What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-10-28 · 228 added, 443 removed, 580 unchanged (54% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands, except per share amounts)

9 unchanged sentences

Change in fair value of contingent consideration — 797

Severance 47 — 47 190

Restructuring and severance 3,625 —

Litigation settlements and contingencies ( 27 ) 16

Total costs and expenses 286,112 274,657

Operating income (loss) 7,419 ( 16,117 ) 16,060 ( 2,916 )

Operating loss ( 2,934 ) ( 1,907 )

Other (expense) income, net:

Interest expense, net ( 7,505 ) ( 10,215 )

Other income — — 40,072 7

Other (expense) income ( 1 ) 40,072

(Loss) income before income taxes ( 10,440 ) 27,950

Income tax benefit 1 7,925 455 14,866

Income tax expense ( 383 ) ( 8,638 )

Net (loss) income from continuing operations ( 10,823 ) 19,312

(Loss) income from discontinued operations, net of tax ( 54 ) 166 ( 3,516 ) ( 25,550 )

Loss from discontinued operations, net of tax ( 3 ) ( 263 )

Net (loss) income and comprehensive (loss) income $ ( 10,826 ) $ 19,049

5 unchanged sentences

Diluted $ ( 0.84 ) $ 1.37

(Loss) income per share from discontinued operations:

Loss per share from discontinued operations:

Basic $ — $ ( 0.02 )

7 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

2022 December 31, 2021

5 unchanged sentences

Prepaid and other current assets 26,995 25,379

Current assets of discontinued operations — 8,570

Total current assets 338,067 374,379

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Operating lease liabilities 93,759 96,165

Non-current contingent consideration — 8,249

Deferred income tax liabilities 2,265 2,265

Other non-current liabilities 341 351

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Treasury stock;

2,641,318 shares

3,355,466 and 2,975,571 shares, respectively

( 266,178 ) ( 223,169 )

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Non-cash compensation 15,080 — — 15,080 — — —

Purchase of treasury stock ( 43,009 ) — — — — 379 ( 43,009 )

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes ( 3,086 ) 49 — ( 3,086 ) — — —

Other ( 2 ) — — ( 2 ) — — —

Cumulative effect adjustment due to ASU 2020-06 ( 65,303 ) — — ( 109,750 ) 44,447 — —

Balance as of March 31, 2022 $ 340,848 16,120 $ 161 $ 1,145,038 $ ( 538,173 ) 3,355 $ ( 266,178 )

Net income and comprehensive income 6,601 — — — 6,601 — —

Non-cash compensation 18,294 — — 18,294 — — —

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 30 159 2 28 — — —

Balance as of June 30, 2021 $ 420,368 15,956 $ 160 $ 1,218,628 $ ( 615,259 ) 2,641 $ ( 183,161 )

Net loss and comprehensive loss ( 4,460 ) — — — ( 4,460 ) — —

Non-cash compensation 17,074 — — 17,074 — — —

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes ( 1,894 ) 13 — ( 1,894 ) — — —

Other ( 6 ) — — ( 6 ) — — —

Balance as of September 30, 2021 $ 431,082 15,969 $ 160 $ 1,233,802 $ ( 619,719 ) 2,641 $ ( 183,161 )

Common Stock Treasury Stock

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Balance as of March 31, 2021 $ 395,443 15,797 $ 158 $ 1,200,306 $ ( 621,860 ) 2,641 $ ( 183,161 )

Net loss and comprehensive loss ( 29,757 ) — — — ( 29,757 ) — —

Non-cash compensation 13,158 — — 13,158 — — —

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes ( 981 ) 27 — ( 981 ) — — —

Balance as of June 30, 2020 $ 405,977 15,731 $ 157 $ 1,196,990 $ ( 608,009 ) 2,641 $ ( 183,161 )

Net loss and comprehensive loss ( 24,643 ) — — — ( 24,643 ) — —

Non-cash compensation 14,161 — — 14,161 — — —

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 4,646 28 1 4,645 — — —

Issuance of 0.50 % Convertible Senior Notes, net

116,300 — — 116,300 — — —

Repurchase of 0.625 % Convertible Senior Notes, net

( 107,882 ) — — ( 107,882 ) — — —

Convertible note hedge transactions ( 14,379 ) — — ( 14,379 ) — — —

Warrant transactions ( 33,171 ) — — ( 33,171 ) — — —

Balance as of September 30, 2020 $ 361,009 15,759 $ 158 $ 1,176,664 $ ( 632,652 ) 2,641 $ ( 183,161 )

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

Cash flows from operating activities attributable to continuing operations:

Net income (loss) and comprehensive income (loss) $ 21,190 $ ( 39,999 )

Net (loss) income and comprehensive (loss) income $ ( 10,826 ) $ 19,049

Loss from discontinued operations, net of tax 3 263

Income (loss) from continuing operations 24,706 ( 14,449 )

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

Net (loss) income from continuing operations ( 10,823 ) 19,312

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

Loss on impairments and disposal of assets 431 348

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Change in fair value of contingent consideration — 797

Unrealized gain on investments ( 40,072 ) —

Gain on investments — ( 40,072 )

Bad debt expense 850 516

Amortization of debt issuance costs 2,467 1,275

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

Amortization of debt discount 879 7,346

Loss on extinguishment of debt — 7,768

Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities ( 49 ) 7,132

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Accounts payable, accrued expenses and other current liabilities 9,320 7,154

Current contingent consideration — ( 2,670 )

Income taxes receivable 48 ( 89 )

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Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options ( 3,085 ) ( 4,801 )

Proceeds from the issuance of 0.50 % Convertible Senior Notes

Repurchase of 0.625 % Convertible Senior Notes

— ( 233,862 )

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

— ( 124,200 )

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

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

Termination of warrants related to the 0.625 % Convertible Senior Notes

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

Purchase of treasury stock ( 43,009 ) —

Payment of debt issuance costs ( 4 ) ( 168 )

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

Contingent consideration payments — ( 3,330 )

Other financing activities — ( 31 )

Net cash (used in) provided by financing activities attributable to continuing operations ( 15,192 ) 197,375

Total cash provided by continuing operations 42,006 193,205

Net cash used in financing activities attributable to continuing operations ( 46,098 ) ( 5,000 )

Total cash used in continuing operations ( 54,563 ) ( 7,808 )

Discontinued operations:

Net cash provided by (used in) operating activities attributable to discontinued operations 3,330 ( 66,171 )

Total cash provided by (used in) discontinued operations 3,330 ( 66,171 )

Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents 45,336 127,034

Net cash used in operating activities attributable to discontinued operations ( 1 ) ( 71 )

Total cash used in discontinued operations ( 1 ) ( 71 )

Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents ( 54,564 ) ( 7,879 )

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 251,342 170,049

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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, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings.

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, sales of insurance policies 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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("HLC") subsequent to its bankruptcy filing on July 21, 2019 which resulted in the Company's loss of a controlling interest in HLC under applicable accounting standards.

Intercompany transactions and accounts have been eliminated.

The HLC Bankruptcy case was closed on July 14, 2021.

The HLC entity was legally dissolved in the first quarter of 2022.

See Note 16—Discontinued Operations for additional information.

Intercompany transactions and accounts have been eliminated.

Discontinued Operations

The LendingTree Loans business, which consisted of originating various consumer mortgage loans through HLC (the "LendingTree Loans Business"), is presented as discontinued operations in the accompanying consolidated balance sheets, consolidated statements of operations and comprehensive income and consolidated cash flows for all periods presented.

The notes accompanying these consolidated financial statements reflect the Company's continuing operations and, unless otherwise noted, exclude information related to the discontinued operations.

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Basis of Presentation

The accompanying unaudited interim consolidated financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S.

The accompanying unaudited interim consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission ("SEC").

In the opinion of management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented.

The results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or any other period.

The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or any other period.

The accompanying consolidated balance sheet as of December 31, 2021 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report").

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

Financial instruments, which potentially subject the Company to concentration of credit risk at September 30, 2021, consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet.

Financial instruments, which potentially subject the Company to concentration of credit risk at March 31, 2022, consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet.

Cash and cash equivalents are in excess of Federal Deposit Insurance Corporation insurance limits, but are maintained with quality financial institutions of high credit.

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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.

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 Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 was permitted, including adoption in interim periods.

Entities electing early adoption were required to adopt all amendments in the same period.

Most amendments require prospective application while others are to be applied on a retrospective basis for all

In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments, amends the derivatives scope exception guidance for contracts in an entity’s own equity, and amends the related earnings-per-share guidance.

Under the new guidance, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital.

As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives.

Additionally, the new guidance requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share.

This ASU is effective for annual and interim reporting periods beginning after December 15, 2021, with early adoption permitted for periods beginning after December 15, 2020.

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

The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective transition approach and recognized the cumulative effect of initially applying ASU 2020-06 as a $ 44.4 million adjustment to the opening balance of accumulated deficit, comprised of $ 60.8 million for the interest adjustment net of $ 16.4 million for the related tax impacts.

The recombination of the equity conversion component of our convertible debt remaining outstanding caused a reduction in

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

additional paid-in capital and an increase in deferred income tax assets.

The removal of the remaining debt discounts recorded for this previous separation had the effect of increasing our net debt balance.

ASU 2020-06 also requires the dilutive impact of convertible debt instruments to utilize the if-converted method when calculating diluted earnings per share and the result is more dilutive.

The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

See Note 12—Debt for further information.

The cumulative effect of the changes made to the consolidated January 1, 2022 balance sheet for the adoption of ASU 2020-06 were as follows (in thousands):

December 31, 2021 Adjustments due to

ASU 2020-06 January 1, 2022

Deferred income tax assets $ 87,581 $ 23,979 $ 111,560

Current portion of long-term debt $ 166,008 $ 3,213 $ 169,221

Long-term debt 478,151 86,069 564,220

Shareholders' equity:

Additional paid-in capital $ 1,242,794 $ ( 109,750 ) $ 1,133,044

Accumulated deficit ( 571,794 ) 44,447 ( 527,347 )

The adoption of ASU 2020-06 did not impact our cash flows or compliance with debt covenants.

Recently Issued Accounting Pronouncements

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

Early adoption is permitted for fiscal years beginning after December 15, 2020, including adoption in interim periods.

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

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

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

The Company has considered the applicability of recently issued accounting pronouncements by the Financial Accounting Standards Board and have determined that they are not applicable or are not expected to have a material impact on our consolidated financial statements.

NOTE 3— REVENUE

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Home $ 101,944 $ 128,125

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Match fees and upfront fees for clicks and call transfers are earned through the delivery of loan requests that originated through the Company's websites or affiliates.

The Company recognizes revenue at the time a loan request is delivered to the customer, provided that no significant obligations remain.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company recognizes revenue at the time a loan request is delivered to the customer, provided that no significant obligations remain.

The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a loan request to the customer.

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The Company's contractual right to closing fees and approval fees is not contemporaneous with the satisfaction of the performance obligation to deliver a loan request or a credit card consumer to the customer.

As such, the Company records a contract asset at each reporting period-end related to the estimated variable

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

consideration on closing fees and approval fees for which the Company has satisfied the related performance obligation but are still pending the loan closing or credit card approval before the Company has a contractual right to payment.

As such, the Company records a contract asset at each reporting period-end related to the estimated variable consideration on closing fees and approval fees for which the Company has satisfied the related performance obligation but are still pending the loan closing or credit card approval before the Company has a contractual right to payment.

This estimate is based on the Company's historical closing rates and historical time between when a consumer request for a loan or credit card is delivered to the lender or card issuer and when the loan is closed by the lender or approved by the card issuer.

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The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a consumer request to the customer.

The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration in the Company's Consumer business was $ 7.9 million and $ 6.4 million at September 30, 2021 and December 31, 2020, respectively.

The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers in the Company's Consumer business was $ 1.0 million and $ 0.7 million at September 30, 2021 and December 31, 2020, respectively.

During the first nine months of 2021, the Company recognized revenue of $ 0.7 million that was included in the contract liability balance at December 31, 2020.

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

The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration in the Company's Consumer business was $ 9.7 million and $ 9.1 million at March 31, 2022 and December 31, 2021, respectively.

The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers in the Company's Consumer business was $ 1.0 million and $ 0.8 million at March 31, 2022 and December 31, 2021, respectively.

During the first quarter of 2022, the Company recognized revenue of $ 0.7 million that was included in the contract liability balance at December 31, 2021.

During the first quarter of 2021, the Company recognized revenue of $ 0.6 million that was included in the contract liability balance at December 31, 2020.

Revenue recognized in any reporting period includes estimated variable consideration for which the Company has satisfied the related performance obligations but are still pending the occurrence or non-occurrence of a future event outside the Company's control (such as lenders providing loans to consumers or credit card approvals of consumers) before the Company has a contractual right to payment.

The Company recognized increases to such revenue from prior periods of $ 0.4 million and $ 0.6 million in the third quarters of 2021 and 2020, respectively.

The Company recognized increases to such revenue from prior periods of $ 0.2 million and $ 0.3 million in the first quarters of 2022 and 2021, respectively.

NOTE 4— CASH AND RESTRICTED CASH

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

September 30,

2022 December 31, 2021

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

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

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

Accounts receivable are written off when management deems them uncollectible.

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Accounts receivable are written off when management deems them uncollectible.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Balance, beginning of the period $ 1,456 $ 1,402

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

September 30,

2022 December 31, 2021

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Goodwill and Indefinite-Lived Intangible Assets

The Company's goodwill at each of September 30, 2021 and December 31, 2020 consists of $ 59.3 million associated with the Home segment, $ 166.1 million associated with the Consumer segment, and $ 194.7 million associated with the Insurance segment.

The Company's goodwill at each of March 31, 2022 and December 31, 2021 consists of $ 59.3 million associated with the Home segment, $ 166.1 million associated with the Consumer segment, and $ 194.7 million associated with the Insurance segment.

Intangible assets with indefinite lives relate to the Company's trademarks.

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Trademarks and tradenames 11,700 ( 8,364 ) 3,336

Website content 27,100 ( 24,172 ) 2,928

Balance at September 30, 2021 $ 208,100 $ ( 122,708 ) $ 85,392

Balance at March 31, 2022 $ 172,500 $ ( 104,795 ) $ 67,705

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cost Accumulated

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Balance at December 31, 2021 $ 202,800 $ ( 127,179 ) $ 75,621

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of September 30, 2021, future amortization is estimated to be as follows (in thousands) :

Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of March 31, 2022, future amortization is estimated to be as follows (in thousands) :

Amortization Expense

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NOTE 7— EQUITY INVESTMENT

In January 2022, the Company acquired an equity interest in EarnUp Inc.

("EarnUp") for $ 15.0 million.

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

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

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On January 6, 2021, the Company acquired 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.

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

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

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

During the first nine months of 2021, the Company recorded a gain on the investment in Stash of $ 40.1 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 September 30, 2021, there have been no impairments to the acquisition cost of the Stash equity securities.

See Note 18—Subsequent Event for additional information.

NOTE 8— BUSINESS ACQUISITIONS

Changes in Contingent Consideration

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

During 2020, the Company made the final earnout payment related to the achievement of certain defined operating metrics for Ovation.

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 Company could make an earnout payment ranging from zero to $ 23.4 million based on the achievement of certain defined performance targets for QuoteWizard during the final earnout period ending October 31, 2021.

As of September 30, 2021, this remaining earnout payment is not expected to be made and no liability has been recorded in the accompanying consolidated balance sheet.

See Note 15—Fair Value Measurements for additional information.

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

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

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 March 31, 2022, there have been no impairments to the acquisition cost of the equity securities.

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

QuoteWizard $ ( 196 ) $ 6,568 $ ( 8,249 ) $ 6,364

Ovation — 90 — 1,270

SnapCap — — — 77

Total changes in fair value of contingent consideration $ ( 196 ) $ 6,658 $ ( 8,249 ) $ 7,711

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

NOTE 8— ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

September 30,

2022 December 31, 2021

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Weighted average basic common shares 12,901 13,070

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Weighted average diluted common shares 12,901 14,119

For the third quarter of 2021, as well as the third quarter and first nine months of 2020, the Company had losses from continuing operations and, as a result, no potentially dilutive securities were included in the denominator for computing diluted loss per share, because the impact would have been anti-dilutive.

For the first quarter of 2022, the Company had losses from continuing operations and, as a result, no potentially dilutive securities were included in the denominator for computing diluted loss per share, because the impact would have been anti-dilutive.

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

Approximately 0.4 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the third quarter of 2021 because their inclusion would have been anti-dilutive.

Approximately 1.3 million and 1.1 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the third quarter and first nine months of 2020, respectively.

For the third quarter of 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 0.2 million restricted stock units.

For the first nine months of 2021, the weighted average shares that were anti-dilutive included options to purchase 0.4 million shares of common stock and 0.1 million restricted stock units.

Approximately 0.3 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the first quarter of 2022 because their inclusion would have been anti-dilutive.

For the first quarter of 2022, 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 0.2 million restricted stock units.

For the first quarter of 2021, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 0.3 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 12—Debt for additional information.

On January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method.

Following the adoption, the if-converted method is used for diluted net income per share calculation of our convertible notes.

Prior to the adoption of ASU 2020-06 the dilutive impact of the convertible notes was calculated using the treasury stock method.

See Note 2—Significant Accounting Policies for additional information.

Approximately 2.1 million shares related to the potentially dilutive shares of the Company's common stock associated with the 0.50 % Convertible Senior Notes due July 15, 2025 and the 0.625 % Convertible Senior Notes due June 1, 2022 were excluded from the calculation of diluted loss per share for the first quarter of 2022 because their inclusion would have been anti-dilutive.

Shares of the Company's stock associated with the warrants issued by the Company in 2017 and 2020 were excluded from the calculation of diluted loss per share for the first quarter of 2022 as they were anti-dilutive since the the strike price of the warrants was greater than the average market price of the Company's common stock during the period.

The employee stock purchase plan did not have a material impact to the calculation of diluted shares.

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the third quarter and first nine months of 2020, the weighted average shares that were anti-dilutive included options to purchase 0.1 million and 0.2 million shares of common stock, respectively.

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 13—Debt for additional information.

Shares of the Company's common stock associated with the 0.625 % Convertible Senior Notes due June 1, 2022 were excluded from the calculation of diluted shares for the third quarter of 2021 as they were anti-dilutive since the conversion price of the notes was greater than the average market price of the Company’s common stock during the period.

Shares of the Company's common stock associated with the warrants issued by the Company in 2017 were excluded from the calculation of diluted shares for the third quarter and first nine months of 2021 as they were anti-dilutive since the strike price of the warrants was greater than the average market price of the Company's common stock during these periods.

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 shares for all periods presented, as they were anti-dilutive since the conversion price of the notes and the strike price of the warrants were greater than the average market price of the Company's common stock during these periods.

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

See Note 11—Stock-Based Compensation for additional information.

Common Stock Repurchases

In each of February 2018 and February 2019, the board of directors authorized and the Company announced the repurchase of up to $ 100.0 million and $ 150.0 million, respectively, of LendingTree's common stock.

There were no repurchases of the Company's common stock during the first nine months of 2021 and 2020.

At September 30, 2021, approximately $ 179.7 million of the previous authorizations to repurchase common stock remain available.

In the first quarter of 2022, the Company purchased 379,895 shares of its common stock pursuant to this stock repurchase program.

There were no repurchases of the Company's common stock during the first quarter 2021.

At March 31, 2022, approximately $ 96.7 million of the previous authorizations to repurchase common stock remain available.

NOTE 10— STOCK-BASED COMPENSATION

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Cost of revenue $ 393 $ 397

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Product development 1,965 2,066

Restructuring and severance 1,083 —

Total non-cash compensation $ 15,080 $ 16,436

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Expired ( 811 ) 278.83

Options outstanding at September 30, 2021 826,467 140.38 4.87 $ 50,380

Options exercisable at September 30, 2021 547,177 $ 72.09 2.91 $ 50,380

Options outstanding at March 31, 2022 795,900 159.41 5.85 $ 25,773

Options exercisable at March 31, 2022 485,638 $ 126.88 3.77 $ 24,985

(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $ 119.67 on the last trading day of the quarter ended March 31, 2022 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on March 31, 2022.

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

(b) During the three months ended March 31, 2022, the Company granted stock options to certain employees with a weighted average grant date fair value per share of $ 58.60 , calculated using the Black-Scholes option pricing model, with a vesting period of three years from grant date.

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $ 139.83 on the last trading day of the quarter ended September 30, 2021 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on September 30, 2021.

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

(b) During the nine months ended September 30, 2021, the Company granted stock options to certain employees and members of the board of directors with a weighted average grant date fair value per share of $ 129.21 , calculated using the Black-Scholes option pricing model, which vesting periods include (a) immediate vesting on grant date (b) earlier of one year from grant date and the Company's annual meeting of stockholders for 2022 and (c) three years from grant date.

For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options was estimated using the Black-Scholes option pricing model, which requires the use of various key assumptions.

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Expected term (1)

5.00 - 6.00 years

Expected dividend (2)

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Forfeited — —

Options outstanding at September 30, 2021 700,209 236.01 7.00 $ —

Options exercisable at September 30, 2021 — $ — 0.00 $ —

Expired ( 13,163 ) 378.95

Options outstanding at March 31, 2022 687,046 233.27 6.51 $ —

Options exercisable at March 31, 2022 — $ — 0.00 $ —

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

A maximum of 1,147,367 shares may be earned for achieving superior performance up to 167 % of the target number of shares.

As of March 31, 2022, performance-based nonqualified stock options with a market condition of 481,669 had been earned, which have a vest date of September 30, 2022.

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A maximum of 1,169,349 shares may be earned for achieving superior performance up to 167 % of the target number of shares.

As of September 30, 2021, performance-based nonqualified stock options with a market condition of 481,669 had been earned, which have a vest date of September 30, 2022.

Restricted Stock Units

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Forfeited ( 26,687 ) 215.35

Nonvested at September 30, 2021 300,298 $ 238.28

Restricted Stock Units with Performance Conditions

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

RSUs with Performance Conditions

Number of Units Weighted Average Grant Date Fair Value

Nonvested at January 1, 2021 6,328 $ 223.90

Forfeited — —

Nonvested at September 30, 2021 6,328 $ 223.90

Restricted Stock Awards with Performance Conditions

A summary of changes in outstanding nonvested restricted stock awards ("RSAs") with performance conditions is as follows:

RSAs with Performance Conditions

Number of Awards Weighted Average Grant Date Fair Value

Nonvested at January 1, 2021 23,804 $ 340.25

Vested ( 17,853 ) 340.25

Forfeited — —

Nonvested at September 30, 2021 5,951 $ 340.25

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nonvested at March 31, 2022 527,593 $ 150.41

Restricted Stock Awards with Market Conditions

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Forfeited — —

Nonvested at September 30, 2021 26,674 $ 340.25

Nonvested at March 31, 2022 26,674 $ 340.25

A maximum of 44,545 shares may be earned for achieving superior performance up to 167 % of the target number of shares.

As of September 30, 2021, performance-based restricted stock awards with a market condition of 29,601 had been earned, which have a vest date of September 30, 2022.

As of March 31, 2022, performance-based restricted stock awards with a market condition of 29,601 had been earned, which have a vest date of September 30, 2022.

Employee Stock Purchase Plan

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

In 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.

As of March 31, 2022, 257,188 shares of common stock were available for issuance under the ESPP.

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

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

No shares were issued under the ESPP during the third quarter of 2021.

During the nine months ended September 30, 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.

No shares were issued under the ESPP during the first quarter of 2022.

During the three months ended March 31, 2022, the Company granted employee stock purchase rights to certain employees with a grant date fair value per share of $ 35.43 , 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:

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands, except percentages)

Income tax benefit $ 1 $ 7,925 $ 455 $ 14,866

Income tax expense $ ( 383 ) $ ( 8,638 )

Effective tax rate ( 3.7 ) % 30.9 %

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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

This legislation is an economic relief package in response to the public health and economic impacts of COVID-19 and includes various provisions that impact the Company, including, but not limited to, modifications for net operating losses, accelerated timeframe for refunds associated with prior minimum taxes and modifications of the limitation on business interest.

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

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

For the first quarter of 2022, the effective tax rate varied from the federal statutory rate of 21 % primarily due to excess tax expense of $ 2.5 million, resulting from vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

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

The Company determines its estimated annual effective tax rate at the end of each interim period based on estimated pre-tax income (loss) and facts known at that time.

The estimated annual effective tax rate is applied to the year-to-date pre-tax income (loss) at the end of each interim period with certain adjustments.

The tax effects of significant unusual or extraordinary items are reflected as discrete adjustments in the periods in which they occur.

However, if the Company is unable to make a reliable estimate of its annual effective tax rate, then the actual effective tax rate for the year-to-date period may be the best estimate.

For the three months ended March 31, 2021, the Company determined that its annual effective tax rate approach would provide a reliable estimate and therefore used its historical method to calculate its tax provision.

However, for the three months ended March 31, 2022, the Company used a discrete effective tax rate method as it was determined that the effective tax rate determined using the forecast of ordinary income or loss does not reasonably estimate the effective tax rate to be applied to year-to-date pre-tax income (loss), and any small changes would result in significant changes in the estimated annual effective tax rate.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands)

Income tax benefit (expense) - excluding excess tax (expense) benefit on stock compensation and CARES Act $ 939 $ 7,750 $ ( 6,900 ) $ 6,780

Income tax expense - excluding excess tax benefit on stock compensation $ 2,085 $ ( 8,670 )

Excess tax (expense) benefit on stock compensation ( 2,468 ) 32

Income tax benefit from CARES Act — — — 6,104

Income tax benefit $ 1 $ 7,925 $ 455 $ 14,866

Income tax expense $ ( 383 ) $ ( 8,638 )

NOTE 12— DEBT

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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 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

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 credit facility, described below, to the extent of the value of the assets securing such indebtedness;

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.

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

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

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

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

Holders of the 2025 Notes were not entitled to convert the 2025 Notes during the calendar quarter ended September 30, 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 June 30, 2021, was not greater than or equal to 130 % of the conversion price of the 2025 Notes on each applicable trading day.

Holders of the 2025 Notes are not entitled to convert the 2025 Notes during the calendar quarter ended 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 2025 Notes on each applicable trading day.

Holders of the 2025 Notes were not entitled to convert the 2025 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 2025 Notes on each applicable trading day.

Holders of the 2025 Notes are not entitled to convert the 2025 Notes during the calendar quarter ended June 30, 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 March 31, 2022, was not greater than or equal to 130 % of the conversion price of the 2025 Notes on each applicable trading day.

On or after March 13, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2025 Notes, holders of the 2025 Notes may convert all or a portion of their 2025 Notes regardless of the foregoing conditions.

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Upon the occurrence of a fundamental change prior to the maturity date of the 2025 Notes, holders of the 2025 Notes may require the Company to repurchase all or a portion of the 2025 Notes for cash at a price equal to 100 % of the principal amount of the 2025 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

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

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

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

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Accounting for the Notes After Adoption of ASU 2020-06

The Company adopted ASU 2020-06 on January 1, 2022 as further described in Note 2—Significant Accounting Policies.

Following the adoption of ASU 2020-06, the 2025 Notes are recorded as a single unit within liabilities on the consolidated balance sheets as the conversion features within the 2025 Notes are not derivatives that require bifurcation and the 2025 Notes do not involve a substantial premium.

Debt issuance costs to issue the 2025 Notes were recorded as direct deduction from the related liability and amortized to interest expense over the term of Notes.

The new guidance also requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share.

See Note 2—Significant Accounting Policies for additional information.

Accounting for the Notes Before Adoption of ASU 2020-06

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

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

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

Financing costs related to the issuance of the 2025 Notes were approximately $ 15.1 million, of which $ 12.0 million were allocated to the liability component and are being amortized to interest expense over the term of the debt and $ 3.1 million were allocated to the equity component.

In the first nine months of 2021, the Company recorded interest expense on the 2025 Notes of $ 20.3 million which consisted of $ 2.2 million associated with the 0.50 % coupon rate, $ 16.4 million associated with the accretion of the debt discount, and $ 1.7 million associated with the amortization of the debt issuance costs.

In the first nine months of 2020, the Company recorded interest expense on the 2025 Notes of $ 4.9 million which consisted of $ 0.5 million associated with the 0.50 % coupon rate, $ 4.0 million associated with the accretion of the debt discount, and $ 0.4 million associated with the amortization of the debt issuance costs.

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

As of September 30, 2021, the fair value of the 2025 Notes is estimated to be approximately $ 500.5 million using the Level 1 observable input of the last quoted market price for the quarter ended September 30, 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, all of which is recorded as a non-current liability in the September 30, 2021 consolidated balance sheet, are as follows (in thousands) :

September 30,

In the first quarter of 2022, the Company recorded interest expense on the 2025 Notes of $ 1.5 million which consisted of $ 0.7 million associated with the 0.50 % coupon rate and $ 0.8 million associated with the amortization of the debt issuance costs.

In the first quarter of 2021, the Company recorded interest expense on the 2025 Notes of $ 6.8 million which consisted of $ 0.7 million associated with the 0.50 % coupon rate, $ 5.5 million associated with the accretion of the debt discount, and $ 0.6 million associated with the amortization of the debt issuance costs.

As of March 31, 2022, the fair value of the 2025 Notes is estimated to be approximately $ 471.5 million using the Level 1 observable input of the last quoted market price on March 31, 2022.

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 March 31, 2022 consolidated balance sheet, are as follows (in thousands) :

2022 December 31, 2021

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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 2022 Notes, the Company will, in certain circumstances, increase the conversion rate by a specified number of additional shares for a holder that elects to convert the 2022 Notes in connection with such make-whole fundamental change.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

convert the 2022 Notes in connection with such make-whole fundamental change.

Upon conversion, the 2022 Notes will settle for cash, shares of the Company’s stock, or a combination thereof, at the Company’s option.

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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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Holders of the 2022 Notes were not entitled to convert the 2022 Notes during the calendar quarter ended September 30, 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 June 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 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.

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

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

Accounting for the Notes After Adoption of ASU 2020-06

The Company adopted ASU 2020-06 on January 1, 2022 as further described in Note 2—Significant Accounting Policies.

Following the adoption of ASU 2020-06, the 2022 Notes are recorded as a single unit within liabilities on the consolidated balance sheets as the conversion features within the 2022 Notes are not derivatives that require bifurcation and the 2022 Notes do not involve a substantial premium.

Debt issuance costs to issue the 2022 Notes were recorded as direct deduction from the related liability and amortized to interest expense over the term of Notes.

The new guidance also requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share.

See Note 2—Significant Accounting Policies for additional information.

Accounting for the Notes Before Adoption of ASU 2020-06

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

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

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

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

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

In the first nine months of 2021, the Company recorded interest expense on the 2022 Notes of $ 7.1 million which consisted of $ 0.8 million associated with the 0.625 % coupon rate, $ 5.6 million associated with the accretion of the debt discount, and $ 0.7 million associated with the amortization of the debt issuance costs.

In the first nine months of 2020, the Company recorded interest expense on the 2022 Notes of $ 10.7 million which consisted of $ 1.3 million associated with the 0.625 % coupon rate, $ 8.4 million associated with the accretion of the debt discount, and $ 1.0 million associated with the amortization of the debt issuance costs.

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

As of September 30, 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 for the quarter ended September 30, 2021.

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 September 30, 2021 consolidated balance sheet, are as follows (in thousands) :

September 30,

In the first quarter of 2022, the Company recorded interest expense on the 2022 Notes of $ 0.5 million which consisted of $ 0.3 million associated with the 0.625 % coupon rate and $ 0.2 million associated with the amortization of the debt issuance costs.

In the first quarter of 2021, the Company recorded interest expense on the 2022 Notes of $ 2.3 million which consisted of $ 0.3 million associated with the 0.625 % coupon rate, $ 1.8 million associated with the accretion of the debt discount, and $ 0.2 million associated with the amortization of the debt issuance costs.

As of March 31, 2022, the fair value of the 2022 Notes is estimated to be approximately $ 168.4 million using the Level 1 observable input of the last quoted market price on March 31, 2022.

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 March 31, 2022 consolidated balance sheet, are as follows (in thousands) :

2022 December 31, 2021

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If the market price per share of the common stock, as measured under the terms of the 2020 Warrants, exceeds the strike price of the 2020 Warrants, the 2020 Warrants could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the 2020 Warrants in cash.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2020 Hedge and 2020 Warrants transactions are indexed to, and potentially settled in, the Company's common stock and the net cost of $ 63.0 million has been recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity.

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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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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 September 30, 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.

As of March 31, 2022 and December 31, 2021, the Company had no borrowings outstanding under the 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 September 30, 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 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 % to 4.00 % for loans under the Term Loan Facility, in each case, based on a first lien net leverage ratio.

Under certain conditions, the

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 March 31, 2022 and December 31, 2021, the Company had outstanding one letter of credit issued in the amount of $ 0.2 million.

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

• a LIBO rate generally defined as the sum of (i) the rate for Eurodollar 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 % to 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.

5 unchanged sentences

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 September 30, 2021.

The Credit Facility requires the Company and certain of its subsidiaries to pledge as collateral, subject to certain customary exclusions, substantially all of their 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 Company was in compliance with all covenants at March 31, 2022.

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.

4 unchanged sentences

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 of $ 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.

In the first nine months of 2021, the Company recorded interest expense related to its revolving credit facilities of $ 3.0 million which consisted of $ 1.8 million in unused commitment fees and $ 1.2 million associated with the amortization of the debt issuance costs.

In the first nine months of 2021, the Company recorded interest expense related to the Term Loan Facility of $ 0.7 million which consisted of $ 0.4 million in unused commitment fees, $ 0.2 million associated with the amortization of the debt issuance costs, and $ 0.1 million associated with the amortization of the original issue discount.

In the first nine months of 2020, the Company recorded interest expense related to the Amended Revolving Credit Facility of $ 3.2 million which consisted of $ 1.3 million associated with borrowings bearing interest at the LIBO rate, $ 1.1 million in unused commitment fees, and $ 0.8 million associated with the amortization of the debt issuance costs.

The Company recognized $ 1.1 million in additional interest expense in 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

LENDINGTREE, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revolving Facility are being amortized to interest expense over the life of the Revolving Facility.

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

In the first quarter of 2022, the Company recorded interest expense related to its Revolving Facility of $ 0.4 million which consisted of $ 0.2 million in unused commitment fees, and $ 0.2 million associated with the amortization of the debt issuance costs.

In the first quarter of 2022, the Company recorded interest expense related to the Term Loan Facility of $ 5.1 million which consisted of $ 3.0 million in unused commitment fees, $ 1.2 million associated with the amortization of the debt issuance costs, and $ 0.9 million associated with the amortization of the original issue discount.

In the first quarter of 2021, the Company recorded interest expense related to its revolving credit facilities of $ 1.1 million which consisted of $ 0.6 million in unused commitment fees, and $ 0.5 million associated with the amortization of the debt issuance costs.

NOTE 13— CONTINGENCIES

2 unchanged sentences

With respect to the matters disclosed in this Note 13, unless otherwise indicated, the Company is unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.

As of September 30, 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.

As of March 31, 2022 and December 31, 2021, the Company had litigation settlement accruals of $ 0.1 million in continuing operations.

The litigation settlement accruals relate to litigation matters that were either settled or a firm offer for settlement was extended, thereby establishing an accrual amount that is both probable and reasonably estimable.

See Note 17—Discontinued Operations for additional information.

NOTE 14— FAIR VALUE MEASUREMENTS

Other than the convertible notes and warrants, as well as the equity interest in Stash, the carrying amounts of the Company's financial instruments are equal to fair value at September 30, 2021.

See Note 13—Debt for additional information on the convertible notes and warrants, and see Note 7—Equity Investment for additional information on the equity interest in Stash.

Other than the convertible notes and warrants, as well as the equity interests, the carrying amounts of the Company's financial instruments are equal to fair value at March 31, 2022.

See Note 12—Debt for additional information on the convertible notes and warrants, and see Note 7—Equity Investment for additional information on the equity interests in Stash and EarnUp.

In 2018, the Company acquired all of the outstanding equity interests of QuoteWizard.com, LLC (“QuoteWizard”).

In the first quarter of 2021 the company recorded $ 0.8 million of expense for the change in fair value of the contingent consideration related to the QuoteWizard acquisition.

The earnout was completed in 2021 and there were no earnout payments related to the acquisition in 2021.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Contingent consideration, beginning of period $ 8,249

3 unchanged sentences

Purchases, sales and settlements:

Additions — — — —

Payments — — — ( 6,000 )

Contingent consideration, end of period $ 9,046

As of September 30, 2021, these performance targets are not expected to be achieved.

As such, this remaining earnout payment is not expected to be made and no liability has been recorded in the accompanying consolidated balance sheet.

The significant unobservable input used to estimate achievement of performance targets for the QuoteWizard contingent consideration is a 29.8 % decrease in operating results.

NOTE 15— SEGMENT INFORMATION

3 unchanged sentences

The Home segment includes the following products:

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

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

The Consumer segment includes the following products:

credit cards, personal loans, small

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The Insurance segment consists of insurance quote products.

Revenue from the resale of online advertising space to third parties in the first nine months of 2020 is included within the Other category.

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

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 and insurance policies in the agency businesses.

The following tables are a reconciliation of segment profit, which is the Company's primary segment profitability measure, to income before income taxes and discontinued operations.

Segment cost of revenue and marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses, that are directly attributable to the segments' products.

Segment marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses, that are directly attributable to the segments' products.

This measure excludes overhead, fixed costs and personnel-related expenses.

For the Other category, segment cost of revenue and marketing expense in the first nine months of 2020 also includes the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties.

Three Months Ended September 30, 2021

Home Consumer Insurance Other Total

(in thousands)

Revenue $ 112,422 $ 100,011 $ 84,837 $ 180 $ 297,450

Segment marketing expense 70,905 55,295 58,227 83 184,510

Segment profit 41,517 44,716 26,610 97 112,940

Cost of revenue 15,020

Brand and other marketing expense 21,965

General and administrative expense 40,126

Product development 13,384

Depreciation 4,808

Amortization of intangibles 10,345

Change in fair value of contingent consideration ( 196 )

Litigation settlements and contingencies 22

Operating income 7,419

Interest expense, net ( 11,826 )

Loss before income taxes and discontinued operations $ ( 4,407 )

Three Months Ended September 30, 2020

Three Months Ended March 31, 2022

Home Consumer Insurance Other Total

2 unchanged sentences

Segment marketing expense 66,035 58,561 58,935 183 183,714

Segment profit 25,166 21,647 37,043 2 83,858

Segment profit (loss) 35,909 42,507 21,103 ( 55 ) 99,464

Cost of revenue 15,561

4 unchanged sentences

Amortization of intangibles 7,917

Change in fair value of contingent consideration 6,658

Severance 3,625

Litigation settlements and contingencies ( 27 )

1 unchanged sentence

Interest expense, net ( 7,505 )

Other income ( 1 )

Loss before income taxes and discontinued operations $ ( 10,440 )

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2021

Home Consumer Insurance Other Total

11 unchanged sentences

Litigation settlements and contingencies 16

Operating income 16,060

Interest expense, net ( 31,881 )

Other income 40,072

Income before income taxes and discontinued operations $ 24,251

Nine Months Ended September 30, 2020

Home Consumer Insurance Other Total

(in thousands)

Revenue $ 232,156 $ 205,419 $ 248,156 $ 1,930 $ 687,661

Segment cost of revenue and marketing expense 132,353 121,271 150,458 2,175 406,257

Segment profit (loss) 99,803 84,148 97,698 ( 245 ) 281,404

Cost of revenue (exclusive of cost of advertising re-sold to third parties included above) 39,850

Brand and other marketing expense 58,958

General and administrative expense 94,276

Product development 33,252

Depreciation 10,463

Amortization of intangibles 40,603

Change in fair value of contingent consideration 7,711

Severance 190

Litigation settlements and contingencies ( 983 )

Operating loss ( 1,907 )

1 unchanged sentence

Other income 40,072

Loss before income taxes and discontinued operations $ ( 29,315 )

Income before income taxes and discontinued operations $ 27,950

NOTE 16— DISCONTINUED OPERATIONS

The LendingTree Loans Business is presented as discontinued operations in the accompanying financial statements.

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

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

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

A portion of the purchase price 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.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

HLC agreed to retain certain liability for losses on previously sold loans.

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.

Home Loan Center, Inc.

Bankruptcy Filing

On June 21, 2019, the U.S.

District Court of Minnesota entered judgment in ResCap Liquidating Trust v.

Home Loan Center, Inc.

, against HLC for $ 68.5 million, see Litigation Related to Discontinued Operations below.

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

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

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

Bankruptcy Court in the Northern District of California in San Jose, California (the “Bankruptcy Court”) in order to preserve assets for the benefit of all creditors of HLC.

On September 16, 2019, the Bankruptcy Court converted the bankruptcy to Chapter 7 of the Bankruptcy Code and appointed a Trustee to liquidate HLC's assets.

HLC’s voluntary petition under the Bankruptcy Code does not represent an event of default under the Company’s Credit Agreement dated as of September 15, 2021, 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.

As a result of the voluntary petition, LendingTree, LLC was, as of the initial July 21, 2019 bankruptcy petition filing date, no longer deemed to have a controlling interest in HLC under applicable accounting standards.

As a result, HLC and its consolidated subsidiary were deconsolidated from the Company’s consolidated financial statements as of July 21, 2019.

The effect of such deconsolidation was the elimination of the consolidated assets and liabilities of HLC (and its consolidated subsidiary) from the Company’s consolidated balance sheets.

Upon deconsolidation, in 2019 the Company recognized a loss of $ 5.5 million which includes a net gain of $ 4.5 million related to the removal of HLC's (and its consolidated subsidiary's) assets and liabilities and the recognition of a liability of $ 10.0 million related to LendingTree, LLC's ownership in HLC.

No consideration was received by the Company as a result of the deconsolidation.

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.

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

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

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

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

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

Residential Funding Company

ResCap Liquidating Trust v.

Home Loan Center, Inc., Case No.

14-cv-1716 (U.S.

Ct., Minn.), successor to Residential Funding Company, LLC v Home Loan Center, Inc., No.

13-cv-3451 (U.S.

On or about December 16, 2013, Home Loan Center, Inc.

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

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

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

District Court in Minnesota.

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

LendingTree, LLC, et al., Case No.

19-cv-2360 (U.S.

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

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 was responsible for the difference of $ 58.5 million minus the amount that ResCap received 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, 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 a refund of $ 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.

Lehman Brothers Holdings, Inc.

Lehman Brothers Holdings Inc.

1st Advantage Mortgage, LLC et al., Case No.

08-13555 (SCC), Adversary Proceeding No.

16-01342 (SCC) (Bankr.

In February 2016, Lehman Brothers Holdings, Inc.

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

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.

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

Bankruptcy Filing created an automatic stay of this proceeding.

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

LendingTree, LLC, et al., Case No.

20-cv-01351 (U.S.

Ct., Minn.), transferred to Case No.

08-13555 (SCC), Adversary Proceeding No.

21-01107 (SCC) (Bankr.

S.D.N.Y.) , seeking to hold the Company liable for its allowed bankruptcy claim of $ 13.3 million.

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

Financial Information of Discontinued Operations

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

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

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Revenue $ — $ —

(Loss) income before income taxes ( 103 ) 193 ( 4,717 ) ( 34,333 )

Income tax benefit (expense) 49 ( 27 ) 1,201 8,783

Net (loss) income $ ( 54 ) $ 166 $ ( 3,516 ) $ ( 25,550 )

Losses from discontinued operations included all activity of HLC prior to bankruptcy, including litigation settlements, contingencies and legal fees associated with legal proceedings.

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

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 18— SUBSEQUENT EVENT

In October 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 will close on an additional $ 11.0 million in December 2021.

During the fourth quarter of 2021, the Company will record a realized gain of $ 27.9 million based on the sale of Stash equity securities under the stock transfer agreement.

Additionally, we anticipate net unrealized gains of $ 55.3 million as a result of an adjustment to the fair value of the Stash equity securities still held by the Company based on observable market events.

Loss before income taxes ( 4 ) ( 353 )

Income tax benefit 1 90

Net loss $ ( 3 ) $ ( 263 )

NOTE 17— RESTRUCTURING ACTIVITIES

In the first quarter of 2022, the Company completed a workforce reduction of approximately 75 employees.

The Company incurred total expense of $ 3.6 million consisting of employee separation costs of $ 2.5 million and non-cash compensation expense of $ 1.1 million due to the accelerated vesting of certain equity awards.

All employee separation costs are expected to be paid by the first quarter of 2023.

Accrued Balance at December 31, 2021 Income Statement Impact Payments Non-Cash Accrued Balance at March 31, 2022

First quarter of 2022 action

Employee separation payments $ — $ 2,542 $ ( 1,828 ) $ — $ 714

Non-cash compensation $ — $ 1,083 $ — $ ( 1,083 ) $ —

$ — $ 3,625 $ ( 1,828 ) $ ( 1,083 ) $ 714

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

What changed 10-Q

Item 1. Financial Statements