CHARLOTTE, N.C., April 30, 2010 (GLOBE NEWSWIRE) -- Tree.com, Inc. (Nasdaq:TREE) today announced Q1 2010 Adjusted EBITDA of $0.8 million, an improvement of $0.4 million over the prior quarter and an $8.4 million decrease from prior year. Tree's first quarter 2010 revenue was $48.0 million, up from $47.8 million in Q409. Including $2.6 million in restructuring charges, principally for the building consolidation announced last quarter, Tree reported a GAAP loss of $0.56 per share on a net loss of $6.1 million, an improvement over the loss of $1.92 per share in the prior quarter on a net loss of $21 million.
Doug Lebda, Chairman and CEO of Tree.com stated, "Overall, I am cautiously pleased with the performance of our core business in the first quarter. Both the Exchanges and the LendingTree Loans segments reported positive results despite the continuing headwinds in the mortgage market. The difficult economic conditions and normal seasonality also took a toll on our real estate business. It is precisely for this reason that our strategy of building out new non-mortgage verticals is so critical, and we are looking forward to the launch of the Tree.com site this summer."
Tree.com CFO Matt Packey added, "In this tough market, we are pleased to be able to deliver another positive Adjusted EBITDA quarter. Our focus on disciplined spending has allowed us to lever up our marketing to achieve flat revenue quarter-over-quarter while keeping the Adjusted EBITDA in positive territory. However, with real estate values staying low, upward pressure on interest rates and government stimulus fading, we will need to continue to push hard toward achieving the lower end of our earnings guidance for the year."
| Tree.com Summary Financial Results | |||||
| $s in millions (except per share amounts) | |||||
| Q/Q | Y/Y | ||||
| Q1 2010 | Q4 2009 | % Change | Q1 2009 | % Change | |
| Revenue | $ 48.0 | $ 47.8 | 0% | $ 57.3 | (16%) |
| Cost of Revenue* | $ 14.0 | $ 16.5 | (15%) | $ 18.1 | (23%) |
| Operating Expenses* | $ 33.2 | $ 30.9 | 7% | $ 30.0 | 11% |
| Adjusted EBITDA** | $ 0.8 | $ 0.4 | 122% | $ 9.2 | (91%) |
| EBITDA** | $ (2.9) | $ (18.5) | 84% | $ 6.1 | 147% |
| Restructuring | $ 2.6 | $ 2.8 | (8%) | $ 0.8 | 210% |
| Litigation Settlements and Contingencies | $ 0.0 | $ 12.8 | NM | $ 0.4 | (96%) |
| Net Income/(Loss) | $ (6.1) | $ (21.0) | 71% | $ 3.2 | 295% |
| Net Income/(Loss) Per Share | $ (0.56) | $ (1.92) | 71% | $ 0.33 | 270% |
| Diluted Net Income/(Loss) Per Share | $ (0.56) | $ (1.92) | 71% | $ 0.32 | 275% |
| NM = Not Meaningful | |||||
| * Does not include non-cash compensation, depreciation, gain/loss on disposal of assets, restructuring, amortization, impairment, or litigation settlements and contingencies. | |||||
| ** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP Operating Income/Loss. | |||||
Information Regarding Q1 Results
- First quarter 2010 revenue was virtually flat quarter-over-quarter and decreased 16% year-over-year. Quarter-over-quarter, we saw stronger performance from the LendingTree Loans and Exchanges segments as low rates, higher advertising levels, and expansion of our new verticals led to top-line improvements. These gains were offset somewhat by continued declines in the Real Estate Segment due to significant deteriorations in the number of closings and average transaction values as average home price has continued to decline. The year-over-year decrease reflects the refi-boom impact of first quarter 2009, when historically low rates and significant media and government attention created unprecedented consumer refinance demand.
- First quarter 2010 Adjusted EBITDA improved $0.4 million quarter-over-quarter, despite the increased investment in marketing, with the LendingTree Loans and Lending Exchanges segments each reporting positive results in the quarter from revenue growth. Adjusted EBITDA decreased $8.4 million year-over-year, reflecting both lower revenue and the return to normalized levels of advertising spend in first quarter 2010 compared to the prior year when we significantly curtailed marketing spend and achieved higher revenue because of a market driven surge in refinance activity.
A chart describing average 30-year fixed mortgage rate recent trends is available at http://media.globenewswire.com/cache/10613/file/8181.pdf
Business Unit Discussion
LENDINGTREE LOANS SEGMENT
| LendingTree Loans Segment Results | |||||
| $s in millions | |||||
| Q/Q | Y/Y | ||||
| Q1 2010 | Q4 2009 | % Change | Q1 2009 | % Change | |
| Revenue - Direct Lending | |||||
| Origination and Sale of Loans | $ 23.4 | $ 20.6 | 13% | $ 32.8 | (29%) |
| Other | $ 2.3 | $ 2.3 | 0% | $ 1.6 | 45% |
| Total Revenue - Direct Lending | $ 25.7 | $ 22.9 | 12% | $ 34.4 | (25%) |
| Cost of Revenue* | $ 10.2 | $ 10.2 | (1%) | $ 11.9 | (14%) |
| Operating Expenses* | $ 12.7 | $ 9.8 | 30% | $ 7.2 | 78% |
| Adjusted EBITDA** | $ 2.8 | $ 2.9 | (5%) | $ 15.3 | (82%) |
| EBITDA** | $ 2.6 | $ 2.6 | 2% | $ 15.0 | (83%) |
| Litigation Settlements and Contingencies | $ 0.0 | $ 0.1 | NM | $ 0.4 | (96%) |
| Operating Income | $ 2.1 | $ 1.9 | 14% | $ 14.2 | (85%) |
| Metrics - Direct Lending | |||||
| Purchased loan requests (000s) | 59.2 | 61.5 | (4%) | 57.7 | 3% |
| Closed - units (000s) | 2.7 | 2.7 | 1% | 3.3 | (16%) |
| Closed - units (dollars) | $ 608.5 | $ 622.6 | (2%) | $ 714.8 | (15%) |
| NM = Not Meaningful | |||||
| * Does not include non-cash compensation, depreciation, gain/loss on disposal of assets, restructuring, amortization, impairment, or litigation settlements and contingencies. | |||||
| ** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP Operating Income/Loss. | |||||
LendingTree Loans
First quarter 2010 revenue increased 12% quarter-over-quarter on flat closed units and slightly lower average loan amounts. The quarter-over-quarter increase was primarily due to the fact that fourth quarter 2009 included $4.8 million more in loan losses as a result of loan loss settlements in that period. First quarter revenue decreased 25% from the same period last year on a 16% decrease in closed units and a 10% decrease in the average revenue per loan. We anticipated a year-over-year decline as first quarter 2009 was bolstered by extraordinary levels of refinance loan activity.
Operating expenses increased $3.0 million quarter-over-quarter and $5.6 million year-over-year largely driven by increased marketing spend. The quarter-over-quarter increase in marketing was the result of a normal seasonal uptick in spend, in addition to an investment in testing and implementing new sources of lead volume. The lending segment has also undertaken an expansion of its team of loan officers. In the first quarter, LendingTree Loans had a net addition of nearly 20 LOs, a greater than 10% increase over the prior quarter. This investment in licensing and training will position this segment well for a favorable market when it does return.
EXCHANGES SEGMENT
| Exchanges Segment Results | |||||
| $s in millions | |||||
| Q/Q | Y/Y | ||||
| Q1 2010 | Q4 2009 | % Change | Q1 2009 | % Change | |
| Revenue - Exchanges | |||||
| Match Fees | $ 14.2 | $ 12.3 | 15% | $ 10.0 | 42% |
| Closed Loan Fees | $ 3.3 | $ 5.3 | (37%) | $ 6.4 | (48%) |
| Inter-segment Revenue | $ 7.7 | $ 5.1 | 50% | $ 1.9 | 296% |
| Other | $ 0.9 | $ 0.4 | 113% | $ 0.8 | 20% |
| Total Revenue - Exchanges | $ 26.1 | $ 23.1 | 13% | $ 19.1 | 37% |
| Cost of Revenue* | $ 1.1 | $ 1.9 | (40%) | $ 1.9 | (40%) |
| Operating Expenses* | $ 21.3 | $ 17.5 | 21% | $ 14.7 | 45% |
| Adjusted EBITDA** | $ 3.7 | $ 3.7 | 0% | $ 2.5 | 45% |
| EBITDA** | $ 3.2 | $ 1.4 | 128% | $ 1.7 | 87% |
| Operating Income | $ 2.6 | $ 0.7 | 281% | $ 1.5 | 76% |
| Metrics - Exchanges | |||||
| Matched requests (000s) | 337.1 | 279.3 | 21% | 366.3 | (8%) |
| Closing - units (000s) | 9.1 | 11.6 | (22%) | 14.3 | (36%) |
| Closing - units (dollars) | 1,663.4 | 2,291.5 | (27%) | $ 2,625.0 | (37%) |
| NM = Not Meaningful | |||||
| * Does not include non-cash compensation, depreciation, gain/loss on disposal of assets, restructuring, amortization, impairment, or litigation settlements and contingencies. | |||||
| ** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP Operating Income/Loss. | |||||
Exchanges
Exchanges revenue in first quarter 2010 increased 13% compared to Q409 and 37% compared to first quarter 2009. Match fee revenue has improved 15% Q/Q and 42% Y/Y due largely to the expansion of our new consumer services (education, auto and home services), which now account for more than 50% of our matched consumer requests. Additionally, pricing changes on the lending exchange increased the average match fee and decreased the average closed loan fee earned from network lenders. This planned pricing action, with a greater emphasis on up-front match fee revenue, more closely aligns the value of the transaction with our marketing efforts. Inter-segment revenue has increased significantly Q/Q and Y/Y reflecting higher volume sold and a higher transfer price (cost plus margin) charged to LendingTree Loans.
Operating expenses increased $3.7 million quarter-over-quarter and increased $6.6 million year-over-year. The increases Q/Q are the result of higher seasonal marketing expense on the lending exchanges as well as the expanded marketing spend on our new consumer verticals. On a Y/Y basis, the increased spend primarily reflects the very low levels of spend in first quarter 2009 as a result of the market-driven surge in refinance activity.
| Real Estate Segment Results | |||||
| $s in millions | |||||
| Q/Q | Y/Y | ||||
| Q1 2010 | Q4 2009 | % Change | Q1 2009 | % Change | |
| Total Revenue - Real Estate | $ 3.9 | $ 6.9 | (43%) | $ 5.8 | (32%) |
| Cost of Revenue* | $ 2.5 | $ 4.3 | (43%) | $ 3.9 | (36%) |
| Operating Expenses* | $ 2.3 | $ 2.5 | (5%) | $ 4.8 | (52%) |
| Adjusted EBITDA** | $ (0.9) | $ 0.1 | NM | $ (2.9) | 69% |
| EBITDA** | $ (1.0) | $ (2.5) | 63% | $ (3.8) | 75% |
| Operating Loss | $ (1.9) | $ (3.6) | (46%) | $ (5.2) | (63%) |
| Metrics - Real Estate | |||||
| Closing - units (000s) | 0.8 | 1.3 | (38%) | 1.2 | (32%) |
| Closing - units (dollars) | $ 164.6 | $ 278.3 | (41%) | $ 281.4 | (42%) |
| Agents - RealEstate.com, REALTORS® | 910 | 1,145 | (21%) | 1,213 | (25%) |
| Markets - RealEstate.com, REALTORS® | 20 | 20 | 0% | 20 | 0% |
| NM = Not Meaningful | |||||
| * Does not include non-cash compensation, depreciation, gain/loss on disposal of assets, restructuring, amortization, impairment, or litigation settlements and contingencies. | |||||
| ** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP Operating Income/Loss. | |||||
Real Estate
First quarter 2010 Real Estate revenue decreased $3.0 million, or 43%, from Q409 and $1.9 million, or 32%, from first quarter 2009. These decreases are primarily due to continued declines in the number of total real estate transactions (down 38% quarter-over-quarter and 32% year over year) and lower average home prices (down 5% quarter-over-quarter and 13% year-over-year). Additionally, first quarter 2010 ended with 21% fewer agents quarter-over-quarter and 25% fewer agents year-over-year.
Adjusted EBITDA declined $1.0 million quarter-over-quarter and improved $2.0 million year-over-year. The quarter-over-quarter deterioration was driven by the lower revenue in the period. The primary driver of the year-over-year improvement in Adjusted EBITDA, despite lower revenue, is lower operating expense which decreased $2.5 million year-over-year. The reductions in operating expense were across marketing as well as general and administrative, reflecting prior cost cutting initiatives.
CORPORATE
| Unallocated Corporate Costs and Eliminations | |||||
| $s in millions | |||||
| Q/Q | Y/Y | ||||
| Q1 2010 | Q4 2009 | % Change | Q1 2009 | % Change | |
| Inter-segment Revenue - elimination | $ (7.7) | $ (5.1) | (50%) | $ (1.9) | (296%) |
| Cost of Revenue* | $ 0.3 | $ 0.1 | 149% | $ 0.6 | (43%) |
| Inter-segment Marketing - elimination | $ (7.6) | $ (5.1) | (49%) | $ (1.9) | (294%) |
| Operating Expenses* | $ 4.3 | $ 6.2 | (30%) | $ 5.2 | (17%) |
| Adjusted EBITDA** | $ (4.7) | $ (6.3) | 25% | $ (5.8) | 19% |
| EBITDA** | $ (7.8) | $ (19.9) | 61% | $ (6.9) | (13%) |
| Restructuring | $ 2.5 | $ 0.2 | 895% | $ 0.2 | 1454% |
| Litigation Settlements and Contingencies | $ 0.0 | $ 12.8 | NM | $ -- | NM |
| Operating Loss | $ (8.2) | $ (20.3) | (60%) | $ (7.3) | 12% |
| NM = Not Meaningful | |||||
| * Does not include non-cash compensation, depreciation, gain/loss on disposal of assets, restructuring, amortization, impairment, or litigation settlements and contingencies. | |||||
| ** See separate reconciliation of Adjusted EBITDA and EBITDA to GAAP Operating Income/Loss. | |||||
Corporate
The eliminations both in revenue and in marketing principally represent the elimination of inter-segment transfer pricing charged from Exchanges to LendingTree Loans for leads. Operating expenses decreased $1.8 million quarter-over-quarter and decreased $0.8 million year-over-year. The quarter-over-quarter decrease was largely due to lower employee costs and lower legal consulting in the quarter. The year-over-year decreases in operating expense were primarily driven by lower employee costs reflecting prior cost-cutting initiatives.
Liquidity and Capital Resources
As of March 31, 2010, Tree.com had $73.1 million in unrestricted cash and cash equivalents, compared to $86.1 million as of December 31, 2009. Under the previously announced $10 million share repurchase program, which began in February with the opening of the Tree.com trading window, the Company repurchased 78,790 shares at an average price of $8.43 in open market transactions and has approximately $9.3 million of repurchase authorization remaining. As of March 31, 2010, LendingTree Loans had three committed lines of credit totaling $165 million of borrowing capacity. Borrowings under these lines of credit are used to fund, and are secured by, consumer residential loans that are held for sale. Loans under these lines of credit are repaid from proceeds from the sales of loans held for sale by LendingTree Loans. The loans held for sale and warehouse lines of credit balances as of March 31, 2010 were $100.7 million and $83.5 million, respectively. On April 28, 2010, Home Loan Center ("HLC") entered into an amendment to its existing warehouse line of credit with Bank of America. The amendment extends the termination date from April 30, 2010 to June 29, 2010. The amendment also decreases the percentage of loans originated by HLC which are required to be sold to Bank of America from 50% to 25% of Conventional Conforming loans and 25% of Government Mortgage Loans. The amount of the "pair-off fee" charged on the difference between the required and actual volume of loans sold to Bank of America is also reduced from 0.375% to 0.250%.
Conference Call
Tree.com will audio cast its conference call with investors and analysts discussing the Company's first quarter financial results on Friday, April 30, 2010 at 11:00 a.m. Eastern Time (ET). This call will include the disclosure of certain information, including forward-looking information, which may be material to an investor's understanding of Tree.com's business. The live audio cast is open to the public at http://investor-relations.tree.com/.
|
TREE.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
||
| Three Months Ended March 31, | ||
| 2010 | 2009 | |
|
(In thousands, except per share amounts) |
||
| Revenue | ||
| LendingTree Loans | $25,738 | $34,372 |
| Exchanges and other | 18,374 | 17,129 |
| Real Estate | 3,899 | 5,759 |
| Total revenue | 48,011 | 57,260 |
| Cost of revenue | ||
| LendingTree Loans | 10,154 | 11,856 |
| Exchanges and other | 1,452 | 2,467 |
| Real Estate | 2,455 | 3,864 |
| Total cost of revenue (exclusive of depreciation shown separately below) | 14,061 | 18,187 |
| Gross margin | 33,950 | 39,073 |
| Operating expenses | ||
| Selling and marketing expense | 20,146 | 13,822 |
| General and administrative expense | 12,702 | 16,299 |
| Product development | 1,366 | 1,608 |
| Litigation settlements and contingencies | 16 | 394 |
| Restructuring expense | 2,610 | 842 |
| Amortization of intangibles | 943 | 1,263 |
| Depreciation | 1,509 | 1,664 |
| Total operating expenses | 39,292 | 35,893 |
| Operating (loss) income | (5,342) | 3,180 |
| Other income (expense) | ||
| Interest income | 7 | 48 |
| Interest expense | (166) | (151) |
| Total other (expense), net | (159) | (103) |
| (Loss) income before income taxes | (5,501) | 3,077 |
| Income tax (provision) benefit | (645) | 83 |
| Net (loss) income | $(6,146) | $3,160 |
| Weighted average common shares outstanding | 10,960 | 9,676 |
| Weighted average diluted shares outstanding | 10,960 | 9,739 |
| Net (loss) income per share available to common shareholders | ||
| Basic | $(0.56) | $0.33 |
| Diluted | $(0.56) | $0.32 |
|
TREE.COM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS |
||
|
March 31, 2010 |
December 31, 2009 |
|
| (unaudited) | ||
| (In thousands, except par value and share amounts) | ||
| ASSETS: | ||
| Cash and cash equivalents | $73,051 | $86,093 |
| Restricted cash and cash equivalents | 12,173 | 12,019 |
| Accounts receivable, net of allowance of $974 and $518, respectively | 7,149 | 6,835 |
| Loans held for sale ($99,471and $92,236 measured at fair value, respectively) | 100,716 | 93,596 |
| Prepaid and other current assets | 10,104 | 10,758 |
| Total current assets | 203,193 | 209,301 |
| Property and equipment, net | 12,397 | 12,257 |
| Goodwill | 12,152 | 12,152 |
| Intangible assets, net | 56,683 | 57,626 |
| Other non-current assets | 602 | 496 |
| Total assets | $285,027 | $291,832 |
| LIABILITIES: | ||
| Warehouse lines of credit | $83,498 | $78,481 |
| Accounts payable, trade | 9,840 | 5,905 |
| Deferred revenue | 1,781 | 1,731 |
| Deferred income taxes | 2,033 | 2,211 |
| Accrued expenses and other current liabilities | 42,058 | 54,694 |
| Total current liabilities | 139,210 | 143,022 |
| Income taxes payable | 488 | 510 |
| Other long-term liabilities | 14,589 | 12,010 |
| Deferred income taxes | 16,088 | 15,380 |
| Total liabilities | 170,375 | 170,922 |
| SHAREHOLDERS' EQUITY: | ||
| Preferred stock $.01 par value; authorized 5,000,000 shares; none issued or outstanding | — | — |
| Common stock $.01 par value; authorized 50,000,000 shares; issued 11,227,117 and 10,904,330 shares, respectively, and outstanding 11,148,327 and 10,904,330 shares, respectively | 112 | 109 |
| Additional paid-in capital | 902,370 | 901,818 |
| Accumulated deficit | (787,163) | (781,017) |
| Treasury stock 78,790 and -0- shares, respectively | (667) | — |
| Total shareholders' equity | 114,652 | 120,910 |
| Total liabilities and shareholders' equity | $285,027 | $291,832 |
|
TREE.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
||
| Three Months Ended March 31, | ||
| 2010 | 2009 | |
| (In thousands) | ||
| Cash flows from operating activities: | ||
| Net (loss) income | $(6,146) | $3,160 |
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||
| Loss on disposal of fixed assets | 4 | 638 |
| Amortization of intangibles | 943 | 1,263 |
| Depreciation | 1,509 | 1,664 |
| Non-cash compensation expense | 1,094 | 1,177 |
| Non-cash restructuring expense | 93 | 161 |
| Deferred income taxes | 530 | — |
| Gain on origination and sale of loans | (23,400) | (32,764) |
| Loss on impaired loans not sold | — | 61 |
| Loss on sale of real estate acquired in satisfaction of loans | 368 | 34 |
| Bad debt expense | 75 | 79 |
| Changes in current assets and liabilities: | ||
| Accounts receivable | (390) | 684 |
| Origination of loans | (608,365) | (714,441) |
| Proceeds from sales of loans | 626,226 | 747,332 |
| Principal payments received on loans | 180 | 446 |
| Payments to investors for loan repurchases and early payoff obligations | (2,236) | (876) |
| Prepaid and other current assets | (175) | (421) |
| Accounts payable and other current liabilities | (7,997) | 2,901 |
| Income taxes payable | 59 | (126) |
| Deferred revenue | (36) | (14) |
| Other, net | 2,573 | 287 |
| Net cash (used in) provided by operating activities | (15,091) | 11,245 |
| Cash flows from investing activities: | ||
| Acquisitions | — | (1,000) |
| Capital expenditures | (1,609) | (592) |
| Other, net | 446 | 458 |
| Net cash used in investing activities | (1,163) | (1,134) |
| Cash flows from financing activities: | ||
| Borrowing under warehouse lines of credit | 551,088 | 592,347 |
| Repayments of warehouse lines of credit | (546,070) | (596,374) |
| Issuance of common stock, net of withholding taxes | (539) | 1,909 |
| Purchase of treasury stock | (667) | — |
| Increase in restricted cash | (600) | (200) |
| Net cash provided by (used in) financing activities | 3,212 | (2,318) |
| Net (decrease) increase in cash and cash equivalents | (13,042) | 7,793 |
| Cash and cash equivalents at beginning of period | 86,093 | 73,643 |
| Cash and cash equivalents at end of period | $73,051 | $81,436 |
|
TREE.COM, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENTS OF OPERATIONS – BY SEGMENT (Unaudited) |
|||||
| For the Three Months Ended March 31, 2010: | |||||
|
LendingTree Loans |
Exchanges |
Real Estate |
Unallocated— Corporate |
Total | |
| Revenue | $25,738 | $26,051 | $3,899 | $(7,677) | $48,011 |
| Cost of revenue (exclusive of depreciation shown separately below) | 10,154 | 1,128 | 2,455 | 324 | 14,061 |
| Gross margin | 15,584 | 24,923 | 1,444 | (8,001) | 33,950 |
| Operating expenses: | |||||
| Selling and marketing expense | 7,998 | 19,085 | 689 | (7,626) | 20,146 |
| General and administrative expense | 4,816 | 1,593 | 1,541 | 4,752 | 12,702 |
| Product development | 131 | 882 | 168 | 185 | 1,366 |
| Litigation loss contingencies and settlements | 16 | — | — | — | 16 |
| Restructuring expense | 7 | 140 | — | 2,463 | 2,610 |
| Amortization of intangibles | — | 295 | 636 | 12 | 943 |
| Depreciation | 490 | 319 | 334 | 366 | 1,509 |
| Total operating expenses | 13,458 | 22,314 | 3,368 | 152 | 39,292 |
| Operating income (loss) | 2,126 | 2,609 | (1,924) | (8,153) | (5,342) |
| Adjustments to reconcile to EBITDA and Adjusted EBITDA: | |||||
| Amortization of intangibles | — | 295 | 636 | 12 | 943 |
| Depreciation | 490 | 319 | 334 | 366 | 1,509 |
| EBITDA | 2,616 | 3,223 | (954) | (7,775) | (2,890) |
| Restructuring expense | 7 | 140 | — | 2,463 | 2,610 |
| Loss on disposal of assets | — | — | 1 | 3 | 4 |
| Non-cash compensation | 131 | 333 | 55 | 575 | 1,094 |
| Litigation loss contingencies and settlements | 16 | — | — | — | 16 |
| Adjusted EBITDA | $2,770 | $3,696 | $(898) | $(4,734) | $834 |
| Reconciliation to net loss in total: | |||||
| Operating loss per above | $(5,342) | ||||
| Other expense, net | (159) | ||||
| Loss before income taxes | (5,501) | ||||
| Income tax provision | (645) | ||||
| Net loss | $(6,146) | ||||
|
TREE.COM, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENTS OF OPERATIONS – BY SEGMENT (Unaudited) |
|||||
| For the Three Months Ended March 31, 2009: | |||||
|
LendingTree Loans |
Exchanges |
Real Estate |
Unallocated— Corporate |
Total | |
| Revenue | $34,372 | $19,067 | $5,759 | $(1,938) | $57,260 |
| Cost of revenue (exclusive of depreciation shown separately below) | 11,856 | 1,891 | 3,864 | 576 | 18,187 |
| Gross margin | 22,516 | 17,176 | 1,895 | (2,514) | 39,073 |
| Operating expenses: | |||||
| Selling and marketing expense | 2,114 | 11,968 | 1,678 | (1,938) | 13,822 |
| General and administrative expense | 4,974 | 2,784 | 2,699 | 5,842 | 16,299 |
| Product development | 150 | 632 | 534 | 292 | 1,608 |
| Litigation loss contingencies and settlements | 363 | 7 | 25 | — | 395 |
| Restructuring expense | (108) | 58 | 733 | 159 | 842 |
| Amortization of intangibles | 70 | 50 | 1,143 | — | 1,263 |
| Depreciation | 787 | 199 | 260 | 418 | 1,664 |
| Total operating expenses | 8,350 | 15,698 | 7,072 | 4,773 | 35,893 |
| Operating income (loss) | 14,166 | 1,478 | (5,177) | (7,287) | 3,180 |
| Adjustments to reconcile to EBITDA and Adjusted EBITDA: | |||||
| Amortization of intangibles | 70 | 50 | 1,143 | — | 1,263 |
| Depreciation | 787 | 199 | 260 | 418 | 1,664 |
| EBITDA | 15,023 | 1,727 | (3,774) | (6,869) | 6,107 |
| Restructuring expense | (108) | 58 | 733 | 159 | 842 |
| Loss on disposal of assets | — | 638 | — | — | 638 |
| Non-cash compensation | 69 | 113 | 98 | 897 | 1,177 |
| Litigation loss contingencies and settlements | 363 | 7 | 25 | — | 395 |
| Adjusted EBITDA | $15,347 | $2,543 | $(2,918) | $(5,813) | $9,159 |
| Reconciliation to net income in total: | |||||
| Operating income per above | $3,180 | ||||
| Other expense, net | (103) | ||||
| Income before income taxes | 3,077 | ||||
| Income tax benefit | 83 | ||||
| Net income | $3,160 | ||||
About Tree.com, Inc.
Tree.com, Inc. (NASDAQ: TREE) is the parent of several brands and businesses that provide information, tools, advice, products and services for critical transactions in our customers' lives. Our family of brands includes: LendingTree.com®, GetSmart.com®, RealEstate.com®, DegreeTree.comSM, HealthTree.comSM, LendingTreeAutos.com, DoneRight.com®, and InsuranceTree.comSM. Together, these brands serve as an ally for consumers who are looking to comparison shop for loans, real estate and other services from multiple businesses and professionals who will compete for their business.
Tree.com, Inc. is the parent company of wholly owned operating subsidiaries: LendingTree, LLC and Home Loan Center, Inc.
Tree.com, Inc. is headquartered in Charlotte, N.C. and maintains operations solely in the United States. For more information, please visit www.tree.com.
The Tree.com, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5367
TREE.COM'S PRINCIPLES OF FINANCIAL REPORTING
Tree.com reports Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), and adjusted for certain items discussed below ("Adjusted EBITDA"), as supplemental measures to GAAP. These measures are two of the primary metrics by which Tree.com evaluates the performance of its businesses, on which its internal budgets are based and by which management is compensated. Tree.com believes that investors should have access to the same set of tools that it uses in analyzing its results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Tree.com provides and encourages investors to examine the reconciling adjustments between the GAAP and non-GAAP measure which are discussed below.
Definition of Tree.com's Non-GAAP Measures
Adjusted EBITDA is defined as EBITDA excluding (1) non-cash compensation expense, (2) non-cash intangible asset impairment charges, (3) gain/loss on disposal of assets, (4) restructuring expenses, (5) litigation loss contingencies and settlements, (6) pro forma adjustments for significant acquisitions, and (7) one-time items. Adjusted EBITDA has certain limitations in that it does not take into account the impact to Tree.com's statement of operations of certain expenses, including depreciation, non-cash compensation and acquisition related accounting. Tree.com endeavors to compensate for the limitations of the non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure.
Pro Forma Results
Tree.com will only present EBITDA and Adjusted EBITDA on a pro forma basis if it views a particular transaction as significant in size or transformational in nature. For the periods presented in this report, there are no transactions that Tree.com has included on a pro forma basis.
One-Time Items
EBITDA and Adjusted EBITDA are presented before one-time items, if applicable. These items are truly one-time in nature and non-recurring, infrequent or unusual, and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. For the periods presented in this report, there are no one-time items.
Non-Cash Expenses That Are Excluded From Tree.com's Non-GAAP Measures
Non-cash compensation expense consists principally of expense associated with the grants of restricted stock units and stock options. These expenses are not paid in cash, and Tree.com will include the related shares in its future calculations of fully diluted shares outstanding. Upon vesting of restricted stock units and the exercise of certain stock options, the awards will be settled, at Tree.com's discretion, on a net basis, with Tree.com remitting the required tax withholding amount from its current funds.
Amortization and impairment of intangibles are non-cash expenses relating primarily to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as purchase agreements, technology and customer relationships, are valued and amortized over their estimated lives.
Other
REALTORS®—a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
The matters contained in the discussion above may be considered to be "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Those statements include statements regarding the intent, belief or current expectations or anticipations of the Company and members of our management team. Factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following: our ability to operate effectively as a separate public entity following our spin-off from IAC in August 2008; additional costs associated with operating as an independent company; volatility in our stock price and trading volume; our ability to obtain financing on acceptable terms; limitations on our ability to enter into transactions due to spin-related restrictions; adverse conditions in the primary and secondary mortgage markets and in the economy; adverse conditions in our industries; adverse conditions in the credit markets and the inability to renew or replace warehouse lines of credit; seasonality in our businesses; potential liabilities to secondary market purchasers; changes in our relationships with network lenders, real estate professionals, credit providers and secondary market purchasers; breaches of our network security or the misappropriation or misuse of personal consumer information; our failure to provide competitive service; our failure to maintain brand recognition; our ability to attract and retain customers in a cost-effective manner; our ability to develop new products and services and enhance existing ones; competition from our network lenders and affiliated real estate professionals; our failure to comply with existing or changing laws, rules or regulations, or to obtain and maintain required licenses; failure of our network lenders or other affiliated parties to comply with regulatory requirements; failure to maintain the integrity of our systems and infrastructure; liabilities as a result of privacy regulations; failure to adequately protect our intellectual property rights or allegations of infringement of intellectual property rights; changes in our management; and deficiencies in our disclosure controls and procedures and internal control over financial reporting. These and additional factors to be considered are set forth under "Risk Factors" in our Annual Report on Form 10-K for the period ended December 31, 2009, our Quarterly Reports on Form 10-Q for the periods ended March 31, 2009, June 30, 2009, September 30, 2009, and in our other filings with the Securities and Exchange Commission. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results or expectations.