(Source: PrimeNewswire)
CHARLOTTE, N.C., Oct. 30, 2009 (GLOBE NEWSWIRE) -- Tree.com, Inc. (Nasdaq:TREE) today announced that it has added a new $75 million warehouse line as well as its financial results for its third quarter ended September 30, 2009. Tree's Q309 revenue was $50.7 million, which was a slight improvement over Q308 revenue of $50.3 million. Tree reported a GAAP loss of $0.68 per share on a net loss of $7.4 million, both improved over the Q308 levels of a $2.41 loss per share and a $22.6 million net loss. Q309 Adjusted EBITDA was a loss of $3.5 million, which was a $4.8 million improvement year-over-year, from a Q308 Adjusted EBITDA loss of $8.3 million.
Doug Lebda, Chairman and CEO of Tree.com, stated, "We are very pleased to announce that we added a new $75 million warehouse line at LendingTree Loans, giving that business financial stability and even more capacity to expand our business. We remain enthusiastic about executing our long-term strategy. As you will see in our results, we are beginning to see real traction in our Education and Home Services verticals. We are encouraged that demand from our Network lenders is improving, meaning we can obtain a higher number of multiple offers for each consumer and our new tools and services on the site are getting great reception."
Tree.com CFO Matt Packey added, "Overall, we are pleased with our Q3 operating results, even as two unanticipated items negatively impacted our bottom line. As we stated previously, we expected the surge in refinance activity from earlier this year to subside and our Adjusted EBITDA to return to break-even levels for Q3 and Q4. However, continued high levels of loan loss settlement requests prompted us to increase our provision for loan losses by $4.2 million in the quarter and our legal fees were approximately $1.0 million higher than expected, principally because of the Mortech lawsuit."
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Tree.com Summary Financial Results
$s in millions (except per share amounts)
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Q3 Q2 Q/Q % Q3 Y/Y %
2009 2009 Change 2008 Change
------ ----- ----- ------ ------
Revenue $ 50.7 $61.0 (17%) $ 50.3 1%
Net Income/(Loss) $ (7.4) $ 0.7 NM $(22.6) 67%
EBITDA * $ (4.7) $ 4.3 NM $(18.5) 75%
Adjusted EBITDA * $ (3.5) $ 8.2 NM $ (8.3) 57%
Net Income/(Loss) Per Share $(0.68) $0.07 NM $(2.41) 72%
Diluted Net Income/(Loss)
Per Share $(0.68) $0.07 NM $(2.41) 72%
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NM = Not Meaningful
* See separate reconciliation of Adjusted EBITDA and EBITDA to
Operating Income/Loss.
Information Regarding Q3 Results
* Q309 revenue increased 1% from Q308 and decreased 17% from Q209.
The year-over-year increase was driven by solid improvements in
the number of funded units at LendingTree Loans and the
expansion of our Exchanges offerings into Education and Home
Services in the quarter. The quarter-over-quarter decline in
revenue was primarily driven by the rapid rise in interest rates
from historical lows, as seen in the chart below, causing fewer
closings than the prior quarter. This impact was offset
somewhat by the revenue earned by the recently acquired
education lead generation business.
* Adjusted EBITDA improved $4.8 million year-over-year, primarily
from higher margins at LendingTree Loans and lower operating
expenses across three of our four operating segments. Q309
Adjusted EBITDA decreased $11.7 million quarter-over-quarter as
consumer request-to-conversion rates and our advertising
spending returned to normal levels from the Q209 levels that
were supported by historically low interest rates.
A chart describing average 30-year fixed mortgage rate recent trends is available at http://media.globenewswire.com/cache/10613/file/7527.pdf
Business Unit Discussion
LENDINGTREE LOANS SEGMENT
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LendingTree Loans Segment Results
$s in millions
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Q3 Q2 Q/Q % Q3 Y/Y %
2009 2009 Change 2008 Change
------ ------ ----- ------ ------
Revenue - Direct Lending
Origination and Sale of Loans $ 22.5 $ 34.4 (35%) $ 17.9 26%
Other $ 1.6 $ 1.9 (16%) $ 2.1 (24%)
------ ------ ----- ------ ------
Total Revenue - Direct Lending $ 24.1 $ 36.3 (34%) $ 20.0 21%
Cost of Revenue * $ 11.2 $ 14.0 (20%) $ 9.2 22%
Operating Expenses* $ 11.2 $ 10.1 11% $ 11.5 (3%)
------ ------ ----- ------ ------
EBITDA $ 1.7 $ 13.2 (87%) $ (3.0) NM
Adjusted EBITDA $ 1.7 $ 12.2 (86%) $ (0.7) NM
Metrics - Direct Lending
Purchased loan requests (000s) 63.0 66.5 (5%) 86.3 (27%)
Closed - units (000s) 2.8 4.0 (30%) 2.4 17%
Closed - units (dollars) $620.2 $898.0 (31%) $637.6 (3%)
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* Does not include non-cash compensation, depreciation, gain/loss on
disposal of assets, restructuring, amortization or impairment. See
separate reconciliation of Adjusted EBITDA and EBITDA to Operating
Income/Loss.
LendingTree Loans
Continuing to show indications of a potential recovery in the mortgage market, Q309 revenue from the origination and sale of loans increased 26% from the same period last year on a 17% increase in funded units.
Following a period of unusually low interest rates and significant media attention on refinancing in Q1 and Q2, LendingTree Loans revenue decreased 34% in Q309 compared to Q209 on 30% fewer funded units, which was partially offset by a 25% decrease in provision for loan losses quarter-over-quarter.
Operating expenses decreased $0.3 million year-over-year on lower lead acquisition costs and increased $1.1 million quarter-over-quarter as advertising spend was returned to normal levels following the reduced spend in Q2.
EXCHANGES SEGMENT
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Exchanges Segment Results
$s in millions
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Q3 Q2 Q/Q % Q3 Y/Y %
2009 2009 Change 2008 Change
-------- -------- ----- -------- ------
Revenue - Exchanges
Match Fees $ 12.4 $ 9.9 26% $ 12.1 3%
Closed Loan Fees $ 5.3 $ 6.4 (17%) $ 8.2 (35%)
Inter-segment Revenue $ 5.3 $ 3.7 44% $ 4.8 12%
Other $ 0.9 $ 0.6 53% $ 0.5 98%
-------- -------- ----- -------- ------
Total Revenue - Exchanges $ 23.9 $ 20.6 16% $ 25.6 (7%)
Cost of Revenue * $ 1.9 $ 2.0 (3%) $ 2.5 (22%)
Operating Expenses* $ 18.3 $ 15.3 19% $ 23.3 (21%)
-------- -------- ----- -------- ------
EBITDA $ 3.6 $ 2.7 36% $ (1.4) NM
Adjusted EBITDA $ 3.7 $ 3.3 13% $ (0.2) NM
Metrics - Exchanges
Matched requests (000s) 340.7 333.2 2% 390.1 (13%)
Closing - units (000s) 10.5 13.1 (20%) 21.1 (50%)
Closing - units (dollars) $1,851.3 $2,613.1 (29%) $2,862.2 (35%)
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NM = Not Meaningful
* Does not include non-cash compensation, depreciation, gain/loss on
disposal of assets, restructuring, amortization or impairment. See
separate reconciliation of Adjusted EBITDA and EBITDA to Operating
Income/Loss.
Exchanges
Exchanges revenue in Q309 increased 16% compared to Q209 and decreased 7% compared to the same period in 2008. On a quarter-over-quarter basis, Exchanges revenue improved largely due to match fees earned through our new education vertical and increases in transfer fees to LendingTree Loans. The decrease in revenue year-over-year continues to reflect the weaker closing revenue due to continued tight consumer credit markets, making it difficult for many consumers to qualify for a loan.
Operating expenses increased $3.0 million quarter-over-quarter and decreased $5.0 million year-over-year. The increase quarter-over-quarter was largely due to variable marketing expense, which was up 25%, reflecting the uptick in spend to drive traffic since Q2 when very low rates and high levels of media attention were prompting consumers to refinance. On a year-over-year basis we've continued to trim operating costs back and increase the efficiencies of our marketing spend.
REAL ESTATE SEGMENT
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Real Estate Segment Results
$s in millions
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Q3 Q2 Q/Q % Q3 Y/Y %
2009 2009 Change 2008 Change
-------- -------- ----- -------- ------
Total Revenue -
Real Estate $ 8.0 $ 7.8 3% $ 9.8 (18%)
Cost of Revenue * $ 5.0 $ 4.8 3% $ 5.8 (15%)
Operating Expenses* $ 3.6 $ 3.7 (2%) $ 4.8 (26%)
-------- -------- ----- -------- ------
EBITDA $ (0.8) $ (4.6) 83% $ (3.5) 78%
Adjusted EBITDA $ (0.6) $ (0.7) 4% $ (0.8) 19%
Metrics - Real Estate
Closing - units (000s) 1.4 1.5 (5%) 2.1 (30%)
Closing - units (dollars) $ 330.4 $ 332.4 (1%) $ 516.1 (36%)
Agents - RealEstate.com,
REALTORS(R) 1,304 1,365 (4%) 1,070 22%
Markets - RealEstate.com,
REALTORS(R) 20 20 0% 14 43%
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* Does not include non-cash compensation, depreciation, gain/loss on
disposal of assets, restructuring, amortization or impairment. See
separate reconciliation of Adjusted EBITDA and EBITDA to Operating
Income/Loss.
Real Estate
Q309 Real Estate revenue increased $0.2 million or 3% from Q209 and decreased $1.8 million or 18% from Q308. The year-over-year decrease in Real Estate revenue is attributed to declines in our referral networks, which experienced decreases in closings and transaction values year-over-year from persistent negative market conditions.
Operating expenses decreased $0.1 million quarter-over-quarter and decreased $1.2 million year-over-year. The decreases in operating expense were primarily due to decreases in marketing expenses related to the continued progress in marketing efficiency driven by ongoing innovation on the RealEstate.com Web site, as well as general and administrative reductions reflecting our prior cost cutting initiatives.
CORPORATE
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Unallocated Corporate Costs and Eliminations
$s in millions
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Q3 Q2 Q/Q % Q3 Y/Y %
2009 2009 Change 2008 Change
------ ------ ---- ------- -----
Inter-segment Revenue -
elimination $ (5.2) $ (3.7) 42% $ (5.1) 2%
Cost of Revenue * $ 0.5 $ 0.5 10% $ 0.5 1%
Inter-segment Marketing -
elimination $ (5.2) $ (3.7) 42% $ (4.8) 10%
Operating Expenses* $ 7.8 $ 6.1 27% $ 5.8 36%
------ ------ ---- ------- -----
EBITDA $ (9.2) $ (7.0) (31%) $ (10.6) 13%
Adjusted EBITDA $ (8.3) $ (6.6) (25%) $ (6.6) (25%)
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* Does not include non-cash compensation, depreciation, gain/loss on
disposal of assets, restructuring, amortization or impairment. See
separate reconciliation of Adjusted EBITDA and EBITDA to Operating
Income/Loss.
Corporate
The eliminations both in revenue and in marketing were primarily associated with the inter-segment transfer pricing charged from Exchanges to LendingTree Loans for leads. Operating expenses increased $1.7 million quarter-over-quarter and $2.0 million year-over-year. The quarter-over-quarter and year-over-year increases in operating expense were primarily related to increases in professional fees, including legal for the Mortech lawsuit, and various corporate matters and public company costs.
Liquidity and Capital Resources
As of September 30, 2009, Tree.com had $86.9 million in unrestricted cash and cash equivalents, compared to $83.7 million as of June 30, 2009. The increase in cash was driven by a $7.5 million net cash inflow related to timing of the origination and sale of loans and warehouse line activity and $5.1 million of net working capital changes. These increases were offset by $5.5 million of cash used for acquisitions and capital expenditures, an Adjusted EBITDA loss of $3.5 million for the quarter and $0.4 million cash paid for taxes on equity compensation instruments that vested in the period.
The loans held for sale and warehouse lines of credit balances as of September 30, 2009 were $81.9 million and $67.1 million, respectively. As separately announced, we have also entered into an agreement with a new lender for a $75 million warehouse line with a term through October 29, 2010.
Conference Call
Tree.com will audio cast its conference call with investors and analysts discussing the Company's third quarter financial results on Friday, October 30, 2009 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/.
QUARTERLY FINANCIALS
TREE.COM, INC.