What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-04 compared with 2020-05-05 · 118 added, 73 removed, 200 unchanged (49% of the section changed)

27 unchanged sentences

This is designed to provide consumers with measurable savings opportunities over their lifetimes.

Three Months Ended June 30,

My LendingTree

Cumulative Sign-ups as of quarter-end (in millions)

Revenue Contribution (in thousands)

% of total revenue

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.

12 unchanged sentences

Of our three reportable segments, the Consumer segment has been and is expected to be most impacted as unsecured credit and the flow of capital in certain areas of the market have contracted.

Within our Consumer segment, each of credit card, personal loan, and small business is anticipated to see reductions of as much as 60-80% in near-term lender demand for our services reflecting those lenders' uncertainty over the length and depth of the economic recession.

The impact to our Home and Insurance segments is anticipated to be much less substantial.

Within our Consumer segment we have seen reductions of over 70% in near-term lender demand for our services reflecting those lenders' uncertainty over the length and depth of the economic recession.

The impact to our Home and Insurance segments has been and is anticipated to be much less substantial.

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 is negatively impacted during the recession, we anticipate our marketing expenses will generally decrease in line with revenue.

Thus, as our revenue is negatively impacted during the recession, we anticipate our marketing expenses will continue to generally decrease in line with revenue.

Segment Reporting

32 unchanged sentences

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 declined during 2020 to a monthly average of 3.45% in March 2020.

On a quarterly basis, 30-year mortgage interest rates in the first quarter of 2020 averaged 3.51% , compared to 4.37% in the first quarter of 2019 and 3.70% in the fourth quarter of 2019.

According to Freddie Mac, 30-year mortgage interest rates declined during 2020 to a monthly average of 3.16% in June 2020.

On a quarterly basis, 30-year mortgage interest rates in the second quarter of 2020 averaged 3.23% , compared to 4.00% in the second quarter of 2019 and 3.51% in the first quarter of 2020.

Typically, as mortgage interest rates decline, there are more consumers in the marketplace seeking refinancings and, accordingly, the mix of mortgage origination dollars will move towards refinance mortgages.

According to Mortgage Bankers Association ("MBA") data, total refinance origination dollars remained relatively consistent at 54% of total mortgage origination dollars in the first quarter of 2020 compared to 55% in the fourth quarter of 2019.

In the first quarter of 2020 , total refinance origination dollars increased 215% from the first quarter of 2019 and decreased 20% from the fourth quarter of 2019.

In April 2020, the MBA projected 30-year mortgage interest rates to remain relatively consistent through the end of the year.

According to Mortgage Bankers Association ("MBA") data, total refinance origination dollars increased to 63% of total mortgage origination dollars in the second quarter of 2020 compared to 54% in the first quarter of 2020.

In the second quarter of 2020 , total refinance origination dollars increased 297% to $580 million from the second quarter of 2019 and 90% from the first quarter of 2020.

Industry-wide mortgage origination volume in the second quarter of 2020 was up 85% from the second quarter of 2019.

In July 2020, the MBA projected 30-year mortgage interest rates to remain relatively consistent through the end of the year.

According to MBA projections, the refinance share of total mortgage origination dollars is projected to represent approximately 54% for 2020.

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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 the National Association of Realtors ("NAR"), the COVID-19 pandemic contributed to a slowdown in existing-home sales at the end of the first quarter of 2020.

Existing-home sales increased minimally in the first quarter of 2020 over the fourth quarter of 2019, but still experienced a 5% increase over the first quarter of 2019.

The NAR expects continued temporary interruptions to existing-home sales in the following months, and predicts an overall decrease of 13.5% in 2020 compared to 2019.

Results of Operations for the Three Months ended March 31, 2020 and 2019

Three Months Ended March 31,

According to the National Association of Realtors ("NAR"), existing-home sales rebounded at the end of the second quarter of 2020 after three straight months of sales decline caused by the ongoing COVID-19 pandemic.

Existing-home sales decreased 21% in the second quarter of 2020 compared to the first quarter of 2020, and decreased 18% compared to the second quarter of 2019.

The NAR expects a continued increase in existing-home sales as long as mortgage rates remain low and job gains continue, but predicts an overall decrease of 3% in 2020 compared to 2019.

Results of Operations for the Three and Six Months ended June 30, 2020 and 2019

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

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Total costs and expenses

Operating income (loss)

Operating (loss) income

Other (expense) income, net:

Interest expense, net

Income (loss) before income taxes

(Loss) income before income taxes

Income tax benefit

Net income from continuing operations

Net (loss) income from continuing operations

Loss from discontinued operations, net of tax

Net income (loss) and comprehensive income (loss)

Revenue increased in the first quarter of 2020 compared to the first quarter of 2019 due to increases in our Home and Insurance segments, partially offset by a decrease in our Other category.

Our Home segment includes the following products:

purchase mortgage, refinance mortgage, home equity loans and lines of credit, reverse mortgage loans, and real estate.

Revenue from our Home segment increased $15.7 million in the first quarter of 2020 from the first quarter of 2019 , or 25% , primarily due to an increase in revenue from our refinance mortgage product, partially offset by decreases in our purchase mortgage and home equity loans and lines of credit products.

Revenue from our refinance mortgage product increased $25.9 million in the first quarter of 2020 compared to the first quarter of 2019 primarily due to an increase in the number of consumers completing request forms resulting from increased refinancing activity in a declining interest rate environment, partially offset by a decrease in revenue earned per consumer.

Revenue from our purchase mortgage and home equity loans and lines of credit products decreased $4.9 million and $4.6 million, respectively, in the first quarter of 2020 from the first quarter of 2019 , due to decreases in the number of consumers completing request forms as well as a decrease in revenue earned per consumer.

Revenue from our Insurance segment increased $15.6 million to $82.7 million in the first quarter of 2020 from $67.1 million in the first quarter of 2019 , or 23% , due to increases in the number of consumers seeking insurance coverage, partially offset by a decrease in revenue earned per consumer.

Net (loss) income and comprehensive (loss) income

Revenue decreased in the second quarter and first six months of 2020 compared to the second quarter and first six months of 2019 due to decreases in our Consumer segment and Other category, partially offset by increases in our Home and Insurance segments.

Our Consumer segment includes the following products:

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Many of our Consumer segment products are not individually significant to revenue.

Revenue from our Consumer segment remained relatively consistent in the first quarter of 2020 from the first quarter of 2019, primarily due to decreases in our credit cards, personal loans and student loans products, partially offset by increases in our small business loans and deposit accounts products.

Revenue from our credit cards product decreased $2.9 million to $51.6 million in the first quarter of 2020 from $54.5 million in the first quarter of 2019 , or 5% , due to decreases in the number of approvals and a decrease in revenue earned per approval and the impact of the economic conditions primarily related to the COVID-19 pandemic in late March 2020.

Revenue from our personal loans product decreased $1.0 million to $31.5 million in the first quarter of 2020 from $32.5 million in the first quarter of 2019 , or 3% , primarily due to a decrease in revenue earned per consumer partially offset by an increase in the number of consumers completing request forms and the impact of the economic conditions related to the COVID-19 pandemic in late March 2020.

Revenue from our Consumer segment decreased in the second quarter and first six months of 2020 from the second quarter and first six months of 2019 , primarily due to decreases in our credit cards, personal loans, small business loans and student loans products.

Revenue from our credit cards product decreased $48.8 million to $7.2 million in the second quarter of 2020 from $56.0 million in the second quarter of 2019 , or 87% , and decreased $51.8 million to $58.8 million in the first six months of 2020 from $110.6 million in the first six months of 2019 , or 47%, primarily due to the impact of economic conditions related to the COVID-19 pandemic that caused a decrease in the number of approvals and a decrease in revenue earned per approval.

Revenue from our personal loans product decreased $32.3 million to $8.8 million in the second quarter of 2020 from $41.1 million in the second quarter of 2019 , or 79% , and decreased $33.3 million to $40.3 million in the first six months of 2020 from $73.6 million in the first six months of 2019 , or 45%, primarily due to the impact of economic conditions related to the COVID-19 pandemic that caused a contraction in the flow of capital and a decrease in revenue earned per consumer.

For the periods presented, no other products in our Consumer segment represented more than 10% of revenue;

however, certain other Consumer products experienced notable changes.

Revenue from our student loans product decreased $3.3 million in the first quarter of 2020 compared to the first quarter of 2019 due to a decrease in the number of consumers on our marketplace seeking student loans.

Revenue from our small business loans product increased $4.4 million in the first quarter of 2020 compared to the first quarter of 2019 due to increases in the number of consumers seeking business loans and an increase in revenue earned per consumer.

Revenue from our deposit accounts product increased by $1.7 million in the first quarter of 2020 compared to the first quarter of 2019 due to increased Network Partner demand.

however, certain other Consumer products experienced notable changes primarily due to the impact of economic conditions related to the COVID-19 pandemic.

Revenue from our small business loans product decreased $8.5 million in the second quarter of 2020 compared to the second quarter of 2019 and decreased $4.1 million in the first six months of 2020 compared to the first six months of 2019 , due to a contraction in the flow of capital and a decrease in revenue earned per consumer.

Revenue from our student loans product decreased $2.3 million in the second quarter of 2020 compared to the second quarter of 2019 and decreased $5.6 million in the first six months of 2020 compared to the first six months of 2019 , due to a decrease in the number of consumers on our marketplace seeking student loans.

The ongoing COVID-19 pandemic is anticipated to significantly impact our Consumer product revenues in the near-term due to the significant industry-wide contraction in the availability of capital for products in the Consumer segment, specifically credit cards, small business loans and personal loans, as discussed above.

Our Other category includes revenue from the resale of online advertising space to third parties and revenue from home improvement referrals.

Revenue in the Other category decreased $9.9 million in the first quarter of 2020 compared to the first quarter of 2019 , as we ceased offering home improvement referrals during the first quarter of 2019 and ceased reselling online advertising space during the first quarter of 2020.

Our Home segment includes the following products:

purchase mortgage, refinance mortgage, home equity loans and lines of credit, reverse mortgage loans, and real estate.

Revenue from our Home segment increased $2.4 million in the second quarter of 2020 from the second quarter of 2019 , or 3% , and increased $18.1 million in the first six months of 2020 from the first six months of 2019 , or 13% , primarily due to an increase in revenue from our refinance mortgage product, partially offset by decreases in our purchase mortgage and home equity loans and lines of credit products.

Revenue from our refinance mortgage product increased $22.3 million in the second quarter of 2020 compared to the second quarter of 2019 , and increased $48.2 million in the first six months of 2020 compared to the first six months of 2019 , primarily due to an increase in the number of consumers completing request forms resulting from increased refinancing activity in a declining interest rate environment, partially offset by a decrease in revenue earned per consumer.

Revenue from our purchase mortgage product decreased $10.3 million in the second quarter of 2020 compared to the second quarter of 2019 and decreased $15.2 million in the first six months of 2020 compared to the first six months of 2019 .

Revenue from our home equity loans and lines of credit product decreased $8.6 million in the second quarter of 2020 compared to the second quarter of 2019 and decreased $13.2 million in the first six months of 2020 compared to the first six months of 2019 .

Revenue from our purchase mortgage and home equity loans and lines of credit products decreased due to a shift in lender focus toward refinance products as well as decreases in revenue earned per consumer.

Revenue from our Insurance segment increased $1.0 million to $72.9 million in the second quarter of 2020 from $71.9 million in the second quarter of 2019 , or 1% , and increased $16.6 million to $155.7 million in the first six months of 2020 from $139.0 million in the first six months of 2019 , or 12% , due to increases in the number of consumers seeking insurance coverage, partially offset by a decrease in revenue earned per consumer.

Our Other category primarily includes revenue from the resale of online advertising space to third parties and revenue from home improvement referrals.

Revenue in the Other category decreased $5.6 million in the second quarter of 2020 compared to the second quarter of 2019 , and decreased $15.5 million in the first six months of 2020 compared to the first six months of 2019 , as we ceased offering home improvement referrals during the first quarter of 2019 and ceased reselling online advertising space during the first quarter of 2020.

Cost of revenue

Cost of revenue consists primarily of costs associated with compensation and other employee-related costs (including stock-based compensation) relating to internally-operated customer call centers, third-party customer call center fees, costs for online advertising resold to third parties, credit scoring fees, credit card fees, website network hosting and server fees.

Cost of revenue decreased in the first quarter of 2020 from the first quarter of 2019 , primarily due to a $6.2 million decrease for the cost of resold advertising space, partially offset by a $1.2 million increase in compensation and benefits as a result of increases in headcount.

Cost of revenue decreased in the second quarter of 2020 from the second quarter of 2019 , primarily due to a $5.1 million decrease for the cost of resold advertising space.

We ceased reselling online advertising space during the first quarter of 2020.

Cost of revenue as a percentage of revenue decreased to 5% in the first quarter of 2020 compared to 7% in the first quarter of 2019 due to the items above.

This was partially offset by a $1.1 million increase in website network hosting and server fees and a $0.7 million increase in compensation and benefits as a result of increases in headcount.

Cost of revenue decreased in the first six months of 2020 from the first six months of 2019 , primarily due to a $11.3 million decrease for the cost of resold advertising space, partially offset by increases in website network hosting and server fees, compensation and benefits, and credit card fees of $2.0 million, $1.8 million and $1.0 million, respectively.

Cost of revenue as a percentage of revenue increased to 7% in the second quarter of 2020 compared to 6% in the second quarter of 2019 , and remained consistent at 6% in each of the first six months of 2020 and 2019.

Selling and marketing expense

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Advertising production costs are expensed in the period the related ad is first run.

The increase in selling and marketing expense in the first quarter of 2020 compared to the first quarter of 2019 was primarily due to increases in advertising and promotional expense of $21.2 million , as discussed below.

Selling and marketing expense decreased in the second quarter and first six months of 2020 compared to the second quarter and first six months of 2019 primarily due to decreases in advertising and promotional expense of $77.7 million and $56.5 million , respectively, as discussed below.

Advertising and promotional expense is the largest component of selling and marketing expense, and is comprised of the following:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

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This relationship exists for our Home, Consumer and Insurance segments.

We increased our advertising expenditures in the first quarter of 2020 compared to the first quarter of 2019 in order to generate additional consumer inquiries to meet the increased demand of Network Partners on our marketplace.

We will continue to adjust selling and marketing expenditures dynamically in relation to anticipated revenue opportunities and in response to changes in Network Partner demand as a result of the ongoing COVID-19 pandemic discussed above.

We decreased our advertising expenditures in the second quarter and first six months of 2020 compared to the second quarter and first six months of 2019 in response to changes in Network Partner demand on our marketplace as a result of the ongoing COVID-19 pandemic discussed above.

We will continue to adjust selling and marketing expenditures dynamically in relation to this and in response to anticipated revenue opportunities.

General and administrative expense

General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in finance, legal, tax, corporate information technology, human resources and executive management functions, as well as facilities and infrastructure costs and fees for professional services.

General and administrative expense increased in the first quarter of 2020 from the first quarter of 2019 , primarily due to increases in professional fees of $2.5 million, technology expense of $1.1 million and facilities expense of $0.7 million.

The increase in general and administrative expense was partially offset by a decrease in compensation and benefits of $2.8 million, primarily due to a decrease in bonus and certain equity awards that vested in 2019.

General and administrative expense as a percentage of revenue decreased to 11% in the first quarter of 2020 compared to 12% in the first quarter of 2019 .

General and administrative expense remained relatively consistent in the second quarter and first six months of 2020 compared to the second quarter and first six months of 2019 .

The second quarter and first six months of 2019 benefited from a $2.7 million gain on the sale of two office buildings.

Additionally, travel and entertainment expense decreased $1.5 million in the second quarter of 2020 compared to the second quarter of 2019.

General and administrative expenses decreased in the first six months of 2020 compared to the first six months of 2019 due to decreases in compensation and benefits, travel and entertainment expense and other taxes of $3.4 million, $1.8 million and $1.4 million, respectively.

In addition to the change in general and administrative expenses due to the gain on the sale of the office buildings in 2019, general and administrative expenses increased in the first six months of 2020 compared to the first six months of 2019 due to increases in professional fees, technology expense and facilities expense of $3.2 million, $1.6 million and $1.2 million, respectively.

General and administrative expense as a percentage of revenue increased to 16% and 13% in the second quarter and first six months of 2020 , respectively, compared to 10% and 11% in the second quarter and first six months of 2019 , respectively.

Product development

Product development expense consists primarily of compensation and other employee-related costs (including stock-based compensation) and third-party labor costs that are not capitalized, for employees and consultants engaged in the design, development, testing and enhancement of technology.

Product development expense increased in the first quarter of 2020 compared to the first quarter of 2019 as we continued to invest in internal development of new and enhanced features, functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners.

The increase in depreciation expense in the first quarter of 2020 compared to the first quarter of 2019 was primarily the result of higher investment in internally developed software in recent years, to support the growth of our business.

Product development expense increased in the second quarter and first six months of 2020 compared to the second quarter and first six months of 2019 as we continued to invest in internal development of new and enhanced features, functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners.

The increase in depreciation expense in the second quarter and first six months of 2020 compared to the second quarter and first six months of 2019 was primarily the result of higher investment in internally developed software in recent years, to support the growth of our business.

Contingent consideration

During the first quarter of 2020 , we recorded an aggregate gain of $8.1 million due to adjustments in the estimated fair value of the earnout payments related to our recent acquisitions.

For the first quarter of 2020 , the gain related to the QuoteWizard acquisition was $8.3 million , partially offset by contingent consideration expense for the Ovation acquisition of $0.1 million .

During the first quarter of 2019 , we recorded aggregate contingent consideration expense of $14.6 million due to adjustments in the estimated fair value of the earnout payments related to our recent acquisitions.

For the first quarter of 2019, the contingent consideration expense for the QuoteWizard and SnapCap acquisitions was $14.4 million and $1.6 million, respectively.

This was partially offset by contingent consideration gains recorded for the DepositAccounts and Ovation acquisitions of $0.7 million and $0.6 million, respectively.

During the second quarter and first six months of 2020 , we recorded aggregate contingent consideration expense of $9.2 million and $1.1 million , respectively, due to adjustments in the estimated fair value of the earnout payments related to our recent acquisitions.

For the second quarter of 2020 , the contingent consideration expense for the QuoteWizard, Ovation and SnapCap acquisitions was $8.1 million , $1.0 million and $0.1 million , respectively.

For the first six months of 2020 , the contingent consideration expense for the Ovation and SnapCap acquisitions was $1.2 million and $0.1 million , respectively, partially offset by a contingent consideration gain for the QuoteWizard acquisition of $0.2 million .

During the second quarter and first six months of 2019, we recorded aggregate contingent consideration expense of $2.8 million and $17.4 million, respectively, due to adjustments in the estimated fair value of the earnout payments related to our recent acquisitions.

For the second quarter of 2019, the contingent consideration expense for the QuoteWizard and Ovation acquisitions was $2.5 million and $0.6 million, respectively.

This was partially offset by contingent consideration gains recorded for the SnapCap and DepositAccounts acquisitions of $0.1 million and $0.2 million, respectively.

For the first six months of 2019, the contingent consideration expense for the QuoteWizard and SnapCap acquisitions was $16.9 million and $1.5 million, respectively.

This was partially offset by a contingent consideration gain recorded for the DepositAccounts acquisition of $0.9 million.

Income tax expense

For the first quarter of 2020 , the effective tax rate varied from the federal statutory rate of 21% in part due to a tax benefit of $1.1 million recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes, as well as a tax benefit of $6.1 million for the impact of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, as described below.

For the second quarter and first six months of 2020 , the effective tax rate varied from the federal statutory rate of 21% in part due to a tax benefit of $0.8 million and $1.8 million , respectively, recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

The effective tax rate for the first six months of 2020 was also impacted by a tax benefit of $6.1 million for the impact of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, as described below.

On March 27, 2020, President Trump signed into law the CARES Act.

This legislation is an economic relief package in response to the public health and economic impacts of COVID-19 and includes various provisions that impact us, including, but not limited to, modifications for net operating losses, accelerated timeframe for refunds associated with prior minimum taxes and modifications of the limitation on business interest.

We revalued deferred tax assets related to net operating losses in light of the changes in the CARES Act, and recorded a net tax benefit of $6.1 million during the first quarter of 2020.

We revalued deferred tax assets related to net operating losses in light of the changes in the CARES Act, and recorded a net tax benefit of $6.1 million during the first six months of 2020 .

These deferred tax assets are being revalued, as they will be carried back to 2016 and 2017, which are tax periods prior to the Tax Cuts and Jobs Act ("TCJA") when the federal statutory tax rate was 35% versus the 21% federal statutory tax rate in effect after the enactment of the TCJA.

For the first quarter of 2019 , the effective tax rate varied from the federal statutory rate of 21% primarily due to a tax benefit of $6.0 million recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

For the second quarter and first six months of 2019 , the effective tax rate varied from the federal statutory rate of 21% primarily due to a tax benefit of $7.7 million and $13.7 million , respectively, recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

Discontinued operations

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Segment Profit

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

3 unchanged sentences

See Note 17 —Segment Information in the notes to the consolidated financial statements for additional information on segments and a reconciliation of segment profit to pre-tax income from continuing operations.

Home segment profit and Insurance segment profit increased $12.0 million and $2.7 million , respectively, in the first quarter of 2020 from the first quarter of 2019 , primarily due to an increase in revenue, partially offset by corresponding increases in selling and marketing expense.

Consumer segment profit decreased $10.9 million in the first quarter of 2020 from the first quarter of 2019 , primarily due to a decrease in revenue.

Additionally, selling and marketing expenses in our Consumer segment increased as a percentage of revenue in the first quarter of 2020 compared to the first quarter of 2019 .

Consumer segment profit decreased $31.4 million in the second quarter of 2020 from the second quarter of 2019 , and decreased $42.2 million in the first six months of 2020 from the first six months of 2019 , primarily due to decreases in revenue, partially offset by corresponding decreases in selling and marketing expense.

The biggest challenge facing many of our consumer Network Partners, and in turn our own business, is a lack of visibility into the true health of consumer balance sheets.

Credit performance across consumer lenders of varying shapes and sizes has seemingly fared better than expected, and unemployment has begun to improve after peaking at nearly 15% in April.

But questions remain as to the impact on these trends from government stimulus, forbearance and deferment programs offered by the lenders, and ultimately, our country's ability to re-open safely.

Credit card issuers and personal loan lenders appetite for risk is temporarily diminished until there is further evidence of economic stabilization.

We do believe the revenue opportunity in our Consumer segment has hit the trough as many of our consumer Network Partners who initially paused entirely are beginning to return to the platform.

In most cases, those consumer Network Partners are returning to reach narrower bands of consumers, with much stricter credit standards, smaller budgets, and less aggressive bids.

Home segment profit increased $14.5 million in the second quarter of 2020 from the second quarter of 2019 , and increased $26.5 million in the first six months of 2020 from the first six months of 2019 , due to increases in revenue and decreases in selling and marketing expense.

Historically, as explained, in periods similar to those experienced in the second quarter of 2020 with sharp declines in interest rates and increased consumer interest, our mortgage Network Partners become inundated with more organic volume than they can process and their demand for our services diminishes for a period of time.

While that dynamic has remained very relevant for us in the second quarter, our improved ability to withstand it is evident.

We've developed differentiated offerings and price points for mortgage Network Partners to better serve a wider array of their needs.

Our Home segment has benefited from a decrease in unit marketing costs during the COVID-19 pandemic.

With heightened interest in refinancing and home-buying activity, we managed to meet the demand of our Network Partners in an optimized and cost-efficient way.

We expect Home unit marketing costs in the third quarter of 2020 to return to levels experienced prior to the second quarter of 2020.

Insurance segment profit increased $1.3 million in the second quarter of 2020 from the second quarter of 2019 due to an increase in revenue and a decrease in selling and marketing expense, and increased $4.0 million in the first six months of 2020 from the first six months of 2019 due to an increase in revenue, partially offset by corresponding increases in selling and marketing expense.

At the end of the first quarter of 2020, we noted a slowdown in consumers searching for auto insurance which we attributed to slumping car sales amid the pandemic.

While those trends have steadily begun to recover since early April, reduced search engine traffic has continued to present a modest headwind to achieving the levels of growth in the Insurance segment that we've historically experienced and we have taken on several initiatives to combat these trends.

We've seen demonstrable traffic growth through several non-search channels and the agent portion of the Insurance segment is achieving record-highs as agents find increasing value in our services in a remote work environment.

Adjusted EBITDA

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Three Months Ended

Net income from continuing operations

Six Months Ended

Net (loss) income from continuing operations

Adjustments to reconcile to Adjusted EBITDA:

Amortization of intangibles

Loss on impairments and disposal of assets

Loss (gain) on impairments and disposal of assets

Non-cash compensation expense

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Financial Position, Liquidity and Capital Resources

As of March 31, 2020 , we had $51.2 million of cash and cash equivalents, compared to $60.2 million of cash and cash equivalents as of December 31, 2019 .

In the first quarter of 2020, we acquired an equity interest in Stash for $80.0 million .

As of June 30, 2020 , we had $101.8 million of cash and cash equivalents, compared to $60.2 million of cash and cash equivalents as of December 31, 2019 .

In February 2020, we acquired an equity interest in Stash for $80.0 million .

The investment was funded through $80.0 million drawn on our Amended Revolving Credit Facility.

See Note 7 —Equity Investment to the consolidated financial statements included elsewhere in this report for more information.

During the first quarter of 2020 , we paid down $25.0 million on our Amended Revolving Credit Facility.

During the first quarter of 2020 , we made a contingent consideration payment of $3.0 million related to the prior acquisition of SnapCap.

We could make additional potential contingent consideration payments of up to $1.0 million for DepositAccounts, $3.0 million for SnapCap, $4.4 million for Ovation, and $46.8 million for QuoteWizard.

During the first six months of 2020 , we paid down $25.0 million on our Amended Revolving Credit Facility.

We made net repayments of $130.0 million on our Amended Revolving Credit Facility in July 2020.

During the first six months of 2020 , we made two contingent consideration payments of $3.0 million each, related to the prior acquisition of SnapCap.

We could make additional potential contingent consideration payments of up to $4.4 million for Ovation and $46.8 million for QuoteWizard.

In July 2020, we made litigation settlement payments of $26.5 million to the ResCap Liquidating Trust and $36.0 million to the HLC bankruptcy Trustee for the matters noted in Note 18 —Discontinued Operations.

In July 2020, we issued $575.0 million of our 0.50% Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) for estimated net proceeds of approximately $559.8 million.

We used approximately $63.0 million of the net proceeds to enter into Convertible Note Hedge and Warrant transactions.

Further, we used approximately $234.0 million of the net proceeds to repurchase approximately $130.3 million principal amount of our 0.625% Convertible Senior Notes due June 1, 2022 (the “2022 Notes”).

To the extent of the repurchases of the 2022 Notes, we received approximately $15.6 million as a result of terminating a corresponding portion of the Convertible Note Hedge and Warrant transactions entered into on May 31, 2017.

See Note 19 —Subsequent Events for additional information.

We expect our cash and cash equivalents and cash flows from operations to be sufficient to fund our operating needs for the next twelve months and beyond.

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Borrowings under the Amended Revolving Credit Facility can be used to finance working capital needs, capital expenditures and general corporate purposes, including to finance permitted acquisitions.

As of May 5, 2020 , we have $130.0 million of borrowings and a $0.2 million letter of credit under the Amended Revolving Credit Facility.

The remaining borrowing capacity at May 5, 2020 is $369.8 million .

In July 2020, we executed a temporary amendment to the Amended Revolving Credit Facility to provide for certain covenant relief, primarily to facilitate the issuance of the 2025 Notes, the repurchase of a portion of the 2022 Notes, and to pay down existing borrowings under the credit facility.

As of August 4, 2020 , we have a $0.2 million letter of credit under the Amended Revolving Credit Facility.

The remaining borrowing capacity at August 4, 2020 is $499.8 million .

Cash Flows from Continuing Operations

Our cash flows attributable to continuing operations are as follows:

Three Months Ended

Six Months Ended

(in thousands)

1 unchanged sentence

Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Cash Flows from Operating Activities

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In addition, our uses of cash from operating activities include compensation and other employee-related costs, other general corporate expenditures, litigation settlements and contingencies, certain contingent consideration payments, and income taxes.

Net cash provided by operating activities attributable to continuing operations increased in the first quarter of 2020 from the first quarter of 2019 primarily due to an increase in revenue, generally offset by an increase in selling and marketing expense.

Additionally, there was a net increase in cash from changes in working capital primarily driven by changes in accounts receivable, partially offset by changes in accounts payable, accrued expenses and other current liabilities and income taxes receivable.

Net cash provided by operating activities attributable to continuing operations increased in the first six months of 2020 from the first six months of 2019 primarily due to changes in accounts receivable, partially offset by changes in accounts payable, accrued expenses and other current liabilities.

The first six months of 2020 also experienced a decrease in revenue, partially offset by a corresponding decrease in selling and marketing expense, compared to the first six months of 2019 .

Cash Flows from Investing Activities

Net cash used in investing activities attributable to continuing operations in the first quarter of 2020 of $84.2 million consisted of the purchase of an $80.0 million equity interest in Stash and capital expenditures of $4.2 million primarily related to internally developed software.

Net cash used in investing activities attributable to continuing operations in the first quarter of 2019 of $110.4 million consisted primarily of the acquisition of ValuePenguin for $105.4 million , net of cash acquired, and capital expenditures of $5.0 million primarily related to internally developed software.

Net cash used in investing activities attributable to continuing operations in the first six months of 2020 of $89.1 million consisted of the purchase of an $80.0 million equity interest in Stash and capital expenditures of $9.1 million primarily related to internally developed software.

Net cash used in investing activities attributable to continuing operations in the first six months of 2019 of $90.8 million consisted primarily of the acquisition of ValuePenguin for $105.6 million , net of cash acquired, and capital expenditures of $9.8

million primarily related to internally developed software.

This was partially offset by proceeds of $24.1 million on the sale of two office buildings, net of closing expenses.

Cash Flows from Financing Activities

Net cash provided by financing activities attributable to continuing operations in the first quarter of 2020 of $46.6 million consisted primarily of $55.0 million of net proceeds from our Amended Revolving Credit Facility, partially offset by $5.1 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options, and a $3.0 million contingent consideration payment for SnapCap.

Net cash provided by financing activities attributable to continuing operations in the first quarter of 2019 of $49.4 million consisted primarily of $60.0 million of net proceeds from our 2017 Revolving Credit Facility, partially offset by $4.0 million for the repurchase of our common stock, $3.6 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options, and a $3.0 million contingent consideration payment for SnapCap.

Net cash provided by financing activities attributable to continuing operations in the first six months of 2020 of $45.3 million consisted primarily of $55.0 million of net proceeds from our Amended Revolving Credit Facility, partially offset by $6.1 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options, and $3.3 million related to contingent consideration payments for SnapCap.

Net cash used in financing activities attributable to continuing operations in the first six months of 2019 of $24.7 million consisted primarily of $10.0 million of net repayments on our 2017 Revolving Credit Facility, $4.0 million for the repurchase of our common stock, $7.6 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options, and a $3.0 million contingent consideration payment for SnapCap.

Off-Balance Sheet Arrangements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis