LendingTree, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited consolidated results. LendingTree operates an online marketplace connecting consumers with financial product and insurance providers. Its reportable segments are Home, Consumer, and Insurance. LendingTree Loans is presented as discontinued operations.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $283.2 million | $272.8 million; up 4% |
| Operating loss | $2.9 million | $1.9 million loss |
| Net income (loss) from continuing operations | $(10.8) million | $19.3 million income |
| Net income (loss) per diluted share | $(0.84) | $1.35 income |
| Adjusted EBITDA | $29.4 million | $30.7 million |
| Cash from continuing operations | $10.0 million provided | $8.9 million provided |
| Cash and cash equivalents at March 31 | $196.7 million | $251.2 million at December 31, 2021 |
| Debt carrying amount at March 31 | $734.5 million | $644.2 million at December 31, 2021 |
Q1 2022 investing activities used $18.5 million, including $15.0 million for an EarnUp equity investment. Financing activities used $46.1 million, primarily $43.0 million of share repurchases. The company reported no borrowings under its credit facilities at March 31 and stated it was in compliance with covenants. It had a $200 million revolving facility and a $250 million delayed-draw term facility; at May 5, $199.8 million of revolving capacity remained and no term loans had been drawn.
Operating loss was approximately 1.0% of revenue, versus approximately 0.7% in Q1 2021. The filing does not provide a consolidated gross-margin measure. Segment profit, defined as segment revenue less directly attributable variable marketing costs, was $99.5 million, up 3% year over year.
Material changes versus the prior period
- Consumer: Revenue rose 75% to $101.1 million and segment profit increased 73% to $42.5 million. Personal-loan revenue increased 137% and credit-card revenue increased 69%.
- Home: Revenue fell 20% to $101.9 million and segment profit declined 8% to $35.9 million. Refinance revenue fell amid higher interest rates and fewer consumer requests; home equity and purchase mortgage products grew.
- Insurance: Revenue decreased 8% to $80.0 million and segment profit fell 36% to $21.1 million, though revenue rose 22% sequentially from Q4 2021.
- Net results swung from income to loss chiefly because Q1 2021 included $40.1 million of investment gain, primarily from a fair-value adjustment to Stash. Q1 2022 reported essentially no other income or expense.
- In January 2022, the company adopted ASU 2020-06, increasing opening debt carrying amounts and recording a $44.4 million cumulative-effect adjustment to opening accumulated deficit. The adoption did not affect cash flows or covenant compliance.
- The company recorded $3.6 million of restructuring expense following a workforce reduction of approximately 75 employees.
Outlook, commentary, and risks
No specific company revenue or earnings guidance is provided in the filing. Management said it expects cash, operating cash flows, and available credit to fund operating needs for the next 12 months and beyond. It intended to use the delayed-draw term facility to settle $169.7 million principal amount of 0.625% convertible notes maturing June 1, 2022; the filing states no term borrowing had occurred as of May 5.
Management expected mortgage rates to rise during 2022, citing an MBA projection of a 4.8% average 30-year rate and a 33% refinance share of mortgage originations. It highlighted continued refinance headwinds, while describing Consumer demand as improving. Management expected Insurance margins to improve in the second half of 2022 as partner demand recovered and marketing costs improved. These are forward-looking expectations, not guarantees.
Key exposures include mortgage-rate and housing-market sensitivity, changes in lender and carrier demand, online competition and non-exclusive partner relationships, and economic uncertainty including potential COVID-19 effects. The company also noted litigation in the ordinary course; it reported $0.1 million of litigation settlement accruals and said it could not estimate possible losses for certain matters. It reported no material changes to its previously disclosed risk factors.
Important facts for investors to verify
- Whether and on what terms the June 2022 convertible-note maturity was settled, including the actual use and cost of delayed-draw term borrowing.
- Whether Consumer growth and its segment economics persist, and whether management’s expected Insurance margin recovery materializes.
- How higher mortgage rates and reduced refinancing activity affect Home revenue, marketing costs, and cash generation.
- Whether cash use from repurchases and investments remains consistent with liquidity needs and debt obligations.