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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2022
or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                 
Commission File No. 001-34063 
 
tree-20220930_g1.jpg
LendingTree, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
26-2414818
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
 1415 Vantage Park Dr., Suite 700, Charlotte, North Carolina 28203
(Address of principal executive offices)(Zip Code)
(704) 541-5351
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.01 par value per share   TREE   The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No   
As of October 31, 2022, there were 12,785,635 shares of the registrant's common stock, par value $.01 per share, outstanding, excluding treasury shares.




TABLE OF CONTENTS


2


PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements 

LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited) 
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2022 2021 2022 2021
  (in thousands, except per share amounts)
Revenue $ 237,836  $ 297,450  $ 782,937  $ 840,214 
Costs and expenses:        
Cost of revenue (exclusive of depreciation and amortization shown separately below)
14,105  15,020  44,240  42,849 
Selling and marketing expense 176,875  206,475  565,569  589,143 
General and administrative expense 39,540  40,126  115,802  114,926 
Product development 14,043  13,384  42,413  39,142 
Depreciation 5,274  4,808  15,024  12,969 
Amortization of intangibles 6,582  10,345  21,574  32,967 
Change in fair value of contingent consideration —  (196) —  (8,249)
Restructuring and severance —  47  3,760  47 
Litigation settlements and contingencies (7) 22  (41) 360 
Total costs and expenses 256,412  290,031  808,341  824,154 
Operating (loss) income (18,576) 7,419  (25,404) 16,060 
Other (expense) income, net:        
Interest expense, net (5,720) (11,826) (19,990) (31,881)
Other income 1,523  —  1,806  40,072 
(Loss) income before income taxes (22,773) (4,407) (43,588) 24,251 
Income tax (expense) benefit (135,910) (133,956) 455 
Net (loss) income from continuing operations (158,683) (4,406) (177,544) 24,706 
Loss from discontinued operations, net of tax (1) (54) (4) (3,516)
Net (loss) income and comprehensive (loss) income $ (158,684) $ (4,460) $ (177,548) $ 21,190 
Weighted average shares outstanding:
Basic 12,758  13,268  12,794  13,194 
Diluted 12,758  13,268  12,794  13,797 
(Loss) income per share from continuing operations:    
Basic $ (12.44) $ (0.33) $ (13.88) $ 1.87 
Diluted $ (12.44) $ (0.33) $ (13.88) $ 1.79 
Loss per share from discontinued operations:    
Basic $ —  $ —  $ —  $ (0.27)
Diluted $ —  $ —  $ —  $ (0.25)
Net (loss) income per share:    
Basic $ (12.44) $ (0.34) $ (13.88) $ 1.61 
Diluted $ (12.44) $ (0.34) $ (13.88) $ 1.54 
 
The accompanying notes to consolidated financial statements are an integral part of these statements.
3

LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 (Unaudited) 
  September 30,
2022
December 31,
2021
  (in thousands, except par value and share amounts)
ASSETS:    
Cash and cash equivalents $ 285,538  $ 251,231 
Restricted cash and cash equivalents 127  111 
Accounts receivable (net of allowance of $2,356 and $1,456, respectively)
96,330  97,658 
Prepaid and other current assets 28,466  25,379 
Total current assets 410,461  374,379 
Property and equipment (net of accumulated depreciation of $33,211 and $28,315, respectively)
64,848  72,477 
Operating lease right-of-use assets 69,770  77,346 
Goodwill 420,139  420,139 
Intangible assets, net 64,189  85,763 
Deferred income tax assets —  87,581 
Equity investments 174,580  158,140 
Other non-current assets 6,308  6,942 
Non-current assets of discontinued operations —  16,589 
Total assets $ 1,210,295  $ 1,299,356 
LIABILITIES:    
Current portion of long-term debt $ 2,484  $ 166,008 
Accounts payable, trade 4,583  1,692 
Accrued expenses and other current liabilities 84,464  106,731 
Current liabilities of discontinued operations — 
Total current liabilities 91,531  274,432 
Long-term debt 813,395  478,151 
Operating lease liabilities 90,532  96,165 
Deferred income tax liabilities 8,059  2,265 
Other non-current liabilities 281  351 
Total liabilities 1,003,798  851,364 
Commitments and contingencies (Note 13)
SHAREHOLDERS' EQUITY:    
Preferred stock $.01 par value; 5,000,000 shares authorized; none issued or outstanding
—  — 
Common stock $.01 par value; 50,000,000 shares authorized; 16,140,103 and 16,070,720 shares issued, respectively, and 12,784,637 and 13,095,149 shares outstanding, respectively
161  161 
Additional paid-in capital 1,177,409  1,242,794 
Accumulated deficit (704,895) (571,794)
Treasury stock; 3,355,466 and 2,975,571 shares, respectively
(266,178) (223,169)
Total shareholders' equity 206,497  447,992 
Total liabilities and shareholders' equity $ 1,210,295  $ 1,299,356 
 
The accompanying notes to consolidated financial statements are an integral part of these statements.
4

LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 2022
 (Unaudited)
 
    Common Stock   Treasury Stock
  Total Number
of Shares
Amount Additional
Paid-in
Capital
Accumulated
Deficit
Number
of Shares
Amount
  (in thousands)
Balance as of December 31, 2021 $ 447,992  16,071  $ 161  $ 1,242,794  $ (571,794) 2,976  $ (223,169)
Net loss and comprehensive loss (10,826) —  —  —  (10,826) —  — 
Non-cash compensation 15,080  —  —  15,080  —  —  — 
Purchase of treasury stock (43,009) —  —  —  —  379  (43,009)
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes (3,086) 49  —  (3,086) —  —  — 
Cumulative effect adjustment due to ASU 2020-06 (65,303) —  —  (109,750) 44,447  —  — 
Balance as of March 31, 2022 $ 340,848  16,120 $ 161  $ 1,145,038  $ (538,173) 3,355 $ (266,178)
Net loss and comprehensive loss (8,038) —  —  —  (8,038) —  — 
Non-cash compensation 17,335  —  —  17,335  —  —  — 
Issuance of common stock for stock options, employee stock purchase plan, restricted stock awards and restricted stock units, net of withholding taxes 341  21  —  341  —  —  — 
Balance as of June 30, 2022 $ 350,486  16,141  $ 161  $ 1,162,714  $ (546,211) 3,355  $ (266,178)
Net loss and comprehensive loss (158,684) —  —  —  (158,684) —  — 
Non-cash compensation 15,575  —  —  15,575  —  —  — 
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes and cancellations (880) (1) —  (880) —  —  — 
Balance as of September 30, 2022 $ 206,497  16,140  $ 161  $ 1,177,409  $ (704,895) 3,355  $ (266,178)















LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 2021
 (Unaudited)
5


    Common Stock   Treasury Stock
  Total Number
of Shares
Amount Additional
Paid-in
Capital
Accumulated
Deficit
Number
of Shares
Amount
  (in thousands)
Balance as of December 31, 2020 $ 364,761  15,766  $ 158  $ 1,188,673  $ (640,909) 2,641  $ (183,161)
Net income and comprehensive income 19,049  —  —  —  19,049  —  — 
Non-cash compensation 16,436  —  —  16,436  —  —  — 
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes (4,801) 31  (4,801) —  —  — 
Other (2) —  —  (2) —  —  — 
Balance as of March 31, 2021 $ 395,443  15,797 $ 158  $ 1,200,306  $ (621,860) 2,641 $ (183,161)
Net income and comprehensive income 6,601  —  —  —  6,601  —  — 
Non-cash compensation 18,294  —  —  18,294  —  —  — 
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 30  159  28  —  —  — 
Balance as of June 30, 2021 $ 420,368  15,956  $ 160  $ 1,218,628  $ (615,259) 2,641  $ (183,161)
Net loss and comprehensive loss (4,460) —  —  —  (4,460) —  — 
Non-cash compensation 17,074  —  —  17,074  —  —  — 
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes (1,894) 13  —  (1,894) —  —  — 
Other (6) —  —  (6) —  —  — 
Balance as of September 30, 2021 $ 431,082  15,969  $ 160  $ 1,233,802  $ (619,719) 2,641  $ (183,161)
 
The accompanying notes to consolidated financial statements are an integral part of these statements.
6

LENDINGTREE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
  Nine Months Ended
September 30,
  2022 2021
  (in thousands)
Cash flows from operating activities attributable to continuing operations:    
Net (loss) income and comprehensive (loss) income $ (177,548) $ 21,190 
Less: Loss from discontinued operations, net of tax 3,516 
Net (loss) income from continuing operations (177,544) 24,706 
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities attributable to continuing operations:
Loss on impairments and disposal of assets 4,261  2,651 
Amortization of intangibles 21,574  32,967 
Depreciation 15,024  12,969 
Non-cash compensation expense 47,990  51,804 
Deferred income taxes 133,943  (455)
Change in fair value of contingent consideration —  (8,249)
Gain on investments —  (40,072)
Bad debt expense 2,708  1,823 
Amortization of debt issuance costs 5,443  3,756 
Write-off of previously-capitalized debt issuance costs —  1,066 
Amortization of debt discount 1,475  22,297 
Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities (890) 13,015 
Changes in current assets and liabilities:
Accounts receivable (1,380) (43,688)
Prepaid and other current assets (6,271) (2,762)
Accounts payable, accrued expenses and other current liabilities (19,146) 7,537 
Income taxes receivable (389) 10,322 
Other, net (469) (794)
Net cash provided by operating activities attributable to continuing operations 26,329  88,893 
Cash flows from investing activities attributable to continuing operations:
Capital expenditures (8,970) (30,515)
Equity investments (16,440) (1,180)
Net cash used in investing activities attributable to continuing operations (25,410) (31,695)
Cash flows from financing activities attributable to continuing operations:
Proceeds from term loan 250,000  — 
Repayment of term loan (625) — 
Repayment of 0.625% Convertible Senior Notes
(169,659) — 
Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options (3,292) (6,666)
Purchase of treasury stock (43,009) — 
Payment of debt issuance costs (4) (5,995)
Payment of original issue discount on undrawn term loan —  (2,500)
Other financing activities —  (31)
Net cash provided by (used in) financing activities attributable to continuing operations 33,411  (15,192)
Total cash provided by continuing operations 34,330  42,006 
Discontinued operations:
Net cash (used in) provided by operating activities attributable to discontinued operations (7) 3,330 
Total cash (used in) provided by discontinued operations (7) 3,330 
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents 34,323  45,336 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 251,342  170,049 
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 285,665  $ 215,385 
 
The accompanying notes to consolidated financial statements are an integral part of these statements.
7


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



NOTE 1—ORGANIZATION
Company Overview
LendingTree, Inc. is the parent of LT Intermediate Company, LLC, which holds all of the outstanding ownership interests of LendingTree, LLC, and LendingTree, LLC owns several companies (collectively, “LendingTree” or the “Company”).

LendingTree operates what it believes to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions. The Company offers consumers tools and resources, including free credit scores, that facilitate comparison-shopping for mortgage loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes, sales of insurance policies and other related offerings. The Company primarily seeks to match in-market consumers with multiple providers on its marketplace who can provide them with competing quotes for loans, deposit products, insurance or other related offerings they are seeking. The Company also serves as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries it generates with these providers.

The consolidated financial statements include the accounts of LendingTree and all its wholly-owned entities, except Home Loan Center, Inc. (“HLC”) subsequent to its bankruptcy filing on July 21, 2019, which resulted in the Company's loss of a controlling interest in HLC under applicable accounting standards. Intercompany transactions and accounts have been eliminated. The HLC Bankruptcy case was closed on July 14, 2021. The HLC entity was legally dissolved in the first quarter of 2022. See Note 16—Discontinued Operations for additional information.
Discontinued Operations
The LendingTree Loans business, which consisted of originating various consumer mortgage loans through HLC (the “LendingTree Loans Business”), is presented as discontinued operations in the accompanying consolidated balance sheets, consolidated statements of operations and comprehensive income and consolidated statements of cash flows for all periods presented. The notes accompanying these consolidated financial statements reflect the Company's continuing operations and, unless otherwise noted, exclude information related to the discontinued operations. See Note 16Discontinued Operations for additional information.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or any other period. The accompanying consolidated balance sheet as of December 31, 2021 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”). The accompanying consolidated financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in the 2021 Annual Report. 
NOTE 2—SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
Management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and
8


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates. 
Significant estimates underlying the accompanying consolidated financial statements, including discontinued operations, include: the recoverability of long-lived assets, goodwill and intangible assets; the determination of income taxes payable and deferred income taxes, including related valuation allowances; fair value of assets acquired in a business combination; contingent consideration related to business combinations; litigation accruals; contract assets; various other allowances, reserves and accruals; assumptions related to the determination of stock-based compensation; and the determination of right-of-use assets and lease liabilities. 
The Company considered the impact of the COVID-19 pandemic on the assumptions and estimates used when preparing its financial statements including, but not limited to, the allowance for doubtful accounts, valuation allowances, contract asset and contingent consideration. These assumptions and estimates may change as new events occur and additional information is obtained. If economic conditions caused by the COVID-19 pandemic do not recover as currently estimated by management, such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity.
Certain Risks and Concentrations
LendingTree's business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud.
Financial instruments, which potentially subject the Company to concentration of credit risk at September 30, 2022, consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet. Cash and cash equivalents are in excess of Federal Deposit Insurance Corporation insurance limits, but are maintained with quality financial institutions of high credit. The Company requires certain Network Partners to maintain security deposits with the Company, which in the event of non-payment, would be applied against any accounts receivable outstanding.
Due to the nature of the mortgage lending industry, interest rate fluctuations may negatively impact future revenue from the Company's marketplace.
Lenders and lead purchasers participating on the Company's marketplace can offer their products directly to consumers through brokers, mass marketing campaigns or through other traditional methods of credit distribution. These lenders and lead purchasers can also offer their products online, either directly to prospective borrowers, through one or more online competitors, or both. If a significant number of potential consumers are able to obtain loans and other products from Network Partners without utilizing the Company's services, the Company's ability to generate revenue may be limited. Because the Company does not have exclusive relationships with the Network Partners whose loans and other financial products are offered on its online marketplace, consumers may obtain offers from these Network Partners without using its service.
Other than a support services office in India, the Company's operations are geographically limited to and dependent upon the economic condition of the United States.
Litigation Settlements and Contingencies
Litigation settlements and contingencies consists of expenses related to actual or anticipated litigation settlements.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments, amends the derivatives scope exception guidance for contracts in an entity’s own equity, and amends the related earnings-per-share guidance. Under the new guidance, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. Additionally, the new guidance requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share. This ASU is effective for annual and interim reporting periods beginning after December 15, 2021, with early adoption permitted for periods beginning after December 15, 2020. An entity may adopt the amendments through either a modified retrospective method of transition or a fully retrospective method of transition.
9


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective transition approach and recognized the cumulative effect of initially applying ASU 2020-06 as a $44.4 million adjustment to the opening balance of accumulated deficit, comprised of $60.8 million for the interest adjustment, net of $16.4 million for the related tax impacts. The recombination of the equity conversion component of our convertible debt remaining outstanding caused a reduction in additional paid-in capital and an increase in deferred income tax assets. The removal of the remaining debt discounts recorded for this previous separation had the effect of increasing our net debt balance. ASU 2020-06 also requires the dilutive impact of convertible debt instruments to utilize the if-converted method when calculating diluted earnings per share and the result is more dilutive. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods. See Note 12—Debt for further information.
The cumulative effect of the changes made to the consolidated January 1, 2022 balance sheet for the adoption of ASU 2020-06 were as follows (in thousands):
December 31, 2021 Adjustments due to
ASU 2020-06
January 1, 2022
Assets:
Deferred income tax assets $ 87,581  $ 23,979  $ 111,560 
Liabilities:
Current portion of long-term debt $ 166,008  $ 3,213  $ 169,221 
Long-term debt 478,151  86,069  564,220 
Shareholders' equity:
Additional paid-in capital $ 1,242,794  $ (109,750) $ 1,133,044 
Accumulated deficit (571,794) 44,447  (527,347)
The adoption of ASU 2020-06 did not impact our cash flows or compliance with debt covenants.
Recently Issued Accounting Pronouncements

The Company has considered the applicability of recently issued accounting pronouncements by the Financial Accounting Standards Board and have determined that they are not applicable or are not expected to have a material impact on our consolidated financial statements.
NOTE 3—REVENUE
Revenue is as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 2021
Home $ 64,927  $ 112,422  $ 240,809  $ 345,408 
Credit cards 24,298  26,914  81,426  66,975 
Personal loans 37,701  33,803  115,209  73,879 
Other Consumer 40,662  39,294  113,238  92,740 
Total Consumer 102,661  100,011  309,873  233,594 
Insurance 70,231  84,837  232,025  260,714 
Other 17  180  230  498 
Total revenue $ 237,836  $ 297,450  $ 782,937  $ 840,214 
The Company derives its revenue primarily from match fees and closing fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised services have transferred to the customer. The Company's services are generally transferred to the customer at a point in time.
10


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue from Home products is primarily generated from upfront match fees paid by mortgage Network Partners that receive a loan request, and in some cases upfront fees for clicks or call transfers. Match fees and upfront fees for clicks and call transfers are earned through the delivery of loan requests that originated through the Company's websites or affiliates. The Company recognizes revenue at the time a loan request is delivered to the customer, provided that no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a loan request to the customer.
Revenue from Consumer products is generated by match and other upfront fees for clicks or call transfers, as well as from closing fees, approval fees and upfront service and subscription fees. Closing fees are derived from lenders on certain auto loans, business loans, personal loans and student loans when the lender funds a loan with the consumer. Approval fees are derived from credit card issuers when the credit card consumer receives card approval from the credit card issuer. Upfront service fees and subscription fees are derived from consumers in the Company's credit services product. Upfront fees paid by consumers are recognized as revenue over the estimated time the consumer will remain a customer and receive services. Subscription fees are recognized over the period a consumer is receiving services.
The Company recognizes revenue on closing fees and approval fees at the point when a loan request or a credit card consumer is delivered to the customer. The Company's contractual right to closing fees and approval fees is not contemporaneous with the satisfaction of the performance obligation to deliver a loan request or a credit card consumer to the customer. As such, the Company records a contract asset at each reporting period-end related to the estimated variable consideration on closing fees and approval fees for which the Company has satisfied the related performance obligation but are still pending the loan closing or credit card approval before the Company has a contractual right to payment. This estimate is based on the Company's historical closing rates and historical time between when a consumer request for a loan or credit card is delivered to the lender or card issuer and when the loan is closed by the lender or approved by the card issuer.
Revenue from the Company's Insurance products is primarily generated from upfront match fees and upfront fees for website clicks or fees for calls. Match fees and upfront fees for clicks and call transfers are earned through the delivery of consumer requests that originated through the Company's websites or affiliates. The Company recognizes revenue at the time a consumer request is delivered to the customer, provided that no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a consumer request to the customer.
The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration was $12.2 million and $9.1 million at September 30, 2022 and December 31, 2021, respectively.
The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers was $0.9 million and $0.8 million at September 30, 2022 and December 31, 2021, respectively. During the first nine months of 2022, the Company recognized revenue of $0.8 million that was included in the contract liability balance at December 31, 2021. During the first nine months of 2021, the Company recognized revenue of $0.7 million that was included in the contract liability balance at December 31, 2020.
Revenue recognized in any reporting period includes estimated variable consideration for which the Company has satisfied the related performance obligations but are still pending the occurrence or non-occurrence of a future event outside the Company's control (such as lenders providing loans to consumers or credit card approvals of consumers) before the Company has a contractual right to payment. The Company recognized increases to such revenue from prior periods. This increase was $0.1 million in the third quarter of 2022, and was $0.4 million in the third quarter of 2021.
NOTE 4—CASH AND RESTRICTED CASH
Total cash, cash equivalents, restricted cash and restricted cash equivalents consist of the following (in thousands):
September 30,
2022
December 31,
2021
Cash and cash equivalents $ 285,538  $ 251,231 
Restricted cash and cash equivalents 127  111 
Total cash, cash equivalents, restricted cash and restricted cash equivalents $ 285,665  $ 251,342 
11


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5—ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts.
The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, previous loss history, current and expected economic conditions and the specific customer's current and expected ability to pay its obligation. Accounts receivable are considered past due when they are outstanding longer than the contractual payment terms. Accounts receivable are written off when management deems them uncollectible.
A reconciliation of the beginning and ending balances of the allowance for doubtful accounts is as follows (in thousands):
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2022 2021 2022 2021
Balance, beginning of the period $ 2,300  $ 1,473  $ 1,456  $ 1,402 
Charges to earnings 679  678  2,708  1,823 
Write-off of uncollectible accounts receivable (623) (645) (1,808) (1,724)
Recoveries collected —  —  — 
Balance, end of the period $ 2,356  $ 1,506  $ 2,356  $ 1,506 
NOTE 6—GOODWILL AND INTANGIBLE ASSETS
The balance of goodwill, net and intangible assets, net is as follows (in thousands):
  September 30,
2022
December 31,
2021
Goodwill $ 903,227  $ 903,227 
Accumulated impairment losses (483,088) (483,088)
Net goodwill $ 420,139  $ 420,139 
Intangible assets with indefinite lives $ 10,142  $ 10,142 
Intangible assets with definite lives, net 54,047  75,621 
Total intangible assets, net $ 64,189  $ 85,763 
Goodwill and Indefinite-Lived Intangible Assets
The Company's goodwill at each of September 30, 2022 and December 31, 2021 consists of $59.3 million associated with the Home segment, $166.1 million associated with the Consumer segment, and $194.7 million associated with the Insurance segment.
At June 30, 2022, the Company assessed the qualitative factors in its impairment testing of goodwill and determined that the effects of the challenging interest rate environment, consumer price inflation, and the decline in the Company's market capitalization required a quantitative impairment test be performed. The quantitative goodwill impairment test found that the fair value of each reporting unit exceeded its carrying amount, indicating no goodwill impairment. The Company will monitor the recovery of the Insurance reporting unit. The property and casualty auto industry is experiencing challenges caused by inflation, supply chain challenges, and rising severity and frequency of claims. Changes in the timing of the recovery compared to current expectations could cause an impairment to the Insurance reporting unit.
Intangible assets with indefinite lives relate to the Company's trademarks.
12


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible Assets with Definite Lives
Intangible assets with definite lives relate to the following (in thousands):
  Cost Accumulated
Amortization
Net
Technology $ 74,900  $ (71,108) $ 3,792 
Customer lists 77,300  (29,248) 48,052 
Trademarks and tradenames 10,700  (8,497) 2,203 
Balance at September 30, 2022 $ 162,900  $ (108,853) $ 54,047 
  Cost Accumulated
Amortization
Net
Technology $ 87,700  $ (69,369) $ 18,331 
Customer lists 77,300  (24,668) 52,632 
Trademarks and tradenames 11,700  (7,767) 3,933 
Website content 26,100  (25,375) 725 
Balance at December 31, 2021 $ 202,800  $ (127,179) $ 75,621 
Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of September 30, 2022, future amortization is estimated to be as follows (in thousands):
  Amortization Expense
Remainder of current year $ 3,682 
Year ending December 31, 2023 8,602 
Year ending December 31, 2024 6,747 
Year ending December 31, 2025 6,259 
Year ending December 31, 2026 5,504 
Thereafter 23,253 
Total intangible assets with definite lives, net $ 54,047 
NOTE 7—EQUITY INVESTMENTS
In January 2022, the Company acquired an equity interest in EarnUp Inc. (“EarnUp”) for $15.0 million. The company is a consumer-first mortgage payment platform that intelligently automates loan payment scheduling and helps consumers better manage their money and improve their financial well-being.
On February 28, 2020, the Company acquired an equity interest in Stash Financial, Inc. (“Stash”) for $80.0 million. On January 6, 2021, the Company acquired an additional equity interest for $1.2 million. On October 18, 2021, the Company entered into a stock transfer agreement with third parties to sell a portion of its Stash equity securities for $46.3 million. The Company sold $35.3 million in October and closed on an additional $11.0 million in November 2021. The Company recorded a realized gain of $27.9 million based on the sale of Stash equity securities under the stock transfer agreement, which is included within other income on the consolidated statement of operations and comprehensive income. Stash is a consumer investing and banking platform. Stash brings together banking, investing, and financial services education into one seamless experience offering a full suite of personal investment accounts, traditional and Roth IRAs, custodial investment accounts, and banking services, including checking accounts and debit cards with a Stock-Back® rewards program.
The equity securities do not have a readily determinable fair value and, upon acquisition, the Company elected the measurement alternative to value its securities. The equity securities will be carried at cost less impairment, if any, and subsequently measured to fair value upon observable price changes in an orderly transaction for the identical or similar investments with any gains or losses recorded to the consolidated statement of operations and comprehensive income. In 2021, the Company recorded a net unrealized gain on the investment in Stash of $95.4 million as a result of an adjustment to the fair
13


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

value of the Stash equity securities based on observable price changes, which is included within other income on the consolidated statement of operations and comprehensive income.
As of September 30, 2022, there have been no impairments to the acquisition cost of the equity securities.
NOTE 8—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following (in thousands):
  September 30,
2022
December 31,
2021
Accrued advertising expense $ 48,162  $ 59,150 
Accrued compensation and benefits 8,954  16,330 
Accrued professional fees 3,021  1,887 
Customer deposits and escrows 7,442  7,546 
Contribution to LendingTree Foundation —  3,333 
Current lease liabilities 8,909  8,595 
Other 7,976  9,890 
Total accrued expenses and other current liabilities $ 84,464  $ 106,731 
NOTE 9—SHAREHOLDERS' EQUITY 
Basic and diluted income per share was determined based on the following share data (in thousands):
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2022 2021 2022 2021
Weighted average basic common shares 12,758  13,268  12,794  13,194 
Effect of stock options —  —  —  452 
Effect of dilutive share awards —  —  —  96 
Effect of Convertible Senior Notes and warrants —  —  —  55 
Weighted average diluted common shares 12,758  13,268  12,794  13,797 
For the third quarter and first nine months of 2022, the Company had losses from continuing operations and, as a result, no potentially dilutive securities were included in the denominator for computing diluted loss per share, because the impact would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding was used to compute loss per share. Approximately 0.1 million and 0.2 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the third quarter and first nine months of 2022 respectively, because their inclusion would have been anti-dilutive. Approximately 0.4 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the third quarter of 2021.
For the third quarter of 2022, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 1.0 million shares of common stock and 0.5 million restricted stock units. For the first nine months of 2022, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 1.0 million shares of common stock and 0.4 million restricted stock units. For the third quarter of 2021, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 0.9 million shares of common stock and 0.2 million restricted stock units. For the first nine months of 2021, the weighted average shares that were anti-dilutive included options to purchase 0.4 million shares of common stock and 0.1 million restricted stock units.
The convertible notes and the warrants issued by the Company could be converted into the Company’s common stock, subject to certain contingencies. See Note 12—Debt for additional information. On January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method. Following the adoption, the if-converted method is used for diluted net income per share calculation of our convertible notes. Prior to the adoption of ASU 2020-06 the dilutive impact of the
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

convertible notes was calculated using the treasury stock method. See Note 2—Significant Accounting Policies for additional information.
Approximately 1.2 million shares and 2.1 million shares related to the potentially dilutive shares of the Company's common stock associated with the 0.50% Convertible Senior Notes due July 15, 2025 and the 0.625% Convertible Senior Notes due June 1, 2022 were excluded from the calculation of diluted loss per share for the third quarter and first nine months of 2022, respectively, because their inclusion would have been anti-dilutive. Shares of the Company's stock associated with the warrants issued by the Company in 2017 and 2020 were excluded from the calculation of diluted loss per share for the third quarter and first nine months of 2022 and 2021 as they were anti-dilutive since the strike price of the warrants was greater than the average market price of the Company's common stock during the relevant periods.
Shares of the Company's common stock associated with the 0.50% Convertible Senior Notes due July 15, 2025 were excluded from the calculation of diluted income per share for the third quarter and first nine months of 2021 and shares of the Company's common stock associated with the 0.625% Convertible Senior Notes due June 1, 2022 were excluded in the third quarter of 2021 as they were anti-dilutive since the conversion price of the notes was greater than the average market price of the Company's common stock during the relevant periods.
The employee stock purchase plan did not have a material impact to the calculation of diluted shares.
Common Stock Repurchases
In each of February 2018 and February 2019, the board of directors authorized and the Company announced the repurchase of up to $100.0 million and $150.0 million, respectively, of LendingTree's common stock. During the nine months ended September 30, 2022, the Company purchased 379,895 shares of its common stock pursuant to this stock repurchase program. At September 30, 2022, approximately $96.7 million of the previous authorizations to repurchase common stock remain available.
NOTE 10—STOCK-BASED COMPENSATION
Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations and comprehensive income (in thousands):
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2022 2021 2022 2021
Cost of revenue $ 417  $ 371  $ 1,252  $ 1,231 
Selling and marketing expense 2,198  1,805  6,522  5,583 
General and administrative expense 11,212  13,233  32,685  38,658 
Product development 1,748  1,665  6,448  6,332 
Restructuring and severance —  —  1,083  — 
Total non-cash compensation $ 15,575  $ 17,074  $ 47,990  $ 51,804 
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options
A summary of changes in outstanding stock options is as follows:
  Number of Options Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value(a)
    (per option) (in years) (in thousands)
Options outstanding at January 1, 2022 676,293  $ 169.71 
Granted (b)
157,632  103.54 
Exercised —  — 
Forfeited (20,089) 205.97 
Expired (6,475) 256.11 
Options outstanding at September 30, 2022 807,361  155.20  5.47 $ 3 
Options exercisable at September 30, 2022 489,581  $ 126.08  3.39 $ 3 
(a)The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $23.86 on the last trading day of the quarter ended September 30, 2022 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on September 30, 2022. The intrinsic value changes based on the market value of the Company's common stock.
(b)During the nine months ended September 30, 2022, the Company granted stock options to certain employees with a weighted average grant date fair value per share of $53.21, calculated using the Black-Scholes option pricing model, which vesting periods include (1) immediate vesting on grant date (b) earlier of one year from grant date and the Company's annual meeting of stockholders for 2023 and (c) three years from grant date.
For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options was estimated using the Black-Scholes option pricing model, which requires the use of various key assumptions. The weighted average assumptions used are as follows:
Expected term (1)
5.00 - 6.00 years
Expected dividend (2)
— 
Expected volatility (3)
53 - 56%
Risk-free interest rate (4)
1.62 - 3.23%
(1)The expected term of stock options granted was calculated using the “Simplified Method,” which utilizes the midpoint between the weighted average time of vesting and the end of the contractual term. This method was utilized for the stock options due to a lack of historical exercise behavior by the Company's employees.
(2)For all stock options granted in 2022, no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.
(3)The expected volatility rate is based on the historical volatility of the Company's common stock.
(4)The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options with Market Conditions
A summary of changes in outstanding stock options with market conditions at target is as follows:
  Number of Options with Market Conditions Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value(a)
    (per option) (in years) (in thousands)
Options outstanding at January 1, 2022 700,209  $ 236.01 
Granted 47,639  195.10 
Exercised —  — 
Forfeited —  — 
Expired (13,163) 378.95 
Options outstanding at September 30, 2022 734,685  230.79  5.94 $  
Options exercisable at September 30, 2022 481,669  $ 195.10  4.85 $  
(a)The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $23.86 on the last trading day of the quarter ended September 30, 2022 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on September 30, 2022. The intrinsic value changes based on the market value of the Company's common stock.
As of September 30, 2022, a maximum of 422,537 shares may be earned for achieving superior performance up to 167% of the remaining unvested target number of shares. As of September 30, 2022, no additional performance-based nonqualified stock options with a market condition had been earned.
Restricted Stock Units
A summary of changes in outstanding nonvested restricted stock units (“RSUs”) is as follows:
  RSUs
  Number of Units Weighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 2022 308,068  $ 226.55 
Granted 402,960  101.14 
Vested (125,961) 243.60 
Forfeited (79,112) 167.83 
Nonvested at September 30, 2022 505,955  $ 131.60 
Restricted Stock Units with Performance Conditions
A summary of changes in outstanding nonvested RSUs with performance conditions is as follows:
  RSUs with Performance Conditions
  Number of Units Weighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 2022   $  
Granted 16,000  83.25 
Vested —  — 
Forfeited —  — 
Nonvested at September 30, 2022 16,000  $ 83.25 
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A maximum of 24,000 shares may be earned for achieving superior performance up to 150% of the target number of shares.
Restricted Stock Awards with Market Conditions
A summary of changes in outstanding nonvested RSAs with market conditions at target is as follows:
  RSAs with Market Conditions
  Number of Awards Weighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 2022 26,674  $ 340.25 
Granted 2,927  340.25 
Vested (29,601) 340.25 
Forfeited —  — 
Nonvested at September 30, 2022   $  
Employee Stock Purchase Plan
In 2021, the Company implemented an employee stock purchase plan (“ESPP”), under which a total of 262,731 shares of the Company's common stock were reserved for issuance. As of September 30, 2022, 243,929 shares of common stock were available for issuance under the ESPP. The ESPP is a tax-qualified plan under Section 423 of the Internal Revenue Code. Under the terms of the ESPP, eligible employees are granted options to purchase shares of the Company's common stock at 85% of the lesser of (1) the fair market value at time of grant or (2) the fair market value at time of exercise. The offering periods and purchase periods are typically six-month periods ending on June 30 and December 31 of each year. During the nine months ended September 30, 2022, 13,259 shares were issued under the ESPP.
During the nine months ended September 30, 2022, the Company granted employee stock purchase rights to certain employees with a grant date fair value per share of $20.96, calculated using the Black-Scholes option pricing model. For purposes of determining stock-based compensation expense, the grant date fair value per share estimated using the Black-Scholes option pricing model required the use of the following key assumptions:
Expected term (1)
0.50 years
Expected dividend (2)
— 
Expected volatility (3)
49 - 73%
Risk-free interest rate (4)
0.19 - 2.51%
(1)The expected term was calculated using the time period between the grant date and the purchase date.
(2)No dividends are expected to be paid, resulting in a zero expected dividend rate.
(3)The expected volatility rate is based on the historical volatility of the Company's common stock.
(4)The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the employee stock purchase rights, in effect at the grant date.
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11—INCOME TAXES
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2022 2021 2022 2021
(in thousands, except percentages)
Income tax (expense) benefit $ (135,910) $ $ (133,956) $ 455 
Effective tax rate (596.8) % —  % (307.3) % (1.9) %
For the third quarter and first nine months of 2022, the effective tax rate varied from the federal statutory rate of 21% primarily due to expense of $139.7 million to record a full valuation allowance against our net deferred tax assets, excess tax expense of $1.8 million and $4.7 million, respectively, resulting from vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes. For the third quarter and first nine months of 2021, the effective tax rate varied from the federal statutory rate of 21% in part due to an excess tax expense of $0.9 million and an excess tax benefit of $7.4 million, respectively, resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.
During the third quarter of 2022, the Company recorded tax expense of $139.7 million to establish a full valuation allowance against its net deferred tax assets due to historical cumulative pre-tax losses and continued pre-tax losses in the quarter. Management regularly reviews the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing taxable temporary differences, and tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In determining the amount of the valuation allowance, the Company considered the scheduled reversal of deferred tax liabilities. The Company will maintain a full valuation allowance on net deferred tax assets until there is sufficient evidence to support the reversal of some or all of the allowance. Should there be a change in the valuation allowance in the future, the income tax provision would increase or decrease in the period in which the allowance is changed.
The indefinite carryforward period for certain deferred tax assets means that indefinite-lived deferred tax liabilities can be considered as support for realization of such deferred tax assets including post December 31, 2017 net operating loss carryovers, which can affect the need to record or maintain a valuation allowance for deferred tax assets. At September 30, 2022 the Company maintains a valuation allowance of $146 million against its net deferred tax assets.
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2022 2021 2022 2021
(in thousands)
Income tax benefit (expense) - excluding excess tax expense from valuation allowance and excess tax (expense) benefit on stock compensation $ 5,512  $ 939  $ 10,372  $ (6,900)
Income tax expense from valuation allowance (139,670) —  (139,670) — 
Excess tax (expense) benefit on stock compensation (1,752) (938) (4,658) 7,355 
Income tax (expense) benefit $ (135,910) $ $ (133,956) $ 455 
NOTE 12—DEBT
Convertible Senior Notes
2025 Notes
On July 24, 2020, the Company issued $575.0 million aggregate principal amount of its 0.50% Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) in a private placement. The issuance included $75.0 million aggregate principal amount of 2025 Notes under a 13-day purchase option which was exercised in full. The 2025 Notes bear interest at a rate of 0.50% per year, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2021. The 2025 Notes will mature on July 15, 2025, unless earlier repurchased, redeemed or converted.
19


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The initial conversion rate of the 2025 Notes is 2.1683 shares of the Company's common stock per $1,000 principal amount of 2025 Notes (which is equivalent to an initial conversion price of approximately $461.19 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change prior to the maturity of the 2025 Notes or if the Company issues a notice of redemption for the 2025 Notes, the Company will, in certain circumstances, increase the conversion rate by a specified number of additional shares for a holder that elects to convert the 2025 Notes in connection with such make-whole fundamental change or to convert its 2025 Notes called for redemption, as the case may be. Upon conversion, the 2025 Notes will settle for cash, shares of the Company’s stock, or a combination thereof, at the Company’s option. It is the intent of the Company to settle the principal amount of the 2025 Notes in cash and any conversion premium in shares of its common stock.
The 2025 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2025 Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness, including borrowings under the senior secured credit facility, described below, to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.
Prior to the close of business on the business day immediately preceding March 13, 2025, the 2025 Notes will be convertible at the option of the holders thereof only under the following circumstances:
during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on, and including the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price (as defined in the 2025 Notes) per $1,000 principal amount of 2025 Notes for such trading day was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;
if the Company calls such 2025 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the notes called for redemption; or
upon the occurrence of specified corporate events including but not limited to a fundamental change.
Holders of the 2025 Notes were not entitled to convert the 2025 Notes during the calendar quarter ended September 30, 2022 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on June 30, 2022, was not greater than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day. Holders of the 2025 Notes are not entitled to convert the 2025 Notes during the calendar quarter ended December 31, 2022 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on September 30, 2022, was not greater than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day.
On or after March 13, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2025 Notes, holders of the 2025 Notes may convert all or a portion of their 2025 Notes regardless of the foregoing conditions.
The Company may not redeem the 2025 Notes prior to July 20, 2023. On or after July 20, 2023 and before the 41st scheduled trading day immediately before the maturity date, the Company may redeem for cash all or a portion of the 2025 Notes, at its option, if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period (and including the last trading day of such period) ending on, and including the last trading day immediately preceding the date of notice of redemption is greater than or equal to 130% of the conversion price on each applicable trading day. The redemption price will be equal to 100% of the principal amount of the 2025 Notes to be
20


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2025 Notes.
Upon the occurrence of a fundamental change prior to the maturity date of the 2025 Notes, holders of the 2025 Notes may require the Company to repurchase all or a portion of the 2025 Notes for cash at a price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
If the market price per share of the common stock, as measured under the terms of the 2025 Notes, exceeds the conversion price of the 2025 Notes, the 2025 Notes could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the principal amount of the 2025 Notes and any conversion premium in cash.
Accounting for the Notes After Adoption of ASU 2020-06
The Company adopted ASU 2020-06 on January 1, 2022 as further described in Note 2—Significant Accounting Policies. Following the adoption of ASU 2020-06, the 2025 Notes are recorded as a single unit within liabilities on the consolidated balance sheets as the conversion features within the 2025 Notes are not derivatives that require bifurcation and the 2025 Notes do not involve a substantial premium. Debt issuance costs to issue the 2025 Notes were recorded as direct deduction from the related liability and amortized to interest expense over the term of Notes. The new guidance also requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share. See Note 2—Significant Accounting Policies for additional information.
Accounting for the Notes Before Adoption of ASU 2020-06
The initial measurement of convertible debt instruments that may be settled in cash was separated into a debt and an equity component whereby the debt component was based on the fair value of a similar instrument that does not contain an equity conversion option. The separate components of debt and equity of the Company’s 2025 Notes were determined using an interest rate of 5.30%, which reflects the nonconvertible debt borrowing rate of the Company at the date of issuance. As a result, the initial components of debt and equity were $455.6 million and $119.4 million, respectively. Financing costs related to the issuance of the 2025 Notes were approximately $15.1 million, of which $12.0 million were allocated to the liability component and are being amortized to interest expense over the term of the debt and $3.1 million were allocated to the equity component.
In the first nine months of 2022, the Company recorded interest expense on the 2025 Notes of $4.4 million which consisted of $2.1 million associated with the 0.50% coupon rate and $2.3 million associated with the amortization of the debt issuance costs. In the first nine months of 2021, the Company recorded interest expense on the 2025 Notes of $20.3 million which consisted of $2.2 million associated with the 0.50% coupon rate, $16.4 million associated with the accretion of the debt discount, and $1.7 million associated with the amortization of the debt issuance costs.
As of September 30, 2022, the fair value of the 2025 Notes is estimated to be approximately $411.8 million using the Level 1 observable input of the last quoted market price on September 30, 2022.
A summary of the gross carrying amount, unamortized debt cost, debt issuance costs, and net carrying value of the liability component of the 2025 Notes, all of which is recorded as a non-current liability in the September 30, 2022 consolidated balance sheet, are as follows (in thousands):
  September 30,
2022
December 31,
2021
Gross carrying amount $ 575,000  $ 575,000 
Unamortized debt discount —  87,994 
Debt issuance costs 8,496  8,855 
Net carrying amount $ 566,504  $ 478,151 
2022 Notes
On May 31, 2017, the Company issued $300.0 million aggregate principal amount of its 0.625% Convertible Senior Notes due June 1, 2022 (the “2022 Notes”) in a private placement. The Company settled the outstanding balance of the 2022 Notes of $169.7 million in cash on June 1, 2022. The initial conversion rate of the 2022 Notes was 4.8163 shares of the Company's
21


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

common stock per $1,000 principal amount of 2022 Notes (which is equivalent to an initial conversion price of approximately $207.63 per share).
Accounting for the Notes After Adoption of ASU 2020-06
The Company adopted ASU 2020-06 on January 1, 2022 as further described in Note 2—Significant Accounting Policies. Following the adoption of ASU 2020-06, the 2022 Notes are recorded as a single unit within liabilities on the consolidated balance sheets as the conversion features within the 2022 Notes are not derivatives that require bifurcation and the 2022 Notes do not involve a substantial premium. Debt issuance costs to issue the 2022 Notes were recorded as direct deduction from the related liability and amortized to interest expense over the term of Notes. The new guidance also requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share. See Note 2—Significant Accounting Policies for additional information.
Accounting for the Notes Before Adoption of ASU 2020-06
The separate components of debt and equity of the Company’s 2022 Notes were determined using an interest rate of 5.36%, which reflects the nonconvertible debt borrowing rate of the Company at the date of issuance. As a result, the initial components of debt and equity were $238.4 million and $61.6 million, respectively. Financing costs related to the issuance of the 2022 Notes were approximately $9.3 million, of which $7.4 million were allocated to the liability component and are being amortized to interest expense over the term of the debt and $1.9 million were allocated to the equity component.
On July 24, 2020, the Company used approximately $234.0 million of the net proceeds from the issuance of the 2025 Notes to repurchase approximately $130.3 million principal amount of the 2022 Notes, including the payment of accrued and unpaid interest of approximately $0.1 million, through separate transactions with certain holders of the 2022 Notes. Of the consideration paid, $126.0 million was allocated to the extinguishment of the liability component of the notes, while the remaining $107.9 million was allocated to the reacquisition of the equity component and recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity. The Company recognized a loss on debt extinguishment of $7.8 million in the third quarter of 2020, which is included in interest expense, net in the consolidated statements of operations and comprehensive income.
In the first nine months of 2022, the Company recorded interest expense on the 2022 Notes of $0.8 million which consisted of $0.4 million associated with the 0.625% coupon rate and $0.4 million associated with the amortization of the debt issuance costs. In the first nine months of 2021, the Company recorded interest expense on the 2022 Notes of $7.1 million which consisted of $0.8 million associated with the 0.625% coupon rate, $5.6 million associated with the accretion of the debt discount, and $0.7 million associated with the amortization of the debt issuance costs.
A summary of the gross carrying amount, unamortized debt cost, debt issuance costs and net carrying value of the liability component of the 2022 Notes, are as follows (in thousands):
  September 30,
2022
December 31,
2021
Gross carrying amount $ —  $ 169,659 
Unamortized debt discount —  3,260 
Debt issuance costs —  391 
Net carrying amount $   $ 166,008 
Convertible Note Hedge and Warrant Transactions
2020 Hedge and Warrants
On July 24, 2020, in connection with the issuance of the 2025 Notes, the Company entered into Convertible Note Hedge (the “2020 Hedge”) and warrant transactions with respect to the Company’s common stock. The Company used approximately $63.0 million of the net proceeds from the 2025 Notes to pay for the cost of the 2020 Hedge, after such cost was partially offset by the proceeds from the warrant transactions.
On July 24, 2020, the Company paid $124.2 million to the counterparties for the 2020 Hedge transactions. The 2020 Hedge transactions cover 1.2 million shares of the Company’s common stock, the same number of shares initially underlying the 2025 Notes, and are exercisable upon any conversion of the 2025 Notes. The 2020 Hedge transactions are expected generally to
22


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

reduce the potential dilution to the Company's common stock upon conversion of the 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2025 Notes, as the case may be, in the event that the market price per share of common stock, as measured under the terms of the 2020 Hedge transactions, is greater than the strike price of the 2020 Hedge transactions, which initially corresponds to the initial conversion price of the 2025 Notes, or approximately $461.19 per share of common stock. The 2020 Hedge transactions will expire upon the maturity of the Notes.
On July 24, 2020, the Company sold to the counterparties, warrants (the “2020 Warrants”) to acquire 1.2 million shares of the Company's common stock at an initial strike price of $709.52 per share, which represents a premium of 100% over the last reported sale price of the common stock of $354.76 on July 21, 2020. On July 24, 2020, the Company received aggregate proceeds of approximately $61.2 million from the sale of the 2020 Warrants. If the market price per share of the common stock, as measured under the terms of the 2020 Warrants, exceeds the strike price of the 2020 Warrants, the 2020 Warrants could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the 2020 Warrants in cash.
The 2020 Hedge and 2020 Warrants transactions are indexed to, and potentially settled in, the Company's common stock and the net cost of $63.0 million has been recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity.
2017 Hedge and Warrants
On May 31, 2017, in connection with the issuance of the 2022 Notes, the Company entered into Convertible Note Hedge (the “2017 Hedge”) and warrant transactions with respect to the Company’s common stock. The Company used approximately $18.1 million of the net proceeds from the 2022 Notes to pay for the cost of the 2017 Hedge, after such cost was partially offset by the proceeds from the warrant transactions.
On May 31, 2017, the Company paid $61.5 million to the counterparties for the 2017 Hedge transactions. The 2017 Hedge transactions initially covered 1.4 million shares of the Company’s common stock, the same number of shares initially underlying the 2022 Notes, and were exercisable upon any conversion of the 2022 Notes. The 2017 Hedge transactions were expected generally to reduce the potential dilution to the Company's common stock upon conversion of the 2022 Notes and/or offset any cash payments the Company was required to make in excess of the principal amount of the converted 2022 Notes, as the case may be, in the event that the market price per share of common stock, as measured under the terms of the 2017 Hedge transactions, was greater than the strike price of the 2017 Hedge transactions, which initially corresponded to the initial conversion price of the 2022 Notes, or approximately $207.63 per share of common stock. The 2017 Hedge transactions expired on June 1, 2022 upon the maturity of the Notes.
On May 31, 2017, the Company sold to the counterparties, warrants (the “2017 Warrants”) to acquire 1.4 million shares of the Company's common stock at an initial strike price of $266.39 per share, which represents a premium of 70% over the last reported sale price of the common stock of $156.70 on May 24, 2017. On May 31, 2017, the Company received aggregate proceeds of approximately $43.4 million from the sale of the 2017 Warrants. If the market price per share of the common stock, as measured under the terms of the 2017 Warrants, exceeds the strike price of the 2017 Warrants, the 2017 Warrants could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the 2017 Warrants in cash. As of September 30, 2022, there were 0.8 million warrants outstanding. The warrants expire ratably from October 14, 2022 through December 12, 2022.
The 2017 Hedge and 2017 Warrants transactions are indexed to, and potentially settled in, the Company's common stock and the net cost of $18.1 million was recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity.
To the extent of the repurchases of the 2022 Notes noted above, the Company entered into agreements with the counterparties for the 2017 Hedge and 2017 Warrants transactions to terminate a portion of these call spread transactions effective July 24, 2020 in notional amounts corresponding to the principal amount of the 2022 Notes repurchased. The Company received $109.9 million and paid $94.3 million as a result of terminating such portions of the 2017 Hedge and 2017 Warrants, respectively. The net $15.6 million was recorded as an increase to additional paid-in capital in the consolidated statement of shareholders’ equity.
23


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Credit Facility
On September 15, 2021, the Company entered into a credit agreement (the “Credit Agreement”), consisting of a $200.0 million revolving credit facility (the “Revolving Facility”), which matures on September 15, 2026, and a $250.0 million delayed draw term loan facility (the “Term Loan Facility” and together with the Revolving Facility, the “Credit Facility”), which matures on September 15, 2028. The proceeds of the Revolving Facility can be used to finance working capital, for general corporate purposes and any other purpose not prohibited by the Credit Agreement. On May 31, 2022, the Company received proceeds of $250.0 million from the Term Loan Facility and on June 1, 2022, used $170.2 million of the proceeds to settle the Company’s 2022 Notes, including interest. The remaining proceeds of $79.8 million may be used for general corporate purposes and any other purposes not prohibited by the Credit Agreement. The Credit Facility replaces the Company's $500.0 million five-year senior secured revolving credit facility (the “Amended Revolving Credit Facility”) which was entered into on December 10, 2019. As of September 30, 2022, the Company had $249.4 million of borrowings outstanding under the Term Loan Facility bearing interest at the LIBO option rate of 6.87% and had no borrowings under the Revolving Facility. As of December 31, 2021, the Company had no borrowings outstanding under the Credit Facility. As of September 30, 2022, borrowings of $2.5 million under the Term Loan Facility are recorded as current portion of long-term debt on the consolidated balance sheet.
The full amount of the Revolving Facility will be available on a same-day basis, with respect to base rate loans and upon advance notice with respect to LIBO rate loans, subject to customary terms and conditions. Under certain conditions, the Company will be permitted to add one or more term loans and/or increase revolving or term loan commitments under the Credit Facility by an amount set at the greater of $116.0 million and 100% of consolidated EBITDA (subject to adjustments for certain prepayments), plus an unlimited amount provided that the first lien net leverage ratio does not exceed 3.00 to 1.00. Additionally, up to $20.0 million of the Revolving Facility will be available for the issuance of letters of credit. At each of September 30, 2022 and December 31, 2021, the Company had outstanding one letter of credit issued in the amount of $0.2 million.
The Company’s borrowings under the Credit Facility bear interest at annual rates that, at the Company’s option, will be either:
a base rate generally defined as the sum of (i) the greater of (a) the prime rate of Truist Bank, (b) the federal funds effective rate plus 0.5% and (c) the LIBO rate (defined below) on a daily basis applicable for an interest period of one month plus 1.0% and (ii) an applicable percentage of 1.25% to 1.75% for loans under the Revolving Facility and 2.75% to 3.00% for loans under the Term Loan Facility, in each case, based on a first lien net leverage ratio; or
a LIBO rate generally defined as the sum of (i) the rate for Eurodollar deposits for the applicable interest period and (ii) an applicable percentage of 2.25% to 2.75% for loans under the Revolving Facility and 3.75% to 4.00% for loans under the Term Loan Facility, in each case, based on a first lien net leverage ratio.
Interest on the Company’s borrowings is payable quarterly in arrears for base rate loans and on the last day of each interest rate period (but not less often than three months) for LIBO rate loans.
The Credit Facility contains a restrictive financial covenant, which is set at a first lien net leverage ratio of 2.50 to 1.00, except that this may increase by 0.50:1.00 for the four fiscal quarters following a material acquisition. The financial covenant will be tested only if the loans and certain other obligations under the Revolving Facility exceed $20.0 million as of the last date of any fiscal quarter (starting with the fiscal quarter ending on December 31, 2021). The Credit Facility also includes a restricted payment covenant which is set at a total net leverage ratio of 4.0 to 1. In addition, the Credit Facility contains mandatory prepayment events, affirmative and negative covenants and events of default customary for a transaction of this type. The covenants, among other things, restrict additional indebtedness, liens, mergers or certain fundamental changes, asset dispositions, dividends and other restricted payments, transactions with affiliates, loans and investments and other matters customarily restricted in credit agreements of this type. The Company is required to make mandatory prepayments of the outstanding principal amount of loans under the Term Loan Facility with the net cash proceeds from certain disposition of assets and the receipt of insurance proceeds upon certain casualty and condemnation events, in each case, to the extent not reinvested within a specified time period, from excess cash flow beyond stated threshold amounts, and from the incurrence of certain indebtedness. The Company has the right to prepay its term loans under the Credit Agreement, in whole or in part, at any time without premium or penalty, subject to certain limitations and a 1.0% soft call premium applicable during the first six months following the closing date.
24


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company was in compliance with all covenants at September 30, 2022.
The Credit Facility requires the Company and certain of its subsidiaries to pledge as collateral, subject to certain customary exclusions, substantially all of its assets, including 100% of the equity in certain domestic subsidiaries and 65% of the voting equity, and 100% of the non-voting equity, in certain foreign subsidiaries. The obligations under the Credit Facility are unconditionally guaranteed on a senior basis by the Company's material domestic subsidiaries, which guaranties are secured by the collateral.
With respect to the Revolving Facility, the Company is required to pay an unused commitment fee quarterly in arrears on the difference between committed amounts and amounts actually borrowed under the Revolving Facility equal to an applicable percentage of 0.25% to 0.50% per annum based on a first lien net leverage ratio. The Company is required to pay a letter of credit participation fee and a letter of credit fronting fee quarterly in arrears. The letter of credit participation fee is based upon the aggregate face amount of outstanding letters of credit at an applicable percentage of 2.25% to 2.75% based on a first lien net leverage ratio. The letter of credit fronting fee is 0.125% per annum on the face amount of each letter of credit.
With respect to the Term Loan Facility, the Company was required to pay an unused commitment fee quarterly in arrears on the difference between committed amounts and amounts actually borrowed under the Term Loan Facility equal to an applicable LIBO rate plus an applicable percentage of 3.75% to 4.00% per annum based on a first lien net leverage ratio.
The Company recognized $1.1 million in additional interest expense in 2021 due to the write-off of certain unamortized debt issuance costs associated with the Amended Revolving Credit Facility. In addition to the remaining unamortized debt issuance costs associated with the Amended Revolving Credit Facility, debt issuance costs of $2.8 million related to the Revolving Facility are being amortized to interest expense over the life of the Revolving Facility. Debt issuance costs of $3.5 million related to the Term Loan Facility and the original issue discount of $2.5 million paid on the undrawn term loan facility were amortized to interest expense over the delayed draw access period, until such time that the loans thereunder are drawn. These deferred costs are included in prepaid and other current assets and other non-current assets in the Company's consolidated balance sheet.
In the first nine months of 2022, the Company recorded interest expense related to its Revolving Facility of $1.1 million which consisted of $0.4 million in unused commitment fees, and $0.7 million associated with the amortization of the debt issuance costs. In the first nine months of 2022, the Company recorded interest expense related to the Term Loan Facility of $13.5 million which consisted of $4.9 million associated with borrowings bearing interest at the LIBO rate, $5.1 million in unused commitment fees, $2.0 million associated with the amortization of the debt issuance costs, and $1.5 million associated with the amortization of the original issue discount.
In the first nine months of 2021, the Company recorded interest expense related to its revolving credit facilities of $3.0 million which consisted of $1.8 million in unused commitment fees, and $1.2 million associated with the amortization of the debt issuance costs. In the first nine months of 2021, the Company recorded interest expense related to the Term Loan Facility of $0.7 million which consisted of $0.4 million in unused commitment fees, $0.2 million associated with the amortization of the debt issuance costs, and $0.1 million associated with the amortization of the original issue discount.
NOTE 13—CONTINGENCIES
Overview
LendingTree is involved in legal proceedings on an ongoing basis. In assessing the materiality of a legal proceeding, the Company evaluates, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs (e.g., injunctive relief) that may require it to change its business practices in a manner that could have a material and adverse impact on the Company's business. With respect to the matters disclosed in this Note 13, unless otherwise indicated, the Company is unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.
As of September 30, 2022 and December 31, 2021, the Company had litigation settlement accruals of $0.1 million in continuing operations. The litigation settlement accruals relate to litigation matters that were either settled or a firm offer for settlement was extended, thereby establishing an accrual amount that is both probable and reasonably estimable.
25


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 14—FAIR VALUE MEASUREMENTS
Other than the convertible notes and warrants, as well as the equity interests, the carrying amounts of the Company's financial instruments are equal to fair value at September 30, 2022. See Note 12—Debt for additional information on the convertible notes and warrants, and see Note 7—Equity Investments for additional information on the equity interests in Stash and EarnUp.
In 2018, the Company acquired all of the outstanding equity interests of QuoteWizard.com, LLC (“QuoteWizard”). In the third quarter and first nine months of 2021, the company recorded $0.2 million and $8.2 million, respectively, of income for the change in fair value of the contingent consideration related to the QuoteWizard acquisition. The earnout was completed in 2021 and there were no earnout payments related to the acquisition in 2021.
Contingent consideration payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The changes in the fair value of the Company's Level 3 liabilities are as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
  2021 2021
Contingent consideration, beginning of period $ 196  $ 8,249 
Transfers into Level 3 —  — 
Transfers out of Level 3 —  — 
Total net losses (gains) included in earnings (realized and unrealized) (196) (8,249)
Purchases, sales and settlements:
Additions —  — 
Payments —  — 
Contingent consideration, end of period $   $  
NOTE 15—SEGMENT INFORMATION
The Company manages its business and reports its financial results through the following three operating and reportable segments: Home, Consumer and Insurance. Characteristics which were relied upon in making the determination of the reportable segments include the nature of the products, the organization's internal structure, and the information that is regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources.
The Home segment includes the following products: purchase mortgage, refinance mortgage, home equity loans and lines of credit, and reverse mortgage loans. The Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products such as credit repair and debt settlement. The Insurance segment consists of insurance quote products and sales of insurance policies in the agency businesses.
The following tables are a reconciliation of segment profit, which is the Company's primary segment profitability measure, to income before income taxes and discontinued operations. Segment marketing expense represents the portion of selling and
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses, that are directly attributable to the segments' products. This measure excludes overhead, fixed costs and personnel-related expenses.
Three Months Ended September 30, 2022
Home Consumer Insurance Other Total
(in thousands)
Revenue $ 64,927  $ 102,661  $ 70,231  $ 17  $ 237,836 
Segment marketing expense 40,810  56,868  47,663  228  145,569 
Segment profit (loss) 24,117  45,793  22,568  (211) 92,267 
Cost of revenue 14,105 
Brand and other marketing expense 31,306 
General and administrative expense 39,540 
Product development 14,043 
Depreciation 5,274 
Amortization of intangibles 6,582 
Restructuring and severance — 
Litigation settlements and contingencies (7)
Operating loss (18,576)
Interest expense, net (5,720)
Other income 1,523 
Loss before income taxes and discontinued operations $ (22,773)
Three Months Ended September 30, 2021
Home Consumer Insurance Other Total
(in thousands)
Revenue $ 112,422  $ 100,011  $ 84,837  $ 180  $ 297,450 
Segment marketing expense 70,905  55,295  58,227  83  184,510 
Segment profit 41,517  44,716  26,610  97  112,940 
Cost of revenue 15,020 
Brand and other marketing expense 21,965 
General and administrative expense 40,126 
Product development 13,384 
Depreciation 4,808 
Amortization of intangibles 10,345 
Change in fair value of contingent consideration (196)
Restructuring and severance 47 
Litigation settlements and contingencies 22 
Operating income 7,419 
Interest expense, net (11,826)
Loss before income taxes and discontinued operations $ (4,407)

27


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended September 30, 2022
Home Consumer Insurance Other Total
(in thousands)
Revenue $ 240,809  $ 309,873  $ 232,025  $ 230  $ 782,937 
Segment marketing expense 154,043  176,985  165,770  643  497,441 
Segment profit (loss) 86,766  132,888  66,255  (413) 285,496 
Cost of revenue 44,240 
Brand and other marketing expense 68,128 
General and administrative expense 115,802 
Product development 42,413 
Depreciation 15,024 
Amortization of intangibles 21,574 
Restructuring and severance 3,760 
Litigation settlements and contingencies (41)
Operating loss (25,404)
Interest expense, net (19,990)
Other income 1,806 
Loss before income taxes and discontinued operations $ (43,588)
Nine Months Ended September 30, 2021
Home Consumer Insurance Other Total
(in thousands)
Revenue $ 345,408  $ 233,594  $ 260,714  $ 498  $ 840,214 
Segment marketing expense 225,884  130,877  168,024  542  525,327 
Segment profit (loss) 119,524  102,717  92,690  (44) 314,887 
Cost of revenue 42,849 
Brand and other marketing expense 63,816 
General and administrative expense 114,926 
Product development 39,142 
Depreciation 12,969 
Amortization of intangibles 32,967 
Change in fair value of contingent consideration (8,249)
Restructuring and severance 47 
Litigation settlements and contingencies 360 
Operating income 16,060 
Interest expense, net (31,881)
Other income 40,072 
Income before income taxes and discontinued operations $ 24,251 
NOTE 16—DISCONTINUED OPERATIONS
The results of discontinued operations include litigation settlements and contingencies and legal fees associated with legal proceedings against LendingTree, Inc. or LendingTree, LLC that arose due to the LendingTree Loans business or the HLC bankruptcy filing.
28


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of net loss reported as discontinued operations in the accompanying consolidated statements of operations and comprehensive income are as follows (in thousands):
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2022 2021 2022 2021
Revenue $   $   $   $  
Loss before income taxes —  (103) (6) (4,717)
Income tax benefit (1) 49  1,201 
Net loss $ (1) $ (54) $ (4) $ (3,516)
NOTE 17—RESTRUCTURING ACTIVITIES
In the first quarter of 2022, the Company completed a workforce reduction of approximately 75 employees, and in the second quarter of 2022 completed a workforce reduction of approximately 25 employees. The Company incurred total expense of $3.8 million consisting of employee separation costs of $2.7 million and non-cash compensation expense of $1.1 million due to the accelerated vesting of certain equity awards. All employee separation costs are expected to be paid by the first quarter of 2023.
Accrued Balance at December 31, 2021 Income Statement Impact Payments Non-Cash Accrued Balance at September 30, 2022
2022 action
Employee separation payments $ —  $ 2,677  $ (2,518) $ —  $ 159 
Non-cash compensation —  1,083  —  (1,083) — 
$   $ 3,760  $ (2,518) $ (1,083) $ 159 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 
Cautionary Statement Regarding Forward-Looking Information
This report contains “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. These forward-looking statements include statements related to our anticipated financial performance, business prospects and strategy; anticipated trends and prospects in the various industries in which our businesses operate; new products, services and related strategies; and other similar matters. These forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. The use of words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans” and “believes,” among others, generally identifies forward-looking statements. 
Actual results could differ materially from those contained in the forward-looking statements. Factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include those matters discussed or referenced in Part II, Item 1A. Risk Factors included elsewhere in this quarterly report and Part I, Item 1A. Risk Factors of the 2021 Annual Report.
Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of LendingTree, Inc.'s management as of the date of this report. 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, except as required by law. 
Company Overview
LendingTree, Inc. is the parent of LT Intermediate Company, LLC, which holds all of the outstanding ownership interests of LendingTree, LLC, and LendingTree, LLC owns several companies.
We operate what we believe to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions. Our online consumer platform provides consumers with access to product offerings from our Network Partners, including mortgage loans, home equity loans, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings. In addition, we offer tools and resources, including free credit scores, that facilitate comparison shopping for loans, deposit products, insurance and other offerings. We seek to match consumers with multiple providers, who can offer them competing quotes for the product, or products, they are seeking. We also serve as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries we generate with these Network Partners.
Our My LendingTree platform offers a personalized comparison-shopping experience by providing free credit scores and credit score analysis. This platform enables us to monitor consumers' credit profiles and then identify and alert them to loans and other offerings on our marketplace that may be more favorable than the terms they may have at a given point in time. This is designed to provide consumers with measurable savings opportunities over their lifetimes.
We are focused on developing new product offerings and enhancements to improve the experiences that consumers and Network Partners have as they interact with us. By expanding our portfolio of financial services offerings, we are growing and diversifying our business and sources of revenue. We intend to capitalize on our expertise in performance marketing, product development and technology, and to leverage the widespread recognition of the LendingTree brand, to effect this strategy.
We believe the consumer and small business financial services industry is still in the early stages of a fundamental shift to online product offerings, similar to the shift that started in retail and travel many years ago and is now well established. We believe that like retail and travel, as consumers continue to move towards online shopping and transactions for financial services, suppliers will increasingly shift their product offerings and advertising budgets toward the online channel. We believe the strength of our brands and of our partner network place us in a strong position to continue to benefit from this market shift.
The LendingTree Loans business is presented as discontinued operations in the accompanying consolidated balance sheets, consolidated statements of operations and comprehensive income and consolidated statements of cash flows for all periods
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presented. Except for the discussion under the heading “Discontinued Operations,” the analysis within Management's Discussion and Analysis of Financial Condition and Results of Operations reflects our continuing operations.
Economic Conditions
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). The pandemic has significantly impacted the economic conditions in the U.S., as federal, state and local governments react to the public health crisis, creating significant uncertainties in the U.S. economy. The downstream impact of various lockdown orders and related economic pullback are affecting our business and marketplace participants to varying degrees. We are continuously monitoring the impacts of the current economic conditions related to the COVID-19 pandemic and the effect on our business, financial condition and results of operations.
Of our three reportable segments, the Consumer segment was most impacted as unsecured credit and the flow of capital in certain areas of the market have contracted. Most of our selling and marketing expenses are variable costs that we adjust dynamically in relation to revenue opportunities to profitably meet demand. Thus, as our revenue was negatively impacted during the COVID-19 pandemic, our marketing expenses generally decreased in line with revenue.
During the first nine months of 2022, the challenging interest rate environment combined with annual inflation persistently running above 8% has presented additional challenges for many of our mortgage lending and insurance partners. We have seen the most significant impact in our Home segment as mortgage rates have nearly doubled over the first nine months of 2022, causing a sharp decline in refinance volumes and more recent pressure on purchase activity. Although our Insurance segment continues to rebound from the trough in the fourth quarter of 2021, the recovery has been slower than expected as demand from our carrier partners remains volatile as premium increases continue to chase inflation.
Segment Reporting
We have three reportable segments: Home, Consumer, and Insurance.
Recent Business Acquisitions
On February 28, 2020, we acquired an equity interest in Stash for $80.0 million. On January 6, 2021 we acquired an additional equity interest for $1.2 million. Stash is a consumer investing and banking platform. Stash brings together banking, investing, and financial services education into one seamless experience offering a full suite of personal investment accounts, traditional and Roth IRAs, custodial investment accounts, and banking services, including checking accounts and debit cards with a Stock-Back® rewards program. In the fourth quarter of 2021, we sold a portion of our investment in Stash for $46.3 million, realizing a gain on the sale of $27.9 million.
In January 2022, the Company acquired an equity interest in EarnUp for $15.0 million. EarnUp is a consumer-first mortgage payment platform that intelligently automates loan payment scheduling and helps consumers better manage their money and improve their financial well-being. See Note 7—Equity Investments for additional information on the equity interest in EarnUp.
North Carolina Office Properties
Our new corporate office is located on approximately 176,000 square feet of office space in Charlotte, North Carolina under an approximate 15-year lease that contractually commenced in the second quarter of 2021.
With our expansion in North Carolina, in December 2016, we received a grant from the state that provides up to $4.9 million in reimbursements through 2029 beginning in 2017 for investing in real estate and infrastructure in addition to increasing jobs in North Carolina at specific targeted levels through 2021, and maintaining the jobs thereafter. Additionally, the city of Charlotte and the county of Mecklenburg provided a grant that will be paid over five years and is based on a percentage of new property tax we pay on the development of a corporate headquarters. In December 2018, we received an additional grant from the state that provides an aggregate amount up to $8.4 million in reimbursements through 2032 beginning in 2021 for increasing jobs in North Carolina at specific targeted levels through 2024, and maintaining the jobs thereafter.
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Recent Mortgage Interest Rate Trends
Interest rate and market risks can be substantial in the mortgage lead generation business. Short-term fluctuations in mortgage interest rates primarily affect consumer demand for mortgage refinancings, while long-term fluctuations in mortgage interest rates, coupled with the U.S. real estate market, affect consumer demand for new mortgages. Consumer demand, in turn, affects lender demand for mortgage leads from third-party sources, as well as our own ability to attract online consumers to our website.
Typically, when interest rates decline, we see increased consumer demand for mortgage refinancing, which in turn leads to increased traffic to our website and decreased selling and marketing efforts associated with that traffic. At the same time, lender demand for leads from third-party sources typically decreases, as there are more consumers in the marketplace seeking refinancings and, accordingly, lenders receive more organic mortgage lead volume. Due to lower lender demand, our revenue earned per consumer typically decreases, but with correspondingly lower selling and marketing costs.
Conversely, when interest rates increase, we typically see decreased consumer demand for mortgage refinancing, leading to decreased traffic to our website and higher associated selling and marketing efforts associated with that traffic. At the same time, lender demand for leads from third-party sources typically increases, as there are fewer consumers in the marketplace and, accordingly, the supply of organic mortgage lead volume decreases. Due to high lender demand, we typically see an increase in the amount lenders will pay per matched lead, which often leads to higher revenue earned per consumer. However, increases in the amount lenders will pay per matched lead in this situation is limited by the overall cost models of our lenders, and our revenue earned per consumer can be adversely affected by the overall reduced demand for refinancing in a rising rate environment.
We dynamically adjust selling and marketing expenditures in all interest rate environments to optimize our results against these variables.
According to Freddie Mac, 30-year mortgage interest rates increased from a monthly average of 3.10% in December 2021 to a monthly average of 6.11% in September 2022. On a quarterly basis, 30-year mortgage interest rates in the third quarter of 2022 averaged 5.58%, compared to 2.87% in the third quarter of 2021 and 3.08% in the fourth quarter of 2021.
tree-20220930_g2.jpg
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Typically, as mortgage interest rates rise, there are fewer consumers in the marketplace seeking refinancings and, accordingly, the mix of mortgage origination dollars will move toward purchase mortgages. According to Mortgage Bankers Association (“MBA”) data, total refinance origination dollars decreased to 19% of total mortgage origination dollars in the third quarter of 2022 compared to 53% in the fourth quarter of 2021. In the third quarter of 2022, total refinance origination dollars decreased 82% from the fourth quarter of 2021 and 84% from the third quarter of 2021. Industry-wide mortgage origination dollars in the third quarter of 2022 decreased 52% from the fourth quarter of 2021 and 55% from third quarter of 2021.
In October 2022, the MBA projected 30-year mortgage interest rates to increase during 2022, to an average 6.7% for the year. According to MBA projections, the mix of mortgage origination dollars is expected to move back towards purchase mortgages with the refinance share representing approximately 30% for 2022.
The U.S. Real Estate Market
The health of the U.S. real estate market and interest rate levels are the primary drivers of consumer demand for new mortgages. Consumer demand, in turn, affects lender demand for purchase mortgage leads from third-party sources. Typically, a strong real estate market will lead to reduced lender demand for leads, as there are more consumers in the marketplace seeking financing and, accordingly, lenders receive more organic lead volume. Conversely, a weaker real estate market will typically lead to an increase in lender demand, as there are fewer consumers in the marketplace seeking mortgages. 
According to Fannie Mae data, existing-home sales decreased 24% in the third quarter of 2022 compared to the fourth quarter of 2021, and 22% compared to the third quarter of 2021. Fannie Mae predicts an overall decrease in existing-home sales of approximately 18% in 2022 compared to 2021.
MyLendingTree
We consider certain metrics related to MyLendingTree set forth below to help us evaluate our business and growth trends and assess operational efficiencies. The calculation of the metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.
We continued to grow our user base and added 0.8 million new users in the third quarter of 2022, bringing cumulative sign-ups to 23.9 million at September 30, 2022. We attribute $29 million of revenue in the third quarter of 2022 to registered MyLendingTree members across the LendingTree platform.
Our focus on improving the MyLendingTree experience for consumers remains a top priority. Becoming an integrated digital advisor will greatly improve the consumer experience, which we expect to result in higher levels of engagement improved membership growth rates, and ultimately stronger financial results.
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Results of Operations for the Three and Nine Months ended September 30, 2022 and 2021
  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 $
Change
%
Change
2022 2021 $
Change
%
Change
  (Dollars in thousands)
Home $ 64,927  $ 112,422  $ (47,495) (42) % $ 240,809  $ 345,408  $ (104,599) (30) %
Consumer 102,661  100,011  2,650  % 309,873  233,594  76,279  33  %
Insurance 70,231  84,837  (14,606) (17) % 232,025  260,714  (28,689) (11) %
Other 17  180  (163) (91) % 230  498  (268) (54) %
Revenue 237,836  297,450  (59,614) (20) % 782,937  840,214  (57,277) (7) %
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)
14,105  15,020  (915) (6) % 44,240  42,849  1,391  %
Selling and marketing expense 176,875  206,475  (29,600) (14) % 565,569  589,143  (23,574) (4) %
General and administrative expense 39,540  40,126  (586) (1) % 115,802  114,926  876  %
Product development 14,043  13,384  659  % 42,413  39,142  3,271  %
Depreciation 5,274  4,808  466  10  % 15,024  12,969  2,055  16  %
Amortization of intangibles 6,582  10,345  (3,763) (36) % 21,574  32,967  (11,393) (35) %
Change in fair value of contingent consideration —  (196) 196  100  % —  (8,249) 8,249  100  %
Restructuring and severance —  47  (47) (100) % 3,760  47  3,713  7,900  %
Litigation settlements and contingencies (7) 22  (29) (132) % (41) 360  (401) (111) %
Total costs and expenses 256,412  290,031  (33,619) (12) % 808,341  824,154  (15,813) (2) %
Operating (loss) income (18,576) 7,419  (25,995) (350) % (25,404) 16,060  (41,464) (258) %
Other (expense) income, net:
Interest expense, net (5,720) (11,826) (6,106) (52) % (19,990) (31,881) (11,891) (37) %
Other income 1,523  —  1,523  —  % 1,806  40,072  (38,266) (95) %
(Loss) income before income taxes (22,773) (4,407) (18,366) (417) % (43,588) 24,251  (67,839) (280) %
Income tax (expense) benefit (135,910) (135,911) —  % (133,956) 455  (134,411) —  %
Net (loss) income from continuing operations (158,683) (4,406) (154,277) (3,502) % (177,544) 24,706  (202,250) (819) %
Loss from discontinued operations, net of tax (1) (54) (53) (98) % (4)