LendingTree Inc.'s market capitalization is struggling amid a rising rate environment — plunging roughly 75% in the last 14 months. However, executives appear confident in a turnaround, saying the company is in a much stronger position compared to other times of economic uncertainty.
Charlotte-based LendingTree (NASDAQ: TREE), an online lending marketplace, had a market cap at $2.8 billion when the first quarter of 2021 ended. A year later, it had fallen to $1.53 billion, according to data from Yahoo Finance. Market cap refers to the total value of a company's shares. This week, its market cap dipped to roughly $700 million.
It's not just LendingTree. The larger fintech industry is taking a beating this year.
CEO Doug Lebda, in addition to being mission-driven, is highly motivated to recover share value, considering the large role it plays in his annual compensation. He struck a new contract a few years ago based on performance options starting at about $300 per share. In 2021, his compensation fell 97% year over year to $1.37 million.
"At the time I struck it, I thought it was a good deal, and quite frankly, I still think it's a good deal, except for we had Covid for two years of it, and it's a big reset," Lebda said at this week's JPMorgan Global Technology, Media and Communications Conference.
LendingTree is not the same company it was during economic recessions in the 2000s. Twenty years ago, the business was fully reliant on mortgages and not turning a profit, Lebda recalled. The business was still about 90% mortgage-based when he again took the helm in 2008 — just as the housing market was crashing.
Covid-19 has created challenges for LendingTree, particularly in its consumer segment with credit cards and personal loans. That has since begun to recover. More recently, LendingTree is seeing issues in insurance, driven in part by carriers' reduced marketing budgets. The company posted a $10.8 million net loss from continuing operations in the first quarter. Revenue was up by 4% on the year. Adjusted net income was at $6.1 million, or 46 cents per diluted share.
"It feels just monumentally different," Lebda said. "Now we've got several hundred millions of dollars in cash, a completely diversified business. If you looked 10 years ago at our top lenders, top clients, you would be hard-pressed to recognize one of them probably, except for maybe Quicken in those days."
Chief Financial Officer Trent Ziegler agreed. He has been with the company for a decade, watching per-share prices bounce from $12 to more than $400 and now back to $55.
He noted LendingTree's recent strategy shift to home in on customer experience.
"I have more conviction in the leadership team and the alignment that we have and the fact that we're working on the right things today than I've ever had," Ziegler said.
LendingTree plans to largely maintain its outlook on M&A, an important part of its growth. One example is its $300 million QuoteWizard acquisition in 2018, which grew its insurance footprint. Insurance, although currently struggling, is one of LendingTree's major segments and a place where it continues to invest. Lebda noted a strategic sale for LendingTree would not make sense at this point.
LendingTree shares were trading at $55.73 per share as of 2 p.m. today, after opening at $58.89.
