What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-28 compared with 2022-03-01 · 236 added, 179 removed, 242 unchanged (63% of the section changed)

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

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

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

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

We seek to match consumers with multiple providers, who can offer them competing quotes for the product, or products, they are seeking.

We seek to match consumers with multiple providers, who can offer them competing quotes for the product(s) they are seeking.

We also serve as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries we generate with these Network Partners.

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

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

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

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By expanding our portfolio of financial services offerings, we are growing and diversifying our business and sources of revenue.

We intend to capitalize on our expertise in performance marketing, product development and technology, and to leverage the widespread recognition of the LendingTree brand, to effect this strategy.

We intend to capitalize on our expertise in performance marketing, product development and technology by leveraging the widespread recognition of the LendingTree brand.

We believe the consumer and small business financial services industry is still in the early stages of a fundamental shift to online product offerings, similar to the shift that started in retail and travel many years ago and is now well established.

We believe that like retail and travel, as consumers continue to move towards online shopping and transactions for financial services, suppliers will increasingly shift their product offerings and advertising budgets toward the online channel.

We believe the strength of our brands and of our partner network place us in a strong position to continue to benefit from this market shift.

We believe the strength of our brands and of our Network Partners place us in a strong position to continue to benefit from this market shift.

The LendingTree Loans business is presented as discontinued operations in the accompanying consolidated balance sheets, consolidated statements of operations and comprehensive income (loss) and consolidated cash flows for all periods presented.

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Economic Conditions

During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of COVID-19.

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

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

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

Of our three reportable segments, the Consumer segment was most impacted as unsecured credit and the flow of capital in certain areas of the market have contracted.

The impact to our Home and Insurance segments was much less substantial.

We believe our three reporting segments have generally recovered from the impact of the pandemic.

We continue to monitor the impact of the COVID-19 pandemic, government actions and measures taken to prevent its spread, and the potential to affect our operations.

We are also monitoring the current global economic environment, specifically including inflationary pressures and interest rates, and any resulting impacts on our financial position and results of operations.

Refer to Item 1A.

“Risk Factors” for additional information.

Of our three reportable segments, the Consumer segment was impacted the most as unsecured credit and the flow of capital in certain areas of the market contracted.

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

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

Thus, as our revenue was negatively impacted during the COVID-19 pandemic and the macro-economic conditions that followed, our marketing expenses generally decreased in line with revenue.

During 2022, the challenging interest rate environment and persistent inflationary pressures have presented additional challenges for many of our mortgage lending and insurance partners.

We have seen the most significant impact in our Home segment as mortgage rates have nearly doubled in 2022, causing a sharp decline in refinance volumes and more recent pressure on purchase activity.

Although our Insurance segment continues to rebound from the trough in the fourth quarter of 2021, the recovery has been slower than expected as demand from our carrier partners remains volatile as they continue to attempt to

implement premium increases to offset the effect of inflation on claims.

In addition, the auto and home insurance industry was impacted in 2022 by persistent industry headwinds, supply chain issues, rising accident severity and frequency, and hurricane losses.

Segment Reporting

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Home, Consumer, and Insurance.

Recent Business Acquisitions

On February 28, 2020, we acquired an equity interest in Stash for $80.0 million.

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

Recent Business Acquisitions & Investments

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

EarnUp 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.

In February 2020, we acquired an equity interest in Stash for $80.0 million, and in January 2021, we acquired an additional equity interest in Stash for $1.2 million.

Stash is a consumer investing and banking platform.

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In the fourth quarter of 2021, we sold a portion of our investment in Stash for $46.3 million, realizing a gain on the sale of $27.9 million.

On January 10, 2019, we acquired ValuePenguin, a personal finance website that offers consumers objective analysis on a variety of financial topics from insurance to credit cards, for $106.2 million.

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

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

These acquisitions continue our diversification strategy.

See Note 8—Equity Investments in the notes to the consolidated financial statements included elsewhere in this report for additional information on the equity interest in Stash and EarnUp.

Recent Mortgage Interest Rate Trends

Interest rate and market risks can be substantial in the mortgage lead generation business.

Interest rate and market risks are substantial in the mortgage lead generation business.

Short-term fluctuations in mortgage interest rates primarily affect consumer demand for mortgage refinancings, while long-term fluctuations in mortgage interest rates, coupled with the U.S.

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Consumer demand, in turn, affects lender demand for mortgage leads from third-party sources, as well as our own ability to attract online consumers to our website.

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

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

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

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

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

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

According to Freddie Mac, 30-year mortgage interest rates steadily decreased from a monthly average of 4.46% in January 2019, ending at a monthly average of 3.72% in December 2019.

The declining trend continued into 2020, largely as a result of stimulus efforts in response to the COVID-19 pandemic, beginning at a monthly average of 3.62% in January 2020 and ending at a monthly average of 2.68% in December 2020.

According to Freddie Mac, 30-year mortgage interest rates steadily decreased in 2020, largely as a result of stimulus efforts in response to the COVID-19 pandemic, beginning at a monthly average of 3.62% in January 2020 and ending at a monthly average of 2.68% in December 2020.

During 2021, 30-year mortgage interest rates steadily increased from a monthly average of 2.74% in January 2021, ending at a monthly average of 3.10% in December 2021.

On a full-year basis, 30-year mortgage interest rates decreased to an average 2.96% in 2021, compared to 3.11% and 3.94% in 2020 and 2019, respectively.

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

According to Mortgage Bankers Association ("MBA") data, total refinance origination dollars increased from 38% of total 2019 mortgage origination dollars to 60% in 2020, then remained relatively consistent at 59% in 2021 as a result of the general trend in average mortgage interest rates.

Total refinance origination dollars increased by 109% in 2020 over 2019 and decreased by 11% in 2021 over 2020.

Industry-wide mortgage origination dollars increased by 59% in 2020 over 2019 and decreased by 3% in 2021 over 2020.

Looking forward, the MBA is projecting 30-year mortgage interest rates to increase slightly in 2022 to an average 4.0%.

According to MBA projections, the mix of mortgage origination dollars is expected to move back towards purchase mortgages with the refinance share representing just 33% for 2022.

During 2022, 30-year mortgage interest rates increased significantly from a monthly average of 3.45% in January 2022, ending at a monthly average of 6.36% in December 2022.

On a full-year basis, 30-year mortgage interest rates increased to an average 5.33% in 2022, compared to 2.96% and 3.11% in 2021 and 2020, respectively.

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

According to Mortgage Bankers Association (“MBA”) data, total refinance origination dollars of total mortgage origination dollars remained relatively consistent in 2020 and 2021, with 60% of total 2020 mortgage origination dollars from refinance and 59% of total 2021 mortgage origination dollars from refinance as a result of the general trend in average mortgage interest rates.

Total refinance original dollars decreased to 30% of total mortgage origination dollars in 2022 due to the increase in average mortgage interest rates.

Total refinance origination dollars decreased by 11% in 2021 over 2020 and 74% in 2022 over 2021.

Industry-wide mortgage origination dollars decreased by 3% in 2021 over 2020 and 49% in 2022 over 2021.

Looking forward, the MBA is projecting 30-year mortgage interest rates to decrease in 2023 to an average 5.2%.

According to MBA projections, the mix of mortgage origination dollars is expected to continue to move towards purchase mortgages with the refinance share representing just 24% for 2023.

Real Estate Market

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

According to Fannie Mae data, existing-home sales in 2019 remained consistent with 2018 levels, which had decreased due to limited inventory of homes for sale and rising interest rates.

In 2020, existing home sales grew by 6% over 2019, fueled by increased competition for low inventory as well as an increase in first-time home buyers.

According to Fannie Mae data, in 2020, existing home sales grew by 6% over 2019, fueled by increased competition for low inventory as well as an increase in first-time home buyers.

This trend continued into 2021 with existing home sales growing 9% over 2020.

Fannie Mae expects a 5% decrease in existing home sales in 2022.

In 2022, existing home sales decreased by 17% as compared to 2021 due to increased interest rates and limited inventory of homes.

Fannie Mae expects a 22% decrease in existing home sales in 2023 compared to 2022.

MyLendingTree

We consider certain metrics related to MyLendingTree set forth below to help us evaluate our business and growth trends and assess operational efficiencies.

The calculation of the metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.

We continued to grow our user base and added 3.8 million new users in 2022, bringing cumulative sign-ups to 24.8 million at December 31, 2022.

We attribute $123.7 million of revenue in 2022 to registered MyLendingTree members across the LendingTree platform.

Our focus on improving the MyLendingTree experience for consumers remains a top priority.

Becoming an integrated digital advisor will greatly improve the consumer experience, which we expect to result in higher levels of engagement improved membership growth rates, and ultimately stronger financial results.

Convertible Senior Notes and Hedge and Warrant Transactions

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A portion of the call spread transactions associated with the 2022 Notes was also terminated on July 24, 2020 in notional amounts corresponding to the principal amount of the 2022 Notes repurchased.

On May 31, 2022, we drew $250.0 million on the Term Loan Facility.

A portion of this was used to pay the outstanding balance of $169.7 million and interest on our 0.625% Convertible Senior Notes that matured on June 1, 2022.

The remaining call spread transactions associated with the 2022 Notes terminated in 2022.

For more information, see Note 16—Debt, in the notes to the consolidated financial statements included elsewhere in this report.

North Carolina Office Properties

Our principal executive office is located on approximately 176,000 square feet of office space in Charlotte, North Carolina under an approximate 15-year lease that commenced in the second quarter of 2021.

With our expansion in North Carolina, in December 2016, we received a grant from the state that provides an aggregate amount up to $4.9 million in reimbursements through 2029 beginning in 2017 for investing in real estate and infrastructure in addition to increasing jobs in North Carolina at specific targeted levels through 2021, and maintaining the jobs thereafter.

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

With our expansion in North Carolina, in December 2016, we received a grant from the state that provides up to $4.9 million in reimbursements through 2029 beginning in 2017 for investing in real estate and infrastructure in addition to increasing jobs in North Carolina at specific targeted levels through 2021, and maintaining the jobs thereafter.

We have received approximately $0.7 million related to the December 2016 grants.

If we are unable to maintain the specified target levels, our ability to earn further reimbursements could be limited.

Additionally, the city of Charlotte and the county of Mecklenburg provided a grant that will be paid over five years and is based on a percentage of new property tax we pay on the development of a corporate headquarters.

In December 2018, we received an additional grant from the state that provides an aggregate amount up to $8.4 million in reimbursements through 2032 beginning in 2021 for increasing jobs in North Carolina at specific targeted levels through 2024, and maintaining the jobs thereafter.

We have currently not met the specified target levels set forth in the December 2018 grant and may not realize any reimbursements from this grant.

Results of Operations for the Years ended December 31, 2022 and 2021

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Change in fair value of contingent consideration — (8,249) 8,249 100 %

Severance 53 295 (242) (82) %

Restructuring and severance 4,428 53 4,375 8,255 %

Litigation settlements and contingencies (18) 392 (410) (105) %

Total costs and expenses 1,017,748 1,090,468 (72,720) (7) %

Operating income (loss) 8,031 (6,603) 14,634 222 %

Operating (loss) income (32,756) 8,031 (40,787) (508) %

Other (expense) income, net:

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Other income 3,843 123,272 (119,429) (97) %

Income (loss) before income taxes 84,436 (42,527) 126,963 299 %

Income tax (expense) benefit (11,298) 19,961 (31,259) (157) %

Net income (loss) from continuing operations 73,138 (22,566) 95,704 424 %

(Loss) income before income taxes (54,927) 84,436 (139,363) (165) %

Income tax expense (133,019) (11,298) 121,721 1,077 %

Net (loss) income from continuing operations (187,946) 73,138 (261,084) (357) %

Loss from discontinued operations, net of tax (6) (4,023) (4,017) (100) %

Net income (loss) and comprehensive income (loss) $ 69,115 $ (48,255) $ 117,370 243 %

Revenue increased in 2021 compared to 2020 due to increases in our Home and Consumer segments, partially offset by decreases in our Insurance segment.

Net (loss) income and comprehensive (loss) income $ (187,952) $ 69,115 $ (257,067) (372) %

Revenue decreased in 2022 compared to 2021 due to decreases in our Home and Insurance segments, partially offset by an increase in our Consumer segment.

Our Consumer segment includes the following products:

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

Revenue from our Consumer segment increased $76.7 million in 2021 from 2020, or 30%, primarily due to increases in our personal loans, small business loans products, and credit cards.

Revenue from our personal loans product increased $43.6 million to $110.1 million in 2021 from $66.5 million in 2020, or 66%, primarily due to an increase in revenue earned per consumer, and an increase in the number of consumers completing request forms.

Revenue from our Consumer segment increased $66.2 million in 2022 from 2021, or 20%, primarily due to increases in our personal loans, small business loans products, credit cards, and deposit accounts, partially offset by a decrease in student loans.

Many of our products in the Consumer segment experienced increases in revenue in 2022 from 2021 due to the recovery from the impacts of the COVID-19 pandemic.

Revenue from our personal loans product increased $34.0 million, or 31%, to $144.1 million in 2022 from $110.1 million in 2021 primarily due to an increase in the number of consumers completing request forms.

Revenue from our credit cards product increased $6.8 million, or 7%, to $100.2 million in 2022 from $93.4 million in 2021 primarily due to an increase in revenue earned per click, partially offset by a decrease in the number of clicks.

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

however, certain other Consumer products experienced notable changes.

Revenue from our small business loans product increased $21.5 million in 2021 compared to 2020, due to loosening underwriting standards and improved flow of capital, as well as an

increase in revenue earned per consumer.

Revenue from our credit cards product increased $16.1 million in 2021 compared to 2020 due to an increase in the number of approvals and an increase in revenue earned per approval.

Revenue from our Insurance segment decreased $7.6 million to $326.2 million in 2021 from $333.8 million in 2020, or 2%, due to a decrease in revenue earned per consumer, partially offset by an increase in the number of consumers seeking insurance coverage.

Revenue from our small business loans product increased $19.9 million in 2022 compared to 2021, due to an increase in revenue earned per consumer, partially offset by a decrease in the number of consumers.

Revenue from our deposit accounts product increased $6.6 million in 2022 compared to 2021 due to an increase in the number of consumers and an increase in revenue earned per consumer.

Student loans decreased $6.4 million in 2022 compared to 2021, due to a decrease in the number of consumers, partially offset by an increase in revenue earned per consumer.

Revenue from our Insurance segment decreased $27.1 million, or 8%, to $299.1 million in 2022 from $326.2 million in 2021 primarily due to a decrease in carrier budgets reducing the number of consumers completing request forms.

The decrease in carrier budgets was due primarily to reduced customer acquisition activity for insurance carriers as they attempted to raise premium rates in response to inflationary pressures on claims.

Our Home segment includes the following products:

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

Revenue from our Home segment increased $120.7 million in 2021 from 2020, or 38%, primarily due to increases in revenue from our refinance mortgage, purchase mortgage, and home equity loans products.

Revenue from our refinance mortgage product increased $65.5 million in 2021 compared to 2020, primarily due to an increase in revenue earned per consumer, partially offset by a decrease in the number of consumers completing request forms.

Revenue from our purchase mortgage product and our home equity loans and lines of credit product increased $24.5 million and $31.5 million, respectively, in 2021 compared to 2020.

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

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

We ceased offering reverse mortgage loans in the fourth quarter of 2022.

Revenue from our Home segment decreased $152.4 million, or 34%, in 2022 from 2021 primarily due to a decrease in revenue from our refinance mortgage product, partially offset by increases in our home equity loans and purchase mortgage products.

Revenue from our mortgage products decreased $196.6 million, or 52%, to $179.4 million in 2022 from $376.1 million in 2021.

Revenue from our refinance mortgage product decreased $203.7 million in 2022 compared to 2021, primarily due to a decrease in the number of consumers completing request forms and a decrease in revenue earned per consumer, as interest rates rose significantly in 2022.

Revenue from our purchase mortgage product increased $7.1 million in 2022 compared to 2021 primarily due to an increase in revenue earned per consumer, partially offset by a decrease in the number of consumers completing request forms.

Revenue from our home equity loans and lines of credit product increased $43.0 million, or 67% to $105.8 million in 2022 from $62.7 million in 2021 due to an increase in both the number of consumers completing request forms and the revenue earned per consumer.

While we believe our three reportable segments have generally recovered from the impacts of the ongoing COVID-19 pandemic, we are continuously monitoring the impacts of the pandemic on the economy and any potential future impacts to our segment revenue.

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

Revenue in the Other category decreased $1.4 million in 2021 compared to 2020, as we ceased reselling online advertising space during the first quarter of 2020.

Cost of revenue

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

Cost of revenue increased in 2021 from 2020, primarily due to increases in compensation and benefits, website network hosting and server fees, and call center technology of $3.7 million, $1.5 million, and $1.5 million, respectively, partially offset by a $3.3 million decrease in credit card fees.

Cost of revenue as a percentage of revenue decreased to 5% in 2021 compared to 6% in 2020.

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

Cost of revenue remained relatively consistent in 2022 compared to 2021.

Cost of revenue as a percentage of revenue increased to 6% in 2022 compared to 5% in 2021.

Selling and marketing expense

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

The increase in selling and marketing expense in 2021 compared to 2020 was primarily due to the increases in advertising and promotional expense discussed below.

Additionally, compensation and benefits increased $7.7 million in 2021 compared to 2020.

The $71.8 million decrease in selling and marketing expense in 2022 compared to 2021 was primarily due to the decreases in advertising and promotional expense discussed below.

Additionally, compensation and benefits decreased $2.4 million in 2022 compared to 2021.

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

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Other 16,301 19,925 (3,624) (18) %

Total advertising expense $ 716,639 $ 567,748 $ 148,891 26 %

Total advertising and promotional expense $ 647,324 $ 716,639 $ (69,315) (10) %

In the periods presented, advertising and promotional expenses are equivalent to the non-GAAP measure variable marketing expense.

See Variable Marketing Expense and Variable Marketing Margin below for additional information.

Revenue is primarily driven by Network Partner demand for our products, which is matched to corresponding consumer requests.

We adjust our selling and marketing expenditures dynamically in relation to anticipated revenue opportunities in order

to ensure sufficient consumer inquiries to profitably meet such demand.

We adjust our selling and marketing expenditures dynamically in relation to anticipated revenue opportunities in order to ensure sufficient consumer inquiries to profitably meet such demand.

An increase in a product’s revenue is generally met by a corresponding increase in marketing spend, and conversely a decrease in a product’s revenue is generally met by a corresponding decrease in marketing spend.

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

We adjusted our advertising expenditures in 2021 compared to 2020 in response to changes in Network Partner demand on our marketplace as they recovered from the COVID-19 pandemic discussed above.

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

We adjusted our advertising expenditures in 2022 compared to 2021 in response to changes in Network Partner demand on our marketplace.

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

General and administrative expense

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

General and administrative expense increased in 2021 compared to 2020, primarily due to increases in compensation and benefits, technology expense, and facilities expense of $18.0 million, $4.0 million, and $2.1 million, respectively.

This was partially offset by decrease in professional fees of $2.3 million.

Losses on the disposal of assets also increased $2.3 million in 2021 compared to 2020.

Non-cash compensation expense within general and administrative expense increased in 2021, which resulted in reductions in net income from continuing operations in 2021 compared to historical periods.

General and administrative expense decreased in 2022 compared to 2021, primarily due to decreases in compensation and benefits, facilities, and professional fees expense of $13.4 million, $1.6 million, and $1.1 million, respectively.

This was partially offset by increases in technology, fees and charges, travel and entertainment, and other tax expense of $5.6 million, $2.0 million, $1.5 million, and $1.5 million, respectively.

Additionally, losses on the disposal of assets increased $3.1 million in 2022 compared to 2021.

Non-cash compensation expense, included in total compensation and benefits noted above, within general and administrative expense decreased in 2022, which resulted in an increase in net income from continuing operations in 2022 compared to 2021.

For additional information, see Note—14-Stock-Based Compensation in the notes to the consolidated financial statements included elsewhere in this report.

Non-cash compensation expense is excluded from Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”), as discussed below.

General and administrative expense as a percentage of revenue remained consistent at 14% for each of 2021 and 2020.

General and administrative expense as a percentage of revenue increased to 15% in 2022 from 14% in 2021.

Product development

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Product development expense increased in 2022 compared to 2021 as we continued to invest in internal development of new and enhanced features, functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners.

The increase in depreciation expense in 2021 compared to 2020 was primarily the result of higher investment in internally developed software in recent years, to support the growth of our business.

The increase in depreciation expense in 2022 compared to 2021 was primarily the result of higher investment in internally developed software in recent years, to support the growth of our business in addition to depreciation on new assets related to our principal executive offices which we moved into in mid-2021.

Amortization of Intangibles

The decrease in amortization of intangibles in 2022 compared to 2021 was due to certain intangible assets associated with our recent business acquisitions becoming fully amortized.

Contingent consideration

During 2022, we did not record contingent consideration expense.

All earnouts were completed prior to 2022.

During 2021, we recorded aggregate contingent consideration gains of $8.2 million due to adjustments in the estimated fair value of the earnout payment related to the QuoteWizard acquisition for which the earnout period ended in 2021.

During 2020, we recorded aggregate contingent consideration expense of $5.3 million due to adjustments in the estimated fair value of the earnout payments related to our recent acquisitions.

For 2020, the net contingent consideration expense for the QuoteWizard, Ovation, and SnapCap acquisitions was $4.0 million, $1.3 million and $0.1 million, respectively.

Restructuring and severance

During 2022, we completed workforce reductions in each of the first, second, and fourth quarters of approximately 75 employees, 25 employees, and 50 employees, respectively.

We incurred total expense of $4.4 million consisting of employee separation costs of $3.3 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 third quarter of 2023.

Interest expense

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

Interest expense was recognized on the 2025 Notes for the entire year of 2021, compared to the partial period in 2020.

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

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

See Note 15—Debt for additional information on the issuance of the 2025 Notes and the partial repurchase of the 2022 Notes.

Interest expense decreased in 2022 compared to 2021 primarily due to the adoption of Accounting Standards Update (“ASU”) 2020-06 on January 1, 2022, whereby we derecognized the remaining debt discounts on the 2022 Notes and 2025 Notes and therefore no longer recognize any amortization of debt discounts as interest expense, partially offset by an increase in interest from our Term Loan Facility.

See Note—2 Significant Accounting Policies in the notes to the consolidated financial statements included elsewhere in this report for additional information.

Other income for 2022 primarily consists of dividend income.

During 2021, we sold a portion of our investment in Stash and realized a gain of $27.9 million.

Additionally, we recorded unrealized gains of $95.4 million as a result of an adjustment to the fair value of the Stash equity securities still held by us based on observable market events.

Income tax benefit

Income tax expense

Year Ended December 31,

(in thousands, except percentages)

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

Income tax expense $ (133,019) $ (11,298)

Effective tax rate (242.2) % 13.4 %

For 2021, the effective tax rate varied from the federal statutory rate of 21% in part due to the benefit derived from excess tax deductions from exercise of stock options of $11.7 million, including state taxes and from research and experimentation ("R&D") tax credits of $3.2 million, partially offset by expense due to nondeductible executive compensation of $3.1 million and incremental valuation allowance on state net operating losses of $0.6 million, primarily due to state legislative changes.

For 2020, the effective tax rate varied from the federal statutory rate of 21% in part due to the benefit derived from excess tax deductions from the vesting of restricted stock and exercise of stock options of $2.5 million, including state taxes.

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

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

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

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

These deferred tax assets have been revalued, as they have been carried back to 2016 and 2017, which are tax periods prior to the 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 2022, the effective tax rate varied from the federal statutory rate of 21% primarily due to expense of $139.4 million to record a full valuation allowance against our net deferred tax assets.

See Note—15 Income Taxes in the notes to the consolidated financial statements included elsewhere in this report for additional information on the valuation allowance.

For 2021, the effective tax rate varied from the federal statutory rate of 21% in part due to the benefit derived from excess tax deductions from exercise of stock options of $11.7 million, including state taxes and from research and experimentation tax credits of $3.2 million, partially offset by expense due to nondeductible executive compensation of $3.1 million and incremental valuation allowance on state net operating losses of $0.6 million, primarily due to state legislative changes.

Discontinued Operations

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

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

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

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

See Note 21—Discontinued Operations to the consolidated financial statements included elsewhere in this report for more information, including the accounting effect of HLC’s bankruptcy filing on our consolidated financial statements.

See Note 22—Discontinued Operations in the notes to the consolidated financial statements included elsewhere in this report for more information, including the accounting effect of HLC’s bankruptcy filing on our consolidated financial statements.

Segment Profit

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Segment profit is calculated as segment revenue less segment selling and marketing expenses attributed to variable costs paid for advertising, direct marketing and related expenses that are directly attributable to the segments' products.

See Note 22—Segment Information in the notes to the consolidated financial statements for additional information on segments and a reconciliation of segment profit to pre-tax income from continuing operations.

The Home segment had an increase in revenue and segment profit of 38% and 16%, respectively in 2021 compared to 2020.

Our unit economics steadily improved throughout the year, with increases in revenue per lead for refinance, purchase and home equity in 2021 compared to 2020.

Mortgage rates have risen from historic lows and refinance volumes have subsequently declined.

The purchase market remains competitive as a national home inventory shortage and lower affordability impact purchase application rates.

In this type of environment our lender partners rely even more on LendingTree to help meet their origination goals.

We continue to look for opportunities to optimize towards higher converting products such as cash-out refinance and home equity loans, as our partners are focused on these products.

The average home with a mortgage has increased its available equity from a year ago.

As interest rates have risen broadly from all-time lows, loans secured with home equity represent the lowest cost source of financing for most consumers.

We continue to focus on improving the consumer experience to increase repeat users, cross-sell, and conversion rates.

This will allow us to increase our reach and better align the right borrowers to the right experiences based on their readiness to transact.

The Consumer segment grew steadily throughout the year, generating revenue and segment profit growth of 30% and 34%, respectively, in 2021 compared to 2020.

Personal loans and small business revenue in the fourth quarter of 2021 returned to 2019 levels and we are forecasting strong growth to continue in 2022, while credit card is experiencing a slower rebound.

As we add new lending partners to the TreeQual platform, we anticipate a significantly improved customer experience that should drive increased conversion rates, margins, and pace of revenue growth in both credit card and personal loans.

Demand for the personal loans continues to grow as consumer savings rates decline with the end of government stimulus programs and higher consumer spending.

Our partner network has grown in 2021 compared to 2020, and we maintain a strong pipeline of new lenders looking to onboard.

The addition of TreeQual to the personal loans product and our continued investment in the down funnel experience should continue to push close rates higher and increase monetization.

Our credit card business continues its recovery from pandemic lows.

Issuers remain aggressive with the introduction of new cards and features, and we have expanded our partner network.

Margins in the credit card business continue to lag pre-pandemic levels.

We are working to diversify our marketing mix, actively pursuing more profitable marketing channels and partnerships to expand our reach and attract more consumers, which should lead to improved unit economics over time.

Our small business product has been consistently growing, and we expect that to continue in 2022.

We launched our Premium Marketplace offering in the fourth quarter of 2021, which led to increased conversions and higher revenue per referral from enhanced customer tiering.

Volume increased as our concierge model helps small business owners find the right financing options to fit their unique business needs.

We expect these positive trends to continue in 2022 as we focus on product diversification, optimization of customer matching by segment, and cross-sell to unlock additional marketing opportunities.

The claims market for our carrier partners was challenging in the last half of 2021, driving insurance revenue down 2% in 2021 from 2020 and segment profit down 13%.

Property and Casualty ("P&C") carriers reduced marketing budgets as they incurred significantly higher loss ratios, but we believe this down cycle may be behind us.

Although the dynamic remains fluid, we expect the business to return to a normalized operating environment by mid-year.

In the face of the overall industry challenge, we are committed to capturing additional share of carrier budgets by focusing on conversion rate and lead quality,

which will benefit results when carriers look to aggressively acquire new customers.

Consumer demand, as measured by traffic to our sites, remains robust and continued to strengthen into year end.

We expect this trend to continue as significant rate increases kicks-off a historic cycle of drivers shopping for new auto policies.

We also made significant progress expanding our P&C Agency, adding P&C carriers to the platform and increasing our agent base, driving growth in policies sold and written premium in our direct-to-consumer channel.

Providing bindable insurance quotes improves the consumer experience and increases conversion rates, and aligns well with our strategy of improving customer fulfillment across our platform.

Our Medicare Agency has scaled nicely, with growth in written policies of 111% in 2021 compared to 2020 as we invested in additional training while managing our agent count responsibly.

Exiting our second Annual Enrollment Period, we continue to evaluate our performance and look for ways to improve unit economics through marketing effectiveness and close rates.

We have observed the challenges increased customer churn and lower policy persistency have created for competitors in the space.

We will only scale this business to the extent we can do so with attractive targeted returns.

See Note 23—Segment Information in the notes to the consolidated financial statements included elsewhere in this report for additional information on segments and a reconciliation of segment profit to pre-tax income from continuing operations.

Revenue in the Home segment decreased 34% to $289.4 million in 2022 from 2021, with segment profit of $103.1 million in 2022, a decrease of 33% from 2021.

Our Home segment margin (segment profit divided by segment revenue) remained relatively consistent, at 36% in 2022 compared to 35% in 2021.

Within Home, our core mortgage business generated revenue of $179.4 million in 2022, down 52% from 2021, as demand for refinancing transactions diminished throughout the year, with almost no outstanding mortgages later in the year carrying a higher rate than current loan offerings.

The 30-year mortgage interest rates increased from a monthly average of 3.1% in December 2021 to a monthly average of 6.36% in December 2022, according to Freddie Mac Near record home prices coupled with higher mortgage rates led to a 17% decrease in existing home sales in 2022 compared to 2021.

Our mortgage volume decreased 47% and revenue per lead decreased 10% in 2022 compared to 2021.

The volume mix in our mortgage business was close to evenly balanced between refinance at 54% and purchase loans at 46% of total volume in 2022 as compared to refinance at 67% and purchase at 33% of total volume in 2021.

Revenue from our home equity loan product of $105.8 million in 2022 increased 69% from 2021, as homeowners in the U.S.

enjoy near record levels of equity to borrow against for other debt repayments and to finance home improvements.

Home equity revenue per lead increased 13% in 2022 compared to 2021 as we were able to capture 49% more volume in 2022 compared to 2021.

During the fourth quarter of 2022, we discontinued our reverse mortgage offering to better focus resources on supporting our traditional lending Network Partners going forward.

The outlook for the mortgage industry is a sustained period of lower refinance demand, with the Mortgage Bankers Association forecasting a 37% decline in refinance originations in 2023 after falling 76% in 2022.

We have been actively engaged with our Network Partners in mortgage to increase purchase lead conversion rates, and are focusing on this metric internally as a key growth priority for the segment this year.

We expect home equity will continue to generate the majority of our Home revenue in 2023, as our Network Partners have leaned on the favorable environment for cash-out transactions to maintain loan officer productivity.

Growth in our Consumer segment continued, with revenue of $396.1 million in 2022, an increase of 20% from 2021, and segment profit of $174.6 million in 2022, an increase of 22% from 2021.

Our Consumer segment margin remained consistent, at 44% in 2022 compared to 43% in 2021.

Revenue from our personal loan product of $144.1 million increased 31% in 2022 compared to 2021 as debt consolidation was attractive with consumer credit card balances continuing to rise.

Many of our partners have tightened their underwriting criteria to reduce portfolio risk given recession fears, focusing their customer acquisition activity on consumers with somewhat higher credit quality.

Credit card revenue increased to $100.2 million or 7.3% in 2022 compared to 2021.

Revenue per click grew 17% in 2022 compared to 2021 while we experienced an 8% decrease in the number of clicks.

Operational improvements are being implemented and improving credit card results is a core priority for the company in 2023.

Small business achieved revenue growth of 41% in 2022 from 2021.

In the second half of 2022 we continue to focus on lender performance to grow originations and improve conversion rates.

By optimizing our marketing mix, we have aimed to increase the quality of our leads which benefits lenders and increases profitability.

Our ability to efficiently steer borrowers to the most appropriate lender on our network with our concierge model continues to positively impact results.

Going forward we are implementing technology improvements to automate capture of applicant financial data to enhance the borrower experience and increase lender match rate.

The auto and home insurance industry in 2022 was impacted by persistent industry headwinds, supply chain issues, rising accident severity and frequency, and hurricane losses in the back half of the year.

This difficult operating environment for our carrier partners caused an 8% decrease in revenue in our Insurance segment to $299.1 million in 2022, from 2021.

Segment profit of $91.8 million in 2022 decreased 19% from 2021.

Our Insurance segment margin decreased to 31% in 2022 compared to 35% in 2021.

Variable Marketing Expense and Variable Marketing Margin

We report variable marketing expense and variable marketing margin as supplemental measures to GAAP.

These related measures are the primary metrics by which we measure the effectiveness of our marketing efforts.

Variable marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing, and related expenses, and excludes overhead, fixed costs, and personnel-related expenses.

Variable marketing margin is a measure of the efficiency of our operating model, measuring revenue after subtracting variable marketing expense.

Our operating model is highly sensitive to the amount and efficiency of variable marketing expenditures, and our proprietary systems are able to make rapidly changing decisions concerning the deployment of variable marketing expenditures (primarily but not exclusively online and mobile advertising placement) based on proprietary and sophisticated analytics.

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

This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results.

We provide and encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures discussed below.

Variable marketing expense is defined as the expense attributable to variable costs paid for advertising, direct marketing and related expenses, and excluding overhead, fixed costs and personnel-related expenses.

The majority of these variable advertising costs are expressly intended to drive traffic to our websites and these variable advertising costs are included in selling and marketing expense on our consolidated statements of operations and comprehensive income (loss).

Variable marketing margin is defined as revenue less variable marketing expense.

The following shows the calculation of variable marketing margin:

Year Ended December 31,

(in thousands)

Revenue $ 984,992 $ 1,098,499

Variable marketing expense 647,324 716,639

Variable marketing margin $ 337,668 $ 381,860

Below is a reconciliation of selling and marketing expense, the most directly comparable GAAP measure, to variable marketing expense:

Year Ended December 31,

(in thousands)

Selling and marketing expense $ 702,238 $ 773,990

Non-variable selling and marketing expense (54,914) (57,351)

Variable marketing expense $ 647,324 $ 716,639

The following is a reconciliation of net (loss) income from continuing operations, the most directly comparable GAAP measure, to variable marketing margin:

Year Ended December 31,

(in thousands)

Net (loss) income from continuing operations $ (187,946) $ 73,138

Adjustments to reconcile to variable marketing margin:

Cost of revenue 57,769 57,297

Non-variable selling and marketing expense (1)

54,914 57,351

General and administrative expense 152,377 153,472

Product development 55,553 52,865

Depreciation 20,095 17,910

Amortization of intangibles 25,306 42,738

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

Restructuring and severance 4,428 53

Litigation settlements and contingencies (18) 392

Interest expense, net 26,014 46,867

Other income (3,843) (123,272)

Income tax expense 133,019 11,298

Variable marketing margin $ 337,668 $ 381,860

(1) Represents the portion of selling and marketing expense not attributable to variable costs paid for advertising, direct marketing and related expenses.

Includes overhead, fixed costs and personnel-related expenses.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization

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Definition of Adjusted EBITDA

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

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

We endeavor to compensate for the limitations of the non-GAAP measures presented by also providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures.

We endeavor to compensate for the limitations of the non-GAAP measures presented by also providing the comparable GAAP measures with

equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures.

These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

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Items are considered one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules.

One-time items for the year ended December 31, 2020 consisted of expenses incurred in connection with a secondary public offering of our common stock by our largest shareholder, for which we did not receive any proceeds.

One-time items for the year ended December 31, 2022 consisted of the $1.5 million franchise tax caused by the equity investment gain in Stash.

There are no adjustments for one-time items for the year ended December 31, 2021.

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

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

The following table is a reconciliation of net (loss) income from continuing operations, the most directly comparable GAAP measure, to Adjusted EBITDA.

Year Ended December 31,

(in thousands)

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

Net (loss) income from continuing operations $ (187,946) $ 73,138

Adjustments to reconcile to Adjusted EBITDA:

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Depreciation 20,095 17,910

Severance 53 295

Restructuring and severance 4,428 53

Loss on impairments and disposal of assets 6,590 3,465

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Non-cash compensation expense 58,541 68,555

Costs of secondary public offering — 863

Franchise tax caused by equity investment gain 1,500 —

Contribution to LendingTree Foundation 500 —

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

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Interest expense, net 26,014 46,867

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

Dividend income (3,842) —

Income tax expense 133,019 11,298

Adjusted EBITDA $ 84,464 $ 134,691

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

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

We will continue to monitor economic impacts caused by the challenging interest rate environment, high levels of inflation, and lingering effects of the COVID-19 pandemic on our liquidity and capital resources.

Notable transactions affecting cash and cash equivalents during the reported periods are as follows:

In 2022, we repurchased an aggregate of 379,895 shares of our common stock pursuant to a stock repurchase program for $43.0 million.

In the first quarter of 2022, we acquired an equity interest in EarnUp for $15.0 million.

See Note 8—Equity Investments in the notes to the consolidated financial statements included elsewhere in this report for additional information on the equity interest.

In 2021, we repurchased an aggregate of 334,253 shares of our common stock pursuant to a stock repurchase program for $40.0 million.

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

In the fourth quarter of 2021, we sold a portion of our Stash equity securities to a third party for $46.3 million.

See Note 8—Equity Investment to the consolidated financial statements included elsewhere in this report for additional information on the equity interest in Stash.

In July 2020, we made litigation settlement payments of $26.5 million to the ResCap Liquidating Trust ("ResCap") and $36.0 million to the HLC bankruptcy Trustee for the matters noted in Note 21—Discontinued Operations.

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

In 2021, we received an $8.6 million reimbursement from the HLC bankruptcy estate related to the ResCap payments.

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

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

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

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

See Note 15—Debt for additional information.

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

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

See Note 8—Equity Investment to the consolidated financial statements included elsewhere in this report for more information.

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

During 2020, we made contingent consideration payments of $6.0 million, $4.4 million and $20.2 million related to the prior acquisitions of SnapCap, Ovation and QuoteWizard, respectively.

See Note 8—Equity Investment in the notes to the consolidated financial statements included elsewhere in this report for additional information on the equity interest in Stash.

Credit Facility

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

The delayed draw commitments under the Term Loan Facility will be available until June 1, 2022.

On September 15, 2021, we entered into a credit agreement (the “Credit Agreement”), consisting of a $200.0 million Revolving Facility, which matures on September 15, 2026, and a $250.0 million delayed draw Term Loan Facility, which matures on September 15, 2028.

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

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

See Note 15—Debt for additional information.

As of February 28, 2022, we have outstanding a $0.2 million letter of credit under the Revolving Facility, and the remaining borrowing capacity is $199.8 million.

No term loans have been drawn under the Term Loan Facility as of February 28, 2022.

We drew $250.0 million under the Term Loan Facility on May 31, 2022 and used $170.2 million of the proceeds to settle the Company’s 2022 Notes, including interest.

The remaining proceeds of $79.8 million may be used for general corporate purposes and any other purposes not prohibited by the Credit Agreement.

As of February 27, 2023, we have outstanding $248.8 million under the Term Loan Facility, a $0.2 million letter of credit under the Revolving Facility, and the remaining borrowing capacity is $199.8 million.

For additional information on the Credit Facility, see Note 16—Debt in the notes to the consolidated financial statements included elsewhere in this report.

Convertible Debt

Our 2022 Notes have a principal balance of $169.7 million and mature on June 1, 2022, unless earlier repurchased or converted.

Our 2025 Notes have a principal balance of $575.0 million and mature on July 15, 2025, unless earlier repurchased or converted.

See Note 15—Debt to the consolidated financial statements included elsewhere in this report for more information.

Operating Leases

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We anticipate cash payments under operating lease obligations of $13.1 million in 2023.

See Note 11—Leases to the consolidated financial statements included elsewhere in this report for more information.

See Note 12—Leases in the notes to the consolidated financial statements included elsewhere in this report for more information.

Cash Flows from Continuing Operations

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Net cash provided by operating activities $ 42,974 $ 131,256

Net cash provided by (used in) investing activities $ 10,067 $ (122,149)

Net cash (used in) provided by financing activities $ (63,347) $ 193,290

Net cash (used in) provided by investing activities $ (27,876) $ 10,067

Net cash provided by (used in) financing activities $ 32,536 $ (63,347)

Cash Flows from Operating Activities

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activities include compensation and other employee-related costs, other general corporate expenditures, litigation settlements and contingencies, certain contingent consideration payments, and income taxes.

Net cash provided by operating activities attributable to continuing operations increased in 2021 from 2020 primarily due to a increase in revenue, partially offset by a corresponding increase in selling and marketing expense.

Additionally, cash from changes in working capital increased primarily as a result of changes in contingent consideration, accounts payable, accrued expenses and other current liabilities, and income taxes receivable, partially offset by unfavorable changes in accounts receivable.

Net cash provided by operating activities attributable to continuing operations decreased in 2022 from 2021 primarily due to a decrease in revenue, partially offset by a corresponding decrease in selling and marketing expense.

Additionally, cash from changes in working capital decreased primarily as a result of changes in accounts payable, accrued expenses and other current liabilities, and income taxes receivable, partially offset by favorable changes in accounts receivable.

Cash Flows from Investing Activities

Net cash used in investing activities attributable to continuing operations in 2022 of $27.9 million consisted of the purchase of a $16.4 million equity investment in EarnUp and another small investment, as well as capital expenditures of $11.4 million primarily related to internally-developed software.

Net cash provided by investing activities attributable to continuing operations in 2021 of $10.1 million consisted of $46.3 million in proceeds from a partial sale of our equity interest in Stash partially offset by $1.2 million for the purchase of an additional equity interest in Stash and capital expenditures of $35.1 million primarily related to internally developed software.

Net cash used in investing activities attributable to continuing operations in 2020 of $122.1 million consisted of the purchase of an $80.0 million equity interest in Stash and capital expenditures of $42.1 million primarily related to internally developed software and leasehold improvements for our new principal corporate offices.

Cash Flows from Financing Activities

Net cash used in financing activities attributable to continuing operations in 2021 of $63.3 million consisted primarily of $40.0 million for the repurchase of our stock, $14.4 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options, as well as $6.4 million for the payment of debt issuance costs and $2.5 million paid for the original issue discount on the undrawn Term Loan Facility.

Net cash used in financing activities attributable to continuing operations in 2020 of $193.3 million consisted primarily of $575.0 million of gross proceeds from the issuance of the 2025 Notes, partially offset by $233.9 million paid to repurchase a portion of the 2022 Notes, a net $47.4 million paid for the related convertible note hedge and warrant transactions outlined above, $75.0 million of net repayments on our Amended Revolving Credit Facility, and $16.6 million for the payment of debt issuance costs.

Net cash provided by financing activities attributable to continuing operations in 2022 of $32.5 million consisted primarily of $250.0 million in proceeds from the term loan and the repayment of $169.7 million to settle our 2022 Notes discussed in the “Credit Facility” section above, $43.0 million for the repurchase of our stock, $3.4 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options and $1.3 million repayment of the term loan.

Critical Accounting Policies and Estimates

The following disclosure is provided to supplement the description of our accounting policies contained in Note 2—Significant Accounting Policies to the consolidated financial statements included elsewhere in this report in regard to significant areas of judgment.

The following disclosure is provided to supplement the description of our accounting policies contained in Note 2—Significant Accounting Policies in the notes to the consolidated financial statements included elsewhere in this report in regard to significant areas of judgment.

This disclosure includes accounting policies related to both continuing operations and discontinued operations.

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A discussion of some of our more significant accounting policies and estimates follows.

Estimates of deferred income taxes and the significant items giving rise to the deferred assets and liabilities are shown in Note 14—Income Taxes to the consolidated financial statements included elsewhere in this report, and reflect management's assessment of actual future taxes to be paid on items reflected in the consolidated financial statements, giving consideration to both timing and the probability of realization.

Actual income taxes could vary from these estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the IRS, as well as actual operating results that may vary significantly from anticipated results.

Estimates of current and deferred income taxes and the significant items giving rise to the deferred assets and liabilities are shown in Note 15—Income Taxes in the notes to the consolidated financial statements included elsewhere in this report, and reflect management's assessment of actual future taxes to be paid on items reflected in the consolidated financial statements, giving consideration to both timing and the probability of realization.

Actual income taxes could vary from these estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the IRS and/or state tax authorities, as well as actual operating results that may vary significantly from anticipated results.

We also recognize liabilities for uncertain tax positions based on the two-step process prescribed by the accounting guidance for uncertainty in income taxes.

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A valuation allowance is provided on deferred tax assets if it is determined that it is “more likely than not” that the deferred tax asset will not be realized.

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

During the third quarter of 2022, we established a full valuation allowance against our net deferred tax assets due to historical cumulative pre-tax losses and continued pre-tax losses in the quarter.

We regularly review our deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing taxable temporary differences, and tax planning strategies.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.

In determining the amount of the valuation allowance, we considered the scheduled reversal of deferred tax liabilities.

We will maintain a full valuation allowance on net deferred tax assets until there is sufficient evidence to support the reversal of some or all of the allowance.

Should there be a change in the valuation allowance in the future, the income tax provision would increase or decrease in the period in which the allowance is changed.

The indefinite carryforward period for certain deferred tax assets means that indefinite-lived deferred tax liabilities can be considered as support for realization of such deferred tax assets including post December 31, 2017 net operating loss carryovers, which can affect the need to record or maintain a valuation allowance for deferred tax assets.

During 2022, we incurred income tax expense of $139.4 million related to the valuation allowance.

At December 31, 2022, we maintain a valuation allowance of $145.4 million against our net deferred tax assets.

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

Stock-Based Compensation

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If an award is modified, we determine if the modification requires a new calculation of fair value or change in the vesting term of the award.

See Note 13—Stock-Based Compensation to the consolidated financial statements included elsewhere in this report for additional information on assumptions and inputs to the fair value determination of stock-based awards.

See Note 14—Stock-Based Compensation in the notes to the consolidated financial statements included elsewhere in this report for additional information on assumptions and inputs to the fair value determination of stock-based awards.

Evaluation of Goodwill Impairment

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Otherwise, the goodwill reporting unit must be quantitatively tested for impairment.

Performing the quantitative test for goodwill impairment that compares the reporting unit fair value with its carrying value using a discounted cash flow analysis requires the exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates and the amount and timing of expected future cash flows.

Performing the quantitative test for goodwill impairment that compares the reporting unit fair value with its carrying value using a discounted cash flow and market analysis requires the exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates, including revenue, the amount and timing of expected future cash flows, and market multiples.

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

At June 30, 2022, we assessed the qualitative factors in our impairment testing of goodwill and determined that the effects of the challenging interest rate environment, consumer price inflation, and the decline in our market capitalization required a quantitative impairment test be performed.

The quantitative goodwill impairment test found that the fair value of each reporting unit exceeded its carrying amount, indicating no goodwill impairment.

We will monitor the recovery of the Insurance reporting unit and the Mortgage reporting unit.

The property and casualty auto insurance industry is experiencing challenges caused by inflation, supply chain challenges, and the rising severity and frequency of claims.

Additionally, the significant increase in mortgage interest rates have had a negative impact on our Mortgage reporting unit.

Changes in the timing of the recovery compared to current expectations could cause an impairment to the Insurance or Mortgage reporting units.

The value of goodwill subject to assessment for impairment at December 31, 2022 is $420.1 million.

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Equity Investment

Our equity investment does not have a readily determinable fair value and, upon acquisition, we elected the measurement alternative to value these securities.

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

Our equity securities do not have a readily determinable fair value and, upon acquisition, we elected the measurement alternative to value these securities.

Accordingly, the equity securities will be carried at cost less impairment, if any, and subsequently measured to fair value upon observable price changes in an orderly transaction for the identical or similar investments with any gains or losses recorded to the consolidated statement of operations and comprehensive income.

The carrying value of our equity investment at December 31, 2022 is $174.6 million.

New Accounting Pronouncements

See Note 2—Significant Accounting Policies to the consolidated financial statements included elsewhere in this report for a description of recent accounting pronouncements.

See Note 2—Significant Accounting Policies in the notes to the consolidated financial statements included elsewhere in this report for a description of recent accounting pronouncements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis