What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-03-01 compared with 2020-02-27 · 684 added, 652 removed, 1076 unchanged (55% of the section changed)

5 unchanged sentences

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Statements of Operations and Comprehensive Income

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Balance Sheets

6 unchanged sentences

We have audited the accompanying consolidated balance sheets of LendingTree, Inc.

and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive income (loss), of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

26 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of ValuePenguin Inc.

Content Intangible Asset

As described in Note 8 to the consolidated financial statements, in 2019 the Company acquired Value Holding, Inc., the parent company of ValuePenguin Inc., for a purchase price of $106.2 million, which resulted in $31.6 million of intangible assets being recorded, primarily consisting of the content intangible asset of $26.1 million.

The estimated fair value of the content intangible asset was determined using the excess earnings method.

Management applied significant judgment in determining the fair value of the content intangible asset, which involved the use of significant assumptions including revenue growth rates, the probability weighting of scenarios, and the discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of the ValuePenguin Inc.

content intangible asset is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the content intangible asset.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions, including revenue growth rates, the probability weighting of scenarios, and the discount rate.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to acquisition accounting, including controls over the fair value measurement of the content intangible asset, as well as controls over development of the significant assumptions related to the valuation of the content intangible asset, including revenue growth rates, the probability weighting of scenarios, and the discount rate.

These procedures also included, among others, (i) reading the purchase agreement, (ii) testing management’s process for estimating the fair value of the content intangible asset, and (iii) evaluating management’s significant assumptions used to estimate the fair value of the content intangible asset.

Testing management’s process included evaluating the appropriateness of the excess earnings method and the reasonableness of the significant assumptions, including revenue growth rates, the probability weighting of scenarios and the discount rate.

Evaluating the reasonableness of the revenue growth rates and probability weighting of scenarios involved considering the current and historical results of the acquired business, consistency of the revenue growth in previously acquired businesses, and consistency with external market and industry data.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s excess earnings method and certain significant assumptions, including the discount rate.

Contingent Consideration - QuoteWizard

As described in Notes 8 and 17 to the consolidated financial statements, on October 31, 2018 the Company completed the acquisition of QuoteWizard.com, LLC (“QuoteWizard”).

During 2019 the Company recorded $27.1 million of contingent consideration expense and as of December 31, 2019, the estimated fair value of the contingent consideration associated with earnout payments totaled $24.4 million.

The Company will make payments ranging from zero to $70.2 million based on the achievement of certain defined operating results for QuoteWizard.

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

As described in Notes 9 and 18 to the consolidated financial statements, on October 31, 2018 the Company acquired QuoteWizard.com, LLC.

During 2020 the Company recorded $4.0 million of contingent consideration expense and as of December 31, 2020, the estimated fair value of the contingent consideration totaled $8.2 million.

The Company could make payments ranging from zero to $70.2 million based on the achievement of certain defined operating results for QuoteWizard.

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

Management estimates the fair value of any contingent consideration payments each reporting period using Level 3 unobservable inputs.

The significant unobservable inputs used to calculate the fair value of the contingent consideration for QuoteWizard are estimated future cash flows, estimated customer growth rates, and the discount rate.

The principal considerations for our determination that performing procedures relating to the contingent consideration associated with the QuoteWizard acquisition is a critical audit matter are (i) there was a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence related to the fair value measurement of contingent consideration due to the significant amount of judgment by management when developing the estimate, (ii) significant audit effort was required in assessing the estimated customer growth rates assumption, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

The significant unobservable inputs used to calculate the fair value of the contingent consideration for QuoteWizard are the operating results growth rate and the discount rate.

The principal considerations for our determination that performing procedures relating to the contingent consideration associated with the QuoteWizard acquisition is a critical audit matter are the significant judgment by management to determine the fair value of contingent consideration, which included the use of an option pricing model and significant assumption related to the operating results growth rate;

this in turn led to a high degree of auditor subjectivity and judgment to evaluate the audit evidence obtained related to the fair value estimate, and the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the accounting for contingent consideration, including controls over the fair value measurement of the contingent consideration.

These procedures also included, among others, testing management’s process for developing the fair value measurement, evaluating the appropriateness of the option pricing model, and evaluating the reasonableness of the estimated customer growth rates assumption used by management.

Evaluating the reasonableness of the estimated customer growth rates involved considering the past performance of the acquired business as well as industry forecasts.

These procedures included testing the effectiveness of controls relating to the accounting for contingent consideration, including controls over determining the fair value of the contingent consideration.

These procedures also included, among others, testing management’s process for determining the fair value estimate, evaluating the appropriateness of the option pricing model, and evaluating the reasonableness of the operating results growth rate assumption used by management.

Evaluating the reasonableness of the operating results growth rate involved considering the past performance of the acquired business as well as industry forecasts.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s option pricing model.

2025 Convertible Senior Notes Valuation

As described in Note 15 to the consolidated financial statements, 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 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.

The principal considerations for our determination that performing procedures relating to the 2025 convertible senior notes valuation is a critical audit matter is the significant judgment by management in estimating the fair value of the separate components of debt and equity, including determining the interest rate used, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the interest rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s convertible senior notes valuation, including controls over the determination of the interest rate used to value the

separate components of debt and equity.

These procedures also included, among others, testing management’s process for determining the estimate and evaluating the reasonableness of the interest rate used by management to value the separate components of debt and equity.

Professionals with specialized skill and knowledge were used to assist in evaluating whether the interest rate of the notes used by management were reasonable.

/s/ PricewaterhouseCoopers LLP

4 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Year Ended December 31,

2020 2019 2018

(in thousands, except per share amounts)

Revenue $ 909,990 $ 1,106,603 $ 764,865

Costs and expenses:

Cost of revenue (exclusive of depreciation and amortization shown separately below)

54,494 68,379 36,399

Selling and marketing expense 617,404 735,180 500,291

1 unchanged sentence

Product development 43,636 39,953 26,958

Depreciation 14,201 10,998 7,385

Amortization of intangibles 53,078 55,241 23,468

Change in fair value of contingent consideration 5,327 28,402 10,788

Severance 295 1,026 2,352

Litigation settlements and contingencies ( 943 ) ( 151 ) ( 186 )

Total costs and expenses 916,593 1,055,875 708,674

Operating income

Operating (loss) income ( 6,603 ) 50,728 56,191

Other (expense) income, net:

1 unchanged sentence

Other income (expense) 376 524 ( 10 )

Income before income taxes

Income tax benefit (expense)

Net income from continuing operations

(Loss) income before income taxes ( 42,527 ) 30,981 43,744

Income tax benefit 19,961 8,479 65,575

Net (loss) income from continuing operations ( 22,566 ) 39,460 109,319

Loss from discontinued operations, net of tax ( 25,689 ) ( 21,632 ) ( 12,820 )

Net income and comprehensive income

Net (loss) income and comprehensive (loss) income $ ( 48,255 ) $ 17,828 $ 96,499

Weighted average shares outstanding:

Income per share from continuing operations:

Basic 13,007 12,834 12,504

Diluted 13,007 14,619 14,097

(Loss) income per share from continuing operations:

Basic $ ( 1.73 ) $ 3.07 $ 8.74

Diluted $ ( 1.73 ) $ 2.70 $ 7.75

Loss per share from discontinued operations:

Net income per share:

Basic $ ( 1.98 ) $ ( 1.69 ) $ ( 1.03 )

Diluted $ ( 1.98 ) $ ( 1.48 ) $ ( 0.91 )

Net (loss) income per share:

Basic $ ( 3.71 ) $ 1.39 $ 7.72

Diluted $ ( 3.71 ) $ 1.22 $ 6.85

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

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

(in thousands, except par value

3 unchanged sentences

Accounts receivable (net of allowance of $ 1,402 and $ 1,466 , respectively)

89,841 113,487

Prepaid and other current assets 27,949 15,516

Assets held for sale (Note 7)

Current assets of discontinued operations (Note 20)

Current assets of discontinued operations 8,570 84

Total current assets 296,409 189,426

Property and equipment (net of accumulated depreciation of $ 20,238 and $ 17,979 , respectively)

62,381 31,363

Operating lease right-of-use assets 84,109 25,519

Goodwill 420,139 420,139

Intangible assets, net 128,502 181,580

Deferred income tax assets 96,224 87,664

Equity investment (Note 8)

Other non-current assets 5,334 4,330

Non-current assets of discontinued operations (Note 20)

Non-current assets of discontinued operations 15,892 7,948

Total assets $ 1,188,990 $ 947,969

Revolving credit facility $ — $ 75,000

2 unchanged sentences

Current contingent consideration — 9,028

Current liabilities of discontinued operations (Note 20)

Current liabilities of discontinued operations 536 31,050

Total current liabilities 111,843 230,706

Long-term debt 611,412 264,391

Operating lease liabilities 92,363 21,358

Non-current contingent consideration 8,249 24,436

Deferred income tax liabilities

Other non-current liabilities 362 4,752

11 unchanged sentences

Treasury stock;

2,641,318 and 2,618,587 shares, respectively

2,641,318 shares

( 183,161 ) ( 183,161 )

Total shareholders' equity 364,761 402,326

4 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Treasury Stock

Noncontrolling

Common Stock Treasury Stock

of Shares Amount Additional

Capital Accumulated

Deficit Number

of Shares Amount Noncontrolling

(in thousands)

5 unchanged sentences

Cumulative effect adjustment due to ASU 2014-09 1,373 — — — 1,373 — — —

Issuance of 0.625% Convertible Senior Notes, net

Convertible note hedge

Sale of warrants

Noncontrolling interest

Acquisition of noncontrolling interest ( 510 ) — — 79 — — — ( 589 )

Other ( 4 ) — — ( 4 ) — — — —

Balance as of December 31, 2018 $ 346,208 15,428 $ 154 $ 1,134,227 $ ( 610,482 ) 2,618 $ ( 177,691 ) $ —

3 unchanged sentences

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes ( 8,406 ) 249 3 ( 8,409 ) — — — —

Cumulative effect adjustment due to ASU 2014-09

Acquisition of noncontrolling interest

Other ( 1 ) — — ( 1 ) — — — —

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

Net loss and comprehensive loss ( 48,255 ) — — — ( 48,255 ) — — —

Non-cash compensation 53,733 — — 53,733 — — — —

Purchase of treasury stock

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes ( 3,910 ) 89 1 ( 3,911 ) — — — —

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 ) — — — —

Other ( 1 ) — — ( 1 ) — — — —

Balance as of December 31, 2020 $ 364,761 15,766 $ 158 $ 1,188,673 $ ( 640,909 ) 2,641 $ ( 183,161 ) $ —

4 unchanged sentences

Year Ended December 31,

2020 2019 2018

(in thousands)

Cash flows from operating activities attributable to continuing operations:

Net income and comprehensive income

Net (loss) income and comprehensive (loss) income $ ( 48,255 ) $ 17,828 $ 96,499

Loss from discontinued operations, net of tax 25,689 21,632 12,820

Income from continuing operations

(Loss) income from continuing operations ( 22,566 ) 39,460 109,319

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

(Gain) loss on impairments and disposal of assets

Loss (gain) on impairments and disposal of assets 1,160 ( 695 ) 2,210

Amortization of intangibles 53,078 55,241 23,468

Depreciation 14,201 10,998 7,385

Rental amortization of intangibles and depreciation — — 630

6 unchanged sentences

Amortization of convertible debt discount 19,570 12,016 11,397

ROU asset amortization, offset by change in operating lease liabilities

Loss on extinguishment of debt 7,768 — —

Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities 8,888 213 —

Changes in current assets and liabilities:

4 unchanged sentences

Income taxes receivable ( 10,598 ) 4,548 3,669

Other, net ( 2,002 ) ( 88 ) ( 591 )

Net cash provided by operating activities attributable to continuing operations 111,299 157,174 123,948

2 unchanged sentences

Proceeds from the sale of fixed assets — 24,077 —

Acquisition of intangible assets

Equity investment ( 80,000 ) — —

Acquisition of ValuePenguin, net of cash acquired — ( 105,578 ) —

3 unchanged sentences

Acquisition of SnapCap — — ( 10 )

Acquisition of DepositAccounts

Acquisition of MagnifyMoney, net of cash acquired

Net cash used in investing activities attributable to continuing operations ( 122,149 ) ( 101,060 ) ( 383,038 )

1 unchanged sentence

Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options ( 3,910 ) ( 8,406 ) 2,217

Contingent consideration payments

Net (repayment of) proceeds from revolving credit facility

Acquisition of noncontrolling interest

Proceeds from the issuance of 0.50 % Convertible Senior Notes

Payment of convertible note hedge transactions

Proceeds from the sale of warrants

Repurchase of 0.625 % Convertible Senior Notes

( 233,862 ) — —

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

( 124,200 ) — —

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

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

Termination of warrants related to the 0.625 % Convertible Senior Notes

( 94,292 ) — —

Net (repayment of) proceeds from revolving credit facility ( 75,000 ) ( 50,000 ) 125,000

Payment of debt issuance costs ( 16,568 ) ( 2,518 ) ( 583 )

Contingent consideration payments ( 4,755 ) ( 21,275 ) ( 27,588 )

Purchase of treasury stock — ( 5,470 ) ( 93,704 )

Acquisition of noncontrolling interest — — ( 499 )

Other financing activities ( 184 ) ( 9 ) —

Net cash (used in) provided by financing activities attributable to continuing operations

Total cash (used in) provided by continuing operations

Net cash provided by (used in) financing activities attributable to continuing operations 193,290 ( 87,678 ) 4,843

Total cash provided by (used in) continuing operations 182,440 ( 31,564 ) ( 254,247 )

Discontinued operations:

1 unchanged sentence

Total cash used in discontinued operations ( 72,730 ) ( 13,255 ) ( 13,236 )

Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents 109,710 ( 44,819 ) ( 267,483 )

Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period 60,339 105,158 372,641

1 unchanged sentence

Non-cash investing activities:

Increase (decrease) in capital expenditures included in accounts payable and accrued expenses $ 4,196 $ ( 946 ) $ 949

Capital additions from tenant improvement allowance — 1,111 —

10 unchanged sentences

LendingTree, Inc.

is currently the parent of LendingTree, LLC and several companies owned by LendingTree, LLC (collectively, "LendingTree" or the "Company").

is the parent of LT Intermediate Company, LLC, which holds all of the outstanding ownership interests of LendingTree, LLC, and LendingTree, LLC owns several companies (collectively, "LendingTree" or the "Company").

LendingTree operates what it believes to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions.

6 unchanged sentences

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 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 (loss) 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.

4 unchanged sentences

Certain prior year amounts have been reclassified to conform to current year presentation.

See the discussion in Note 2 —Significant Accounting Policies for the impact of adopting Accounting Standards Update ("ASU") 2016-18 on the presentation of changes in restricted cash.

NOTE 2— SIGNIFICANT ACCOUNTING POLICIES

9 unchanged sentences

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.

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recognition on match fees was not impacted by the adoption of ASC Topic 606 in the first quarter of 2018, as 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.

Prior to the adoption of ASC Topic 606, closed loan fees were recognized at the time the lender reported the closed loan to the Company, which could be several months after the original request was transmitted.

Approval fees are derived from credit card issuers when the credit card consumer receives card approval from the credit card issuer.

Prior to the adoption of ASC Topic 606, approval fees were recognized at the time the credit card issuer reported the card approval for the consumer to the Company, which is generally within two weeks after the consumer's request was transmitted.

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

14 unchanged sentences

Sales commissions are incremental costs of obtaining contracts with customers.

The Company expenses sales commissions when incurred as the duration of contracts with customers is less than one year, based on the right for either party to terminate the contract with less than one year's notice without compensation to either party.

These costs are recorded within selling and marketing expense on the consolidated statements of operations and comprehensive income.

For additional information on the adoption of ASC Topic 606, see the discussion over ASU 2014-09 in the section titled "Recently Adopted Accounting Pronouncements" within this Note.

The Company expenses sales commissions when incurred as the duration of contracts with customers is less than one year, based on the right of either party to terminate the contract with less than one year's notice without compensation to either party.

These costs are recorded within selling and marketing expense on the consolidated statements of operations and comprehensive income (loss).

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term, highly liquid money market investments with original maturities of three months or less.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Cash

2 unchanged sentences

Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts.

The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, previous loss history and the specific customer's current ability to pay its obligation.

The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, previous loss history, current and expected economic conditions and the specific customer's current and expected ability to pay its obligation.

Accounts receivable are considered past due when they are outstanding longer than the contractual payment terms.

Accounts receivable are written off when management deems them uncollectible.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the beginning and ending balances of the allowance for doubtful accounts is as follows (in thousands) :

Year Ended December 31,

2020 2019 2018

Balance, beginning of the period $ 1,466 $ 1,143 $ 675

1 unchanged sentence

Write-off of uncollectible accounts receivable ( 1,859 ) ( 1,400 ) ( 435 )

Recoveries collected 10 26 23

Balance, end of the period $ 1,402 $ 1,466 $ 1,143

2 unchanged sentences

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 CODM for the purpose of assessing performance and allocating resources.

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, or CODM, for the purpose of assessing performance and allocating resources.

Property and Equipment

4 unchanged sentences

The following table presents the estimated useful lives for each asset category:

Asset Category

Estimated Useful Lives

Computer equipment and capitalized software

Leasehold improvements

Lesser of asset life or life of lease

Furniture and other equipment

Aircraft and automobile

5 to 10 years

Asset Category Estimated Useful Lives

Computer equipment and capitalized software 1 to 5 years

Leasehold improvements Lesser of asset life or life of lease

Furniture and other equipment 7 years

Aircraft and automobile 5 to 10 years

Hosting Arrangement that is a Service Contract

Subsequent to the adoption of Accounting Standards Update ("ASU") 2018-15 in the first quarter of 2020, as described below, qualifying implementation costs incurred in a hosting arrangement that is a service contract are capitalized and deferred on a straight-line basis over the term of the hosting arrangement, which is typically one to five years .

These costs are capitalized to prepaid and other current assets and other non-current assets on the balance sheet, and the associated amortization expense is included within general and administrative expense on the statement of operations and comprehensive income (loss).

The majority of such capitalized implementation costs arise from internal and external labor associated with software development , described below.

Software Development Costs

Software development costs primarily include internal and external labor expenses incurred to develop the software that powers the Company's websites.

Certain costs incurred during the application development stage are capitalized based on specific activities tracked, while costs incurred during the preliminary project stage and post-implementation/operation stage are expensed as incurred.

Certain costs incurred during the application development stage are capitalized, either as property and equipment or as a hosting arrangement that is a service contract, based on specific activities tracked, while costs incurred during the preliminary project stage and post-implementation/operation stage are expensed as incurred.

Capitalized software development costs are amortized over an estimated useful life of one to five years .

9 unchanged sentences

Otherwise, the goodwill reporting unit or long-lived intangible assets, as applicable, must be quantitatively tested for impairment.

The quantitative test for goodwill impairment is determined using a two-step process.

The first step is to compare the fair value of a reporting unit with its carrying amount, including goodwill.

In performing the first step, the Company determines the fair value of its reporting units by using a market approach and a discounted cash flow ("DCF") analysis.

The quantitative impairment test for goodwill involves a comparison of the fair value of a reporting unit with its carrying amount, including goodwill.

The Company determines the fair value of its reporting units by using a market approach and a discounted cash flow ("DCF") analysis.

Determining fair value using a DCF analysis requires the exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates and the amount and timing of expected future cash flows.

If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not required.

If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is required to be performed to measure the amount of impairment, if any.

The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill.

The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.

If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired.

If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

The quantitative impairment test for indefinite-lived intangible assets involves a comparison of the estimated fair value of the intangible asset with its carrying value.

2 unchanged sentences

Significant judgments inherent in this analysis include the determination of royalty rates, discount rates, perpetual growth rates and the amount and timing of future revenues.

Results of the October 1, 2020 qualitative annual impairment tests indicated that it is not more likely than not that the fair value of the goodwill and the indefinite-lived intangible assets were each less than their respective carrying values.

Accordingly, no further testing was required.

At October 1, 2019, the Company performed the first step of the quantitative goodwill impairment test and found that the fair value of each reporting unit exceeded its carrying amount, indicating no goodwill impairment.

3 unchanged sentences

Accordingly, no further testing was required.

Results of the October 1, 2018 qualitative annual impairment tests indicated that it is not more likely than not that the fair value of the goodwill and the indefinite-lived intangible assets were each less than their respective carrying values.

Accordingly, no further testing was required.

Long-Lived Assets and Intangible Assets with Definite Lives

1 unchanged sentence

Amortization of definite-lived intangible assets is recorded on a straight-line basis over their estimated lives.

Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

If the carrying amount is deemed to not be recoverable, an impairment loss is recorded as the amount by which the carrying amount of the long-lived asset exceeds its fair value.

At December 31, 2019 and 2018, the Company performed its review of impairment triggering events for long-lived assets and determined that a triggering event had not occurred.

Assets and Liabilities Held for Sale

The Company classifies assets or disposal groups to be sold as held for sale in the period in which all of the following criteria are met:

Management, having the authority to approve the action, commits to a plan to sell the asset or disposal group;

The asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets or disposal groups;

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

An active program to locate a buyer and other actions required to complete the plan to sell the asset or disposal group have been initiated;

The sale of the asset or disposal group is probable, and transfer of the asset or disposal group is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond the Company's control extend the period of time required to sell the asset or disposal group beyond one year;

The asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value;

Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A long-lived asset or disposal group that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale.

The fair value of a long-lived asset or disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any subsequent changes are reported as an adjustment to the carrying value of the asset or disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale.

Subsequent to the adoption of ASU 2018-15, described below, capitalized implementation costs incurred in a hosting arrangement that is a service contract are also allocated to and included within long-lived asset groups tested for recoverability.

Long-lived asset groups are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

The carrying amount of a long-lived asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group.

If the carrying amount is deemed to not be recoverable, an impairment loss is recorded as the amount by which the carrying amount of the long-lived asset group exceeds its fair value.

At December 31, 2020 and 2019, the Company performed its review of impairment triggering events for long-lived asset groups and determined that a triggering event had not occurred.

Fair Value Measurements

1 unchanged sentence

Observable inputs, such as quoted prices for identical assets and liabilities in active markets obtained from independent sources.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data.

5 unchanged sentences

The Company's estimates of fair value are based upon assumptions believed to be reasonable but which are uncertain and involve significant judgments by management.

Any changes in the fair value of these contingent consideration payments are included in operating income in the consolidated statements of operations and comprehensive income.

Any changes in the fair value of these contingent consideration payments are included in operating income in the consolidated statements of operations and comprehensive income (loss).

Cost of Revenue

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

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

Product Development

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising costs are expensed in the period incurred (except for production costs which are initially capitalized and then recognized as expense when the advertisement first runs) and principally represent offline costs, including television, print and radio advertising, a nd online advertising costs, including fees paid to search engines and distribution partners.

Advertising expense was $ 688.2 million , $ 469.9 million and $ 410.8 million for the years ended December 31, 2019 , 2018 and 2017 , respectively, and is included in selling and marketing expense on the consolidated statements of operations and comprehensive income.

Advertising costs are expensed in the period incurred (except for production costs which are initially capitalized and then recognized as expense when the advertisement first runs) and principally represent offline costs, including television, print and radio advertising, and online advertising costs, including fees paid to search engines and distribution partners.

Advertising expense was $ 567.7 million, $ 688.2 million and $ 469.9 million for the years ended December 31, 2020, 2019 and 2018, respectively, and is included in selling and marketing expense on the consolidated statements of operations and comprehensive income (loss).

Income taxes are accounted for under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

10 unchanged sentences

The Company historically estimated these expenses to be deductible if the services were provided within 12 months of payment.

Under the proposed method of accounting, the Company will take into account only prepaid marketing and advertising as the Company makes payment for the services to the extent that the payment is due and the services are reasonably expected by the Company to be provided to the applicant within 3 ½-months after the date of payment as authorized by Treas.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

proposed method of accounting, the Company will take into account only prepaid marketing and advertising as the Company makes payment for the services to the extent that the payment is due and the services are reasonably expected by the Company to be provided to the applicant within 3-½ months after the date of payment as authorized by Treas.

§1.461-4(d)(6)(ii).

The Company has accounted for this change as a change in accounting method and recorded a cumulative impact of $ 1.0 million as a deferred tax liability to be recognized over four years.

Effective January 1, 2017, the Company changed the method used to estimate the deduction for internally developed software.

This change in methodology impacts the timing of the tax deductibility of these related costs.

The Company historically capitalized these expenses and amortized them over three years.

Under the proposed method of accounting, the Company will treat costs attributable to internally developed software as current expenses and take them into account in full in accordance with Section 5.01(1) of Rev.

2000-50 and rules similar to those applicable under Section 174(a).

The Section 481(a) adjustment is the cumulative difference between the present method and the proposed method of accounting computed as of the first day of the year of change, January 1, 2017 and was reflected in the timely filed income tax return during 2018 related to the period of change.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No.

8 unchanged sentences

Although the Company no longer considers these amounts to be provisional, the determination of the Act's income tax effects may change following future legislation or further interpretation of the Act based on future guidance from the Internal Revenue Service and state tax authorities.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

The forms of stock-based awards granted to LendingTree employees are principally restricted stock units ("RSUs"), RSUs with performance conditions, stock options and stock options with performance conditions.

The forms of stock-based awards granted to LendingTree employees are principally restricted stock units ("RSUs"), RSUs with performance conditions and stock options.

Further, stock options with market conditions, restricted stock awards ("RSAs") with performance conditions and RSAs with market conditions have been granted to the Company's Chairman and Chief Executive Officer.

8 unchanged sentences

For service-based awards, non-cash compensation is measured at fair value on the grant date and expensed ratably over the vesting term.

The fair value of each stock option award without a market condition is estimated using the Black-Scholes option pricing model, while the fair value of an RSU or restricted stock award is measured as the closing common stock price at the time of grant.

The fair value of stock option awards without a market condition is typically estimated using the Black-Scholes option pricing model, while the fair value of an RSU or RSA is measured as the closing common stock price at the time of grant.

For performance-based grants, the fair value is measured on the grant date and recognized as non-cash compensation expense, considering the probability of the targets being achieved.

Performance-based grants with a market condition are generally valued using a Monte Carlo simulation model.

Excess tax benefits and deficiencies that arise due to the difference in the measure of stock compensation and the amount deductible for tax purposes are recorded in income tax expense within the consolidated statement of operations and comprehensive income, and are classified as a component of operating cash flows within the consolidated statements of cash flows .

Performance-based grants with a market condition are typically valued using a Monte Carlo simulation model.

Non-cash compensation expense for single cliff-vesting grants with a market condition are recognized on a straight-line basis, while graded-vesting grants with a market condition use graded vesting expense attribution.

Excess tax benefits and deficiencies that arise due to the difference in the measure of stock compensation and the amount deductible for tax purposes are recorded in income tax expense within the consolidated statement of operations and comprehensive income (loss), and are classified as a component of operating cash flows within the consolidated statements of cash flows.

Litigation Settlements and Contingencies

2 unchanged sentences

If the Company believes that a loss arising from such matters is probable and can be reasonably estimated, the estimated liability is accrued in the consolidated financial statements.

If only a range of estimated losses can be determined, an amount within the range is accrued that, in the Company's judgment, reflects the most likely outcome;

If only a range of estimated losses can be determined, an amount within the range is accrued that, in the Company's judgment,

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

reflects the most likely outcome;

if none of the estimates within that range is a better estimate than any other amount, the low end of the range is accrued.

7 unchanged sentences

Significant estimates underlying the accompanying consolidated financial statements, including discontinued operations, include:

loan loss obligations;

the recoverability of long-lived assets, goodwill and intangible assets;

6 unchanged sentences

various other allowances, reserves and accruals;

and assumptions related to the determination of stock-based compensation.

assumptions related to the determination of stock-based compensation;

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

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

These assumptions and estimates may change as new events occur and additional information is obtained.

If economic conditions caused by the COVID-19 pandemic do not recover as currently estimated by management, such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity.

Certain Risks and Concentrations

LendingTree's business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial instruments, which potentially subject the Company to concentration of credit risk at December 31, 2020, consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet.

2 unchanged sentences

Due to the nature of the mortgage lending industry, interest rate fluctuations may negatively impact future revenue from the Company's marketplace.

For the year ended December 31, 2019 , one network partner accounted for 12 % of total consolidated revenue, all of which was recorded within the Insurance segment.

For the years ended December 31, 2020 and 2019, one network partner accounted for 15 % and 12 %, respectively, of total consolidated revenue, all of which was recorded within the Insurance segment.

No Network Partners accounted for more than 10% of total consolidated revenue for the year ended December 31, 2018.

For the year ended December 31, 2017 , another network partner accounted for 11 % of total consolidated revenue, which was recorded within the Home and Consumer segments.

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.

4 unchanged sentences

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued 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,

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 amortization expense associated with these capitalized implementation costs is included within general and administrative expense on the consolidated statement of operations and comprehensive income (loss).

The adoption of ASU 2018-15 did not have a material impact on the consolidated financial statements as of and for the year ended December 31, 2020.

See Note 6—Hosting Arrangements.

In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds certain disclosure requirements in 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 18—Fair Value Measurement.

In June 2018, the FASB issued ASU 2018-07 which simplifies the accounting for nonemployee share-based payments by expanding the scope of ASC Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees.

7 unchanged sentences

The Company adopted this ASU during the first quarter of 2018.

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 November 2016, the FASB issued ASU 2016-18 which is intended to reduce the diversity in the classification and presentation of changes in restricted cash in the statement of cash flows, by requiring entities to combine the changes in cash and cash equivalents and restricted cash in one line.

4 unchanged sentences

The Company adopted this ASU during the first quarter of 2018.

The adoption resulted in an immaterial reclassification of cash outflows from investing activities to operating activities for 2017.

See Note 4—Cash and Restricted Cash for the reconciliation of cash and cash equivalents and restricted cash reported on the balance sheet to the total of such amounts shown on the statement of cash flows.

2 unchanged sentences

The retrospective transition method, requiring adjustment to all comparative periods presented, is required unless it is impracticable for some of the amendments, in which case those amendments would be prospectively applied as of the earliest date practicable.

The Company adopted this ASU during the first quarter of 2018, and there was no adjustment to prior periods.

Pursuant to adoption of this ASU, contingent consideration payments made are classified as cash outflows from financing activities up to the amount of the contingent

The Company adopted this ASU during the first quarter of 2018.

Pursuant to adoption of this ASU, contingent consideration payments made are classified as cash outflows from financing activities up to the amount of the contingent consideration liability recognized at the acquisition date, and the portion of payments in excess of that initial liability are classified as cash outflows from operating activities.

See Note 9—Business Acquisitions for additional information.

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

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

consideration liability recognized at the acquisition date, and the portion of payments in excess of that initial liability are classified as cash outflows from operating activities.

See Note 8 —Business Acquisitions for additional information.

In March 2016, the FASB issued ASU 2016-09 which simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements, including the income tax consequences, classification of awards as either equity or liabilities, forfeitures and classification of excess tax benefits on the statement of cash flows.

This ASU was effective for annual and interim reporting periods beginning after December 15, 2016.

Upon adoption, any adjustments were to be reflected as of the beginning of the fiscal year of adoption.

The Company adopted this ASU during the first quarter of 2017.

The new standard required excess tax benefits and deficiencies, which arise due to the difference in the measure of stock compensation and the amount deductible for tax purposes, to be recorded in earnings in income tax expense.

These excess tax benefits and deficiencies were generally previously recorded in additional paid-in capital and had no impact on net income.

The standard required prospective adoption for this portion of the new guidance.

Additionally, the new standard required the excess tax benefits and deficiencies to be classified as an operating activity in the accompanying consolidated statements of cash flows.

These excess tax benefits and deficiencies were previously recorded as a financing activity in the statement of cash flows.

The standard allowed for either prospective or retrospective adoption for the change in presentation in the statement of cash flows.

The Company elected to retrospectively adopt the classification change in the statement of cash flows.

The standard also allows for an election by the Company to either estimate forfeitures, as required under previous guidance, or recognize forfeitures when they occur.

The Company elected to recognize forfeitures of stock awards as they occur, with the modified retrospective transition method required.

Accordingly, the Company recognized a $ 1.4 million cumulative-effect adjustment to retained earnings as of January 1, 2017.

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.

In February 2016, the FASB issued ASU 2016-02 related to lease accounting guidance.

3 unchanged sentences

The clarification ASUs must be adopted concurrently with the adoption of ASU 2016-02 (collectively, "ASC Topic 842").

The Company has adopted ASC Topic 842 as of January 1, 2019 using the optional transition method to apply the new requirements at the adoption date without restating comparative prior periods presented.

The Company adopted ASC Topic 842 as of January 1, 2019, using the optional transition method to apply the new requirements at the adoption date without restating comparative prior periods presented.

The adoption resulted in the increase in total assets and total liabilities of $ 8.8 million as of January 1, 2019, related to operating leases greater than one year in duration for which the Company is the lessee, with no cumulative effect adjustment to the opening balance of accumulated deficit.

As part of the transition, the Company has elected the package of practical expedients, which allows the Company to not reassess whether expired or existing contracts contain leases, lease classification for expired or existing leases, and initial direct costs for existing leases.

Additionally, the Company has elected an accounting policy to not record short-term leases, which are leases with an initial term of twelve months or fewer, on the balance sheet.

As part of the transition, the Company elected the package of practical expedients, which allows the Company to not reassess whether expired or existing contracts contain leases, lease classification for expired or existing leases, and initial direct costs for existing leases.

Additionally, the Company elected an accounting policy to not record short-term leases, which are leases with an initial term of twelve months or fewer, on the balance sheet.

In May 2014, the FASB issued ASU 2014-09 related to revenue recognition.

5 unchanged sentences

The Company recognized the cumulative effect of initially applying ASC Topic 606 as an adjustment to the opening balance of accumulated deficit.

Under this approach, revenue for 2017 is reported in the consolidated statements of operations and comprehensive income on the historical basis, and revenue for 2019 and 2018 is reported in the consolidated statements of operations and comprehensive income under ASC Topic 606.

See Note 3 —Revenue for additional information.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet for the adoption of ASC Topic 606 were as follows (in thousands) :

ASC Topic 606

December 31, 2017 Adjustments due to

ASC Topic 606 January 1, 2018

Prepaid and other current assets $ 11,881 $ 1,903 $ 13,784

3 unchanged sentences

Recently Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board ("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.

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.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

1 unchanged sentence

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

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

In August 2018, the FASB issued 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 does not expect this ASU to have a material impact on its consolidated financial statements and will adopt ASU 2018-15 in the first quarter of 2020 using the prospective approach.

In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds certain disclosure requirements in 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 will adopt ASU 2018-13 in the first quarter of 2020.

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 is evaluating the impact this ASU will have on its consolidated financial statements and does not expect material effects.

The Company will adopt ASU 2019-12 in the first quarter of 2021.

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 adoption of ASC Topic 326 is not expected to have a material effect on the Company's consolidated financial statements.

The Company will adopt ASC Topic 326 as of January 1, 2020, and does not expect a material cumulative effect adjustment to the opening balance of accumulated deficit in the period of adoption.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3— REVENUE

1 unchanged sentence

Year Ended December 31,

2020 2019 2018

Home $ 320,992 $ 277,935 $ 319,176

Credit cards 77,361 211,294 165,776

Personal loans 66,513 152,729 134,199

Other Consumer 109,324 151,014 95,640

Consumer 253,198 515,037 395,615

Insurance 333,765 284,792 31,369

Other 2,035 28,839 18,705

Total revenue $ 909,990 $ 1,106,603 $ 764,865

2 unchanged sentences

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

During 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 $ 4.4 million and $ 0.7 million in 2019 and 2018 , respectively.

The Company recognized increases to such revenue from prior periods of $ 0.3 million, $ 4.4 million and $ 0.7 million in 2020, 2019 and 2018, respectively.

NOTE 4— CASH AND RESTRICTED CASH

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Cash and cash equivalents $ 169,932 $ 60,243

6 unchanged sentences

The balance of property and equipment, net is as follows (in thousands) :

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Computer equipment and capitalized software $ 34,777 $ 28,425

6 unchanged sentences

Total property and equipment, net $ 62,381 $ 31,363

See Note 7 —Assets Held for Sale for property and equipment classified as held for sale during 2018, which were sold to an unrelated third party in 2019.

Unamortized capitalized software development costs, in service or under development, are $ 19.9 million and $ 16.2 million at December 31, 2019 and 2018 , respectively.

Unamortized capitalized software development costs recorded in property and equipment, whether in service or under development, are $ 24.8 million and $ 19.9 million at December 31, 2020 and 2019, respectively.

Capitalized software development depreciation expense was $ 11.1 million, $ 8.6 million and $ 6.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Long-lived assets located outside the United States, the Company's country of domicile, were $ 0.1 million at each of December 31, 2020 and 2019.

NOTE 6— HOSTING ARRANGEMENTS

The balance of capitalized implementation costs incurred in a hosting arrangement that is a service contract, which are recorded within prepaid and other current assets and other non-current assets, is as follows at December 31, 2020 (in thousands) :

Current portion Non-current portion

Capitalized implementation costs $ 530 $ 1,036

Projects in progress 505 1,154

Total gross 1,035 2,190

Accumulated amortization — ( 185 )

Total net $ 1,035 $ 2,005

Amortization expense included within general and administrative expense on the consolidated statement of operations and comprehensive income (loss) associated with these capitalized implementation costs was $ 0.2 million for the year ended December 31, 2020.

NOTE 7— GOODWILL AND INTANGIBLE ASSETS

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

Accumulated Impairment Loss

Balance at December 31, 2017

Acquisition of Ovation

Acquisition of Student Loan Hero

Acquisition of QuoteWizard

Goodwill Accumulated Impairment Loss Net Goodwill

Balance at December 31, 2018 $ 831,435 $ ( 483,088 ) $ 348,347

3 unchanged sentences

Balance at December 31, 2019 $ 903,227 $ ( 483,088 ) $ 420,139

Changes in goodwill — — —

Balance at December 31, 2020 $ 903,227 $ ( 483,088 ) $ 420,139

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Intangible assets with indefinite lives $ 10,142 $ 10,142

1 unchanged sentence

Total intangible assets, net $ 128,502 $ 181,580

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Indefinite-Lived Intangible Assets

The Company's goodwill at December 31, 2019 consists of $ 59.3 million associated with the Home segment, $ 166.1 million associated with the Consumer segment, and $ 194.7 million associated with the Insurance segment.

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

Prior to the fourth quarter of 2019, the Company's goodwill was associated with its then one reportable segment.

The carrying amount of goodwill increased during the year ended December 31, 2019 primarily due to the acquisition of ValuePenguin and increased during the year ended December 31, 2018 due to the acquisitions of Ovation, Student Loan Hero, and QuoteWizard.

See Note 8 —Business Acquisitions for a discussion of the acquisitions and associated goodwill.

Results of the annual impairment test as of October 1, 2020 indicated that no impairment had occurred.

4 unchanged sentences

Weighted Average

Amortization Life

Customer lists

Trademarks and tradenames

Website content

Amortization Life Cost Accumulated

Amortization Net

Technology 4.3 years $ 87,700 $ ( 48,166 ) $ 39,534

Customer lists 13.2 years 77,300 ( 18,560 ) 58,740

Trademarks and tradenames 4.9 years 17,200 ( 9,947 ) 7,253

Website content 3.0 years 43,200 ( 30,367 ) 12,833

Balance at December 31, 2020 $ 225,400 $ ( 107,040 ) $ 118,360

Weighted Average

Amortization Life

Customer lists

Trademarks and tradenames

Website content

Amortization Life Cost Accumulated

Amortization Net

Technology 4.2 years $ 116,200 $ ( 48,938 ) $ 67,262

Customer lists 13.2 years 77,300 ( 12,452 ) 64,848

Trademarks and tradenames 4.9 years 17,200 ( 6,407 ) 10,793

Website content 3.0 years 51,000 ( 22,467 ) 28,533

Other 3.0 years 5 ( 3 ) 2

Balance at December 31, 2019 $ 261,705 $ ( 90,267 ) $ 171,438

See Note 7 —Assets Held for Sale for tenant leases classified as held for sale during 2018, which were sold to an unrelated third party in 2019.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of December 31, 2020, future amortization is estimated to be as follows (in thousands) :

5 unchanged sentences

Year ending December 31, 2025 6,259

Thereafter 28,758

Total intangible assets with definite lives, net $ 118,360

NOTE 8— 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 financial services education into one seamless experience offering a full suite of personal investment accounts, traditional and Roth IRAs, custodial investment accounts, and banking services, including checking accounts and debit cards with a Stock-Back® rewards program.

The 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 December 31, 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 9— 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.

See 2018 Acquisitions—QuoteWizard and 2018 Acquisitions—Ovation below.

In 2017, the Company acquired certain assets of Snap Capital LLC, which does business under the name SnapCap (“SnapCap”).

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

The earnout payment of $ 3.0 million in 2019 is included within cash flows from financing activities on the consolidated statement of cash flows.

Of the total earnout payments of $ 6.0 million in 2020, $ 3.3 million is included within cash flows from financing activities and $ 2.7 million is included within cash flows from operating activities on the consolidated statement of cash flows.

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

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

Total earnout payments of $ 4.0 million in 2018 are included within cash flows from financing activities on the consolidated statement of cash flows, except for an immaterial portion included within cash flows from operating activities.

Total earnout payments of $ 3.0 million in 2019 are included within cash flows from operating activities on the consolidated statement of cash flows.

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

See Note 8 —Business Acquisitions for a discussion of the 2019 and 2018 acquisitions and associated intangibles.

NOTE 7 — ASSETS HELD FOR SALE

In December 2016, the Company acquired two office buildings in Charlotte, North Carolina for $ 23.5 million in cash, which included $ 0.1 million in acquisition-related costs which were capitalized.

The buildings were acquired with the intent to use such buildings as the Company's corporate headquarters and rent any unused space.

In November 2018, the Company's Board of Directors approved a plan to sell the two office buildings.

The properties were classified as current assets held for sale in the consolidated balance sheet for December 31, 2018.

The Company sold these buildings to an unrelated third party in the second quarter of 2019 for a sale price of $ 24.4 million , and the Company incurred closing fees of $ 0.3 million .

The Company recognized a gain of $ 2.7 million on the sale within general and administrative expense in the consolidated statement of operations and comprehensive income.

At the time the buildings were classified as held for sale, and at time of sale, they were associated with the Company's then one reportable segment.

Property and equipment classified as held for sale at December 31, 2018 is as follows (in thousands) :

Site improvements

Computer equipment and capitalized software

Furniture and other equipment

Total gross property and equipment

Accumulated depreciation

Total property and equipment, net

Intangible assets classified as held for sale at December 31, 2018 is as follows (in thousands) :

Tenant leases

Total gross intangible assets

Accumulated amortization

Total intangible assets, net

NOTE 8 — BUSINESS ACQUISITIONS

Changes in the fair value of contingent consideration is summarized as follows (in thousands) :

Year Ended December 31,

2020 2019 2018

QuoteWizard $ 3,980 $ 27,103 $ 6,833

Ovation 1,270 26 1,654

SnapCap 77 2,220 ( 330 )

DepositAccounts — ( 947 ) 1,979

CompareCards — — 652

Total changes in fair value of contingent consideration $ 5,327 $ 28,402 $ 10,788

2019 Acquisition

5 unchanged sentences

In 2019, the Company completed the determination of the final allocation of purchase price to the assets acquired and liabilities assumed as follows (in thousands) :

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net working capital $ 2,502

Fixed assets 68

Intangible assets 31,600

Goodwill 71,739

Net noncurrent assets 323

6 unchanged sentences

The fair value of the intangible assets with definite lives is as follows (dollars in thousands) :

Weighted Average

Fair Value Weighted Average

Amortization Life

Trademarks and tradenames

Total intangible assets

Technology $ 4,200 3 years

Content 26,100 3 years

Trademarks and tradenames 1,300 5 years

Total intangible assets $ 31,600 3.1 years

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded goodwill of $ 71.7 million, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed.

7 unchanged sentences

Due to the integration of the ValuePenguin business subsequent to the acquisition, earnings of the acquired ValuePenguin business beginning in the third quarter of 2019 is impracticable to determine with sufficient accuracy.

Acquisition-related costs were $ 0.1 million in 2019 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income.

Acquisition-related costs were $ 0.1 million in 2019 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income (loss).

2018 Acquisitions

On October 31, 2018 , the Company acquired QuoteWizard.com, LLC ("QuoteWizard"), one of the largest insurance comparison marketplaces in the growing online insurance advertising market.

On October 31, 2018, the Company acquired QuoteWizard.com, LLC, one of the largest insurance comparison marketplaces in the growing online insurance advertising market.

QuoteWizard services clients by driving consumers to insurance companies’ websites, providing leads to agents and carriers, as well as phone transfers of consumers into carrier call centers.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

from zero to $ 23.4 million , based on certain defined operating results during the earnout periods November 1, 2018 through October 31, 2019, November 1, 2019 through October 31, 2020, and November 1, 2020 through October 31, 2021.

The Company paid $ 299.9 million in initial cash consideration, funded through $ 174.9 million of cash on hand and $ 125.0 million drawn on the Company's revolving credit facility, and could make up to three additional earnout payments, each ranging from zero to $ 23.4 million, based on certain defined operating results during the earnout periods November 1, 2018 through October 31, 2019, November 1, 2019 through October 31, 2020, and November 1, 2020 through October 31, 2021.

These additional payments, to the extent earned, will be payable in cash.

1 unchanged sentence

In the fourth quarter of 2019, the Company paid $ 23.4 million related to the earnout payment for the period of November 1, 2018 through October 31, 2019, of which $ 13.9 million is included within cash flows from financing activities and $ 9.5 million is included within cash flows from operating activities on the consolidated statement of cash flows.

In the fourth quarter of 2020, the Company paid $ 20.2 million related to the earnout payment for the period of November 1, 2019 through October 31, 2020, which is included within cash flows from operating activities on the consolidated statement of cash flows.

As of December 31, 2020, the estimated fair value of the contingent consideration totaled $ 8.2 million, which is included in non-current contingent consideration in the accompanying consolidated balance sheet.

1 unchanged sentence

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.

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

During 2019 and 2018, the Company recorded $ 27.1 million and $ 6.8 million , respectively, of contingent consideration expense in the consolidated statements of operations and comprehensive income due to the change in estimated fair value of the contingent consideration.

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

During 2020, 2019 and 2018, the Company recorded $ 4.0 million, $ 27.1 million and $ 6.8 million, respectively, of contingent consideration expense in the consolidated statements of operations and comprehensive income (loss) due to the change in estimated fair value of the contingent consideration.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The acquisition has been accounted for as a business combination.

1 unchanged sentence

Net working capital $ 8,521

Fixed assets 1,509

Intangible assets 120,400

Goodwill 182,896

Other noncurrent assets 29

5 unchanged sentences

The fair value of the intangible assets with definite lives is as follows (dollars in thousands) :

Weighted Average

Fair Value Weighted Average

Amortization Life

Customer lists

Trademarks and tradenames

Total intangible assets

Technology $ 68,900 4 years

Customer lists 42,700 14.7 years

Content 1,000 3 years

Trademarks and tradenames 7,800 5 years

Total intangible assets $ 120,400 7.9 years

The Company recorded goodwill of $ 182.9 million, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed.

2 unchanged sentences

The goodwill was recorded in the Company’s then one reportable segment.

For income tax

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

purposes, the acquisition was an asset purchase and the goodwill will be tax deductible.

Acquisition-related costs were $ 4.8 million in 2018 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income.

The unaudited pro forma financial results for the years ended December 31, 2018 and 2017 below combine the consolidated results of the Company and QuoteWizard, giving effect to the acquisition as if it had been completed on January 1, 2017.

For income tax purposes, the acquisition was an asset purchase and the goodwill will be tax deductible.

Acquisition-related costs were $ 4.8 million in 2018 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income (loss).

The unaudited pro forma financial results for the year ended December 31, 2018 below combine the consolidated results of the Company and QuoteWizard, giving effect to the acquisition as if it had been completed on January 1, 2017.

This unaudited pro forma financial information is presented for informational purposes only and is not indicative of future operations or results had the acquisition been completed as of January 1, 2017, or any other date.

The unaudited pro forma financial results include adjustments for additional amortization expense based on the fair value of the intangible assets with definite lives and their estimated useful lives, as well as changes in depreciation expense associated with the change in fair value of the property, plant and equipment recorded in relation to the acquisition.

The unaudited pro forma financial results include adjustments for additional amortization expense based on the fair value of the intangible assets with definite lives and their estimated useful lives, as well as changes in depreciation expense associated with the change in fair value of the property and equipment recorded in relation to the acquisition.

Interest expense was adjusted to eliminate historical interest associated with QuoteWizard's revolving credit facility and notes payable that were not assumed with the acquisition, as well as reflect incremental interest expense associated with debt issued to finance the acquisition.

1 unchanged sentence

QuoteWizard did not pay taxes at the entity level as it was a limited liability company whose members elected for it to be taxed as a partnership.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

2 unchanged sentences

The unaudited pro forma net income from continuing operations in 2018 includes the aggregate after-tax contingent consideration expense associated with the QuoteWizard earnout of $ 4.9 million.

The unaudited pro forma net income from continuing operations for 2017 has been adjusted to include acquisition-related costs of $ 5.9 million incurred by the Company and QuoteWizard that are directly attributable to the acquisition, which will not have an ongoing impact.

Accordingly, these acquisition-related costs have been eliminated from the unaudited pro forma net income from continuing operations for 2018.

Acquisition-related costs of $ 5.9 million incurred by the Company and QuoteWizard that are directly attributable to the acquisition, which will not have an ongoing impact, have been eliminated from the unaudited pro forma net income from continuing operations for 2018.

Student Loan Hero

1 unchanged sentence

Student Loan Hero offers current and former students in-depth financial comparison tools, educational resources, and unbiased, personalized advice.

The Company made an upfront cash payment of $ 60.7 million at the closing of the transaction, of which $ 2.3 million was recognized as severance expense in the Company's consolidated statements of operations and comprehensive income.

The purchase price of $ 60.4 million is comprised of the upfront cash payment of $ 60.7 million less the $ 2.3 million recognized as severance expense, and a $ 2.0 million post-closing payment for working capital settlement.

3 unchanged sentences

Intangible assets 19,600

Goodwill 40,856

Deferred tax liabilities ( 5,467 )

2 unchanged sentences

Market participants are buyers and sellers unrelated to the Company and fair value is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction at the measurement date.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The acquired intangible assets are definite-lived assets consisting of content, customer relationships and trademarks and tradenames.

1 unchanged sentence

The fair value of the intangible assets with definite lives is as follows (dollars in thousands) :

Weighted Average

Fair Value Weighted Average

Amortization Life

Customer lists

Trademarks and tradenames

Total intangible assets

Content $ 16,100 3 years

Customer lists 2,500 10 years

Trademarks and tradenames 1,000 5 years

Total intangible assets $ 19,600 4.0 years

The Company recorded goodwill of $ 40.9 million, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed.

3 unchanged sentences

For income tax purposes, the acquisition was an equity purchase and the goodwill will not be tax deductible.

Acquisition-related costs were $ 0.5 million in 2018 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income.

Acquisition-related costs were $ 0.5 million in 2018 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income (loss).

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On June 11, 2018, the Company acquired Ovation Credit Services, Inc., a leading provider of credit services with a strong customer service reputation.

Ovation utilizes a proprietary software application that facilitates the credit repair process and is integrated directly with certain credit bureaus while educating consumers on credit improvement via ongoing outreach with Ovation case advisors.

Ovation utilizes a proprietary software application that facilitates the credit repair process and is integrated directly with certain credit reporting agencies while educating consumers on credit improvement via ongoing outreach with Ovation case advisors.

The proprietary software application offers consumers a simple, streamlined process to identify, dispute, and correct inaccuracies within their credit reports.

The Company paid $ 12.2 million in initial cash consideration and could make up to two additional earnout payments, each ranging from zero to $ 4.4 million , based on certain defined operating metrics during the earnout periods July 1, 2018 through June 30, 2019 and July 1, 2019 through June 30, 2020.

These additional payments, to the extent earned, will be payable in cash.

The Company paid $ 12.2 million in initial cash consideration and had the potential to make up to two additional earnout payments, each ranging from zero to $ 4.4 million, based on certain defined operating metrics during the earnout periods July 1, 2018 through June 30, 2019 and July 1, 2019 through June 30, 2020.

The purchase price of $ 17.9 million is comprised of the upfront cash payment of $ 12.2 million, $ 5.8 million for the estimated fair value of the earnout payments, and a $ 0.1 million post-closing receipt for working capital settlement.

In the fourth quarter of 2019, the Company paid $ 4.4 million related to the earnout payment for the period of July 1, 2018 through June 30, 2019, which is included within cash flows from financing activities on the consolidated statement of cash flows.

As of December 31, 2019 , the estimated fair value of the contingent consideration totaled $ 3.1 million , which is included in 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.

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

During 2018, the Company recorded $ 1.6 million of contingent consideration expense in the consolidated statements of operations and comprehensive income due to the change in estimated fair value of the contingent consideration.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the fourth quarter of 2020, the Company paid $ 4.4 million related to the earnout payment for the period of July 1, 2019 through June 30, 2020, of which $ 1.4 million is included within cash flows from financing activities and $ 3.0 million is included within cash flows from operating activities on the consolidated statement of cash flows.

The acquisition has been accounted for as a business combination.

1 unchanged sentence

Net working capital $ 303

Fixed assets 76

Intangible assets 8,900

Goodwill 11,280

Net deferred tax liabilities ( 2,688 )

5 unchanged sentences

The fair value of the intangible assets with definite lives is as follows (dollars in thousands) :

Weighted Average

Fair Value Weighted Average

Amortization Life

Customer lists

Trademarks and tradenames

Total intangible assets

Technology $ 6,000 7 years

Customer lists 1,900 1 year

Trademarks and tradenames 1,000 4 years

Total intangible assets $ 8,900 5.4 years

The Company recorded goodwill of $ 11.3 million, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed.

3 unchanged sentences

For income tax purposes, the acquisition was an equity purchase and the goodwill will not be tax deductible.

Acquisition-related costs were $ 0.4 million in 2018 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income.

2017 Acquisitions

On September 19, 2017 , the Company acquired certain assets of Snap Capital LLC, which does business under the name SnapCap (“SnapCap”).

SnapCap, a tech-enabled online platform, connects business owners with lenders offering small business loans, lines of credit and merchant cash advance products through a concierge-based sales approach.

The Company paid $ 11.9 million of initial cash consideration and could make up to three additional contingent consideration payments, each ranging from zero to $ 3.0 million , based on certain defined operating results during the periods of October 1, 2017 through September 30, 2018, October 1, 2018 through September 30, 2019 and October 1, 2019 through March 31, 2020.

These additional payments, to the extent earned, will be payable in cash.

The purchase price for the acquisition is $ 18.2 million , comprised of the upfront cash payment of $ 11.9 million and $ 6.3 million for the estimated fair value of the contingent consideration.

In the first quarter of 2019, the Company paid $ 3.0 million related to the earnout payment for the period of October 1, 2017 through September 30, 2018, which is included within cash flows from financing activities on the consolidated statement of cash

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2020, the Company paid $ 3.0 million related to the earnout payment for the period of October 1, 2018 through September 30, 2019.

As of December 31, 2019 , the estimated fair value of the contingent consideration totaled $ 5.9 million , which is included in 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.

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

During 2019, 2018 and 2017, the Company recorded contingent consideration expense of $ 2.2 million , a gain of $ 0.3 million and expense of $ 0.7 million , respectively, in the consolidated statements of operations and comprehensive income due to the change in estimated fair value of the contingent consideration.

The acquisition has been accounted for as a business combination.

During 2017, the Company completed the determination of the final allocation of purchase price to the assets acquired and liabilities assumed as follows (in thousands) :

Net working capital and other assets

Intangible assets

Total purchase price

The Company primarily used the income approach for the valuation as appropriate, and used valuation inputs in these models and analyses that were based on market participant assumptions.

The acquired intangible assets are definite-lived assets consisting primarily of developed technology, customer relationships and trade name and trademarks.

The estimated fair values of the developed technology were determined using the cost savings method, the customer relationships were determined using the excess earnings method and the trade name and trademarks were determined using the relief from royalty method.

The fair value of the intangible assets with definite lives are as follows (dollars in thousands) :

Weighted Average Amortization Life

Customer lists

Trade name and trademarks

Total intangible assets

The Company recorded goodwill of $ 13.7 million , which represents the excess of the purchase price over the estimated fair value of the intangible assets acquired.

The goodwill is primarily attributable to SnapCap as a going concern which represents the ability of the Company to earn a higher return on the collection of assets and business of SnapCap than if those assets were to be acquired and managed separately.

The benefit of access to the workforce is an additional element of goodwill.

The goodwill was recorded in the Company’s then one reportable segment.

For income tax purposes, the acquisition was an asset purchase and the goodwill will be tax deductible.

Acquisition-related costs were $ 0.3 million in 2017 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income.

On June 20, 2017 , the Company acquired the membership interests of Camino Del Avion (Delaware), LLC, which does business under the name MagnifyMoney (“MagnifyMoney”) for $ 29.6 million cash consideration at the closing of the transaction.

Camino del Avion (Delaware), LLC was immediately merged with and into LendingTree, LLC following such acquisition.

MagnifyMoney is a leading consumer-facing media property that offers editorial content, expert commentary, tools and resources to help consumers compare financial products and make informed financial decisions.

The Company also acquired an option to purchase an affiliate in India, which provides technology and research support to MagnifyMoney under a services agreement, for

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

an estimated fair value of $ 0.5 million at any time during the three years after the closing.

This purchase option was exercised on December 31, 2018.

In addition, the Company issued two key employees of MagnifyMoney restricted stock unit awards for a total of 38,468 shares of Company common stock.

In connection with the terms of the purchase option described above, the Company issued a further restricted stock unit award for 19,234 shares to a key employee of technology and research operations in India upon the exercise of the purchase option.

The total value of these restricted stock unit awards was $ 10.0 million on June 20, 2017.

Vesting of these restricted stock units was contingent on the basis of performance conditions following the acquisition.

The acquisition has been accounted for as a business combination.

During 2017, the Company completed the determination of the final allocation of purchase price to the assets acquired and liabilities assumed as follows (in thousands) :

Net working capital

Intangible assets

Deferred tax liabilities

Noncontrolling interest

Total purchase price

The Company primarily used the income approach for the valuation as appropriate, and used valuation inputs in these models and analyses that were based on market participant assumptions.

The acquired intangible assets are definite-lived assets consisting primarily of content, developed technology, customer relationships and trade name and trademarks.

The estimated fair values of the content was determined using the excess earnings method, developed technology was determined using the cost savings method, the customer relationships were determined using the distributor method and the trade name and trademarks were determined using the relief from royalty method.

The fair value of the intangible assets with definite lives are as follows (dollars in thousands) :

Weighted Average Amortization Life

Customer lists

Trade name and trademarks

Total intangible assets

The Company recorded goodwill of $ 23.8 million , which represents the excess of the purchase price over the estimated fair value of the tangible and intangible assets acquired, net of the liabilities assumed.

The goodwill is primarily attributable to MagnifyMoney as a going concern which represents the ability of the Company to earn a higher return on the collection of assets and business of MagnifyMoney than if those assets were to be acquired and managed separately.

The benefit of access to the workforce is an additional element of goodwill.

The goodwill was recorded in the Company’s then one reportable segment.

For income tax purposes, the acquisition was an equity purchase and the goodwill will not be tax deductible.

Acquisition-related costs were $ 0.4 million in 2017 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income.

DepositAccounts

On June 14, 2017 , the Company acquired substantially all of the assets of Deposits Online, LLC, which does business under the name DepositAccounts.com (“DepositAccounts”).

DepositAccounts is a leading consumer-facing media property in the depository industry and is one of the most comprehensive sources of depository deals and analysis on the Internet, covering all major deposit product categories through editorial content, programmatic rate tables and user-generated content.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company paid $ 24.0 million of initial cash consideration and could make additional contingent consideration payments of up to $ 9.0 million .

The potential contingent consideration payments are comprised of (i) up to seven payments of $ 1.0 million each based on specified increases in Federal Funds interest rates during the period commencing on the closing date and ending on June 30, 2020 and (ii) a one-time performance payment of up to $ 2.0 million based on the net revenue of deposit products during the period of January 1, 2018 through December 31, 2018.

These additional payments, to the extent earned, will be payable in cash.

The purchase price for the acquisition is $ 29.0 million , comprised of the upfront cash payment of $ 24.0 million and $ 5.0 million for the estimated fair value of the contingent consideration at the time of closing the acquisition.

In the third quarter of 2017, the Company made a payment of $ 1.0 million associated with a specified increase in the Federal Funds rate in June 2017.

In each of the four quarters of 2018, the Company paid $ 1.0 million associated with specified increases in the Federal Funds rate in December 2017, March 2018, June 2018 and September 2018, respectively, which are included within cash flows from financing activities on the consolidated statement of cash flows, except for an immaterial portion of the fourth quarter payment included within cash flows from operating activities.

In the first quarter of 2019, the Company paid $ 1.0 million associated with a specified increase in the Federal Funds rate in December 2018.

In the second quarter of 2019, the Company paid $ 2.0 million associated with the one-time performance payment based on the net revenue of deposit products during the period of January 1, 2018 through December 31, 2018.

The contingent consideration paid in 2019 is included within cash flows from operating activities on the consolidated statement of cash flows.

The estimated fair value of the portion of the contingent consideration payments based on increases in interest rates is determined using a scenario approach based on the interest rate forecasts of Federal Open Market Committee participants.

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.

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

As of December 31, 2019 , no liability has been recorded in the accompanying consolidated balance sheet for the remaining contingent consideration payment based on Federal Funds interest rates.

Accordingly, during 2019 the Company recorded a gain of $ 1.0 million in the consolidated statement of operations and comprehensive income due to the change in estimated fair value of the contingent consideration.

During each of 2018 and 2017, the Company recorded $ 2.0 million of contingent consideration expense in the consolidated statement of operations and comprehensive income due to the change in estimated fair value of the contingent consideration.

The acquisition has been accounted for as a business combination.

During 2017, the Company completed the determination of the final allocation of purchase price to the assets acquired and liabilities assumed as follows (in thousands) :

Intangible assets

Total purchase price

The Company primarily used the income approach for the valuation as appropriate, and used valuation inputs in these models and analyses that were based on market participant assumptions.

The acquired intangible assets are definite-lived assets consisting primarily of developed technology, customer relationships and trade name and trademarks.

The estimated fair values of the developed technology were determined using the excess earnings method, the customer relationships were determined using the distributor method and the trade name and trademarks were determined using the relief from royalty method.

The fair value of the intangible assets with definite lives are as follows (dollars in thousands) :

Weighted Average Amortization Life

Customer lists

Trade name and trademarks

Total intangible assets

Acquisition-related costs were $ 0.4 million in 2018 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income (loss).

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded goodwill of $ 19.4 million , which represents the excess of the purchase price over the estimated fair value of the intangible assets acquired.

The goodwill is primarily attributable to DepositAccounts as a going concern which represents the ability of the Company to earn a higher return on the collection of assets and business of DepositAccounts than if those assets were to be acquired and managed separately.

The benefit of access to the workforce is an additional element of goodwill.

The goodwill was recorded in the Company’s then one reportable segment.

For income tax purposes, the acquisition was an asset purchase and the goodwill will be tax deductible.

Acquisition-related costs were $ 0.3 million in 2017 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income.

Pro forma Financial Results

The unaudited pro forma financial results for the years ended December 31, 2019, 2018 and 2017 combine the consolidated results of the Company and DepositAccounts, MagnifyMoney, SnapCap, Ovation, Student Loan Hero, QuoteWizard and ValuePenguin, giving effect to the acquisitions as if the DepositAccounts, MagnifyMoney and SnapCap acquisitions had been completed on January 1, 2016, as if the Ovation, Student Loan Hero and QuoteWizard acquisitions had been completed on January 1, 2017, and as if the ValuePenguin acquisition had been completed on January 1, 2018.

The unaudited pro forma financial results for the years ended December 31, 2019 and 2018 combine the consolidated results of the Company and Ovation, Student Loan Hero, QuoteWizard and ValuePenguin, giving effect to the acquisitions as if the Ovation, Student Loan Hero and QuoteWizard acquisitions had been completed on January 1, 2017, and as if the ValuePenguin acquisition had been completed on January 1, 2018.

This unaudited pro forma financial information is presented for informational purposes only and is not indicative of future operations or results had the acquisitions been completed as of January 1, 2017 or 2018, or any other date.

2 unchanged sentences

Interest expense was also adjusted to reflect incremental interest associated with debt issued to finance the ValuePenguin acquisition.

The provision for income taxes from continuing operations has been adjusted to reflect taxes on the historical results of operations of DepositAccounts, SnapCap and QuoteWizard.

DepositAccounts, SnapCap and QuoteWizard did not pay taxes at the entity level as these entities were limited liability companies whose members elected for them to be taxed as a partnership.

The provision for income taxes from continuing operations has been adjusted to reflect taxes on the historical results of operations of QuoteWizard, as described above.

(in thousands)

5 unchanged sentences

The unaudited pro forma net income from continuing operations in 2018 includes the aggregate after-tax contingent consideration expense associated with the DepositAccounts, SnapCap, Ovation and QuoteWizard earnouts of $ 7.2 million.

The unaudited pro forma net income from continuing operations for 2017 has been adjusted to include acquisition-related costs of $ 6.9 million incurred by the Company, Student Loan Hero and QuoteWizard that are directly attributable to the Ovation, Student Loan Hero and QuoteWizard acquisitions, which will not have an ongoing impact.

Accordingly, these acquisition-related costs have been eliminated from the unaudited pro forma net income from continuing operations for 2018.

The unaudited pro forma net income from continuing operations in 2017 includes the aggregate after-tax contingent consideration expense associated with the DepositAccounts and SnapCap earnouts of $ 1.6 million .

Acquisition-related costs of $ 1.0 million incurred by the Company, DepositAccounts, MagnifyMoney and SnapCap that are directly attributable to the DepositAccounts, MagnifyMoney and SnapCap acquisitions, and which will not have an ongoing impact, have been eliminated from the unaudited pro forma net income from continuing operations for 2017.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Acquisition-related costs of $ 6.9 million incurred by the Company, Student Loan Hero and QuoteWizard that are directly attributable to the Ovation, Student Loan Hero and QuoteWizard acquisitions, and which will not have an ongoing impact, have been eliminated from the unaudited pro forma net income from continuing operations for 2018.

NOTE 10— ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Accrued advertising expense $ 54,045 $ 65,836

4 unchanged sentences

Current lease liabilities 5,375 6,885

Other 14,340 17,681

Total accrued expenses and other current liabilities $ 101,196 $ 112,755

2 unchanged sentences

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.

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2019 , right-of use assets totaling $ 25.5 million are included in other non-current assets and lease liabilities totaling $ 28.2 million are included in accrued expenses and other current liabilities and other non-current liabilities in the accompanying balance sheet.

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) :

As of December 31, 2020, right-of-use assets totaled $ 84.1 million and lease liabilities, the current portion of which is included in accrued expenses and other current liabilities in the accompanying balance sheet, totaled $ 97.7 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.

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

Year Ended December 31,

3 unchanged sentences

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

December 31, 2019

Weighted average remaining lease term

December 31, 2020 December 31, 2019

Weighted average remaining lease term 13.0 years 5.0 years

Weighted average discount rate 5.0 % 4.7 %

1 unchanged sentence

Year Ended December 31,

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

Net cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 2,359 $ 6,779

Right-of-use assets obtained in exchange for new operating lease liabilities $ 66,881 $ 21,969

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease liabilities as of December 31, 2020 are as follows (in thousands) :

5 unchanged sentences

Year ending December 31, 2025 9,336

Thereafter 96,062

Total lease payments 150,958

Interest 44,959

Tenant improvement allowances 8,261

Present value of lease liabilities $ 97,738

Rental expense for all operating leases, except those with terms of a month or less that were not renewed, charged to continuing operations was $ 3.4 million in 2018 and $ 2.0 million in 2017 , which is included in general and administrative expense in the consolidated statements of operations and comprehensive income.

The Company operated as a lessor in connection with the office buildings in Charlotte, North Carolina acquired in December 2016.

Rental expense for all operating leases, except those with terms of a month or less that were not renewed, charged to continuing operations was $ 3.4 million in 2018, which is included in general and administrative expense in the consolidated statements of operations and comprehensive income (loss).

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company operated as a lessor in connection with office buildings in Charlotte, North Carolina acquired in December 2016.

The properties were sold in 2019 to an unrelated third party.

See Note 7—Assets Held for Sale for further information.

Rental income of $ 0.3 million , $ 0.9 million and $ 1.6 million in 2019 , 2018 , and 2017 respectively, is included in other income on the accompanying consolidated statements of operations and comprehensive income.

Rental income of $ 0.3 million in 2019 and $ 0.9 million in 2018 is included in other income on the accompanying consolidated statements of operations and comprehensive income (loss).

NOTE 12— SHAREHOLDERS' EQUITY

Basic and diluted net income per share was determined based on the following share data (in thousands) :

Basic and diluted income (loss) per share was determined based on the following share data (in thousands) :

Year Ended December 31,

2020 2019 2018

Weighted average basic common shares 13,007 12,834 12,504

3 unchanged sentences

Weighted average diluted common shares 13,007 14,619 14,097

For the years ended December 31, 2019 , 2018 and 2017, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 0.1 million, 0.4 million and 0.1 million shares of common stock, respectively.

The 0.625 % Convertible Senior Notes due June 1, 2022 and the warrants issued by the Company in 2017 could be converted into the Company’s common stock, subject to certain contingencies.

For the year ended December 31, 2020, the Company had a loss from continuing operations and, as a result, no potentially dilutive securities were included in the denominator for computing diluted loss per share, because the impact would have been anti-dilutive.

Accordingly, the weighted average basic shares outstanding was used to compute loss per share.

Approximately 1.1 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the year ended December 31, 2020 because their inclusion would have been anti-dilutive.

For the year ended December 31, 2020, the weighted average shares that were anti-dilutive included options to purchase 0.2 million shares of common stock.

For the years ended December 31, 2019 and 2018, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 0.1 million and 0.4 million shares of common stock, respectively.

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 15—Debt for additional information.

Shares of the Company’s common stock associated with these instruments were excluded from the calculation of diluted income per share during 2017 as they were anti-dilutive since the conversion price of the Convertible Senior Notes and the strike price of the warrants were greater than the average market price of the Company’s common stock.

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 year ended December 31, 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 the relevant period.

See Note 13—Stock-Based Compensation for a full description of outstanding equity awards.

1 unchanged sentence

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 years ended December 31, 2019 , 2018 and 2017 , the Company purchased 22,731 , 379,449 and 75,393 shares, respectively, of its common stock for aggregate consideration of $ 5.5 million, $ 92.6 million and $ 21.0 million, respectively.

During the years ended December 31, 2019 and 2018, the Company purchased 22,731 and 379,449 shares, respectively, of its common stock for aggregate consideration of $ 5.5 million and $ 92.6 million, respectively.

At December 31, 2020, $ 179.7 million remains authorized for share repurchase.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13— STOCK-BASED COMPENSATION

2 unchanged sentences

The Equity Award Plan and Inducement Plan each have a stated term of ten years and provide that the exercise price of stock options granted will not be less than the market price of the common stock on the grant date.

The Equity Award Plan and Inducement Plan do not specify grant dates or vesting schedules, as those determinations are delegated to the Compensation Committee of the board of directors.

The Equity Award Plan and Inducement Plan do not specify grant dates or vesting schedules, as those determinations are delegated to the Compensation

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Committee of the board of directors.

Each grant agreement reflects the vesting schedule for that particular grant, as determined by the Compensation Committee.

The Compensation Committee has the authority to modify the vesting provisions of an award.

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) :

Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations and comprehensive income (loss) (in thousands) :

Year Ended December 31,

2020 2019 2018

Cost of revenue $ 1,319 $ 755 $ 378

3 unchanged sentences

Total non-cash compensation $ 53,733 $ 52,167 $ 44,365

For the years ended December 31, 2019 , 2018 and 2017 , the Company recognized $ 12.2 million , $ 11.2 million and $ 9.5 million of income tax benefit related to non-cash compensation.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 11.4 million, $ 12.2 million and $ 11.2 million of income tax benefit, including state taxes, related to non-cash compensation.

Additionally, for the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 2.5 million, $ 17.1 million and $ 77.6 million, respectively, of excess tax benefit, including state taxes, in income tax expense.

2 unchanged sentences

A summary of changes in outstanding stock options is as follows:

Number of Options

(in thousands)

Number of Options Weighted

Price Weighted

Term Aggregate

(per option) (in years) (in thousands)

Outstanding at December 31, 2019 777,871 $ 69.87

Granted 203,582 290.27

Exercised ( 47,630 ) 161.25

Forfeited ( 5,396 ) 285.56

Expired ( 3,717 ) 221.99

Outstanding at December 31, 2020 924,710 $ 111.82 4.47 $ 155,411

Options exercisable 663,239 $ 44.49 2.63 $ 153,243

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $ 303.44 on the last trading day of 2019 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 December 31, 2019 .

(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $ 273.79 on the last trading day of 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 December 31, 2020.

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, there was approximately $ 25.5 million of unrecognized compensation cost related to stock options.

3 unchanged sentences

Cash received from stock option exercises and the related actual tax benefit realized were $ 7.7 million and $ 0.7 million, respectively, for the year ended December 31, 2020.

During the years ended December 31, 2019 , 2018 and 2017 , the Company granted stock options with a weighted average grant date fair value per share of $ 167.10 , $ 150.55 and $ 105.15 , respectively, of which the vesting periods include (a) immediately upon grant, (b) one year from the grant date, (c) 50 % over a period of two years from the grant date, (d) 33 % over a period of three years from the grant date, and (e) certain grants to executive officers that vest over periods of up to five and a half years.

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.

During the years ended December 31, 2020, 2019 and 2018, the Company granted stock options with a weighted average grant date fair value per share of $ 116.08 , $ 167.10 and $ 150.55 , respectively, of which the vesting periods include (a) immediately upon grant, (b) one year from the grant date, (c) 50 % over a period of two years from the grant date, (d) 33 % over a period of three years from the grant date, (e) 25 % over a period of four years from the grant date, and (f) certain grants to executive officers that vest over periods of up to six years .

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options, except the December 2020 grant to the Chairman and Chief Executive Officer described below, 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:

Year Ended December 31,

2020 2019 2018

Expected term (1)

15 unchanged sentences

Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

During the years ended December 31, 2019 , 2018 and 2017 , the total fair value of options vested was $ 6.9 million , $ 11.4 million and $ 4.1 million , respectively.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options with Performance Conditions

A summary of changes in outstanding stock options with performance conditions is as follows:

Number of Options with Performance Conditions

(in thousands)

Outstanding at December 31, 2018

Outstanding at December 31, 2019

Options exercisable

No stock options with performance conditions were granted in 2019 or 2018.

During 2017, the Company granted stock options with performance conditions with a weighted average grant date fair value per share of $ 152.45 , of which vesting periods range from 1.2 years to 2.2 years , pending the attainment of certain performance targets set at the time of grant.

The performance measurement period ended on December 31, 2019.

The performance conditions associated with this grant were not met, and the performance-based nonqualified stock options were not earned.

No compensation cost associated with these options has been recorded.

The weighted average assumptions used are as follows:

December 31, 2017

Expected term (1)

5.50 - 6.00 years

Expected dividend (2)

Expected volatility (3)

Risk-free interest rate (4)

2.16% - 2.23%

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.

For all stock options granted during the year ended December 31, 2017, no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.

The expected volatility rate is based on the historical volatility of the Company's common stock.

The risk-free interest rate is specific to the date of grant.

The risk-free interest rate is based on U.S.

In December 2020, the Company granted time-based stock options to its Chairman and Chief Executive Officer at a premium exercise price of $ 300 , representing an approximate 25 % premium over the closing market price of LendingTree's common stock on the date of grant.

The net after-tax shares acquired through exercise of these stock options are subject to a two-year post-exercise holding requirement.

For purposes of determining stock-based compensation expense, the grant date fair value per share of these time-based stock options was estimated using the Monte Carlo simulation model.

The key assumptions used in the valuation are as follows:

(1) An average expected term of 6.90 years based on the midpoint between the first day that the stock options are both vested and in-the-money and the end of the contractual term.

(2) A zero expected dividend rate as no dividends are expected to be paid over the contractual term of the stock options.

(3) An expected volatility rate of 52 % based on the historical volatility of the Company's common stock.

(4) A risk-free interest rate of 0.92 % based on U.S.

Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

(5) An 8.8 % discount for the post-exercise holding requirement, calculated using the cost-of-carry method, the Chaffe protective put method, and the Finnerty model.

During the years ended December 31, 2020, 2019 and 2018, the total fair value of options vested was $ 5.8 million, $ 6.9 million and $ 11.4 million, respectively.

LENDINGTREE, INC.

3 unchanged sentences

A summary of changes in outstanding stock options with market conditions at target is as follows:

Number of Options with Market Conditions

(in thousands)

Number of Options with Market Conditions Weighted

Price Weighted

Term Aggregate

(per option) (in years) (in thousands)

Outstanding at December 31, 2019 463,440 $ 204.31

236,769 298.05

Exercised — —

Forfeited — —

Outstanding at December 31, 2020 700,209 $ 236.01 7.75 $ 36,238

Options exercisable — $ — 0 $ —

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

1 unchanged sentence

These costs are expected to be recognized over a weighted-average period of approximately 2.8 years.

The fair value of the stock options with market conditions will be recognized on a straight-line basis through each grant’s vest date, whether or not any of the total shareholder return targets are met.

During the years ended December 31, 2019 , 2018 and 2017 , the Company granted stock options with a weighted-average grant date fair value per share of $ 230.81 , $ 296.80 and $ 142.45 , respectively, which have vest dates of March 31, 2023, March 31, 2022 and September 30, 2022, respectively.

For single cliff-vesting stock options with market conditions, the fair value will be recognized on a straight-line basis through each grant’s vest date, whether or not any of the total shareholder return targets are met.

For graded-vesting stock options with market conditions, the fair value will be recognized using graded vesting expense attribution, whether or not any of the total shareholder return targets are met.

During the years ended December 31, 2020, 2019 and 2018, the Company granted stock options with a weighted-average grant date fair value per share of $ 142.54 , $ 230.81 and $ 296.80 , respectively.

The single cliff-vesting stock options granted during the years ended December 31, 2020, 2019 and 2018 have vest dates of March 31, 2024, March 31, 2023, March 31, 2022 and September 30, 2022.

The graded-vesting stock options granted during the year ended December 31, 2020 have a vesting schedule with vesting dates of December 31, 2024, December 31, 2025 and December 31, 2026.

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

The weighted-average assumptions used are as follows:

The weighted-average assumptions used for single cliff-vesting stock options with a market condition are as follows:

Year Ended December 31,

2020 2019 2018

Expected term (1)

7.00 - 7.15 years

7.00 years 7.00 years 7.00 - 7.15 years

Expected dividend (2)

Expected volatility (3)

51 % 51 % 50 %

Risk-free interest rate (4)

1.03 % 2.54 %

2.38 % - 2.81 %

(1) The expected term of stock options with a market condition granted was calculated using the midpoint between the weighted average time of vesting and the end of the contractual term.

1 unchanged sentence

(3) The expected volatility rate is based on the historical volatility of the Company's common stock.

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.

The stock options with a market condition granted in 2019 have a target number of shares that vest upon achieving a targeted total shareholder return performance of 81 % stock price appreciation and a maximum of 27,132 shares for achieving superior

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

In December 2020, the Company granted graded-vesting stock options with a market condition to its Chairman and Chief Executive Officer at a premium exercise price of $ 300 , representing an approximate 25 % premium over the closing market price of LendingTree's common stock on the date of grant.

The net after-tax shares acquired through exercise of these stock options are subject to a two-year post-exercise holding requirement.

The key assumptions used in the Monte Carlo simulation model to determine the grant date fair value per share of these graded-vesting stock options with a market condition are as follows:

(1) An average expected term of 7.54 years based on the midpoint between vesting and the end of the contractual term.

(2) A zero expected dividend rate as no dividends are expected to be paid over the contractual term of the stock options.

(3) An expected volatility rate of 52 % based on the historical volatility of the Company's common stock.

(4) A risk-free interest rate of 0.92 % based on U.S.

Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

(5) An 8.8 % discount for the post-exercise holding requirement, calculated using the cost-of-carry method, the Chaffe protective put method, and the Finnerty model.

The single cliff-vesting stock options with a market condition granted in 2020 have a target number of shares that vest upon achieving a targeted total shareholder return performance of 81 % stock price appreciation and a maximum of 31,940 shares for achieving superior performance.

No shares will vest unless 41 % of the targeted performance is achieved.

The performance measurement period ends on March 31, 2024.

The graded-vesting stock options with a market condition granted in 2020 have a target number of shares that vest upon achieving a targeted total shareholder return performance of 135 % stock price appreciation and a maximum of 363,464 shares for achieving superior performance.

No shares will vest unless 81 % of the targeted performance is achieved.

The performance measurement period ends on March 31, 2025.

No shares will vest unless 41 % of the targeted performance is achieved.

The performance measurement period ends on March 31, 2023.

Certain of the stock options with a market condition granted in 2018 have a target number of shares that vest upon achieving a targeted total shareholder return performance of 110 % stock price appreciation and a maximum of 52,332 shares for achieving superior performance.

4 unchanged sentences

The performance measurement period ends on March 31, 2022.

The stock options with a market condition granted 2017 have a target number of shares that vest upon achieving a targeted total shareholder return performance of 110 % stock price appreciation and a maximum of 672,499 shares for achieving superior performance.

No shares will vest unless 70 % of the targeted performance is achieved.

The performance measurement period ends on September 30, 2022.

For all stock options with market conditions, time-based service vesting conditions would also have to be satisfied in order for shares to become fully vested and no longer subject to forfeiture.

As of December 31, 2020, stock options with a market condition of 481,669 had been earned, which have a vest date of September 30, 2022.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

A summary of changes in outstanding nonvested RSUs is as follows:

Number of Units

Weighted Average Grant Date

Number of Units Weighted Average Grant Date

Nonvested at December 31, 2019 144,939 $ 267.85

138,418 286.42

Vested ( 70,698 ) 239.15

Forfeited ( 17,973 ) 285.95

Nonvested at December 31, 2020 194,686 $ 289.82

The grant date fair value per share of the RSUs is calculated as the closing market price of LendingTree's common stock at the time of grant.

(a) The grant date fair value per share of the RSUs is calculated as the closing market price of LendingTree's common stock at the time of grant.

As of December 31, 2020, there was approximately $ 35.2 million of unrecognized compensation cost related to RSUs.

1 unchanged sentence

The total fair value of RSUs that vested during the years ended December 31, 2020, 2019 and 2018 was $ 22.4 million, $ 27.2 million and $ 21.8 million, respectively.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units with Performance Conditions

1 unchanged sentence

RSUs with Performance Conditions

Number of Units

Weighted Average Grant Date Fair Value

Number of Units Weighted Average Grant Date Fair Value

Nonvested at December 31, 2019 14,647 $ 210.55

Vested ( 8,319 ) 200.40

Forfeited — —

Nonvested at December 31, 2020 6,328 $ 223.90

No RSUs with performance conditions were granted in 2019.

During 2018 and 2017, the Company granted RSUs with performance conditions to certain employees, of which vesting periods range from 0.50 years to 4.00 years , pending the attainment of certain performance targets set at the time of grant.

No RSUs with performance conditions were granted in 2020 or 2019.

During 2018, the Company granted RSUs with performance conditions to an employee with a 0.5 year vesting period, pending the attainment of certain performance targets set at the time of grant.

The grant date fair value per share of the RSUs with performance conditions is calculated as the closing market price of LendingTree's common stock at the time of grant.

2 unchanged sentences

The total fair value of RSUs with performance conditions that vested during the years ended December 31, 2020, 2019, and 2018 was $ 2.6 million, $ 18.8 million, and $ 7.9 million, respectively.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Awards with Performance Conditions

1 unchanged sentence

RSAs with Performance Conditions

Number of Awards

Weighted Average Grant Date Fair Value

Number of Awards Weighted Average Grant Date Fair Value

Nonvested at December 31, 2019 47,608 $ 340.25

Vested ( 23,804 ) 340.25

Forfeited — —

Nonvested at December 31, 2020 23,804 $ 340.25

4 unchanged sentences

As of December 31, 2020, there was approximately $ 4.4 million of unrecognized compensation cost related to RSAs with performance conditions.

These costs are expected to be recognized over a period of approximately 2.0 years .

The total fair value of RSAs with performance conditions that vested during the years ended December 31, 2019 and 2018 was $ 8.2 million and $ 13.6 million , respectively.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

These costs are expected to be recognized over a period of approximately 1.0 year.

The total fair value of RSAs with performance conditions that vested during the years ended December 31, 2020, 2019 and 2018 was $ 6.2 million, $ 8.2 million and $ 13.6 million, respectively.

Restricted Stock Awards with Market Conditions

1 unchanged sentence

RSAs with Market Conditions

Number of Awards

Weighted Average Grant Date Fair Value

Number of Awards Weighted Average Grant Date Fair Value

Nonvested at December 31, 2019 26,674 $ 340.25

Forfeited — —

Nonvested at December 31, 2020 26,674 $ 340.25

8 unchanged sentences

As of December 31, 2020, RSAs with a market condition of 29,601 had been earned, which have a vest date of September 30, 2022.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14— INCOME TAXES

Income Tax Provision

The components of the income tax expense (benefit) are as follows (in thousands) :

The components of the income tax benefit are as follows (in thousands) :

Year Ended December 31,

Current income tax expense (benefit):

Current income tax expense (benefit)

2020 2019 2018

Current income tax (benefit) expense:

Federal $ ( 10,705 ) $ 201 $ ( 1,470 )

State 372 ( 125 ) ( 204 )

Current income tax (benefit) expense ( 10,333 ) 76 ( 1,674 )

Deferred income tax (benefit) provision:

Federal ( 7,495 ) ( 10,857 ) ( 44,950 )

State ( 2,133 ) 2,302 ( 18,951 )

Deferred income tax benefit ( 9,628 ) ( 8,555 ) ( 63,901 )

Income tax (benefit) expense

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the income tax expense (benefit) to the amounts computed by applying the statutory federal income tax rate to income from continuing operations before income taxes is shown as follows (in thousands) :

Income tax benefit $ ( 19,961 ) $ ( 8,479 ) $ ( 65,575 )

A reconciliation of the income tax benefit to the amounts computed by applying the statutory federal income tax rate to (loss) income from continuing operations before income taxes is shown as follows (in thousands) :

Year Ended December 31,

2020 2019 2018

Federal statutory income tax $ ( 8,931 ) $ 6,506 $ 9,186

1 unchanged sentence

Excess tax deductions on non-cash compensation ( 2,033 ) ( 13,971 ) ( 59,601 )

Impact of the Coronavirus Aid, Relief, and Economic Security Act ( 6,104 ) — —

Research and experimentation tax credit ( 3,800 ) ( 5,794 ) ( 2,523 )

5 unchanged sentences

Impact of Tax Cuts and Jobs Act — — 270

Income tax (benefit) expense

Other, net 23 ( 612 ) 1,227

Income tax benefit $ ( 19,961 ) $ ( 8,479 ) $ ( 65,575 )

During the fourth quarter of 2017, LendingTree recorded a net tax expense of $ 9.1 million related to the enactment of the TCJA.

The expense is primarily related to the remeasurement of LendingTree’s deferred tax assets and liabilities considering the TCJA’s enacted tax rates and certain other impacts.

Simultaneous with the Act, the SEC Staff released Accounting Bulletin No.

118 ("SAB 118"), which allows the use of provisional amounts (reasonable estimates) if the analysis of the impacts of the Act have not been completed when financial statements are issued.

Simultaneous with the Act, the SEC Staff released SAB 118, which allows the use of provisional amounts (reasonable estimates) if the analysis of the impacts of the Act have not been completed when financial statements are issued.

During the fourth quarter of 2018, the Company finalized the computations of the income tax effects of the Act.

10 unchanged sentences

Provision for accrued expenses $ 4,907 $ 12,234

Net operating loss carryforwards (b)

Leasing 24,864 7,299

Net operating loss carryforwards (a)

56,190 56,450

Non-cash compensation expense 20,746 15,805

Intangible assets 12,684 4,182

Interest limitation 4,059 987

Contingent liabilities 4,507 9,366

Tax credits 13,656 6,124

Other 3,605 446

Total gross deferred tax assets 145,218 112,893

valuation allowance (c)

valuation allowance (b)

( 5,802 ) ( 4,102 )

Total deferred tax assets, net of the valuation allowance 139,416 108,791

Deferred tax liabilities:

Intangible and other assets

Leasing ( 21,632 ) ( 6,596 )

Property and equipment ( 5,015 ) ( 4,748 )

Other ( 653 ) ( 1,835 )

Total gross deferred tax liabilities ( 27,300 ) ( 13,179 )

Net deferred taxes $ 112,116 $ 95,612

As of December 31, 2019, the adoption of ASC Topic 842 has no material impact to the effective tax rate.

Related deferred tax positions are individually disclosed as components of deferred tax as of December 31, 2019.

At December 31, 2019 , the Company had pre-tax consolidated federal net operating losses ("NOLs") of $ 188.2 million .

(a) At December 31, 2020, the Company had pre-tax consolidated federal net operating losses ("NOLs") of $ 179.5 million.

The federal NOLs no longer expire under the new TCJA.

1 unchanged sentence

In addition, the Company has state NOLs of approximately $ 519.5 million at December 31, 2020 that will expire at various times between 2021 and 2040.

The valuation allowance is related to items for which it is "more likely than not" that the tax benefit will not be realized.

(b) The valuation allowance is related to items for which it is "more likely than not" that the tax benefit will not be realized.

Deferred income taxes are presented in the accompanying consolidated balance sheets as follows (in thousands) :

1 unchanged sentence

Non-current assets of discontinued operations 15,892 7,948

Deferred income tax liabilities

Net deferred taxes $ 112,116 $ 95,612

2 unchanged sentences

As of each reporting date, management considers both positive and negative evidence regarding the likelihood of future realization of the deferred tax assets.

At December 31, 2020, 2019 and 2018, the Company recorded a partial valuation allowance of $ 5.8 million, $ 4.1 million and $ 2.2 million, respectively, primarily related to state net operating losses, which the Company does not expect to be able to utilize prior to expiration.

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2019 , 2018 and 2017 , the Company recorded a partial valuation allowance of $ 4.1 million , $ 2.2 million and $ 2.7 million , respectively, primarily related to state net operating losses, which the Company does not expect to be able to utilize prior to expiration.

A reconciliation of the beginning and ending balances of the deferred tax valuation allowance is as follows (in thousands) :

Year Ended December 31,

2020 2019 2018

Balance, beginning of the period $ 4,102 $ 2,229 $ 2,694

11 unchanged sentences

As of December 31, 2020 and 2019, the accrual for unrecognized tax benefits, including interest, was $ 2.6 million and $ 2.1 million, respectively, which would benefit the effective tax rate if recognized.

Management also believes that it is reasonably possible that the amount of unrecognized income tax benefits may decrease by $ 0.6 million within the next twelve months due to settlement of audits and expiration of statutes of limitations.

LendingTree is subject to audits by federal, state and local authorities in the area of income tax.

7 unchanged sentences

Convertible Senior 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 “Notes”) in a private placement.

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

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

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 fundamental change prior to the maturity of the Notes, the Company will, in certain circumstances, increase the

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

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

conversion rate by a specified number of additional shares for a holder that elects to convert the Notes in connection with such fundamental change.

the Company to settle the principal amount of the 2025 Notes in cash and any conversion premium in shares of its common stock.

The 2025 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2025 Notes;

equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated;

effectively junior in right of payment to any of the Company’s secured indebtedness, including borrowings under the senior secured revolving credit facility, described below, to the extent of the value of the assets securing such indebtedness;

and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.

Prior to the close of business on the business day immediately preceding March 13, 2025, the 2025 Notes will be convertible at the option of the holders thereof only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on, and including the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price (as defined in the 2025 Notes) per $1,000 principal amount of 2025 Notes for such trading day was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;

• if the Company calls such 2025 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the notes called for redemption;

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

Holders of the 2025 Notes were 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.

Holders of the 2025 Notes are not entitled to convert the 2025 Notes during the calendar quarter ended March 31, 2021 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 December 31, 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 41st scheduled trading day immediately before the maturity date, the Company may redeem for cash all or a portion of the 2025 Notes, at its option, if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period (and including the last trading day of such period) ending on, and including the last trading day immediately preceding the date of notice of redemption is greater than or equal to 130 % of the conversion price on each applicable trading day.

The redemption price will be equal to 100 % of the principal amount of the 2025 Notes to be 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 separate components of debt and equity of the Company’s 2025 Notes were determined using an

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

During 2020, the Company recorded interest expense on the 2025 Notes of $ 11.5 million which consisted of $ 1.3 million associated with the 0.50 % coupon rate, $ 9.3 million associated with the accretion of the debt discount, and $ 0.9 million associated with the amortization of the debt issuance costs.

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

As of December 31, 2020, the fair value of the 2025 Notes is estimated to be approximately $ 564.1 million using the Level 1 observable input of the last quoted market price on December 31, 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) :

Gross carrying amount $ 575,000

Unamortized debt discount 110,110

Debt issuance costs 11,056

Net carrying amount $ 453,834

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.

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.

8 unchanged sentences

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

Holders of the Notes became entitled to convert the Notes on January 1, 2018, based on the last reported sales price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on December 31, 2017, being greater than or equal to 130 % of the conversion price of the Notes on each applicable trading day.

Holders of the Notes continued to have such right until June 30, 2018 based on the last reported sales price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on March 31, 2018, being greater than or equal to 130 % of the conversion price of the Notes on each applicable trading day.

Holders of the Notes were not entitled to convert the Notes from July 1, 2018 to March 31, 2019.

Holders of the Notes became entitled to convert the Notes on April 1, 2019, based on the last reported sales price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on March 31, 2019, being greater than or equal to 130 % of the conversion price of the Notes on each applicable trading day.

Holders of the Notes will continue to have such right until March 31, 2020, based on the last reported sales price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on December 31, 2019, being greater than or equal to 130 % of the conversion price of the Notes on each applicable trading day.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Holders of the 2022 Notes were 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.

Holders of the 2022 Notes are not entitled to convert the 2022 Notes during the calendar quarter ended March 31, 2021 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 December 31, 2020, was not greater than or equal to 130 % of the conversion price of the 2022 Notes on each applicable trading day.

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

2 unchanged sentences

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

The separate components of debt and equity of the Company’s 2022 Notes were determined using an interest rate of 5.36 %, which reflects the nonconvertible debt borrowing rate of the Company at the date of issuance.

As a result, the initial components of debt and equity were $ 238.4 million and $ 61.6 million, respectively.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financing costs related to the issuance of the 2022 Notes were approximately $ 9.3 million, of which $ 7.4 million were allocated to the liability component and are being amortized to interest expense over the term of the debt and $ 1.9 million were allocated to the equity component.

On July 24, 2020, the Company used approximately $ 234.0 million of the net proceeds from the issuance of the 2025 Notes to repurchase approximately $ 130.3 million principal amount of the 2022 Notes, including the payment of accrued and unpaid interest of approximately $ 0.1 million, through separate transactions with certain holders of the 2022 Notes.

Of the consideration paid, $ 126.0 million was allocated to the extinguishment of the liability component of the notes, while the remaining $ 107.9 million was allocated to the reacquisition of the equity component and recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity.

The Company recognized a loss on debt extinguishment of $ 7.8 million in the third quarter of 2020, which is included in interest expense, net in the consolidated statements of operations and comprehensive income (loss).

During 2020, the Company recorded interest expense on the 2022 Notes of $ 13.0 million which consisted of $ 1.5 million associated with the 0.625 % coupon rate, $ 10.3 million associated with the accretion of the debt discount, and $ 1.2 million associated with the amortization of the debt issuance costs.

4 unchanged sentences

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) :

2020 December 31,

Gross carrying amount $ 169,690 $ 299,991

2 unchanged sentences

Net carrying amount $ 157,578 $ 264,391

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

1 unchanged sentence

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

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

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

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

The 2017 Hedge transactions are expected generally to reduce the potential dilution to the Company's common stock upon conversion of the 2022 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2022 Notes, as the case may be, in the event that the market price per share of common stock, as measured under the terms of the 2017 Hedge transactions, is greater than the strike price of the 2017 Hedge transactions, which initially corresponds to the initial conversion price of the 2022 Notes, or approximately $ 207.63 per share of common stock.

The 2017 Hedge transactions will expire upon the maturity of the Notes.

On May 31, 2017, the Company sold to the counterparties, warrants (the "Warrants") to acquire 1.4 million shares of Common Stock at an initial strike price of $ 266.39 per share, which represents a premium of 70 % over the reported sale price of the Common Stock of $ 156.70 on May 24, 2017.

On May 31, 2017, the Company sold to the counterparties, warrants (the “2017 Warrants”) to acquire 1.4 million shares of the Company's common stock at an initial strike price of $ 266.39 per share, which represents a premium of 70 % over the last reported sale price of the common stock of $ 156.70 on May 24, 2017.

On May 31, 2017, the Company received aggregate proceeds of approximately $ 43.4 million from the sale of the 2017 Warrants.

If the market price per share of the common stock, as measured under the terms of the 2017 Warrants, exceeds the strike price of the 2017 Warrants, the 2017 Warrants could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the 2017 Warrants in cash.

The Hedge and Warrant transactions are indexed to, and potentially settled in, the Company's common stock and the net cost of $ 18.1 million has been recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity.

Senior Secured Revolving Credit Facility

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.

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

restated the Company's previous $ 350.0 million five-year senior secured revolving credit facility (the “2017 Revolving Credit Facility”).

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 December 31, 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.

As of December 31, 2018, the Company had a $ 125.0 million , 31-day borrowing outstanding under the Revolving Credit Facility bearing interest at the LIBO rate option of 4.02 % .

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

1 unchanged sentence

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

As of December 31, 2019, the Company has outstanding one letter of credit issued in the amount of $ 0.2 million .

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

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

5 unchanged sentences

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

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2020.

2 unchanged sentences

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

The Company is required to pay an unused commitment fee quarterly in arrears on the difference between committed amounts and amounts actually borrowed under the Amended Revolving Credit Facility equal to an applicable percentage of 0.25 % to 0.45 % per annum based on a total consolidated debt to EBITDA ratio.

Except as noted in the covenant relief discussion above, the Company is required to pay an unused commitment fee quarterly in arrears on the difference between committed amounts and amounts actually borrowed under the Amended Revolving Credit Facility equal to an applicable percentage of 0.25 % to 0.45 % per annum based on a total consolidated debt to EBITDA ratio.

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

1 unchanged sentence

The letter of credit fronting fee is 0 .125 % per annum on the face amount of each letter of credit.

The Company recognized $ 0.3 million and $ 0.1 million in additional interest expense in the fourth quarters of 2019 and 2017, respectively, due to the write-off of certain unamortized debt issuance costs associated with the original revolving credit facility and previous amendments to the credit agreement.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revolving Credit Facility entered into on December 10, 2019 are being amortized to interest expense over the life of the Amended Revolving Credit Facility, and are included in prepaid and other current assets and other non-current assets in the Company's consolidated balance sheet.

The Company recognized $ 0.3 million in additional interest expense in the fourth quarter of 2019 due to the write-off of certain unamortized debt issuance costs associated with the original revolving credit facility and previous amendments to the credit agreement.

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, 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.

During 2020, the Company recorded interest expense related to the revolving credit facility of $ 4.3 million which consisted of $ 1.3 million associated with borrowings bearing interest at the LIBO rate, $ 1.7 million in unused commitment fees, and $ 1.3 million associated with the amortization of the debt issuance costs.

During 2018 , the Company recorded interest expense related to the revolving credit facility of $ 2.0 million which consisted of $ 0.8 million associated with borrowing bearing interest at the base rate and the LIBO rate, $ 0.8 million in unused commitment fees, and $ 0.4 million associated with the amortization of the debt issuance costs.

During 2017 , the Company recorded interest expense related to the revolving credit facility of $ 0.5 million in unused commitment fees and $ 0.4 million associated with the amortization of the debt issuance costs.

During 2019, the Company recorded interest expense related to the revolving credit facility of $ 6.1 million which consisted of $ 4.9 million associated with borrowings bearing interest at the LIBO rate, $ 0.6 million in unused commitment fees, and $ 0.6 million associated with the amortization of the debt issuance costs.

During 2018, the Company recorded interest expense related to the revolving credit facility of $ 2.0 million which consisted of $ 0.8 million associated with borrowings bearing interest at the base rate and the LIBO rate, $ 0.8 million in unused commitment fees, and $ 0.4 million associated with the amortization of the debt issuance costs.

NOTE 16— COMMITMENTS

1 unchanged sentence

Commitments Due By Period

Total Less Than

1 year 1-3 years 3-5 years More Than

Surety bonds (a)

$ 5,077 $ 4,952 $ 125 $ — $ —

(a) State laws and regulations generally require businesses which engage in mortgage brokering activity to maintain a mortgage broker or similar license.

1 unchanged sentence

All states require that the Company maintain surety bonds for potential claims.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Commitments

9 unchanged sentences

NOTE 18— FAIR VALUE MEASUREMENTS

Other than the Notes and the Warrants, the carrying amounts of the Company's financial instruments are equal to fair value at December 31, 2019 .

See Note 14 —Debt for additional information on the Notes and the Warrants.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2020.

See Note 15—Debt for additional information on the convertible notes and warrants, and see Note 8—Equity Investment for additional information on the equity interest in Stash.

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

1 unchanged sentence

Year Ended December 31,

2020 2019 2018

Contingent consideration, beginning of period $ 33,464 $ 38,837 $ 57,349

3 unchanged sentences

Purchases, sales and settlements:

Additions — — 19,700

Payments ( 30,542 ) ( 33,775 ) ( 49,000 )

Contingent consideration, end of period $ 8,249 $ 33,464 $ 38,837

The contingent consideration liability at December 31, 2020 consisted of the estimated fair value of the remaining earnout payment for the QuoteWizard acquisition.

The contingent consideration liability at December 31, 2019 and 2018 consisted of the estimated fair value of the earnout payments of the DepositAccounts, SnapCap, Ovation, and QuoteWizard acquisitions.

The contingent consideration liability at December 31, 2017 was the estimated fair value of the earnout payments of the CompareCards, DepositAccounts, and SnapCap acquisitions.

The Company will make earnout payments ranging from zero to $ 1.0 million based on the achievement of defined milestone targets for DepositAccounts, payments ranging from $ 3.0 million to $ 6.0 million based on the achievement of certain defined earnings targets for SnapCap, payments ranging from zero to $ 4.4 million based on the achievement of certain defined operating metrics for Ovation, and payments ranging from zero to $ 46.8 million based on the achievement of certain defined performance targets for QuoteWizard.

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

The significant unobservable inputs used to calculate the fair value of the contingent consideration are estimated future cash flows for the acquisitions, estimated customer growth rates, estimated date and likelihood of an increase in interest rates 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.

The Company will make an earnout payment ranging from zero to $ 23.4 million based on the achievement of certain defined performance targets for QuoteWizard.

See Note 9—Business Acquisitions for additional information.

The significant unobservable inputs used to calculate the fair value of the contingent consideration for QuoteWizard are the operating results growth rate 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 consideration.

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.

Any changes in fair value will be recorded in operating income in the consolidated statements of operations and comprehensive income (loss).

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides quantitative information about Level 3 fair value measurements.

Fair Value at

December 31, 2020 Valuation Technique Unobservable Input Range (Weighted Average) (a)

(in thousands)

Contingent consideration $ 8,249 Option pricing model Operating results growth rate 4.8 %

Discount rate 6.8 %

(a) Discount rates are weighted by the relative undiscounted value of expected earnout payments.

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

NOTE 19— RELATED PARTY TRANSACTIONS

One of the Company's board of directors served as a director to a marketing partner of the Company through 2018.

During 2018 and 2017 , the Company recognized $ 0.7 million and $ 1.2 million , respectively, of expenses for this marketing partner through the normal course of business.

A then-member of the Company's board of directors served as a director to a marketing partner of the Company through 2018.

During 2018, the Company recognized $ 0.7 million of expenses for this marketing partner through the normal course of business.

In 2017, the Company's Board of Directors approved a $ 10.0 million contribution to fund the newly formed LendingTree Foundation.

The Company paid $ 3.3 million of the $ 10.0 million contribution in 2019, and expects to pay the remainder in equal installments in 2020 and 2021.

In each of 2020 and 2019, the Company paid $ 3.3 million of the $ 10.0 million contribution, and expects to pay the final installment in 2021.

Officers of the Company serve as officers of the LendingTree Foundation.

The contribution is recorded in general and administrative expense on the consolidated statement of operations and comprehensive income.

NOTE 20— BENEFIT PLANS

7 unchanged sentences

Matching contributions were approximately $ 2.4 million, $ 2.0 million and $ 1.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21— DISCONTINUED OPERATIONS

3 unchanged sentences

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

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

A portion of the purchase price 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.

Liability for losses on previously sold loans remains with HLC and is discussed below.

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.

7 unchanged sentences

On July 19, 2019, HLC appealed the judgment to the United States Court of Appeals for the Eighth Circuit.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

1 unchanged sentence

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.

5 unchanged sentences

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

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

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

LendingTree, LLC intends to vigorously contest such claims.

During the third quarter of 2019, LendingTree, LLC made a settlement offer to HLC after it filed for bankruptcy for $ 31.0 million for the release of any and all claims against the Company, including the dividend claim.

LendingTree estimates the range of potential losses related to the dividend matter to be $ 0.0 million to $ 40.0 million plus a potential award of prejudgment interest.

An estimated liability of $ 31.0 million is included in the accompanying consolidated balance sheet as of December 31, 2019 related to LendingTree LLC's ownership in HLC.

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loan Loss Obligations

Prior to the sale of its LendingTree Loans Business on June 6, 2012, HLC sold loans it originated through its LendingTree Loans Business to investors on a servicing-released basis, so the risk of loss or default by the borrower was generally transferred to the investor.

However, HLC was required by these investors to make certain representations and warranties relating to credit information, loan documentation and collateral.

These representations and warranties may extend through the contractual life of the loan.

If underwriting deficiencies, borrower fraud or documentation defects, arising prior to the sale of the loan by HLC to such investor, are discovered in individual loans, HLC may be obligated to repurchase the respective loan or indemnify such investor for any losses from borrower defaults if such deficiency or defect cannot be cured within the contractually specified period following discovery.

HLC continues to be liable for these indemnification obligations, repurchase obligations and premium repayment obligations following the sale of substantially all of its operating assets, including the LendingTree Loans Business, in the second quarter of 2012.

The liability for losses on previously sold loans was presented as current liabilities of discontinued operations in the accompanying consolidated balance sheet as of December 31, 2018.

Additionally, LendingTree guaranteed certain loans sold to investors in the event that HLC is unable to satisfy its repurchase and warranty obligations related to such loans.

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

21 unchanged sentences

On June 21, 2019, the U.S.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

District Court in Minnesota entered judgment against HLC for $ 68.5 million.

7 unchanged sentences

On August 27, 2019, plaintiff filed a lawsuit captioned ResCap Liquidating Trust v.

LendingTree, LCC, et al., Case No.

LendingTree, LLC, et al., Case No.

19-cv-2360 (U.S.

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 and intends to defend this action vigorously.

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.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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 and fourth quarters of 2020, the Company made payments of $ 26.5 million and $ 6.4 million, respectively, to the ResCap Liquidating Trust.

The Company expects to be refunded $ 8.6 million of these amounts, subsequent to the final distributions in the HLC Bankruptcy.

This $ 8.6 million is recorded within current assets of discontinued operations on the accompanying consolidated balance sheet as of December 31, 2020.

Lehman Brothers Holdings, Inc.

13 unchanged sentences

Bankruptcy Filing creates an automatic stay of this proceeding.

On June 11, 2020, LBHI filed a lawsuit captioned Lehman Brothers Holdings Inc.

LendingTree, LLC, et al., Case No.

20-cv-01351 (U.S.

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

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 December 31, 2020.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Information of Discontinued Operations

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

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

Year Ended December 31,

2020 2019 2018

Revenue $ — $ — $ —

Gain from removal of HLC's assets and liabilities — 4,515 —

2 unchanged sentences

Income tax benefit 7,619 8,855 3,408

Net loss $ ( 25,689 ) $ ( 21,632 ) $ ( 12,820 )

Losses from discontinued operations included all activity of HLC prior to bankruptcy, including litigation settlements, contingencies and legal fees associated with legal proceedings, as well as a gain upon deconsolidation due to the accounting effect of HLC’s bankruptcy filing on the consolidated financial statements.

12 unchanged sentences

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.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

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.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2020

Home Consumer Insurance Other Total

(in thousands)

Revenue $ 320,992 $ 253,198 $ 333,765 $ 2,035 $ 909,990

Segment cost of revenue and marketing expense 188,869 146,308 202,623 2,717 540,517

Segment profit

Segment profit (loss) 132,123 106,890 131,142 ( 682 ) 369,473

Cost of revenue (exclusive of cost of advertising re-sold to third parties included above) 53,408

2 unchanged sentences

Product development 43,636

Depreciation 14,201

Amortization of intangibles 53,078

Change in fair value of contingent consideration 5,327

Severance 295

Litigation settlements and contingencies ( 943 )

Operating income

Operating loss ( 6,603 )

Interest expense, net ( 36,300 )

Income before income taxes and discontinued operations

Other income 376

Loss before income taxes and discontinued operations $ ( 42,527 )

Year Ended December 31, 2019

Home Consumer Insurance Other Total

(in thousands)

Revenue $ 277,935 $ 515,037 $ 284,792 $ 28,839 $ 1,106,603

Segment cost of revenue and marketing expense 174,814 301,852 170,153 27,466 674,285

4 unchanged sentences

Product development 39,953

Depreciation 10,998

Amortization of intangibles 55,241

Change in fair value of contingent consideration 28,402

Severance 1,026

Litigation settlements and contingencies ( 151 )

1 unchanged sentence

Interest expense, net ( 20,271 )

Other expense

Other income 524

Income before income taxes and discontinued operations $ 30,981

3 unchanged sentences

Year Ended December 31, 2018

Home Consumer Insurance Other Total

(in thousands)

Revenue $ 319,176 $ 395,615 $ 31,369 $ 18,705 $ 764,865

Segment cost of revenue and marketing expense 214,475 207,891 20,011 17,351 459,728

Segment profit (loss)

Segment profit 104,701 187,724 11,358 1,354 305,137

Cost of revenue (exclusive of cost of advertising re-sold to third parties included above) 27,587

2 unchanged sentences

Product development 26,958

Depreciation 7,385

Amortization of intangibles 23,468

Change in fair value of contingent consideration 10,788

Severance 2,352

Litigation settlements and contingencies ( 186 )

4 unchanged sentences

The CODM does not review information on segment assets and as such, no segment asset information is reported herein.

NOTE 22— QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following tables set forth summary financial information for the years ended December 31, 2019 and 2018 :

(in thousands, except per share amounts)

Operating (loss) income (1)

Income from continuing operations (1)

(Loss) income from discontinued operations

Net (loss) income and comprehensive (loss) income

Income per share from continuing operations:

(Loss) income per share from discontinued operations:

Net (loss) income per share:

The first quarter of 2019 includes contingent consideration expense of $ 14.4 million for the QuoteWizard acquisition due to an increased probability of achievement of certain defined performance targets for QuoteWizard.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Operating income (1)

Income from continuing operations (1)

Loss from discontinued operations

Net income (loss) and comprehensive income (loss)

Income per share from continuing operations:

Loss per share from discontinued operations:

Net income (loss) per share:

The fourth quarter of 2018 includes contingent consideration expense of $ 6.8 million for the QuoteWizard acquisition due to an increased probability of achievement of certain defined performance targets for QuoteWizard.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data