LendingTree, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021; comparisons are with the same 2020 periods unless stated otherwise. LendingTree operates an online marketplace connecting consumers seeking financial products and insurance with providers. Its reportable segments are Home, Consumer and Insurance. The LendingTree Loans business is reported as discontinued operations.
Financial performance and position
- Revenue: Q3 revenue was $297.5 million, up 35%; nine-month revenue was $840.2 million, up 22%.
- Segment trends: Q3 Home revenue increased 43% to $112.4 million and Consumer increased 107% to $100.0 million; Insurance decreased 8% to $84.8 million. For the first nine months, Home rose 49% to $345.4 million, Consumer rose 14% to $233.6 million and Insurance rose 5% to $260.7 million.
- Profitability: Q3 operating income was $7.4 million, versus an operating loss of $16.1 million; continuing-operations net loss was $4.4 million, versus a loss of $24.8 million. Nine-month operating income was $16.1 million, versus a loss of $2.9 million; continuing-operations net income was $24.7 million, versus a loss of $14.4 million. Total nine-month net income was $21.2 million, compared with a $40.0 million net loss.
- Adjusted EBITDA (non-GAAP): Q3 was $41.0 million, versus $21.7 million; nine-month Adjusted EBITDA was $110.0 million, versus $97.4 million.
- Cash flow and investment: Nine-month cash from continuing operations was $88.9 million, compared with $96.2 million. Investing activities used $31.7 million, primarily for $30.5 million of capital expenditures; financing activities used $15.2 million. Cash and cash equivalents were $215.3 million at September 30, up from $169.9 million at year-end 2020.
- Liquidity and debt: Current assets were $372.4 million and current liabilities were $282.7 million. Debt carrying value totaled approximately $635.8 million, including $163.9 million current and $472.0 million long-term. The current portion relates to the 0.625% convertible notes due June 2022. A new $200 million revolving facility and $250 million delayed-draw term facility were established in September; neither was drawn at quarter-end. Management said cash, operating cash flow and the credit facility should fund operating needs for the next 12 months and beyond. The company reported compliance with credit covenants.
Changes, outlook and material items
- Growth was led by Home and Consumer, while Insurance profitability was pressured: Q3 Insurance segment profit fell 28% to $26.6 million. Total segment profit rose 35% to $112.9 million in Q3 and 12% to $314.9 million year to date.
- Higher marketing spend accompanied higher revenue: Q3 selling and marketing expense rose 33% to $206.5 million, and nine-month expense rose 27% to $589.1 million. Management says it adjusts advertising spending to marketplace demand and revenue opportunities.
- Nine-month pre-tax income included a $40.1 million unrealized gain on the Stash equity investment, which was measured using observable market events. In October, LendingTree agreed to sell part of its Stash holdings for $46.3 million; it expected a $27.9 million realized gain and a $55.3 million unrealized gain on retained holdings in Q4. These are subsequent-event expectations, not Q3 results.
- Management described Consumer recovery as progressing, while noting near-term pandemic effects, muted personal-loan consumer demand and student-loan refinancing constraints linked to the federal payment moratorium. It expects student-loan refinancing demand to return after the moratorium ends, then scheduled for January 2022. Management was optimistic about Consumer recovery over the medium to long term.
- Home refinance activity was decelerating from earlier peaks; management cited uncertainty around rates and refinancing but expressed confidence in its partner position and flexible model. Mortgage refinance originations declined 31% industry-wide year over year in Q3. Insurance faced reduced carrier marketing budgets amid higher claims costs and catastrophe losses; management characterized these pressures as transitory.
- No formal company revenue or earnings guidance is provided in the supplied filing text. Management cited expected 2021 mortgage-rate increases in discussing industry conditions, not as company guidance.
- The HLC Chapter 7 bankruptcy case closed in July 2021. LendingTree reported a July 2021 settlement with Lehman Brothers Holdings, paid in Q3. It disclosed $0.1 million of litigation accruals in continuing operations and said it could not estimate potential losses for certain non-monetary remedies. The company reported no material changes to its previously disclosed risk factors.
Important facts for investors to verify
- How much of reported earnings and future performance depends on Stash valuation changes and the subsequent partial sale, rather than marketplace operations.
- Whether Home revenue and profitability can hold up as refinance volumes and mortgage rates change, and how effectively marketing costs adjust.
- Whether Consumer growth persists after pandemic-related disruptions and the federal student-loan payment moratorium.
- The timing and funding plan for the June 2022 convertible notes maturity, including any use of the delayed-draw term facility.
- Cash conversion and working-capital trends: operating cash flow declined year over year, with accounts receivable a significant use of cash.
- Potential remaining costs or liabilities tied to HLC-related litigation and other legal proceedings; the filing does not provide a clear estimate for certain possible losses.