LendingTree(US:TREE)2021-05-04 16:00PART I—FINANCIAL INFORMATION Financial Statements LendingTree reported Q1 2021 revenue of $272.8 million, a 4% decrease, with net income of $19.0 million, boosted by a $40.1 million equity gain Consolidated Statements of Operations and Comprehensive Income Q1 2021 revenue decreased to $272.8 million, resulting in an operating loss of $1.9 million, but net income reached $19.0 million due to a $40.1 million other income gain Q1 2021 vs Q1 2020 Statement of Operations (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenue | $272,750 | $283,084 | | Total costs and expenses | $274,657 | $262,335 | | Operating (loss) income | $(1,907) | $20,749 | | Other income | $40,072 | $— | | Net income from continuing operations | $19,312 | $18,976 | | Net income | $19,049 | $14,401 | | Diluted Net income per share | $1.35 | $1.02 | Consolidated Balance Sheets As of March 31, 2021, total assets increased to $1.24 billion, driven by higher accounts receivable and equity investment valuation, while total liabilities rose to $847.7 million Balance Sheet Summary (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $322,431 | $296,409 | | Goodwill | $420,139 | $420,139 | | Equity investment | $121,253 | $80,000 | | Total assets | $1,243,177 | $1,188,990 | | Total current liabilities | $130,521 | $111,843 | | Long-term debt | $619,502 | $611,412 | | Total liabilities | $847,734 | $824,229 | | Total shareholders' equity | $395,443 | $364,761 | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly decreased to $8.9 million in Q1 2021, leading to a net cash decrease of $7.9 million for the quarter Cash Flow Summary from Continuing Operations (in thousands) | Cash Flow Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,925 | $29,302 | | Net cash used in investing activities | $(11,733) | $(84,189) | | Net cash (used in) provided by financing activities | $(5,000) | $46,601 | | Net decrease in cash | $(7,879) | $(9,038) | Notes to Consolidated Financial Statements The notes detail accounting policies, segment performance with strong Home growth, debt structure, a $40.1 million gain on equity investment, and discontinued operations - The company operates an online consumer platform connecting consumers with providers for various financial products, including mortgages, credit cards, and insurance21 Revenue by Segment (in thousands) | Segment | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Home | $128,125 | $79,174 | | Consumer (Total) | $57,907 | $119,924 | | - Credit cards | $17,637 | $51,586 | | - Personal loans | $14,868 | $31,509 | | - Other Consumer | $25,402 | $36,829 | | Insurance | $86,614 | $82,737 | | Total revenue | $272,750 | $283,084 | - The company recorded a $40.1 million gain on its equity investment in Stash Financial, Inc. during Q1 2021 due to an adjustment to fair value based on observable market events58 - The LendingTree Loans Business (HLC) is presented as discontinued operations, with related litigation settlements and legal fees included in discontinued operations following its 2019 bankruptcy filing23156173 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 4% revenue decline to COVID-19's impact on the Consumer segment, offset by strong Home segment growth, while a $40.1 million gain on the Stash investment boosted pre-tax income - The COVID-19 pandemic significantly impacted the Consumer segment, while the Home and Insurance segments were less affected and recovered by the end of 2020185 Segment Profit (in thousands) | Segment | Q1 2021 | Q1 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Home | $38,990 | $35,911 | $3,079 | 9% | | Consumer | $24,607 | $43,099 | $(18,492) | (43)% | | Insurance | $32,842 | $30,533 | $2,309 | 8% | | Total Segment Profit | $96,347 | $109,215 | $(12,868) | (12)% | - Adjusted EBITDA for Q1 2021 was $30.7 million, down from $44.9 million in Q1 2020, adjusted for items including a $40.1 million unrealized gain on investments and $16.4 million in non-cash compensation239 Results of Operations Total revenue decreased 4% to $272.8 million in Q1 2021, with Home segment revenue up 62% and Consumer segment revenue down 52%, leading to an operating loss - Home segment revenue increased by $49.0 million (62%), primarily due to a $52.0 million increase in the refinance mortgage product206 - Consumer segment revenue decreased by $62.0 million (52%), led by a $34.0 million (66%) drop in credit cards revenue and a $16.6 million (53%) drop in personal loans revenue, attributed to the economic impact of COVID-19201202203 - Selling and marketing expense remained relatively flat, increasing by 1% to $197.5 million, while General and administrative expense rose 9% to $35.0 million due to higher compensation and facilities costs199211215 - A change in the fair value of contingent consideration resulted in a $0.8 million expense in Q1 2021, compared to an $8.1 million gain in Q1 2020220 Financial Position, Liquidity and Capital Resources The company maintains sufficient liquidity with $162.1 million in cash and an undrawn $500 million revolving credit facility, despite a decrease in operating cash flow - The company held $162.1 million in cash and cash equivalents as of March 31, 2021240 - The company has a $500.0 million five-year senior secured revolving credit facility, which was undrawn as of March 31, 2021, providing significant liquidity125243 - Net cash provided by operating activities decreased from $29.3 million in Q1 2020 to $8.9 million in Q1 2021, primarily due to unfavorable changes in accounts receivable245247 Quantitative and Qualitative Disclosures About Market Risk The company's business is highly sensitive to interest rate fluctuations, which impact consumer demand for mortgages and refinancing, affecting both traffic and revenue per consumer - The company's business is sensitive to interest rate fluctuations, which impact consumer demand for mortgages, particularly refinancing255 - Falling interest rates tend to increase consumer traffic but decrease revenue per consumer, while rising rates have the opposite effect255 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021256 - No material changes to the company's internal control over financial reporting occurred during the first quarter of 2021257 PART II—OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business, with further details available in the financial statement notes - The company is party to litigation in the ordinary course of business, with further details available in Notes 14 and 17 of the financial statements260 Risk Factors No material changes were reported to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes were reported to the risk factors from the company's 2020 Annual Report261 Unregistered Sales of Equity Securities and Use of Proceeds LendingTree did not repurchase any shares under its stock repurchase program in Q1 2021, but acquired shares from employees for tax withholding obligations - No shares were repurchased under the stock repurchase program during Q1 2021, with approximately $179.7 million remaining available for repurchase as of April 23, 2021262 - A total of 16,981 shares were purchased from employees to satisfy tax withholding obligations upon the settlement of equity awards263265 Other Information There is no other information to report for this item - None267 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Lists exhibits filed with the report, including CEO/CFO certifications and XBRL data269