LendingTree(US:TREE)2021-10-27 16:00PART I—FINANCIAL INFORMATION Financial Statements LendingTree reported Q3 2021 revenue of $297.5 million and a $4.5 million net loss, with nine-month revenue at $840.2 million and $21.2 million net income, while total assets increased to $1.28 billion Consolidated Statements of Operations and Comprehensive Income Q3 & Nine Months 2021 vs 2020 Performance (in thousands, except per share amounts) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $297,450 | $220,251 | $840,214 | $687,661 | | Operating Income (Loss) | $7,419 | $(16,117) | $16,060 | $(2,916) | | Net (Loss) Income from Continuing Operations | $(4,406) | $(24,809) | $24,706 | $(14,449) | | Net (Loss) Income | $(4,460) | $(24,643) | $21,190 | $(39,999) | | Diluted (Loss) Income Per Share | $(0.34) | $(1.89) | $1.54 | $(3.08) | Consolidated Balance Sheets Key Balance Sheet Items (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $215,277 | $169,932 | | Total current assets | $372,438 | $296,409 | | Goodwill | $420,139 | $420,139 | | Total assets | $1,284,529 | $1,188,990 | | Total current liabilities | $282,731 | $111,843 | | Long-term debt | $471,991 | $611,412 | | Total liabilities | $853,447 | $824,229 | | Total shareholders' equity | $431,082 | $364,761 | Consolidated Statements of Shareholders' Equity - Total shareholders' equity increased from $364.8 million at the end of 2020 to $431.1 million as of September 30, 2021, driven by $21.2 million net income and $51.8 million non-cash compensation during the first nine months of 20211410 Consolidated Statements of Cash Flows Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Category | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $88,893 | $96,216 | | Net cash used in investing activities | $(31,695) | $(100,386) | | Net cash (used in) provided by financing activities | $(15,192) | $197,375 | | Net increase in cash | $45,336 | $127,034 | - The significant decrease in cash from financing activities in 2021 compared to 2020 is primarily due to the issuance of $575 million in Convertible Senior Notes and related debt transactions in 2020, which did not recur in 202118 Notes to Consolidated Financial Statements The notes detail accounting policies, revenue recognition by segment, goodwill, debt instruments including new credit facilities, and the financial impact of the Stash equity investment and discontinued operations - The company operates an online consumer platform connecting consumers with financial product providers, generating revenue primarily from match fees and closing fees21 Revenue by Segment (in thousands) | Segment | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Home | $112,422 | $78,859 | $345,408 | $232,156 | | Consumer | $100,011 | $48,377 | $233,594 | $205,419 | | Insurance | $84,837 | $92,500 | $260,714 | $248,156 | | Total Revenue | $297,450 | $220,251 | $840,214 | $687,661 | - In September 2021, the company entered into a new credit agreement consisting of a $200 million revolving facility and a $250 million delayed draw term loan facility, replacing its previous credit facility136 - The company recorded a $40.1 million gain on its equity investment in Stash Financial, Inc. during the first nine months of 2021 due to an adjustment to fair value based on observable market events61 - Subsequent to the quarter end, in October 2021, the company agreed to sell a portion of its Stash equity securities for $46.3 million, expecting to record a realized gain of $27.9 million in Q4 2021181 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q3 2021 revenue growth of 35% to strong Consumer and Home segment performance, despite an 8% decline in Insurance, with operating expenses increasing 23% and Adjusted EBITDA reaching $41.0 million Results of Operations Q3 2021 total revenue increased 35% to $297.5 million, driven by 107% Consumer and 43% Home segment growth, resulting in an operating income of $7.4 million and a $40.1 million gain on the Stash investment for the nine-month period Q3 2021 vs Q3 2020 Revenue by Segment (in thousands) | Segment | Q3 2021 | Q3 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Home | $112,422 | $78,859 | $33,563 | 43% | | Consumer | $100,011 | $48,377 | $51,634 | 107% | | Insurance | $84,837 | $92,500 | $(7,663) | (8)% | | Total Revenue | $297,450 | $220,251 | $77,199 | 35% | - The 107% growth in Consumer segment revenue was primarily driven by increases in personal loans, credit cards, and small business loans products211 - Selling and marketing expense increased by 33% year-over-year in Q3 2021, corresponding with revenue growth, as the company dynamically adjusts advertising spend to meet network partner demand208223 - For the first nine months of 2021, the company recorded a $40.1 million gain on its investment in Stash, which was a significant contributor to pre-tax income237 Segment Profit Total segment profit increased 35% year-over-year to $112.9 million in Q3 2021, driven by strong growth in Consumer and Home segments, while Insurance segment profit decreased 28% due to market headwinds Q3 2021 vs Q3 2020 Segment Profit (in thousands) | Segment | Q3 2021 | Q3 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Home | $41,517 | $25,166 | $16,351 | 65% | | Consumer | $44,716 | $21,647 | $23,069 | 107% | | Insurance | $26,610 | $37,043 | $(10,433) | (28)% | | Total Segment Profit | $112,940 | $83,858 | $29,082 | 35% | - The Insurance segment faced transitory headwinds as carriers reduced marketing budgets due to rising loss costs and higher catastrophe losses252 - The Home segment continues to perform well, with mortgage revenue per lead increasing 78% and home equity revenue per lead increasing 79% in Q3 2021 compared to Q3 2020251 Adjusted EBITDA Adjusted EBITDA significantly increased to $41.0 million in Q3 2021 from $21.7 million in Q3 2020, reaching $110.0 million for the first nine months of 2021 Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income from continuing operations | $(4,406) | $(24,809) | $24,706 | $(14,449) | | Adjusted EBITDA | $40,997 | $21,679 | $109,975 | $97,402 | Financial Position, Liquidity and Capital Resources As of September 30, 2021, the company held $215.3 million in cash and equivalents, with $88.9 million net cash from operations, and secured a new credit agreement to enhance liquidity and fund future operations - The company ended Q3 2021 with $215.3 million in cash and cash equivalents, an increase from $169.9 million at the end of 2020259 - A new credit agreement was established in September 2021, providing a $200 million revolving credit facility and a $250 million delayed draw term loan facility, which can be used to settle the 2022 Notes261262 Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Category | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $88,893 | $96,216 | | Net cash used in investing activities | $(31,695) | $(100,386) | | Net cash (used in) provided by financing activities | $(15,192) | $197,375 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations impacting mortgage demand and lender lead requirements, though exposure from financial instruments is minimal with no borrowings under its variable-rate Credit Facility as of October 28, 2021 - The company's main market risk is interest rate volatility, which affects consumer demand for mortgages and, consequently, lender demand for the company's leads274 - As of October 28, 2021, there were no borrowings under the new Credit Facility, minimizing exposure to interest rate changes on its debt273 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during Q3 2021 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the quarter275 - No changes occurred during the quarter ended September 30, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting276 PART II—OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business, with material litigation updates provided in Notes 14 and 17 of the financial statements - The company is party to litigation in the ordinary course of business; for detailed updates, refer to Notes 14 and 17 of the financial statements278 Risk Factors No material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K were reported - No material changes to the risk factors from the 2020 Annual Report were reported279 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase common stock under its program in Q3 2021, with $179.7 million remaining authorized, but purchased 11,047 shares from employees for tax withholding obligations - No shares were repurchased under the stock repurchase program during Q3 2021; approximately $179.7 million remains authorized for repurchase as of October 22, 2021280 - During Q3 2021, 11,047 shares were purchased from employees at an average price of $171.50 per share to satisfy tax withholding obligations on equity awards283281 Other Information No other information was reported for this item - None285 Exhibits This section lists exhibits filed with the Form 10-Q, including the Credit Agreement and CEO/CFO certifications - Key exhibits filed include the Credit Agreement dated September 15, 2021, and CEO/CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906287