LendingTree, Inc. — Q2 2022 Form 10-Q
Business context and period. Unaudited results cover the three and six months ended June 30, 2022. LendingTree operates an online marketplace connecting consumers with providers of home, consumer-finance, and insurance products. The former LendingTree Loans business is reported as discontinued operations.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $261.9 million | $270.0 million | $545.1 million | $542.8 million |
| Operating income (loss) | ($3.9 million) | $10.5 million | ($6.8 million) | $8.6 million |
| Net income (loss) from continuing operations | ($8.0 million) | $9.8 million | ($18.9 million) | $29.1 million |
| Adjusted EBITDA (non-GAAP) | $28.6 million | $38.2 million | $58.0 million | $69.0 million |
| Variable marketing margin (non-GAAP) | $90.8 million | $98.4 million | $184.9 million | $187.5 million |
| Operating cash flow | Not separately provided for the quarter | $16.1 million | $54.6 million |
- Q2 diluted loss per share was $0.63, versus diluted continuing-operations income per share of $0.71 a year earlier. Six-month diluted loss per share was $1.47, versus income of $2.09.
- Q2 revenue declined 3% year over year; costs and expenses rose 2%, contributing to the operating loss. Six-month revenue was roughly flat, but results moved from operating and net income to losses.
- By segment, Q2 revenue was Home $73.9 million (down 29%), Consumer $106.1 million (up 40%), and Insurance $81.8 million (down 8%). Segment profit was $26.7 million, $44.6 million, and $22.6 million, respectively. Segment profit is a company-defined measure before corporate and other expenses.
- At June 30, cash and cash equivalents were $279.1 million, versus $251.2 million at year-end 2021. Current assets were $422.1 million and current liabilities $105.3 million.
- Debt was $815.7 million: $250.0 million drawn on the term loan and approximately $565.7 million net carrying value of the 2025 convertible notes. The $169.7 million principal balance of the 2022 notes was repaid at maturity in June. The $200 million revolving facility had no borrowings at June 30; a $0.2 million letter of credit was outstanding. The company reported covenant compliance.
- Six-month investing cash outflow was $22.8 million, including a $16.4 million equity investment and $6.3 million of capital expenditures. Financing cash inflow was $34.6 million, including the term-loan proceeds, note repayment, and $43.0 million of share repurchases. Operating cash flow fell year over year, primarily reflecting working-capital and tax-related changes.
Material changes and unusual items
- Home revenue contracted as rising mortgage rates sharply reduced refinancing activity; home equity and purchase products partly offset the decline. Consumer growth, led by personal loans, credit cards, and small-business loans, more than offset the Home and Insurance declines for the six-month revenue comparison.
- Insurance results weakened amid inflation, supply-chain constraints, and increased accident severity and frequency affecting carrier economics and marketing budgets.
- In Q1 and Q2, the company reduced its workforce by approximately 75 and 25 employees, respectively. It recorded $3.8 million of restructuring costs, including $2.7 million of separation costs and $1.1 million of non-cash accelerated stock compensation; separation payments were expected by Q1 2023.
- Adoption of ASU 2020-06 on January 1, 2022 increased opening accumulated deficit by $44.4 million and raised recorded debt by removing prior debt discounts. The company said adoption did not affect cash flows or covenant compliance. Lower reported interest expense also reflected the accounting change.
- Six-month 2021 results included $40.1 million of investment gains, primarily related to Stash; this did not recur in 2022. LendingTree acquired an equity interest in EarnUp for $15.0 million in January 2022.
- The company repurchased 379,895 shares for $43.0 million during the first six months; approximately $96.7 million remained authorized. No shares were repurchased under the program during Q2.
Outlook, commentary, and risks
- Management said cash, operating cash flows, and available credit were expected to fund operating needs for the next twelve months and beyond. No specific company revenue or earnings guidance was provided in the filing text.
- Management expected the insurance industry to remain challenged through the rest of 2022 and reported that leading carrier partners indicated lower Q3 budgets. The Home business faced higher rates, low housing inventory, and affordability pressures; management emphasized home equity and higher-converting products. Consumer lenders had begun tightening some underwriting criteria.
- Mortgage rates, consumer demand, lender and carrier marketing budgets, inflation, and broader economic conditions may affect marketplace revenue. The company also cited reliance on third-party technology, online security and fraud exposure, and competition from providers and other online channels.
- The company reported a $0.1 million litigation accrual. It stated that it could not estimate possible losses or ranges for certain non-monetary remedies; ordinary-course litigation includes property, contract, intellectual-property, privacy, and security matters. No material changes to previously disclosed risk factors were reported.
- A quantitative goodwill test at June 30 found each reporting unit’s fair value exceeded carrying value, so no impairment was recorded. Management said it would monitor the Insurance unit, where a slower-than-expected recovery could cause impairment.
Important facts for investors to verify
- Whether Consumer growth can offset continued weakness in mortgage and Insurance activity, particularly given rate trends and partner budget changes.
- The sustainability of Adjusted EBITDA and cash generation, and the effects of working-capital movements and restructuring costs.
- Term-loan interest costs, leverage, covenant headroom, and the company’s capacity to service debt while maintaining liquidity.
- Whether Insurance recovery and goodwill assumptions remain supportable as claims inflation and carrier spending evolve.
- Potential outcomes of litigation and other contingencies, for which the filing does not provide a clear estimate of possible losses.