What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-10-28 compared with 2021-07-30 · 111 added, 103 removed, 221 unchanged (49% of the section changed)

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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.

Our online consumer platform provides consumers with access to product offerings from our Network Partners, including mortgage loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings.

Our online consumer platform provides consumers with access to product offerings from our Network Partners, including mortgage loans, home equity loans, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings.

In addition, we offer tools and resources, including free credit scores, that facilitate comparison shopping for loans, deposit products, insurance and other offerings.

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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 various lockdown orders 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 affected 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.

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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.

In October 2021, we entered into a stock transfer agreement with third parties to sell a portion of our Stash equity securities.

See Note 7—Equity Investment and Note 18—Subsequent Event for additional information on the equity interest in Stash.

North Carolina Office Properties

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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 generally increased from a monthly average of 2.68% in December 2020 to a monthly average of 2.98% in June 2021.

On a quarterly basis, 30-year mortgage interest rates in the second quarter of 2021 averaged 3.00%, compared to 3.23% in the second quarter of 2020 and 2.88% in the first quarter of 2021.

According to Freddie Mac, 30-year mortgage interest rates generally increased from a monthly average of 2.68% in December 2020 to a monthly average of 2.90% in September 2021.

On a quarterly basis, 30-year mortgage interest rates in the third quarter of 2021 averaged 2.87%, compared to 2.95% in the third quarter of 2020 and 3.00% in the second quarter of 2021.

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.

According to Mortgage Bankers Association ("MBA") data, total refinance origination dollars decreased to 56% of total mortgage origination dollars in the second quarter of 2021 compared to 71% in the first quarter of 2021.

In the second quarter of 2021, total refinance origination dollars decreased 24% from the first quarter of 2021 and increased 2% from the second quarter of 2020.

Industry-wide mortgage origination dollars in the second quarter of 2021 decreased 4% from the first quarter of 2021 and increased 13% from the second quarter of 2020.

In July 2021, the MBA projected 30-year mortgage interest rates to increase during 2021, to an average 3.4% for the year.

According to Mortgage Bankers Association ("MBA") data, total refinance origination dollars remained relatively consistent at 55% of total mortgage origination dollars in the third quarter of 2021 compared to 56% in the second quarter of 2021.

In the third quarter of 2021, total refinance origination dollars decreased 15% from the second quarter of 2021 and decreased 31% from the third quarter of 2020.

Industry-wide mortgage origination dollars in the third quarter of 2021 decreased 13% from the second quarter of 2021 and decreased 21% from the third quarter of 2020.

In October 2021, the MBA projected 30-year mortgage interest rates to increase during 2021, to an average 3.1% 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 59% for 2021.

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

According to Fannie Mae data, existing-home sales decreased 8% in the second quarter of 2021 compared to the first quarter of 2021, and increased 32% compared to the second quarter of 2020.

According to Fannie Mae data, existing-home sales increased 2% in the third quarter of 2021 compared to the second quarter of 2021, and decreased 3% compared to the third quarter of 2020.

Fannie Mae predicts an overall increase in existing-home sales of approximately 6% in 2021 compared to 2020.

Results of Operations for the Three and Six Months ended June 30, 2021 and 2020

Three Months Ended June 30, Six Months Ended June 30,

Results of Operations for the Three and Nine Months ended September 30, 2021 and 2020

Three Months Ended September 30, Nine Months Ended September 30,

Change 2021 2020 $

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Other income — — — — % 40,072 7 40,065 n/a

Income (loss) before income taxes 708 (12,496) 13,204 106 % 28,658 3,419 25,239 738 %

(Loss) income before income taxes (4,407) (32,734) (28,327) (87) % 24,251 (29,315) 53,566 183 %

Income tax benefit 1 7,925 (7,924) (100) % 455 14,866 (14,411) (97) %

Net income (loss) from continuing operations 9,800 (8,616) 18,416 214 % 29,112 10,360 18,752 181 %

Loss from discontinued operations, net of tax (3,199) (21,141) (17,942) (85) % (3,462) (25,716) (22,254) (87) %

Net income (loss) and comprehensive income (loss) $ 6,601 $ (29,757) $ 36,358 122 % $ 25,650 $ (15,356) $ 41,006 267 %

Revenue increased in the second quarter of 2021 compared to the second quarter of 2020 due to increases in all our segments.

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

Net (loss) income from continuing operations (4,406) (24,809) (20,403) (82) % 24,706 (14,449) 39,155 271 %

(Loss) income from discontinued operations, net of tax (54) 166 (220) (133) % (3,516) (25,550) (22,034) (86) %

Net (loss) income and comprehensive (loss) income $ (4,460) $ (24,643) $ (20,183) (82) % $ 21,190 $ (39,999) $ 61,189 153 %

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

Revenue increased in the first nine months of 2021 compared to the first nine months of 2020 due to increases in our Home, Consumer and Insurance segments, partially offset by a decrease in our Other category.

Our Consumer segment includes the following products:

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

Revenue from our Consumer segment increased $38.6 million in the second quarter of 2021 from the second quarter of 2020, or 104%, primarily due to increases in our personal loans, credit cards, and small business loans products.

Revenue from our Consumer segment decreased $23.5 million in the first six months of 2021 from the first six months of 2020, or 15%, primarily due to decreases in our credit cards and deposits products.

Revenue from our credit cards product increased $15.2 million to $22.4 million in the second quarter of 2021 from $7.2 million in the second quarter of 2020, or 212%, primarily due to an increase in the number of approvals and an increase in revenue earned per approval.

Revenue from our credit cards product decreased $18.7 million to $40.1 million in the first six months of 2021 from $58.8 million in the first six months of 2020, or 32%, primarily due to a decrease in the number of approvals and a decrease in revenue earned per approval.

Revenue from our Consumer segment increased $51.6 million in the third quarter of 2021 from the third quarter of 2020, or 107%, primarily due to increases in our personal loans, credit cards, and small business loans products.

Revenue from our Consumer segment increased $28.2 million in the first nine months of

2021 from the first nine months of 2020, or 14%, primarily due to increases in our personal loans and small business loans products.

Revenue from our personal loans product increased $21.3 million to $33.8 million in the third quarter of 2021 from $12.5 million in the third quarter of 2020, or 170%, due to an increase in the number of consumers completing request forms as well as an increase in revenue earned per consumer.

Revenue from our personal loans product increased $21.1 million to $73.9 million in the first nine months of 2021 from $52.8 million in the first nine months of 2020, or 40%, primarily due to an increase in revenue earned per consumer, partially offset by a decrease in the number of consumers completing request forms.

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

however, certain other Consumer products experienced notable changes.

Revenue from our personal loans product increased $16.4 million in the second quarter of 2021 compared to the second quarter of 2020, due to an increase in the number of consumers completing request forms as well as an increase in revenue earned per consumer.

Revenue from our small business loans product increased $7.7 million in the second quarter of 2021 compared to the second quarter of 2020, due to loosening underwriting standards and improved flow of capital, as well as an increase in revenue earned per consumer.

Revenue from our deposits product decreased $7.9 million in the first six months of 2021 compared to the first six months of 2020, due to a decrease in the number of consumers completing request forms as well as a decrease in revenue earned per consumer.

Revenue from our credit cards product increased $20.3 million in the third quarter of 2021 compared to the third quarter of 2020, due to an increase in the number of approvals and an increase in revenue earned per approval.

Revenue from our small business loans product increased $11.4 million in the third quarter of 2021 compared to the third quarter of 2020, and increased $12.5 million in the first nine months of 2021 compared to the first nine months of 2020, due to loosening underwriting standards and improved flow of capital, as well as an increase 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 $30.7 million in the second quarter of 2021 from the second quarter of 2020, or 41%, primarily due to increases in revenue from our refinance mortgage, purchase mortgage, and home equity loans and lines of credit products.

Revenue from our Home segment increased $79.7 million in the first six months of 2021 from the first six months of 2020, or 52%, primarily due to increases in revenue from those same products.

Revenue from our refinance mortgage product increased $12.7 million in the second quarter of 2021 compared to the second quarter of 2020, and increased $64.7 million in the first six months of 2021 compared to the first six months of 2020, due to an increase in revenue earned per consumer, partially offset by a decrease in the number of consumers completing request forms.

Revenue from our home equity loans and lines of credit product increased $10.0 million in the second quarter of 2021 compared to the second quarter of 2020, and increased $9.9 million in the first six months of 2021 compared to the first six months of 2020.

Revenue from our purchase mortgage product increased $8.2 million in the second quarter of 2021 compared to the second quarter of 2020, and increased $5.5 million in the first six months of 2021 compared to the first six months of 2020.

Revenue from our home equity loans and lines of credit product and our purchase mortgage product increased due to a shift in both lender and consumer focus away from refinance products as well as an increase in revenue earned per consumer.

Revenue from our Insurance segment increased $16.3 million to $89.3 million in the second quarter of 2021 from $72.9 million in the second quarter of 2020, or 22%, and increased $20.2 million to $175.9 million in the first six months of 2021 from $155.7 million in the first six months of 2020, or 13%, 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 six months of 2021 compared to the first six months of 2020, primarily as we ceased reselling online advertising space during the first quarter of 2020.

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

Revenue from our Home segment increased $33.6 million in the third quarter of 2021 from the third quarter of 2020, or 43%, primarily due to increases in revenue from our refinance mortgage, purchase mortgage, and home equity loans products.

Revenue from our Home segment increased $113.3 million in the first nine months of 2021 from the first nine months of 2020, or 49%, primarily due to increases in revenue from those same products.

Revenue from our refinance mortgage product increased $12.6 million in the third quarter of 2021 compared to the third quarter of 2020, and increased $77.3 million in the first nine months of 2021 compared to the first nine months of 2020, due to an increase in revenue earned per consumer, partially offset by a decrease in the number of consumers completing request forms.

Revenue from our home equity loans product increased $11.9 million in the third quarter of 2021 compared to the third quarter of 2020, and increased $21.8 million in the first nine months of 2021 compared to the first nine months of 2020.

Revenue from our purchase mortgage product increased $9.1 million in the third quarter of 2021 compared to the third quarter of 2020, and increased $14.6 million in the first nine months of 2021 compared to the first nine months of 2020.

Revenue from our home equity loans product and our purchase mortgage product increased due to a shift in both lender and consumer focus away from refinance products as well as an increase in revenue earned per consumer.

Revenue from our Insurance segment decreased $7.7 million to $84.8 million in the third quarter of 2021 from $92.5 million in the third quarter of 2020, or 8%, due to a decrease in revenue earned per consumer, partially offset by an increase in the number of consumers seeking insurance coverage.

Revenue from our Insurance segment increased $12.6 million to $260.7 million in the first nine months of 2021 from $248.2 million in the first nine months 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 $1.4 million in the first nine months of 2021 compared to the first nine months 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 increased in the second quarter of 2021 from the second quarter of 2020, primarily due to an increase in compensation and benefits of $0.8 million, partially offset by a $0.6 million decrease in credit card fees.

Cost of revenue increased slightly in the first six months of 2021 from the first six months of 2020, primarily due to an increase in compensation and benefits of $1.7 million, partially offset by a $1.3 million decrease in credit card fees, as well as a $1.1 million decrease for the cost of resold advertising space.

Cost of revenue as a percentage of revenue decreased to 5% in the second quarter of 2021 compared to 7% in the second quarter of 2020, and decreased to 5% in the first six months of 2021 compared to 6% in the first six months of 2020.

Cost of revenue increased in the third quarter of 2021 from the third quarter of 2020, primarily due to an increase in compensation and benefits of $1.3 million.

Cost of revenue increased in the first nine months of 2021 from the first nine months of 2020, primarily due to an increase in compensation and benefits of $3.1 million, partially offset by a $2.3 million decrease in credit card fees.

Cost of revenue as a percentage of revenue decreased to 5% in the third quarter and first nine months of 2021 compared to 6% in the third quarter and first nine months of 2020.

Selling and marketing expense

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

Selling and marketing expense increased in the second quarter and first six months of 2021 compared to the second quarter and first six months of 2020 primarily due to the increases in advertising and promotional expense discussed below.

Selling and marketing expense increased in the third quarter and first nine months of 2021 compared to the third quarter and first nine months of 2020 primarily due to the increases in advertising and promotional expense discussed below.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Change 2021 2020 $

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

We adjusted our advertising expenditures in the second quarter and first six months of 2021 compared to the second quarter and first six months 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 adjusted our advertising expenditures in the third quarter and first nine months of 2021 compared to the third quarter and first nine months 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.

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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 second quarter of 2021 compared to the second quarter of 2020, primarily due to increases in compensation and benefits, technology expense, and facilities expense of $5.5 million, $1.7 million, and $1.4 million, respectively, as well as a $1.0 million increase in losses on asset impairments and disposals.

General and administrative expense increased in the first six months of 2021 compared to the first six months of 2020, primarily due to increases in compensation and benefits, facilities expense, and technology expense of $10.2 million, $2.9 million, and $2.3 million, respectively.

This was partially offset by a decrease in professional fees of $1.3 million.

General and administrative expense as a percentage of revenue decreased to 15% in the second quarter of 2021 compared to 16% in the second quarter of 2020, and increased to 14% in the first six months of 2021 compared to 13% in the first six months of 2020.

General and administrative expense increased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to increases in compensation and benefits of $4.3 million and technology expense of $1.3 million.

General and administrative expense increased in the first nine months of 2021 compared to the first nine months of 2020, primarily due to increases in compensation and benefits, technology expense, and facilities expense of $14.5 million, $3.6 million, and $2.4 million, respectively.

General and administrative expense as a percentage of revenue decreased to 13% in the third quarter of 2021 compared to 15% in the third quarter of 2020, and remained consistent at 14% in both the first nine months of 2021 and 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 second quarter and first six months of 2021 compared to the second quarter and first six months 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.

The increase in depreciation expense in the second quarter and first six months of 2021 compared to the second quarter and first six months of 2020 was primarily the result of depreciation on assets related to our new corporate office, which lease contractually commenced in the second quarter of 2021.

Product development expense increased in the third quarter and first nine months of 2021 compared to the third quarter and first nine months 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.

The increase in depreciation expense in the third quarter and first nine months of 2021 compared to the third quarter and first nine months of 2020 was primarily the result of depreciation on assets related to our new corporate office, which lease contractually commenced in the second quarter of 2021.

Amortization of intangibles

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

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

Contingent consideration

During the second quarter and first six months of 2021, we recorded contingent consideration gains of $8.9 million and $8.1 million, respectively, due to adjustments in the estimated fair value of the remaining earnout payment related to the QuoteWizard acquisition.

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

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

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

During the third quarter and first nine months of 2021, we recorded contingent consideration gains of $0.2 million and $8.2 million, respectively, due to adjustments in the estimated fair value of the remaining earnout payment related to the QuoteWizard acquisition.

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.

Interest expense

Interest expense increased in the second quarter and first six months of 2021 compared to the second quarter and first six months 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 second quarter and first six months of 2021, interest expense of $6.7 million and $13.5 million, respectively, was recognized on the 2025 Notes.

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

Interest expense decreased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to a loss on debt extinguishment of $7.8 million recognized upon the partial repurchase of the 0.625% Convertible Senior Notes due June 1, 2022 (the “2022 Notes”) in July 2020.

Interest expense increased in the first nine months of 2021 compared to the first nine months of 2020 primarily due to the issuance of the 0.50% Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) as well as the partial repurchase of the 2022 Notes in July 2020.

Interest expense was recognized on the 2025 Notes during the entire first nine months of 2021, compared to a partial period of the first nine months of 2020.

This incremental interest expense was partially offset by lower interest expense on the 2022 Notes in the first nine months of 2021 compared to the first nine months of 2020 as a result of the July 2020 partial repurchase of the notes.

The overall increase was further offset by the loss on debt extinguishment of $7.8 million recognized in July 2020, noted above.

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 six months 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.

For the first nine months 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 second quarter and first six months of 2021, the effective tax rate varied from the federal statutory rate of 21% in part due to a tax benefit of $8.3 million recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

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

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

For the third quarter and first nine months of 2021, the effective tax rate varied from the federal statutory rate of 21% in part due to an excess tax expense of $0.9 million and an excess tax benefit of $7.4 million, respectively, resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

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

The effective tax rate for the first nine months of 2020 was also impacted by a tax benefit of $6.1 million for the impact

of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.

See Note 12—Income Taxes for additional information.

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The sale of substantially all of the assets of HLC, including the LendingTree Loans business, was completed on June 6, 2012.

HLC filed a petition under Chapter 11 of the United States

Bankruptcy Code on July 21, 2019, which was converted to Chapter 7 of the United States Bankruptcy Code on September 16, 2019.

HLC filed a petition under Chapter 11 of the United States Bankruptcy Code on July 21, 2019, which was converted to Chapter 7 of the United States Bankruptcy Code on September 16, 2019.

As a result of the voluntary bankruptcy petition, as of the initial July 21, 2019 bankruptcy petition filing date, HLC and its consolidated subsidiary were deconsolidated from LendingTree’s consolidated financial statements.

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After all distributions to creditors were made and HLC’s Chapter 7 bankruptcy estate was fully administered, the HLC bankruptcy case was closed on July 14, 2021.

Prior to the bankruptcy filing, losses from the LendingTree Loans business were primarily due to litigation settlements and contingencies and legal fees associated with ongoing legal proceedings.

The results of discontinued operations include litigation settlements and contingencies and legal fees associated with ongoing legal proceedings against LendingTree, Inc.

Prior to the bankruptcy filing, losses from the LendingTree Loans business were primarily due to litigation settlements and contingencies and legal fees associated with legal proceedings.

The results of discontinued operations include litigation settlements and contingencies and legal fees associated with legal proceedings against LendingTree, Inc.

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

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Segment Profit

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Change 2021 2020 $

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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 increased $14.0 million in the second quarter of 2021 from the second quarter of 2020, primarily due to an increase in revenue, partially offset by a corresponding increase in selling and marketing expense.

Consumer segment profit decreased $4.5 million in the first six months of 2021 from the first six months of 2020, primarily due to a decrease in revenue, partially offset by a corresponding decrease in selling and marketing expense.

We continue to build momentum in the Consumer segment as demand from both consumers and our Network Partners returns.

Consumer demand for personal loans began to return as the economy begins to reopen.

Lender demand in our personal loans product continues to improve, with more lenders currently on our marketplace than prior to the onset of the COVID-19 pandemic.

Credit card issuer budgets continue to increase, with an increasing number of issuers returning to our marketplace and increasing approval rates.

The profitability of our credit card product remains constrained as we continue to re-invest incremental revenue into the product to capture wallet share.

Our small business loans product continues steady recovery from the impact of the COVID-19 pandemic.

Insurance segment profit increased $3.1 million in the second quarter of 2021 from the second quarter of 2020, and increased $5.4 million in the first six months of 2021 from the first six months of 2020, primarily due to an increase in revenue, partially offset by a corresponding increase in selling and marketing expense.

We continue to diversify and increase the durability of the Insurance segment by broadening traffic acquisition sources, expanding our insurance carrier network, and growing into non-automobile categories.

During the second quarter of 2021, our publisher platform again delivered record performance, and our inbound channel continued positive momentum.

These additional traffic sources enable incremental

growth while reducing our reliance on paid search marketing, in which we have observed increasing competition in recent months.

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

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

We continue to make significant investments in our Medicare category, ahead of the annual fourth quarter enrollment season.

Home segment profit remained relatively consistent in the second quarter of 2021 from the second quarter of 2020.

Home segment profit increased $3.4 million in the first six months of 2021 from the first six months of 2020, primarily due to an increase in revenue, partially offset by a corresponding increase in selling and marketing expense.

Although refinance activity is decelerating from the peak experienced earlier this year, the Home segment continues to perform well as we are an integral part of our Network Partners' marketing model.

Demand for our services, and competition on our network, drove a 71% increase in mortgage revenue per lead in the second quarter of 2021 compared to the second quarter of 2020.

The Home segment margin increased to 37% of revenue in the second quarter of 2021, compared to 30% in the first quarter of 2021.

While there is uncertainty over the current low interest rate environment and corresponding impact to refinance activity, we are confident in our market-leading position and flexible business model.

Consumer segment profit increased $23.1 million in the third quarter of 2021 from the third quarter of 2020, and increased $18.6 million in the first nine months of 2021 from the first nine months of 2020, primarily due to an increase in revenue, partially offset by a corresponding increase in selling and marketing expense.

We continue to build momentum in the Consumer segment amid increased demand from both consumers and our Network Partners.

Lender demand in our personal loans product is strong, with new lenders joining our marketplace during the third quarter of 2021.

While consumer demand for our personal loans product has been relatively muted in part due to government stimulus programs, we expect demand to return to pre-pandemic levels as consumer savings balances begin to normalize.

Credit card issuer budgets and payouts continue to increase;

however, the profitability of our credit card product remains constrained as we continue to re-invest incremental revenue into the product to capture wallet share.

Within our small business loans product, our concierge business continues to be an

important growth driver following the conclusion of the Paycheck Protection Program.

Our student loans product benefited from the annual in-school lending season, but remains constrained due to reduced lender budgets.

While demand for student loan refinancing has decreased with the moratorium on federal student loan payments extended to January 2022, we expect demand to return once the moratorium concludes.

We continue to view the Consumer segment with optimism and are pleased with the pace of its recovery.

Home segment profit increased $16.4 million in the third quarter of 2021 from the third quarter of 2020, and increased $19.7 million in the first nine months of 2021 from the first nine months of 2020, primarily due to an increase in revenue, partially offset by a corresponding increase in selling and marketing expense.

While refinance activity decelerates from the peak experienced earlier this year, the Home segment continues to perform well as we are an integral part of our Network Partners' marketing model.

Mortgage revenue per lead increased 78%, and home equity revenue per lead increased 79%, in the third quarter of 2021 compared to the third quarter of 2020.

While there is uncertainty over the interest rate environment and corresponding impact to refinance activity, we are confident in our market-leading position, key partner status, and flexible business model.

Insurance segment profit decreased $10.4 million in the third quarter of 2021 from the third quarter of 2020, primarily due to a decrease in revenue and an increase in selling and marketing expense.

Insurance segment profit decreased $5.0 million in the first nine months of 2021 from the first nine months of 2020, primarily due to an increase in selling and marketing expense, partially offset by an increase in revenue.

The Insurance segment experienced challenging market factors in the third quarter of 2021.

Personal lines insurance carriers are experiencing rising loss costs as the economy reopens and drivers return to the road.

Higher catastrophe losses from major storms have also pressured carrier earnings, resulting in an industry-wide reduction in carrier marketing budgets.

We view these factors as transitory and are optimistic that the Insurance segment will return to historic earnings and growth in the near term.

Our investments in other insurance categories, including our Medicare agency, property and casualty agency, and in-dealership automobile product, continue to make significant progress and provide diversification benefits.

Our inbound channel continued to deliver record performance and we observed significant growth in the home category as we increasingly leverage our presence in the mortgage industry.

Adjusted EBITDA

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Non-cash compensation expense consists principally of expense associated with grants of restricted stock, restricted stock units and stock options, some of which awards have performance-based vesting conditions.

Non-cash compensation expense also includes expense associated with employee stock purchase plans.

These expenses are not paid in cash, and we include the related shares in our calculations of fully diluted shares outstanding.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income (loss) from continuing operations $ 9,800 $ (8,616) $ 29,112 $ 10,360

Net (loss) income from continuing operations $ (4,406) $ (24,809) $ 24,706 $ (14,449)

Adjustments to reconcile to Adjusted EBITDA:

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Interest expense, net 11,826 16,617 31,881 26,406

Income tax benefit (9,092) (3,880) (454) (6,941)

Income tax expense (benefit) (1) (7,925) (455) (14,866)

Adjusted EBITDA $ 40,997 $ 21,679 $ 109,975 $ 97,402

Financial Position, Liquidity and Capital Resources

As of June 30, 2021, we had $203.2 million of cash and cash equivalents, compared to $169.9 million of cash and cash equivalents as of December 31, 2020.

As of September 30, 2021, we had $215.3 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.

Our credit facility described below is an additional potential source of liquidity.

We will continue to monitor the impact of the ongoing COVID-19 pandemic on our liquidity and capital resources.

We expect our cashflow from operating activities to be negatively impacted by the economic recession.

Senior Secured Revolving Credit Facility

On December 10, 2019, we entered into an amended and restated $500.0 million five-year senior secured revolving credit facility, which matures on December 10, 2024 (the “Amended Revolving Credit Facility”).

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.

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

The amendment was applicable from the effective date through the fiscal quarter ending June 30, 2021.

As a result of the expiration of the temporary amendment, we are currently unable to draw on the Amended Revolving Credit Facility and we are in the process of establishing a new facility during the third quarter of 2021.

Credit Facility

On September 15, 2021, we entered into a credit agreement (the “Credit Agreement”), consisting of a $200.0 million revolving credit facility (the “Revolving Facility”), which matures on September 15, 2026, and a $250.0 million delayed draw term loan facility (the “Term Loan Facility” and together with the Revolving Facility, the “Credit Facility”), which matures on September 15, 2028 to the extent the loans thereunder will be drawn.

The delayed draw commitments under the Term Loan

Facility will be available until June 1, 2022.

The proceeds of the Revolving Facility can be used to finance working capital, for general corporate purposes and any other purpose not prohibited by the Credit Agreement.

The proceeds of the Term Loan Facility can be used to settle the Company’s 2022 Notes, including related fees, costs and expenses, and up to $80.0 million may be used for general corporate purposes and any other purposes not prohibited by the Credit Agreement.

See Note 13—Debt for additional information.

As of July 29, 2021, we have outstanding a $0.2 million letter of credit under the Amended Revolving Credit Facility.

As of October 28, 2021, we have outstanding a $0.2 million letter of credit under the Revolving Facility, and the remaining borrowing capacity is $199.8 million.

No term loans have been drawn under the Term Loan Facility as of October 28, 2021.

Cash Flows from Continuing Operations

Our cash flows attributable to continuing operations are as follows:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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

Net cash provided by operating activities attributable to continuing operations decreased in the first six months of 2021 from the first six 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, and income taxes receivable.

Net cash provided by operating activities attributable to continuing operations decreased in the first nine months of 2021 from the first nine 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, and income taxes receivable.

Cash Flows from Investing Activities

Net cash used in investing activities attributable to continuing operations in the first six months of 2021 of $24.8 million consisted of capital expenditures of $23.6 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 six months of 2020 of $89.1 million consisted of the initial purchase of an $80.0 million equity interest in Stash and capital expenditures of $9.1 million primarily related to internally developed software.

Net cash used in investing activities attributable to continuing operations in the first nine months of 2021 of $31.7 million consisted of capital expenditures of $30.5 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 nine months of 2020 of $100.4 million consisted of the initial 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 corporate offices.

Cash Flows from Financing Activities

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

Net cash used in financing activities attributable to continuing operations in the first nine months of 2021 of $15.2 million consisted primarily of $6.7 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options, as well as $6.0 million for the payment of debt issuance costs and $2.5 million paid for the original issue discount on the undrawn Term Loan Facility.

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 convertible note hedge and warrant transactions, $75.0 million of net repayments on our revolving credit facility, and $16.4 million for the payment of debt issuance costs.

Off-Balance Sheet Arrangements

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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