margin % of Revenue

34

%


32

%





38

%
















Adjusted EBITDA (4)

$

34.7



$

27.0



29

%



$

18.5



88

%


Adjusted EBITDA % of Revenue (4)

20

%


18

%





20

%
















Adjusted Net Income (4)

$

16.1



$

12.2



32

%



$

9.1



77

%














Adjusted Net Income per Share (4)

$

1.17



$

0.90



30

%



$

0.71



65

%














Third Quarter 2017 Financial Highlights

  • Record consolidated revenue of $171.5 million represents an increase of $76.9 million, or 81%, over revenue in the third quarter 2016.
  • GAAP net income from continuing operations of $10.1 million, or $0.74 per diluted share.
  • Record Variable Marketing Margin of $59.1 million represents an increase of $22.8 million, or 63%, over third quarter 2016.
  • Adjusted Net Income per share of $1.17 represents growth of 65% over third quarter 2016.
  • During the quarter, the company repurchased 42 thousand shares of its stock at a weighted-average price per share of $237 for aggregate consideration of $10.0 million. As of September 30, 2017, the company has $38.7 million in repurchase authorization remaining.

Business Outlook - 2017

LendingTree is revising Revenue, Variable Marketing Margin and Adjusted EBITDA guidance for full-year 2017, as follows:

  • Revenue is anticipated to be in the range of $603 - $608 million, representing growth of 57% - 58% over full-year 2016 and an increase from prior guidance of $580 - $590 million.
  • Variable Marketing Margin is anticipated to be $202 - $205 million compared to prior guidance of $190 - $195 million.
  • Adjusted EBITDA is anticipated to be in the range of $111 - $113 million, up 59% - 62% over full-year 2016 and an increase from prior guidance of $103 - $106 million.

For fourth quarter 2017:

  • Revenue of $146 - $151 million, representing growth of 45% - 50% over 4Q 2016.
  • Adjusted EBITDA in the range of $25.5 - $27.5 million, up 35% - 45% over 4Q 2016.

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, contingent consideration and income taxes. These expenses or benefits 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 third quarter 2017 financial results will be webcast live today, October 26, 2017 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, November 2, 2017. To listen to the telephone replay, call toll-free (855) 859-2056 with passcode #98763739. Callers outside the United States and Canada may dial (404) 537-3406 with passcode #98763739.

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016


(in thousands, except per share amounts)

Revenue

$

171,494



$

94,558



$

456,782



$

283,561


Costs and expenses:








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

4,388



3,392



12,143



10,329


Selling and marketing expense (1)

118,538



62,819



320,930



192,416


General and administrative expense (1)

17,920



9,008



41,561



26,820


Product development (1)

4,805



3,718



12,492



11,384


Depreciation

1,798



1,286



5,309



3,458


Amortization of intangibles

3,817



166



9,034



263


Change in fair value of contingent consideration

2,501





20,640




Severance





404



72


Litigation settlements and contingencies

272



19



961



109


Total costs and expenses

154,039



80,408



423,474



244,851


Operating income

17,455



14,150



33,308



38,710


Other income (expense), net:








Interest expense, net

(2,804)



(141)



(4,048)



(424)


Other (expense) income

(228)





(215)




Income before income taxes

14,423



14,009



29,045



38,286


Income tax expense

(4,292)



(6,729)



(3,109)



(15,099)


Net income from continuing operations

10,131



7,280



25,936



23,187


Loss from discontinued operations, net of tax

(1,011)



(664)



(2,632)



(3,017)


Net income and comprehensive income

$

9,120



$

6,616



$

23,304



$

20,170










Weighted average shares outstanding:








Basic

11,999



11,754



11,931



11,827


Diluted

13,774



12,742



13,625



12,782


Income per share from continuing operations:








Basic

$

0.84



$

0.62



$

2.17



$

1.96


Diluted

$

0.74



$

0.57



$

1.90



$

1.81


Loss per share from discontinued operations:








Basic

$

(0.08)



$

(0.06)



$

(0.22)



$

(0.26)


Diluted

$

(0.07)



$

(0.05)



$

(0.19)



$

(0.24)


Net income per share:








Basic

$

0.76



$

0.56



$

1.95



$

1.71


Diluted

$

0.66



$

0.52



$

1.71



$

1.58










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








Cost of revenue

$

41



$

29



$

129



$

99


Selling and marketing expense

1,366



737



2,543



2,118


General and administrative expense

5,864



1,072



8,684



3,511


Product development

667



510



1,712



1,682


LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)



September 30,
2017


December 31,
2016


(in thousands, except par value and
share amounts)

ASSETS:




Cash and cash equivalents

$

345,239



$

91,131


Restricted cash and cash equivalents

4,087



4,089


Accounts receivable, net

64,128



41,382


Prepaid and other current assets

9,690



4,021


Total current assets

423,144



140,623


Property and equipment, net

35,345



35,462


Goodwill

113,558



56,457


Intangible assets, net

85,265



71,684


Deferred income tax assets

17,737



14,610


Other non-current assets

826



810


Non-current assets of discontinued operations

3,781



3,781


Total assets

$

679,656



$

323,427






LIABILITIES:




Accounts payable, trade

$

3,552



$

5,593


Accrued expenses and other current liabilities

68,744



49,403


Current contingent consideration

24,014




Current liabilities of discontinued operations

13,396



11,711


Total current liabilities

109,706



66,707


Long-term debt

235,120




Non-current contingent consideration

30,544



23,600


Other non-current liabilities

1,473



1,685


Total liabilities

376,843



91,992


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; 14,174,357 and 13,955,378 shares
issued, respectively, and 11,968,459 and 11,791,633 shares outstanding, respectively

142



140


Additional paid-in capital

1,076,748



1,018,010


Accumulated deficit

(700,628)



(722,630)


Treasury stock; 2,205,898 and 2,163,745 shares, respectively

(74,086)



(64,085)


Noncontrolling interest

637




Total shareholders' equity

302,813



231,435


Total liabilities and shareholders' equity

$

679,656



$

323,427


LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP

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


September 30,
2017

June 30,
2017

September 30,
2016





Net income from continuing operations

$

10,131


$

8,007


$

7,280


Net income from continuing operations % of revenue

6

%

5

%

8

%





Adjustments to reconcile to Variable Marketing Margin:




Cost of revenue

4,388


4,164


3,392


Non-variable selling and marketing expense (1)

6,118


4,681


4,583


General and administrative expense

17,920


12,094


9,008


Product development

4,805


4,064


3,718


Depreciation

1,798


1,808


1,286


Amortization of intangibles

3,817


2,608


166


Change in fair value of contingent consideration

2,501


9,393



Severance


247



Litigation settlements and contingencies (2)

272


285


19


Interest expense, net

2,804


1,079


141


Other expense (income)

228


(13)



Income tax expense (benefit)

4,292


(104)


6,729


Variable Marketing Margin

$

59,074


$

48,313


$

36,322


Variable Marketing Margin % of revenue

34

%

32

%

38

%

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


September 30,
2017

June 30,
2017

September 30,
2016





Net income from continuing operations

$

10,131


$

8,007


$

7,280


Net income from continuing operations % of revenue

6

%

5

%

8

%

Adjustments to reconcile to Adjusted EBITDA:




Non-cash compensation

7,938


2,900


2,348


Loss on disposal of assets

364


36


121


Acquisition expense

320


488


362


Change in fair value of contingent consideration

2,501


9,393



Severance


247



Litigation settlements and contingencies (1)

272


285


19


Depreciation

1,798


1,808


1,286


Amortization of intangibles

3,817


2,608


166


Rental depreciation and amortization of intangibles

486


263



Interest expense, net

2,804


1,079


141


Income tax expense (benefit)

4,292


(104)


6,729


Adjusted EBITDA

$

34,723


$

27,010


$

18,452


Adjusted EBITDA % of revenue

20

%

18

%

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


September 30,
2017

June 30,
2017

September 30,
2016





Net income from continuing operations

$

10,131


$

8,007


$

7,280


Adjustments to reconcile to Adjusted Net Income:




Non-cash compensation

7,938


2,900


2,348


Loss on disposal of assets

364


36


121


Acquisition expense

320


488


362


Change in fair value of contingent consideration

2,501


9,393



Severance


247



Litigation settlements and contingencies (1)

272


285


19


Income tax benefit from adjusted items

(4,581)


(5,340)


(1,047)


Excess tax benefit from stock-based compensation

(811)


(3,840)



Adjusted net income

$

16,134


$

12,176


$

9,083






Net income per diluted share from continuing operations

$

0.74


$

0.59


$

0.57


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

0.43


0.31


0.14


Adjusted net income per share

$

1.17


$

0.90


$

0.71






Weighted average diluted shares outstanding

13,774


13,604


12,742


LENDINGTREE'S PRINCIPLES OF FINANCIAL REPORTING

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

  • Variable Marketing Margin
  • 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 operating efficiency of the Company's operating model, measuring revenue after subtracting variable marketing 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 measure 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, contingencies and legal fees for certain patent litigation, 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 (loss) 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 the portion of selling & marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses, which excludes overhead, fixed costs and personnel-related expenses.

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) severance expenses, (5) litigation settlements, contingencies and legal fees for certain patent litigation, (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) severance expenses, (5) litigation settlements, contingencies and legal fees for certain patent litigation, (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. There were no GAAP losses recorded in any periods in this report.

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.

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 lenders, including dependence on certain key network lenders; 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 lenders 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 Form 10-Q for the period ended June 30, 2017, our Annual Report on Form 10-K for the period ended December 31, 2016 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, Inc. (NASDAQ: TREE) operates the nation's leading online loan marketplace and provides consumers with an array of online tools and information to help them find the best loans for their needs. LendingTree's online marketplace connects consumers with multiple lenders that compete for their business, empowering consumers as they comparison-shop across a full suite of loans and credit-based offerings. Since its inception, LendingTree has facilitated more than 65 million loan requests. LendingTree provides access to its network of over 450 lenders offering home loans, home equity loans/lines of credit, reverse mortgages, personal loans, auto loans, small business loans, credit cards, student loans, and more.

LendingTree, Inc. is headquartered in Charlotte, NC and maintains operations solely in the United States. For more information, please visit www.lendingtree.com.

SOURCE LendingTree, Inc.


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