
Investor Presentation
Second Quarter 2016 Results
Contact Investor Relations at (877) 640‐4856 or investors@lendingtree.com
Forward Looking Statements
Forward Looking Statements
Certain statements herein are “forward‐looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.
Statements contained herein that are not clearly historical in nature are forward‐looking. In many cases, you can identify forward‐looking statements by terms such as “may,”
“will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology. These
forward‐looking statements speak only as of the date hereof and are based on the Company’s current plans and expectations and are subject to a number of known and
unknown uncertainties and risks, many of which are beyond the Company’s control. As a consequence, current plans, anticipated actions and future financial position and
results of operations may differ significantly from those expressed in any forward‐looking statements in the presentation. You should consider the risks in the Company’s
periodic reports filed with the U.S. Securities and Exchange Commission (the “SEC”), including those described under the headings “Risk Factors” and “Cautionary Note
Regarding Forward‐Looking Statements”. You are cautioned not to unduly rely on such forward‐looking statements when evaluating the information presented herein and
we do not intend to update any of these forward‐looking statements except as may be required by applicable law.
Non‐GAAP Financial Measures
This presentation includes unaudited non‐GAAP financial measures, including Adjusted EBITDA, and the ratios based on these financial measures. We present non‐GAAP
measures herein because our management believes that such information provides useful information about our operating performance. Non‐GAAP financial measures do
not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non‐GAAP financial
measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See the Appendix
for a reconciliation of non‐GAAP financial measures to the comparable GAAP measures.
Industry Data
This presentation also contains industry data, forecasts and other information that we obtained from industry publications and surveys, public filings and internal company
sources. Statements as to our ranking, market position and market estimates are based on independent industry publications, government publications, third‐party forecasts
and management’s estimates and assumptions about our markets and our internal research. While we are not aware of any misstatements regarding our market, industry or
similar data presented herein, such data involve risks and uncertainties and are subject to change based on various factors.
Proven Leadership Team
1
Doug Lebda
Gabe Dalporto
Nikul Patel
Sam Yount
Chief Executive Officer
& Founder
Chief Financial Officer
Chief Operating Officer
Chief Marketing Officer
Paul Tyma
Neil Salvage
Claudette Parham
Carla Shumate
Chief Technology Officer
Chief Revenue Officer
Chief People Officer
SVP, Chief
Accounting Officer,
Treasurer
LendingTree Today
Empowering consumers to save money on any loan through fast, easy comparison shopping and
delivering scale and efficiency for lenders
2
A Marketplace and Brand Built Over 20 Years
The Marketplace For Loans
1996 Founded
3
2000
IPO
2003
Sale to
IAC
2008
2012
Exited Spun out Mortgage from Origination IAC
Business
2012‐15
Expanded Non‐
Mortgage
Offerings Today
Tomorrow
THE Online Marketplace for Loans
Increasing Consumer Lifetime Value through Repeat Engagement
Key Investment Highlights
Leading Online Loan Marketplace
#1 in Mortgages; Leading Player in Personal Loans and Auto Loans
with Massive Opportunities in Credit Cards, Small Business Loans and Student Loans
Dominant Brand Drives Sustainable Competitive Advantage and Expansion Opportunities
Massive Industry Shift to Online
Accelerating Growth and Profitability
Results Driven Leadership Team with Proven Track Record
4
A True Online Marketplace
A True Online Marketplace Enabling Consumers and Lenders to Shop for Each Other
Free Credit Scores
Tools & Resources
Access to Multiple
Offers
Cost‐Efficient Customer Acquisition
Highly Targeted, Predictable Volume
Clicks, Calls and Data Leads
Real‐Time
Reporting & Analytics
5
Retail Banks
Mortgage
Small Business Lenders
Auto Lenders
P2P Lenders
Student Loans
Credit Cards
Lenders
Consumers
Ratings & Reviews
Delivering a Fast, Easy Experience that Gets Results
58%
Easy Three Minute Process
of potential homebuyers stated “getting the best deal” (price) is their most important feature when considering a mortgage(1)
Live Competitive Quotes
Intuitive Mobile Experience
1) Internal data.
6
Proven Savings
Unparalleled Scale and Brand
$24bn+
Annual Loan Originations
Facilitated(1)
1) Last 12 months originations based on lender‐reported funding data and internal estimates.
7
400+ ~$1.5bn
Strategic Relationships
with Top Tier Lenders
Lifetime Brand
Investment
The Iconic Brand
~$1.5 billion Lifetime Brand Investment
Aided Brand Awareness
68%
Click Through Rate
Conversion Rate
41%
Revenue Per Lead
22%
13%
Our Sustainable Competitive Advantage
Source: LendingTree Consumer Research Study conducted by S. Radoff Associates, LLC, February 2015. 1,722 online surveys. Prospects defined as creditworthy current or prospective homeowners who are in the market for either a primary mortgage or refinancing. Awareness and familiarity of selected companies within category defined by companies that offer mortgages online. Credit Karma aided brand awareness from LendingTree Consumer Research Study conducted by S. Radoff Associates, LLC, YTD September 2015. 1,761 online surveys. Regardless of whether you mentioned any of these companies previously, which of the following companies have you heard of when it comes to shopping for loans and credit products online?
8
Large Scale, Fully Diversified Marketing Mix
Fully Mobile‐Enabled Marketing Strategy to Strengthen Brand and Leadership
9
Television
SEM
SEO
Display
Partnerships
Native Advertising
Social Media
Email
Partnering with Top Tier Lenders Across the Spectrum
Our
Lending Partners
Multiple Products
10
Increasing Consumer Lifetime Value Through My LendingTree
From the Old Transaction Model…
…To the New Relationship Model
Periodic, mortgage‐centric transactions
Recurring, highly diversified transactions Represents Savings Alerts
Building Strong, Recurring User Engagement
11
My LendingTree: Driving Engaged, Repeat Consumers My LendingTree Cumulative User Growth
3.3+ million users
Free Credit Score Driving Customer Retention
Delivering Engaging Consumer Experiences
Market‐Based Savings Alerts Through Rich Data & Analytics
Providing Leverage to Paid Marketing
Jun‐14 Sep‐14 Dec‐14 Mar‐15 Jun‐15 Sep‐15 Dec‐15 Mar‐16 Jun‐16
Leveraging data to provide real time, market‐based pricing
Source: Internal data. 12
Seamless transaction
Delivering targeted transaction‐ready consumers to lenders
Our Market Opportunity
Evolving Model Supported by Strong Tailwinds
Leveraged Squarely to Key Consumer Trends
Benefiting From Secular Shift Towards Online
US Financial Services Industry Digital Ad Spend(1)
($ in billions)
$14.0
12.4
11.5
$12.0
Simplification
10.4
9.4
$10.0
8.4
7.3
$8.0
6.2
$6.0
$4.0
$2.0
$0.0
Transparency
2014
2015
2016
2017
2018
2019
2020
Digital ad spending by the financial services industry should continue to grow at a healthy clip
The number of US mobile financial services users to double from 45 million in 2012 to nearly 90 million in 2017
Insights
Nearly half (49.4%) of all consumer interactions with banks and financial services companies now occur online
1) Frost & Sullivan, “Financial Services Digital Marketers: Four Opportunities to Improve the Customer Experience,” June 2015, eMarketer: “US Financial Services Industry Digital Ad Spending, 2014‐2020,” March 2016.
13
Massive Market Opportunity
Adjacent Opportunities
~$19bn
(3) US Bank & Credit Union Marketing Spending
~1.8% Penetration (4)
Total Addressable Market
~$9.4bn
(2)
US Financial Services Online Advertising
Served Market
~$2.0bn
(1)
Core Target Market
~17% Market Share (4)
Core
Sources:
1) Mortgage Brokers Association, Wall Street research, Wall Street Journal, Department of Education, Federal Reserve, Scotsman Guide, RealtyTrac, Booz & Co., company filings, internal estimates.
2) eMarketer, May 2015, includes advertising that appears on desktop and laptop computers as well as mobile phones and tablets; inclusive of $2.0bn core target market as per internal estimates. 3) The Financial Brand and Aite Group, "2015 State of Bank & Credit Union Marketing" as cited in Aite Group blog post, Jan 28, 2015.
4) Market share and penetration percentages are based on LTM revenue (as of June 30, 2016) of $337.1mm.
14
~3.6% Penetration (4)
Highly Attractive Vertical with Ample Growth Runway
1
Total Market Size
Est. Online Ad Market
Significant loan origination volume to drive TAM expansion
1
2
Fragmented Suppliers / Buyers
2
Meaningful opportunity for increased digital penetration
High Value Purchase
Frequency
Mobile Adoption
Inventory Differentiation
3
Key Online Players
3
Market Cap(4)
Source: Capital IQ and Wall Street Research.
1) Wall Street Research.
2) Board of Governors of the Federal Reserve System, Department of Education, Federal Reserve Bank of New York, Mortgage Brokers Association, Scotsman Guide, Wall Street Journal, internal data.
3) eMarketer, U.S. Financial Services Industry Digital Ad Spending, 2013‐2019, May 2015. Inclusive of internal estimate of ~$2.0bn for online lead generation.
4) Capital IQ
5) Combination of Priceline market cap: $66.6bn, Expedia market cap: $18.9bn and TripAdvisor market cap: $10.1bn. Market cap as of July 22, 2016.
6) Combination of LendingTree market cap: $1.4bn and Bankrate market cap: $0.8bn. Market cap as of July 22, 2016. 15
Substantial value upside relative to similar markets
Attractive Revenue Model Highly Levered to Exponential Growth
# Loan Requests
Factors Driving Our Operational Improvements & Expansion:
70%
Match Rate %
65%
Match Rate
# of Matches
4x
3x
# of Matches
Price per
Lead
$25
Revenue
Exponential EBITDA Improvement From Operating Leverage
16
Expansion opportunity for new and existing lenders
$30
Avg. Price Per Lead
Source: Internal data. Matching the right people with the right lenders to optimize traffic quality
Focus on improved lender conversion rates
Enabling Lenders to Grow in a Cost‐Effective Way
Facilitating Highly Cost Efficient Loan Volume for Our Marketplace Lenders
Close Fees(1)
Refinance Mortgage
$10 – $55
–
20 – 180
Purchase Mortgage
$3 – $35
–
35 – 240
Home Equity
$10 – $35
–
Auto Loans
$1 – $12
$135 – $180
Personal Loans
$5 – $15
$25 – $200
140 – 650
Small Biz Loans
–
$180 – $2,500
200 – 375
Products
Source: Internal data. 1) Reflects 10th / 90th percentiles as of October 26, 2015. 2) Reflects 70th percentile as of Q1 2015.
17
Lender Cost per Funded
Loan (bps)(2)
Match Fees(1)
# of
Leads
Total Originated
Purchased
Volume
X
Avg. Price Per Lead
5 – 170
75 – 130
Financial Highlights
Financial Highlights
Strong and Consistent Revenue Growth Across Cycles
18
#1 Market Share in Mortgage
Rapid Growth in Non‐Mortgage
Attractive Operating Leverage Supporting Growth
Strong and Consistent Revenue Growth
Annual Revenue
($ in millions)
Quarterly Revenue by Revenue Segment
($ in millions)
$100.0
$450.0
$380–
$390 $400.0
$94.7 $94.3
$90.0
$78.3
$80.0
$350.0
$39.7 $38.3 $69.8
$70.0
$300.0
$31.4 $60.0
$254.2
$96.0 ‐
$99.0
$55.1
$250.0
$25.6 $50.9
$50.0
$200.0
$40.0
$167.4 $4.4 $139.2 $150.0
$37.4 $36.4
$40.0
$5.8 $42.2 $41.3
$7.5 $43.9
$9.3 $13.9 $17.9 $10.7 $4.7 $30.0
$55.0 $56.0 (1)
$100.0
$94.3 $20.0
$50.0
$44.2 $37.0 $37.2 $33.0 $31.7 $34.2 $34.7 $32.0 $33.2 $10.0
$‐
$‐
2012
2013
2014
2015
(2)
2016
(2)
Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Mortgage
Non‐mortgage
1) Reflects “Adjusted Exchanges” revenue which is non‐GAAP. GAAP revenue for such period was $77.4mm. For definitions and reconciliations of this measure please refer to our Q4 ‘13 earnings press release dated 3/10/14.
2) Reflects company guidance as of Q2 ‘16 earnings release.
19
$46.9 Secular Growth Through Execution
Mortgage Segment
Industry Originations(1)
($ in billions)
LendingTree Mortgage Revenue
($ in millions)
$250
$2,500
$202.1
$2,092
$2,000
$200
$1,886
$1,771
$165.3
$1,697
$150
$1,500
$134.1
$123.1
$1,218
$100
$1,000
$76.2
$500
$50
$0
2012
2013
2014
Refinance
2015
2016E
$0
2012
(2)
2013
2014
2015
Purchase
1) Survey of estimates from MBA, Fannie Mae and Freddie Mac. 2) Reflects “Adjusted Exchanges” revenue which is non‐GAAP. GAAP mortgage revenue for such period was $61.2mm. For definitions and reconciliations of this measure, please refer to our Q4 ‘13 earnings press release dated 3/10/14
3) Last twelve months as of Q2 ‘16 earnings release
20
LTM
(3)
Non‐Mortgage Categories Diversifying Revenue
Rates and Purchase/Refinance Mix are Becoming Less Relevant as New Products Gain Share and Diversify Revenues
Non‐Mortgage Products
Non‐Mortgage as a Percent of Total Revenue
42%
40%
41%
37%
32%
27%
Reverse Mortgage
Student Loans
Small Business Loans
24%
23%
18%
Home Equity
15%
10%
12%
13%
Personal Loans
Credit Cards
Auto Loans
Q2 '13 Q3 '13 Q4 '13 Q1 ' 14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16
21
Focus on Growing VMM Dollars
Annual Variable Marketing Margin
Quarterly Variable Marketing Margin
($ in millions)
($ in millions)
$40.0
$137.0 –
$140.0 150%
$35.0 ‐
$36.5
$140.0
80%
$34.1 $34.0
$35.0
$120.0
130%
70%
$30.0
110%
$28.0 60%
$100.0
$95.0
$24.3 $25.0
50%
$21.2 $21.4 50%
$80.0
42%
$65.2 $58.6 $60.0
37%
$20.0
(3)
36%
$15.0
$47.1 30%
$40.0
70%
$17.5 40%
39%
90%
$16.7 $16.3 $15.8
$15.1 $15.2
45%
42%
(3)
40%
39%
38% 37% 40% 40%
37%
36%
36%
36%
35%
50%
$10.0
30%
$5.0
10%
20%
$20.0
10%
$‐
0%
2012
1)
2)
3)
22
(1)
2013
2014
2015
2016
(2)
2012 variable marketing expense is adjusted to use Adjusted Exchanges revenue rather than revenue for the calculation.
Based on company guidance as of Q2 ‘16 earnings release
Calculated off of the midpoint of company VMM and Revenue guidance
$‐
‐10%
Q3 '13 Q4 '13 Q1 '14 Q2'14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
(2)
Attractive and Expanding EBITDA Margins
Rapid Growth in Adjusted EBITDA Profitability(1)
Annual Adj. EBITDA
($ in millions)
Quarterly Adj. EBITDA
($ in millions)
$64.0 –
$66.0 $70.0
$20.0
20%
$18.0
$60.0
$16.7
$16.0
(3)
$50.0
16%
35%
$15.8
18%
17%
$16.5–
$17.5
30%
$14.0
16%
15%
$40.8
$40.0
13%
$12.0 $12.0
$11.0 $10.0
14%
$8.9 $8.9 13%
$30.0
(3)
$8.0
$21.8 12%
$6.0
$18.7 $20.0
$14.2 $4.0
$5.4 $5.9 16%
14%
$5.5
$4.5
13%
10%
$10.0
$5.8 $6.0 18%
16% 16%
15%
17%
20%
18% 17%
15%
14% 14%
10%
$2.0
$‐
2012
2013
2014
2015
(2)
2016
8%
11%
$‐
5%
Q3 '13 Q4 '13 Q1 '14 Q2'14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Note: 2012 figure reflects Adjusted Exchanges EBITDA which is defined as Adjusted EBITDA from continuing operations, plus modeled revenue for leads provided to HLC, minus the selling and marketing expense allocated to HLC.
1)
See appendix for reconciliation to net income(loss) from continuing operations. 2)
Based on company guidance as of Q2 ‘16 earnings release
3)
Calculated off of the midpoint of company EBITDA and Revenue guidance
23
25%
(2)
Key Investment Highlights
Leading Online Loan Marketplace
#1 in Mortgages; Leading Player in Personal Loans and Auto Loans
with Massive Opportunities in Credit Cards, Small Business Loans and Student Loans
Dominant Brand Drives Sustainable Competitive Advantage and Expansion Opportunities
Massive Industry Shift to Online
Accelerating Growth and Profitability
Results Driven Leadership Team with Proven Track Record
24
Appendix
Non‐GAAP Adjusted EBITDA Reconciliation
Year Ending December 31,
(Amounts in millions)
2012
(1)
2014
2015
Q1
Q2
‐
‐
‐
‐
‐
Adj: Combined Revenue and Marketing
(10.94) ‐
‐
‐
‐
‐
Adj: Shared compensation costs allocated to HLC
0.49
‐
‐
‐
‐
‐
$ 3.78
$ 18.72
$ 21.83
$ 40.82
$ 15.80
$ 16.66
Adjusted Exchanges EBITDA
Adjusted EBITDA
$ 14.23
2013
2016
Adjustments:
Depreciation
(4.11) (3.50) (3.25) (3.01)
(1.00) (1.17)
Amortization of intangibles
(0.36) (0.15) (0.14) (0.15)
(0.03) (0.07)
Interest expense
(0.88) (0.02) (0.00) (0.17)
(0.14) (0.14)
Income tax (expense) benefit
1.48
0.45
0.48
(4.80) (3.57)
Impairment of long‐lived assets
0.00
0.00
(0.81) 0.00
Discretionary cash bonus
0.00
(0.92) 0.00
Trust contribution
0.00
(0.35) 0.00
Non‐cash compensation
(4.59) (5.63) (7.28) (8.37)
(2.63) (2.43)
Loss on disposal of assets
(0.74) (0.17) (0.28) (0.75)
(0.13) (0.14)
Estimated settlement for unclaimed property
0.00
0.00
0.00
(0.13)
0.00
0.00
Acquisition expense
0.00
0.00
(0.06) (0.08)
0.00
(0.14)
Restructuring and severance
0.06
(0.16) (0.37) (0.42)
0.00
(0.07)
Litigation settlements and contingencies
3.10
(8.96) 10.62
(0.17) 0.08
Net income (loss) from continuing operations
$ (2.25) $ (0.67) $ (0.49) $ 47.18
18.83
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.61
$ 6.91
$ 9.00
1) 2012 figure reflects Adjusted Exchanges EBITDA which is defined as Adjusted EBITDA from continuing operations, plus modeled revenue for leads provided to HLC, minus the selling and marketing expense allocated to HLC.
25
Pro Forma Adjusted Exchanges Reconciliation
(Amounts in millions)
Revenue
Mortgage Revenue
Adjustment: Modeled revenue for leads sent to HLC
Adjusted Mortgage Exchange Revenue
Non‐mortgage revenue
Corporate Revenue
Total Adjusted Exchanges Revenue
Selling & Marketing Expense
Exchanges Marketing Expense
Adjustment: Shared Variable Marketing Allocated to HLC
Adjusted Exchanges Marketing Expense
Other Marketing
Adjusted EBITDA
Adjustment: Combined Revenue & Marketing
Adjustment: Shared Compensation Costs Allocated to HLC
Adjusted Exchanges EBITDA
26
Year Ending December 31,
2012
2013
2014
77.4
NA
NA
61.2 123.1 134.1
16.9 ‐
‐
78.0 123.1 134.1
14.6 15.5 33.3
1.7 0.6 ‐
94.3 139.2 167.4
48.9 91.1 112.7
41.3 80.7 102.2
5.9 ‐
‐
47.2 80.7 102.2
7.7 10.4 10.6
3.8 18.7 21.8
10.9 ‐
‐
(0.5) ‐
‐
14.2 18.7 21.8
2015
NA
165.3
‐
165.3
88.9
‐
254.2
172.8
159.2
‐
159.2
13.6
40.8
‐
‐
40.8
2016
Q1
Q2
NA
NA
55.0 56.0
‐
‐
55.0 56.0
39.7 38.3
‐
‐
94.7
94.3
65.1 64.5
60.6 60.3
‐
‐
60.6
60.3
4.5 4.2
15.8 16.7
‐
‐
‐
‐
15.8
16.7