What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-03 compared with 2022-11-04 · 169 added, 184 removed, 203 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, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings.

Our online consumer platform provides consumers with access to product offerings from our Network Partners, including mortgage loans, home equity loans 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.

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

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

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.

Economic Conditions

During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“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.

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 Part I, Item 1A.

“Risk Factors” of our 2022 Annual Report for additional information.

Of our three reportable segments, the Consumer segment was impacted the most from the COVID-19 pandemic 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 COVID-19 pandemic, our marketing expenses generally decreased in line with revenue.

During the first nine months of 2022, the challenging interest rate environment combined with annual inflation persistently running above 8% has 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 over the first nine months of 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 premium increases continue to chase inflation.

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 the first quarter of 2023, the challenging interest rate environment and inflationary pressures have continued to present challenges for many of our mortgage lending and insurance partners.

In our Home segment, mortgage rates have remained relatively consistent in the first quarter of 2023 compared to the fourth quarter of 2022, but nearly doubled compared to the first quarter of 2022.

The significant increases in mortgage rates caused a sharp decline in refinance volumes and are putting pressure on purchase activity.

In our Insurance segment, demand from our carrier partners remains volatile as they continue to deal with persistent industry headwinds.

Segment Reporting

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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.

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.

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.

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.

See Note 7—Equity Investments for additional information on the equity interest in EarnUp.

North Carolina Office Properties

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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.

Recent Mortgage Interest Rate Trends

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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 increased from a monthly average of 3.10% in December 2021 to a monthly average of 6.11% in September 2022.

On a quarterly basis, 30-year mortgage interest rates in the third quarter of 2022 averaged 5.58%, compared to 2.87% in the third quarter of 2021 and 3.08% in the fourth quarter of 2021.

According to Freddie Mac, 30-year mortgage interest rates increased from a monthly average of 6.36% in December 2022 to a monthly average of 6.54% in March 2023.

On a quarterly basis, 30-year mortgage interest rates in the first quarter of 2023 averaged 6.36%, compared to 3.79% in the first quarter of 2022 and 6.69% in the fourth quarter of 2022.

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

According to Mortgage Bankers Association (“MBA”) data, total refinance origination dollars decreased to 19% of total mortgage origination dollars in the third quarter of 2022 compared to 53% in the fourth quarter of 2021.

In the third quarter of 2022, total refinance origination dollars decreased 82% from the fourth quarter of 2021 and 84% from the third quarter of 2021.

Industry-wide mortgage origination dollars in the third quarter of 2022 decreased 52% from the fourth quarter of 2021 and 55% from third quarter of 2021.

In October 2022, the MBA projected 30-year mortgage interest rates to increase during 2022, to an average 6.7% for the year.

According to MBA projections, the mix of mortgage origination dollars is expected to move back towards purchase mortgages with the refinance share representing approximately 30% for 2022.

According to Mortgage Bankers Association (“MBA”) data, total refinance origination dollars increased to 20% of total mortgage origination dollars in the first quarter of 2023 compared to 17% in the fourth quarter of 2022 but decreased from 45% in the first quarter of 2022.

In the first quarter of 2023, total refinance origination dollars did not change from the fourth quarter of 2022 and decreased 79% from the first quarter of 2022.

Industry-wide mortgage origination dollars in the first quarter of 2023 decreased 16% from the fourth quarter of 2022 and 52% from first quarter of 2022.

In April 2023, the MBA projected 30-year mortgage interest rates to an average 5.5% for the 2023 year, consistent with the average rates in 2022.

According to MBA projections, the mix of mortgage origination dollars is expected to continue to be weighted towards purchase mortgages with the refinance share representing approximately 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 decreased 24% in the third quarter of 2022 compared to the fourth quarter of 2021, and 22% compared to the third quarter of 2021.

According to Fannie Mae data, existing home sales increased 3% in the first quarter of 2023 compared to the fourth quarter of 2022, and decreased 28% compared to the first quarter of 2022.

Fannie Mae predicts an overall decrease in existing-home sales of approximately 16% in 2023 compared to 2022.

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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 0.8 million new users in the third quarter of 2022, bringing cumulative sign-ups to 23.9 million at September 30, 2022.

We attribute $29 million of revenue in the third quarter of 2022 to registered MyLendingTree members across the LendingTree platform.

We continued to grow our user base and added 1.0 million new users in the first quarter of 2023, bringing cumulative sign-ups to 25.8 million at March 31, 2023.

We attribute $20 million of revenue in the first quarter of 2023 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.

Results of Operations for the Three and Nine Months ended September 30, 2022 and 2021

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

Change 2022 2021 $

Cost Reductions and Simplification of Business

On March 24, 2023, we committed to a workforce reduction plan (the “Reduction Plan”), that is intended to reduce operating costs.

The Reduction Plan includes the elimination of approximately 13% of the Company’s current workforce.

As a result of the Reduction Plan, we expect to incur approximately $5.6 million in severance charges in connection with the workforce reduction, $4.3 million of which was incurred in the first quarter of 2023.

Part of this Reduction Plan included the shut down of our LendingTree customer call center as well as our Medicare insurance agency operations within QuoteWizard.

We anticipate the Reduction Plan will reduce annual compensation expense by approximately $14 million, comprised of $2 million in cost of revenue, $4 million in selling and marketing expense, $3 million in general and administrative expense, and $5 million in product development.

Separately, we made the decision to close our Ovation credit services business, an asset group within our Consumer segment, by mid- 2023.

As a result, the Company recorded an asset impairment charge of $4.2 million in the first quarter of 2023 related to the write-off of certain long-term assets.

We acquired Ovation in 2018 to better serve those customers who come to LendingTree and receive suboptimal offers of credit.

The business grew for a number of years before running into challenges in the wake of COVID-19, and more recently the industry has faced increased regulatory pressure.

The business is capital-intensive, requires elevated overhead, and future prospects were becoming uncertain.

The Ovation business accounted for approximately 3% of total Revenue and 3% of Total Costs and Expenses, with an immaterial impact to Net Income on the Consolidated Statement of Operations and Comprehensive Income (Loss) for the year ended December 31, 2022.

Results of Operations for the Three Months ended March 31, 2023 and 2022

Three Months Ended March 31,

(Dollars in thousands)

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Amortization of intangibles 2,049 7,917 (5,868) (74) %

Change in fair value of contingent consideration — (196) 196 100 % — (8,249) 8,249 100 %

Restructuring and severance 4,454 3,625 829 23 %

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Total costs and expenses 213,519 286,116 (72,597) (25) %

Operating (loss) income (18,576) 7,419 (25,995) (350) % (25,404) 16,060 (41,464) (258) %

Other (expense) income, net:

Interest expense, net (5,720) (11,826) (6,106) (52) % (19,990) (31,881) (11,891) (37) %

Other income 1,523 — 1,523 — % 1,806 40,072 (38,266) (95) %

(Loss) income before income taxes (22,773) (4,407) (18,366) (417) % (43,588) 24,251 (67,839) (280) %

Income tax (expense) benefit (135,910) 1 (135,911) — % (133,956) 455 (134,411) — %

Net (loss) income from continuing operations (158,683) (4,406) (154,277) (3,502) % (177,544) 24,706 (202,250) (819) %

Loss from discontinued operations, net of tax (1) (54) (53) (98) % (4) (3,516) (3,512) (100) %

Net (loss) income and comprehensive (loss) income $ (158,684) $ (4,460) $ (154,224) (3,458) % $ (177,548) $ 21,190 $ (198,738) (938) %

Revenue decreased in the third quarter of 2022 compared to the third quarter of 2021, and in the first nine months of 2022 compared to the first nine months of 2021, due to decreases in our Home and Insurance segments, partially offset by an increase in our Consumer segment.

Operating loss (13,011) (2,938) (10,073) (343) %

Other income (expense), net:

Interest income (expense), net 25,029 (7,505) 32,534 433 %

Other income (expense) 1,834 (1) 1,835 183,500 %

Income (loss) before income taxes 13,852 (10,444) 24,296 233 %

Income tax expense (395) (382) (13) (3) %

Net income (loss) and comprehensive income (loss) $ 13,457 $ (10,826) $ 24,283 224 %

Revenue decreased in the first quarter of 2023 compared to the first quarter of 2022 due to decreases in our Home, Consumer, and Insurance segments.

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 $2.7 million, or 3%, in the third quarter of 2022 from the third quarter of 2021.

Revenue from our Consumer segment increased $76.3 million, or 33%, in the first nine months of 2022 from the first nine months of 2021, primarily due to increases in our personal loans, small business loans, and credit cards.

Many of our products in the Consumer segment experienced increases in revenue in the third quarter and first nine months of 2022 from the third quarter and first nine months of 2021 due to the recovery from the impacts of the COVID-19 pandemic.

Revenue from our personal loans product increased $3.9 million, or 12%, to $37.7 million in the third quarter of 2022 from $33.8 million in the third quarter of 2021, and increased $41.3 million, or 56%, to $115.2 million in the first nine months of

2022 from $73.9 million in the first nine months of 2021 primarily due to an increase in the number of consumers completing request forms.

Revenue from our credit cards product decreased $2.6 million, or 10%, to $24.3 million in the third quarter of 2022 from $26.9 million in the third quarter of 2021 primarily due to a decrease in the number of consumer clicks.

Revenue from our credit cards product increased $14.5 million, or 22%, to $81.4 million in the first nine months of 2022 compared to $67.0 million in the first nine months of 2021, due to an increase in revenue earned per click.

Revenue from our Consumer segment decreased $21.4 million, or 21%, in the first quarter of 2023 from the first quarter of 2022 primarily due to decreases in our personal loans and credit cards.

Revenue from our personal loans product decreased $11.6 million, or 33%, to $23.6 million in the first quarter of 2023 from $35.2 million in the first quarter of 2022 primarily due to a decrease in the number of consumers completing request forms and a decrease in revenue earned per consumer.

Revenue from our credit cards product decreased $11.5 million, or 39%, to $18.3 million in the first quarter of 2023 from $29.8 million in the first quarter of 2022 primarily due to a decrease in the number of consumer clicks and in revenue earned per click.

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 $1.3 million, or 9%, in the third quarter of 2022 compared to the third quarter of 2021, primarily due to an increase in revenue earned per consumer.

Revenue from our small business loans product increased $19.8 million, or 62%, in the first nine months of 2022 compared to the first nine months of 2021, primarily due to an increase in revenue earned per consumer and an increase in the number of consumers completing request forms.

Our Home segment includes the following products:

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

Revenue from our Home segment decreased $47.5 million, or 42%, in the third quarter of 2022 from the third quarter of 2021, and $104.6 million, or 30%, in the first nine months of 2022 compared to the first nine months of 2021, primarily due to a decrease in revenue from our refinance mortgage product, partially offset by increases in our home equity and purchase mortgage products.

Revenue from deposits increased $2.4 million, or 134%, in the third quarter of 2022 compared to the third quarter of 2021, and $3.3 million, or 52%, in the first nine months of 2022 compared to the first nine months of 2021, primarily due to increases in both revenue earned per consumer and in the number of consumers.

Revenue from student loans decreased $3.3 million, or 40%, in the third quarter of 2022 compared to the third quarter of 2021, primarily due to a decrease in the number of consumers.

Revenue from student loans decreased $5.8 million, or 43%, in the first nine months of 2022 compared to the first nine months of 2021, primarily due to revenue earned per consumer.

Revenue from our mortgage products decreased $58.1 million, or 63%, to $34.5 million in the third quarter of 2022 from $92.6 million in the third quarter of 2021, and decreased $139.6 million or 47%, to $156.9 million in the first nine months of 2022 from $296.5 million in the first nine months of 2021.

Revenue from our refinance mortgage product decreased $58.8 million in the third quarter of 2022 compared to the third quarter of 2021, and $150.4 million in the first nine months of 2022 compared to the first nine months of 2021, due to a decrease in the number of consumers completing request forms as interest rates have risen.

Revenue from our purchase mortgage product increased $10.8 million in the first nine months of 2022 compared to the first nine months of 2021, primarily due to an increase in revenue earned per consumer.

Revenue from our home equity loans product increased $10.0 million, or 52%, to $29.0 million in the third quarter of 2022 from $19.0 million in to the third quarter of 2021, and increased $34.0 million, or 73%, to $80.5 million in the first nine months of 2022 from $46.5 million in the first nine months of 2021, primarily due to increases in consumers completing request forms and in revenue earned per consumer.

Revenue from our Insurance segment decreased $14.6 million, or 17%, to $70.2 million in the third quarter of 2022 from $84.8 million in the third quarter of 2021 due to decreases in the number of consumers seeking insurance coverage and in revenue earned per consumer.

Revenue from our Insurance segment decreased $28.7 million, or 11%, to $232.0 million in the first nine months of 2022 from $260.7 million in the first nine months of 2021 due to a decrease in the number of consumers seeking insurance coverage, partially offset by an increase in revenue earned per consumer.

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

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

Revenue from our Home segment decreased $58.3 million, or 57%, in the first quarter of 2023 from the first quarter of 2022 primarily due to decreases in revenue from our refinance and purchase mortgage products.

Revenue from our mortgage products decreased $58.0 million, or 74%, to $20.0 million in the first quarter of 2023 from $78.0 million in the first quarter of 2022.

Revenue from our refinance mortgage product decreased $48.2 million in the first

quarter of 2023 compared to the first quarter of 2022 due to a decrease in the number of consumers completing request forms and a decrease in revenue earned per consumer, as interest rates have risen.

Revenue from our purchase mortgage product decreased $9.8 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to a decrease in the number of consumers completing request forms and a decrease in revenue earned per consumer.

Revenue from our home equity loans product increased $0.5 million, or 2%, to $23.7 million in the first quarter of 2023 from $23.2 million in the first quarter of 2022.

Revenue from our Insurance segment decreased $3.0 million, or 4%, to $77.1 million in the first quarter of 2023 from $80.0 million in the first quarter of 2022 due to a decrease in revenue earned per consumer, partially offset by an increase in the number of consumers seeking insurance.

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, credit scoring fees, credit card fees, website network hosting, and server fees.

Cost of revenue decreased in the third quarter of 2022 from the third quarter of 2021 by $0.9 million.

Cost of revenue increased $1.4 million in the first nine months of 2022 from the first nine months of 2021, due to an increase in website network hosting and server hosting fees.

Cost of revenue as a percentage of revenue increased to 6% in the third quarter of 2022 compared to 5% in the third quarter of 2021, and increased to 6% in the first nine months of 2022 compared to 5% in the first nine months of 2021.

Cost of revenue decreased in the first quarter of 2023 from the first quarter of 2022 by $1.8 million, primarily due to a $1.3 million decrease in website network hosting and server hosting fees.

Cost of revenue as a percentage of revenue increased to 7% in the first quarter of 2023 compared to 5% in the first quarter of 2022.

Selling and marketing expense

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

Selling and marketing expense decreased in the third quarter of 2022 compared to the third quarter 2021 by $29.6 million and decreased in the first nine months of 2022 from the first nine months of 2021 by $23.6 million, primarily due to the changes in advertising and promotional expense discussed below.

Additionally, compensation and benefits decreased $1.2 million in the third quarter of 2022 compared to the third quarter 2021.

Selling and marketing expense decreased in the first quarter of 2023 compared to the first quarter 2022 by $67.0 million primarily due to the changes in advertising and promotional expense discussed below.

Additionally, compensation and benefits decreased $2.4 million in the first quarter of 2023 compared to the first quarter 2022.

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

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

Change 2022 2021 $

Three Months Ended March 31,

(Dollars in thousands)

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Total advertising expense $ 124,399 $ 189,076 $ (64,677) (34) %

In the periods presented, advertising and promotional expenses are equivalent to our variable marketing expense.

See Variable Marketing Margin below for additional information on variable marketing expense.

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.

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

We adjusted our advertising expenditures in the third quarter and first nine months of 2022 compared to the third quarter and first nine months of 2021 in response to changes in Network Partner demand on our marketplace.

We adjusted our advertising expenditures in the first quarter of 2023 compared to the first quarter of 2022 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.

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

General and administrative expense decreased in the third quarter of 2022 compared to the third quarter of 2021, due to a $2.6 million decrease in compensation and benefits, partially offset by an increase in technology expenses of $1.6 million.

General and administrative expense increased in the first nine months of 2022 compared to the first nine months of 2021 primarily due to increases in technology of $4.2 million, loss on assets of $1.6 million, other tax expense of $1.5 million, an increase in travel and entertainment expenses of $1.5 million, and an increase in fees and charges of $1.3 million, partially offset by decreases in compensation and benefits of $7.6 million and a decrease in professional fees of $1.8 million.

General and administrative expense as a percentage of revenue in the third quarter of 2022 was 17% compared to 13% for the third quarter of 2021, and 15% for the first nine months of 2022 compared to 14% for the first nine months of 2021.

General and administrative expense remained relatively consistent in the first quarter of 2023 compared to the first quarter of 2022.

Compensation and benefits, other tax expense, and facilities expense decreased in the first quarter of 2023 compared to the first quarter of 2022 by $1.7 million, $1.5 million, and $0.8 million, respectively.

We incurred a $4.2 million loss on the impairment of assets for our Ovation business in the first quarter of 2023.

General and administrative expense as a percentage of revenue in the first quarter of 2023 was 18% compared to 13% for the first quarter of 2022.

Product development

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

Product development expense increased in the third quarter and first nine months of 2022 compared to the third quarter and first nine months of 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.

Product development expense remained relatively consistent in the first quarter of 2023 compared to the first quarter of 2022 as we continued to invest in internal development of new and enhanced features, functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners.

Amortization of intangibles

The decrease in amortization of intangibles in the third quarter and first nine months of 2022 compared to the third quarter and first nine months of 2021 was due to certain intangible assets associated with our recent business acquisitions becoming fully amortized.

Contingent consideration

During the third quarter and first nine months of 2022, we did not record contingent consideration expense.

All earnouts were completed prior to 2022.

During the third quarter and first nine months of 2021, we recorded an aggregate gain of $0.2 million and $8.2 million respectively, due to adjustments in the estimated fair value of the earnout payments related to the QuoteWizard acquisition.

The decrease in amortization of intangibles in the first quarter of 2023 compared to the first quarter of 2022 was primarily due to certain intangible assets associated with our recent business acquisitions becoming fully amortized.

Restructuring and severance

In the first quarter of 2022, we completed a workforce reduction of approximately 75 employees, and in the second quarter of 2022 completed a workforce reduction of approximately 25 employees.

The Company incurred total expense of $3.8 million consisting of employee separation costs of $2.7 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.

Interest expense

Interest expense decreased in the third quarter and first nine months of 2022 compared to the third quarter and first nine months of 2021 primarily due to the adoption of 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 for additional information.

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

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

On March 24, 2023, we committed to the Reduction Plan that is intended to reduce operating costs.

The Reduction Plan includes the elimination of approximately 13% of the Company’s current workforce.

As a result of the Reduction Plan, we estimate that we will incur approximately $5.6 million in severance charges in connection with the workforce reduction, consisting of cash expenditures for employee separation costs of approximately $4.6 million and non-cash charges for the accelerated vesting of certain equity awards of approximately $1.0 million.

We incurred restructuring expense of $4.3 million in the first quarter of 2023 and expect to incur an additional $1.3 million of restructuring expense in the second quarter of 2023 related to the Reduction Plan.

We anticipate that the execution of the Reduction Plan, including cash payments, will be completed by the end of the second quarter of 2024.

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

We 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 were paid by the first quarter of 2023.

Interest income/expense

In the first quarter of 2023, we repurchased approximately $190.6 million in principal amount of our 2025 Notes for $156.3 million plus accrued and unpaid interest of approximately $0.1 million.

As a result of the repurchase, we recognized a gain on the extinguishment of $34.3 million, a loss on the write-off of unamortized debt issuance costs of $2.4 million, and incurred debt repayment costs of $1.0 million, all of which are included in interest income/expense, net in the consolidated statement of operations and comprehensive income.

See Note 12—Debt for additional information.

For the first quarter of 2023, other income primarily consists of dividend income.

Income tax expense

For the third quarter and first nine months of 2022, the effective tax rate varied from the federal statutory rate of 21% primarily due to expense of $139.7 million to record a full valuation allowance against our net deferred tax assets, excess tax expense of $1.8 million and $4.7 million, respectively, resulting from vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

See Note 11—Income Taxes for additional information on the valuation allowance.

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 first quarter of 2023, the effective tax rate varied from the federal statutory rate of 21% primarily due to the change in the valuation allowance, net of the current period change in tax effected net indefinite-lived intangibles.

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.

Segment Profit

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

Change 2022 2021 $

Three Months Ended March 31,

(Dollars in thousands)

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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 15—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.

Our home equity product achieved record revenue in the third quarter of 2022, with a 52% increase in the third quarter of 2022 from the third quarter of 2021.

Purchase revenue increased 4% in the third quarter of 2022 compared to the third quarter of 2021 despite volumes declining 29% in the third quarter of 2022 compared to the third quarter of 2021.

Revenue per lead for purchase loans continues to expand having become more valuable to our lending partners in this difficult origination market.

However, limited home inventory and overall affordability is expected to continue to weigh on overall home sale volumes.

The 30-year fixed mortgage rate at the end of the third quarter, as measured by the Freddie Mac Mortgage Market Survey, reached the highest level recorded since 2006 at 6.7%, negatively impacting already depressed loan origination volumes.

The number of consumers with an incentive to refinance has dropped to levels last seen in January 2000, according to the August 2022 Black Knight Mortgage Monitor.

Near record home prices coupled with higher mortgage rates led to a 24% decrease in existing home sales in September 2022 compared to September 2021.

Our home lending partners continue to adjust their origination capacity to the rapidly changing housing market.

As a result, revenue in the Home segment decreased 42% to $64.9 million in the third quarter of 2022 from the third quarter of 2021, with segment profit of $24.1 million in the third quarter of 2022, a decrease of 42% from the third quarter of 2021.

Importantly, our variable model allowed us to generate a 37% segment margin in the third quarter, which was consistent with that of the third quarter of 2021, as decreased revenue per lead was offset by a similar decline in cost per lead.

Growth in our Consumer segment continued, although the pace of growth has slowed as expected, with revenue of $102.7 million in the third quarter of 2022, an increase of 3% from the third quarter of 2021, and segment profit of $45.8 million in the third quarter of 2022, an increase of 2% from the third quarter of 2021.

Personal loans revenue of $37.7 million in the third quarter of 2022 increased 12% from the third quarter of 2021 as debt consolidation remains attractive with consumer credit card balances continuing to rise.

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

Small business performed well this quarter, achieving revenue growth of 9% in the third quarter of 2022 compared to the third quarter of 2021.

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.

We are working on providing new product offerings and expanding data capabilities to provide real-time borrower cash flow insights, with a focus on being a valued partner to our lenders to gain share in this quickly evolving market over time.

Our credit card business generated revenue of $24.3 million in the third quarter of 2022, a decrease of 10% from the third quarter of 2021, as high levels of competition in the quarter drove a decline in volume.

Revenue per click growth continued in the quarter, increasing 3% in the third quarter of 2022 from the third quarter of 2021.

Margins in the segment remain lower than historical levels as we prioritize capturing partner spend and maximizing variable marketing dollars.

We aim to continue to diversify our marketing mix to pursue more profitable marketing channels and partnerships to expand our reach and attract more consumers.

Our student loan business, which typically has seasonally strong performance in the third quarter, continues to be negatively impacted by the extension of the government’s loan payment moratorium.

However, loan payments are expected to resume beginning in 2023.

We believe borrowers will be looking for opportunities to refinance their student debt as payments have been paused since the onset of the pandemic.

Our deposits business is growing quickly again as consumers are looking to capitalize on higher interest rates for their savings.

The auto and home insurance industry continues to be impacted by persistent industry headwinds, supply chain issues, rising accident severity and frequency, and more recently hurricane losses.

Although consumer search volumes are running at all-time highs, the difficult operating environment for our carrier partners limited growth in the quarter.

Revenue was $70.2 million in the third quarter of 2022, a decrease of 17% from the third quarter of 2021.

Segment profit of $22.6 million in the third quarter of 2022 decreased 15% from the third quarter of 2021.

We do not expect property & casualty carriers to return with meaningful budget increases until next year.

Most of our top partners have lowered budgets due to profitability concerns and outsized losses from Hurricane Ian.

Given our focus on lead quality and margin performance, we believe we are well positioned to capture additional share of carrier marketing spend when budgets begin to grow again.

Variable Marketing Margin

We report variable marketing margin as a supplemental measure to GAAP.

This measure is the primary metric by which we measure the effectiveness of our marketing efforts.

Variable marketing margin is a measure of the efficiency of our operating model, measuring revenue after subtracting variable marketing and advertising costs that directly influence revenue.

See Note 15—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.

Revenue in the Home segment decreased 57% to $43.7 million in the first quarter of 2023, with segment profit of $15.1 million in the first quarter of 2023, a decrease of 58% from the first quarter of 2022.

Despite the sharp decrease in revenue in the first quarter of 2023, our variable marketing model generated a 35% segment margin, which was consistent with the first quarter of 2022.

Our home equity business again produced the majority of the Home segment's revenue, growing 2% in the first quarter of 2023 from the first quarter of 2022.

Consumer demand to borrow against a near record level of equity in their homes remains strong, with volume for the product increasing 20% in the first quarter of 2023 compared to the first quarter of 2022.

Our team is focused on operating efficiently in this difficult period, helping our lending partners improve conversion rates for our customers that are in the market to purchase a home.

The 30-year fixed mortgage rate fluctuated between a range of 6.09% and 6.73% during the quarter, according to the Freddie Mac Mortgage Market Survey.

Interest rates for new home loans remain at the highest level recorded since 2006.

Home affordability, as measured by the National Association of Realtors (“NAR”) Composite Index, remains at the lowest level since it began the benchmark dating back to 1986.

In addition to affordability concerns, current homeowners appear patient with regard to moving during the typically busy spring selling season.

Existing for-sale home inventory remains exceptionally low at just under 1 million homes in the U.S., according to NAR, up only modestly from the all-time low of 0.85 million homes for sale recorded in January, 2022.

Current mortgage rates that are much higher than the average homeowner has today are creating a "lock-in" effect, discouraging those who desire a change in their current living situation from moving.

Many homeowners instead are exploring renovation projects to accommodate changes in lifestyle.

This phenomenon has likely led to the increased demand we have seen for Home Equity loans, and we have been shifting more of our team and resources to focus on this opportunity.

Our Consumer segment experienced a continued slowdown in revenue due to stricter underwriting criteria at many of our partners and decreased new loan appetite across multiple product lines.

Revenue of $79.7 million in the first quarter of 2023 decreased 21% from the first quarter of 2022, and profit of $34.9 million in the first quarter of 2023 decreased 18% from the first quarter of 2022.

Consumer segment margin increased to 44% in the first quarter of 2023 from 42% in the first quarter of 2022 due to a mix-shift towards higher earning products, as well as continued operating discipline as we moved away from underperforming marketing partners, publishers and channels.

Personal loans revenue of $23.6 million decreased 33% in the first quarter of 2023 from the first quarter of 2022 as lending standards continued to tighten, a trend that began to emerge in the second-half of 2022.

Close rates have declined at most issuers, leaving more of our customers who are looking for a loan without an offer.

We are working to assist this growing pool of borrowers who are being turned down by pairing them with debt relief partners to help improve their credit profile.

Small business revenue also slowed, with revenue decreasing 11% in the first quarter of 2023 from the first quarter of 2022.

The causes were similar to those experienced in personal loans.

Tighter credit conditions are decreasing conversion rates at our lending partners.

We are primarily focused on optimizing our marketing mix to increase the quality of our potential borrowers to drive higher conversion rates, and negotiating better terms from our lending partners as a result of those improvements.

Our credit card business generated revenue in the first quarter of 2023 of $18.3 million, a decrease of 39% from the first quarter of 2022.

At the end of the quarter we had completed our transition to a new tech platform for our credit card business, LightSpeed.

This new platform provides faster page load speeds and improved routing flexibility.

Initially we expect to see improved throughput for our customers to partner application pages, which should result in improved margins and conversion.

The LightSpeed implementation has also allowed us to begin transitioning all of our credit card traffic from the Compare Cards brand to our core LendingTree experience.

Over time we expect improved marketing efficiencies and reduced costs from this shift will help stimulate improvement in results.

Revenue of $77.1 million in the first quarter of 2023 decreased 4% from the first quarter of 2022 as our carrier partners remain cautious in their desire for new auto and home policyholders.

However, disciplined operating improvements the team implemented over the second-half of last year generated segment profit of $30.2 million in the first quarter of 2023, an increase of 43% from the first quarter of 2022.

The realized 39% segment margin in the first quarter of 2023 is a testament to the quality of our Insurance business.

We experienced an uptick in partner spend for new auto policies during the quarter, an encouraging sign after six straight quarters of reduced demand.

However, loss ratios at major personal auto insurers remain elevated.

As such, we do not expect this uptick in demand for new customers from our carrier partners to continue.

We are now forecasting segment revenue to decline somewhat from the first quarter of 2023 for the remainder of the year given this development.

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.

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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:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

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Variable marketing margin $ 76,109 $ 94,102

Below is a reconciliation of selling and marketing expense to variable marketing expense:

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(in thousands)

2 unchanged sentences

Variable marketing expense $ 124,399 $ 189,076

The following is a reconciliation of net (loss) income from continuing operations to variable marketing margin (in thousands):

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net (loss) income from continuing operations $ (158,683) $ (4,406) $ (177,544) $ 24,706

(in thousands)

Net income (loss) $ 13,457 $ (10,826)

Adjustments to reconcile to variable marketing margin:

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Amortization of intangibles 2,049 7,917

Change in fair value of contingent consideration — (196) — (8,249)

Restructuring and severance 4,454 3,625

Litigation settlements and contingencies 12 (27)

Interest expense, net 5,720 11,826 19,990 31,881

Other income (1,523) — (1,806) (40,072)

Income tax expense (benefit) 135,910 (1) 133,956 (455)

Interest (income) expense, net (25,029) 7,505

Other (income) expense (1,834) 1

Income tax expense 395 382

Variable marketing margin $ 76,109 $ 94,102

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

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

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.

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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), (8) dividend income, and (9) one-time items.

We report Adjusted EBITDA as net income 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), (8) contributions to the LendingTree Foundation, (9) dividend income, and (10) 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.

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Adjusted EBITDA is adjusted for one-time items, if applicable.

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.

For the periods presented below, one-time items consisted of the franchise tax caused by the equity investment gain in Stash.

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.

For the periods presented below, one-time items consisted of the franchise tax caused by the equity investment gain in Stash Financial, Inc.

Non-Cash Expenses that are Excluded from Adjusted EBITDA

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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 (loss) income from continuing operations to Adjusted EBITDA (in thousands) .

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net (loss) income from continuing operations $ (158,683) $ (4,406) $ (177,544) $ 24,706

(in thousands)

Net income (loss) $ 13,457 $ (10,826)

Adjustments to reconcile to Adjusted EBITDA:

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Loss on impairments and disposal of assets 5,027 431

Gain on investments — — — (40,072)

Non-cash compensation expense 11,203 13,997

Franchise tax caused by equity investment gain — 1,500

Change in fair value of contingent consideration — (196) — (8,249)

Acquisition expense (9) 9

Litigation settlements and contingencies 12 (27)

Interest expense, net 5,720 11,826 19,990 31,881

Interest (income) expense, net (25,029) 7,505

Dividend income (1,834) —

Income tax (expense) benefit 135,910 (1) 133,956 (455)

Income tax expense 395 382

Adjusted EBITDA $ 14,520 $ 29,367

Financial Position, Liquidity and Capital Resources

As of September 30, 2022, we had $285.5 million of cash and cash equivalents, compared to $251.2 million of cash and cash equivalents as of December 31, 2021.

In the first quarter of 2022, we acquired an equity interest in EarnUp Inc.

(“EarnUp”) for $15.0 million.

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

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.

As of March 31, 2023, we had $150.1 million of cash and cash equivalents, compared to $298.8 million of cash and cash equivalents as of December 31, 2022.

On March 8, 2023, we repurchased approximately $190.6 million in principal amount of our 2025 Notes, through separate transactions with certain holders of the 2025 Notes, for $156.3 million plus accrued and unpaid interest of approximately $0.1 million.

In the first quarter of 2023, we recognized a gain on the extinguishment of $34.3 million, a loss on the write-off of unamortized debt issuance costs of $2.4 million and incurred debt repayment costs of $1.0 million, all of which are included in interest income/expense, net in the consolidated statement of operations and comprehensive income.

See Note 12—Debt for additional information.

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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 and inflation on our liquidity and capital resources.

We will continue to monitor the impact of the current economic conditions, including interest rates, inflation, and ongoing COVID-19 pandemic on our liquidity and capital resources.

Credit Facility

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See Note 12—Debt for additional information.

As of November 4, 2022, we have outstanding $249.4 million under the Term Loan Facility, a $0.2 million letter of credit under the Revolving Facility and the remaining borrowing capacity under the Revolving Facility is $199.8 million.

Our cash flows attributable to continuing operations are as follows:

Nine Months Ended

September 30,

As of May 2, 2023, we have outstanding $248.1 million under the Term Loan Facility, a $0.2 million letter of credit under the Revolving Facility and the remaining borrowing capacity under the Revolving Facility is $199.8 million.

Our cash flows are as follows:

Three Months Ended

(in thousands)

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Net cash used in investing activities (2,452) (18,465)

Net cash provided by (used in) financing activities 33,411 (15,192)

Net cash used in financing activities (159,565) (46,098)

Cash Flows from Operating Activities

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Our primary uses of cash from our operating activities include advertising and promotional payments.

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

Net cash provided by operating activities attributable to continuing operations decreased in the first nine months of 2022 from the first nine months of 2021 primarily due to a reduction in revenue generated by our products.

Net cash provided by operating activities increased in the first three months of 2023 from the first three months of 2022 primarily due to favorable changes in accounts receivable.

Cash Flows from Investing Activities

Net cash used in investing activities attributable to continuing operations in the first nine months of 2022 of $25.4 million consisted of the purchase of a $16.4 million equity interest in EarnUp and another small investment, as well as capital expenditures of $9.0 million primarily related to internally developed software.

Net cash used in investing activities attributable to continuing operations in the first nine months of 2021 of $31.7 million consisted of capital expenditures of $30.5 million primarily related to internally developed software and leasehold improvements for our new principal corporate offices, as well as the purchase of an additional $1.2 million equity interest in Stash.

Net cash used in investing activities in the first three months of 2023 of $2.5 million consisted of capital expenditures of $2.5 million primarily related to internally developed software.

Net cash used in investing activities in the first three months of 2022 of $18.5 million consisted of capital expenditures of $3.5 million primarily related to internally developed software, as well as the purchase of a $15 million equity interest in EarnUp.

Cash Flows from Financing Activities

Net cash provided by financing activities attributable to continuing operations in the first nine months of 2022 of $33.4 million consisted primarily of $250.0 million in proceeds from the term loan and the repayment of $169.7 million to settle the Company’s 2022 Notes discussed in the “Credit Facility” section above, $43.0 million for the repurchase of our stock, and $3.3 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options.

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

Net cash used in financing activities in the first three months of 2023 of $159.6 million consisted primarily of the repurchase of our Convertible Senior Notes for $156.3 million and $1.7 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options.

Net cash used in financing activities in the first three months of 2022 of $46.1 million consisted primarily of $43.0 million for the repurchase of our stock and $3.1 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis