LendingTree Inc. reported an operating loss of $19.6 million in the second quarter, matching the consensus estimate of a $1.06 per-share loss and bringing its total loss for the year to more than $36 million.
Though the second-quarter loss was a 330% increase from the year earlier, LendingTree officials pointed to similarly big increases in revenues and loan volume and said the company is on track to profitability, which they forecast for the first half of 2002.
The Charlotte, N.C., company reported revenues of $7.7 million, up 600% from the year before and about 22% higher than some analysts' estimates, said Douglas R. Lebda, founder and chief executive.
The company said it funded $1.3 billion of loans, a volume increase of 822% from the year earlier.
However, LendingTree said its cost per loan request transmitted to a lender, $93.21, was 5% higher than in the first quarter. The company said average revenue per transmitted application was $40.96, up 24%, leaving the gap between costs and revenues per application at $52.25, down from $56.73. Company officials attributed the cost increase to higher advertising expenses for the LendingTree.com channel.
The difference between costs and revenues is a figure "we're going to be watching very closely over the next several quarters to make sure that gap is narrowing," said Michael Hodes, an analyst at Goldman, Sachs & Co. "But we would expect it to continue to narrow in coming quarters as the company moves along its growth trajectory."
Using different methodology than LendingTree's, Christopher F. Penny, an analyst at Friedman Billings Ramsey & Co., calculated LendingTree's cost per application and the gap between costs and revenues as $105 and $64, respectively. But even by his calculations the gap is narrowing.
Marketing and advertising costs totaled $18.7 million in the second quarter, bringing the total for the first half to $33.6 million. Officials at LendingTree said they will start cutting marketing spending this quarter.
"We expect advertising expenses to decrease in the second half of the year as the company uses less national TV advertising on traditional networks and supplements its advertising with more cable TV and radio spots," said Keith Hall, chief financial officer of LendingTree.
Several analysts said that by curbing its lavish TV spending LendingTree is entering a pivotal period. The next several quarters, they said, will show whether its strategy can work without heavy spending on marketing.
"It's like taking the training wheels off the bike and hoping that it continues to pedal," Mr. Penny said.