What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-01 · 315 added, 526 removed, 1234 unchanged (41% of the section changed)

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AND SUBSIDIARIES:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

CONSOLIDATED FINANCIAL STATEMENTS:

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

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

Contingent Consideration - QuoteWizard

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

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

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

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

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

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

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

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

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

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

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

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

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

2025 Convertible Senior Notes Valuation

As described in Note 15 to the consolidated financial statements, on July 24, 2020, the Company issued $575.0 million aggregate principal amount of its 0.50% Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) in a private placement.

The initial measurement of convertible debt instruments that may be settled in cash is separated into a debt and an equity component whereby the debt component is based on the fair value of a similar instrument that does not contain an equity conversion option.

The separate components of debt and equity of the Company’s 2025 Notes were determined using an interest rate of 5.30%, which reflects the nonconvertible debt borrowing rate of the Company at the date of issuance.

As a result, the initial components of debt and equity were $455.6 million and $119.4 million, respectively.

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

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

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

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

Valuation of equity securities - Stash

As described in Note 8 to the consolidated financial statements, on February 28, 2020, the Company acquired an equity interest in Stash Financial, Inc.

(“Stash”) for $80.0 million.

On January 6, 2021, the Company acquired an additional equity interest for $1.2 million.

The Stash equity securities do not have a readily determinable fair value and, upon acquisition, the Company elected the measurement alternative to value its securities.

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

On October 18, 2021, the Company entered into a stock transfer agreement with third parties to sell a portion of its Stash equity securities for $46.3 million.

The Company sold $35.3 million in October and closed on an additional $11.0 million in November 2021.

The Company recorded a realized gain of $27.9 million based on the sale of Stash equity securities under the stock transfer agreement.

In 2021, the Company recorded a net unrealized gain on the investment in Stash of $95.4 million as a result of an adjustment to the fair value of the Stash equity securities based on observable market events, which is included within other income on the consolidated statement of operations and comprehensive income.

The principal considerations for our determination that performing procedures relating to the valuation of the Stash equity securities is a critical audit matter are (i) the significant judgment by management to determine the fair value of the Stash equity securities, which included identifying the observable market events utilized in the fair value estimate, and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management's fair value estimate.

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

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

separate components of debt and equity.

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

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

These procedures included testing the effectiveness of controls relating to management’s valuation of the Stash equity securities, including controls over the identification of the observable market events.

These procedures also included, among others, (i) testing management’s process for determining the fair value of the Stash equity securities, (ii) evaluating the appropriateness of the model and management’s identification of observable market events, and (iii) evaluating the appropriateness of the observable market events used to estimate the fair value of the Stash equity securities.

Evaluating the observable market events involved assessing whether the inputs were reasonable considering consistency with recent company and third party executed transactions.

/s/ PricewaterhouseCoopers LLP

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Total costs and expenses 1,090,468 916,593 1,055,875

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

Operating income (loss) 8,031 ( 6,603 ) 50,728

Other (expense) income, net:

Interest expense, net ( 46,867 ) ( 36,300 ) ( 20,271 )

Other income (expense) 376 524 ( 10 )

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

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

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

Other income 123,272 376 524

Income (loss) before income taxes 84,436 ( 42,527 ) 30,981

Income tax (expense) benefit ( 11,298 ) 19,961 8,479

Net income (loss) from continuing operations 73,138 ( 22,566 ) 39,460

Loss from discontinued operations, net of tax ( 4,023 ) ( 25,689 ) ( 21,632 )

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

Net income (loss) and comprehensive income (loss) $ 69,115 $ ( 48,255 ) $ 17,828

Weighted average shares outstanding:

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Diluted 13,695 13,007 14,619

(Loss) income per share from continuing operations:

Income (loss) per share from continuing operations:

Basic $ 5.54 $ ( 1.73 ) $ 3.07

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Diluted $ ( 0.29 ) $ ( 1.98 ) $ ( 1.48 )

Net (loss) income per share:

Net income (loss) per share:

Basic $ 5.24 $ ( 3.71 ) $ 1.39

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Equity investment (Note 8)

158,140 80,000

Other non-current assets 6,942 5,334

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Total assets $ 1,299,356 $ 1,188,990

Revolving credit facility $ — $ 75,000

Current portion of long-term debt $ 166,008 $ —

Accounts payable, trade 1,692 10,111

Accrued expenses and other current liabilities 106,731 101,196

Current contingent consideration — 9,028

Current liabilities of discontinued operations 1 536

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Non-current contingent consideration — 8,249

Deferred income tax liabilities 2,265 —

Other non-current liabilities 351 362

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Treasury stock;

2,641,318 shares

2,975,571 and 2,641,318 shares, respectively

( 223,169 ) ( 183,161 )

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Deficit Number

of Shares Amount Noncontrolling

of Shares Amount

(in thousands)

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

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

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

Other ( 1 ) — — ( 1 ) — — —

Balance as of December 31, 2019 $ 402,326 15,677 $ 157 $ 1,177,984 $ ( 592,654 ) 2,641 $ ( 183,161 )

Net income and comprehensive income 17,828 — — — 17,828 — — —

Non-cash compensation 52,167 — — 52,167 — — — —

Purchase of treasury stock ( 5,470 ) — — — — 23 ( 5,470 ) —

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

Other ( 1 ) — — ( 1 ) — — — —

Balance as of December 31, 2019 $ 402,326 15,677 $ 157 $ 1,177,984 $ ( 592,654 ) 2,641 $ ( 183,161 ) $ —

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

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

Net income and comprehensive income 69,115 — — — 69,115 — —

Non-cash compensation 68,555 — — 68,555 — — —

Purchase of treasury stock ( 40,008 ) — — — — 335 ( 40,008 )

Issuance of common stock for stock options, employee stock purchase plan, restricted stock awards and restricted stock units, net of withholding taxes ( 14,423 ) 305 3 ( 14,426 ) — — —

Other ( 8 ) — — ( 8 ) — — —

Balance as of December 31, 2021 $ 447,992 16,071 $ 161 $ 1,242,794 $ ( 571,794 ) 2,976 $ ( 223,169 )

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

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Cash flows from operating activities attributable to continuing operations:

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

Net income (loss) and comprehensive income (loss) $ 69,115 $ ( 48,255 ) $ 17,828

Loss from discontinued operations, net of tax 4,023 25,689 21,632

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

Income (loss) from continuing operations 73,138 ( 22,566 ) 39,460

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

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Depreciation 17,910 14,201 10,998

Rental amortization of intangibles and depreciation — — 630

Non-cash compensation expense 68,555 53,733 52,167

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Change in fair value of contingent consideration ( 8,249 ) 5,327 28,402

Gain on investments ( 123,272 ) — —

Bad debt expense 2,472 1,785 1,697

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Write-off of previously-capitalized debt issuance costs 1,066 — 333

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

Amortization of debt discount 30,695 19,570 12,016

Loss on extinguishment of debt — 7,768 —

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

Equity investment ( 80,000 ) — —

Purchase of equity investment ( 1,180 ) ( 80,000 ) —

Proceeds from the sale of equity investment 46,312 — —

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

Acquisition of QuoteWizard, net of cash acquired — — 482

Acquisition of Student Loan Hero, net of cash acquired — — ( 59,483 )

Acquisition of Ovation, net of cash acquired — — ( 11,566 )

Acquisition of SnapCap — — ( 10 )

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

Net cash provided by (used in) investing activities attributable to continuing operations 10,067 ( 122,149 ) ( 101,060 )

Cash flows from financing activities attributable to continuing operations:

Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options ( 14,423 ) ( 3,910 ) ( 8,406 )

Purchase of treasury stock ( 40,008 ) — ( 5,470 )

Proceeds from the issuance of 0.50 % Convertible Senior Notes

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— ( 94,292 ) —

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

Net repayment of revolving credit facility — ( 75,000 ) ( 50,000 )

Payment of debt issuance costs ( 6,385 ) ( 16,568 ) ( 2,518 )

Payment of original issue discount on undrawn term loan ( 2,500 ) — —

Contingent consideration payments — ( 4,755 ) ( 21,275 )

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

Acquisition of noncontrolling interest — — ( 499 )

Other financing activities ( 31 ) ( 184 ) ( 9 )

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

Net cash (used in) provided by financing activities attributable to continuing operations ( 63,347 ) 193,290 ( 87,678 )

Total cash provided by (used in) continuing operations 77,976 182,440 ( 31,564 )

Discontinued operations:

Net cash used in operating activities attributable to discontinued operations ( 72,730 ) ( 13,255 ) ( 13,236 )

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

Net cash provided by (used in) operating activities attributable to discontinued operations 3,317 ( 72,730 ) ( 13,255 )

Total cash provided by (used in) discontinued operations 3,317 ( 72,730 ) ( 13,255 )

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents 81,293 109,710 ( 44,819 )

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Non-cash investing activities:

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

(Decrease) increase in capital expenditures included in accounts payable and accrued expenses $ ( 4,793 ) $ 4,196 $ ( 946 )

Capital additions from tenant improvement allowance — — 1,111

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

The Company offers consumers tools and resources, including free credit scores, that facilitate comparison-shopping for mortgage loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings.

The Company primarily seeks to match in-market consumers with multiple providers on its marketplace who can provide them with competing quotes for loans, deposit products, insurance or other related offerings they are seeking.

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Securities and Exchange Commission ("SEC").

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

NOTE 2— SIGNIFICANT ACCOUNTING POLICIES

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Goodwill acquired in business combinations is assigned to the reporting units that are expected to benefit from the combination as of the acquisition date.

Goodwill and indefinite-lived intangible assets, consisting of certain trade names and trademarks, are not amortized.

Rather, these assets are tested annually for impairment as of October 1, or more frequently upon the occurrence of certain events or substantive changes in circumstances.

Goodwill and indefinite-lived intangible assets, consisting of certain trade names and

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

trademarks, are not amortized.

Rather, these assets are tested annually for impairment as of October 1, or more frequently upon the occurrence of certain events or substantive changes in circumstances.

As part of its annual impairment testing of goodwill and indefinite-lived intangible assets, in each instance, the Company may elect to assess qualitative factors as a basis for determining whether it is necessary to perform the traditional quantitative impairment testing.

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

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

Results of the October 1, 2021 and 2020 qualitative annual impairment tests indicated that it is not more likely than not that the fair value of the goodwill and the indefinite-lived intangible assets were each less than their respective carrying values.

Accordingly, no further testing was required.

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

At December 31, 2021, the Company had no outstanding contingent consideration arrangements.

Cost of Revenue

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The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

Effective January 1, 2018, the Company changed the method used to estimate the deduction for prepaid marketing and advertising costs.

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

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

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

§1.461-4(d)(6)(ii).

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

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

118 ("SAB 118"), which provides guidance on accounting for the tax effect of the Tax Cuts and Jobs Act ("TCJA").

SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740.

In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete.

To the extent that a company's accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

In accordance with SAB 118, the Company determined that the $ 9.1 million of the deferred tax expense recorded in connection with the remeasurement of certain deferred tax assets and liabilities was a provisional amount and a reasonable estimate at December 31, 2017.

During the fourth quarter of the year ended December 31, 2018, the Company finalized the computations of the income tax effects of the Act.

As such, in accordance with SAB 118, the Company's accounting for the effects of the Act is complete.

The Company did not significantly adjust provisional amounts recorded in 2017 and the SAB 118 measurement period subsequently ended on December 22, 2018.

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

Stock-Based Compensation

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

The forms of stock-based awards granted to LendingTree employees are principally restricted stock units ("RSUs"), RSUs with performance conditions, stock options, and employee stock purchases related to the Employee Stock Purchase Plan ("Employee Stock Purchase Rights").

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

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

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

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

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

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

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

reflects the most likely outcome;

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

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

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

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

contingent consideration.

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

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

If economic conditions caused by the COVID-19 pandemic worsen, such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity.

Certain Risks and Concentrations

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

For the year ended December 31, 2021, there were no network partners accounting for more than 10% of total revenue.

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

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

Lenders and lead purchasers participating on the Company's marketplace can offer their products directly to consumers through brokers, mass marketing campaigns or through other traditional methods of credit distribution.

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Recently Adopted Accounting Pronouncements

In May 2021, the FASB issued ASU 2021-04 to clarify and reduce diversity in accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange.

The amendments clarify that a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be accounted for as an exchange of the original instrument for a new instrument.

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

Early adoption is permitted, including adoption in interim periods.

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

The amendments should be applied prospectively to modifications or exchanges occurring on or after the date of adoption.

The Company adopted ASU 2021-04 in the second quarter of 2021.

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

This ASU is effective for annual and interim reporting periods beginning after December 15, 2020.

Early adoption is permitted, including adoption in interim periods.

Entities electing early adoption must adopt all amendments in the same period.

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

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

The amendments applicable to the Company required prospective application, and do not have material impacts to its consolidated financial statements.

In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

This ASU is effective for annual and interim reporting periods beginning after December 15, 2019.

The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

The Company adopted ASU 2018-15 in the first quarter of 2020 using the prospective approach.

LENDINGTREE, INC.

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The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

The Company adopted ASU 2018-15 in the first quarter of 2020 using the prospective approach.

Subsequent to the adoption of this ASU, capitalizable implementation costs incurred in a hosting arrangement that is a service contract are recorded within prepaid and other current assets and other non-current assets on the consolidated balance sheet.

to the adoption of this ASU, capitalizable implementation costs incurred in a hosting arrangement that is a service contract are recorded within prepaid and other current assets and other non-current assets on the consolidated balance sheet.

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

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The Company adopted ASU 2018-13 in the first quarter of 2020.

See Note 18—Fair Value Measurement.

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

Under the new guidance, most of the initial and subsequent measurement for such payments to nonemployees is aligned with the requirements for share-based payments to employees.

This ASU is effective for annual and interim reporting periods beginning after December 15, 2018, and early adoption was permitted.

Entities must transition to the new guidance through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

The Company early-adopted this ASU during the second quarter of 2018, with no impact to its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09 which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification.

Under the new guidance, modification accounting is required only if the fair value, the vesting conditions or the classification of the award changes as a result of the change in terms or conditions.

This ASU is effective prospectively for annual periods beginning on or after December 15, 2017.

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

See Note 18—Fair Value Measurements.

In January 2017, the FASB issued ASU 2017-04, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2 of the goodwill impairment test).

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The Company adopted ASU 2017-04 in the first quarter of 2020.

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

As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows.

In addition, if more than one line item is recorded on the balance sheet for cash and cash equivalents and restricted cash, a reconciliation between the statement of cash flows and balance sheet is required.

This ASU is effective for annual and interim reporting periods beginning after December 15, 2017.

The retrospective transition method, requiring adjustment to all comparative periods presented, is required.

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

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

In August 2016, the FASB issued ASU 2016-15 which addresses eight cash flow classification issues, eliminating the diversity in practice.

This ASU is effective for annual and interim reporting periods beginning after December 15, 2017.

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

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

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

See Note 9—Business Acquisitions for additional information.

In June 2016, the FASB issued ASU 2016-13, which requires entities to measure expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

This ASU introduces ASC Topic 326, Financial Instruments—Credit Losses, which replaces the existing incurred loss model and is applicable to financial assets measured at amortized cost, including trade receivables and certain other financial assets that have the contractual right to receive cash.

ASC Topic 326 is effective for annual and interim reporting periods beginning after

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 15, 2019.

ASC Topic 326 is effective for annual and interim reporting periods beginning after December 15, 2019.

The guidance must be adopted using a modified retrospective transition.

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

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

This guidance introduces ASC Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition.

In 2016, the FASB issued final amendments clarifying implementation guidance for principal versus agent considerations, identifying performance obligations, assessing collectability, presenting sales taxes, measuring noncash consideration and certain other transition matters.

The clarification ASUs must be adopted concurrently with the adoption of ASU 2014-09 (collectively, "ASC Topic 606").

Under the new ASUs, the timing of recognizing revenue for closing fees and approval fees in the Company's Consumer products has been accelerated to the point when a loan request or a credit card consumer is delivered to the customer as opposed to when the consumer loan is closed by the lender or credit card approval is made by the issuer and communicated to the Company.

The Company adopted ASC Topic 606 as of January 1, 2018 using the modified retrospective transition approach.

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

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

December 31, 2017 Adjustments due to

ASC Topic 606 January 1, 2018

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

Deferred income tax assets 20,156 ( 530 ) 19,626

Shareholders' equity:

Accumulated deficit $ ( 708,354 ) $ 1,373 $ ( 706,981 )

Recently Issued Accounting Pronouncements

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

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

The Company plans to adopt the amendments through the modified retrospective method of transition in the first quarter of 2022.

As a result, the Company's convertible senior notes will be stated on its consolidated balance sheet at their principal amounts, net of debt issuance costs.

The Company will record a cumulative-effect adjustment to retained earnings related to prior interest costs associated with the debt discount initially recorded upon issuance of the notes and will record a decrease to additional paid in capital.

The cumulative-effect adjustment is expected to increase retained earnings by approximately $ 61 million.

Additionally, ASU 2020-06 will result in

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This ASU is effective for annual and interim reporting periods beginning after December 15, 2020.

Early adoption is permitted, including adoption in interim periods.

Entities electing early adoption must adopt all amendments in the same period.

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

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

the reporting of diluted earnings per share, if the effect is dilutive, in our consolidated financial statements, regardless of our settlement intent.

NOTE 3— REVENUE

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NOTE 6— HOSTING ARRANGEMENTS

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

Current portion Non-current portion

December 31, 2021 December 31, 2020

Current portion Non-current portion Current portion Non-current portion

Capitalized implementation costs $ 1,771 $ 2,960 $ 530 $ 1,036

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Total net $ 2,047 $ 2,714 $ 1,035 $ 2,005

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

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NOTE 7— GOODWILL AND INTANGIBLE ASSETS

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

Acquisition of Ovation 20 — 20

Acquisition of QuoteWizard 33 — 33

Acquisition of ValuePenguin 71,739 — 71,739

Changes in goodwill — — —

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

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Balance at December 31, 2021 $ 903,227 $ ( 483,088 ) $ 420,139

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

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

Other 3.0 years 5 ( 3 ) 2

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

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(“Stash”) for $ 80.0 million.

On January 6, 2021, the Company acquired an additional equity interest for $ 1.2 million.

On October 18, 2021, the Company entered into a stock transfer agreement with third parties to sell a portion of its Stash equity securities for $ 46.3 million.

The Company sold $ 35.3 million in October and closed on an additional $ 11.0 million in November 2021.

The Company recorded a realized gain of $ 27.9 million based on the sale of Stash equity securities under the stock transfer agreement, which is included within other income on the consolidated statement of operations and comprehensive income.

Stash is a consumer investing and banking platform.

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

As of December 31, 2020, there have been no observable market events that would result in upward or downward adjustments in the fair value, and there have been no impairments to the original cost of $ 80.0 million.

In 2021, the Company recorded a net unrealized gain on the investment in Stash of $ 95.4 million as a result of an adjustment to the fair value of the Stash equity securities based on observable market events, which is included within other income on the consolidated statement of operations and comprehensive income.

As of December 31, 2021, there have been no impairments to the acquisition cost of the Stash equity securities.

NOTE 9— BUSINESS ACQUISITIONS

Changes in Contingent Consideration

In 2018, the Company acquired all of the outstanding equity interests of QuoteWizard.com, LLC (“QuoteWizard”) and Ovation Credit Services, Inc.

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

In 2018, the Company acquired all of the outstanding equity interests of QuoteWizard.com, LLC, which does business under the name QuoteWizard (“QuoteWizard”).

The Company made no earnout payments related to the QuoteWizard acquisition during 2021, and this earnout is complete.

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

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

In 2018, the Company acquired all of the outstanding equity interests of Ovation Credit Services, Inc., which does business under the name Ovation (“Ovation”).

The Company made no earnout payments related to the Ovation acquisition during 2021, as this earnout was completed in 2020.

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

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

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

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

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

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

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

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

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

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

During 2020, the Company made the final earnout payments related to the achievement of certain defined

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earnings targets for SnapCap.

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

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

The Company made no earnout payments related to the DepositAccounts acquisition during 2020 and 2021, and this earnout is complete.

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

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

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DepositAccounts — — ( 947 )

CompareCards — — 652

Total changes in fair value of contingent consideration $ ( 8,249 ) $ 5,327 $ 28,402

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

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

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Total intangible assets $ 31,600 3.1 years

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

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

2018 Acquisitions

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

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

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

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

The purchase price of $ 313.4 million is comprised of the upfront cash payment of $ 299.9 million, $ 13.9 million for the estimated fair value of the earnout payments, and a $ 0.4 million post-closing receipt for working capital settlement.

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

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

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

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

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

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

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

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The acquisition has been accounted for as a business combination.

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

Net working capital $ 8,521

Fixed assets 1,509

Intangible assets 120,400

Goodwill 182,896

Other noncurrent assets 29

Total purchase price $ 313,355

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

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

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

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

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

Fair Value Weighted Average

Amortization Life

Technology $ 68,900 4 years

Customer lists 42,700 14.7 years

Content 1,000 3 years

Trademarks and tradenames 7,800 5 years

Total intangible assets $ 120,400 7.9 years

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

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

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

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

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

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

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

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

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

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

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

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

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(in thousands)

Pro forma revenue $ 900,978

Pro forma net income from continuing operations $ 110,015

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

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

Student Loan Hero

On July 23, 2018, the Company acquired Student Loan Hero, Inc., a personal finance website dedicated to helping student loan borrowers manage their student debt.

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

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

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

The acquisition has been accounted for as a business combination.

During 2018, the Company completed the determination of the final allocation of purchase price to the assets acquired and liabilities assumed as follows (in thousands) :

Net working capital $ 5,429

Intangible assets 19,600

Goodwill 40,856

Deferred tax liabilities ( 5,467 )

Total purchase price $ 60,418

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

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

The estimated fair values of the content was determined using the excess earnings method, the customer relationships were determined using the distributor method and the trademarks and tradenames were determined using the relief from royalty method.

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

Fair Value Weighted Average

Amortization Life

Content $ 16,100 3 years

Customer lists 2,500 10 years

Trademarks and tradenames 1,000 5 years

Total intangible assets $ 19,600 4.0 years

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

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

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

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

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

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

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

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

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

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

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

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

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

The acquisition has been accounted for as a business combination.

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

Net working capital $ 303

Fixed assets 76

Intangible assets 8,900

Goodwill 11,280

Net deferred tax liabilities ( 2,688 )

Total purchase price $ 17,871

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

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

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

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

Fair Value Weighted Average

Amortization Life

Technology $ 6,000 7 years

Customer lists 1,900 1 year

Trademarks and tradenames 1,000 4 years

Total intangible assets $ 8,900 5.4 years

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

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

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

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

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

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

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Pro forma Financial Results

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

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

The unaudited pro forma financial results for the year ended December 31, 2019 combine the consolidated results of the Company and ValuePenguin, giving effect to the acquisition as if the acquisition had been completed on January 1, 2018.

Depreciation expense and interest expense were adjusted for the impact of the QuoteWizard acquisition, as described above, including incremental interest associated with debt issued to finance the acquisition.

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

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

(in thousands)

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The unaudited pro forma net income from continuing operations in 2019 includes the aggregate after-tax contingent consideration expense associated with the DepositAccounts, SnapCap, Ovation and QuoteWizard earnouts of $ 21.5 million.

The unaudited pro forma net income from continuing operations for 2018 has been adjusted to include acquisition-related costs of $ 0.6 million incurred by the Company that are directly attributable to the ValuePenguin acquisition, and which will not have an ongoing impact.

Accordingly, these acquisition-related costs have been eliminated from the unaudited pro forma net income from continuing operations for 2019.

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

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

Acquisition-related costs of $ 0.1 million incurred by the Company that are directly attributable to the ValuePenguin acquisition, and which will not have an ongoing impact, have been eliminated from the unaudited pro forma net income from continuing operations for 2019.

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NOTE 10— ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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The majority of leases for corporate offices include one or more options to renew, with renewal terms ranging from two to five years .

These renewal options have not been included in the calculation of right-of-use assets and lease liabilities, as the Company is not reasonably certain of the

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exercise of these renewal options.

These renewal options have not been included in the calculation of right-of-use assets and lease liabilities, as the Company is not reasonably certain of the exercise of these renewal options.

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

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At December 31, 2020, right-of-use assets totaled $ 84.1 million and lease liabilities totaled $ 97.7 million.

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

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

Year Ended December 31,

2021 2020 2019

Operating lease cost $ 13,160 $ 11,226 $ 6,346

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

December 31, 2020 December 31, 2019

Weighted average remaining lease term 13.0 years 5.0 years

December 31, 2021 December 31, 2020 December 31, 2019

Weighted average remaining lease term 12.3 years 13.0 years 5.0 years

Weighted average discount rate 5.0 % 5.0 % 4.7 %

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Year Ended December 31,

2021 2020 2019

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

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Right-of-use assets obtained in exchange for new operating lease liabilities $ 1,250 $ 66,881 $ 21,969

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Maturities of lease liabilities as of December 31, 2021 are as follows (in thousands) :

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Present value of lease liabilities $ 104,760

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

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

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

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

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

NOTE 12— SHAREHOLDERS' EQUITY

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Weighted average diluted common shares 13,695 13,007 14,619

For the year ended December 31, 2021, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 0.9 million shares of common stock and 0.1 million restricted stock units.

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

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

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

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

The convertible notes and the warrants issued by the Company could be converted into the Company’s common stock, subject to certain contingencies.

See Note 15—Debt for additional information.

Shares of the Company's common stock associated with the 0.50 % Convertible Senior Notes due July 15, 2025 and the warrants issued by the Company in 2020 were excluded from the calculation of diluted loss per share for the year ended December 31, 2020 as they were anti-dilutive since the conversion price of the notes and the strike price of the warrants were greater than the average market price of the Company’s common stock during the relevant period.

Shares of the Company's common stock associated with the 0.50 % Convertible Senior Notes due July 15, 2025 and the warrants issued by the Company in 2020 were excluded from the calculation of diluted loss per share for the years ended December 31, 2021 and 2020 as they were anti-dilutive since the conversion price of the notes and the strike price of the warrants were greater than the average market price of the Company’s common stock during the relevant period.

Shares of the Company's common stock associated with the 0.625 % Convertible Senior Notes due June 1, 2022 and the warrants issued by the Company in 2017 were excluded from the calculation of diluted loss per share for the year ended December 31, 2021 as they were anti-dilutive since the conversion price of the notes and the strike price of the warrants were greater than the average market price of the Company’s common stock during the relevant period.

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In 2021, the Company implemented an employee stock purchase plan, which did not have a material impact to the calculation of diluted shares.

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

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NOTE 13— STOCK-BASED COMPENSATION

The Company currently has two active plans, the Sixth Amended and Restated LendingTree 2008 Stock and Annual Incentive Plan (the "Equity Award Plan") and the LendingTree 2017 Inducement Grant Plan (the "Inducement Plan"), under which future awards may be granted, which currently covers outstanding stock options to acquire shares of the Company's common stock, restricted stock, restricted stock with performance conditions, RSUs and RSUs with performance conditions, and provides for the future grants of these and other equity awards.

Under the Equity Award Plan and the Inducement Plan, the Company is authorized to grant stock options, restricted stock, RSUs and other equity-based awards for up to 6.1 million and 0.5 million shares, respectively, of LendingTree common stock to employees, and, under the Equity Award Plan only, to non-employee consultants and directors.

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Committee of the board of directors.

The Company currently has one active plan, the Seventh Amended and Restated LendingTree 2008 Stock Plan (the "Equity Award Plan"), under which future awards may be granted, which currently covers outstanding stock options to acquire shares of the Company's common stock, restricted stock, restricted stock with performance conditions, RSUs and RSUs with performance conditions, and provides for the future grants of these and other equity awards.

Under the Equity Award Plan, the Company is authorized to grant stock options, restricted stock, RSUs and other equity-based awards for up to 6.7 million shares of LendingTree common stock to employees, and to non-employee consultants and directors.

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

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

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

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See Note 2—Significant Accounting Policies, for additional information regarding excess tax benefits and deficiencies.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

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Cash received from stock option exercises and the related actual tax benefit realized were $ 2.2 million and $ 13.1 million, respectively, for the year ended December 31, 2021.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the years ended December 31, 2021, 2020 and 2019, the Company granted stock options with a weighted average grant date fair value per share of $ 128.86 , $ 116.08 and $ 167.10 , respectively, of which the vesting periods include (a) immediately upon grant, (b) earlier of one year from grant date and the Company's annual meeting of stockholders for 2022, (c) 33 % over a period of three years from the grant date, (d) 25 % over a period of four years from the grant date, and (e) certain grants to executive officers that vest over periods of up to six years .

For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options, except the December 2020 grant to the Chairman and Chief Executive Officer described below, was estimated using the Black-Scholes option pricing model, which requires the use of various key assumptions.

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

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

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During the years ended December 31, 2021, 2020 and 2019, the total fair value of options vested was $ 10.8 million, $ 5.8 million and $ 6.9 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options with Market Conditions

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Outstanding at December 31, 2020 700,209 $ 236.01

236,769 298.05

Exercised — —

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

No stock options with market conditions were granted in 2021.

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

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

The single cliff-vesting stock options granted during the years ended December 31, 2020 and 2019 have vest dates of March 31,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2024 and March 31, 2023, respectively.

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

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Year Ended December 31,

2020 2019 2018

Expected term (1)

7.00 years 7.00 years 7.00 - 7.15 years

7.00 years 7.00 years

Expected dividend (2)

Expected volatility (3)

51 % 51 % 50 %

Risk-free interest rate (4)

1.03 % 2.54 %

2.38 % - 2.81 %

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

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

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

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The performance measurement period ends on March 31, 2023.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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As of December 31, 2021, stock options with a market condition of 481,669 had been earned, which have a vest date of September 30, 2022.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

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No RSUs with performance conditions were granted in 2021, 2020, or 2019.

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

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

As of December 31, 2020, there was approximately $ 1.1 million of unrecognized compensation cost related to RSUs with performance conditions.

These costs are expected to be recognized over a weighted-average period of approximately 0.8 years.

As of December 31, 2021, there was no unrecognized compensation cost related to RSUs with performance conditions.

The total fair value of RSUs with performance conditions that vested during the years ended December 31, 2021, 2020, and 2019 was $ 0.9 million, $ 2.6 million, and $ 18.8 million, respectively.

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No RSAs with performance conditions were granted in 2021, 2020, or 2019.

During 2018, the Company granted time-vested RSAs with a performance condition to its Chairman and Chief Executive Officer, which vest through December 31, 2021.

During 2018, the Company granted time-vested RSAs with a performance condition to its Chairman and Chief Executive Officer, which vested through December 31, 2021.

The terms of this award were fixed in compensation agreements in July 2017 with a total grant date fair value of $ 21.9 million.

The performance condition was tied to the Company's operating results during the first six months of 2018, and has been met.

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

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

As of December 31, 2021, there was no unrecognized compensation cost related to RSAs with performance conditions.

The total fair value of RSAs with performance conditions that vested during the years ended December 31, 2021, 2020 and 2019 was $ 4.1 million, $ 6.2 million and $ 8.2 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Stock Purchase Plan

During 2021, the Company implemented an employee stock purchase plan ("ESPP"), under which a total of 262,731 shares of the Company's common stock were reserved for issuance.

The ESPP is a tax-qualified plan under Section 423 of the Internal Revenue Code.

Under the terms of the ESPP, eligible employees are granted options to purchase shares of the Company's common stock at 85 % of the lesser of (1) the fair market value at time of grant or (2) the fair market value at time of exercise.

The offering periods and purchase periods are typically 6-month periods ending on June 30 and December 31 of each year.

During the year ended December 31, 2021, 5,543 shares were purchased under the ESPP at a weighted average purchase price of $ 103.62 per share, resulting in cash proceeds of $ 0.6 million.

As of December 31, 2021, 257,188 shares were available for issuance under the ESPP.

For the year ended December 31, 2021, the Company granted Employee Stock Purchase Rights to certain employees with a grant date fair value per share of $ 42.39 , calculated using the Black-Scholes option pricing model.

For purposes of determining stock-based compensation expense, the grant date fair value per share estimated using the Black-Scholes option pricing model required the use of the following key assumptions:

Expected term (1)

Expected dividend (2)

Expected volatility (3)

Risk-free interest rate (4)

(1) The expected term was calculated using the time period between the grant date and the purchase date.

(2) No dividends are expected to be paid, resulting in a zero expected dividend rate.

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

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

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

Treasury yields for notes with comparable expected terms as the Employee Stock Purchase Rights, in effect at the grant date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14— INCOME TAXES

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2021 2020 2019

Current income tax (benefit) expense:

Current income tax expense (benefit):

Federal $ 128 $ ( 10,705 ) $ 201

State 262 372 ( 125 )

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

Deferred income tax (benefit) provision:

Current income tax expense (benefit) 390 ( 10,333 ) 76

Deferred income tax provision (benefit):

Federal 9,912 ( 7,495 ) ( 10,857 )

State 996 ( 2,133 ) 2,302

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

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

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

Deferred income tax provision (benefit) 10,908 ( 9,628 ) ( 8,555 )

Income tax expense (benefit) $ 11,298 $ ( 19,961 ) $ ( 8,479 )

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

Year Ended December 31,

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Nondeductible executive compensation 3,058 1,778 988

Change in (release of) valuation allowance 2,100 954 ( 12 )

Increase (decrease) in valuation allowance 595 2,100 954

Uncertain tax positions 435 458 922

Nondeductible meals & entertainment 239 99 428

Impact of Tax Cuts and Jobs Act — — 270

Other, net 579 23 ( 612 )

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

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

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

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

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

As such, in accordance with SAB 118, the Company's accounting for the effects of the Act is complete.

The Company did not significantly adjust provisional amounts recorded in 2017 and the SAB 118 measurement period subsequently ended on December 22, 2018.

Although the Company no longer considers these amounts to be provisional, the determination of the Act’s income tax effects may change following future legislation or further interpretation of the Act based on the publication of recently proposed U.S.

Treasury regulations and guidance from the Internal Revenue Service and state tax authorities.

Income tax expense (benefit) $ 11,298 $ ( 19,961 ) $ ( 8,479 )

LENDINGTREE, INC.

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Property and equipment ( 8,156 ) ( 5,015 )

Equity investment ( 25,608 ) —

Other ( 444 ) ( 653 )

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Non-current assets of discontinued operations 16,589 15,892

Deferred income tax liabilities ( 2,265 ) —

Net deferred taxes $ 101,905 $ 112,116

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

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

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2021, 2020 and 2019, the Company recorded a partial valuation allowance of $ 6.0 million, $ 5.8 million and $ 4.1 million, respectively, primarily related to state net operating losses, which the Company does not expect to be able to utilize prior to expiration.

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

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Additions based on tax positions of the current period 435 570

Additions based on tax positions of the prior period 47 344

Additions (subtractions) based on tax positions of the prior period ( 134 ) 47

Balance, end of the period $ 2,914 $ 2,613

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The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest.

In addition, upon the occurrence of a make-whole fundamental change prior to the maturity of the 2025 Notes or if the Company issues a notice of redemption for the 2025 Notes, the Company will, in certain circumstances, increase the conversion rate by a specified number of additional shares for a holder that elects to convert the 2025 Notes in connection with such make-whole fundamental change or to convert its 2025 Notes called for redemption, as the case may be.

Upon conversion, the 2025 Notes will settle for cash, shares of the Company’s stock, or a combination thereof, at the Company’s option.

It is the intent of

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

rate by a specified number of additional shares for a holder that elects to convert the 2025 Notes in connection with such make-whole fundamental change or to convert its 2025 Notes called for redemption, as the case may be.

Upon conversion, the 2025 Notes will settle for cash, shares of the Company’s stock, or a combination thereof, at the Company’s option.

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

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

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

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

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

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

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If the market price per share of the common stock, as measured under the terms of the 2025 Notes, exceeds the conversion price of the 2025 Notes, the 2025 Notes could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the principal amount of the 2025 Notes and any conversion premium in cash.

The separate components of debt and equity of the Company’s 2025 Notes were determined using an

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

interest rate of 5.30 %, which reflects the nonconvertible debt borrowing rate of the Company at the date of issuance.

The separate components of debt and equity of the Company’s 2025 Notes were determined using an interest rate of 5.30 %, which reflects the nonconvertible debt borrowing rate of the Company at the date of issuance.

As a result, the initial components of debt and equity were $ 455.6 million and $ 119.4 million, respectively.

1 unchanged sentence

During 2021, the Company recorded interest expense on the 2025 Notes of $ 27.2 million which consisted of $ 2.9 million associated with the 0.50 % coupon rate, $ 22.1 million associated with the accretion of the debt discount, and $ 2.2 million associated with the amortization of the debt issuance costs.

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

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

As of December 31, 2021, the fair value of the 2025 Notes is estimated to be approximately $ 475.1 million using the Level 1 observable input of the last quoted market price on December 31, 2021.

A summary of the gross carrying amount, unamortized debt cost, debt issuance costs and net carrying value of the liability component of the 2025 Notes are as follows (in thousands) :

A summary of the gross carrying amount, unamortized debt cost, debt issuance costs and net carrying value of the liability component of the 2025 Notes, all of which is recorded as a non-current liability in the December 31, 2021 consolidated balance sheet, are as follows (in thousands) :

2021 December 31,

Gross carrying amount $ 575,000 $ 575,000

12 unchanged sentences

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

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

Prior to the close of business on the business day immediately preceding February 1, 2022, the 2022 Notes will be convertible at the option of the holders thereof only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on September 30, 2017 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on, and including the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price (as defined in the 2022 Notes) per $1,000 principal amount of 2022 Notes for such trading day was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;

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

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Holders of the 2022 Notes were entitled to convert the 2022 Notes during the calendar quarter ended December 31, 2020 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on September 30, 2020, was greater than or equal to 130 % of the conversion price of the 2022 Notes on each applicable trading day.

immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

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

Holders of the 2022 Notes were not entitled to convert the 2022 Notes during the calendar quarter ended December 31, 2021 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on September 30, 2021, was not greater than or equal to 130 % of the conversion price of the 2022 Notes on each applicable trading day.

Holders of the 2022 Notes are not entitled to convert the 2022 Notes during the calendar quarter ended March 31, 2022 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on December 31, 2021, was not greater than or equal to 130 % of the conversion price of the 2022 Notes on each applicable trading day.

14 unchanged sentences

As of December 31, 2021, the fair value of the 2022 Notes is estimated to be approximately $ 167.3 million using the Level 1 observable input of the last quoted market price on December 31, 2021.

A summary of the gross carrying amount, unamortized debt cost, debt issuance costs and net carrying value of the liability component of the 2022 Notes are as follows (in thousands) :

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the gross carrying amount, unamortized debt cost, debt issuance costs and net carrying value of the liability component of the 2022 Notes, all of which is recorded as a current liability in the December 31, 2021 consolidated balance sheet, are as follows (in thousands) :

2021 December 31,

3 unchanged sentences

Net carrying amount $ 166,008 $ 157,578

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Convertible Note Hedge and Warrant Transactions

17 unchanged sentences

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

reported sale price of the common stock of $ 156.70 on May 24, 2017.

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

2 unchanged sentences

To the extent of the repurchases of the 2022 Notes noted above, the Company entered into agreements with the counterparties for the 2017 Hedge and 2017 Warrants transactions to terminate a portion of these call spread transactions effective July 24, 2020 in notional amounts corresponding to the principal amount of the 2022 Notes repurchased.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

The Company received $ 109.9 million and paid $ 94.3 million as a result of terminating such portions of the 2017 Hedge and 2017 Warrants, respectively.

The net $ 15.6 million has been recorded as an increase to additional paid-in capital in the consolidated statement of shareholders’ equity.

Senior Secured Revolving Credit Facility

On December 10, 2019, the Company's wholly-owned subsidiary, LendingTree, LLC, entered into an amended and restated $ 500.0 million five-year senior secured revolving credit facility (the "Amended Revolving Credit Facility") which amended and restated the Company's previous $ 350.0 million five-year senior secured revolving credit facility (the “2017 Revolving Credit Facility”).

The Amended Revolving Credit Facility matures on December 10, 2024.

Borrowings under the Amended Revolving Credit Facility can be used to finance working capital needs, capital expenditures and general corporate purposes, including to finance permitted acquisitions.

As of December 31, 2020, the Company had no borrowings outstanding under the Amended Revolving Credit Facility.

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

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

Under certain conditions, the Company will be permitted to add one or more term loans and/or increase revolving commitments under the Amended Revolving Credit Facility by an additional amount equal to the greater of $ 185.0 million or 100% of Consolidated EBITDA as defined, or a greater amount provided that a total consolidated senior secured debt to EBITDA ratio does not exceed 2.50 to 1.00.

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

Credit Facility

On September 15, 2021, the Company 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.

The Credit Facility replaces the Company's $ 500.0 million five-year senior secured revolving credit facility (the "Amended Revolving Credit Facility") which was entered into on December 10, 2019.

As of December 31, 2021, the Company had no borrowings outstanding under the Credit Facility and at December 31, 2020, the Company had no borrowings outstanding under the Amended Revolving Credit Facility.

The full amount of the Revolving Facility will be available on a same-day basis, with respect to base rate loans and upon advance notice with respect to LIBO rate loans, subject to customary terms and conditions.

Under certain conditions, the Company will be permitted to add one or more term loans and/or increase revolving or term loan commitments under the Credit Facility by an amount set at the greater of $ 116.0 million and 100% of consolidated EBITDA (subject to adjustments for certain prepayments), plus an unlimited amount provided that the first lien net leverage ratio does not exceed 3.00 to 1.00.

Additionally, up to $ 20.0 million of the Revolving Facility will be available for the issuance of letters of credit.

At each of December 31, 2021 and December 31, 2020, the Company had outstanding one letter of credit issued in the amount of $ 0.2 million.

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

• a base rate generally defined as the sum of (i) the greater of (a) the prime rate of Truist Bank, (b) the federal funds effective rate plus 0.5 % and (c) the LIBO rate (defined below) on a daily basis applicable for an interest period of one month plus 1.0 % and (ii) an applicable percentage of 0.25 % to 1.0 % based on a total consolidated debt to EBITDA ratio;

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

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

Interest on the Company’s borrowings are payable quarterly in arrears for base rate loans and on the last day of each interest rate period (but not less often than three months) for LIBO rate loans.

The Amended Revolving Credit Facility contains a restrictive financial covenant, which initially limits the total consolidated debt to EBITDA ratio to 4.5 , with step downs to 4.0 over time, except that this may increase by 0.5 for the four fiscal quarters following a material acquisition.

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

On July 21, 2020, the Company executed a temporary amendment to its Amended Revolving Credit Facility to provide for certain covenant relief, primarily to facilitate the issuance of the 2025 Notes, the repurchase of a portion of the 2022 Notes, and to pay down existing borrowings under the credit facility.

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

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

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

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

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

• a base rate generally defined as the sum of (i) the greater of (a) the prime rate of Truist Bank, (b) the federal funds effective rate plus 0.5 % and (c) the LIBO rate (defined below) on a daily basis applicable for an interest period of one month plus 1.0 % and (ii) an applicable percentage of 1.25 % to 1.75 % for loans under the Revolving Facility and 2.75 % to 3.00 % for loans under the Term Loan Facility, in each case, based on a first lien net leverage ratio;

• a LIBO rate generally defined as the sum of (i) the rate for Eurodollar dollar deposits for the applicable interest period and (ii) an applicable percentage of 2.25 % to 2.75 % for loans under the Revolving Facility and 3.75 % and 4.00 % for loans under the Term Loan Facility, in each case, based on a first lien net leverage ratio.

Interest on the Company’s borrowings is payable quarterly in arrears for base rate loans and on the last day of each interest rate period (but not less often than three months) for LIBO rate loans.

The Credit Facility contains a restrictive financial covenant, which is set at a first lien net leverage ratio of 2.50 to 1.00, except that this may increase by 0.50 :1.00 for the four fiscal quarters following a material acquisition.

The financial covenant will be tested only if the loans and certain other obligations under the Revolving Facility exceed $ 20.0 million as of the last date

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Facility during the temporary period.

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

of any fiscal quarter (starting with the fiscal quarter ending on December 31, 2021).

In addition, the Credit Facility contains mandatory prepayment events, affirmative and negative covenants and events of default customary for a transaction of this type.

The covenants, among other things, restrict additional indebtedness, liens, mergers or certain fundamental changes, asset dispositions, dividends and other restricted payments, transactions with affiliates, loans and investments and other matters customarily restricted in credit agreements of this type.

The Company is required to make mandatory prepayments of the outstanding principal amount of loans under the Term Loan Facility with the net cash proceeds from certain disposition of assets and the receipt of insurance proceeds upon certain casualty and condemnation events, in each case, to the extent not reinvested within a specified time period, from excess cash flow beyond stated threshold amounts, and from the incurrence of certain indebtedness.

The Company has the right to prepay its term loans under the Credit Agreement, in whole or in part, at any time without premium or penalty, subject to certain limitations and a 1.0 % soft call premium applicable during the first six months following the closing date.

The Company was in compliance with all covenants at December 31, 2021.

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

The obligations under this facility are unconditionally guaranteed on a senior basis by LendingTree, Inc.

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

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

The Credit Facility requires the Company and certain of its subsidiaries to pledge as collateral, subject to certain customary exclusions, substantially all of its assets, including 100 % of the equity in certain domestic subsidiaries and 65 % of the voting equity, and 100 % of the non-voting equity, in certain foreign subsidiaries.

The obligations under the Credit Facility are unconditionally guaranteed on a senior basis by the Company's material domestic subsidiaries, which guaranties are secured by the collateral.

With respect to the Revolving Facility, the Company is required to pay an unused commitment fee quarterly in arrears on the difference between committed amounts and amounts actually borrowed under the Revolving Facility equal to an applicable percentage of 0.25 % to 0.50 % per annum based on a first lien net leverage ratio.

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

The letter of credit participation fee is based upon the aggregate face amount of outstanding letters of credit at an applicable percentage of 1.25 % to 2.0 % based on a total consolidated debt to EBITDA ratio.

The letter of credit participation fee is based upon the aggregate face amount of outstanding letters of credit at an applicable percentage of 2.25 % to 2.75 % based on a first lien net leverage ratio.

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

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

In addition to the remaining unamortized debt issuance costs associated with the original revolving credit facility and the Revolving Credit Facility, debt issuance costs of $ 2.8 million related to the Amended Revolving Credit Facility entered into on December 10, 2019 are being amortized to interest expense over the life of the Amended Revolving Credit Facility.

Debt issuance costs of $ 1.1 million related to the July 21, 2020 temporary amendment are being amortized to interest expense through June 30, 2021, unless the temporary amendment is terminated in advance by the Company.

Unamortized debt issuance costs are included in prepaid and other current assets and other non-current assets in the Company's consolidated balance sheet.

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

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

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

With respect to the Term Loan Facility, the Company is required to pay an unused commitment fee quarterly in arrears on the difference between committed amounts and amounts actually borrowed under the Term Loan Facility equal to an applicable LIBO rate plus an applicable percentage of 3.75 % to 4.00 % per annum based on a first lien net leverage ratio.

The Company recognized $ 1.1 million in additional interest expense in the third quarter of 2021 due to the write-off of certain unamortized debt issuance costs associated with the Amended Revolving Credit Facility.

In addition to the remaining unamortized debt issuance costs associated with the Amended Revolving Credit Facility, debt issuance costs of $ 2.8 million related to the Revolving Facility are being amortized to interest expense over the life of the Revolving Facility.

Debt issuance costs of $ 3.5 million related to the Term Loan Facility and the original issue discount $ 2.5 million paid on the undrawn term loan facility are being amortized to interest expense over the delayed draw access period, until such time that the loans thereunder are drawn.

These deferred costs are included in prepaid and other current assets and other non-current assets in the Company's consolidated balance sheet.

During 2021, the Company recorded interest expense related to its revolving credit facilities of $ 3.4 million which consisted of $ 2.0 million in unused commitment fees and $ 1.4 million associated with the amortization of the debt issuance costs.

During 2021, the Company recorded interest expense related to the Term Loan Facility of $ 5.9 million which consisted of $ 3.5 million in unused commitment fees, $ 1.4 million associated with the amortization of the debt issuance costs, and $ 1.0 million associated with the amortization of the original issue discount.

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

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16— COMMITMENTS

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Commitments

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With respect to the matters disclosed in this Note 17, unless otherwise indicated, the Company is unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.

As of December 31, 2020, the Company had litigation settlement accruals of $ 0.1 million and $ 0.5 million in continuing operations and discontinued operations, respectively.

As of December 31, 2021, the Company had litigation settlement accruals of $ 0.1 million in continuing operations.

As of December 31, 2020, the Company had litigation settlement accruals of $ 0.1 million and $ 0.5 million in continuing operations and discontinued operations, respectively.

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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Contingent consideration, end of period $ — $ 8,249 $ 33,464

There was no contingent consideration liability at December 31, 2021 because the final earnout period for the QuoteWizard acquisition ended on October 31, 2021.

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

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

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

See Note 9—Business Acquisitions for additional information.

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

Actual results will differ from the projected results and could have a significant impact on the estimated fair value of the contingent consideration.

Additionally, as the liability is stated at present value, the passage of time alone will increase the estimated fair value of the liability each reporting period.

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Fair Value at

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

(in thousands)

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

Discount rate 6.8 %

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

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

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

NOTE 19— RELATED PARTY TRANSACTIONS

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

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

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

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

In each of 2020 and 2019, the Company paid $ 3.3 million of the $ 10.0 million contribution, and paid the final installment in 2022.

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

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The LendingTree Loans Business originated various consumer mortgage loans through HLC.

On June 6, 2012, the Company sold substantially all of the operating assets of HLC, including the LendingTree Loans Business, for $ 55.9 million in cash to a wholly-owned subsidiary of Discover Financial Services ("Discover").

On June 6, 2012, the Company sold substantially all of the operating assets of HLC, including the LendingTree Loans Business, to a wholly-owned subsidiary of Discover Financial Services ("Discover").

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

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

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

Upon closing of the sale of substantially all of the operating assets of HLC on June 6, 2012, HLC ceased to originate consumer loans.

Certain liability for losses on previously sold loans remains with HLC.

Litigation settlements and contingencies and legal fees associated with ongoing related bankruptcy and legal proceedings against the Company are included in discontinued operations in the accompanying financial statements.

Certain liability for losses on previously sold loans remained with HLC.

Litigation settlements and contingencies and legal fees associated with related bankruptcy and legal proceedings against the Company are included in discontinued operations in the accompanying financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Home Loan Center, Inc.

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The judgment against HLC exceeded the assets of HLC, which were $ 11.2 million at July 21, 2019, including cash of $ 5.9 million.

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 21, 2019, at the direction of the sole independent director of HLC, HLC voluntarily filed a petition under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the U.S.

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The derecognition of HLC’s cash of $ 5.9 million removed from the consolidated balance sheet on the deconsolidation date of July 21, 2019 is included within cash flows from operating activities attributable to discontinued operations in the accompanying consolidated statement of cash flows.

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

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

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

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

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

The Bankruptcy Court approved the settlement on July 16, 2020.

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

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

During the HLC bankruptcy, a bar date for claims against HLC was set, establishing a deadline for all HLC’s creditors to assert any claim they may have had against HLC.

Distributions were made to holders of allowed claims deemed timely filed.

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.

Litigation Related to Discontinued Operations

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was served in the original captioned matter, which involves claims of Residential Funding Company, LLC ("RFC") for damages for breach of contract and indemnification for certain residential mortgage loans as well as residential mortgage-backed securitizations ("RMBS") containing mortgage loans.

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

RFC filed for bankruptcy protection in May 2012.

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

In December 2013, the United States Bankruptcy Court for the Southern District of New York entered an Order confirming the Second Amended Joint Chapter 11 Plan Proposed by Residential Capital, LLC et al.

and the Official Committee of Unsecured Creditors.

Plaintiff then began filing substantially similar complaints against approximately 80 of the loan originators from whom RFC had purchased loans, including HLC, in federal and state courts in Minnesota and New York.

In each case, plaintiff claimed that the defendant is liable for a portion of the global settlement in RFC’s bankruptcy.

Plaintiff asserted two claims against HLC:

(1) breach of contract based on HLC’s alleged breach of representations and warranties concerning the quality and characteristics of the mortgage loans it sold to RFC;

and (2) contractual indemnification for alleged liabilities, losses, and damages incurred by RFC arising out of purported defects in loans that RFC purchased from HLC and sold to third parties.

Plaintiff alleged that the “types of defects” contained in the loans it purchased from HLC included “income misrepresentation, employment misrepresentation, appraisal misrepresentations or inaccuracies, undisclosed debt, and missing or inaccurate documents.” Plaintiff sought damages of up to $ 61.0 million plus attorney's fees and prejudgment interest.

HLC denied the material allegations of the complaint and asserted numerous defenses thereto.

The matter went to trial in the fourth quarter of 2018 and the jury returned a verdict of $ 28.7 million in favor of plaintiff.

On June 21, 2019, the U.S.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The judgment is comprised of:

(i) $ 28.7 million in damages awarded by the jury;

(ii) $ 14.1 million in pre-verdict interest;

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

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

It filed substantially similar complaints against approximately 80 of the loan originators from whom RFC had purchased loans, including HLC.

Judgment was entered against HLC, see Home Loan Center, Inc.

Bankruptcy Filing above.

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

Bankruptcy Filing creates an automatic stay of enforcement of the judgment entered against HLC by the U.S.

District Court in Minnesota.

Bankruptcy Filing created an automatic stay of enforcement of the judgment entered against HLC.

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

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19-cv-2360 (U.S.

Ct., Minn.) , seeking to hold the Company liable for the judgment against HLC, under assumption of liability, agency and alter ego theories.

The Company believes that these claims lack merit.

On October 17, 2019, the Company filed a motion to dismiss the liability and agency claims, and oral arguments with respect to such motion were held on January 10, 2020.

On March 20, 2020, the court denied the Company's motion to dismiss, or in the alternative, to compel arbitration, and on April 3, 2020, the Company appealed the court's findings with respect to the Company's request to compel arbitration of the first count of the lawsuit.

On June 17, 2020, the Company entered into a settlement agreement with ResCap, pursuant to which, the Company agreed to, among other things, pay ResCap $ 58.5 million, less any amounts ResCap receives in the HLC bankruptcy, in exchange for, among other things, ResCap releasing any and all claims against the Company, and the Company’s directors and officers, including any claims asserted in ResCap v.

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

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

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

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

Ct., Minn.) , seeking to hold the Company liable for the judgment against HLC.

In June 2020, the Company entered into a settlement with ResCap, pursuant to which, the Company agreed to, among other things, pay ResCap $ 58.5 million, less any amounts ResCap receives in the HLC bankruptcy.

In the third and fourth quarters of 2020, the Company made payments of $ 26.5 million and $ 6.4 million, respectively, to the ResCap Liquidating Trust and the ResCap Liquidating Trust, in turn, assigned its allowed claims against HLC to the Company.

In the second quarter of 2021, the Company received $ 8.6 million related to these amounts, from the final distributions in the HLC bankruptcy on account of the allowed claims that the ResCap Liquidating Trust had assigned to the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lehman Brothers Holdings, Inc.

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(“LBHI”) filed an Adversary Complaint against HLC and approximately 149 other defendants (the "Complaint").

In December 2018, LBHI amended its complaint against HLC.

The amended complaint references approximately 370 allegedly defective mortgage loans sold by HLC with purported "Claim Amounts" totaling $ 40.2 million.

LBHI alleges it settled all such claims and is seeking indemnification from HLC for LBHI’s purported losses and liabilities associated with such settlements, plus prejudgment interest, attorneys’ fees, litigation costs and other expenses.

The amended complaint does not specify the amount of LBHI’s purported damages.

On December 4, 2019, LBHI filed a $ 44.7 million proof of claim in HLC’s bankruptcy seeking recovery for the claims asserted in the lawsuit.

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

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

Bankruptcy Filing creates an automatic stay of this proceeding.

Bankruptcy Filing created an automatic stay of this proceeding.

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

1 unchanged sentence

20-cv-01351 (U.S.

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

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

In the third quarter of 2020, the Company made a settlement offer to LBHI for $ 0.5 million, which is included as a liability on the accompanying consolidated balance sheet as of December 31, 2020.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Ct., Minn.) , seeking to hold the Company liable for their allowed bankruptcy claim of $ 13.3 million.

In July 2021, the Company entered into a settlement with LBHI, which payment was made in the third quarter of 2021.

Financial Information of Discontinued Operations

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Losses from discontinued operations included all activity of HLC prior to bankruptcy, including litigation settlements, contingencies and legal fees associated with legal proceedings, as well as a gain upon deconsolidation due to the accounting effect of HLC’s bankruptcy filing on the consolidated financial statements.

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

The results of discontinued operations also 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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Characteristics which were relied upon in making the determination of the reportable segments include the nature of the products, the organization's internal structure, and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources.

The Company changed its reportable segments in the fourth quarter of 2019 and previously reported segment results have been revised to conform to the Company's reportable segments at December 31, 2020.

The Home segment includes the following products:

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credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products such as credit repair and debt settlement.

The Insurance segment consists of insurance quote products.

The Insurance segment consists of insurance quote products and insurance policies in our agency businesses.

Revenue from the resale of online advertising space to third parties and revenue from home improvement referrals, and the related variable marketing and advertising expenses, are included within the Other category.

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Segment cost of revenue and marketing expense 288,386 186,448 212,689 610 688,133

Segment profit (loss) 132,123 106,890 131,142 ( 682 ) 369,473

Cost of revenue (exclusive of cost of advertising re-sold to third parties included above) 53,408

Segment profit 153,352 143,497 113,464 53 410,366

Cost of revenue 57,297

Brand and other marketing expense 85,857

4 unchanged sentences

Change in fair value of contingent consideration ( 8,249 )

Severance 295

Litigation settlements and contingencies 392

Operating loss ( 6,603 )

Operating income 8,031

Interest expense, net ( 46,867 )

Other income 123,272

Loss before income taxes and discontinued operations $ ( 42,527 )

Income before income taxes and discontinued operations $ 84,436

Year Ended December 31, 2020

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Segment cost of revenue and marketing expense 188,869 146,308 202,623 2,717 540,517

Segment profit 103,121 213,185 114,639 1,373 432,318

Segment profit (loss) 132,123 106,890 131,142 ( 682 ) 369,473

Cost of revenue (exclusive of cost of advertising re-sold to third parties included above) 53,408

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Litigation settlements and contingencies ( 943 )

Operating income 50,728

Operating (loss) ( 6,603 )

Interest expense, net ( 36,300 )

Other income 376

Income before income taxes and discontinued operations $ 30,981

Loss before income taxes and discontinued operations $ ( 42,527 )

LENDINGTREE, INC.

21 unchanged sentences

The CODM does not review information on segment assets and as such, no segment asset information is reported herein.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 23— SUBSEQUENT EVENT

In January 2022, the Company acquired an equity interest in another company for $ 15.0 million.

This company is a consumer-first payment platform that intelligently automates loan payment scheduling and helps consumers better manage their money and improve their financial well-being.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data