TREE filing — read by section

Item 1. Financial Statements

Item 1. Financial Statements 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME 
 (Unaudited) 
 
 Three Months Ended
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 (in thousands, except per share amounts) 
 
 Revenue 
 $ 
 220,251 
 
 $ 
 310,605 
 
 $ 
 687,661 
 
 $ 
 851,416 
 
 Costs and expenses: 
 
 Cost of revenue (exclusive of depreciation and amortization shown separately below) 
 13,220 
 
 17,671 
 
 40,936 
 
 51,651 
 
 Selling and marketing expense 
 154,670 
 
 200,818 
 
 464,129 
 
 567,338 
 
 General and administrative expense 
 33,705 
 
 30,323 
 
 94,276 
 
 89,391 
 
 Product development 
 11,477 
 
 10,200 
 
 33,252 
 
 30,541 
 
 Depreciation 
 3,535 
 
 2,696 
 
 10,463 
 
 7,737 
 
 Amortization of intangibles 
 13,090 
 
 13,778 
 
 40,603 
 
 41,485 
 
 Change in fair value of contingent consideration 
 6,658 
 
 3,839 
 
 7,711 
 
 21,221 
 
 Severance 
 — 
 
 179 
 
 190 
 
 636 
 
 Litigation settlements and contingencies 
 13 
 
 ( 92 
 ) 
 
 ( 983 
 ) 
 
 ( 291 
 ) 
 
 Total costs and expenses 
 236,368 
 
 279,412 
 
 690,577 
 
 809,709 
 
 Operating (loss) income 
 ( 16,117 
 ) 
 
 31,193 
 
 ( 2,916 
 ) 
 
 41,707 
 
 Other (expense) income, net: 
 
 Interest expense, net 
 ( 16,617 
 ) 
 
 ( 4,845 
 ) 
 
 ( 26,406 
 ) 
 
 ( 15,408 
 ) 
 
 Other income 
 — 
 
 4 
 
 7 
 
 143 
 
 (Loss) income before income taxes 
 ( 32,734 
 ) 
 
 26,352 
 
 ( 29,315 
 ) 
 
 26,442 
 
 Income tax benefit (expense) 
 7,925 
 
 ( 1,889 
 ) 
 
 14,866 
 
 11,552 
 
 Net (loss) income from continuing operations 
 ( 24,809 
 ) 
 
 24,463 
 
 ( 14,449 
 ) 
 
 37,994 
 
 Income (loss) from discontinued operations, net of tax 
 166 
 
 ( 20,199 
 ) 
 
 ( 25,550 
 ) 
 
 ( 22,024 
 ) 
 
 Net (loss) income and comprehensive (loss) income 
 $ 
 ( 24,643 
 ) 
 
 $ 
 4,264 
 
 $ 
 ( 39,999 
 ) 
 
 $ 
 15,970 
 
 Weighted average shares outstanding: 
 
 Basic 
 13,033 
 
 12,890 
 
 12,992 
 
 12,805 
 
 Diluted 
 13,033 
 
 14,632 
 
 12,992 
 
 14,629 
 
 (Loss) income per share from continuing operations: 
 
 Basic 
 $ 
 ( 1.90 
 ) 
 
 $ 
 1.90 
 
 $ 
 ( 1.11 
 ) 
 
 $ 
 2.97 
 
 Diluted 
 $ 
 ( 1.90 
 ) 
 
 $ 
 1.67 
 
 $ 
 ( 1.11 
 ) 
 
 $ 
 2.60 
 
 Income (loss) per share from discontinued operations: 
 
 Basic 
 $ 
 0.01 
 
 $ 
 ( 1.57 
 ) 
 
 $ 
 ( 1.97 
 ) 
 
 $ 
 ( 1.72 
 ) 
 
 Diluted 
 $ 
 0.01 
 
 $ 
 ( 1.38 
 ) 
 
 $ 
 ( 1.97 
 ) 
 
 $ 
 ( 1.51 
 ) 
 
 Net (loss) income per share: 
 
 Basic 
 $ 
 ( 1.89 
 ) 
 
 $ 
 0.33 
 
 $ 
 ( 3.08 
 ) 
 
 $ 
 1.25 
 
 Diluted 
 $ 
 ( 1.89 
 ) 
 
 $ 
 0.29 
 
 $ 
 ( 3.08 
 ) 
 
 $ 
 1.09 
 
 The accompanying notes to consolidated financial statements are an integral part of these statements. 
 
 3 

 Table of Contents 

 LENDINGTREE, INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS 
 (Unaudited) 
 
 September 30, 
2020 
 
 December 31, 
2019 
 
 (in thousands, except par value and share amounts) 
 
 ASSETS: 
 
 Cash and cash equivalents 
 $ 
 187,261 
 
 $ 
 60,243 
 
 Restricted cash and cash equivalents 
 112 
 
 96 
 
 Accounts receivable (net of allowance of $1,638 and $1,466, respectively) 
 96,631 
 
 113,487 
 
 Prepaid and other current assets 
 27,585 
 
 15,516 
 
 Current assets of discontinued operations 
 1,172 
 
 84 
 
 Total current assets 
 312,761 
 
 189,426 
 
 Property and equipment (net of accumulated depreciation of $22,318 and $17,979, respectively) 
 48,877 
 
 31,363 
 
 Operating lease right-of-use assets 
 86,193 
 
 25,519 
 
 Goodwill 
 420,139 
 
 420,139 
 
 Intangible assets, net 
 140,977 
 
 181,580 
 
 Deferred income tax assets 
 92,649 
 
 87,664 
 
 Equity investment (Note 7) 
 80,000 
 
 — 
 
 Other non-current assets 
 5,262 
 
 4,330 
 
 Non-current assets of discontinued operations 
 16,731 
 
 7,948 
 
 Total assets 
 $ 
 1,203,589 
 
 $ 
 947,969 
 
 LIABILITIES: 
 
 Revolving credit facility 
 $ 
 — 
 
 $ 
 75,000 
 
 Accounts payable, trade 
 4,895 
 
 2,873 
 
 Accrued expenses and other current liabilities 
 106,333 
 
 112,755 
 
 Current contingent consideration 
 25,068 
 
 9,028 
 
 Current liabilities of discontinued operations 
 300 
 
 31,050 
 
 Total current liabilities 
 136,596 
 
 230,706 
 
 Long-term debt 
 603,520 
 
 264,391 
 
 Operating lease liabilities 
 87,597 
 
 21,358 
 
 Non-current contingent consideration 
 10,107 
 
 24,436 
 
 Other non-current liabilities 
 4,760 
 
 4,752 
 
 Total liabilities 
 842,580 
 
 545,643 
 
 Commitments and contingencies (Note 15) 
 
 SHAREHOLDERS' EQUITY: 
 
 Preferred stock $.01 par value; 5,000,000 shares authorized; none issued or outstanding 
 — 
 
 — 
 
 Common stock $.01 par value; 50,000,000 shares authorized; 15,759,235 and 15,676,819 shares issued, respectively, and 13,117,917 and 13,035,501 shares outstanding, respectively 
 158 
 
 157 
 
 Additional paid-in capital 
 1,176,664 
 
 1,177,984 
 
 Accumulated deficit 
 ( 632,652 
 ) 
 
 ( 592,654 
 ) 
 
 Treasury stock; 2,641,318 shares 
 ( 183,161 
 ) 
 
 ( 183,161 
 ) 
 
 Total shareholders' equity 
 361,009 
 
 402,326 
 
 Total liabilities and shareholders' equity 
 $ 
 1,203,589 
 
 $ 
 947,969 
 
 The accompanying notes to consolidated financial statements are an integral part of these statements. 
 
 4 

 Table of Contents 

 LENDINGTREE, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 
 (Unaudited) 
 
 Common Stock 
 
 Treasury Stock 
 
 Total 
 
 Number 
 of Shares 
 
 Amount 
 
 Additional 
 Paid-in 
 Capital 
 
 Accumulated 
 Deficit 
 
 Number 
 of Shares 
 
 Amount 
 
 (in thousands) 
 
 Balance as of December 31, 2019 
 $ 
 402,326 
 
 15,677 
 
 $ 
 157 
 
 $ 
 1,177,984 
 
 $ 
 ( 592,654 
 ) 
 
 2,641 
 
 $ 
 ( 183,161 
 ) 
 
 Net income and comprehensive income 
 14,401 
 
 — 
 
 — 
 
 — 
 
 14,401 
 
 — 
 
 — 
 
 Non-cash compensation 
 11,917 
 
 — 
 
 — 
 
 11,917 
 
 — 
 
 — 
 
 — 
 
 Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 
 ( 5,087 
 ) 
 
 27 
 
 — 
 
 ( 5,087 
 ) 
 
 — 
 
 — 
 
 — 
 
 Other 
 — 
 
 — 
 
 — 
 
 ( 1 
 ) 
 
 1 
 
 — 
 
 — 
 
 Balance as of March 31, 2020 
 $ 
 423,557 
 
 15,704 
 
 $ 
 157 
 
 $ 
 1,184,813 
 
 $ 
 ( 578,252 
 ) 
 
 2,641 
 
 $ 
 ( 183,161 
 ) 
 
 Net loss and comprehensive loss 
 ( 29,757 
 ) 
 
 — 
 
 — 
 
 — 
 
 ( 29,757 
 ) 
 
 — 
 
 — 
 
 Non-cash compensation 
 13,158 
 
 — 
 
 — 
 
 13,158 
 
 — 
 
 — 
 
 — 
 
 Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 
 ( 981 
 ) 
 
 27 
 
 — 
 
 ( 981 
 ) 
 
 — 
 
 — 
 
 — 
 
 Balance as of June 30, 2020 
 $ 
 405,977 
 
 15,731 
 
 $ 
 157 
 
 $ 
 1,196,990 
 
 $ 
 ( 608,009 
 ) 
 
 2,641 
 
 $ 
 ( 183,161 
 ) 
 
 Net loss and comprehensive loss 
 ( 24,643 
 ) 
 
 — 
 
 — 
 
 — 
 
 ( 24,643 
 ) 
 
 — 
 
 — 
 
 Non-cash compensation 
 14,161 
 
 — 
 
 — 
 
 14,161 
 
 — 
 
 — 
 
 — 
 
 Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 
 4,646 
 
 28 
 
 1 
 
 4,645 
 
 — 
 
 — 
 
 — 
 
 Issuance of 0.50% Convertible Senior Notes, net 
 116,300 
 
 — 
 
 — 
 
 116,300 
 
 — 
 
 — 
 
 — 
 
 Repurchase of 0.625% Convertible Senior Notes, net 
 ( 107,882 
 ) 
 
 — 
 
 — 
 
 ( 107,882 
 ) 
 
 — 
 
 — 
 
 — 
 
 Convertible note hedge transactions 
 ( 14,379 
 ) 
 
 — 
 
 — 
 
 ( 14,379 
 ) 
 
 — 
 
 — 
 
 — 
 
 Warrant transactions 
 ( 33,171 
 ) 
 
 — 
 
 — 
 
 ( 33,171 
 ) 
 
 — 
 
 — 
 
 — 
 
 Balance as of September 30, 2020 
 $ 
 361,009 
 
 15,759 
 
 $ 
 158 
 
 $ 
 1,176,664 
 
 $ 
 ( 632,652 
 ) 
 
 2,641 
 
 $ 
 ( 183,161 
 ) 
 
 5 

 Table of Contents 

 Common Stock 
 
 Treasury Stock 
 
 Total 
 
 Number 
 of Shares 
 
 Amount 
 
 Additional 
 Paid-in 
 Capital 
 
 Accumulated 
 Deficit 
 
 Number 
 of Shares 
 
 Amount 
 
 (in thousands) 
 
 Balance as of December 31, 2018 
 $ 
 346,208 
 
 15,428 
 
 $ 
 154 
 
 $ 
 1,134,227 
 
 $ 
 ( 610,482 
 ) 
 
 2,618 
 
 $ 
 ( 177,691 
 ) 
 
 Net loss and comprehensive loss 
 ( 512 
 ) 
 
 — 
 
 — 
 
 — 
 
 ( 512 
 ) 
 
 — 
 
 — 
 
 Non-cash compensation 
 14,053 
 
 — 
 
 — 
 
 14,053 
 
 — 
 
 — 
 
 — 
 
 Purchase of treasury stock 
 ( 3,976 
 ) 
 
 — 
 
 — 
 
 — 
 
 — 
 
 18 
 
 ( 3,976 
 ) 
 
 Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 
 ( 3,585 
 ) 
 
 87 
 
 1 
 
 ( 3,586 
 ) 
 
 — 
 
 — 
 
 — 
 
 Balance as of March 31, 2019 
 $ 
 352,188 
 
 15,515 
 
 $ 
 155 
 
 $ 
 1,144,694 
 
 $ 
 ( 610,994 
 ) 
 
 2,636 
 
 $ 
 ( 181,667 
 ) 
 
 Net income and comprehensive income 
 12,218 
 
 — 
 
 — 
 
 — 
 
 12,218 
 
 — 
 
 — 
 
 Non-cash compensation 
 15,982 
 
 — 
 
 — 
 
 15,982 
 
 — 
 
 — 
 
 — 
 
 Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 
 ( 6,501 
 ) 
 
 89 
 
 1 
 
 ( 6,502 
 ) 
 
 — 
 
 — 
 
 — 
 
 Balance as of June 30, 2019 
 $ 
 373,887 
 
 15,604 
 
 $ 
 156 
 
 $ 
 1,154,174 
 
 $ 
 ( 598,776 
 ) 
 
 2,636 
 
 $ 
 ( 181,667 
 ) 
 
 Net income and comprehensive income 
 4,264 
 
 — 
 
 — 
 
 — 
 
 4,264 
 
 — 
 
 — 
 
 Non-cash compensation 
 10,797 
 
 — 
 
 — 
 
 10,797 
 
 — 
 
 — 
 
 — 
 
 Purchase of treasury stock 
 ( 310 
 ) 
 
 — 
 
 — 
 
 — 
 
 — 
 
 1 
 
 ( 310 
 ) 
 
 Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 
 626 
 
 31 
 
 — 
 
 626 
 
 — 
 
 — 
 
 — 
 
 Balance as of September 30, 2019 
 $ 
 389,264 
 
 15,635 
 
 $ 
 156 
 
 $ 
 1,165,597 
 
 $ 
 ( 594,512 
 ) 
 
 2,637 
 
 $ 
 ( 181,977 
 ) 
 
 The accompanying notes to consolidated financial statements are an integral part of these statements. 
 
 6 

 Table of Contents 

 LENDINGTREE, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 (Unaudited) 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 (in thousands) 
 
 Cash flows from operating activities attributable to continuing operations: 
 
 Net (loss) income and comprehensive (loss) income 
 $ 
 ( 39,999 
 ) 
 
 $ 
 15,970 
 
 Less: Loss from discontinued operations, net of tax 
 25,550 
 
 22,024 
 
 (Loss) income from continuing operations 
 ( 14,449 
 ) 
 
 37,994 
 
 Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations: 
 
 Loss (gain) on impairments and disposal of assets 
 686 
 
 ( 1,119 
 ) 
 
 Amortization of intangibles 
 40,603 
 
 41,485 
 
 Depreciation 
 10,463 
 
 7,737 
 
 Non-cash compensation expense 
 39,236 
 
 40,832 
 
 Deferred income taxes 
 ( 15,489 
 ) 
 
 ( 11,532 
 ) 
 
 Change in fair value of contingent consideration 
 7,711 
 
 21,221 
 
 Bad debt expense 
 1,314 
 
 1,865 
 
 Amortization of debt issuance costs 
 2,241 
 
 1,463 
 
 Amortization of convertible debt discount 
 12,429 
 
 8,959 
 
 Loss on extinguishment of debt 
 7,768 
 
 — 
 
 Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities 
 2,490 
 
 302 
 
 Changes in current assets and liabilities: 
 
 Accounts receivable 
 15,541 
 
 ( 50,030 
 ) 
 
 Prepaid and other current assets 
 ( 335 
 ) 
 
 ( 865 
 ) 
 
 Accounts payable, accrued expenses and other current liabilities 
 ( 9,733 
 ) 
 
 11,047 
 
 Current contingent consideration 
 ( 2,670 
 ) 
 
 ( 3,000 
 ) 
 
 Income taxes receivable 
 65 
 
 4,513 
 
 Other, net 
 ( 1,655 
 ) 
 
 8 
 
 Net cash provided by operating activities attributable to continuing operations 
 96,216 
 
 110,880 
 
 Cash flows from investing activities attributable to continuing operations: 
 
 Capital expenditures 
 ( 20,386 
 ) 
 
 ( 15,151 
 ) 
 
 Proceeds from sale of fixed assets 
 — 
 
 24,060 
 
 Equity investment 
 ( 80,000 
 ) 
 
 — 
 
 Acquisition of ValuePenguin, net of cash acquired 
 — 
 
 ( 105,578 
 ) 
 
 Acquisition of QuoteWizard, net of cash acquired 
 — 
 
 482 
 
 Net cash used in investing activities attributable to continuing operations 
 ( 100,386 
 ) 
 
 ( 96,187 
 ) 
 
 Cash flows from financing activities attributable to continuing operations: 
 
 Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options 
 ( 1,421 
 ) 
 
 ( 9,459 
 ) 
 
 Proceeds from the issuance of 0.50% Convertible Senior Notes 
 575,000 
 
 — 
 
 Repurchase of 0.625% Convertible Senior Notes 
 ( 233,862 
 ) 
 
 — 
 
 Payment for convertible note hedge on the 0.50% Convertible Senior Notes 
 ( 124,200 
 ) 
 
 — 
 
 Termination of convertible note hedge on the 0.625% Convertible Senior Notes 
 109,881 
 
 — 
 
 Proceeds from the sale of warrants related to the 0.50% Convertible Senior Notes 
 61,180 
 
 — 
 
 Termination of warrants related to the 0.625% Convertible Senior Notes 
 ( 94,292 
 ) 
 
 — 
 
 Net repayment of revolving credit facility 
 ( 75,000 
 ) 
 
 ( 40,000 
 ) 
 
 Payment of debt issuance costs 
 ( 16,398 
 ) 
 
 ( 31 
 ) 
 
 Contingent consideration payments 
 ( 3,330 
 ) 
 
 ( 3,000 
 ) 
 
 Purchase of treasury stock 
 — 
 
 ( 4,286 
 ) 
 
 Other financing activities 
 ( 183 
 ) 
 
 ( 3 
 ) 
 
 Net cash provided by (used in) financing activities attributable to continuing operations 
 197,375 
 
 ( 56,779 
 ) 
 
 Total cash provided by (used in) continuing operations 
 193,205 
 
 ( 42,086 
 ) 
 
 Discontinued operations: 
 
 Net cash used in operating activities attributable to discontinued operations 
 ( 66,171 
 ) 
 
 ( 12,316 
 ) 
 
 Total cash used in discontinued operations 
 ( 66,171 
 ) 
 
 ( 12,316 
 ) 
 
 Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 
 127,034 
 
 ( 54,402 
 ) 
 
 Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 
 60,339 
 
 105,158 
 
 Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period 
 $ 
 187,373 
 
 $ 
 50,756 
 
 Non-cash investing activities: 
 
 Capital additions from tenant improvement allowance 
 $ 
 — 
 
 $ 
 1,490 
 
 The accompanying notes to consolidated financial statements are an integral part of these statements. 
 
 7 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Unaudited) 
 
 NOTE 1 — ORGANIZATION 
 Company Overview 
 LendingTree, Inc. is currently the parent of LendingTree, LLC and several companies owned by LendingTree, LLC (collectively, "LendingTree" or the "Company"). 
 
 LendingTree operates what it believes to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions. The Company offers consumers tools and resources, including free credit scores, that facilitate comparison-shopping for mortgage loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings. The Company primarily seeks to match in-market consumers with multiple providers on its marketplace who can provide them with competing quotes for loans, deposit products, insurance or other related offerings they are seeking. The Company also serves as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries it generates with these providers. 
 
 The consolidated financial statements include the accounts of LendingTree and all its wholly-owned entities, except Home Loan Center, Inc. ("HLC") subsequent to its bankruptcy filing on July 21, 2019 which resulted in the Company's loss of a controlling interest in HLC under applicable accounting standards. Intercompany transactions and accounts have been eliminated. 
 Discontinued Operations 
 The LendingTree Loans business, which consisted of originating various consumer mortgage loans through HLC (the "LendingTree Loans Business"), is presented as discontinued operations in the accompanying consolidated balance sheets, consolidated statements of operations and comprehensive income and consolidated cash flows for all periods presented. The notes accompanying these consolidated financial statements reflect the Company's continuing operations and, unless otherwise noted, exclude information related to the discontinued operations. See Note 18 — Discontinued Operations for additional information. 
 Basis of Presentation 
 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 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"). The accompanying consolidated financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in the 2019 Annual Report. 
 
 NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES 
 Accounting Estimates 
 Management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates. 
 Significant estimates underlying the accompanying consolidated financial statements, including discontinued operations, include: the recoverability of long-lived assets, goodwill and intangible assets; the determination of income taxes payable and deferred income taxes, including related valuation allowances; fair value of assets acquired in a business combination; contingent consideration related to business combinations; litigation accruals; HLC ownership related claims; contract assets; various other 
 
 8 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 allowances, reserves and accruals; assumptions related to the determination of stock-based compensation; and the determination of right-of-use assets and lease liabilities. 
 The Company considered the impact of 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. These assumptions and estimates may change as new events occur and additional information is obtained. If economic conditions caused by COVID-19 do not recover as currently estimated by management, such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity. 
 Certain Risks and Concentrations 
 LendingTree's business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud. 
 Financial instruments, which potentially subject the Company to concentration of credit risk at September 30, 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. The Company requires certain Network Partners to maintain security deposits with the Company, which in the event of non-payment, would be applied against any accounts receivable outstanding. 
 Due to the nature of the mortgage lending industry, interest rate fluctuations may negatively impact future revenue from the Company's marketplace. 
 Lenders and lead purchasers participating on the Company's marketplace can offer their products directly to consumers through brokers, mass marketing campaigns or through other traditional methods of credit distribution. These lenders and lead purchasers can also offer their products online, either directly to prospective borrowers, through one or more online competitors, or both. If a significant number of potential consumers are able to obtain loans and other products from Network Partners without utilizing the Company's services, the Company's ability to generate revenue may be limited. Because the Company does not have exclusive relationships with the Network Partners whose loans and other financial products are offered on its online marketplace, consumers may obtain offers from these Network Partners without using its services. 
 Other than a support services office in India, the Company's operations are geographically limited to and dependent upon the economic condition of the United States. 
 Litigation Settlements and Contingencies 
 Litigation settlements and contingencies consists of expenses related to actual or anticipated litigation settlements. 
 Recently Adopted Accounting Pronouncements 
 In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted ASU 2018-15 in the first quarter of 2020 using the prospective approach. Subsequent to the adoption of this ASU, capitalizable implementation costs incurred in a hosting arrangement that is a service contract are recorded within prepaid and other current assets and other non-current assets on the consolidated balance sheet. 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 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. This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. Certain amendments must be applied prospectively while others are to be applied on a retrospective basis to all periods presented. The Company adopted ASU 2018-13 in the first quarter of 2020. See Note 16 —Fair Value Measurements. 
 
 9 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 In January 2017, the FASB issued ASU 2017-04, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2 of the goodwill impairment test). Instead, an impairment charge will be based on the excess of the carrying amount over the fair value. This ASU is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. The Company adopted ASU 2017-04 in the first quarter of 2020. 
 In June 2016, the FASB issued ASU 2016-13, which requires entities to measure expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU introduces ASC Topic 326, Financial Instruments—Credit Losses, which replaces the existing incurred loss model and is applicable to financial assets measured at amortized cost, including trade receivables and certain other financial assets that have the contractual right to receive cash. ASC Topic 326 is effective for annual and interim reporting periods beginning after December 15, 2019. The guidance must be adopted using a modified retrospective transition. The Company adopted ASC Topic 326 as of January 1, 2020, which did not result in any cumulative effect adjustment to the opening balance of accumulated deficit in the period of adoption. 
 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. This ASU is effective for annual and interim reporting periods beginning after December 15, 2020. Early adoption is permitted, including adoption in interim periods. Entities electing early adoption must adopt all amendments in the same period. 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 will adopt ASU 2019-12 in the first quarter of 2021. 
 
 NOTE 3 — REVENUE 
 Revenue is as follows (in thousands) : 
 
 Three Months Ended
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Home 
 $ 
 78,859 
 
 $ 
 77,265 
 
 $ 
 232,156 
 
 $ 
 212,458 
 
 Credit cards 
 6,656 
 
 54,822 
 
 65,436 
 
 165,373 
 
 Personal loans 
 12,505 
 
 43,873 
 
 52,841 
 
 117,513 
 
 Other Consumer 
 29,216 
 
 53,234 
 
 87,142 
 
 118,735 
 
 Total Consumer 
 48,377 
 
 151,929 
 
 205,419 
 
 401,621 
 
 Insurance 
 92,500 
 
 74,849 
 
 248,156 
 
 213,882 
 
 Other 
 515 
 
 6,562 
 
 1,930 
 
 23,455 
 
 Total revenue 
 $ 
 220,251 
 
 $ 
 310,605 
 
 $ 
 687,661 
 
 $ 
 851,416 
 
 The Company derives its revenue primarily from match fees and closing fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised services have transferred to the customer. The Company's services are generally transferred to the customer at a point in time. 
 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 
 
 10 

 Table of Contents 
 
 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. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a loan request to the customer. 
 Revenue from Consumer products is generated by match and other upfront fees for clicks or call transfers, as well as from closing fees, approval fees and upfront service and subscription fees. Closing fees are derived from lenders on certain auto loans, business loans, personal loans and student loans when the lender funds a loan with the consumer. Approval fees are derived from credit card issuers when the credit card consumer receives card approval from the credit card issuer. Upfront service fees and subscription fees are derived from consumers in the Company's credit services product. Upfront fees paid by consumers are recognized as revenue over the estimated time the consumer will remain a customer and receive services. Subscription fees are recognized over the period a consumer is receiving services. 
 The Company recognizes revenue on closing fees and approval fees at the point when a loan request or a credit card consumer is delivered to the customer. The Company's contractual right to closing fees and approval fees is not contemporaneous with the satisfaction of the performance obligation to deliver a loan request or a credit card consumer to the customer. As such, the Company records a contract asset at each reporting period-end related to the estimated variable consideration on closing fees and approval fees for which the Company has satisfied the related performance obligation, but are still pending the loan closing or credit card approval before the Company has a contractual right to payment. This estimate is based on the Company's historical closing rates and historical time between when a consumer request for a loan or credit card is delivered to the lender or card issuer and when the loan is closed by the lender or approved by the card issuer. 
 Revenue from the Company's Insurance products is primarily generated from upfront match fees, and upfront fees for website clicks or fees for calls. Match fees and upfront fees for clicks and call transfers are earned through the delivery of consumer requests that originated through the Company's websites or affiliates. The Company recognizes revenue at the time a consumer request is delivered to the customer, provided that no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a consumer request to the customer. 
 The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration was $ 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 $ 0.6 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, 
2020 
 
 December 31, 
2019 
 
 Cash and cash equivalents 
 $ 
 187,261 
 
 $ 
 60,243 
 
 Restricted cash and cash equivalents 
 112 
 
 96 
 
 Total cash, cash equivalents, restricted cash and restricted cash equivalents 
 $ 
 187,373 
 
 $ 
 60,339 
 
 NOTE 5 — ALLOWANCE FOR DOUBTFUL ACCOUNTS 
 Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts. 
 
 11 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, previous loss history, current and expected economic conditions and the specific customer's current and expected ability to pay its obligation. Accounts receivable are considered past due when they are outstanding longer than the contractual payment terms. Accounts receivable are written off when management deems them uncollectible. 
 A reconciliation of the beginning and ending balances of the allowance for doubtful accounts is as follows (in thousands) : 
 
 Three Months Ended September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Balance, beginning of the period 
 $ 
 1,756 
 
 $ 
 1,676 
 
 $ 
 1,466 
 
 $ 
 1,143 
 
 Charges to earnings 
 365 
 
 583 
 
 1,314 
 
 1,865 
 
 Write-off of uncollectible accounts receivable 
 ( 483 
 ) 
 
 ( 441 
 ) 
 
 ( 1,152 
 ) 
 
 ( 1,202 
 ) 
 
 Recoveries collected 
 — 
 
 5 
 
 10 
 
 17 
 
 Balance, end of the period 
 $ 
 1,638 
 
 $ 
 1,823 
 
 $ 
 1,638 
 
 $ 
 1,823 
 
 NOTE 6 — GOODWILL AND INTANGIBLE ASSETS 
 The balance of goodwill and intangible assets, net is as follows (in thousands) : 
 
 September 30, 
2020 
 
 December 31, 
2019 
 
 Goodwill 
 $ 
 903,227 
 
 $ 
 903,227 
 
 Accumulated impairment losses 
 ( 483,088 
 ) 
 
 ( 483,088 
 ) 
 
 Net goodwill 
 $ 
 420,139 
 
 $ 
 420,139 
 
 Intangible assets with indefinite lives 
 $ 
 10,142 
 
 $ 
 10,142 
 
 Intangible assets with definite lives, net 
 130,835 
 
 171,438 
 
 Total intangible assets, net 
 $ 
 140,977 
 
 $ 
 181,580 
 
 Goodwill and Indefinite-Lived Intangible Assets 
 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. 
 Intangible Assets with Definite Lives 
 Intangible assets with definite lives relate to the following (in thousands) : 
 
 Cost 
 
 Accumulated 
 Amortization 
 
 Net 
 
 Technology 
 $ 
 116,000 
 
 $ 
 ( 70,004 
 ) 
 
 $ 
 45,996 
 
 Customer lists 
 77,300 
 
 ( 17,033 
 ) 
 
 60,267 
 
 Trademarks and tradenames 
 17,200 
 
 ( 9,062 
 ) 
 
 8,138 
 
 Website content 
 43,200 
 
 ( 26,767 
 ) 
 
 16,433 
 
 Other 
 5 
 
 ( 4 
 ) 
 
 1 
 
 Balance at September 30, 2020 
 $ 
 253,705 
 
 $ 
 ( 122,870 
 ) 
 
 $ 
 130,835 
 
 12 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 Cost 
 
 Accumulated 
 Amortization 
 
 Net 
 
 Technology 
 $ 
 116,200 
 
 $ 
 ( 48,938 
 ) 
 
 $ 
 67,262 
 
 Customer lists 
 77,300 
 
 ( 12,452 
 ) 
 
 64,848 
 
 Trademarks and tradenames 
 17,200 
 
 ( 6,407 
 ) 
 
 10,793 
 
 Website content 
 51,000 
 
 ( 22,467 
 ) 
 
 28,533 
 
 Other 
 5 
 
 ( 3 
 ) 
 
 2 
 
 Balance at December 31, 2019 
 $ 
 261,705 
 
 $ 
 ( 90,267 
 ) 
 
 $ 
 171,438 
 
 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 
 
 Remainder of current year 
 $ 
 12,475 
 
 Year ending December 31, 2021 
 42,738 
 
 Year ending December 31, 2022 
 25,256 
 
 Year ending December 31, 2023 
 8,602 
 
 Year ending December 31, 2024 
 6,747 
 
 Thereafter 
 35,017 
 
 Total intangible assets with definite lives, net 
 $ 
 130,835 
 
 NOTE 7 — EQUITY INVESTMENT 
 On February 28, 2020 , the Company acquired an equity interest in Stash Financial, Inc. (“Stash”) for $ 80.0 million . Stash is a consumer investing and banking platform. Stash brings together banking, investing, and education into one seamless experience offering a full-suite of personal investment accounts, Traditional and Roth IRAs, custodial investment accounts, and banking services, including checking accounts and debit cards with a Stock-Back ® rewards program. 
 The Stash equity securities do not have a readily determinable fair value and, upon acquisition, the Company elected the measurement alternative to value its securities. 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 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 
 Changes in Contingent Consideration 
 In 2018, the Company acquired all of the outstanding equity interests of QuoteWizard.com, LLC (“QuoteWizard”) and Ovation Credit Services, Inc. (“Ovation”). 
 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 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. 
 
 13 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 Changes in the fair value of contingent consideration is summarized as follows ( in thousands) : 
 
 Three Months Ended
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 QuoteWizard 
 $ 
 6,568 
 
 $ 
 4,278 
 
 $ 
 6,364 
 
 $ 
 21,171 
 
 Ovation 
 90 
 
 ( 811 
 ) 
 
 1,270 
 
 ( 825 
 ) 
 
 SnapCap 
 — 
 
 372 
 
 77 
 
 1,822 
 
 DepositAccounts 
 — 
 
 — 
 
 — 
 
 ( 947 
 ) 
 
 Total changes in fair value of contingent consideration 
 $ 
 6,658 
 
 $ 
 3,839 
 
 $ 
 7,711 
 
 $ 
 21,221 
 
 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 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. 
 
 NOTE 9 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 
 Accrued expenses and other current liabilities consist of the following (in thousands) : 
 
 September 30, 
2020 
 
 December 31, 
2019 
 
 Accrued advertising expense 
 $ 
 50,752 
 
 $ 
 65,836 
 
 Accrued compensation and benefits 
 15,480 
 
 10,540 
 
 Accrued professional fees 
 3,510 
 
 1,560 
 
 Customer deposits and escrows 
 7,547 
 
 6,920 
 
 Contribution to LendingTree Foundation 
 3,333 
 
 3,333 
 
 Current lease liabilities 
 5,826 
 
 6,885 
 
 Other 
 19,885 
 
 17,681 
 
 Total accrued expenses and other current liabilities 
 $ 
 106,333 
 
 $ 
 112,755 
 
 NOTE 10— LEASES 
 The Company is a lessee to leases of corporate offices and certain office equipment. The majority of leases for corporate offices include one or more options to renew, with renewal terms ranging from two to five years . These renewal options have not been included in the calculation of right-of-use assets and lease liabilities, as the Company is not reasonably certain of the exercise of these renewal options. 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. 
 
 14 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 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
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Operating lease cost 
 $ 
 3,568 
 
 $ 
 1,765 
 
 $ 
 7,562 
 
 $ 
 4,495 
 
 Short-term lease cost 
 11 
 
 21 
 
 49 
 
 69 
 
 Total lease cost 
 $ 
 3,579 
 
 $ 
 1,786 
 
 $ 
 7,611 
 
 $ 
 4,564 
 
 Weighted average remaining lease term and discount rate for operating leases are as follows: 
 
 September 30, 2020 
 
 December 31, 2019 
 
 Weighted average remaining lease term 
 13.0 years 
 
 5.0 years 
 
 Weighted average discount rate 
 5.0 
 % 
 
 4.7 
 % 
 
 Supplemental cash flow information related to leases is as follows (in thousands) : 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 Cash paid for amounts included in the measurement of lease liabilities: 
 
 Operating cash flows from operating leases 
 $ 
 5,077 
 
 $ 
 4,191 
 
 Right-of-use assets obtained in exchange for new operating lease liabilities 
 $ 
 66,463 
 
 $ 
 21,912 
 
 Maturities of lease liabilities as of September 30, 2020 are as follows (in thousands) : 
 
 Operating Leases 
 
 Remainder of current year 
 $ 
 2,118 
 
 Year ending December 31, 2021 
 8,949 
 
 Year ending December 31, 2022 
 12,619 
 
 Year ending December 31, 2023 
 12,409 
 
 Year ending December 31, 2024 
 10,885 
 
 Thereafter 
 105,398 
 
 Total lease payments 
 152,378 
 
 Less: Interest 
 46,096 
 
 Less: Tenant improvement allowances 
 12,859 
 
 Present value of lease liabilities 
 $ 
 93,423 
 
 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. 
 
 15 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 NOTE 11 — SHAREHOLDERS' EQUITY 
 Basic and diluted income per share was determined based on the following share data (in thousands) : 
 
 Three Months Ended
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Weighted average basic common shares 
 13,033 
 
 12,890 
 
 12,992 
 
 12,805 
 
 Effect of stock options 
 — 
 
 726 
 
 — 
 
 760 
 
 Effect of dilutive share awards 
 — 
 
 136 
 
 — 
 
 176 
 
 Effect of Convertible Senior Notes and warrants 
 — 
 
 880 
 
 — 
 
 888 
 
 Weighted average diluted common shares 
 13,033 
 
 14,632 
 
 12,992 
 
 14,629 
 
 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 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 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 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 
 Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations and comprehensive income (in thousands) : 
 
 Three Months Ended
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Cost of revenue 
 $ 
 372 
 
 $ 
 208 
 
 $ 
 947 
 
 $ 
 558 
 
 Selling and marketing expense 
 1,678 
 
 835 
 
 4,431 
 
 4,867 
 
 General and administrative expense 
 10,356 
 
 8,627 
 
 29,208 
 
 30,534 
 
 Product development 
 1,755 
 
 1,127 
 
 4,650 
 
 4,873 
 
 Total non-cash compensation 
 $ 
 14,161 
 
 $ 
 10,797 
 
 $ 
 39,236 
 
 $ 
 40,832 
 
 16 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 Stock Options 
 A summary of changes in outstanding stock options is as follows: 
 
 Number of Options 
 
 Weighted 
 Average 
 Exercise 
 Price 
 
 Weighted 
 Average 
 Remaining 
 Contractual 
 Term 
 
 Aggregate 
 Intrinsic 
 Value (a) 
 
 (per option) 
 
 (in years) 
 
 (in thousands) 
 
 Options outstanding at January 1, 2020 
 777,871 
 
 $ 
 69.87 
 
 Granted (b) 
 73,737 
 
 276.38 
 
 Exercised 
 ( 47,500 
 ) 
 
 161.39 
 
 Forfeited 
 ( 717 
 ) 
 
 291.12 
 
 Expired 
 ( 2,036 
 ) 
 
 352.68 
 
 Options outstanding at September 30, 2020 
 801,355 
 
 82.54 
 
 3.87 
 
 $ 
 180,661 
 
 Options exercisable at September 30, 2020 
 651,144 
 
 $ 
 40.61 
 
 2.79 
 
 $ 
 173,993 
 
 (a) 
 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. 
 
 (b) 
 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. The weighted average assumptions used are as follows: 
 
 Expected term (1) 
 5.00 - 6.25 years 
 
 Expected dividend (2) 
 — 
 
 Expected volatility (3) 
 52 - 60% 
 
 Risk-free interest rate (4) 
 0.33 - 0.96% 
 
 (1) 
 The expected term of stock options granted was calculated using the "Simplified Method," which utilizes the midpoint between the weighted average time of vesting and the end of the contractual term. This method was utilized for the stock options due to a lack of historical exercise behavior by the Company's employees. 
 
 (2) 
 For all stock options granted in 2020 , no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate. 
 
 (3) 
 The expected volatility rate is based on the historical volatility of the Company's common stock. 
 
 (4) 
 The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date. 
 
 17 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 Stock Options with Market Conditions 
 A summary of changes in outstanding stock options with market conditions at target is as follows: 
 
 Number of Options with Market Conditions 
 
 Weighted 
 Average 
 Exercise 
 Price 
 
 Weighted 
 Average 
 Remaining 
 Contractual 
 Term 
 
 Aggregate 
 Intrinsic 
 Value (a) 
 
 (per option) 
 
 (in years) 
 
 (in thousands) 
 
 Options outstanding at January 1, 2020 
 463,440 
 
 $ 
 204.31 
 
 Granted (b) 
 19,126 
 
 275.82 
 
 Exercised 
 — 
 
 — 
 
 Forfeited 
 — 
 
 — 
 
 Expired 
 — 
 
 — 
 
 Options outstanding at September 30, 2020 
 482,566 
 
 207.14 
 
 7.02 
 
 $ 
 50,162 
 
 Options exercisable at September 30, 2020 
 — 
 
 $ 
 — 
 
 0.00 
 
 $ 
 — 
 
 (a) 
 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. 
 
 (b) 
 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. The assumptions used are as follows: 
 
 Expected term (1) 
 7.00 years 
 
 Expected dividend (2) 
 — 
 
 Expected volatility (3) 
 51% 
 
 Risk-free interest rate (4) 
 1.03% 
 
 (1) 
 The expected term of stock options with a market condition granted was calculated using the midpoint between the time of vesting and the end of the contractual term. 
 
 (2) 
 For all stock options with a market condition granted in 2020 , no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate. 
 
 (3) 
 The expected volatility rate is based on the historical volatility of the Company's common stock. 
 
 (4) 
 The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date. 
 
 A maximum of 805,885 shares may be earned for achieving superior performance up to 167 % of the target number of shares. 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 . 
 
 18 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 Restricted Stock Units 
 A summary of changes in outstanding nonvested restricted stock units ("RSUs") is as follows: 
 
 RSUs 
 
 Number of Units 
 
 Weighted Average Grant Date Fair Value 
 
 (per unit) 
 
 Nonvested at January 1, 2020 
 144,939 
 
 $ 
 267.85 
 
 Granted 
 130,518 
 
 286.40 
 
 Vested 
 ( 62,167 
 ) 
 
 240.57 
 
 Forfeited 
 ( 10,333 
 ) 
 
 279.95 
 
 Nonvested at September 30, 2020 
 202,957 
 
 $ 
 287.54 
 
 Restricted Stock Units with Performance Conditions 
 A summary of changes in outstanding nonvested RSUs with performance conditions is as follows: 
 
 RSUs with Performance Conditions 
 
 Number of Units 
 
 Weighted Average Grant Date Fair Value 
 
 (per unit) 
 
 Nonvested at January 1, 2020 
 14,647 
 
 $ 
 210.55 
 
 Granted 
 — 
 
 — 
 
 Vested 
 ( 1,992 
 ) 
 
 125.75 
 
 Forfeited 
 — 
 
 — 
 
 Nonvested at September 30, 2020 
 12,655 
 
 $ 
 223.90 
 
 Restricted Stock Awards with Performance Conditions 
 A summary of changes in outstanding nonvested restricted stock awards ("RSAs") with performance conditions is as follows: 
 
 RSAs with Performance Conditions 
 
 Number of Awards 
 
 Weighted Average Grant Date Fair Value 
 
 (per unit) 
 
 Nonvested at January 1, 2020 
 47,608 
 
 $ 
 340.25 
 
 Granted 
 — 
 
 — 
 
 Vested 
 ( 17,853 
 ) 
 
 340.25 
 
 Forfeited 
 — 
 
 — 
 
 Nonvested at September 30, 2020 
 29,755 
 
 $ 
 340.25 
 
 19 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 Restricted Stock Awards with Market Conditions 
 A summary of changes in outstanding nonvested RSAs with market conditions at target is as follows: 
 
 RSAs with Market Conditions 
 
 Number of Awards 
 
 Weighted Average Grant Date Fair Value 
 
 (per unit) 
 
 Nonvested at January 1, 2020 
 26,674 
 
 $ 
 340.25 
 
 Granted 
 — 
 
 — 
 
 Vested 
 — 
 
 — 
 
 Forfeited 
 — 
 
 — 
 
 Nonvested at September 30, 2020 
 26,674 
 
 $ 
 340.25 
 
 A maximum of 44,545 shares may be earned for achieving superior performance up to 167 % of the target number of shares. 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
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 (in thousands, except percentages) 
 
 Income tax benefit (expense) 
 $ 
 7,925 
 
 $ 
 ( 1,889 
 ) 
 
 $ 
 14,866 
 
 $ 
 11,552 
 
 Effective tax rate 
 24.2 
 % 
 
 7.2 
 % 
 
 50.7 
 % 
 
 ( 43.7 
 )% 
 
 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 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 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. 
 
 20 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 Three Months Ended
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 (in thousands) 
 
 Income tax benefit (expense) - excluding excess tax benefit on stock compensation and CARES Act 
 $ 
 7,750 
 
 $ 
 ( 4,705 
 ) 
 
 $ 
 6,780 
 
 $ 
 ( 4,989 
 ) 
 
 Excess tax benefit on stock compensation 
 175 
 
 2,816 
 
 1,982 
 
 16,541 
 
 Income tax benefit from CARES Act 
 — 
 
 — 
 
 6,104 
 
 — 
 
 Income tax benefit (expense) 
 $ 
 7,925 
 
 $ 
 ( 1,889 
 ) 
 
 $ 
 14,866 
 
 $ 
 11,552 
 
 NOTE 14 — DEBT 
 Convertible Senior Notes 
 2025 Notes 
 On July 24, 2020, the Company issued $ 575.0 million aggregate principal amount of its 0.50 % Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) in a private placement. The issuance included $ 75.0 million aggregate principal amount of 2025 Notes under a 13-day purchase option which was exercised in full. The 2025 Notes bear interest at a rate of 0.50 % per year, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2021. The 2025 Notes will mature on July 15, 2025, unless earlier repurchased, redeemed or converted. 
 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; or 
 
 • 
 upon the occurrence of specified corporate events including but not limited to a fundamental change. 
 
 21 

 Table of Contents 
 
 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, 
2020 
 
 Gross carrying amount 
 $ 
 575,000 
 
 Unamortized debt discount 
 115,427 
 
 Debt issuance costs 
 11,591 
 
 Net carrying amount 
 $ 
 447,982 
 
 2022 Notes 
 On May 31, 2017, the Company issued $ 300.0 million aggregate principal amount of its 0.625 % Convertible Senior Notes due June 1, 2022 (the “2022 Notes”) in a private placement. The 2022 Notes bear interest at a rate of 0.625 % per year, payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2017. The 2022 Notes will mature on June 1, 2022, unless earlier repurchased or converted. 
 
 22 

 Table of Contents 
 
 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 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. It is the intent of the Company to settle the principal amount of the 2022 Notes in cash and any conversion premium in shares of its common stock. 
 The 2022 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 2022 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 February 1, 2022, the 2022 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, 2017 (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 2022 Notes) per $1,000 principal amount of 2022 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; or 
 
 • 
 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 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. 
 The Company may not redeem the 2022 Notes prior to the maturity date and no sinking fund is provided for the 2022 Notes. Upon the occurrence of a fundamental change prior to the maturity date of the 2022 Notes, holders of the 2022 Notes may require the Company to repurchase all or a portion of the 2022 Notes for cash at a price equal to 100 % of the principal amount of the 2022 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 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. As a result, the initial components of debt and equity were $ 238.4 million and $ 61.6 million , respectively. Financing costs related to the issuance of the 2022 Notes were approximately $ 9.3 million , of which $ 7.4 million were allocated to the liability component and are being amortized to interest expense over the term of the debt and $ 1.9 million were allocated to the equity component. 
 
 23 

 Table of Contents 
 
 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 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, 
2020 
 
 December 31, 
2019 
 
 Gross carrying amount 
 $ 
 169,692 
 
 $ 
 299,991 
 
 Unamortized debt discount 
 12,639 
 
 31,789 
 
 Debt issuance costs 
 1,515 
 
 3,811 
 
 Net carrying amount 
 $ 
 155,538 
 
 $ 
 264,391 
 
 Convertible Note Hedge and Warrant Transactions 
 2020 Hedge and Warrants 
 On July 24, 2020, in connection with the issuance of the 2025 Notes, the Company entered into Convertible Note Hedge (the “2020 Hedge”) and warrant transactions with respect to the Company’s common stock. The Company used approximately $ 63.0 million of the net proceeds from the 2025 Notes to pay for the cost of the 2020 Hedge, after such cost was partially offset by the proceeds from the warrant transactions. 
 On July 24, 2020, the Company paid $ 124.2 million to the counterparties for the 2020 Hedge transactions. The 2020 Hedge transactions cover 1.2 million shares of the Company’s common stock, the same number of shares initially underlying the 2025 Notes, and are exercisable upon any conversion of the 2025 Notes. The 2020 Hedge transactions are expected generally to 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. 
 
 24 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 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. The Company used approximately $ 18.1 million of the net proceeds from the 2022 Notes to pay for the cost of the 2017 Hedge, after such cost was partially offset by the proceeds from the warrant transactions. 
 On May 31, 2017, the Company paid $ 61.5 million to the counterparties for the 2017 Hedge transactions. The 2017 Hedge transactions initially covered 1.4 million shares of the Company’s common stock, the same number of shares initially underlying the 2022 Notes, and 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 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 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 
 On December 10, 2019, the Company's wholly-owned subsidiary, LendingTree, LLC, entered into an amended and restated $ 500.0 million five -year senior secured revolving credit facility (the "Amended Revolving Credit Facility") which amended and restated the Company's previous $ 350.0 million five -year senior secured revolving credit facility (the “2017 Revolving Credit Facility”). The Amended Revolving Credit Facility matures on December 10, 2024. 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 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. 
 Up to $ 10.0 million of the Amended Revolving Credit Facility will be available for short-term loans, referred to as swingline loans. Under certain conditions, the Company will be permitted to add one or more term loans and/or increase revolving commitments under the Amended Revolving Credit Facility by an additional amount equal to the greater of $ 185.0 million or 100% of Consolidated EBITDA as defined, or a greater amount provided that a total consolidated senior secured debt to EBITDA ratio does not exceed 2.50 to 1.00. 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 September 30, 2020 and December 31, 2019 , the Company had outstanding one letter of credit issued in the amount of $ 0.2 million . 
 
 25 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 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: 
 
 • 
 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; or 
 
 • 
 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. 
 
 All swingline loans bear interest at the base rate defined above. Interest on the Company’s borrowings are payable quarterly in arrears for base rate loans and on the last day of each interest rate period (but not less often than three months) for LIBO rate loans. 
 The Amended Revolving Credit Facility contains a restrictive financial covenant, which initially limits the total consolidated debt to EBITDA ratio to 4.5 , with step downs to 4.0 over time, except that this may increase by 0.5 for the four fiscal quarters following a material acquisition. 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. 
 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). The obligations under this facility are unconditionally guaranteed on a senior basis by LendingTree, Inc. 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). 
 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. The letter of credit participation fee is based upon the aggregate face amount of outstanding letters of credit at an applicable percentage of 1.25 % to 2.0 % based on a total consolidated debt to EBITDA ratio. 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. Debt issuance costs of $ 1.1 million related to the July 21, 2020 temporary amendment are being amortized to interest expense through June 30, 
 
 26 

 Table of Contents 
 
 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 
 Overview 
 LendingTree is involved in legal proceedings on an ongoing basis. In assessing the materiality of a legal proceeding, the Company evaluates, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs (e.g., injunctive relief) that may require it to change its business practices in a manner that could have a material and adverse impact on the Company's business. With respect to the matters disclosed in this Note 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 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. The litigation settlement accruals relate to litigation matters that were either settled or a firm offer for settlement was extended, thereby establishing an accrual amount that is both probable and reasonably estimable. See Note 18 —Discontinued Operations for additional information. 
 
 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 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. The changes in the fair value of the Company's Level 3 liabilities are as follows (in thousands) : 
 
 Three Months Ended
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Contingent consideration, beginning of period 
 $ 
 28,517 
 
 $ 
 50,219 
 
 $ 
 33,464 
 
 $ 
 38,837 
 
 Transfers into Level 3 
 — 
 
 — 
 
 — 
 
 — 
 
 Transfers out of Level 3 
 — 
 
 — 
 
 — 
 
 — 
 
 Total net losses (gains) included in earnings (realized and unrealized) 
 6,658 
 
 3,839 
 
 7,711 
 
 21,221 
 
 Purchases, sales and settlements: 
 
 Additions 
 — 
 
 — 
 
 — 
 
 — 
 
 Payments 
 — 
 
 — 
 
 ( 6,000 
 ) 
 
 ( 6,000 
 ) 
 
 Contingent consideration, end of period 
 $ 
 35,175 
 
 $ 
 54,058 
 
 $ 
 35,175 
 
 $ 
 54,058 
 
 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. 
 
 27 

 Table of Contents 
 
 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. Actual results will differ from the projected results and could have a significant impact on the estimated fair value of the contingent considerations. Additionally, as the liability is stated at present value, the passage of time alone will increase the estimated fair value of the liability each reporting period. Any changes in fair value will be recorded in operating income in the consolidated statements of operations and comprehensive income. 
 The following table provides quantitative information about Level 3 fair value measurements. 
 
 Fair Value at 
 September 30, 2020 
 Valuation Technique 
 Unobservable Input 
 Range (Weighted Average) (a) 
 
 (in thousands) 
 
 Contingent consideration 
 $ 
 35,175 
 
 Option pricing model 
 Operating results growth rate 
 24.4% - 25.7% (25.1%) 
 
 Discount rate 
 6.8 
 % 
 
 (a) Discount rates were weighted by the relative undiscounted value of expected earnout payments. Other unobservable inputs were weighted by the relative maximum potential earnout payments. 
 
 NOTE 17 — SEGMENT INFORMATION 
 The Company manages its business and reports its financial results through the following three operating and reportable segments: Home, Consumer and Insurance. Characteristics which were relied upon in making the determination of the reportable segments include the nature of the products, the organization's internal structure, and the information that is regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources. The 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: purchase mortgage, refinance mortgage, home equity loans and lines of credit, reverse mortgage loans, and real estate. The Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products such as credit repair and debt settlement. The Insurance segment consists of insurance quote products. Revenue from the resale of online advertising space to third parties and revenue from home improvement referrals, and the related variable marketing and advertising expenses, are included within the Other category. 
 The following tables are a reconciliation of segment profit, which is the Company's primary segment profitability measure, to income before income taxes and discontinued operations. Segment cost of revenue and marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses, that are directly attributable to the segments' products. This measure excludes overhead, fixed costs and personnel-related expenses. For the Other category, segment cost of revenue and marketing expense also includes the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties. The Company ceased reselling online advertising space during the first quarter of 2020. 
 
 28 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 Three Months Ended September 30, 2020 
 
 Home 
 Consumer 
 Insurance 
 Other 
 Total 
 
 (in thousands) 
 
 Revenue 
 $ 
 78,859 
 
 $ 
 48,377 
 
 $ 
 92,500 
 
 $ 
 515 
 
 $ 
 220,251 
 
 Segment marketing expense 
 53,693 
 
 26,730 
 
 55,457 
 
 513 
 
 136,393 
 
 Segment profit 
 25,166 
 
 21,647 
 
 37,043 
 
 2 
 
 83,858 
 
 Cost of revenue 
 
 13,220 
 
 Brand and other marketing expense 
 
 18,277 
 
 General and administrative expense 
 
 33,705 
 
 Product development 
 
 11,477 
 
 Depreciation 
 
 3,535 
 
 Amortization of intangibles 
 
 13,090 
 
 Change in fair value of contingent consideration 
 
 6,658 
 
 Litigation settlements and contingencies 
 
 13 
 
 Operating loss 
 
 ( 16,117 
 ) 
 
 Interest expense, net 
 
 ( 16,617 
 ) 
 
 Loss before income taxes and discontinued operations 
 
 $ 
 ( 32,734 
 ) 
 
 Three Months Ended September 30, 2019 
 
 Home 
 Consumer 
 Insurance 
 Other 
 Total 
 
 (in thousands) 
 
 Revenue 
 $ 
 77,265 
 
 $ 
 151,929 
 
 $ 
 74,849 
 
 $ 
 6,562 
 
 $ 
 310,605 
 
 Segment cost of revenue and marketing expense 
 49,173 
 
 86,760 
 
 44,846 
 
 6,178 
 
 186,957 
 
 Segment profit 
 28,092 
 
 65,169 
 
 30,003 
 
 384 
 
 123,648 
 
 Cost of revenue (exclusive of cost of advertising re-sold to third parties included above) 
 
 11,862 
 
 Brand and other marketing expense 
 
 19,670 
 
 General and administrative expense 
 
 30,323 
 
 Product development 
 
 10,200 
 
 Depreciation 
 
 2,696 
 
 Amortization of intangibles 
 
 13,778 
 
 Change in fair value of contingent consideration 
 
 3,839 
 
 Severance 
 
 179 
 
 Litigation settlements and contingencies 
 
 ( 92 
 ) 
 
 Operating income 
 
 31,193 
 
 Interest expense, net 
 
 ( 4,845 
 ) 
 
 Other income 
 
 4 
 
 Income before income taxes and discontinued operations 
 
 $ 
 26,352 
 
 29 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
 
 Nine Months Ended September 30, 2020 
 
 Home 
 Consumer 
 Insurance 
 Other 
 Total 
 
 (in thousands) 
 
 Revenue 
 $ 
 232,156 
 
 $ 
 205,419 
 
 $ 
 248,156 
 
 $ 
 1,930 
 
 $ 
 687,661 
 
 Segment cost of revenue and marketing expense 
 132,353 
 
 121,271 
 
 150,458 
 
 2,175 
 
 406,257 
 
 Segment profit (loss) 
 99,803 
 
 84,148 
 
 97,698 
 
 ( 245 
 ) 
 281,404 
 
 Cost of revenue (exclusive of cost of advertising re-sold to third parties included above) 
 
 39,850 
 
 Brand and other marketing expense 
 
 58,958 
 
 General and administrative expense 
 
 94,276 
 
 Product development 
 
 33,252 
 
 Depreciation 
 
 10,463 
 
 Amortization of intangibles 
 
 40,603 
 
 Change in fair value of contingent consideration 
 
 7,711 
 
 Severance 
 
 190 
 
 Litigation settlements and contingencies 
 
 ( 983 
 ) 
 
 Operating loss 
 
 ( 2,916 
 ) 
 
 Interest expense, net 
 
 ( 26,406 
 ) 
 
 Other income 
 
 7 
 
 Loss before income taxes and discontinued operations 
 
 $ 
 ( 29,315 
 ) 
 
 Nine Months Ended September 30, 2019 
 
 Home 
 Consumer 
 Insurance 
 Other 
 Total 
 
 (in thousands) 
 
 Revenue 
 $ 
 212,458 
 
 $ 
 401,621 
 
 $ 
 213,882 
 
 $ 
 23,455 
 
 $ 
 851,416 
 
 Segment cost of revenue and marketing expense 
 136,235 
 
 231,707 
 
 127,209 
 
 21,967 
 
 517,118 
 
 Segment profit 
 76,223 
 
 169,914 
 
 86,673 
 
 1,488 
 
 334,298 
 
 Cost of revenue (exclusive of cost of advertising re-sold to third parties included above) 
 
 33,453 
 
 Brand and other marketing expense 
 
 68,418 
 
 General and administrative expense 
 
 89,391 
 
 Product development 
 
 30,541 
 
 Depreciation 
 
 7,737 
 
 Amortization of intangibles 
 
 41,485 
 
 Change in fair value of contingent consideration 
 
 21,221 
 
 Severance 
 
 636 
 
 Litigation settlements and contingencies 
 
 ( 291 
 ) 
 
 Operating income 
 
 41,707 
 
 Interest expense, net 
 
 ( 15,408 
 ) 
 
 Other income 
 
 143 
 
 Income before income taxes and discontinued operations 
 
 $ 
 26,442 
 
 NOTE 18 — DISCONTINUED OPERATIONS 
 The LendingTree Loans Business is presented as discontinued operations in the accompanying financial statements. The LendingTree Loans Business originated various consumer mortgage loans through HLC. On June 6, 2012, the Company sold substantially all of the operating assets of HLC, including the LendingTree Loans Business, for $ 55.9 million in cash to a wholly-owned subsidiary of Discover Financial Services ("Discover"). Discover generally did not assume liabilities of HLC that arose before the closing date, except for certain liabilities directly related to assets Discover acquired. A portion of the purchase price 
 
 30 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 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. 
 Upon closing of the sale of substantially all of the operating assets of HLC on June 6, 2012, HLC ceased to originate consumer loans. Certain liability for losses on previously sold loans remains with HLC. 
 Litigation settlements and contingencies and legal fees associated with ongoing related bankruptcy and legal proceedings against the Company are included in discontinued operations in the accompanying financial statements. 
 Home Loan Center, Inc. Bankruptcy Filing 
 On June 21, 2019, the U.S. District Court of Minnesota entered judgment in ResCap Liquidating Trust v. Home Loan Center, Inc. , against HLC for $ 68.5 million , see Litigation Related to Discontinued Operations below. The judgment against HLC exceeded the assets of HLC, which were $ 11.2 million at July 21, 2019, including cash of $ 5.9 million . On July 19, 2019, HLC appealed the judgment to the United States Court of Appeals for the Eighth Circuit. 
 On July 21, 2019, at the direction of the sole independent director of HLC, HLC voluntarily filed a petition under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the U.S. Bankruptcy Court in the Northern District of California in San Jose, California (the “Bankruptcy Court”) in order to preserve assets for the benefit of all creditors of HLC. On September 16, 2019, the Bankruptcy Court converted the bankruptcy to Chapter 7 of the Bankruptcy Code and appointed a Trustee to liquidate HLC's assets. 
 HLC’s filing under the Bankruptcy Code creates an automatic stay of enforcement of the judgment entered against HLC by the Minnesota court in ResCap Liquidating Trust v. Home Loan Center, Inc. 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 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. The effect of such deconsolidation was the elimination of the consolidated assets and liabilities of HLC (and its consolidated subsidiary) from the Company’s consolidated balance sheets. Upon deconsolidation, in the third quarter of 2019 the Company recognized a loss of $ 5.5 million which includes a net gain of $ 4.5 million related to the removal of HLC's (and its consolidated subsidiary's) assets and liabilities and the recognition of a liability of $ 10.0 million related to LendingTree LLC's ownership in HLC. No consideration was received by the Company as a result of the deconsolidation. 
 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 . 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 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. 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 
 Residential Funding Company 
 ResCap Liquidating Trust v. Home Loan Center, Inc., Case No. 14-cv-1716 (U.S. Dist. Ct., Minn.), successor to Residential Funding Company, LLC v Home Loan Center, Inc., No. 13-cv-3451 (U.S. Dist. Ct., Minn.). On or about December 16, 2013, Home Loan Center, Inc. was served in the original captioned matter, which involves claims of Residential Funding Company, LLC ("RFC") for damages for breach of contract and indemnification for certain residential mortgage loans as well as residential mortgage-backed securitizations ("RMBS") containing mortgage loans. 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 
 
 31 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 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. 
 In December 2013, the United States Bankruptcy Court for the Southern District of New York entered an Order confirming the Second Amended Joint Chapter 11 Plan Proposed by Residential Capital, LLC et al. and the Official Committee of Unsecured Creditors. Plaintiff then began filing substantially similar complaints against approximately 80 of the loan originators from whom RFC had purchased loans, including HLC, in federal and state courts in Minnesota and New York. In each case, plaintiff claimed that the defendant is liable for a portion of the global settlement in RFC’s bankruptcy. 
 Plaintiff asserted two claims against HLC: (1) breach of contract based on HLC’s alleged breach of representations and warranties concerning the quality and characteristics of the mortgage loans it sold to RFC; and (2) contractual indemnification for alleged liabilities, losses, and damages incurred by RFC arising out of purported defects in loans that RFC purchased from HLC and sold to third parties. Plaintiff alleged that the “types of defects” contained in the loans it purchased from HLC included “income misrepresentation, employment misrepresentation, appraisal misrepresentations or inaccuracies, undisclosed debt, and missing or inaccurate documents.” Plaintiff sought damages of up to $ 61.0 million plus attorney's fees and prejudgment interest. 
 HLC denied the material allegations of the complaint and asserted numerous defenses thereto. The matter went to trial in the fourth quarter of 2018 and the jury returned a verdict of $ 28.7 million in favor of plaintiff. On June 21, 2019, the U.S. District Court in Minnesota entered judgment against HLC for $ 68.5 million . The judgment is comprised of: (i) $ 28.7 million in damages awarded by the jury; (ii) $ 14.1 million in pre-verdict interest; (iii) $ 23.1 million in attorneys' fees and costs, and (iv) $ 2.6 million in post-verdict, prejudgment interest. 
 HLC’s filing under the Bankruptcy Code discussed above in Home Loan Center, Inc. Bankruptcy Filing creates an automatic stay of enforcement of the judgment entered against HLC by the U.S. District Court in Minnesota. On August 27, 2019, plaintiff filed a lawsuit captioned ResCap Liquidating Trust v. LendingTree, LLC, et al., Case No. 19-cv-2360 (U.S. Dist. Ct., Minn.) , seeking to hold the Company liable for the judgment against HLC, under assumption of liability, agency and alter ego theories. The Company believes that these claims lack merit. On October 17, 2019, the Company filed a motion to dismiss the liability and agency claims, and oral arguments with respect to such motion were held on January 10, 2020. On March 20, 2020, the court denied the Company's motion to dismiss, or in the alternative, to compel arbitration, and on April 3, 2020, the Company appealed the court's findings with respect to the Company's request to compel arbitration of the first count of the lawsuit. On June 17, 2020, the Company entered into a settlement agreement with ResCap, pursuant to which, the Company agreed to, among other things, pay ResCap $ 58.5 million , less any amounts ResCap receives in the HLC bankruptcy, in exchange for, among other things, ResCap releasing any and all claims against the Company, and the Company’s directors and officers, including any claims asserted in ResCap v. LendingTree. 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 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. 
 Lehman Brothers Holdings Inc. v. 1st Advantage Mortgage, LLC et al., Case No. 08-13555 (SCC), Adversary Proceeding No. 16-01342 (SCC) (Bankr. S.D.N.Y.). In February 2016, Lehman Brothers Holdings, Inc. (“LBHI”) filed an Adversary Complaint against HLC and approximately 149 other defendants (the "Complaint"). In December 2018, LBHI amended its complaint against HLC. The amended complaint references approximately 370 allegedly defective mortgage loans sold by HLC with purported "Claim Amounts" totaling $ 40.2 million . LBHI alleges it settled all such claims and is seeking indemnification from HLC for LBHI’s purported losses and liabilities associated with such settlements, plus prejudgment interest, attorneys’ fees, litigation costs and other expenses. The amended complaint does not specify the amount of LBHI’s purported damages. On December 4, 2019, LBHI filed a $ 44.7 million proof of claim in HLC’s bankruptcy seeking recovery for the claims asserted in the lawsuit. The Company believes that these claims lack merit and understands that HLC intends to defend this action vigorously. 
 HLC’s filing under the Bankruptcy Code discussed above in Home Loan Center, Inc. Bankruptcy Filing creates an automatic stay of this proceeding. On June 11, 2020, LBHI filed a lawsuit captioned Lehman Brothers Holdings Inc. v. LendingTree, LLC, et al., Case No. 20-cv-01351 (U.S. Dist. Ct., Minn.) , seeking to hold the Company liable for their allowed bankruptcy claim of 
 
 32 

 Table of Contents 
 
 LENDINGTREE, INC. AND SUBSIDIARIES 
 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 income (loss) reported as discontinued operations in the accompanying consolidated statements of operations and comprehensive income are as follows (in thousands) : 
 
 Three Months Ended
September 30, 
 
 Nine Months Ended
September 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Revenue 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 Gain from removal of HLC's assets and liabilities 
 — 
 
 4,515 
 
 — 
 
 4,515 
 
 Other operating gains (expenses) 
 193 
 
 ( 32,182 
 ) 
 
 ( 34,333 
 ) 
 
 ( 34,492 
 ) 
 
 Income (loss) before income taxes 
 193 
 
 ( 27,667 
 ) 
 
 ( 34,333 
 ) 
 
 ( 29,977 
 ) 
 
 Income tax (expense) benefit 
 ( 27 
 ) 
 
 7,468 
 
 8,783 
 
 7,953 
 
 Net income (loss) 
 $ 
 166 
 
 $ 
 ( 20,199 
 ) 
 
 $ 
 ( 25,550 
 ) 
 
 $ 
 ( 22,024 
 ) 
 
 Losses from discontinued operations included all activity of HLC prior to bankruptcy, including litigation settlements, contingencies and legal fees associated with legal proceedings. 
 The results of discontinued operations also include litigation settlements and contingencies and legal fees associated with ongoing legal proceedings against LendingTree Inc. or LendingTree LLC that arose due to the LendingTree Loans Business or the HLC bankruptcy filing. 
 
 33 

 Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
LendingTree, Inc. 10-Q

Item 1. Financial Statements
