What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-04 · 295 added, 186 removed, 725 unchanged (40% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands, except per share amounts)

12 unchanged sentences

(Loss) income before income taxes

Income tax benefit

Income tax benefit (expense)

Net (loss) income from continuing operations

Loss from discontinued operations, net of tax

Income (loss) from discontinued operations, net of tax

Net (loss) income and comprehensive (loss) income

1 unchanged sentence

(Loss) income per share from continuing operations:

Loss per share from discontinued operations:

Income (loss) per share from discontinued operations:

Net (loss) income per share:

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands, except par value and share amounts)

52 unchanged sentences

Balance as of June 30, 2020

Net loss and comprehensive loss

Non-cash compensation

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes

Issuance of 0.50% Convertible Senior Notes, net

Repurchase of 0.625% Convertible Senior Notes, net

Convertible note hedge transactions

Warrant transactions

Balance as of September 30, 2020

Treasury Stock

10 unchanged sentences

Balance as of June 30, 2019

Net income and comprehensive income

Non-cash compensation

Purchase of treasury stock

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes

Balance as of September 30, 2019

The accompanying notes to consolidated financial statements are an integral part of these statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Loss from discontinued operations, net of tax

Income from continuing operations

(Loss) income from continuing operations

Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations:

7 unchanged sentences

Amortization of convertible debt discount

Loss on extinguishment of debt

Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities

15 unchanged sentences

Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options

Contingent consideration payments

Net proceeds from (repayment of) revolving credit facility

Proceeds from the issuance of 0.50% Convertible Senior Notes

Repurchase of 0.625% Convertible Senior Notes

Payment for convertible note hedge on the 0.50% Convertible Senior Notes

Termination of convertible note hedge on the 0.625% Convertible Senior Notes

Proceeds from the sale of warrants related to the 0.50% Convertible Senior Notes

Termination of warrants related to the 0.625% Convertible Senior Notes

Net repayment of revolving credit facility

Payment of debt issuance costs

Contingent consideration payments

Purchase of treasury stock

30 unchanged sentences

Basis of Presentation

The accompanying unaudited interim consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 , 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.

The accompanying unaudited interim consolidated financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 , 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 six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 , or any other period.

The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 , or any other period.

The accompanying consolidated balance sheet as of December 31, 2019 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2019 (the " 2019 Annual Report").

21 unchanged sentences

assumptions related to the determination of stock-based compensation;

and the determination of the right-of-use assets and lease liabilities.

and the determination of right-of-use assets and lease liabilities.

The Company considered the impact of COVID-19 on the assumptions and estimates used when preparing its quarterly financial statements including, but not limited to, our allowance for doubtful accounts, valuation allowances, contract asset and contingent consideration.

3 unchanged sentences

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 June 30, 2020 , consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet.

Financial instruments, which potentially subject the Company to concentration of credit risk at September 30, 2020 , 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.

15 unchanged sentences

The expense related to these capitalized implementation costs are included within general and administrative expense on the consolidated statement of operations and comprehensive income.

The adoption of ASU 2018-15 did not have a material impact on the consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 .

The adoption of ASU 2018-15 did not have a material impact on the consolidated financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 .

In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds certain disclosure requirements in Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurement.

16 unchanged sentences

Recently Issued 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.

This ASU is effective for annual and interim reporting periods beginning after December 15, 2021.

Early adoption is permitted for fiscal years beginning after December 15, 2020, including adoption in interim periods.

An entity should adopt the guidance as of the beginning of its annual fiscal year.

An entity may adopt the amendments through either a modified retrospective method of transition or a fully retrospective method of transition.

The Company expects the amendments to impact its convertible senior notes and warrants issued, and is evaluating the impact this ASU will have on its consolidated financial statements and whether to early adopt.

In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes, and clarifies certain aspects of the current guidance to improve consistency among reporting entities.

3 unchanged sentences

Most amendments must be applied prospectively while others are to be applied on a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

The Company is evaluating the impact this ASU will have on its consolidated financial statements and whether to early adopt.

The Company is evaluating the impact this ASU will have on its consolidated financial statements and will adopt ASU 2019-12 in the first quarter of 2021.

NOTE 3 — REVENUE

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Personal loans

6 unchanged sentences

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.

Match fees and upfront fees for clicks and call transfers

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

3 unchanged sentences

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

subscription fees are derived from consumers in the Company's credit services product.

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.

8 unchanged sentences

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 $ 6.5 million at each of June 30, 2020 and December 31, 2019 .

The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers in the Company's Consumer business was $ 0.9 million and $ 0.6 million at June 30, 2020 and December 31, 2019 , respectively.

During the second quarter and first six months of 2020 , the Company recognized revenue of $ 0.1 million and $ 0.6 million , respectively, that was included in the contract liability balance at December 31, 2019 .

During the second quarter and first six months of 2019 , the Company recognized revenue of $ 0.1 million and $ 0.4 million , respectively, that was included in the contract liability balance at December 31, 2018 .

The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration was $ 6.1 million and $ 6.5 million at September 30, 2020 and December 31, 2019 , respectively.

The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers in the Company's Consumer business was $ 0.9 million and $ 0.6 million at September 30, 2020 and December 31, 2019 , respectively.

During the first nine months of 2020 , the Company recognized revenue of $ 0.6 million that was included in the contract liability balance at December 31, 2019 .

During the first nine months of 2019 , the Company recognized revenue of $ 0.4 million that was included in the contract liability balance at December 31, 2018 .

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 of $ 0.3 million and $ 0.5 million in the second quarters of 2020 and 2019 , respectively.

The Company recognized increases to such revenue from prior periods of $ 0.6 million and $ 0.9 million in the third quarters of 2020 and 2019 , respectively.

NOTE 4 — CASH AND RESTRICTED CASH

Total cash, cash equivalents, restricted cash and restricted cash equivalents consist of the following (in thousands) :

September 30,

Cash and cash equivalents

3 unchanged sentences

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.

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 June 30,

Six Months Ended

Three Months Ended September 30,

Nine Months Ended

September 30,

Balance, beginning of the period

5 unchanged sentences

The balance of goodwill and intangible assets, net is as follows (in thousands) :

September 30,

Accumulated impairment losses

3 unchanged sentences

Goodwill and Indefinite-Lived Intangible Assets

The Company's goodwill at each of June 30, 2020 and December 31, 2019 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.

The Company's goodwill at each of September 30, 2020 and December 31, 2019 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.

Intangible assets with indefinite lives relate to the Company's trademarks.

4 unchanged sentences

Website content

Balance at June 30, 2020

Balance at September 30, 2020

LENDINGTREE, INC.

5 unchanged sentences

Balance at December 31, 2019

Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of June 30, 2020 , future amortization is estimated to be as follows (in thousands) :

Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of September 30, 2020 , future amortization is estimated to be as follows (in thousands) :

Amortization Expense

12 unchanged sentences

The Stash equity securities will be carried at cost and subsequently marked to market upon observable market events with any gains or losses recorded in operating income in the consolidated statement of operations.

As of June 30, 2020 , there have been no observable market events that would result in upward or downward adjustments in the fair value and there have been no impairments to the original cost of $ 80.0 million .

As of September 30, 2020 , there have been no observable market events that would result in upward or downward adjustments in the fair value and there have been no impairments to the original cost of $ 80.0 million .

NOTE 8 — BUSINESS ACQUISITIONS

2 unchanged sentences

In 2017, the Company acquired certain assets of Snap Capital LLC, which does business under the name SnapCap (“SnapCap”) and all of the assets of Deposits Online, LLC, which does business under the name DepositAccounts.com (“DepositAccounts”).

The Company will make an earnout payment of $ 4.4 million based on the achievement of certain defined operating metrics for Ovation, and payments ranging from zero to $ 46.8 million based on the achievement of certain defined performance targets for QuoteWizard.

The Company will make earnout payments ranging from zero to $ 46.8 million based on the achievement of certain defined performance targets for QuoteWizard.

During 2020, the Company made the final earnout payments related to the achievement of certain defined earnings targets for SnapCap.

The Company made no earnout payments related to the DepositAccounts acquisition during 2020, and the earnout is complete.

In October 2020, the Company made the final earnout payment related to the achievement of certain defined operating metrics for Ovation.

LENDINGTREE, INC.

3 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

DepositAccounts

Total changes in fair value of contingent consideration

As of June 30, 2020 , the estimated fair value of the contingent consideration for the QuoteWizard acquisition totaled $ 24.2 million , of which $ 14.7 million is included in current contingent consideration and $ 9.5 million is included in non-current contingent consideration in the accompanying consolidated balance sheet.

As of September 30, 2020 , the estimated fair value of the contingent consideration for the QuoteWizard acquisition totaled $ 30.8 million , of which $ 20.7 million is included in current contingent consideration and $ 10.1 million is included in non-current contingent consideration in the accompanying consolidated balance sheet.

The estimated fair value of the contingent consideration payments is determined using an option pricing model.

The estimated value of the contingent consideration is based upon available information and certain assumptions, known at the time of this report, which management believes are reasonable.

As of June 30, 2020 , the estimated fair value of the contingent consideration for the Ovation acquisition totaled $ 4.3 million , which is included in current contingent consideration in the accompanying consolidated balance sheet.

The estimated fair value of the contingent consideration payment is based on the $ 4.4 million achieved target discounted from the payment due date to June 30, 2020.

As of June 30, 2020 , no liability remains outstanding for the DepositAccounts acquisition in the accompanying consolidated balance sheet for the final contingent consideration payment based on Federal Funds interest rates and the earnout is complete.

As of September 30, 2020 , the estimated fair value of the contingent consideration for the Ovation acquisition totaled $ 4.4 million , which is included in current contingent consideration in the accompanying consolidated balance sheet.

The estimated fair value of the contingent consideration payment is based on the $ 4.4 million achieved target discounted from the payment due date to September 30, 2020.

Any differences in the actual contingent consideration payments will be recorded in operating income in the consolidated statements of operations and comprehensive income.

1 unchanged sentence

Accrued expenses and other current liabilities consist of the following (in thousands) :

September 30,

Accrued advertising expense

10 unchanged sentences

The Company used its incremental borrowing rate to calculate the right-of-use asset and lease liability for each lease.

As of September 30, 2020 , right-of-use assets totaled $ 86.2 million and lease liabilities, the current portion of which is included in accrued expenses and other current liabilities in the accompanying balance sheet, totaled $ 93.4 million .

At December 31, 2019 , right-of-use assets totaled $ 25.5 million and lease liabilities totaled $ 28.2 million .

During the second quarter of 2020 the right-of-use assets and lease liabilities increased $ 65.7 million due to commencement of the lease, as defined under ASC Topic 842, Leases, for the Company’s new principal executive offices currently under construction in Charlotte, North Carolina.

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2020 , right-of-use assets totaled $ 87.9 million and lease liabilities, the current portion of which is included in accrued expenses and other current liabilities in the accompanying balance sheet, totaled $ 92.6 million .

At December 31, 2019 , right-of-use assets totaled $ 25.5 million and lease liabilities totaled $ 28.2 million .

Lease expense, which is included in general and administrative expense on the accompanying consolidated statements of operations and comprehensive income, consists of the following (in thousands) :

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating lease cost

2 unchanged sentences

Weighted average remaining lease term and discount rate for operating leases are as follows:

June 30, 2020

September 30, 2020

December 31, 2019

2 unchanged sentences

Supplemental cash flow information related to leases is as follows (in thousands) :

Six Months Ended

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

1 unchanged sentence

Right-of-use assets obtained in exchange for new operating lease liabilities

Maturities of lease liabilities as of June 30, 2020 are as follows (in thousands) :

Maturities of lease liabilities as of September 30, 2020 are as follows (in thousands) :

Operating Leases

7 unchanged sentences

Present value of lease liabilities

Rental income of $ 0.1 million and $ 0.3 million in the second quarter and first six months of 2019 , respectively, is included in other income on the accompanying consolidated statements of operations and comprehensive income.

Rental income of $ 0.3 million in the first nine months of 2019 is included in other income on the accompanying consolidated statements of operations and comprehensive income.

LENDINGTREE, INC.

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Weighted average basic common shares

3 unchanged sentences

Weighted average diluted common shares

For the three months ended June 30, 2020 , the Company had a loss 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.

For the three and nine months ended September 30, 2020 , 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 0.8 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the three months ended June 30, 2020 , because their inclusion would have been anti-dilutive.

For the three months ended June 30, 2020 , the weighted average shares that were anti-dilutive included options to purchase 0.7 million shares of common stock and 0.1 million restricted stock units.

For the six months ended June 30, 2020 , the weighted average shares that were anti-dilutive included options to purchase 0.2 million shares of common stock.

For each of the three and six months ended June 30, 2019 , the weighted average shares that were anti-dilutive included options to purchase 0.1 million shares of common stock.

Approximately 1.3 million and 1.1 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the three and nine months ended September 30, 2020 , respectively, because their inclusion would have been anti-dilutive.

For the three and nine months ended September 30, 2020 , the weighted average shares that were anti-dilutive included options to purchase 0.1 million and 0.2 million shares of common stock, respectively.

For each of the three and nine months ended September 30, 2019 , the weighted average shares that were anti-dilutive included options to purchase 0.1 million shares of common stock.

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 14 —Debt and Note 19 —Subsequent Events for additional information.

Shares of the Company's common stock associated with the warrants were excluded from the calculation of diluted income per share for the six months ended June 30, 2020 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 period.

See Note 14 —Debt for additional information.

Shares of the Company's common stock associated with the 0.50% Convertible Senior Notes due July 15, 2025 and the warrants issued by the Company in 2020 were excluded from the calculation of diluted loss per share for the three and nine months ended September 30, 2020 , as they were anti-dilutive since the conversion price of the notes and the strike price of the warrants were greater than the average market price of the Company's common stock during these periods.

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 first six months of 2019 , the Company purchased 17,501 shares of its common stock for aggregate consideration of $ 4.0 million .

At June 30, 2020 , approximately $ 179.7 million of the previous authorizations to repurchase common stock remain available.

During the first nine months of 2019 , the Company purchased 18,580 shares of its common stock for aggregate consideration of $ 4.3 million .

At September 30, 2020 , approximately $ 179.7 million of the previous authorizations to repurchase common stock remain available.

NOTE 12 — STOCK-BASED COMPENSATION

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Cost of revenue

11 unchanged sentences

Options outstanding at January 1, 2020

Options outstanding at June 30, 2020

Options exercisable at June 30, 2020

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $ 289.53 on the last trading day of the quarter ended June 30, 2020 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 June 30, 2020 .

Options outstanding at September 30, 2020

Options exercisable at September 30, 2020

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $ 306.89 on the last trading day of the quarter ended September 30, 2020 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, 2020 .

The intrinsic value changes based on the market value of the Company's common stock.

During the six months ended June 30, 2020 , the Company granted stock options to certain employees and members of the board of directors with a weighted average grant date fair value per share of $ 138.75 , calculated using the Black-Scholes option pricing model, which vesting periods include (a) immediate vesting on grant date (b) 1 year from grant date (c) three years from grant date and (d) four years from grant date .

During the nine months ended September 30, 2020 , the Company granted stock options to certain employees and members of the board of directors with a weighted average grant date fair value per share of $ 138.75 , calculated using the Black-Scholes option pricing model, which vesting periods include (a) immediate vesting on grant date (b) one year from grant date (c) three years from grant date and (d) four 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.

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Options outstanding at January 1, 2020

Options outstanding at June 30, 2020

Options exercisable at June 30, 2020

Options outstanding at September 30, 2020

Options exercisable at September 30, 2020

The intrinsic value changes based on the market value of the Company's common stock.

During the six months ended June 30, 2020 , the Company granted stock options with a grant date fair value per share of $ 196.07 , calculated using the Monte Carlo simulation model, which has a vesting date of March 31, 2024 .

During the nine months ended September 30, 2020 , the Company granted stock options with a grant date fair value per share of $ 196.07 , calculated using the Monte Carlo simulation model, which has a vesting date of March 31, 2024 .

For purposes of determining stock-based compensation expense, the grant date fair value per share of the stock options was estimated using the Monte Carlo simulation model, which requires the use of various key assumptions.

11 unchanged sentences

A maximum of 805,885 shares may be earned for achieving superior performance up to 167 % of the target number of shares.

As of June 30, 2020 , performance-based nonqualified stock options with a market condition of 481,669 had been earned, which have a vest date of September 30, 2022 .

As of September 30, 2020 , performance-based nonqualified stock options with a market condition of 481,669 had been earned, which have a vest date of September 30, 2022 .

LENDINGTREE, INC.

6 unchanged sentences

Nonvested at January 1, 2020

Nonvested at June 30, 2020

Nonvested at September 30, 2020

Restricted Stock Units with Performance Conditions

4 unchanged sentences

Nonvested at January 1, 2020

Nonvested at June 30, 2020

Nonvested at September 30, 2020

Restricted Stock Awards with Performance Conditions

4 unchanged sentences

Nonvested at January 1, 2020

Nonvested at June 30, 2020

Nonvested at September 30, 2020

LENDINGTREE, INC.

7 unchanged sentences

Nonvested at January 1, 2020

Nonvested at June 30, 2020

Nonvested at September 30, 2020

A maximum of 44,545 shares may be earned for achieving superior performance up to 167 % of the target number of shares.

As of June 30, 2020 , performance-based restricted stock awards with a market condition of 29,601 had been earned, which have a vest date of September 30, 2022 .

As of September 30, 2020 , performance-based restricted stock awards with a market condition of 29,601 had been earned, which have a vest date of September 30, 2022 .

NOTE 13 — INCOME TAXES

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands, except percentages)

Income tax benefit

Income tax benefit (expense)

Effective tax rate

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.

For the third quarter and first nine months of 2020 , the effective tax rate varied from the federal statutory rate of 21 % in part due to a tax benefit of $ 0.2 million and $ 2.0 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 nine 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 the Company, 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.

The Company 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 .

The Company 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 nine 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 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.

For the third quarter and first nine months of 2019 , the effective tax rate varied from the federal statutory rate of 21 % primarily due to a tax benefit of $ 2.8 million and $ 16.5 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, a tax benefit of $ 1.9 million recognized from an adjustment to the federal research tax credit and the effect of state taxes.

LENDINGTREE, INC.

2 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Income tax benefit from CARES Act

Income tax benefit

Income tax benefit (expense)

NOTE 14 — DEBT

Convertible Senior 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.

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 revolving 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;

upon the occurrence of specified corporate events including but not limited to a fundamental change.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Holders of the 2025 Notes are not entitled to convert the 2025 Notes during the calendar quarter ended December 31, 2020 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, 2020, 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 41 st 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 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.

The initial measurement of convertible debt instruments that may be settled in cash is separated into a debt and an equity component whereby the debt component is 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 third quarter of 2020, the Company recorded interest expense on the 2025 Notes of $ 4.9 million which consisted of $ 0.5 million associated with the 0.50 % coupon rate, $ 4.0 million associated with the accretion of the debt discount, and $ 0.4 million associated with the amortization of the debt issuance costs.

The debt discount is being amortized over the term of the debt.

As of September 30, 2020, the fair value of the 2025 Notes is estimated to be approximately $ 562.1 million using the Level 1 observable input of the last quoted market price for the quarter ended September 30, 2020.

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 are as follows (in thousands) :

September 30,

Gross carrying amount

Unamortized debt discount

Debt issuance costs

Net carrying amount

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.

1 unchanged sentence

The 2022 Notes will mature on June 1, 2022, unless earlier repurchased or converted.

The initial conversion rate of the 2022 Notes is 4.8163 shares of Common Stock per $1,000 principal amount of 2022 Notes (which is equivalent to an initial conversion price of approximately $ 207.63 per share).

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The initial conversion rate of the 2022 Notes is 4.8163 shares of the Company's common stock per $1,000 principal amount of 2022 Notes (which is equivalent to an initial conversion price of approximately $ 207.63 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 fundamental change prior to the maturity of the 2022 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 2022 Notes in connection with such fundamental change.

In addition, upon the occurrence of a make-whole fundamental change prior to the maturity of the 2022 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 2022 Notes in connection with such make-whole fundamental change.

Upon conversion, the 2022 Notes will settle for cash, shares of the Company’s stock, or a combination thereof, at the Company’s option.

8 unchanged sentences

upon the occurrence of specified corporate events including but not limited to a fundamental change.

Holders of the 2022 Notes were not entitled to convert the 2022 Notes during the calendar quarter ended June 30, 2020 as the last reported sales 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 March 31, 2020, was not greater than or equal to 130 % of the conversion price of the 2022 Notes on each applicable trading day.

Holders of the 2022 Notes are not entitled to convert the 2022 Notes during the calendar quarter ended September 30, 2020 as the last reported sales price of the Company's common stock, for at least 20 trading

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

days (whether or not consecutive) during the period of 30 consecutive trading days ending on June 30, 2020, was not greater than or equal to 130% of the conversion price of the 2022 Notes on each applicable trading day.

Holders of the 2022 Notes were not entitled to convert the 2022 Notes during the calendar quarter ended September 30, 2020 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, 2020, was not greater than or equal to 130 % of the conversion price of the 2022 Notes on each applicable trading day.

Holders of the 2022 Notes are entitled to convert the 2022 Notes during the calendar quarter ended December 31, 2020 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, 2020, was greater than or equal to 130 % of the conversion price of the 2022 Notes on each applicable trading day.

On or after February 1, 2022, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2022 Notes, holders of the 2022 Notes may convert all or a portion of their 2022 Notes regardless of the foregoing conditions.

2 unchanged sentences

If the market price per share of the common stock, as measured under the terms of the 2022 Notes, exceeds the conversion price of the 2022 Notes, the 2022 Notes could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the principal amount of the 2022 Notes and any conversion premium in cash.

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.

1 unchanged sentence

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.

In the first six months of 2020 , the Company recorded interest expense on the 2022 Notes of $ 7.9 million which consisted of $ 0.9 million associated with the 0.625 % coupon rate, $ 6.3 million associated with the accretion of the debt discount, and $ 0.7 million associated with the amortization of the debt issuance costs.

In the first six months of 2019 , the Company recorded interest expense on the 2022 Notes of $ 7.5 million which consisted of $ 0.9 million associated with the 0.625 % coupon rate, $ 5.9 million associated with the accretion of the debt discount, and $ 0.7 million associated with the amortization of the debt issuance costs.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 2020 , the Company recorded interest expense on the 2022 Notes of $ 10.7 million which consisted of $ 1.3 million associated with the 0.625 % coupon rate, $ 8.4 million associated with the accretion of the debt discount, and $ 1.0 million associated with the amortization of the debt issuance costs.

In the first nine months of 2019 , the Company recorded interest expense on the 2022 Notes of $ 11.5 million which consisted of $ 1.4 million associated with the 0.625 % coupon rate, $ 9.0 million associated with the accretion of the debt discount, and $ 1.1 million associated with the amortization of the debt issuance costs.

The debt discount is being amortized over the term of the debt.

As of June 30, 2020 , the fair value of the 2022 Notes is estimated to be approximately $ 430.5 million using the Level 1 observable input of the last quoted market price for the quarter ended June 30, 2020 .

As of September 30, 2020 , the fair value of the 2022 Notes is estimated to be approximately $ 265.6 million using the Level 1 observable input of the last quoted market price for the quarter ended September 30, 2020 .

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,

Gross carrying amount

2 unchanged sentences

Net carrying amount

On July 24, 2020, the Company repurchased approximately $ 130.3 million principal amount of the 2022 Notes through separate and individually-negotiated transactions with certain holders of the 2022 Notes.

See Note 19 —Subsequent Events for additional information.

Convertible Note Hedge and Warrant Transactions

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 2017 Warrants 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 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.

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

On May 31, 2017, the Company paid $ 61.5 million to the counterparties for the 2017 Hedge transactions.

The 2017 Hedge transactions cover approximately 1.4 million shares of the Company’s common stock, the same number of shares initially underlying the 2022 Notes, and are exercisable upon any conversion of the 2022 Notes.

The 2017 Hedge transactions are expected generally to reduce the potential dilution to the Common Stock upon conversion of the 2022 Notes and/or offset any cash payments the Company is 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, is greater than the strike price of the 2017 Hedge transactions, which initially corresponds to the initial conversion price of the 2022 Notes, or approximately $ 207.63 per share of Common Stock.

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 are exercisable upon any conversion of the 2022 Notes.

The 2017 Hedge transactions are 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 is 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, is greater than the strike price of the 2017 Hedge transactions, which initially corresponds to the initial conversion price of the 2022 Notes, or approximately $ 207.63 per share of common stock.

The 2017 Hedge transactions will expire 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 Common Stock at an initial strike price of $ 266.39 per share, which represents a premium of 70 % over the reported sale price of the Common Stock of $ 156.70 on May 24, 2017.

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.

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 has been 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 the existing call spread transactions effective July 24, 2020 in notional amounts corresponding to the principal amount of the 2022 Notes repurchased.

See Note 19 —Subsequent Events for additional information.

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.

Subsequent to such termination, the outstanding portion of the 2017 Hedge covers 0.8 million shares of the Company's common stock and 2017 Warrants to acquire 0.8 million shares of the Company's common stock remain outstanding.

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 has been recorded as an increase to additional paid-in capital in the consolidated statement of shareholders’ equity.

Senior Secured Revolving Credit Facility

2 unchanged sentences

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 June 30, 2020 , the Company had a $ 130.0 million , 30 -day borrowing outstanding under the Amended Revolving Credit Facility bearing interest at the LIBO rate option of 1.44 % .

As of September 30, 2020 , the Company had no borrowings outstanding under the Amended Revolving Credit Facility.

As of December 31, 2019 , the Company had $ 75.0 million in borrowings outstanding under the Amended Revolving Credit Facility at the LIBO rate option with a weighted average interest rate of 3.01 % , consisting of a $ 50.0 million 31 -day borrowing and a $ 25.0 million 31 -day borrowing.

See Note 19 —Subsequent Events for activity related to the Amended Revolving Credit Facility in July 2020.

Up to $ 10.0 million of the Amended Revolving Credit Facility will be available for short-term loans, referred to as swingline loans.

1 unchanged sentence

Additionally, up to $ 10.0 million of the Amended Revolving Credit Facility will be available for the issuance of letters of credit.

At each of June 30, 2020 and December 31, 2019 , the Company had outstanding one letter of credit issued in the amount of $ 0.2 million .

The Company’s borrowings under the Amended Revolving 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 0.25 % to 1.0 % based on a total consolidated debt to EBITDA ratio;

a LIBO rate generally defined as the sum of (i) the rate for Eurodollar deposits in the applicable currency and (ii) an applicable percentage of 1.25 % to 2.0 % based on a total consolidated debt to EBITDA ratio.

At each of September 30, 2020 and December 31, 2019 , the Company had outstanding one letter of credit issued in the amount of $ 0.2 million .

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s borrowings under the Amended Revolving Credit Facility bear interest at annual rates that, at the Company’s option, will be either:

All swingline loans bear interest at the base rate defined above.

2 unchanged sentences

In addition, the Amended Revolving Credit Facility contains customary affirmative and negative covenants in addition to events of default for a transaction of this type that, among other things, restrict additional indebtedness, liens, mergers or certain fundamental changes, asset dispositions, dividends, stock repurchases and other restricted payments, transactions with affiliates, sale-leaseback transactions, hedging transactions, loans and investments and other matters customarily restricted in such agreements.

The Company was in compliance with all covenants at June 30, 2020 .

On July 21, 2020, the Company executed a temporary amendment to its 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.

The amendment amends the existing credit agreement to, among other things:

(i) temporarily replace the total consolidated debt to EBITDA ratio covenant with a consolidated liquidity covenant requiring the Company to maintain unrestricted cash and cash equivalents in the United States plus amounts available and permitted to be drawn under the Amended Revolving Credit Facility to be no less than $ 200.0 million ;

(ii) impose additional limitations on certain restricted payments during such temporary period;

and (iii) increase the applicable margins to (x) 2.25 % for loans based on the LIBO rate and (y) 1.25 % for loans based on the base rate, subject to a 0.75 % floor, and unused commitment fees to 0.50 % under the Amended Revolving Credit Facility during the temporary period.

These amendments shall apply from the effective date through the fiscal quarter ending June 30, 2021, unless terminated in advance by the Company.

The Company was in compliance with all covenants at September 30, 2020 .

The Amended Revolving Credit Facility requires LendingTree, LLC to pledge as collateral, subject to certain customary exclusions, substantially all of its assets, including 100 % of its equity in all of its domestic subsidiaries and 66 % of the voting equity, and 100 % of the non-voting equity, in all of its material foreign subsidiaries (of which there are currently none).

1 unchanged sentence

and material domestic subsidiaries of LendingTree, LLC, which guaranties are secured by a pledge as collateral, subject to certain customary exclusions, of 100 % of each such guarantor's assets, including 100 % of each such guarantor’s equity in all of its domestic subsidiaries and 66 % of the voting equity, and 100 % of the non-voting equity, in all of its material foreign subsidiaries (of which there are currently none).

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 Amended Revolving Credit Facility equal to an applicable percentage of 0.25 % to 0.45 % per annum based on a total consolidated debt to EBITDA ratio.

Except as noted in the covenant relief discussion above, 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 Amended Revolving Credit Facility equal to an applicable percentage of 0.25 % to 0.45 % per annum based on a total consolidated debt to EBITDA ratio.

The Company is required to pay a letter of credit participation fee and a letter of credit fronting fee quarterly in arrears.

1 unchanged sentence

The letter of credit fronting fee is 0.125 % per annum on the face amount of each letter of credit.

In addition to the remaining unamortized debt issuance costs associated with the original revolving credit facility and the Revolving Credit Facility, debt issuance costs of $ 2.8 million related to the Amended Revolving Credit Facility entered into on December 10, 2019 are being amortized to interest expense over the life of the Amended Revolving Credit Facility, and are included in prepaid and other current assets and other non-current assets in the Company's consolidated balance sheet.

In the first six months of 2020 , the Company recorded interest expense related to the Amended Revolving Credit Facility of $ 2.1 million which consisted of $ 1.1 million associated with borrowings bearing interest at the LIBO rate, $ 0.5 million in unused commitment fees, and $ 0.5 million associated with the amortization of the debt issuance costs.

In the first six months of 2019 , the Company recorded interest expense related to the revolving credit facility of $ 3.8 million which consisted of $ 3.2 million associated with borrowings bearing interest at the LIBO rate, $ 0.3 million in unused commitment fees, and $ 0.3 million associated with the amortization of the debt issuance costs.

Debt issuance costs of $ 1.1 million related to the July 21, 2020 temporary amendment are being amortized to interest expense through June 30,

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2021, unless the temporary amendment is terminated in advance by the Company.

Unamortized debt issuance 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 2020 , the Company recorded interest expense related to the Amended Revolving Credit Facility of $ 3.2 million which consisted of $ 1.3 million associated with borrowings bearing interest at the LIBO rate, $ 1.1 million in unused commitment fees, and $ 0.8 million associated with the amortization of the debt issuance costs.

In the first nine months of 2019 , the Company recorded interest expense related to the revolving credit facility of $ 5.1 million which consisted of $ 4.2 million associated with borrowings bearing interest at the LIBO rate, $ 0.5 million in unused commitment fees, and $ 0.4 million associated with the amortization of the debt issuance costs.

NOTE 15 — CONTINGENCIES

2 unchanged sentences

With respect to the matters disclosed in this Note 15 , 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 June 30, 2020 , the Company had litigation settlement accruals of $ 0.1 million and $ 62.3 million in continuing operations and discontinued operations, respectively.

As of September 30, 2020 , the Company had litigation settlement accruals of $ 0.1 million and $ 0.5 million in continuing operations and discontinued operations, respectively.

As of December 31, 2019 , the Company had litigation settlement accruals of $ 0.2 million and $ 31.0 million in continuing operations and discontinued operations, respectively.

1 unchanged sentence

See Note 18 —Discontinued Operations for additional information.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 16 — FAIR VALUE MEASUREMENTS

Other than the convertible notes and warrants, as well as the equity interest in Stash, the carrying amounts of the Company's financial instruments are equal to fair value at June 30, 2020 .

See Note 14 —Debt and Note 19 —Subsequent Events for additional information on the convertible notes and warrants, and see Note 7 —Equity Investment for additional information on the equity interest in Stash.

Other than the convertible notes and warrants, as well as the equity interest in Stash, the carrying amounts of the Company's financial instruments are equal to fair value at September 30, 2020 .

See Note 14 —Debt for additional information on the convertible notes and warrants, and see Note 7 —Equity Investment for additional information on the equity interest in Stash.

Contingent consideration payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs.

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Contingent consideration, beginning of period

4 unchanged sentences

Contingent consideration, end of period

The contingent consideration liability at June 30, 2020 is the estimated fair value of the earnout payments of the Ovation and QuoteWizard acquisitions.

The contingent consideration liability at September 30, 2020 is the estimated fair value of the earnout payments of the Ovation and QuoteWizard acquisitions.

In October 2020, the Company made an earnout payment of $ 4.4 million based on the achievement of certain defined operating metrics for Ovation.

The Company will make earnout payments ranging from zero to $ 46.8 million based on the achievement of certain defined performance targets for QuoteWizard.

See Note 8 —Business Acquisitions for additional information on the contingent consideration for each of these respective acquisitions.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The significant unobservable inputs used to calculate the fair value of the contingent consideration are estimated future cash flows for the acquisitions and the discount rate.

4 unchanged sentences

Fair Value at

June 30, 2020

September 30, 2020

Valuation Technique

9 unchanged sentences

Other unobservable inputs were weighted by the relative maximum potential earnout payments.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SEGMENT INFORMATION

2 unchanged sentences

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 Company changed its reportable segments in the fourth quarter of 2019 and previously reported segment results have been revised to conform to the Company's reportable segments at June 30, 2020 .

The Company changed its reportable segments in the fourth quarter of 2019 and previously reported segment results have been revised to conform to the Company's reportable segments at September 30, 2020 .

The Home segment includes the following products:

9 unchanged sentences

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

Three Months Ended June 30, 2020

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended September 30, 2020

(in thousands)

Segment marketing expense

Segment profit (loss)

Segment profit

Cost of revenue

8 unchanged sentences

Loss before income taxes and discontinued operations

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

(in thousands)

11 unchanged sentences

Income before income taxes and discontinued operations

Six Months Ended June 30, 2020

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended September 30, 2020

(in thousands)

8 unchanged sentences

Litigation settlements and contingencies

Operating income

Operating loss

Interest expense, net

Income before income taxes and discontinued operations

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended June 30, 2019

Loss before income taxes and discontinued operations

Nine Months Ended September 30, 2019

(in thousands)

16 unchanged sentences

Discover generally did not assume liabilities of HLC that arose before the closing date, except for certain liabilities directly related to assets Discover acquired.

Of the purchase price received, a portion was deposited in escrow in accordance with the purchase agreement with Discover for certain loan loss obligations that remained with HLC following the sale.

A portion of the purchase price

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

received was deposited in escrow in accordance with the purchase agreement with Discover for certain loan loss obligations that remained with HLC following the sale.

During 2018, the remaining funds in escrow were released to HLC in accordance with the terms of the purchase agreement with Discover.

16 unchanged sentences

described above and in Litigation Related to Discontinued Operations below.

As a result of the voluntary petition, LendingTree, LLC was, as of the initial July 21, 2019

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

bankruptcy petition filing date, no longer deemed to have a controlling interest in HLC under applicable accounting standards.

As a result of the voluntary petition, LendingTree, LLC was, as of the initial July 21, 2019 bankruptcy petition filing date, no longer deemed to have a controlling interest in HLC under applicable accounting standards.

As a result, HLC and its consolidated subsidiary were deconsolidated from the Company’s consolidated financial statements as of July 21, 2019.

3 unchanged sentences

HLC has indicated that it believes that it has claims against HLC’s sole shareholder, LendingTree, LLC, and certain of its officers and directors, relating to the declaration of a dividend by HLC in January 2016 of $ 40.0 million .

The Company is obligated to advance any expenses to the officers and directors related to these claims and to indemnify them to the maximum extent permitted by law.

LendingTree, LLC believes the declaration of the dividend was proper, that the amounts paid to LendingTree, LLC following such declaration are not subject to recovery by HLC and that any claims by HLC relating to such dividend declaration are without merit.

During the second quarter of 2020, LendingTree, LLC and HLC entered into a settlement agreement, subject to the approval of the bankruptcy court in the HLC Bankruptcy, in the amount of $ 36.0 million for the release of any and all claims against the Company defendants by HLC, including the dividend claim.

During the second quarter of 2020, LendingTree, LLC and HLC entered into a settlement agreement in the amount of $ 36.0 million for the release of any and all claims against the Company defendants by HLC, including the dividend claim.

The bankruptcy court held a hearing on July 16, 2020 on the motion to approve the settlement to which no objections were made, and approved the settlement the same day.

A liability of $ 36.0 million is included in the accompanying consolidated balance sheet as of June 30, 2020 related to LendingTree LLC's ownership in HLC.

The $ 36.0 million settlement payment was made in July 2020.

HLC’s voluntary petition under the Bankruptcy Code does not represent an event of default under LendingTree, LLC’s Second Amended and Restated Credit Agreement dated as of December 10, 2019 or the Company’s indenture dated May 31, 2017 with respect to the Company’s 0.625 % Convertible Senior Notes due 2022.

The $ 36.0 million settlement payment was made in the third quarter of 2020.

HLC’s voluntary petition under the Bankruptcy Code does not represent an event of default under LendingTree, LLC’s Second Amended and Restated Credit Agreement dated as of December 10, 2019, the Company’s indenture dated May 31, 2017 with respect to the Company’s 0.625 % Convertible Senior Notes due 2022, or the Company’s indenture dated July 24, 2020 with respect to the Company’s 0.50 % Convertible Senior Notes due 2025.

Litigation Related to Discontinued Operations

8 unchanged sentences

RFC asserted that, beginning in 2008, RFC faced massive repurchase demands and lawsuits from purchasers or insurers of the loans and RMBS that RFC had sold.

RFC filed for bankruptcy protection in May 2012.

RFC filed for bankruptcy

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

protection in May 2012.

Plaintiff alleged that, after RFC filed for Chapter 11 protection, hundreds of proofs of claim were filed, many of which mirrored the litigation filed against RFC prior to its bankruptcy.

15 unchanged sentences

(iii) $ 23.1 million in attorneys' fees and costs, and (iv) $ 2.6 million in post-verdict, prejudgment interest.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

HLC’s filing under the Bankruptcy Code discussed above in Home Loan Center, Inc.

10 unchanged sentences

Pursuant to the settlement agreement, the Company will be responsible for the difference of $ 58.5 million minus the amount that ResCap receives through the HLC Bankruptcy.

In July 2020, the Company made a $ 26.5 million payment to the ResCap Liquidating Trust.

In the third quarter of 2020, the Company made a $ 26.5 million payment to the ResCap Liquidating Trust.

The Company expects to be refunded $ 1.1 million of this amount, subsequent to the final distributions in the HLC Bankruptcy.

This $ 1.1 million is recorded within current assets of discontinued operations on the accompanying consolidated balance sheet as of September 30, 2020 .

In October 2020, due to the timing of distributions from the HLC bankruptcy estate, the Company was required per the terms of the ResCap settlement agreement to make a further payment of $ 6.4 million to ResCap.

In turn, ResCap assigned its claims related to this amount to the Company, and the Company anticipates receiving reimbursement of a total $ 7.5 million from the HLC bankruptcy estate by the first quarter of 2021.

Lehman Brothers Holdings, Inc.

16 unchanged sentences

20-cv-01351 (U.S.

Ct., Minn.) , seeking to hold the Company liable for their allowed bankruptcy claim of $ 13.3 million , under assumption of liability, agency and alter ego theories.

Ct., Minn.) , seeking to hold the Company liable for their allowed bankruptcy claim of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ 13.3 million , under assumption of liability, agency and alter ego theories.

The Company believes that these claims lack merit and intends to defend this action vigorously.

In the third quarter of 2020, the Company made a settlement offer to LBHI for $ 0.5 million , which is included as a liability on the accompanying consolidated balance sheet as of September 30, 2020 .

Financial Information of Discontinued Operations

The components of net loss reported as discontinued operations in the accompanying consolidated statements of operations and comprehensive income are as follows (in thousands) :

The components of net income (loss) reported as discontinued operations in the accompanying consolidated statements of operations and comprehensive income are as follows (in thousands) :

Three Months Ended

Six Months Ended

Loss before income taxes

Income tax benefit

September 30,

Nine Months Ended

September 30,

Gain from removal of HLC's assets and liabilities

Other operating gains (expenses)

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss)

Losses from discontinued operations included all activity of HLC prior to bankruptcy, including litigation settlements, contingencies and legal fees associated with legal proceedings.

1 unchanged sentence

or LendingTree LLC that arose due to the LendingTree Loans Business or the HLC bankruptcy filing.

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 19 — SUBSEQUENT EVENTS

Senior Secured Revolving Credit Facility

On July 21, 2020, the Company executed a temporary amendment to its Amended Revolving Credit Facility to provide for certain covenant relief, primarily to facilitate the issuance of convertible notes outlined below, the repurchase of a portion of the 2022 Notes, and to pay down existing borrowings under the credit facility.

The amendment amends the existing credit agreement to, among other things:

(ii) impose additional limitations on certain restricted payments during such temporary period;

These amendments shall apply from the effective date through the fiscal quarter ending June 30, 2021, unless terminated in advance by the Company.

During July 2020, the Company made net repayments of $ 130.0 million on its Amended Revolving Credit Facility, which represented the outstanding balance.

Convertible Senior 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, for estimated net proceeds of approximately $ 559.8 million .

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.

The initial conversion rate of the 2025 Notes is 2.1683 shares of Common Stock per $1,000 principal amount of 2025 Notes (which is equivalent to an initial conversion price of approximately $ 461.19 per share).

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 through separate and individually-negotiated transactions with certain holders of the 2022 Notes.

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 (the “2020 Warrants”) transactions with respect to the Company’s common stock.

The 2020 Warrants have a strike price of $ 709.52 per share, which represents a premium of 100 % over the reported sale price of the Common Stock of $ 354.76 on July 21, 2020.

The Company received approximately $ 15.6 million as a result of terminating such portions of the 2017 Hedge and 2017 Warrants.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements