Q1.2020 1 Exhibit 99.2 May 5, 2020 Fellow Shareholders: In an effort to enhance our dialogue with investors, we're implementing this shareholder letter into our quarterly earnings routine. We believe this quarterly letter will provide a better platform for us to share our thoughts on quarterly results, progress against key initiatives, and our forward-looking outlook while providing investors with greater clarity and transparency and improving the efficiency of our conference calls. We hope you'll find it helpful and please give us any feedback you may have. We’d like to start by expressing our hope that you and your loved ones are healthy and safe in these difficult times. Our top priorities as the COVID-19 outbreak began in early March were the health and safety of our employees, our customers, and our partners. Fortunately, we adapted quickly and we're well-positioned to navigate our business through this challenging environment while continuing to seek opportunities for growth and expansion. Before discussing the quarter’s performance, I’d like to outline just a few of the many reasons why we're incredibly proud of our team’s response to this pandemic: ▪ Our HR and technology teams, along with each of our businesses, worked tirelessly to enable a seamless remote work environment for all of our 1,100+ employees in a matter of days. ▪ Through the LendingTree Foundation, on March 16, we announced a donation of $1 million to jump start and lead fund raising efforts for a coronavirus relief fund alongside the City of Charlotte. ▪ On April 22, we announced the launch of an SBA lending marketplace to match small businesses in need of financial assistance with SBA-approved lenders to facilitate access to funds available through the Paycheck Protection Program (PPP). The LendingTree Foundation has pledged to donate an amount equal to all net proceeds earned from participating PPP lenders to COVID-19 relief funds. ▪ Our team, at every level of the organization, has stepped-up tremendously to provide support: ◦ For consumers, by generating an abundance of high quality COVID-specific educational content to provide support for those in need. ◦ For our partners, many of whose businesses have been severely impacted by this crisis. ◦ For our company, by reacting swiftly and decisively to rapidly changing business conditions. ◦ And importantly, for each other. The collaboration and productivity over these last several weeks have been stronger than ever. So to our employees, thank you for all that you do.
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Q1.2020 1
Exhibit 99.2
May 5, 2020
Fellow Shareholders:
In an effort to enhance our dialogue with investors, we're implementing this shareholder letter into our
quarterly earnings routine. We believe this quarterly letter will provide a better platform for us to share our
thoughts on quarterly results, progress against key initiatives, and our forward-looking outlook while
providing investors with greater clarity and transparency and improving the efficiency of our conference calls.
We hope you'll find it helpful and please give us any feedback you may have.
We’d like to start by expressing our hope that you and your loved ones are healthy and safe in these difficult
times. Our top priorities as the COVID-19 outbreak began in early March were the health and safety of our
employees, our customers, and our partners. Fortunately, we adapted quickly and we're well-positioned to
navigate our business through this challenging environment while continuing to seek opportunities for growth
and expansion.
Before discussing the quarter’s performance, I’d like to outline just a few of the many reasons why we're
incredibly proud of our team’s response to this pandemic:
▪ Our HR and technology teams, along with each of our businesses, worked tirelessly to enable a
seamless remote work environment for all of our 1,100+ employees in a matter of days.
▪ Through the LendingTree Foundation, on March 16, we announced a donation of $1 million to jump
start and lead fund raising efforts for a coronavirus relief fund alongside the City of Charlotte.
▪ On April 22, we announced the launch of an SBA lending marketplace to match small businesses in
need of financial assistance with SBA-approved lenders to facilitate access to funds available through
the Paycheck Protection Program (PPP). The LendingTree Foundation has pledged to donate an
amount equal to all net proceeds earned from participating PPP lenders to COVID-19 relief funds.
▪ Our team, at every level of the organization, has stepped-up tremendously to provide support:
◦ For consumers, by generating an abundance of high quality COVID-specific educational
content to provide support for those in need.
◦ For our partners, many of whose businesses have been severely impacted by this crisis.
◦ For our company, by reacting swiftly and decisively to rapidly changing business
conditions.
◦ And importantly, for each other. The collaboration and productivity over these last several
weeks have been stronger than ever.
So to our employees, thank you for all that you do.
Adjusted net income (2) $ 17.1 $ 15.6 10 % $ 16.3 5 %
Adjusted net income per share (2) $ 1.20 $ 1.10 9 % $ 1.12 7 %
(1) Represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related
expenses. Also includes the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties. Excludes overhead, fixed costs and personnel-related expenses.
(2) Variable marketing expense, variable marketing margin, variable marketing margin % of revenue, adjusted EBITDA, adjusted EBITDA % of revenue, adjusted net income and adjusted net income 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.
Q1 2020 CONSOLIDATED RESULTS
Despite widespread health concerns and market volatility ramping up in early March, our Q1 results were
solid as we delivered adjusted EBITDA in line with our previous guidance. Many of our businesses were
outperforming expectations through the first two months of the year which certainly lessened the blow from
ensuing events. As discussed in our Q1 preview, the deteriorating economic conditions have affected our
businesses to widely varying degrees.
Our Home segment has performed relatively well over the last several weeks despite several challenges faced
by many lenders and servicers in the mortgage industry.
(1) The Home segment includes the following products: purchase mortgage, refinance mortgage, home equity loans and lines of credit, reverse mortgage loans, and real estate.
(2) 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.
(3) The Insurance segment consists of insurance quote products.
(4) The Other category includes revenue from the resale of online advertising space to third parties and revenue from home improvement referrals, and the related variable marketing and advertising expenses.
(5) 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.
Q1.2020 5
HOME
The Home segment continued its resurgence, growing revenue 25% Y/Y and growing segment profit by 50%
to $35.9 million, the highest level since Q3 2017. Within Home, mortgage products revenue of $67.0 million
grew 46% Y/Y led by refinance revenue which recorded an all-time high.
While historically-low interest rates are certainly helping fuel refi demand from borrowers, we believe the
recent success of our mortgage business is largely due to recent product innovations, the strength of our lender
relationships, and our relative competitive position during what has been a tumultuous time for many
mortgage lenders.
We spent much of 2019 talking about our efforts to improve the mortgage experience, and we are seeing real
benefits from those efforts in 2020. Lenders are engaging with us across various different products that serve
their loan officers best. In some cases, we are now selling exclusive leads. For other lenders, the traditional
multi-match offering remains most effective. The common ground is that we are using signals and automated
segmenting more effectively at the top of the funnel and delivering solutions that are best for our partners. For
our consumers, we are streamlining the process and reducing phone calls. And as the efficiency of our
flywheel accelerates, we are seeing market share gains.
Our mortgage business was performing particularly well prior to the outbreak, but like many of our
businesses, it was impacted during the last few weeks of March. When the Federal Reserve initially cut rates
by 50 basis points on March 3, the flurry of consumer interest in refinancing overwhelmed many lenders,
forcing them to actually raise mortgage rates to stave off demand for a period of time. This was further
complicated by secondary market liquidity challenges felt by our lenders, as the MBS market was impacted by
capital markets uncertainty and the overhang of the impact of government mandated forbearance on mortgage
servicers. While the servicer issue remains, conditions have improved, and our lenders are focused on
execution and delivering for borrowers.
Although we experienced volatility in demand from many of our lender partners during the last few weeks of
the quarter, things have largely stabilized early in Q2. While we’re still operating with somewhat limited
capacity relative to pre-crisis levels, we’ve added capacity with key partners, and thanks to substantially lower
customer acquisition costs, our mortgage business should drive the Home segment to continued Y/Y growth in
segment profit despite headwinds on the top-line.
CONSUMER
As discussed along with our Q1 preview, our Consumer segment is feeling the most substantial impact from
recent events. Despite a relatively good start to the year for many of the products within Consumer, the
COVID-19 outbreak took its toll on the quarterly figures with revenue down 1% Y/Y and segment profit down
20%.
In personal loans for example, which experienced a revenue decline of 3% Y/Y for the quarter, revenue was up
18% Y/Y in the month of February before declining 25% in the month of March as several lenders entirely
paused on our platform. Many of our network lenders rely on external funding to originate new loans and as
capital flows to these lending platforms tighten up due to recession fears, it obviously diminishes demand for
our services. That said, we take comfort in the fact that consumers continue to show great interest in this
product. Over the last several years, we and others have created structural consumer awareness for personal
LENDINGTREE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended March 31,
2020 2019
(in thousands, except per share amounts)
Revenue $ 283,084 $ 262,390
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below) (1) 14,252 17,670
Selling and marketing expense (1) 195,538 174,891
General and administrative expense (1) 32,082 31,117
Product development (1) 10,963 10,166
Depreciation 3,378 2,482
Amortization of intangibles 13,757 13,427
Change in fair value of contingent consideration (8,122 ) 14,592
Severance 158 54
Litigation settlements and contingencies 329 (207 )
Total costs and expenses 262,335 264,192
Operating income (loss) 20,749 (1,802 )
Other (expense) income, net:
Interest expense, net (4,834 ) (5,468 )
Other income — 68
Income (loss) before income taxes 15,915 (7,202 )
Income tax benefit 3,061 7,752
Net income from continuing operations 18,976 550
Loss from discontinued operations, net of tax (4,575 ) (1,062 )
Net income (loss) and comprehensive income (loss) $ 14,401 $ (512 )
Weighted average shares outstanding:
Basic 12,957 12,718
Diluted 14,158 14,186
Income per share from continuing operations:
Basic $ 1.46 $ 0.04
Diluted $ 1.34 $ 0.04
Loss per share from discontinued operations:
Basic $ (0.35 ) $ (0.08 )
Diluted $ (0.32 ) $ (0.07 )
Net income (loss) per share:
Basic $ 1.11 $ (0.04 )
Diluted $ 1.02 $ (0.04 )
(1) Amounts include non-cash compensation, as follows:
Cost of revenue $ 242 $ 153
Selling and marketing expense 1,156 1,749
General and administrative expense 9,123 10,221
Product development 1,396 1,930
Q1.2020 10
LENDINGTREE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,
2020 December 31,
2019
(in thousands, except par value and share amounts)
ASSETS:
Cash and cash equivalents $ 51,208 $ 60,243
Restricted cash and cash equivalents 93 96
Accounts receivable, net 119,559 113,487
Prepaid and other current assets 17,375 15,516
Current assets of discontinued operations 84 84
Total current assets 188,319 189,426
Property and equipment, net 31,473 31,363
Goodwill 420,139 420,139
Intangible assets, net 167,823 181,580
Deferred income tax assets 90,725 87,664
Equity investment 80,000 —
Other non-current assets 28,665 29,849
Non-current assets of discontinued operations 9,476 7,948
Total assets $ 1,016,620 $ 947,969
LIABILITIES:
Revolving credit facility $ 130,000 $ 75,000
Accounts payable, trade 6,056 2,873
Accrued expenses and other current liabilities 105,647 112,755
Current contingent consideration 14,183 9,028
Current liabilities of discontinued operations 36,400 31,050
Total current liabilities 292,286 230,706
Long-term debt 267,870 264,391
Non-current contingent consideration 8,159 24,436
Other non-current liabilities 24,748 26,110
Total liabilities 593,063 545,643
SHAREHOLDERS' EQUITY:
Preferred stock $.01 par value; 5,000,000 shares authorized; none issued or outstanding — —
Common stock $.01 par value; 50,000,000 shares authorized; 15,704,064 and 15,676,819 shares issued, respectively, and 13,062,746 and 13,035,501 shares outstanding, respectively 157
Total liabilities and shareholders' equity $ 1,016,620 $ 947,969
Q1.2020 11
LENDINGTREE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
2020 2019
(in thousands) Cash flows from operating activities attributable to continuing operations:
Net income (loss) and comprehensive income (loss) $ 14,401 $ (512 )
Less: Loss from discontinued operations, net of tax 4,575 1,062
Income from continuing operations 18,976 550 Adjustments to reconcile income from continuing operations to net cash provided by operating
activities attributable to continuing operations:
Loss on impairments and disposal of assets 530 468
Amortization of intangibles 13,757 13,427
Depreciation 3,378 2,482
Non-cash compensation expense 11,917 14,053
Deferred income taxes (3,061 ) (7,752 )
Change in fair value of contingent consideration (8,122 ) 14,592
Bad debt expense 880 510
Amortization of debt issuance costs 582 483
Amortization of convertible debt discount 3,111 2,951
Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities (196 ) 35
Changes in current assets and liabilities: Accounts receivable (6,952 ) (27,534 )
Prepaid and other current assets (1,430 ) (207 )
Accounts payable, accrued expenses and other current liabilities (3,271 ) 5,653
Current contingent consideration — (1,000 )
Income taxes receivable 65 4,288
Other, net (862 ) 270
Net cash provided by operating activities attributable to continuing operations 29,302 23,269
Cash flows from investing activities attributable to continuing operations: Capital expenditures (4,189 ) (4,960 )
Equity investment (80,000 ) —
Acquisition of ValuePenguin, net of cash acquired — (105,445 )
Net cash used in investing activities attributable to continuing operations (84,189 ) (110,405 )
Cash flows from financing activities attributable to continuing operations: Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options (5,087 ) (3,585 )
(1 ) Represents the portion of selling and marketing expense not attributable to variable costs paid for advertising, direct marketing and related expenses. Includes overhead, fixed costs and personnel-related expenses.
(2 ) Represents the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties. Excludes overhead, fixed costs, and personnel-related expenses.
Q1.2020 13
LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP
Variable Marketing Margin
Below is a reconciliation of net income from continuing operations to variable marketing margin and net income from
continuing operations % of revenue to variable marketing margin % of revenue. See "LendingTree's Principles of
Financial Reporting" for further discussion of the Company's use of these non-GAAP measures.
Three Months Ended
March 31,
2020 December 31,
2019 March 31,
2019
(in thousands, except percentages)
Net income from continuing operations $ 18,976 $ 1,466 $ 550
Net income from continuing operations % of revenue 7 % 1 % — %
Adjustments to reconcile to variable marketing margin:
Cost of revenue 14,252 16,728 17,670
Cost of advertising re-sold to third parties (1) (1,086 ) (4,557 ) (7,336 )
Non-variable selling and marketing expense (2) 11,772 11,036 12,305
General and administrative expense 32,082 27,456 31,117
Product development 10,963 9,412 10,166
Depreciation 3,378 3,261 2,482
Amortization of intangibles 13,757 13,756 13,427
Change in fair value of contingent consideration (8,122 ) 7,181 14,592
Severance 158 390 54
Litigation settlements and contingencies 329 140 (207 )
Interest expense, net 4,834 4,863 5,468
Other (income) expense — (381 ) (68 )
Income tax (benefit) expense (3,061 ) 3,073 (7,752 )
(1 ) Represents the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties. Excludes overhead, fixed costs, and personnel-related expenses.
(2 ) Represents the portion of selling and marketing expense not attributable to variable costs paid for advertising, direct marketing and related expenses. Includes overhead, fixed costs and personnel-related expenses.
Q1.2020 14
LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP
Adjusted EBITDA
Below is a reconciliation of net income from continuing operations to adjusted EBITDA and net income from continuing
operations % of revenue to adjusted EBITDA % of revenue. See "LendingTree's Principles of Financial Reporting" for
further discussion of the Company's use of these non-GAAP measures.
Three Months Ended
March 31,
2020 December 31,
2019 March 31,
2019
(in thousands, except percentages)
Net income from continuing operations $ 18,976 $ 1,466 $ 550
Net income from continuing operations % of revenue 7 % 1 % — %
Adjustments to reconcile to adjusted EBITDA:
Amortization of intangibles 13,757 13,756 13,427
Depreciation 3,378 3,261 2,482
Severance 158 390 54
Loss on impairments and disposal of assets 530 424 218
Non-cash compensation 11,917 11,335 14,053
Change in fair value of contingent consideration (8,122 ) 7,181 14,592
Acquisition expense 2,180 14 119
Litigation settlements and contingencies 329 140 (207 )
Interest expense, net 4,834 4,863 5,468
Income tax (benefit) expense (3,061 ) 3,073 (7,752 )
Adjusted EBITDA $ 44,876 $ 45,903 $ 43,004
Adjusted EBITDA % of revenue 16 % 18 % 16 %
Q1.2020 15
LENDINGTREE'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP
Adjusted Net Income
Below is a reconciliation of net income from continuing operations to adjusted net income and net income per diluted
share from continuing operations to adjusted net income per share. See "LendingTree's Principles of Financial
Reporting" for further discussion of the Company's use of these non-GAAP measures.
Three Months Ended
March 31,
2020 December 31,
2019 March 31,
2019
(in thousands, except per share amounts)
Net income from continuing operations $ 18,976 $ 1,466 $ 550
Adjustments to reconcile to adjusted net income:
Non-cash compensation 11,917 11,335 14,053
Loss on impairments and disposal of assets 530 424 218
Acquisition expense 2,180 14 119
Change in fair value of contingent consideration (8,122 ) 7,181 14,592
Severance 158 390 54
Litigation settlements and contingencies 329 140 (207 )
Income tax benefit from adjusted items (1,760 ) (4,087 ) (7,811 )