Tree.com Reports Fourth Quarter And Full Year 2012 Financial Results

     Tree.com Reports Fourth Quarter And Full Year 2012 Financial Results

- Continuing operations revenue of $23.9 million, up significantly from fourth
quarter 2011 GAAP revenue and total adjusted Exchanges revenue.

- Record Variable Marketing Margin of $12.4 million; third consecutive quarter
above 50% of revenue.

- Positive net income both quarters since completing HLC transaction.

- Continuing operations Adjusted EBITDA exceeds prior guidance for fourth
quarter 2012 and full year 2012.

PR Newswire

CHARLOTTE, N.C., March 13, 2013

CHARLOTTE, N.C., March 13, 2013 /PRNewswire/ --Tree.com, Inc. (NASDAQ: TREE),
operator of LendingTree.com, the nation's leading online source for
competitive home loan offers, today announced results for the quarter ended
December 31, 2012.

Beginning in the third quarter 2012, after the completion of the sale of
substantially all of the assets of the company's former mortgage origination
business in June 2012, Tree's revenues and expenses reflect the monetization
on our mortgage Exchange of all leads generated. Prior to the third quarter
2012, Tree provided non-GAAP adjusted Exchanges metrics to give investors a
view into what our results might have been if the company did not monetize
some leads through the former mortgage origination business. Tree is
continuing to provide adjusted Exchanges metrics for applicable historical
periods in which the company operated the mortgage origination business.

Chairman and CEO of Tree.com, Doug Lebda, commented, "Continuing our momentum,
Q4 was a record quarter for Tree. In our second full quarter as a pure-play
performance marketing company, we continued to grow revenue and generate
variable marketing margin at record levels, in spite of seasonal pressures we
typically see late in the year. As a result, we exceeded our most recent
guidance for Adjusted Exchanges EBITDA."

"The mortgage business performed particularly well in the fourth quarter, with
revenue 10% higher than the third quarter and 225% higher than GAAP revenue in
the prior year quarter. Fourth quarter revenue was also 55% higher than
adjusted Exchanges revenue for the prior year quarter. The number of mortgage
lenders active on our exchange grew over 15% from the third quarter and our
monetization of consumer loan requests reflected robust lead quality. And at
52% of revenue in Q4, our Variable Marketing Margin exceeded 50% for the third
consecutive quarter," said Mr. Lebda.



Fourth Quarter 2012 Financial and Operating Highlights
 Tree.com Exchanges Metrics (1)
 $s in millions
                             Q/Q                          Y/Y
               Q4     Q3     %         Q4 2011            % Change
               2012  2012  Change
                                       GAAP Adjusted     GAAP Adjusted
 Revenue
               $    $              $    $   
 Mortgage                 10%       6.7  14.1      (2) 225%  55%
               21.9   19.8
               $    $              $    $    
 Non-Mortgage           (41%)     3.9  3.9           (47%) (47%)
               2.1    3.5
 Total         $    $              $     $  
 Exchanges                 3%        10.7 18.0         124%  33%
 revenue      23.9   23.3
 Non Mortgage  9%     15%              37%   22%
 %
 Selling and
 marketing
 expense
 Exchanges     $    $              $    $    
 marketing                 0%        6.2  8.5           86%   37%
 expense (3)  11.6   11.6
 Other         $    $              $    $    
 Marketing              30%       1.2  1.2           97%   97%
               2.3    1.8
 Selling and   $    $              $    $    
 marketing                 4%        7.4  9.7           88%   44%
 expense      13.9   13.4
 Variable      $    $              $    $    
 marketing                 5%        4.4  9.5           178%  30%
 margin (4)  12.4   11.7
 Variable
 marketing     52%    50%              42%   53%
 margin % of
 revenue
 Net
 Income/(Loss) $    $              $ 
 from                    760%      (5.1) N/A         NM    N/A
 Continuing    2.3    0.3
 Operations
 Adjusted      $    $                    $   
 EBITDA                 (28%)     N/A 3.3      (5) N/A (14%)
               2.8    3.9
 Adjusted
 EBITDA % of   12%    17%              N/A 18%           N/A
 revenue
 (1) Adjusted Exchanges mortgage revenue, total adjusted Exchanges revenue, Exchanges
 marketing expense, adjusted EBITDA and adjusted EBITDA % of revenue are non-GAAP
 measures. Please see "Tree.com's Reconciliation of Non-GAAP Measures to GAAP" and
 "Tree.com's Principles of Financial Reporting" below for more information on these and
 other non-GAAP measures identified in this table.
 (2) Adjusted Exchanges mortgage revenue is a non-GAAP measure and is defined as
 revenue from the Exchanges mortgage vertical plus modeled revenue for leads provided
 to the company's former mortgage origination business, assuming sale prices for such
 leads equaled sale prices of leads of similar quality sold to network lenders.
 Accordingly, this measure also assumes lender demand on the network would have been
 sufficient to absorb the additional lead volume without affecting the prices of the
 leads actually sold. Please see "Tree.com's Principles of Financial Reporting" for
 further explanation of this metric.
 (3) Exchanges marketing expense is defined as the portion of selling and marketing
 expense attributable to variable costs paid for advertising, direct marketing and
 related expenses, which excludes overhead, fixed costs and personnel-related
 expenses. Adjusted Q4 2011 Exchanges marketing expense is a non-GAAP measure that
 adds to Exchanges marketing expense selling and marketing expense allocated to the
 company's former mortgage origination business and recorded in discontinued operations
 (4) Variable marketing margin is defined as revenue minus Exchanges marketing expense
 and is considered an operational metric. Adjusted Q4 2011 variable marketing expense
 is adjusted to use Adjusted Exchanges revenue rather than revenue for the calculation.
 (5) Adjusted Q4 2011 adjusted EBITDA is defined as Adjusted EBITDA from continuing
 operations, plus modeled revenue for leads provided to the company's former mortgage
 origination business, minus Exchanges selling and marketing expense allocated to the
 company's former mortgage origination business and recorded in discontinued
 operations.

  oFourth quarter revenue of $23.9 million was $5.9 million, or 33%, higher
    than adjusted Exchanges revenue from the fourth quarter of 2011, driven by
    a substantial increase in the mortgage business. Additionally, revenue
    increased $0.6 million, or 3%, from $23.3 million in the prior quarter.
  oMortgage business revenue was 55% higher than adjusted Exchanges mortgage
    revenue from the fourth quarter of 2011.
  oVariable marketing margin of $12.4 million was the highest level achieved
    since we began reporting this operating metric and, at 52% of revenue,
    represents the third consecutive quarter above fifty percent. Further, it
    is $2.9 million, or 30%, greater than the fourth quarter 2011.
  oContinuing operations Adjusted EBITDA of $2.8 million declined $0.5
    million, or 14%, from the fourth quarter 2011 and $1.1 million, or 28%,
    from the prior quarter. This was largely a result of certain
    non-recurring G&A items, as well as increased product development costs
    related to the Loan Explorer rate table and Reverse Mortgage products we
    launched commercially in January 2013.
  oWorking capital was $68.1 million at December 31, 2012, compared to $73.0
    million at September 30, 2012. Working capital is calculated as current
    assets (including unrestricted and restricted cash) minus current
    liabilities (including loan loss reserves). The decline from September 30
    is principally related to the special dividend cash payment of
    approximately $11.4 million which was made on December 26, 2012, as
    previously reported, and partially offset by a reduction in deferred
    income taxes. Working capital does not include $10 million of deferred
    contingent consideration payable on the one year anniversary of the
    closing of the sale of the company's mortgage origination business,
    subject to various conditions being satisfied.
  oDuring the fourth quarter of 2012, the company spent approximately $519
    thousand to purchase a total of 35,782 shares. As of December 31, 2012,
    there was approximately $3.4 million in share repurchase authorization
    remaining under the current approved plan.

Business Outlook – 2013

Tree is providing revenue, variable marketing margin and Adjusted EBITDA
guidance for 2013 as follows:
For the full year 2013,

  oRevenue is anticipated to grow 40-46% over 2012 revenue reported on a GAAP
    basis and 15%–20% over 2012 adjusted Exchanges revenue. 
  oVariable marketing margin is anticipated to be 45%–48% of revenue.
  oWe are anticipating Adjusted EBITDA to be $15–$17 million.

Guidance for Q1 2013,

  oRevenue is anticipated to grow 104–109% over Q1 2012 revenue reported on a
    GAAP basis and 12–15% over Q1 2012 adjusted Exchanges revenue.
  oVariable marketing margin is anticipated to be $13–$14 million.
  oAdjusted EBITDA is anticipated to be $4.0–$4.5 million.

Quarterly Conference Call

A conference call to discuss Tree's fourth quarter 2012 financial results will
be webcast live today at 11:00 AM Eastern Time (ET). The live audio cast is
open to the public and available on Tree's investor relations website at
http://investor-relations.tree.com/. For those without access to the
Internet, the call may be accessed toll-free via phone at 877-606-1416.
Callers outside the United State may dial 707-287-9313. Following completion
of the call, a recorded replay of the webcast will be available on Tree's
investor relations website until 11:59 PM ET on Wednesday March 27, 2013. To
listen to the telephone replay, call toll-free 855-859-2056 with passcode
#18075511. Callers outside the United States may dial 404-537-3406  with
passcode #18075511.



QUARTERLY TABLES AND FINANCIALS –


TREE.COM, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS


                                      Three Months Ended    Year Ended
                                      December31,          December31,
                                      2012         2011     2012     2011
                                      (Unaudited)
                                      (In thousands, except per share amounts)
Revenue                               $23,942      $10,666  $77,443  $54,617
Costs and expenses (exclusive of
depreciation shown separately
below)
Cost of revenue                       1,465        604      4,295    4,133
Selling and marketing expense         13,937       7,415    48,934   46,662
General and administrative expense    6,456        4,693    22,622   19,751
Product development                   1,146        526      3,529    3,203
Litigation settlements and            (4,173)      525      (3,225)  5,732
contingencies
Restructuring and severance expense   52           90       (57)     1,080
Amortization of intangibles           44           104      358      891
Depreciation                          901          1,346    4,105    5,023
Asset impairments                     —            —        —        29,250
Total operating expenses              19,828       15,303   80,561   115,725
Operating income (loss)               4,114        (4,637)  (3,118)  (61,108)
Other income (expense)
Interest expense                      (275)        (102)    (881)    (368)
Total other expense, net              (275)        (102)    (881)    (368)
Income (loss) before taxes            3,839        (4,739)  (3,999)  (61,476)
Income tax benefit (expense)          (1,497)      (363)    1,589    11,766
Net income (loss) from continuing     2,342        (5,102)  (2,410)  (49,710)
operations
Gain from sale of discontinued        (20)         —        24,293   7,752
operations, net of tax
Income (loss) from operations of      (293)        6,284    24,452   (17,545)
discontinued operations, net of tax.
Income (loss) from discontinued       (313)        6,284    48,745   (9,793)
operations
Net income (loss) available to common $2,029       $1,182   $46,335  $(59,503)
shareholders
Weighted average common shares        11,386       11,045   11,313   10,995
outstanding
Weighted average diluted shares       12,175       11,045   11,313   10,995
outstanding
Net income (loss) per share from
continuing operations
Basic                                 $0.21        $(0.46)  $(0.21)  $(4.52)
Diluted                               $0.19        $(0.46)  $(0.21)  $(4.52)
Net income (loss) per share available
to common shareholders
Basic                                 $0.18        $0.11    $4.10    $(5.41)
Diluted                               $0.17        $0.11    $4.10    $(5.41)





TREE.COM, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS
                                                    December31,  December31,
                                                    2012          2011
                                                    (In thousands, except
                                                    par value and share
                                                    amounts)
ASSETS:
Cash and cash equivalents                           $80,190       $45,541
Restricted cash and cash equivalents                29,414        12,451
Accounts receivable, net of allowance of $503 and   11,488        5,474
$86, respectively
Prepaid and other current assets                    743           1,060
Current assets of discontinued operations           407           232,425
Total current assets                                122,242       296,951
Property and equipment, net                         6,155         8,375
Goodwill                                            3,632         3,632
Intangible assets, net                              10,831        11,189
Other non-current assets                            152           246
Non-current assets of discontinued operations       129           10,947
Total assets                                        $143,141      $331,340
LIABILITIES:
Accounts payable, trade                             $2,741        $9,072
Deferred revenue                                    648           176
Deferred income taxes                               —             4,335
Accrued expenses and other current liabilities      18,793        16,712
Current liabilities of discontinued operations      31,987        250,030
Total current liabilities                           54,169        280,325
Income taxes payable                                —             7
Other long-term liabilities                         936           4,070
Deferred income taxes                               4,687         435
Non-current liabilities of discontinued operations  253           1,032
Total liabilities                                   60,045        285,869
Commitments and contingencies
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 12,625,678 and 12,169,226 shares,    126           121
respectively, and outstanding 11,437,199 and
11,045,965 shares, respectively
Additional paid-in capital                          916,388       911,987
Accumulated deficit                                 (824,006)     (858,105)
Treasury stock 1,188,479 shares                     (9,412)       (8,532)
Total shareholders' equity                          83,096        45,471
Total liabilities and shareholders' equity          $143,141      $331,340





TREE.COM'S RECONCILIATION OF NON-GAAP MEASURES TO GAAP ($ in thousands):


 Below is a reconciliation of Adjusted EBITDA to net income (loss) for
both continuing operations and discontinued operations. See "Tree.com's
Principals of Financial Reporting" for further discussion of the Company's use
of these Non-GAAP measures.
                   Three Months Ended                               Year Ended
                   March 31,      June 30,    September   December  December
                   2012           2012        30, 2012    31, 2012  31, 2012
                   (Dollars in thousands)
 Adjusted EBITDA
from continuing    $(2,546)       $(317)      $3,899      $2,817    $3,852
operations
 Adjustments to
reconcile to net
loss from
continuing
operations:
 Amortization of (107)          (106)       (101)       (44)      (358)
intangibles
 Depreciation    (1,224)        (1,046)     (935)       (901)     (4,105)
 Restructuring
and severance      64             (3)         48          (52)      57
income (expense)
 Loss on         (60)           —           (284)       (394)     (739)
disposal of assets
 Non-cash        (1,184)        (1,072)     (1,310)     (1,485)   (5,050)
compensation
 Litigation
settlements and    (222)          (216)       (510)       4,173     3,225
contingencies
 Other expense,  (121)          (136)       (349)       (276)     (881)
net
 Income tax      2,131          1,142       (188)       (1,497)   1,589
benefit (expense)
 Net income
(loss) from        $(3,269)       $(1,754)    $270        $2,342    $(2,410)
continuing
operations





Below is a reconciliation of revenue to adjusted Exchanges revenue, selling
and marketing expense to adjusted Exchanges marketing expense, and Adjusted
EBITDA from continuing operations (reconciled to Net income (loss) loss in
table above) to Adjusted Exchanges EBITDA.


See "Tree.com's Principles of Financial Reporting" for further discussion of
the Company's use of these Non-GAAP measures.
                                 Qtr 4          Qtr 3         Qtr 4
(Dollars in thousands)           2012           2012          2011
Revenue (Continuing              $23,942        $23,296       $10,666
Operations)
Mortgage Exchanges              21,874         19,801        6,738
Revenue
Adjustment: Modeled Revenue for 0              0             7,343
leads sent to LTL
Adjusted Mortgage Exchange       $21,874        $19,801       $14,082
Revenue
Non-Mortgage Revenue  2,069          3,495         3,928
Total Adjusted Exchanges         $23,942        $23,296       $18,009
Revenue
Selling and Marketing Expense    $13,937        $13,375       $7,415
(Continuing Operations)
Exchanges Marketing  11,590         11,572        6,221
Adjustment: Shared Variable
Marketing allocated to           0              0             2,258
Discontinued Ops
Adjusted Exchanges Marketing     $11,590        $11,572       $8,479
Expense
Other Marketing         2,347          1,804         1,194
Adjusted EBITDA - Continuing     $2,817         $3,899        $(1,427)
Operations *
Adjustment: Combined revenue    0              0             5,085
and marketing
Adjustment: Shared compensation
costs allocated to Discontinued  0              0             (383)
Ops
Adjusted Exchanges EBITDA        $2,817         $3,899        $3,275
* See reconciliation in prior
table.

                                   Qtr 1    Qtr 2    Qtr 3    Qtr 4    FY
                                   2012     2012     2012     2012     2012
Revenue (Continuing                $13,235  $16,969  $23,296  $23,942  $77,443
Operations)
Adjustment: Modeled Revenue for   $10,838  $6,026                     $16,864
leads sent to LTL
Adjusted Exchanges                 $24,073  $22,995  $23,296  $23,942  $94,307
Revenue



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"), adjusted Exchanges mortgage revenue, total adjusted
Exchanges revenue, adjusted Exchanges marketing expense, adjusted Exchanges
EBITDA and adjusted EBITDA % of revenue as supplemental measures to GAAP.
These measures are primary metrics by which Tree.com evaluates (or in the case
of adjusted Exchanges metrics, evaluated prior to the sale of the mortgage
origination business) the performance of its businesses, on which its
marketing expenditures are based and, in the case of Adjusted EBITDA, by which
management and many employees are 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 measures set forth above. Tree.com is not able to provide a
reconciliation of projected adjusted EBITDA to expected reported results due
to the unknown effect, timing and potential significance of the effects of the
wind-down of discontinued operations and tax considerations.

Definition of Tree.com's Non-GAAP Measures
EBITDA is defined as operating income or loss (which excludes interest expense
and taxes) excluding amortization of intangibles and depreciation.

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 and severance expenses, (5) litigation
settlements and contingencies, (6) pro forma adjustments for significant
acquisitions or dispositions, 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 measures
presented by also providing the comparable GAAP measures with equal or greater
prominence and descriptions of the reconciling items, including quantifying
such items, to derive the non-GAAP measures.

Adjusted Exchanges mortgage revenue is defined as revenue from the Exchanges
mortgage vertical plus modeled revenue for leads provided to HLC, assuming
sale prices for such leads equaled contemporaneous sale prices of leads of
similar quality sold to network lenders. Accordingly, this measure also
assumes lender demand on the network would have been sufficient to absorb the
additional lead volume without affecting the prices of the leads actually
sold. The Company believes these are reasonable assumptions to facilitate the
purpose of this metric, which is to give investors a view into what the
results might have been if the Company did not operate HLC. Investors are
cautioned that there is inherent uncertainty in this metric and the Company
urges investors to consider this metric and the other non-GAAP measures
discussed below that include this metric in addition to results prepared in
accordance with GAAP and not as substitutions for or superior to GAAP
results.

Total adjusted Exchanges revenue is defined as adjusted Exchanges revenue plus
revenue from the non-mortgage verticals.

Exchanges marketing expense is defined as the portion of selling and marketing
expense attributable to variable costs paid for advertising, direct marketing
and related expenses, plus selling and marketing expense allocated to HLC and
recorded in discontinued operations. This metric excludes overhead, fixed
costs and personnel-related expenses. Adjusted Exchanges marketing expense is
a non-GAAP measure that adds to Exchanges marketing expense selling and
marketing expense allocated to the company's former mortgage origination
business and recorded in discontinued operations.

Adjusted Exchanges EBITDA is defined as Adjusted EBITDA from continuing
operations, plus modeled revenue for leads provided to HLC, minus Exchanges
selling and marketing expense allocated to HLC and recorded in discontinued
operations.

Non-GAAP adjusted Exchanges metrics are not prepared in accordance with SEC
rules or Generally Accepted Accounting Principles requiring certain pro forma
financial information giving effect to the disposition of a material asset
that has occurred or in some cases that is probable, and they are not intended
to be a substitute for such financial information. The Company prepared and
reported pro forma financial information following the closing of the sale of
assets of Home Loan Center in accordance with SEC rules and Generally Accepted
Accounting Principles, which was filed as an exhibit to Tree.com's Form 8-K
filed on June 7, 2012.

One-Time Items
Adjusted EBITDA is adjusted for one-time items, if applicable. Items are
considered one-time in nature if they are 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 adjustments for one-time items.

Non-Cash Expenses That Are Excluded From Tree.com's Adjusted EBITDA and
Adjusted Exchanges EBITDA
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 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 amounts 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.

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 Tree.com 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: adverse conditions in the primary and
secondary mortgage markets and in the economy, particularly interest rates;
seasonality of results; potential liabilities to secondary market purchasers;
changes in the Company's relationships with network lenders; breaches of
network security or the misappropriation or misuse of personal consumer
information; failure to provide competitive service; failure to maintain brand
recognition; ability to attract and retain customers in a cost-effective
manner; ability to develop new products and services and enhance existing
ones; competition; allegations of failure to comply with existing or changing
laws, rules or regulations, or to obtain and maintain required licenses;
failure of network lenders or other affiliated parties to comply with
regulatory requirements; failure to maintain the integrity of systems and
infrastructure; liabilities as a result of privacy regulations; failure to
adequately protect intellectual property rights or allegations of infringement
of intellectual property rights; and changes in management. 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, 2011, our
Quarterly Reports on Form 10-Q for the period ended March 31, 2012, June 30,
2012 and September 30, 2012, 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.

About Tree.com, Inc.
Tree.com, Inc. (NASDAQ: TREE) is the parent of several brands and
businessesthat provide information, tools, advice, products and services for
critical transactions in consumers' lives. Our family of brands includes:
LendingTree®, GetSmart®, DegreeTree®, LendingTreeAutos, DoneRight!®,
ServiceTree^(SM), InsuranceTree® and HealthTree.Together, these brands serve
as an ally for consumers who are looking to comparison shop for loans,
education, auto, home services and other services from multiple businesses and
professionals who will compete for their business.

Tree.com, Inc. is headquartered in Charlotte, N.C. and maintains operations
solely in the United States. For more information, please visitwww.tree.com.

SOURCE Tree.com, Inc.

Website: http://www.tree.com
Contact: Investor Relations, +1-877-640-4856,
tree.com-investor.relations@tree.com