LendingTree(TREE) - 2020 Q4 - Annual Report

Cautionary Statement Regarding Forward-Looking Information - This report contains forward-looking statements about anticipated financial performance, business prospects, strategy, industry trends, and new products/services[13] - Actual results may differ materially due to inherent uncertainties, risks, and changes in circumstances, including those discussed in Item 1A. Risk Factors[14] - Readers should not place undue reliance on these statements, and the company undertakes no obligation to update or revise them except as required by law[15] PART I Item 1. Business LendingTree is a leading online platform connecting consumers with financial service providers, generating revenue from match fees - LendingTree operates a leading online consumer platform connecting consumers with over 800 Network Partners for financial services, including mortgage loans, auto loans, credit cards, personal loans, student loans, small business loans, and insurance quotes[17] - Revenue is primarily generated from match fees paid by Network Partners for transmitting consumer requests, clicks, or call transfers[18] - The company has diversified its offerings through acquisitions, including Stash Financial (Feb 2020), ValuePenguin (Jan 2019), QuoteWizard (Oct 2018), Student Loan Hero (Jul 2018), and Ovation Credit Services (Jun 2018)[25][26][27] - The COVID-19 pandemic significantly impacted the Consumer segment due to unsecured credit contraction, while Home and Insurance segments recovered by the end of 2020[31][32] Segment Revenue | Segment | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :-------- | :------------------ | :------------------ | :------------------ | | Home | $320,992 | $277,935 | $319,176 | | Consumer | $253,198 | $515,037 | $395,615 | | Insurance | $333,765 | $284,792 | $31,369 | | Other | $2,035 | $28,839 | $18,705 | | Total revenue | $909,990 | $1,106,603 | $764,865 | - One Network Partner, Progressive Casualty Insurance, accounted for 15% of total consolidated revenue in 2020 and 12% in 2019, all within the Insurance segment[36] - The company is subject to extensive federal and state laws and regulations, including those related to consumer lending, data privacy (GLBA, CCPA), and marketing (TSR, TCPA, CAN-SPAM)[53][55] - As of December 31, 2020, LendingTree had 1,303 employees (1,289 full-time, 14 temporary/part-time) and considers relations with employees to be good[59] Item 1A. Risk Factors The company faces significant risks across market conditions, operational dependencies, regulatory compliance, and investment factors - The COVID-19 pandemic has negatively impacted the global economy and significantly affected the Consumer segment's demand for products, with the ultimate impact remaining uncertain[68] - Adverse conditions in the primary and secondary mortgage markets, such as interest rate increases, can materially affect the business by reducing consumer demand and lender ability to close loans[69] - The company's success depends significantly on relationships with Network Partners; financial difficulties or disputes with these partners could have a material adverse effect[70] - Failure to maintain brand recognition and attract/retain consumers cost-effectively, or adverse publicity from litigation/investigations, could materially harm the business[72][74] - Revenue growth from credit card and insurance leads (via QuoteWizard acquisition) and personal loan offerings is subject to specific risks, including economic conditions, competition, and regulatory changes[78][81][82] - Acquisitions may not realize intended benefits, could disrupt business, divert management attention, and harm financial condition due to integration challenges or undisclosed liabilities[89][90][92] - Breaches or failures of systems or website security, theft of personal information, or fraudulent activity could lead to significant costs, liabilities, regulatory actions, and reputational damage[111][112][113] - The company is subject to risks related to the bankruptcy of its Home Loan Center, Inc. subsidiary, including potential claims against LendingTree and its operating subsidiaries[115][116] - Failure to comply with various federal and state laws and regulations (e.g., data privacy, lending, marketing, licensing) could result in fines, proceedings, litigation, and adverse effects on business[133][134][135] - The market price of common stock is volatile and can fluctuate significantly due to operating results, market conditions, analyst reports, and other factors[159][160] - Douglas Lebda, Chairman and CEO, beneficially owns a substantial portion of outstanding common stock, concentrating voting control and potentially limiting other stockholders' influence[163][164] - The conditional conversion feature of outstanding convertible senior notes, if triggered, may adversely affect financial condition and operating results by requiring cash settlement or reclassification as a current liability[172][173] Item 1B. Unresolved Staff Comments This item is not applicable to LendingTree, Inc. for the reported period - Not applicable[185] Item 2. Properties LendingTree's new Charlotte corporate office is nearing completion, with additional offices supporting its Home, Consumer, and Insurance segments - New corporate office in Charlotte, North Carolina, is in final stages of construction, comprising approximately 176,000 square feet under an approximate 15-year lease expected to commence in Q1 2021[186] - The company operates additional offices in Charleston, Chicago, Denver, Jacksonville, New York City, Rancho Cordova, San Mateo, Seattle, and Makarba, India[187] - Charlotte operations support all three segments (Home, Consumer, Insurance), while other offices support specific segments (e.g., San Mateo for Home, Makarba for Consumer, Denver for Insurance)[188] Item 3. Legal Proceedings LendingTree is routinely involved in various legal proceedings and claims, with financial impacts potentially covered by insurance - The company is a party to litigation involving property, contract, intellectual property, and a variety of other claims in the ordinary course of business[189] - Amounts that may be recovered in such matters may be subject to insurance coverage[189] - Further discussion of current and recently settled litigation is available in Note 17 (Contingencies) and Note 21 (Discontinued Operations) of the consolidated financial statements[189] Item 4. Mine Safety Disclosures This item is not applicable to LendingTree, Inc. for the reported period - Not applicable[190] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities LendingTree's common stock trades on Nasdaq, has no current dividend plans, and has an authorized stock repurchase program - LendingTree's common stock is quoted on the Nasdaq Global Select Market under the ticker symbol "TREE"[193] - As of February 19, 2021, there were approximately 575 holders of record of the company's common stock[193] - The company has no current intention to declare or pay cash dividends on its common stock in the foreseeable future[194] - As of February 19, 2021, approximately $179.7 million is authorized for future share repurchases under a stock repurchase program[198] - During the quarter ended December 31, 2020, no shares were repurchased under the publicly announced stock repurchase program[198] Issuer Purchases of Equity Securities (Q4 2020 for Tax Obligations) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------- | :----------------------------- | :--------------------------- | | 10/1/20 - 10/31/20 | 4,899 | $332.98 | | 11/1/20 - 11/30/20 | 339 | $317.02 | | 12/1/20 - 12/31/20 | 2,792 | $274.04 | | Total | 8,030 | $311.81 | Item 6. Selected Financial Data This item is intentionally omitted from the report - This item is intentionally omitted[203] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes LendingTree's financial condition and results, detailing COVID-19's impact, acquisitions, and key performance drivers - LendingTree operates a leading online consumer platform, My LendingTree, offering personalized comparison shopping for financial services and leveraging its brand and technology for diversification[207][208][209] - The COVID-19 pandemic significantly impacted the Consumer segment due to unsecured credit contraction, while Home and Insurance segments recovered by the end of 2020[212][213] - Recent acquisitions include an equity interest in Stash (Feb 2020), ValuePenguin (Jan 2019), QuoteWizard (Oct 2018), Student Loan Hero (Jul 2018), and Ovation (Jun 2018), all contributing to diversification[215][216][217] - 30-year mortgage interest rates decreased to an average of 3.11% in 2020 (from 3.94% in 2019), leading to a 109% increase in refinance origination dollars in 2020 over 2019[226][227] - Issued $575.0 million of 0.50% Convertible Senior Notes due 2025 in July 2020 and repurchased $130.3 million of 0.625% Convertible Senior Notes due 2022[231][232] Consolidated Financial Performance (2020 vs. 2019) | Metric | 2020 (in thousands) | 2019 (in thousands) | Change ($) | Change (%) | | :-------------------------------------------------------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenue | $909,990 | $1,106,603 | $(196,613) | (18)% | | Total costs and expenses | $916,593 | $1,055,875 | $(139,282) | (13)% | | Operating (loss) income | $(6,603) | $50,728 | $(57,331) | (113)% | | (Loss) income before income taxes | $(42,527) | $30,981 | $(73,508) | (237)% | | Net (loss) income from continuing operations | $(22,566) | $39,460 | $(62,026) | (157)% | | Net (loss) income and comprehensive (loss) income | $(48,255) | $17,828 | $(66,083) | (371)% | - Revenue decreased 18% in 2020, primarily due to a 51% decrease in the Consumer segment (credit cards down 63%, personal loans down 56%), partially offset by increases in the Insurance (17%) and Home (15%) segments[240][241][242][243][246][247] - Selling and marketing expense decreased 16% in 2020, largely due to a $120.4 million reduction in advertising expenditures in response to changes in Network Partner demand during the pandemic[253][255][256] Segment Profit (2020 vs. 2019) | Segment | 2020 (in thousands) | 2019 (in thousands) | Change ($) | Change (%) | | :-------- | :------------------ | :------------------ | :--------- | :--------- | | Home | $132,123 | $103,121 | $29,002 | 28% | | Consumer | $106,890 | $213,185 | $(106,295) | (50)% | | Insurance | $131,142 | $114,639 | $16,503 | 14% | | Other | $(682) | $1,373 | $(2,055) | (150)% | | Total Segment Profit | $369,473 | $432,318 | $(62,845) | (15)% | - Adjusted EBITDA decreased to $123.7 million in 2020 from $198.2 million in 2019[284] - Cash and cash equivalents increased to $169.9 million at December 31, 2020, from $60.2 million at December 31, 2019[286] Summary of Contractual Obligations (as of Dec 31, 2020) | Contractual Obligations | Total (in thousands) | Less Than 1 Year (in thousands) | 1-3 Years (in thousands) | 3-5 Years (in thousands) | More Than 5 Years (in thousands) | | :-------------------------- | :------------------- | :------------------------------ | :----------------------- | :----------------------- | :----------------------------- | | Operating lease obligations | $150,958 | $9,147 | $25,440 | $20,309 | $96,062 | | Long-term contractual obligations | $23,146 | $13,858 | $8,512 | $776 | — | | Convertible debt | $744,690 | — | $169,690 | $575,000 | — | | Total contractual obligations | $918,794 | $23,005 | $203,642 | $596,085 | $96,062 | Item 7A. Quantitative and Qualitative Disclosures about Market Risk LendingTree's primary market risk is interest rate fluctuations, impacting mortgage and refinancing demand, and affecting revenue per consumer - The company's financial instruments, other than the Amended Revolving Credit Facility, are not exposed to significant market risk[321] - Fluctuations in interest rates directly affect consumer demand for new mortgages and refinancing, which in turn impacts lender demand for mortgage leads[322] - Declining interest rates typically increase consumer demand for mortgage refinancing, leading to increased website traffic and decreased marketing efforts, but often result in lower revenue earned per consumer[322] - Conversely, increasing interest rates typically decrease consumer demand for mortgage refinancing, leading to decreased website traffic and higher marketing efforts, but can increase revenue per matched lead, though overall reduced demand can still adversely affect revenue per consumer[322] Item 8. Financial Statements and Supplementary Data This section presents LendingTree's consolidated financial statements, including the auditor's unqualified opinion and critical audit matters Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2020[328][329] - Critical audit matters included the significant judgment in determining the fair value of contingent consideration for the QuoteWizard acquisition and the valuation of the 2025 Convertible Senior Notes[337][338][340] Consolidated Financial Statements Consolidated Statements of Operations and Comprehensive Income (Loss) | Metric | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | :------------------ | | Revenue | $909,990 | $1,106,603 | $764,865 | | Operating (loss) income | $(6,603) | $50,728 | $56,191 | | Net (loss) income from continuing operations | $(22,566) | $39,460 | $109,319 | | Loss from discontinued operations, net of tax | $(25,689) | $(21,632) | $(12,820) | | Net (loss) income and comprehensive (loss) income | $(48,255) | $17,828 | $96,499 | | Diluted Net (loss) income per share | $(3.71) | $1.22 | $6.85 | Consolidated Balance Sheets | Asset/Liability | Dec 31, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $169,932 | $60,243 | | Total current assets | $296,409 | $189,426 | | Goodwill | $420,139 | $420,139 | | Intangible assets, net | $128,502 | $181,580 | | Equity investment | $80,000 | — | | Total assets | $1,188,990 | $947,969 | | Total current liabilities | $111,843 | $230,706 | | Long-term debt | $611,412 | $264,391 | | Total liabilities | $824,229 | $545,643 | | Total shareholders' equity | $364,761 | $402,326 | Consolidated Statements of Cash Flows | Cash Flow Activity | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | :------------------ | | Net cash provided by operating activities attributable to continuing operations | $111,299 | $157,174 | $123,948 | | Net cash used in investing activities attributable to continuing operations | $(122,149) | $(101,060) | $(383,038) | | Net cash provided by (used in) financing activities attributable to continuing operations | $193,290 | $(87,678) | $4,843 | | Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | $109,710 | $(44,819) | $(267,483) | | Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period | $170,049 | $60,339 | $105,158 | Notes to Consolidated Financial Statements - LendingTree's business is subject to risks including dependence on third-party technology, online commerce security, credit card fraud, and interest rate fluctuations[418][420] - One Network Partner accounted for 15% and 12% of total consolidated revenue in 2020 and 2019, respectively, all within the Insurance segment[420] Revenue by Segment | Segment | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :------------ | :------------------ | :------------------ | :------------------ | | Home | $320,992 | $277,935 | $319,176 | | Credit cards | $77,361 | $211,294 | $165,776 | | Personal loans | $66,513 | $152,729 | $134,199 | | Other Consumer | $109,324 | $151,014 | $95,640 | | Consumer | $253,198 | $515,037 | $395,615 | | Insurance | $333,765 | $284,792 | $31,369 | | Other | $2,035 | $28,839 | $18,705 | | Total revenue | $909,990 | $1,106,603 | $764,865 | Property and Equipment, Net | Asset Category | Dec 31, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :---------------------------------------- | :-------------------------- | :-------------------------- | | Computer equipment and capitalized software | $34,777 | $28,425 | | Leasehold improvements | $5,012 | $7,751 | | Furniture and other equipment | $3,290 | $3,993 | | Aircraft and automobile | $2,621 | $2,621 | | Projects in progress | $36,919 | $6,552 | | Total gross property and equipment | $82,619 | $49,342 | | Accumulated depreciation | $(20,238) | $(17,979) | | Total property and equipment, net | $62,381 | $31,363 | Goodwill and Intangible Assets, Net | Category | Dec 31, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Intangible assets with indefinite lives | $10,142 | $10,142 | | Intangible assets with definite lives, net | $118,360 | $171,438 | | Total intangible assets, net | $128,502 | $181,580 | - Goodwill at December 31, 2020 and 2019 was $420.1 million, allocated across Home ($59.3M), Consumer ($166.1M), and Insurance ($194.7M) segments, with no impairment found in annual tests[450][453] Estimated Future Amortization of Intangible Assets with Definite Lives | Amortization | Expense (in thousands) | | :------------------------ | :--------------------- | | Year ending December 31, 2021 | $42,738 | | Year ending December 31, 2022 | $25,256 | | Year ending December 31, 2023 | $8,602 | | Year ending December 31, 2024 | $6,747 | | Year ending December 31, 2025 | $6,259 | | Thereafter | $28,758 | | Total intangible assets with definite lives, net | $118,360 | - Acquired an $80.0 million equity interest in Stash Financial, Inc. in February 2020, carried at cost with no observable market events or impairments as of December 31, 2020[458][459] Changes in Fair Value of Contingent Consideration | Acquisition | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :-------------------------- | :------------------ | :------------------ | :------------------ | | QuoteWizard | $3,980 | $27,103 | $6,833 | | Ovation | $1,270 | $26 | $1,654 | | SnapCap | $77 | $2,220 | $(330) | | DepositAccounts | — | $(947) | $1,979 | | CompareCards | — | — | $652 | | Total changes in fair value of contingent consideration | $5,327 | $28,402 | $10,788 | - The company issued $575.0 million of 0.50% Convertible Senior Notes due 2025 in July 2020 and repurchased $130.3 million of 0.625% Convertible Senior Notes due 2022[558][573][583] - Litigation settlement accruals were $0.1 million for continuing operations and $0.5 million for discontinued operations as of December 31, 2020[614] - The LendingTree Loans Business (HLC) was deconsolidated in July 2019 due to bankruptcy, resulting in a $5.5 million loss to LendingTree[629][630] Segment Profit | Segment | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :-------------------------- | :------------------ | :------------------ | :------------------ | | Home | $132,123 | $103,121 | $104,701 | | Consumer | $106,890 | $213,185 | $187,724 | | Insurance | $131,142 | $114,639 | $11,358 | | Other | $(682) | $1,373 | $1,354 | | Segment profit (loss) | $369,473 | $432,318 | $305,137 | Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure This item is not applicable to LendingTree, Inc. for the reported period - Not applicable[654] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of December 31, 2020, providing reasonable assurance for timely and accurate reporting[655][656] - Management assessed and concluded that internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[657][658] - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2020[659] Item 9B. Other Information This item reports that there is no other information required to be disclosed - None[660] PART III Item 10. Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the Company's 2021 Proxy Statement - Information for this item is incorporated by reference from the 2021 Proxy Statement[663] Item 11. Executive Compensation Information for this item is incorporated by reference from the Company's 2021 Proxy Statement - Information for this item is incorporated by reference from the 2021 Proxy Statement[664] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the Company's 2021 Proxy Statement - Information for this item is incorporated by reference from the 2021 Proxy Statement[665] Item 13. Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the Company's 2021 Proxy Statement - Information for this item is incorporated by reference from the 2021 Proxy Statement[666] Item 14. Principal Accounting Fees and Services Information for this item is incorporated by reference from the Company's 2021 Proxy Statement - Information for this item is incorporated by reference from the 2021 Proxy Statement[667] PART IV Item 15. Exhibits, Financial Statement Schedules This item lists the consolidated financial statements and a comprehensive list of exhibits filed or incorporated by reference - The report includes consolidated financial statements of LendingTree, Inc., such as Statements of Operations, Balance Sheets, Shareholders' Equity, and Cash Flows, along with accompanying notes[670][671] - All financial statements and schedules not explicitly listed are omitted because the required information is included in the consolidated financial statements or their notes, or is not applicable[672] - A comprehensive list of exhibits, numbered in accordance with Item 601 of Regulation S-K, is filed or incorporated by reference, including various agreements, plans, and certifications[673][674][675] Item 16. Form 10-K Summary This item reports that there is no Form 10-K Summary - None[682]