LendingTree and real estate-related businesses including RealEstate.com and Domania continue to be money-losers for parent company IAC Interactive Corp., which intends to spin them off as part of a plan to break IAC up into five separate companies.
In a regulatory filing today, IAC said revenue companywide grew by 8 percent from a year ago, to $1.6 billion, although net income dipped 13 percent to $52.8 million. But LendingTree and related businesses under its umbrella saw revenue fall dramatically and losses widen from a year ago.
"With this quarter’s results, it couldn’t be clearer that we are on the right course in separating IAC into five distinct public entities," IAC Chairman and Chief Executive Officer Barry Diller said in a statement. LendingTree was the only one of the five spin-off companies to be created in a reorganization of IAC that saw a decline in revenue during the first quarter.
The reorganization of IAC, which was expected to be completed by the second or third quarter of 2008 when it was announced in November, was delayed by litigation between IAC and a major shareholder, Liberty Media Corp. But IAC remains committed to spinning off LendingTree, Ticketmaster, HSN home shopping network, and other companies.
After the restructuring, real estate-related businesses under the LendingTree umbrella will include RealEstate.com, Domania, GetSmart, Home Loan Center and iNest. IAC is already breaking out separate results for LendingTree that includes those businesses.
IAC said LendingTree and its related businesses saw first-quarter revenue fall 38 percent from a year ago, to $70.2 million, and posted an $8.7 million operating loss, compared with a $7.8 million loss a year ago, IAC said.
The real estate-related businesses that report results under LendingTree saw first-quarter revenue fall by 37 percent, to $8.4 million, and also accounted for a majority of LendingTree’s $8.7 million operating loss, IAC said.
The $5 million operating loss posted by the real estate-related businesses was an improvement from the $8 million loss in the same quarter a year ago, however. IAC said the real estate-related businesses under the LendingTree umbrella were able to cut losses by cutting marketing expenses and administrative costs.
IAC said the decline in revenue from real estate-related businesses reflected the absence of revenue from RealEstate.com’s lead-generation business for agents, which closed in December, and fewer closings through builder and broker lead-generation networks. RealEstate.com announced it was phasing out the lead-generation business for agents in August (see Inman News story).
Revenue declines were partially offset by increased closings at RealEstate.com’s company-owned brokerage, REALTORS, which has 800 sales agents in 15 markets and grew revenue by 38 percent during the first quarter, IAC said.
RealEstate.com and affiliated Web sites also provide an automated valuation tool that allows consumers to estimate the value of properties, real estate listings, and HouseWatch, an automated e-mail notification service for new listings.
At LendingTree, IAC blamed a 38 percent year-over-year decline in first-quarter revenue from lending, to $61.8 million, on fewer loans sold into the secondary market and fewer loans closed at LendingTree’s online exchanges, which connect consumers to lenders.
LendingTree makes money from the exchange when it transmits leads to lenders, and also when a lender reports a closed loan to LendingTree — which may not happen until several months after the lead is transmitted. LendingTree also originates and funds residential real estate loans through Home Loan Center, which does business as LendingTree Loans in some jurisdictions.
IAC said leads transmitted to at least one exchange lender including LendingTree Loans, plus leads sent to at least one lender in the GetSmart network, fell 32 percent during the first quarter from a year ago, to 678,700.
Loan closings — either by exchange lenders, or directly by LendingTree Loans — fell 52 percent, to 29,000. The dollar value of those loans increased 1 percent from a year ago, to $7.48 billion, as the average loan amount more than doubled, to $251,000.
One reason for the increase in loan amount is that LendingTree Loans and other lenders have scaled back on home-equity lending, as delinquencies and defaults on those loans have soared.
In its annual report to investors, IAC said revenue from home-equity loans fell 58 percent in 2007. The $24.9 billion in loans closed by LendingTree’s exchange lenders and directly by LendingTree Loans last year included $13 billion in refinance mortgages, $6.9 billion in purchase mortgages and $4.2 billion in home-equity loans.
LendingTree saw revenue fall 29 percent in 2007, to $304.4 million, and the company posted a $509.5 million operating loss, which IAC blamed on a $459.5 million goodwill impairment charge in the fourth quarter.
IAC said the goodwill impairment charge followed a "reassessment of the likely future profitability of LendingTree in light of the persistent adverse mortgage market conditions and the operational strategies the company has undertaken in response to these market realities."
In May, 2007, LendingTree laid off 440 workers, or 20 percent of the company’s work force (see story).
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