LendingTree, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are to December 31, 2023. LendingTree operates an online marketplace matching consumers with financial-services and insurance providers. Its reportable segments are Home, Consumer and Insurance.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $167.8 million | $200.5 million | Down 16% |
| Operating income (loss) | $7.2 million | ($13.0 million) | Improved $20.2 million |
| Net income | $1.0 million | $13.5 million | Down 92% |
| Diluted EPS | $0.08 | $1.04 | Down |
| Operating cash flow | $5.7 million | $13.2 million | Down $7.4 million |
| Capital expenditures | $2.7 million | $2.5 million | Up $0.3 million |
| Adjusted EBITDA (non-GAAP) | $21.6 million | $14.5 million | Up $7.0 million |
Revenue less variable marketing expense (the company’s non-GAAP variable marketing margin) was $69.4 million, versus $76.1 million. Reported operating margin was approximately 4.3%, compared with negative 6.5%. The effective tax rate was 35.5%, versus 2.9%.
Segments and material changes
- Home: Revenue fell 30% to $30.4 million; segment profit declined 36% to $9.6 million. Mortgage revenue was pressured by reduced purchase and refinance activity; home equity revenue was $20.8 million, down 12% year over year.
- Consumer: Revenue fell 35% to $51.5 million; segment profit declined 21% to $27.4 million. Weakness included credit cards and other credit products; the Ovation credit-services business had closed in 2023. Segment margin rose to 53% from 44%, reflecting product mix and lower use of costly marketing channels.
- Insurance: Revenue increased 11% to $85.9 million and segment profit rose 11% to $33.4 million. Management attributed growth to more consumers seeking insurance; segment margin was 39% in both periods.
Total costs and expenses declined 25% to $160.6 million, including lower marketing spending and reduced general and administrative costs, as well as the absence of much of the prior-year restructuring and impairment expense. Selling and marketing expense fell 21% to $108.2 million. Q1 2023 interest income included a $34.3 million gain on extinguishment of convertible notes, making the year-over-year earnings comparison less favorable despite the improvement in operating income.
Liquidity, debt and cash flow
- Cash and cash equivalents were $230.7 million at March 31, versus $112.1 million at year-end. Operating cash flow was $5.7 million.
- Cash increased primarily from financing: the company received $125.0 million under a new term loan, with $115.7 million net cash provided by financing activities after fees and other payments.
- Balance-sheet debt was $646.2 million, comprising $14.9 million current and $631.3 million long-term. The company also reported $246.3 million outstanding on its 2021 term loan and $125.0 million drawn on its 2024 term loan; the 2025 convertible notes had $284.2 million gross principal outstanding at quarter-end. Debt carrying values and principal amounts differ due to issuance costs and discounts.
- The 2024 first-lien term loan is $175.0 million, with $125.0 million drawn and a further $50.0 million available as a delayed draw through March 27, 2025. The drawn amount bore interest at 11.08% at quarter-end. It includes a $40.0 million minimum-cash covenant, a minimum Consolidated EBITDA covenant and restrictions on matters including additional debt and share repurchases. LendingTree reported covenant compliance at March 31.
- The $200.0 million revolving facility had no borrowings at March 31; reported availability was $91.2 million at that date and $199.8 million as of May 1, subject to facility terms and liquidity conditions. Management said cash and operating cash flows should fund operating needs for the next twelve months and beyond.
Outlook, risks and contingencies
- No quantified full-year financial guidance is provided in the supplied filing text. Management said it remains optimistic about Insurance in 2024 and believes insurance partners are beginning a broader recovery in marketing spend. It expects home equity to remain the majority of Home revenue for the rest of the year.
- Management described mortgage rates and inflation as ongoing challenges. It also cited restrictive consumer lending standards and reduced conversion rates in personal and small-business lending. Mortgage rates, housing activity, lender demand, insurance-carrier appetite and advertising efficiency can materially affect revenue and marketing costs.
- Management said it dynamically adjusts marketing spending to anticipated revenue opportunities. It added 0.6 million Spring users in Q1, bringing cumulative sign-ups to 28.8 million; improving the platform experience remains a stated priority.
- In April 2024, after quarter-end, LendingTree repurchased approximately $37.7 million principal of its 2025 convertible notes for $35.3 million in cash plus accrued interest.
- Litigation accruals were $0.7 million at March 31. The company stated that it cannot estimate possible losses or ranges for certain matters, particularly potential non-monetary remedies. It reported no material change to previously disclosed risk factors.
- Other notable prior-period items include a $38.6 million goodwill impairment charge for the Insurance reporting unit and a $113.1 million impairment of its Stash equity investment in 2023; neither was recorded in Q1 2024.
Key facts for investors to verify
- Whether Insurance growth and carrier demand continue, and whether the reported improvement translates into sustained segment profit.
- Whether Home and Consumer revenue stabilize amid mortgage-market weakness and tighter lending standards.
- Cash generation and debt-service capacity, particularly the high stated borrowing rates, 2025 convertible-note maturity and 2024 term-loan covenants.
- The precise liquidity available under the revolving facility as cash is used for debt repayment; availability is subject to facility terms.
- Adjusted EBITDA and variable marketing margin reconciliations, including the company’s non-GAAP definitions and exclusions.
- Potential litigation exposure, goodwill recovery assumptions and the timing and terms of subsequent convertible-note repurchases.