LendingTree(TREE) - 2024 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements The unaudited Q1 2024 consolidated financial statements show increased cash, decreased revenue, and a return to operating income Consolidated Balance Sheets Consolidated Balance Sheets | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $230,745 | $112,051 | $118,694 | 105.9% | | Total current assets | $325,683 | $196,482 | $129,201 | 65.8% | | Total assets | $926,695 | $802,759 | $123,936 | 15.4% | | Total current liabilities | $87,713 | $75,629 | $12,084 | 16.0% | | Long-term debt | $631,333 | $525,617 | $105,716 | 20.1% | | Total liabilities | $795,180 | $678,627 | $116,553 | 17.2% | | Total shareholders' equity | $131,515 | $124,132 | $7,383 | 6.0% | Consolidated Statements of Operations and Comprehensive Income Consolidated Statements of Operations and Comprehensive Income | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Revenue | $167,768 | $200,508 | $(32,740) | (16.3)% | | Total costs and expenses | $160,589 | $213,519 | $(52,930) | (24.8)% | | Operating income (loss) | $7,179 | $(13,011) | $20,190 | 155.2% | | Interest (expense) income, net | $(6,638) | $25,029 | $(31,667) | (126.5)% | | Income before income taxes | $1,575 | $13,852 | $(12,277) | (88.6)% | | Net income and comprehensive income | $1,016 | $13,457 | $(12,441) | (92.5)% | | Basic net income per share | $0.08 | $1.05 | $(0.97) | (92.4)% | | Diluted net income per share | $0.08 | $1.04 | $(0.96) | (92.3)% | Consolidated Statements of Shareholders' Equity Consolidated Statements of Shareholders' Equity | Metric | Balance as of Dec 31, 2023 (in thousands) | Net income and comprehensive income (in thousands) | Non-cash compensation (in thousands) | Issuance of common stock, net of withholding taxes (in thousands) | Balance as of Mar 31, 2024 (in thousands) | | :--------------------------------------- | :---------------------------------------- | :----------------------------------------- | :----------------------------------- | :---------------------------------------------------------------- | :---------------------------------------- | | Total Shareholders' Equity | $124,132 | $1,016 | $7,789 | $(1,422) | $131,515 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net cash provided by operating activities | $5,708 | $13,156 | $(7,448) | | Net cash used in investing activities | $(2,746) | $(2,452) | $(294) | | Net cash provided by (used in) financing activities | $115,743 | $(159,565) | $275,308 | | Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents | $118,705 | $(148,861) | $267,566 | | Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $230,761 | $150,108 | $80,653 | Notes to Consolidated Financial Statements The notes provide detailed disclosures for the consolidated financial statements, covering accounting policies, segment information, and debt NOTE 1—ORGANIZATION - LendingTree, Inc operates as a leading online consumer platform connecting consumers with financial product choices, including mortgage, home equity, auto, credit cards, personal loans, student loans, small business loans, and insurance quotes[21] - The interim consolidated financial statements are prepared in accordance with GAAP and SEC rules, and should be read in conjunction with the 2023 Annual Report on Form 10-K[23] NOTE 2—SIGNIFICANT ACCOUNTING POLICIES - Management's preparation of financial statements involves significant estimates and assumptions, including recoverability of long-lived assets, goodwill, intangible assets, income taxes, litigation accruals, and stock-based compensation[24][25] - The Company monitors the impact of current economic conditions (interest rates, inflation) on its estimates, noting that worsening conditions could adversely affect results[26] - Business risks include dependence on third-party technology, online commerce security/fraud, and the impact of interest rate fluctuations on mortgage revenue[28][30] - New accounting pronouncements (ASU 2023-07 and ASU 2023-09) will expand disclosure requirements for reportable segments and income taxes, with the Company evaluating their impact and early adoption[34][35] NOTE 3—REVENUE Revenue by Segment | Revenue Segment | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Home | $30,443 | $43,675 | $(13,232) | (30.3)% | | Personal loans | $20,127 | $23,599 | $(3,472) | (14.7)% | | Other Consumer | $31,324 | $56,110 | $(24,786) | (44.2)% | | Total Consumer | $51,451 | $79,709 | $(28,258) | (35.4)% | | Insurance | $85,872 | $77,082 | $8,790 | 11.4% | | Total revenue | $167,768 | $200,508 | $(32,740) | (16.3)% | - Revenue is primarily derived from match fees and closing fees, recognized when performance obligations are satisfied[38] - The Company discontinued its credit services product (Ovation business) in Q2 2023, which previously generated upfront and subscription fees[40][45] - Contract assets related to estimated variable consideration for closing and approval fees increased from $13.7 million at December 31, 2023, to $15.1 million at March 31, 2024[43] NOTE 4—CASH AND RESTRICTED CASH Cash and Restricted Cash | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $230,745 | $112,051 | $118,694 | 105.9% | | Restricted cash and cash equivalents | $16 | $5 | $11 | 220.0% | | Total cash, cash equivalents, restricted cash and restricted cash equivalents | $230,761 | $112,056 | $118,705 | 105.9% | NOTE 5—ALLOWANCE FOR DOUBTFUL ACCOUNTS - The allowance for doubtful accounts is determined by factors such as past due status, loss history, economic conditions, and customer payment ability[49] Allowance for Doubtful Accounts Rollforward | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Balance, beginning of the period | $2,222 | $2,317 | $(95) | | Charges to earnings | $(129) | $963 | $(1,092) | | Write-off of uncollectible accounts receivable | $(67) | $(963) | $896 | | Balance, end of the period | $2,026 | $2,688 | $(662) | NOTE 6—GOODWILL AND INTANGIBLE ASSETS Goodwill and Intangible Assets Summary | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net goodwill | $381,539 | $381,539 | | Intangible assets with indefinite lives | $10,142 | $10,142 | | Intangible assets with definite lives, net | $38,990 | $40,478 | | Total intangible assets, net | $49,132 | $50,620 | - Goodwill is allocated across Home ($59.3M), Consumer ($166.1M), and Insurance ($156.1M) segments[53] - A goodwill impairment charge of $38.6 million was recorded in Q3 2023 for the Insurance reporting unit due to market capitalization falling below book value and pressure from consumer price inflation impacting carrier underwriting[54] Estimated Amortization Expense | Year | Estimated Amortization Expense (in thousands) | | :------------------------ | :------------------------------------ | | Remainder of current year | $4,401 | | Year ending December 31, 2025 | $5,830 | | Year ending December 31, 2026 | $5,504 | | Year ending December 31, 2027 | $5,198 | | Year ending December 31, 2028 | $4,685 | | Thereafter | $13,372 | | Total | $38,990 | NOTE 7—EQUITY INVESTMENTS - Equity investments are carried at cost less impairment, with fair value measured upon observable price changes or impairment indicators[58] - An impairment charge of $113.1 million was recorded in Q3 2023 for the Stash investment due to its estimated fair value falling below carrying value[59] NOTE 8—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued Expenses and Other Current Liabilities | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Accrued advertising expense | $37,334 | $27,859 | $9,475 | 34.0% | | Accrued compensation and benefits | $8,072 | $15,091 | $(7,019) | (46.5)% | | Total accrued expenses and other current liabilities | $69,717 | $70,544 | $(827) | (1.2)% | NOTE 9—SHAREHOLDERS' EQUITY Weighted Average Common Shares | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Weighted average basic common shares | 13,100 | 12,846 | | Weighted average diluted common shares | 13,276 | 12,935 | - Approximately 1.0 million stock options and 0.3 million restricted stock units were anti-dilutive and excluded from diluted EPS calculation in Q1 2024[61] - The Company did not repurchase any common stock in Q1 2024 or Q1 2023, with $96.7 million remaining authorized for repurchases as of March 31, 2024[66] NOTE 10—STOCK-BASED COMPENSATION Stock-Based Compensation Expense | Expense Category | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Cost of revenue | $95 | $214 | $(119) | (55.6)% | | Selling and marketing expense | $1,024 | $1,744 | $(720) | (41.3)% | | General and administrative expense | $5,333 | $7,343 | $(2,010) | (27.4)% | | Product development | $1,337 | $1,902 | $(565) | (29.7)% | | Total non-cash compensation | $7,789 | $11,274 | $(3,485) | (30.9)% | - As of March 31, 2024, 680,672 stock options were outstanding with a weighted average exercise price of $160.83 and an aggregate intrinsic value of $3.2 million[68] - 622,435 nonvested Restricted Stock Units (RSUs) were outstanding at March 31, 2024, with a weighted average grant date fair value of $48.02 per unit[72] - In Q1 2024, 69,000 RSUs with market conditions were granted, vesting based on stock price hurdles ($41.17, $52.94, $64.70) over a performance period ending March 1, 2028[73][74] - No shares were issued under the Employee Stock Purchase Plan (ESPP) in Q1 2024, with 162,264 shares available for issuance[76] NOTE 11—INCOME TAXES Income Tax Expense | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | | Income tax expense | $(559) | $(395) | | Effective tax rate | 35.5% | 2.9% | - The effective tax rate varied from the federal statutory rate of 21% primarily due to changes in the valuation allowance, net of current period changes in tax-effected net indefinite-lived intangibles[81] NOTE 12—DEBT - The Company has $284.2 million aggregate principal amount of 0.50% Convertible Senior Notes due July 15, 2025 ("2025 Notes") outstanding as of March 31, 2024[82][88] - In Q1 2023, the Company repurchased $190.6 million of 2025 Notes for $156.3 million cash, recognizing a $34.3 million gain on extinguishment[83][176] - The 2020 Hedge and 2020 Warrants transactions, initially covering 1.2 million shares, were partially terminated in connection with 2025 Notes repurchases, with 0.6 million shares remaining outstanding for both[89][90][92] - As of March 31, 2024, $246.3 million was outstanding under the 2021 Term Loan (bearing 9.2% SOFR interest), and no borrowings under the $200.0 million Revolving Facility[93][94] - On March 27, 2024, the Company entered into a new $175.0 million 2024 Term Loan, drawing $125.0 million at closing (bearing 11.08% SOFR interest), with proceeds for working capital and potential 2025 Notes repayment[99][109] - The 2024 Term Loan includes financial covenants (minimum cash balance of $40.0 million, minimum Consolidated EBITDA) and mandatory prepayment events[101][103] NOTE 13—CONTINGENCIES - The Company is involved in ongoing legal proceedings, evaluating monetary damages and potential non-monetary remedies[110] - Litigation settlement accruals were $0.7 million at March 31, 2024, up from $0.6 million at December 31, 2023, for settled or firmly offered settlements[111] NOTE 14—FAIR VALUE MEASUREMENTS - The carrying amounts of most financial instruments equal their fair value, with exceptions for convertible notes, warrants, and equity interests[112] NOTE 15—SEGMENT INFORMATION - LendingTree manages its business through three operating segments: Home (mortgage, home equity), Consumer (credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts), and Insurance (insurance quotes and sales)[113][114] Segment Operating Results | Segment | Revenue Q1 2024 (in thousands) | Segment Marketing Expense Q1 2024 (in thousands) | Segment Profit Q1 2024 (in thousands) | Revenue Q1 2023 (in thousands) | Segment Marketing Expense Q1 2023 (in thousands) | Segment Profit Q1 2023 (in thousands) | | :-------- | :----------------------------- | :----------------------------------------------- | :------------------------------------ | :----------------------------- | :----------------------------------------------- | :------------------------------------ | | Home | $30,443 | $20,833 | $9,610 | $43,675 | $28,567 | $15,108 | | Consumer | $51,451 | $24,011 | $27,440 | $79,709 | $44,833 | $34,876 | | Insurance | $85,872 | $52,423 | $33,449 | $77,082 | $46,930 | $30,152 | | Total | $167,768 | $97,246 | $70,522 | $200,508 | $120,551 | $79,957 | NOTE 16—RESTRUCTURING ACTIVITIES - In September 2023, the Company initiated workforce reductions of 14 employees, incurring $0.9 million in severance charges[118] - The Ovation credit services business was closed by mid-2023, resulting in the elimination of approximately 197 employees and $2.1 million in restructuring expense, plus $4.2 million in asset impairment charges in Q1 2023[119][121] - A workforce reduction plan in March 2023 eliminated 162 employees (13% of workforce), incurring $5.3 million in severance charges, including $4.3 million in Q1 2023 restructuring expense[122] Restructuring Accrual Activity | Action | Accrued Balance at Dec 31, 2023 (in thousands) | Income Statement Impact (in thousands) | Payments (in thousands) | Accrued Balance at Mar 31, 2024 (in thousands) | | :------------- | :--------------------------------------------- | :------------------------------------- | :---------------------- | :--------------------------------------------- | | Q3 2023 action | $254 | $(7) | $(82) | $165 | | Q2 2023 action | $34 | $4 | $(38) | $0 | | Q1 2023 action | $421 | $15 | $(181) | $255 | | Total | $709 | $12 | $(301) | $420 | NOTE 17—SUBSEQUENT EVENTS - In April 2024, the Company repurchased approximately $37.7 million in principal amount of its 2025 Notes for $35.3 million in cash plus accrued interest[124] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial performance, highlighting segment results, cost reductions, and strategic debt management Cautionary Statement Regarding Forward-Looking Information - The report contains forward-looking statements about anticipated financial performance, business prospects, and strategy, which are subject to inherent uncertainties and risks[126] - Actual results may differ materially due to factors discussed in the "Risk Factors" section of this report and the 2023 Annual Report on Form 10-K[127] Company Overview - LendingTree operates a leading online consumer platform connecting users with comparison-shopping tools for various financial products (mortgage, auto, credit cards, insurance, etc)[130] - The Spring platform offers personalized comparison-shopping, financial health advice, and credit simulations, aiming to improve consumer engagement and financial results[131] - The Company is focused on expanding its portfolio of financial services and leveraging its expertise and brand recognition to capitalize on the shift to online financial services[132][133] Economic Conditions - Challenging interest rate environment and inflationary pressures continued to impact mortgage lending partners in Q1 2024[135] - Increased mortgage rates have reduced refinance volumes and pressured purchase activity in the Home segment[135] - Demand from carrier partners in the Insurance segment has increased, leading to optimism for 2024[135] Segment Reporting - The Company operates with three reportable segments: Home, Consumer, and Insurance[136] Recent Mortgage Interest Rate Trends - Mortgage interest rate fluctuations significantly impact consumer demand for refinancings and new mortgages, affecting lender demand for leads and the Company's revenue and marketing efforts[137][214] - When interest rates decline, consumer refinance demand increases, leading to higher website traffic and lower marketing costs, but potentially lower revenue per consumer due to decreased lender demand[138][214] - When interest rates increase, consumer refinance demand decreases, leading to lower website traffic and higher marketing costs, but potentially higher revenue per matched lead due to increased lender demand, though limited by lender cost models[139][214] - The monthly average 30-year mortgage interest rate remained consistent at 6.82% from December 2023 to March 2024, but the quarterly average increased slightly to 6.75% in Q1 2024 from 6.36% in Q1 2023[141] The U.S. Real Estate Market - The U.S. real estate market health and interest rates are primary drivers of consumer demand for new mortgages, influencing lender demand for purchase mortgage leads[146] - Total refinance origination dollars increased to 23% of total mortgage origination dollars in Q1 2024, up from 19% in Q4 2023 and 20% in Q1 2023[144] - Existing home sales increased 8% in Q1 2024 compared to Q4 2023, but decreased 3% compared to Q1 2023, with Fannie Mae predicting a 4.3% increase for 2024[147] Spring™ - The Spring platform added 0.6 million new users in Q1 2024, bringing cumulative sign-ups to 28.8 million by March 31, 2024[148] - The Company prioritizes improving the Spring experience to become an integrated digital advisor, expecting higher engagement, membership growth, and stronger financial results[149] Cost Reductions and Simplification of Business - A workforce reduction plan in March 2023 eliminated 13% of the Company's workforce, resulting in $5.3 million in severance charges ($4.3 million in Q1 2023) and an estimated $14 million reduction in annual compensation expense[150] - The Ovation credit services business was closed by mid-2023 due to challenges post-COVID-19, increased regulatory pressure, and its capital-intensive nature, leading to a $4.2 million asset impairment charge in Q1 2023[151] - The Ovation business previously accounted for approximately 3% of total revenue and costs, with an immaterial impact on net income[152] Recent Developments - In April 2024, the Company repurchased approximately $37.7 million in principal amount of its 0.50% Convertible Senior Notes due July 15, 2025, for $35.3 million in cash plus accrued interest[153] Results of Operations for the Three Months ended March 31, 2024 and 2023 Q1 2024 results show a 16% revenue decrease, a 25% cost reduction, and a shift to operating income from a prior-year loss Revenue Revenue by Segment | Segment | Q1 2024 Revenue (in thousands) | Q1 2023 Revenue (in thousands) | Change (in thousands) | % Change | | :-------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Home | $30,443 | $43,675 | $(13,232) | (30)% | | Consumer | $51,451 | $79,709 | $(28,258) | (35)% | | Insurance | $85,872 | $77,082 | $8,790 | 11% | | Total | $167,768 | $200,508 | $(32,740) | (16)% | - Consumer segment revenue decreased 35% primarily due to declines in credit cards (down 57% or $10.5M) and other credit products (down 65% or $7.4M) following the closure of the Ovation business; Personal loans revenue decreased 15% ($3.5M)[157][158][159] - Home segment revenue decreased 30% due to declines in refinance and purchase mortgage products (mortgage products down 52% or $10.3M), driven by increased mortgage rates; Home equity loans also decreased 12% ($2.9M)[160][161] - Insurance segment revenue increased 11% due to an increase in consumers seeking insurance, partially offset by a decrease in revenue earned per consumer[162] Cost of revenue Cost of Revenue | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Cost of revenue | $8,545 | $13,760 | $(5,215) | (38)% | - Cost of revenue decreased by $5.2 million (38%) primarily due to a $4.3 million decrease in compensation and benefits, resulting from the Q1 2023 Reduction Plan and the closure of the Ovation credit services business[164] - Cost of revenue as a percentage of total revenue decreased from 7% in Q1 2023 to 5% in Q1 2024[165] Selling and marketing expense Selling and Marketing Expense | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Selling and marketing expense | $108,176 | $137,111 | $(28,935) | (21)% | | Online advertising | $97,515 | $120,720 | $(23,205) | (19)% | | Total advertising expense | $98,321 | $124,399 | $(26,078) | (21)% | - The decrease of $28.9 million (21%) was primarily driven by a $26.1 million reduction in advertising and promotional expenses and a $2.9 million decrease in compensation and benefits[167] - Advertising expenditures are dynamically adjusted based on Network Partner demand and anticipated revenue opportunities to optimize results[168][169] General and administrative expense General and Administrative Expense | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | General and administrative expense | $25,796 | $36,683 | $(10,887) | (30)% | - The $10.9 million (30%) decrease was due to a $3.8 million reduction in compensation and benefits, a $1.1 million decrease in bad debt expense, and a $4.2 million loss on asset impairment for the Ovation business in Q1 2023 that did not recur[171] - General and administrative expense as a percentage of revenue decreased from 18% in Q1 2023 to 15% in Q1 2024[172] Product development Product Development Expense | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :------------------ | :--------------------- | :--------------------- | :-------------------- | :------- | | Product development | $11,857 | $14,655 | $(2,798) | (19)% | - Product development expense decreased by $2.8 million (19%) primarily due to the Reduction Plan implemented at the end of Q1 2023, while the Company continued to invest in new features and functionality[174] Restructuring and severance Restructuring and Severance Expense | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Restructuring and severance | $23 | $4,454 | $(4,431) | (99)% | - Restructuring expense significantly decreased in Q1 2024 as the majority of severance charges related to the March 2023 Reduction Plan ($4.3 million) were incurred in Q1 2023[175] Interest income/expense Net Interest (Expense) Income | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Interest (expense) income, net | $(6,638) | $25,029 | $(31,667) | (127)% | - The significant shift from net interest income to net interest expense was primarily due to a $34.3 million gain on extinguishment of debt recognized in Q1 2023 from the repurchase of 2025 Convertible Senior Notes, which did not recur in Q1 2024[176] Other income Other Income | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :--------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Other income | $1,034 | $1,834 | $(800) | (44)% | - Other income primarily consists of dividend income[177] Income tax expense Income Tax Expense | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :---------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Income tax expense | $(559) | $(395) | $164 | 42% | - The effective tax rate varied from the federal statutory rate of 21% due to changes in the valuation allowance, net of current period changes in tax-effected net indefinite-lived intangibles[178] Segment Profit Segment profit decreased 12% year-over-year, driven by declines in the Home and Consumer segments despite Insurance growth Home Home Segment Results | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :----------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Revenue | $30,443 | $43,675 | $(13,232) | (30)% | | Segment profit | $9,610 | $15,108 | $(5,498) | (36)% | | Segment margin | 32% | 35% | (3)% | | - Home segment revenue and profit decreased due to challenging mortgage rates, though the home equity business continued to be the majority revenue driver, with volume increasing 14% in Q1 2024[180][181] - Inventory of existing homes for sale increased 14% in Q1 2024 compared to Q1 2023, potentially indicating seller adjustment to higher rates[180] Consumer Consumer Segment Results | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :----------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Revenue | $51,451 | $79,709 | $(28,258) | (35)% | | Segment profit | $27,440 | $34,876 | $(7,436) | (21)% | | Segment margin | 53% | 44% | 9% | | - Consumer segment revenue decreased 35%, but segment margin increased to 53% from 44% due to a mix-shift towards higher-earning products and reduced usage of high-cost marketing channels[182] - Personal loan revenue decreased 15% and small business revenue declined 18% due to restrictive and tighter lending standards impacting conversion rates[183] Insurance Insurance Segment Results | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :----------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Revenue | $85,872 | $77,082 | $8,790 | 11% | | Segment profit | $33,449 | $30,152 | $3,297 | 11% | | Segment margin | 39% | 39% | 0% | | - Insurance revenue and segment profit increased 11% as carrier partners began prioritizing new customer acquisition after two years of increasing premium rates[184] - The cost of consumer auto insurance increased 22% in March 2024 YoY, driving record consumer demand for new quotes and expected increased advertising by carriers[185][186] Variable Marketing Expense and Variable Marketing Margin Variable marketing expense decreased 21% in Q1 2024, resulting in a 9% decline in the variable marketing margin Variable Marketing Margin Reconciliation | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Revenue | $167,768 | $200,508 | $(32,740) | (16)% | | Variable marketing expense | $98,321 | $124,399 | $(26,078) | (21)% | | Variable marketing margin | $69,447 | $76,109 | $(6,662) | (9)% | Reconciliation of Selling and Marketing Expense | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Selling and marketing expense | $108,176 | $137,111 | $(28,935) | (21)% | | Non-variable selling and marketing expense | $(9,855) | $(12,712) | $2,857 | (22)% | | Variable marketing expense | $98,321 | $124,399 | $(26,078) | (21)% | Adjusted EBITDA Adjusted EBITDA, a non-GAAP measure, increased 48% to $21.6 million, reflecting improved operating efficiency Reconciliation of Net Income to Adjusted EBITDA | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Net income | $1,016 | $13,457 | $(12,441) | (92)% | | Amortization of intangibles | $1,489 | $2,049 | $(560) | (27)% | | Depreciation | $4,667 | $4,795 | $(128) | (3)% | | Restructuring and severance | $23 | $4,454 | $(4,431) | (99)% | | Loss on impairments and disposal of assets | $368 | $5,027 | $(4,659) | (93)% | | Non-cash compensation expense | $7,789 | $11,203 | $(3,414) | (30)% | | Interest expense (income), net | $6,638 | $(25,029) | $31,667 | (127)% | | Income tax expense | $559 | $395 | $164 | 42% | | Adjusted EBITDA | $21,551 | $14,520 | $7,031 | 48% | Financial Position, Liquidity and Capital Resources LendingTree's liquidity significantly improved in Q1 2024, with cash and cash equivalents more than doubling, driven by financing activities General Cash and Cash Equivalents | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $230,745 | $112,100 | $118,645 | 105.8% | - The Company expects current cash, cash equivalents, and cash flows from operations to be sufficient for operating needs for the next twelve months and beyond[201] Credit Facilities - As of May 1, 2024, the Company had $245.6 million outstanding under the 2021 Term Loan and $199.8 million remaining borrowing capacity under the Revolving Facility[202][203] - A new $175.0 million 2024 Term Loan was entered into on March 27, 2024, with $125.0 million drawn at closing and $50.0 million available as a delayed draw[204] - Proceeds from the 2024 Term Loan are for working capital, general corporate purposes, and potential repayment of the 2025 Convertible Senior Notes[204] Cash Flows Summary of Cash Flows | Cash Flow Activity | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | | :------------------------------------------ | :--------------------- | :--------------------- | :-------------------- | | Net cash provided by operating activities | $5,708 | $13,156 | $(7,448) | | Net cash used in investing activities | $(2,746) | $(2,452) | $(294) | | Net cash provided by (used in) financing activities | $115,743 | $(159,565) | $275,308 | Cash Flows from Operating Activities - Net cash provided by operating activities decreased in Q1 2024 from Q1 2023, primarily due to unfavorable changes in accounts receivable and accounts payable, accrued expenses, and other current liabilities[208] - Primary sources of operating cash are revenues, while primary uses include advertising, compensation, and general corporate expenditures[207] Cash Flows from Investing Activities - Net cash used in investing activities was $2.7 million in Q1 2024 and $2.5 million in Q1 2023, primarily for capital expenditures related to internally developed software[209] Cash Flows from Financing Activities - Net cash provided by financing activities was $115.7 million in Q1 2024, mainly from $117.8 million net proceeds from the 2024 Term Loan, partially offset by $1.4 million in withholding taxes for equity awards[210] - Net cash used in financing activities was $159.6 million in Q1 2023, primarily due to the repurchase of $156.3 million of 2025 Convertible Senior Notes[211] New Accounting Pronouncements - Refer to Note 2—Significant Accounting Policies for information on new accounting pronouncements[212] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate fluctuations affecting its debt and mortgage lead generation business - A hypothetical 100-basis point change in market interest rates would have a $2.5 million annual effect on interest paid on the Credit Facility and a $1.3 million annual effect on the 2024 Term Loan[213] - Interest rate fluctuations significantly affect consumer demand for mortgages and refinancings, which in turn impacts lender demand for leads, revenue per consumer, and marketing costs[214] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of March 31, 2024[215] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[216] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various routine legal proceedings, with details available in Note 13 and the Annual Report - The Company is party to ongoing legal proceedings involving various claims, with potential monetary damages and non-monetary remedies[218] - Information on legal proceedings is updated in Note 13—Contingencies of this report[218] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's 2023 Annual Report on Form 10-K - No material changes to the risk factors included in the 2023 Annual Report have occurred[219] - Investors should carefully consider the described risks, as well as unknown or unpredictable factors, which could adversely affect the business[220] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased under the public program in Q1 2024, though shares were bought to satisfy employee tax obligations - No shares were repurchased under the publicly announced stock repurchase program during Q1 2024, with $96.7 million remaining authorized as of May 1, 2024[221] - 68,950 shares were purchased in Q1 2024 to satisfy federal and state withholding obligations for employee equity awards[222][224][228] Item 5. Other Information No directors, executive officers, or the Company itself adopted or terminated Rule 10b5-1 trading arrangements during Q1 2024 - No directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements during Q1 2024, nor did the Company itself[226] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications - This section lists all exhibits filed with the Form 10-Q, including the Amended and Restated Certificate of Incorporation, By-laws, Credit Agreement, and certifications from the CEO and CFO[229] SIGNATURE The report was signed on May 1, 2024, by Trent Ziegler, Chief Financial Officer of LendingTree, Inc - The report was signed on May 1, 2024, by Trent Ziegler, Chief Financial Officer of LendingTree, Inc[234][235]