LENDINGTREE, INC. Exhibit 99.2
May 2, 2023
Fellow Shareholders:
Despite ongoing macroeconomic volatility, our first quarter results were in line with our previously provided outlook. While revenue and Variable Marketing Margin were near the lower end of our ranges, Adjusted EBITDA was well-above the midpoint. More importantly, we have taken a number of steps since our last earnings call to bolster, simplify, and structurally improve our business.
In March we deployed $156 million of cash to retire $191 million of principal balance on our 2025 convertible notes. By opportunistically retiring a substantial portion of debt at a reasonable discount, we are better positioned to address this maturity over two years from now, while still maintaining robust liquidity with $150 million of cash on our balance sheet at quarter-end.
We also announced an expense reduction in March which affected 13% of our workforce. We eliminated a number of positions across various departments and seniority levels. The plan focused on certain capital intensive areas of our business, specifically those where our confidence in the revenue opportunity during this challenging macroeconomic environment had diminished. We reduced a substantial portion of our call center operation that historically provided sales and service capabilities within our lending verticals in the Home and Consumer segments. Over time our customers have shown an increasing preference to interact with our website and MyLT platform to discover and research financial products they are most interested in, reducing the utilization of our call center as a result.
In Insurance we exited our Medicare agency operation. The Medicare agency had achieved increased efficiencies operating at a smaller scale, but intense competition across the space and heightened regulatory attention on Medicare Advantage plans led us to conclude the business is unlikely to scale with attractive returns. We continue to be pleased with our direct-to-consumer Property & Casualty agency operation, and view it as an attractive fulfillment option that drives an improved customer experience.
In April, we made the decision to begin winding down the Ovation Credit Services business. We acquired Ovation in 2018 to better serve those customers who come to LendingTree and receive suboptimal offers of credit. The business grew substantially and profitably for a number of years before running into challenges in the wake of COVID, and more recently the industry has faced increased regulatory pressure. The business is capital-intensive, requires elevated overhead, and future prospects were becoming uncertain.
We have moved to a quarterly planning process in order to remain agile and nimble in changing economic conditions, with our key initiatives for the period heavily communicated and publicized throughout the organization. We have also shifted our product development process to a team-based approach with dedicated resources from across the organization assigned to each initiative. The improved
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communication and increased planning pace have already benefited our daily workflow, speed and quality of execution.
Before discussing the quarter's results and our segments in more detail, we want to emphasize the importance of these various actions. Our cost structure has now returned close to 2019 levels, our most profitable year in recent history. The macroeconomic climate remains very challenging across virtually every one of our key businesses, and could remain so for the foreseeable future. We are taking appropriate action to navigate this period, while still generating substantial free cash flow and making calculated investments in our future. When the various revenue headwinds subside, we are poised to grow as a more efficient company while generating significant operating leverage.
The company performed well in the first quarter, despite the economic backdrop. The Insurance segment again had a very efficient quarter, generating a 39% margin on revenue that was down 4% versus last year. Our other segment level margins were essentially flat from a year ago, indicating the secular strength of these businesses despite the broader issues in the economy we are working to overcome.
The Home segment was heavily impacted by higher interest rates as we had forecast, although our Home Equity product had another solid quarter with revenue up 2% YoY. Our Consumer segment revenue declined 21% due to tightening credit conditions driven by higher interest rates and, to a lesser extent, the stress in the overall banking sector that picked up in March. We began to see lower close rates for loans across our personal and small business lending products in the back half of the quarter as a result.
The measures we took in the quarter not only reduced our expense profile, but also the complexity of our business. We are already recognizing the benefits to our focus and execution, as we work towards creating the premiere shopping experience for all of our customers' personal financial needs. We are excited about early signs of demand for our LendingTree Win card, as well as progress the team has made on the new MyLT experience. We expect to launch a rebranded and updated MyLT this summer, delivering to our members a more intuitive shopping tool with improved overall functionality.
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SUMMARY CONSOLIDATED FINANCIALS
(millions, except per share amounts)
Total revenue
Income (loss) before income taxes
Income tax (expense) benefit
Net income (loss)
Net income (loss) % of revenue
Income (loss) per share
Basic
Diluted
Variable marketing margin
Total revenue
Variable marketing expense (1) (2)
Variable marketing margin (2)
Variable marketing margin % of revenue (2)
Adjusted EBITDA (2)
Adjusted EBITDA % of revenue (2)
Adjusted net income (loss) (2)
Adjusted net income (loss) per share (2)
2023 | 2022 | Y/Y | |||||||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | % Change | ||||||||||||
$ | 200.5 | $ | 202.1 | $ | 237.8 | $ | 261.9 | $ | 283.2 | (29)% | |||||||
$ | 13.9 | $ | (11.3) | $ | (22.8) | $ | (10.4) | $ | (10.4) | 234% | |||||||
$ | (0.4) | $ | 0.9 | $ | (135.9) | $ | 2.4 | $ | (0.4) | -% | |||||||
$ | 13.5 | $ | (10.4) | $ | (158.7) | $ | (8.0) | $ | (10.8) | 225% | |||||||
7% | (5)% | (67)% | (3)% | (4)% | |||||||||||||
$ | 1.05 | $ | (0.81) | $ | (12.44) | $ | (0.63) | $ | (0.84) | ||||||||
$ | 1.04 | $ | (0.81) | $ | (12.44) | $ | (0.63) | $ | (0.84) | ||||||||
$ | 200.5 | $ | 202.1 | $ | 237.8 | $ | 261.9 | $ | 283.2 | (29)% | |||||||
$ | (124.4) | $ | (124.0) | $ | (163.1) | $ | (171.1) | $ | (189.1) | (34)% | |||||||
$ | 76.1 | $ | 78.1 | $ | 74.7 | $ | 90.8 | $ | 94.1 | (19)% | |||||||
38% | 39% | 31% | 35% | 33% | |||||||||||||
$ | 14.5 | $ | 16.7 | $ | 9.8 | $ | 28.6 | $ | 29.4 | (51)% | |||||||
7% | 8% | 4% | 11% | 10% | |||||||||||||
$ | 3.2 | $ | 4.9 | $ | (4.6) | $ | 7.6 | $ | 6.1 | (48)% | |||||||
$ | 0.25 | $ | 0.38 | $ | (0.36) | $ | 0.58 | $ | 0.46 | (46)% | |||||||
- Represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses. Excludes overhead, fixed costs and personnel-related expenses.
- Variable marketing expense, variable marketing margin, variable marketing margin % of revenue, adjusted EBITDA, adjusted EBITDA % of revenue, adjusted net income (loss) and adjusted net income (loss) per share are non-GAAP measures. Please see "LendingTree's Reconciliation of Non-GAAP Measures to GAAP" and "LendingTree's Principles of Financial Reporting" below for more information.
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Q1 2023 CONSOLIDATED RESULTS
Consolidated revenue of $200.5 million declined 29% over the prior year, driven by a 57% decline in Home revenue from decreased purchase and refinance activity, as well as continued softening in our Consumer segment with overall credit availability having tightened.
Variable Marketing Margin of $76.1 million declined 19% over prior year. We showed particular strength in our Insurance segment margin of 39% during Q1 compared to 26% a year ago, while stable margins in our other two segments helped offset some of the decline in overall revenue.
GAAP net income was $13.5 million, or $1.04 per diluted share. During the quarter we booked a gain of $30.9 million from the partial repurchase of our 2025 convertible notes at a discount. We also recorded a $4.5 million restructuring charge primarily related to our expense actions taken during the quarter.
Adjusted EBITDA was $14.5 million.
Adjusted net income of $3.2 million translates to $0.25 per share.
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SEGMENT RESULTS
(millions)
Home (1)
Revenue
Segment profit
Segment profit % of revenue
Consumer (2)
Revenue
Segment profit
Segment profit % of revenue
Insurance (3)
Revenue
Segment profit
Segment profit % of revenue
Other Category (4)
Revenue (Loss) profit
Total
Revenue
Segment profit
Segment profit % of revenue
Brand marketing expense (5)
Variable marketing margin
Variable marketing margin % of revenue
2023 | 2022 | Y/Y | ||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | % Change | |||||||
$ | 43.7 | $ | 48.6 | $ | 64.9 | $ | 73.9 | $ | 101.9 | (57)% | ||
$ | 15.1 | $ | 16.3 | $ | 24.1 | $ | 26.7 | $ | 35.9 | (58)% | ||
35% | 34% | 37% | 36% | 35% | ||||||||
$ | 79.7 | $ | 86.2 | $ | 102.7 | $ | 106.1 | $ | 101.1 | (21)% | ||
$ | 34.9 | $ | 41.7 | $ | 45.8 | $ | 44.6 | $ | 42.5 | (18)% | ||
44% | 48% | 45% | 42% | 42% | ||||||||
$ | 77.1 | $ | 67.0 | $ | 70.2 | $ | 81.8 | $ | 80.0 | (4)% | ||
$ | 30.2 | $ | 25.6 | $ | 22.6 | $ | 22.6 | $ | 21.1 | 43% | ||
39% | 38% | 32% | 28% | 26% | ||||||||
$ | - | $ | 0.2 | $ | - | $ | 0.1 | $ | 0.1 | (100)% | ||
$ | (0.2) | $ | (0.1) | $ | (0.2) | $ | (0.1) | $ | (0.1) | (100)% | ||
$ | 200.5 | $ | 202.1 | $ | 237.8 | $ | 261.9 | $ | 283.2 | (29)% | ||
$ | 80.0 | $ | 83.4 | $ | 92.3 | $ | 93.8 | $ | 99.5 | (20)% | ||
40% | 41% | 39% | 36% | 35% | ||||||||
$ | (3.9) | $ | (5.3) | $ | (17.6) | $ | (3.0) | $ | (5.4) | (28)% | ||
$ | 76.1 | $ | 78.1 | $ | 74.7 | $ | 90.8 | $ | 94.1 | (19)% | ||
38% | 39% | 31% | 35% | 33% | ||||||||
- The Home segment includes the following products: purchase mortgage, refinance mortgage, home equity loans, and reverse mortgage loans. We ceased offering reverse mortgage loans in Q4 2022.
- The Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products such as credit repair and debt settlement.
- The Insurance segment consists of insurance quote products and sales of insurance policies.
- The Other category primarily includes marketing revenue and related expenses not allocated to a specific segment.
- Brand marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses that are not assignable to the segments' products. This measure excludes overhead, fixed costs and personnel-related expenses.
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LendingTree Inc. published this content on 02 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 May 2023 11:12:09 UTC.
