What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-05 compared with 2020-11-05 · 129 added, 156 removed, 178 unchanged (62% of the section changed)

18 unchanged sentences

LendingTree, Inc.

is the parent of LendingTree, LLC and several companies owned by LendingTree, LLC.

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

We operate what we believe to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions.

4 unchanged sentences

Our My LendingTree platform offers a personalized comparison-shopping experience by providing free credit scores and credit score analysis.

This platform enables us to observe consumers' credit profiles and then identify and alert them to loans and other offerings on our marketplace that may be more favorable than the terms they may have at a given point in time.

This platform enables us to monitor consumers' credit profiles and then identify and alert them to loans and other offerings on our marketplace that may be more favorable than the terms they may have at a given point in time.

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

Three Months Ended September 30,

My LendingTree

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

Revenue Contribution (in thousands)

% of total revenue

We are focused on developing new product offerings and enhancements to improve the experiences that consumers and Network Partners have as they interact with us.

5 unchanged sentences

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.

Except for the discussion under the heading "Discontinued Operations," the analysis within Management's Discussion and Analysis of Financial Condition and Results of Operations reflects our continuing operations.

for the discussion under the heading "Discontinued Operations," the analysis within Management's Discussion and Analysis of Financial Condition and Results of Operations reflects our continuing operations.

Economic Conditions

1 unchanged sentence

The pandemic has significantly impacted the economic conditions in the U.S., as federal, state and local governments react to the public health crisis, creating significant uncertainties in the U.S.

The downstream impact of social distancing and related economic pullback are affecting our business and marketplace participants to varying degrees.

The downstream impact of various lockdown orders and related economic pullback are affecting our business and marketplace participants to varying degrees.

We are continuously monitoring the impacts of the current economic conditions related to the COVID-19 pandemic and the effect on our business, financial condition and results of operations.

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

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

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

Of our three reportable segments, the Consumer segment has been most impacted.

The impact to our Home and Insurance segments was much less substantial and these segments recovered by the end of 2020.

While forecasting the timeline of full recovery for the Consumer segment remains challenging, the momentum of recovery has increased in each quarter subsequent to the onset of the COVID-19 pandemic.

We are encouraged by the progress made, and continue to view the Consumer segment with optimism over the medium to long term.

Most of our selling and marketing expenses are variable costs that we adjust dynamically in relation to revenue opportunities to profitably meet demand.

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

Thus, as our revenue was negatively impacted during the recession, our marketing expenses generally decreased in line with revenue.

Segment Reporting

1 unchanged sentence

Home, Consumer and Insurance.

We changed our reportable segments in the fourth quarter of 2019, and prior period results have been reclassified to conform with this change in reportable segments.

Recent Business Acquisitions

On January 10, 2019, we acquired Value Holding Inc., the parent company of ValuePenguin Inc.

(“ValuePenguin”), a personal finance website that offers consumers objective analysis on a variety of financial topics from insurance to credit cards for $106.2 million.

Combining ValuePenguin’s high-quality content and search engine optimization capability with proprietary technology and insurance carrier network from QuoteWizard enables us to provide immense value to carriers and agents.

This strategic acquisition positions us to achieve further scale in the insurance space as well as the broader financial services industry.

On February 28, 2020, we acquired an equity interest in Stash Financial, Inc.

(“Stash”) for $80.0 million.

On January 6, 2021, we acquired additional equity interest for $1.2 million.

Stash is a consumer investing and banking platform.

Stash brings together banking, investing, and education into one seamless experience offering a full-suite of personal investment accounts, Traditional and Roth IRAs, custodial investment accounts, and banking services, including checking accounts and debit cards with a Stock-Back ® rewards program.

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.

See Note 7—Equity Investment for additional information on the equity interest in Stash.

North Carolina Office Properties

In December 2016, we completed the acquisition of two office buildings in Charlotte, North Carolina, for $23.5 million in cash.

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

In November 2018, the office buildings were classified as held for sale.

In May 2019, we sold these buildings to an unrelated third party for a sale price of $24.4 million.

Our new corporate office is located on approximately 176,000 square feet of office space in Charlotte, North Carolina under an approximate 15-year lease that contractually commenced in April 2021.

With our expansion in North Carolina, in December 2016, we received a grant from the state that provides up to $4.9 million in reimbursements over 12 years beginning in 2017 for investing in real estate and infrastructure in addition to increasing jobs in North Carolina at specific targeted levels through 2020, and maintaining the jobs thereafter.

7 unchanged sentences

Typically, when interest rates decline, we see increased consumer demand for mortgage refinancing, which in turn leads to increased traffic to our website and decreased selling and marketing efforts associated with that traffic.

At the same time, lender demand for leads from third-party sources typically decreases, as there are more consumers in the marketplace seeking refinancings and, accordingly, lenders receive more organic mortgage lead volume.

At the same time, lender demand for leads from third-party sources typically decreases, as there are more consumers in the marketplace seeking

refinancings and, accordingly, lenders receive more organic mortgage lead volume.

Due to lower lender demand, our revenue earned per consumer typically decreases, but with correspondingly lower selling and marketing costs.

4 unchanged sentences

We dynamically adjust selling and marketing expenditures in all interest rate environments to optimize our results against these variables.

According to Freddie Mac, 30-year mortgage interest rates declined during 2020 to a monthly average of 2.89% in September 2020.

On a quarterly basis, 30-year mortgage interest rates in the third quarter of 2020 averaged 2.95% , compared to 3.67% in the third quarter of 2019 and 3.23% in the second quarter of 2020.

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

However, COVID-19 pandemic-related restrictions that impacted traditional homebuying in the second quarter of 2020 resulted in increased demand for purchase mortgages in the third quarter of 2020.

According to Mortgage Bankers Association ("MBA") data, total refinance origination dollars decreased to 52% of total mortgage origination dollars in the third quarter of 2020 compared to 63% in the second quarter of 2020.

In the third quarter of 2020 , total refinance origination dollars decreased 22% to $450 million from the second quarter of 2020 and increased 63% from the third quarter of 2019 .

Industry-wide mortgage originations in the third quarter of 2020 decreased 7% from the second quarter of 2020 and increased 32% from the third quarter of 2019.

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

According to MBA projections, the refinance share of total mortgage origination dollars is projected to represent approximately 55% for 2020.

According to Freddie Mac, 30-year mortgage interest rates increased from a monthly average of 2.68% in December 2020 to a monthly average of 3.08% in March 2021.

On a quarterly basis, 30-year mortgage interest rates in the first quarter of 2021 averaged 2.88%, compared to 3.51% in the first quarter of 2020 and 2.76% in the fourth quarter of 2020.

Typically, as mortgage interest rates rise, there are fewer consumers in the marketplace seeking refinancings and, accordingly, the mix of mortgage origination dollars will move toward purchase mortgages.

However, limited inventory of homes for sale have impacted this trend in recent months.

According to Mortgage Bankers Association ("MBA") data, total refinance origination dollars increased to 71% of total mortgage origination dollars in the first quarter of 2021 compared to 67% in the fourth quarter of 2020.

In the first quarter of 2021, total refinance origination dollars decreased 9% from the fourth quarter of 2020 and increased 153% from the first quarter of 2020.

Industry-wide mortgage origination dollars in the first quarter of 2021 decreased 13% from the fourth quarter of 2020 and increased 94% from first quarter of 2020.

In April 2021, the MBA projected 30-year mortgage interest rates to increase during 2021, to an average 3.7% for the year.

According to MBA projections, the mix of mortgage origination dollars is expected to move back towards purchase mortgages with the refinance share representing approximately 49% for 2021.

Real Estate Market

4 unchanged sentences

Conversely, a weaker real estate market will typically lead to an increase in lender demand, as there are fewer consumers in the marketplace seeking mortgages.

According to Fannie Mae data, existing-home sales increased 38% in the third quarter of 2020 compared to the second quarter of 2020, and increased 10% compared to the third quarter of 2019.

Fannie Mae predicts an overall increase in existing-home sales of 1% in 2020 compared to 2019.

Results of Operations for the Three and Nine Months ended September 30, 2020 and 2019

Three Months Ended September 30,

Nine Months Ended September 30,

According to Fannie Mae data, existing-home sales decreased 6% in the first quarter of 2021 compared to the fourth quarter of 2020, and increased 13% compared to the first quarter of 2020.

Fannie Mae predicts an overall increase in existing-home sales of approximately 5% in 2021 compared to 2020.

Results of Operations for the Three Months ended March 31, 2021 and 2020

Three Months Ended March 31,

(Dollars in thousands)

Home $ 128,125 $ 79,174 $ 48,951 62 %

Consumer 57,907 119,924 (62,017) (52) %

Insurance 86,614 82,737 3,877 5 %

Other 104 1,249 (1,145) (92) %

Revenue 272,750 283,084 (10,334) (4) %

Costs and expenses:

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

13,895 14,252 (357) (3) %

Selling and marketing expense 197,462 195,538 1,924 1 %

1 unchanged sentence

Product development 12,468 10,963 1,505 14 %

Depreciation 3,718 3,378 340 10 %

Amortization of intangibles 11,312 13,757 (2,445) (18) %

Change in fair value of contingent consideration 797 (8,122) 8,919 110 %

Severance — 158 (158) (100) %

Litigation settlements and contingencies 16 329 (313) (95) %

3 unchanged sentences

Interest expense, net (10,215) (4,834) 5,381 111 %

(Loss) income before income taxes

Income tax benefit (expense)

Net (loss) income from continuing operations

Income (loss) from discontinued operations, net of tax

Net (loss) income and comprehensive (loss) income

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

Other income 40,072 — 40,072 100 %

Income before income taxes 27,950 15,915 12,035 76 %

Income tax (expense) benefit (8,638) 3,061 11,699 382 %

Net income from continuing operations 19,312 18,976 336 2 %

Loss from discontinued operations, net of tax (263) (4,575) (4,312) (94) %

Net income and comprehensive income $ 19,049 $ 14,401 $ 4,648 32 %

Revenue decreased in the first quarter of 2021 compared to the first quarter of 2020 due to decreases in our Consumer segment and Other category, partially offset by increases in our Home and Insurance segments.

Our Consumer segment includes the following products:

1 unchanged sentence

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

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

Revenue from our credit cards product decreased $48.1 million to $6.7 million in the third quarter of 2020 from $54.8 million in the third quarter of 2019 , or 88% , and decreased $100.0 million to $65.4 million in the first nine months of 2020 from $165.4 million in the first nine months of 2019 , or 60% , primarily due to the impact of economic conditions related to the COVID-19 pandemic that caused lower issuer demand, resulting in a decrease in the number of approvals and a decrease in revenue earned per approval.

Revenue from our personal loans product decreased $31.4 million to $12.5 million in the third quarter of 2020 from $43.9 million in the third quarter of 2019 , or 72% , and decreased $64.7 million to $52.8 million in the first nine months of 2020 from $117.5 million in the first nine months of 2019 , or 55% , primarily due to the impact of economic conditions related to the COVID-19 pandemic that caused a contraction in the flow of capital and a decrease in revenue earned per consumer.

Revenue from our Consumer segment decreased $62.0 million in the first quarter of 2021 from the first quarter of 2020, or 52%, primarily due to decreases in our credit cards, personal loans, small business loans and deposits products.

Revenue from our credit cards product decreased $34.0 million to $17.6 million in the first quarter of 2021 from $51.6 million in the first quarter of 2020, or 66%, primarily due to the impact of economic conditions related to the COVID-19 pandemic that caused lower issuer demand, resulting in a decrease in the number of approvals and a decrease in revenue earned per approval.

Revenue from our personal loans product decreased $16.6 million to $14.9 million in the first quarter of 2021 from $31.5 million in the first quarter of 2020, or 53%, primarily due to the impact of economic conditions related to the COVID-19 pandemic that caused a decrease in consumers' risk tolerance and subsequent demand for this product.

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

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

Revenue from our student loans product decreased $11.3 million in the third quarter of 2020 compared to the third quarter of 2019 and decreased $16.9 million in the first nine months of 2020 compared to the first nine months of 2019 , due to a decrease in the number of consumers on our marketplace seeking student loans and lower demand for student loan refinancing due to the Coronavirus Aid, Relief, and Economic Security ("CARES") Act providing temporary payment deferral relief.

Revenue from our small business loans product decreased $9.9 million in the third quarter of 2020 compared to the third quarter of 2019 and decreased $14.0 million in the first nine months of 2020 compared to the first nine months of 2019 , due to a contraction in the flow of capital and a decrease in revenue earned per consumer.

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

Revenue from our Insurance segment increased $17.7 million to $92.5 million in the third quarter of 2020 from $74.8 million in the third quarter of 2019 , or 24% , and increased $34.3 million to $248.2 million in the first nine months of 2020 from $213.9 million in the first nine months of 2019 , or 16% .

The increase in the third quarter and first nine months of 2020 is due to increases in the number of consumers seeking insurance coverage, partially offset by a decrease in revenue earned per consumer.

Revenue from our small business loans product decreased $6.6 million in the first quarter of 2021 compared to the first quarter of 2020, due to government stimulus loans creating less consumer demand for traditional loans, and a decrease in revenue earned per consumer.

Revenue from our deposits product decreased $5.5 million in the first quarter of 2021 compared to the first quarter of 2020, due to lower demand in a reduced interest rate environment and a decrease in revenue earned per consumer.

The ongoing COVID-19 pandemic is anticipated to continue to impact our Consumer product revenues in the near-term.

Our Home segment includes the following products:

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

Revenue from our Home segment increased $1.6 million in the third quarter of 2020 from the third quarter of 2019 , or 2% , and increased $19.7 million in the first nine months of 2020 from the first nine months of 2019 , or 9% , primarily due to an increase in revenue from our refinance mortgage product, partially offset by decreases in our purchase mortgage and home equity loans and lines of credit products.

Revenue from our refinance mortgage product increased $17.1 million in the third quarter of 2020 compared to the third quarter of 2019 , and increased $65.3 million in the first nine months of 2020 compared to the first nine months of 2019 , primarily due to an increase in the number of consumers completing request forms resulting from increased refinancing activity in a declining interest rate environment.

For the first nine months of 2020 compared to the first nine months of 2019 , this was partially offset by a decrease in revenue earned per consumer.

Revenue from our purchase mortgage product decreased $8.2 million in the third quarter of 2020 compared to the third quarter of 2019 and decreased $23.4 million in the first nine months of 2020 compared to the first nine months of 2019 .

Revenue from our home equity loans and lines of credit product decreased $6.6 million in the third quarter of 2020 compared to the third quarter of 2019 and decreased $19.8 million in the first nine months of 2020 compared to the first nine months of 2019 .

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

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

Revenue in the Other category decreased $6.0 million in the third quarter of 2020 compared to the third quarter of 2019 , and decreased $21.5 million in the first nine months of 2020 compared to the first nine months of 2019 , as we ceased offering home improvement referrals during the first quarter of 2019 and ceased reselling online advertising space during the first quarter of 2020.

Revenue from our Home segment increased $49.0 million in the first quarter of 2021 from the first quarter of 2020, or 62%, primarily due to an increase in revenue from our refinance mortgage product, partially offset by a decrease in our purchase mortgage product.

Revenue from our refinance mortgage product increased $52.0 million in the first quarter of 2021 compared to the first quarter of 2020, due to an increase in the number of consumers completing request forms resulting from increased refinancing activity in a declining interest rate environment, as well as an increase in revenue earned per consumer.

Revenue from our purchase mortgage product decreased $2.6 million in the first quarter of 2021 compared to the first quarter of 2020, primarily due to a shift in lender focus toward refinance products as well as a decrease in revenue earned per consumer.

Revenue from our Insurance segment increased $3.9 million to $86.6 million in the first quarter of 2021 from $82.7 million in the first quarter of 2020, or 5%, due to an increase in the number of consumers seeking insurance coverage, partially offset by a decrease in revenue earned per consumer.

Revenue in the Other category decreased $1.1 million in the first quarter of 2021 compared to the first quarter of 2020, primarily as we ceased reselling online advertising space during the first quarter of 2020.

Cost of revenue

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

Cost of revenue decreased in the third quarter of 2020 from the third quarter of 2019 , primarily due to a $5.8 million decrease for the cost of resold advertising space.

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

This was partially offset by an increase in credit card fees and customer service costs of $0.5 million and $0.3 million , respectively.

Cost of revenue decreased in the first nine months of 2020 from the first nine months of 2019 , primarily due to a $17.1 million decrease for the cost of resold advertising space, partially offset by increases in website network hosting and server fees, compensation and benefits, and credit card fees of $2.2 million , $2.1 million , and $1.5 million , respectively.

Cost of revenue as a percentage of revenue remained consistent at 6% for each of the third quarters and first nine months of 2020 and 2019.

Cost of revenue decreased in the first quarter of 2021 from the first quarter of 2020, primarily due to a $1.1 million decrease for the cost of resold advertising space, as well as a $0.7 million decrease in credit card fees.

This was partially offset by an increase in compensation and benefits of $0.9 million.

Cost of revenue as a percentage of revenue remained consistent at 5% for each of the first quarters of 2021 and 2020.

Selling and marketing expense

2 unchanged sentences

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

Selling and marketing expense decreased in the third quarter and first nine months of 2020 compared to the third quarter and first nine months of 2019 primarily due to decreases in advertising and promotional expense of $47.1 million and $103.7 million , respectively, as discussed below.

Selling and marketing expense increased in the first quarter of 2021 compared to the first quarter of 2020 primarily due to an increase in compensation and benefits of $2.0 million as a result of an increase in headcount.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

Online $ 176,821 $ 173,081 $ 3,740 2 %

Broadcast 1,167 6,324 (5,157) (82) %

Other 5,715 4,362 1,353 31 %

Total advertising expense $ 183,703 $ 183,767 $ (64) — %

3 unchanged sentences

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

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

We adjusted our advertising expenditures in the first quarter of 2021 compared to the first quarter of 2020 in response to changes in Network Partner demand on our marketplace as a result of the ongoing COVID-19 pandemic discussed above.

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

1 unchanged sentence

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

General and administrative expense increased in the third quarter of 2020 compared to the third quarter of 2019 , primarily due to increases in professional fees, facilities expense, and compensation and benefits of $1.9 million , $1.9 million , and $1.2 million , respectively, partially offset by a decrease in travel and entertainment expense of $1.0 million .

General and administrative expense increased in the first nine months of 2020 compared to the first nine months of 2019 due to increases in professional fees, facilities expense, and technology expense of $5.1 million , $3.1 million , and $2.3 million , respectively.

The first nine months of 2019 also benefited from a $2.7 million gain on the sale of two office buildings.

This was partially offset by decreases in travel and entertainment expense, compensation and benefits, employee morale, and other taxes of $2.9 million , $2.2 million , $1.2 million , and $0.9 million , respectively.

General and administrative expense as a percentage of revenue increased to 15% in the third quarter of 2020 compared to 10% in the third quarter of 2019 , and increased to 14% in the first nine months of 2020 compared to 10% in the first nine months of 2019 .

General and administrative expense increased in the first quarter of 2021 compared to the first quarter of 2020, primarily due to increases in compensation and benefits, facilities expense, and technology expense of $4.7 million, $1.5 million, and $0.6 million, respectively.

This was partially offset by decreases in professional fees and travel and entertainment expense of $1.5 million and $0.7 million, respectively.

General and administrative expense as a percentage of revenue increased to 13% in the first quarter of 2021 compared to 11% in the first quarter of 2020.

Product development

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

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

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

Product development expense increased in the first quarter of 2021 compared to the first quarter of 2020 as we continued to invest in internal development of new and enhanced features, functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners.

Amortization of intangibles

The decrease in amortization of intangibles in the first quarter of 2021 compared to the first quarter of 2020 was due to intangible assets associated with our recent business acquisitions becoming fully amortized.

Contingent consideration

During the third quarter and first nine months of 2020 , we recorded aggregate contingent consideration expense of $6.7 million and $7.7 million , respectively, due to adjustments in the estimated fair value of the earnout payments related to our recent acquisitions.

For the third quarter of 2020 , the contingent consideration expense for the QuoteWizard and Ovation acquisitions was $6.6 million and $0.1 million , respectively.

For the first nine months of 2020 , the contingent consideration expense for the QuoteWizard, Ovation and SnapCap acquisitions was $6.4 million , $1.3 million and $0.1 million , respectively.

During the third quarter and first nine months of 2019 , we recorded aggregate contingent consideration expense of $3.8 million and $21.2 million, respectively, due to adjustments in the estimated fair value of the earnout payments related to our recent acquisitions.

For the third quarter of 2019 , the contingent consideration expense for the QuoteWizard and SnapCap acquisitions was $4.3 million and $0.3 million, respectively.

This was partially offset by a contingent consideration gain recorded for the Ovation acquisition of $0.8 million.

For the first nine months of 2019 , the contingent consideration expense for the QuoteWizard and SnapCap acquisitions was $21.2 million and $1.8 million, respectively.

This was partially offset by contingent consideration gains recorded for the Ovation and DepositAccounts acquisitions of $0.8 million and $1.0 million, respectively.

During the first quarter of 2021, we recorded contingent consideration expense of $0.8 million due to the adjustment in the estimated fair value of the remaining earnout payment related to the QuoteWizard acquisition.

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

For the first quarter of 2020, the gain related to the

QuoteWizard acquisition was $8.3 million, partially offset by contingent consideration expense for the Ovation acquisition of $0.1 million.

Interest expense

Interest expense increased in the third quarter and first nine months of 2020 compared to the third quarter and first nine months of 2019 due to the issuance of $575.0 million of our 0.50% Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) as well as the repurchase of a portion of our existing 0.625% Convertible Senior Notes due June 1, 2022 (the “2022 Notes”) in July 2020.

In the third quarter and first nine months of 2020 , interest expense of $4.9 million was recognized on the 2025 Notes.

Further, a loss on debt extinguishment of $7.8 million was recognized within interest expense upon the partial repurchase of the 2022 Notes.

These increases to interest expense were partially offset by lower interest expense on the 2022 Notes in the third quarter and first nine months of 2020 as a result of the repurchase of $130.3 million principal amount of the 2022 Notes.

Interest expense increased in the first quarter of 2021 compared to the first quarter of 2020 due to the issuance of $575.0 million of our 0.50% Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) as well as the repurchase of a portion of our existing 0.625% Convertible Senior Notes due June 1, 2022 (the “2022 Notes”) in July 2020.

In the first quarter of 2021, interest expense of $6.8 million was recognized on the 2025 Notes.

This increase to interest expense was partially offset by lower interest expense on the 2022 Notes in the first quarter of 2021 compared to the first quarter of 2020 as a result of the July 2020 repurchase of $130.3 million principal amount of the 2022 Notes.

See Note 13—Debt for additional information on the issuance of the 2025 Notes and the partial repurchase of the 2022 Notes.

For the first quarter of 2021, other income primarily consists of a $40.1 million gain on our investment in Stash as a result of an adjustment to the fair value based on observable market events.

See Note 7—Equity Investment for additional information on the equity interest in Stash.

Income tax expense

For the third quarter and first nine months of 2020 , the effective tax rate varied from the federal statutory rate of 21% in part due to a tax benefit of $0.2 million and $2.0 million , respectively, recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

The effective tax rate for the first nine months of 2020 was also impacted by a tax benefit of $6.1 million for the impact of the CARES Act, as described below.

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

This legislation is an economic relief package in response to the public health and economic impacts of COVID-19 and includes various provisions that impact us, including, but

not limited to, modifications for net operating losses, accelerated timeframe for refunds associated with prior minimum taxes and modifications of the limitation on business interest.

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

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

For the third quarter and first nine months of 2019 , the effective tax rate varied from the federal statutory rate of 21% primarily due to a tax benefit of $2.8 million and $16.5 million , respectively, recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09, a tax benefit of $1.9 million recognized from an adjustment to the federal research tax credit and the effect of state taxes.

For the first quarter of 2021, the effective tax rate varied from the federal statutory rate of 21% primarily due to the effect of state taxes.

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

See Note 12—Income Taxes for additional information.

Discontinued operations

7 unchanged sentences

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

See Note 18 —Discontinued Operations to the consolidated financial statements included elsewhere in this report for more information, including the accounting effect of HLC’s bankruptcy filing on our consolidated financial statements.

See Note 17—Discontinued Operations to the consolidated financial statements included elsewhere in this report for more information.

Segment Profit

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

Home $ 38,990 $ 35,911 $ 3,079 9 %

Consumer 24,607 43,099 (18,492) (43) %

Insurance 32,842 30,533 2,309 8 %

Other (92) (328) 236 72 %

Segment profit $ 96,347 $ 109,215 $ (12,868) (12) %

2 unchanged sentences

See Note 16—Segment Information in the notes to the consolidated financial statements for additional information on segments and a reconciliation of segment profit to pre-tax income from continuing operations.

Consumer segment profit decreased $43.5 million in the third quarter of 2020 from the third quarter of 2019 , and decreased $85.8 million in the first nine months of 2020 from the first nine months of 2019 , primarily due to decreases in revenue, partially offset by corresponding decreases in selling and marketing expense.

While the Consumer segment remains challenged from the impact of economic conditions related to the COVID-19 pandemic, we are encouraged that the performance of each of our credit cards, personal loans and small business loans products has steadily improved from the lows in the second quarter of 2020.

However, it remains difficult to predict the pace of recovery.

We continue to observe favorable trends in consumer credit and spending, but these trends remain unclear due to the uncertainty surrounding further government stimulus and the staying power of COVID-19.

Our Network Partners continue to view the market with caution;

while many Network Partners have resumed activity on our marketplace, their interest in doing so is primarily to assess consumer behavior and performance rather than to aggressively pursue new origination at scale or market share gains.

In considering the coming quarters, it is possible that our unit economics will remain constrained in our credit cards, personal loans and small business loans products due to the lack of heightened competition among our Network Partners.

However, we believe that we are strategically positioning ourselves for success when industry conditions return to health.

We continue to drive volume to our Network Partners, which could decrease segment profitability in the near term.

The strength of our Home and Insurance segments, discussed below, enables us to adopt a longer-term orientation toward our Network Partners in these challenging times.

Home segment profit decreased $2.9 million in the third quarter of 2020 from the third quarter of 2019 , primarily due to an increase in selling and marketing expense, and increased $23.6 million in the first nine months of 2020 from the first nine months of 2019 , primarily due to an increase in revenue.

Mortgage lender capacity continued to expand in the third quarter of 2020 as refinance mortgage activity abated from the highs in the second quarter of 2020.

While increased lender capacity benefits our business and enables improved traffic monetization, these same dynamics drive heightened competition and costs to acquire such traffic, leading to compressed margins.

Other factors such as the November 2020 election also contributed to increased traffic acquisition costs;

however, we view those dynamics as temporary and expect the industry backdrop to remain favorable in the coming quarters.

Insurance segment profit increased $7.0 million in the third quarter of 2020 from the third quarter of 2019 , and increased $11.0 million in the first nine months of 2020 from the first nine months of 2019 , primarily due to increases in revenue, partially offset by corresponding increases in selling and marketing expense.

While decreased search engine traffic presented modest headwinds in the second quarter of 2020, such headwinds largely dissipated in the third quarter of 2020.

We also accelerated the Insurance business in the third quarter of 2020 in a number of areas:

the roll out of our publisher platform that is expected to be a significant growth driver in future quarters, the build out of an in-house agency that complements our existing offerings by enabling us to drive volume for insurance carriers who do not write premiums directly, and steady progress made in the health insurance and Medicare categories.

Consumer segment profit decreased $18.5 million in the first quarter of 2021 from the first quarter of 2020, primarily due to a decrease in revenue, partially offset by a corresponding decrease in selling and marketing expense.

We continue to be encouraged by the progress made in the Consumer segment since the onset of the COVID-19 pandemic.

Credit card issuer budgets continue to increase, and there are sustained signs of increasing consumer health and spending.

The profitability of our credit card product remains constrained in part due to lower approval rates and decreased competition on our network, as well as increased traffic acquisition costs in an environment where government stimulus has temporarily reduced consumers' demand for additional debt.

Lender demand in our personal loans product continues to recover;

however, consumers' lowered risk tolerance and subsequently lower demand continues to constrain this product.

While the timeline of full recovery for the Consumer segment remains uncertain, we continue to view the segment with optimism over the medium to long term.

Home segment profit increased $3.1 million in the first quarter of 2021 from the first quarter of 2020, primarily due to an increase in revenue, partially offset by a corresponding increase in selling and marketing expense.

Refinance activity increased at the beginning of the first quarter of 2021, then decelerated in the latter part of the quarter as mortgage interest rates increased from the historical lows experienced in the fourth quarter of 2020.

The Home segment performed well throughout as we are an integral part of our Network Partners' marketing model.

Demand for our services, and competition on our network, continued to increase with mortgage revenue per lead improving 53% over the first quarter of 2020.

In line with an acceleration of revenue, the Home segment margin contracted to 30% of revenue as we extended into lower-margin channels to fulfill increased lender demand.

While there is uncertainty over near-term changes in interest rates, we are confident in our market-leading position and flexible business model.

Insurance segment profit increased $2.3 million in the first quarter of 2021 from the first quarter of 2020, primarily due to an increase in revenue, partially offset by a corresponding increase in selling and marketing expense.

We continue to expand our presence in the Insurance industry by broadening traffic acquisition sources, growing existing insurance carrier relationships, and increasing efforts to scale non-automobile categories.

Our publisher platform and inbound channel each delivered record performance in the first quarter of 2021.

These additional traffic sources enable incremental growth while reducing our reliance on paid search marketing.

Additionally, our efforts to scale non-automobile categories continue to deliver returns.

We observed record revenue from the home category in the first quarter of 2021, as we increasingly leverage our presence in the mortgage industry.

We continue to make significant investments in our Medicare category.

Adjusted EBITDA

We report Adjusted EBITDA as a supplemental measure to GAAP.

This measure is the primary metric by which we evaluate the performance of our businesses, on which our marketing expenditures and internal budgets are based and by which management and many employees are compensated.

This measure is the primary metric by which we evaluate the performance of our businesses, on which our marketing expenditures and internal budgets are based and by which, in most years, management and many employees are compensated.

We believe that investors should have access to the same set of tools that we use in analyzing our results.

2 unchanged sentences

Definition of Adjusted EBITDA

We report Adjusted EBITDA as net income from continuing operations adjusted to exclude interest, income tax, amortization of intangibles and depreciation, and to further exclude (1) non-cash compensation expense, (2) non-cash impairment charges, (3) gain/loss on disposal of assets, (4) restructuring and severance expenses, (5) litigation settlements and contingencies, (6) acquisitions and dispositions income or expense (including with respect to changes in fair value of contingent consideration), and (7) one-time items.

We report Adjusted EBITDA as net income from continuing operations adjusted to exclude interest, income tax, amortization of intangibles and depreciation, and to further exclude (1) non-cash compensation expense, (2) non-cash impairment charges, (3) gain/loss on disposal of assets, (4) gain/loss on investments, (5) restructuring and severance expenses, (6) litigation settlements and contingencies, (7) acquisitions and dispositions income or expense (including with respect to changes in fair value of contingent consideration), and (8) one-time items.

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses, including depreciation, non-cash compensation and acquisition-related accounting.

11 unchanged sentences

At the time of an acquisition, the intangible assets of the acquired company, such as purchase agreements, technology and customer relationships, are valued and amortized over their estimated lives.

The following table is a reconciliation of net (loss) income from continuing operations to Adjusted EBITDA (in thousands) .

The following table is a reconciliation of net income from continuing operations to Adjusted EBITDA (in thousands) .

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net (loss) income from continuing operations

Net income from continuing operations $ 19,312 $ 18,976

Adjustments to reconcile to Adjusted EBITDA:

Amortization of intangibles 11,312 13,757

Loss (gain) on impairments and disposal of assets

Depreciation 3,718 3,378

Severance — 158

Loss on disposal of assets 348 530

Unrealized gain on investments (40,072) —

Non-cash compensation expense 16,436 11,917

3 unchanged sentences

Interest expense, net 10,215 4,834

Income tax (benefit) expense

Income tax expense (benefit) 8,638 (3,061)

Adjusted EBITDA $ 30,749 $ 44,876

Financial Position, Liquidity and Capital Resources

As of September 30, 2020 , we had $187.3 million of cash and cash equivalents, compared to $60.2 million of cash and cash equivalents as of December 31, 2019 .

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

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

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

During the first nine months of 2020 , we made net repayments of $75.0 million on our Amended Revolving Credit Facility.

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

In October 2020, we made a contingent consideration payment of $4.4 million related to the prior acquisition of Ovation.

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

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

In October 2020, due to the timing of distributions from the HLC bankruptcy estate, we were required to make a further payment of $6.4 million to ResCap.

We anticipate receiving a total $7.5 million reimbursement from the HLC bankruptcy estate related to the ResCap payments by the first quarter of 2021.

In July 2020, we issued $575.0 million of our 2025 Notes for net proceeds of approximately $559.9 million.

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

Further, we used $234.0 million of the net proceeds to repurchase approximately $130.3 million principal amount of our 2022 Notes.

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

See Note 14 —Debt for additional information.

As of March 31, 2021, we had $162.1 million of cash and cash equivalents, compared to $169.9 million of cash and cash equivalents as of December 31, 2020.

In the first quarter of 2021, we acquired additional equity interest in Stash for $1.2 million.

See Note 7—Equity Investment to the consolidated financial statements included elsewhere in this report for additional information on the equity interest in Stash.

We could make an additional potential contingent consideration payment of up to $23.4 million related to the prior acquisition of QuoteWizard.

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

8 unchanged sentences

See Note 13—Debt for additional information.

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

The remaining borrowing capacity at November 5, 2020 is $499.8 million .

As of May 5, 2021, we have outstanding a $0.2 million letter of credit under the Amended Revolving Credit Facility.

The remaining borrowing capacity at May 5, 2021 is $499.8 million.

Cash Flows from Continuing Operations

Our cash flows attributable to continuing operations are as follows:

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

1 unchanged sentence

Net cash used in investing activities (11,733) (84,189)

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities (5,000) 46,601

Cash Flows from Operating Activities

2 unchanged sentences

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

Net cash provided by operating activities attributable to continuing operations decreased in the first nine months of 2020 from the first nine months of 2019 primarily due to a decrease in revenue, partially offset by a corresponding decrease in selling and marketing expense.

This was further partially offset by net favorable changes in working capital, primarily in accounts receivable and accounts payable, accrued expenses and other current liabilities.

Net cash provided by operating activities attributable to continuing operations decreased in the first three months of 2021 from the first three months of 2020 primarily due to unfavorable changes in accounts receivable, partially offset by favorable changes in accounts payable, accrued expenses and other current liabilities.

Cash Flows from Investing Activities

Net cash used in investing activities attributable to continuing operations in the first nine months of 2020 of $100.4 million consisted of the purchase of an $80.0 million equity interest in Stash and capital expenditures of $20.4 million primarily related to internally developed software and leasehold improvements for our new principal executive offices currently under construction.

Net cash used in investing activities attributable to continuing operations in the first nine months of 2019 of $96.2 million consisted primarily of the acquisition of ValuePenguin for $105.6 million , net of cash acquired, and capital expenditures of $15.2

million primarily related to internally developed software.

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

Net cash used in investing activities attributable to continuing operations in the first three months of 2021 of $11.7 million consisted of capital expenditures of $10.6 million primarily related to internally developed software and leasehold improvements for our new principal corporate offices, as well as the purchase of an additional $1.2 million equity interest in Stash, described above.

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

Cash Flows from Financing Activities

Net cash provided by financing activities attributable to continuing operations in the first nine months of 2020 of $197.4 million consisted primarily of $575.0 million of gross proceeds from the issuance of the 2025 Notes, partially offset by $233.9 million paid to repurchase a portion of the 2022 Notes, a net $47.4 million paid for the related convertible note hedge and warrant transactions outlined above, $75.0 million of net repayments on our Amended Revolving Credit Facility, and $16.4 million for the payment of debt issuance costs.

Net cash used in financing activities attributable to continuing operations in the first nine months of 2019 of $56.8 million consisted primarily of $40.0 million of net repayments on our 2017 Revolving Credit Facility, $4.3 million for the repurchase of our common stock, $9.5 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options, and a $3.0 million contingent consideration payment for SnapCap.

Net cash used in financing activities attributable to continuing operations in the first three months of 2021 of $5.0 million consisted primarily of $4.8 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options.

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

Off-Balance Sheet Arrangements

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis