What changed in this filing

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Item 1. Financial Statements

2023-07-28 compared with 2023-05-03 · 200 added, 106 removed, 509 unchanged (38% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(in thousands, except per share amounts)

11 unchanged sentences

Total costs and expenses 175,840 265,819 389,359 551,935

Operating loss ( 13,011 ) ( 2,938 )

Operating income (loss) 6,613 ( 3,896 ) ( 6,398 ) ( 6,834 )

Other income (expense), net:

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

Other income (expense) 1,834 ( 1 )

Interest (expense) income, net ( 6,940 ) ( 6,765 ) 18,089 ( 14,270 )

Other income 439 284 2,273 283

Income (loss) before income taxes 112 ( 10,377 ) 13,964 ( 20,821 )

Income tax expense ( 395 ) ( 382 )

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

Income tax (expense) benefit ( 227 ) 2,339 ( 622 ) 1,957

Net (loss) income and comprehensive (loss) income $ ( 115 ) $ ( 8,038 ) $ 13,342 $ ( 18,864 )

Weighted average shares outstanding:

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Diluted 12,915 12,723 12,912 12,812

Net income (loss) per share:

Net (loss) income per share:

Basic $ ( 0.01 ) $ ( 0.63 ) $ 1.04 $ ( 1.47 )

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Balance as of March 31, 2023 $ 230,979 16,265 $ 163 $ 1,198,836 $ ( 701,842 ) 3,355 $ ( 266,178 )

Net income and comprehensive income ( 115 ) — — — ( 115 ) — —

Non-cash compensation 10,199 — — 10,199 — — —

Purchase of treasury stock — — — — — — —

Issuance of common stock for stock options, employee stock purchase plan, restricted stock awards and restricted stock units, net of withholding taxes 652 59 — 652 — — —

Other — — — — — — —

Balance as of June 30, 2023 $ 241,715 16,324 $ 163 $ 1,209,687 $ ( 701,957 ) 3,355 $ ( 266,178 )

Common Stock Treasury Stock

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

Net income and comprehensive income ( 8,038 ) — — — ( 8,038 ) — —

Non-cash compensation 17,335 — — 17,335 — — —

Purchase of treasury stock — — — — — — —

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes 341 21 — 341 — — —

Balance as of June 30, 2022 $ 350,486 16,141 $ 161 $ 1,162,714 $ ( 546,211 ) 3,355 $ ( 266,178 )

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(in thousands)

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Gain on settlement of convertible debt ( 34,308 ) —

Loss on impairment of investments 1,440 —

Changes in current assets and liabilities:

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Cash flows from financing activities:

Proceeds from term loan — 250,000

Repayment of term loan ( 1,250 ) —

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( 156,294 ) —

Payment of debt issuance costs ( 953 ) ( 4 )

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

Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents ( 148,861 ) ( 54,564 )

Repayment of 0.625 % Convertible Senior Notes

— ( 169,659 )

Payment of debt costs ( 1,079 ) ( 3 )

Net cash (used in) provided by financing activities ( 159,665 ) 34,584

Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents ( 136,294 ) 27,891

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 298,969 251,342

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Basis of Presentation

The accompanying unaudited interim consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023 and 2022, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S.

The accompanying unaudited interim consolidated financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”).

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

The results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or any other period.

The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or any other period.

The accompanying consolidated balance sheet as of December 31, 2022 was derived from audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”).

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Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in the 2022 Annual Report.

The Company reclassified certain amounts in the prior year consolidated statement of operations and comprehensive income and consolidated statement of cash flows to be consistent with the current year presentation.

The Company reclassified certain amounts in the prior year consolidated statements of operations and comprehensive income and consolidated statement of cash flows to be consistent with the current year presentation.

NOTE 2— SIGNIFICANT ACCOUNTING POLICIES

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

Financial instruments, which potentially subject the Company to concentration of credit risk at March 31, 2023, consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet.

Financial instruments, which potentially subject the Company to concentration of credit risk at June 30, 2023, consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet.

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

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Recently Adopted Accounting Pronouncements

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

In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-06, which simplifies the accounting for convertible instruments, amends the derivatives scope exception guidance for contracts in an entity’s own equity, and amends the related earnings-per-share guidance.

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

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

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

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

The recombination of the equity conversion component of our convertible debt remaining outstanding caused a reduction in additional paid-in capital and an increase in deferred income tax assets.

The recombination of the equity conversion component of the Company's convertible debt remaining outstanding caused a reduction in additional paid-in capital and an increase in deferred income tax assets.

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

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

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

The adoption of ASU 2020-06 did not impact the Company's cash flows or compliance with debt covenants.

Recently Issued Accounting Pronouncements

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

LENDINGTREE, INC.

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Home $ 41,563 $ 73,938 $ 85,238 $ 175,882

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Insurance 58,398 81,756 135,480 161,794

Other 15 85 57 213

Total revenue $ 182,453 $ 261,923 $ 382,961 $ 545,101

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Subscription fees are recognized over the period a consumer is receiving services.

As of the second quarter of 2023, the Company discontinued providing its credit services product to consumers and no longer receives upfront and subscription fees.

The Company recognizes revenue on closing fees and approval fees at the point when a loan request or a credit card consumer is delivered to the customer.

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

The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration was $ 13.4 million and $ 12.2 million at March 31, 2023 and December 31, 2022, respectively.

The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers was $ 1.0 million and $ 0.9 million at March 31, 2023 and December 31, 2022,

The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration was $ 13.5 million and $ 12.2 million at June 30, 2023 and December 31, 2022, respectively.

LENDINGTREE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

respectively.

During the first three months of 2023, the Company recognized revenue of $ 0.8 million that was included in the contract liability balance at December 31, 2022.

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

The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers was $ 0.9 million at December 31, 2022.

During the second quarter and first six months of 2023, the Company recognized revenue of $ 0.1 million and $ 0.9 million, respectively, that was included in the contract liability balance at December 31, 2022.

During the second quarter and first six months of 2022, the Company recognized revenue of $ 0.1 million and $ 0.8 million that was included in the contract liability balance at December 31, 2021.

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

The Company recognized increases to such revenue from prior periods.

This increase was $ 0.2 million in the first quarter of 2023, and $ 0.2 million in the first quarter of 2022.

The Company recognized decreases to such revenue from prior periods.

This decrease was $ 0.9 million in the second quarter of 2023, and no t material in the second quarter of 2022.

NOTE 4— CASH AND RESTRICTED CASH

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Balance, beginning of the period $ 2,688 $ 1,803 $ 2,317 $ 1,456

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Write-off of uncollectible accounts receivable ( 1,010 ) ( 682 ) ( 1,973 ) ( 1,185 )

Recoveries collected — —

Assets held for sale (Note 7)

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Goodwill and Indefinite-Lived Intangible Assets

The Company's goodwill at each of March 31, 2023 and December 31, 2022 consists of $ 59.3 million associated with the Home segment, $ 166.1 million associated with the Consumer segment, and $ 194.7 million associated with the Insurance segment.

The Company's goodwill at each of June 30, 2023 and December 31, 2022 consists of $ 59.3 million associated with the Home segment, $ 166.1 million associated with the Consumer segment, and $ 194.7 million associated with the Insurance segment.

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

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Trademarks and tradenames 9,100 ( 8,428 ) 672

Balance at March 31, 2023 $ 86,400 $ ( 40,276 ) $ 46,124

Balance at June 30, 2023 $ 86,400 $ ( 42,258 ) $ 44,142

Cost Accumulated

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of March 31, 2023, future amortization is estimated to be as follows (in thousands) :

Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of June 30, 2023, future amortization is estimated to be as follows (in thousands) :

Amortization Expense

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As a result, the Company recorded asset impairment charges of $ 4.2 million, of which $ 2.1 million related to intangible assets, $ 1.7 million related to property and equipment, and $ 0.4 million related to an operating lease right-of-use asset.

The carrying value of the accounts receivable, prepaid and other assets, and other non-current assets previously held for sale, and the liabilities previously held for sale approximate their fair value and are no longer classified as assets and liabilities held for sale in the consolidated balance sheet as of March 31, 2023.

The carrying value of the accounts receivable, prepaid and other assets, and other non-current assets previously held for sale, and the liabilities previously held for sale approximate their fair value and were no longer classified as assets and liabilities held for sale in the consolidated balance sheet as of March 31, 2023.

The following table presents information related to the major classes of assets and liabilities that were classified as held for sale (in thousands) :

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8— EQUITY INVESTMENT

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

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.

In the second quarter of 2023, the Company recorded an impairment charge of $ 1.4 million on one of its investments.

The impairment is included within other income on the consolidated statement of operations and comprehensive income.

As of December 31, 2022, there had been no impairments to the acquisition cost of the equity securities.

NOTE 9— ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Weighted average basic common shares 12,915 12,723 12,881 12,812

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Weighted average diluted common shares 12,915 12,723 12,912 12,812

For the first quarter of 2023, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 1.0 million shares of common stock and 0.4 million restricted stock units.

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

For the second quarter of 2023, the Company was in a net loss position and, as a result, no potentially dilutive securities were included in the denominator for computing diluted loss per share, because the impact would have been anti-dilutive.

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

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

For the first quarter of 2022, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 0.9 million shares of common stock and 0.2 million restricted stock units.

For the second quarter of 2023, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 1.2 million shares of common stock and 0.6 million restricted stock units.

For the first six months of 2023, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 1.0 million shares of common stock and 0.5 million restricted stock units.

For the second quarter and first six months of 2022, the Company was in a net loss position and, as a result, no potentially dilutive securities were included in the denominator for computing diluted loss per share, because the impact would have been anti-dilutive.

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

Approximately 0.2 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the second quarter and first six months of 2022 because their inclusion would have been anti-dilutive.

For the second quarter of 2022, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

share, included options to purchase 1.0 million shares of common stock and 0.5 million restricted stock units.

For the first six months of 2022, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 1.0 million and 0.4 million restricted stock units.

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

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See Note 2—Significant Accounting Policies for additional information.

Approximately 1.2 million shares related to the potentially dilutive shares of the Company's common stock associated with the 0.50 % Convertible Senior Notes due July 15, 2025 were excluded from the calculation of diluted loss per share for the first quarter of 2023 because their inclusion would have been anti-dilutive.

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

Shares of the Company's stock associated

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

with the warrants issued by the Company in 2020 were excluded from the calculation of diluted loss per share for the first quarter of 2023, and shares of the Company's stock associated with the warrants issued by the Company in 2017 and 2020 were excluded from the calculation of diluted loss per share for the first quarter of 2022 as they were anti-dilutive since the strike price of the warrants was greater than the average market price of the Company's common stock during the relevant periods.

Approximately 0.8 million and 1.2 million shares related to the potentially dilutive shares of the Company's common stock associated with the 0.50 % Convertible Senior Notes due July 15, 2025 were excluded from the calculation of diluted loss (income) per share for the second quarter and first six months of 2023, respectively, because their inclusion would have been anti-dilutive.

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

Shares of the Company's stock associated with the warrants issued by the Company in 2020 were excluded from the calculation of diluted loss per share for the second quarter and first six months of 2023, and shares of the Company's stock associated with the warrants issued by the Company in 2017 and 2020 were excluded from the calculation of diluted loss per share for the second quarter and first six months of 2022 as they were anti-dilutive since the strike price of the warrants was greater than the average market price of the Company's common stock during the relevant periods.

Common Stock Repurchases

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

During the first quarter of 2023, the Company did no t purchase shares of its common stock.

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

At March 31, 2023, approximately $ 96.7 million of the previous authorizations to repurchase common stock remain available.

During the first six months of 2023, the Company did no t repurchase shares of its common stock.

During the first six months of 2022, the Company repurchased 379,895 shares of its common stock pursuant to the stock repurchase program.

At June 30, 2023, approximately $ 96.7 million of the previous authorizations to repurchase common stock remain available.

NOTE 11— STOCK-BASED COMPENSATION

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Cost of revenue $ 31 $ 442 $ 245 $ 835

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Total non-cash compensation $ 10,199 $ 17,335 $ 21,473 $ 32,415

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options

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Expired ( 49,250 ) 224.70

Options outstanding at March 31, 2023 770,766 151.32 5.14 $ 171

Options exercisable at March 31, 2023 553,965 $ 134.08 3.92 $ 171

(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $ 26.66 on the last trading day of the quarter ended March 31, 2023 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on March 31, 2023.

Options outstanding at June 30, 2023 748,066 150.75 4.78 $ —

Options exercisable at June 30, 2023 569,185 $ 129.77 3.80 $ —

(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $ 22.11 on the last trading day of the quarter ended June 30, 2023 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on June 30, 2023.

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options with Market Conditions

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Expired ( 16,247 ) 308.96

Options outstanding at March 31, 2023 718,438 229.02 5.43 $ —

Options exercisable at March 31, 2023 481,669 $ 195.10 4.35 $ —

Options outstanding at June 30, 2023 718,438 229.02 5.18 $ —

Options exercisable at June 30, 2023 481,669 $ 195.10 4.10 $ —

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

As of March 31, 2023, a maximum of 395,404 shares may be earned for achieving superior performance up to 167 % of the remaining unvested target number of shares.

As of March 31, 2023, no additional performance-based nonqualified stock options with a market condition had been earned.

As of June 30, 2023, a maximum of 395,404 shares may be earned for achieving superior performance up to 167 % of the remaining unvested target number of shares.

As of June 30, 2023, no additional performance-based nonqualified stock options with a market condition had been earned.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Stock Units

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Forfeited ( 104,948 ) 74.16

Nonvested at March 31, 2023 672,928 $ 72.68

Nonvested at June 30, 2023 594,756 $ 71.79

Restricted Stock Units with Performance Conditions

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Forfeited ( 16,000 ) 83.25

Nonvested at March 31, 2023 — $ —

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nonvested at June 30, 2023 — $ —

Employee Stock Purchase Plan

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

As of March 31, 2023, 226,813 shares of common stock were available for issuance under the ESPP.

As of June 30, 2023, 190,277 shares of common stock were available for issuance under the ESPP.

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

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

No shares were issued under the ESPP during the three months ended March 31, 2023.

During the three months ended March 31, 2023 and 2022, the Company granted employee stock purchase rights to certain employees with a grant date fair value per share of $ 8.19 and $ 35.43 , respectively, calculated using the Black-Scholes option pricing model.

During the six months ended June 30, 2023, 36,536 shares were issued under the ESPP.

During the six months ended June 30, 2023 and 2022, the Company granted employee stock purchase rights to certain employees with a grant date fair value per share of $ 8.19 and $ 35.43 , respectively, calculated using the Black-Scholes option pricing model.

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

Three Months Ended

Six Months Ended

Expected term (1)

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

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(in thousands, except percentages)

Income tax expense $ ( 395 ) $ ( 382 )

Income tax (expense) benefit $ ( 227 ) $ 2,339 $ ( 622 ) $ 1,957

Effective tax rate 202.7 % 22.5 % 4.5 % 9.4 %

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.

For the second quarter and first six months 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 second quarter and first six months of 2022, the effective tax rate varied from the federal statutory rate of 21 % primarily due to excess tax expense of $ 0.4 million and $ 2.9 million, resulting from vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

The Company has a valuation allowance against the net deferred tax assets, with the exception of the deferred tax liabilities that result from indefinite-life intangibles.

The Company has determined that using the general methodology for calculating income taxes during an interim period for the quarter ending June 30, 2023 provided for a wide range of potential annual effective rates.

Therefore, the Company has calculated the tax provision on a discrete basis under ASC 740-270-30- 36(b) for the quarter ending June 30, 2023.

At September 30, 2022, the Company recorded a net deferred tax asset of zero as the cumulative net deferred tax asset had a full valuation on it and there was not enough positive evidence that would warrant recognizing the benefit of the net deferred tax asset.

In addition, the net indefinite lived deferred tax items were determined to be a net liability resulting in the recognition of a deferred tax liability.

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(in thousands)

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Excess tax expense on stock compensation — ( 438 ) — ( 2,906 )

Income tax expense $ ( 395 ) $ ( 382 )

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income tax (expense) benefit $ ( 227 ) $ 2,339 $ ( 622 ) $ 1,957

NOTE 13— DEBT

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On March 8, 2023, the Company repurchased approximately $ 190.6 million in principal amount of its 2025 Notes, through individual privately-negotiated transactions with certain holders of the 2025 Notes, for $ 156.3 million in cash plus accrued and unpaid interest of approximately $ 0.1 million.

In the first quarter of 2023, the Company recognized a gain on the extinguishment of debt 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.

Holders of the 2025 Notes were not entitled to convert the 2025 Notes during the calendar quarter ended March 31, 2023 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on December 31, 2022, was not greater than or equal to 130 % of the conversion price of the 2025 Notes on each applicable trading day.

In the first three months of 2023, the Company recorded interest expense on the 2025 Notes of $ 1.4 million which consisted of $ 0.7 million associated with the 0.50 % coupon rate and $ 0.7 million associated with the amortization of the debt issuance costs.

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

As of March 31, 2023, the fair value of the 2025 Notes is estimated to be approximately $ 286.7 million using the Level 1 observable input of the last quoted market price on March 31, 2023.

A summary of the gross carrying amount, debt issuance costs, and net carrying value of the 2025 Notes, all of which is recorded as a non-current liability in the March 31, 2023 consolidated balance sheet, are as follows (in thousands) :

In the first quarter of 2023, the Company recognized a gain on the extinguishment of debt of $ 34.3 million, a loss on the write-off of unamortized debt issuance costs of $ 2.4 million and incurred

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

debt repayment costs of $ 1.0 million, all of which are included in interest income/expense, net in the consolidated statements of operations and comprehensive income.

Holders of the 2025 Notes were not entitled to convert the 2025 Notes during the calendar quarter ended June 30, 2023 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on March 31, 2023, was not greater than or equal to 130 % of the conversion price of the 2025 Notes on each applicable trading day.

In the first six months of 2023, the Company recorded interest expense on the 2025 Notes of $ 2.3 million which consisted of $ 1.1 million associated with the 0.50 % coupon rate and $ 1.2 million associated with the amortization of the debt issuance costs.

In the first six months of 2022, the Company recorded interest expense on the 2025 Notes of $ 3.0 million which consisted of $ 1.5 million associated with the 0.50 % coupon rate and $ 1.5 million associated with the amortization of the debt issuance costs.

As of June 30, 2023, the fair value of the 2025 Notes is estimated to be approximately $ 296.0 million using the Level 1 observable input of the last quoted market price on June 30, 2023.

A summary of the gross carrying amount, debt issuance costs, and net carrying value of the 2025 Notes, all of which is recorded as a non-current liability in the June 30, 2023 consolidated balance sheet, are as follows (in thousands) :

2023 December 31,

2 unchanged sentences

Net carrying amount $ 380,240 $ 567,266

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

On May 31, 2017, the Company issued $ 300.0 million aggregate principal amount of its 0.625 % Convertible Senior Notes due June 1, 2022 (the "2022 Notes") in a private placement.

In the first six months of 2022, the Company recorded interest expense on the 2022 Notes of $ 0.8 million which consisted of $ 0.4 million associated with the 0.625 % coupon rate and $ 0.4 million associated with the amortization of the debt issuance costs.

The 2022 Notes were fully settled in June 2022.

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The 2020 Hedge transactions cover 1.2 million shares of the Company’s common stock, the same number of shares initially underlying the 2025 Notes, and are exercisable upon any conversion of the 2025 Notes.

The 2020 Hedge transactions

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

are expected generally to reduce the potential dilution to the Company's common stock upon conversion of the 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2025 Notes, as the case may be, in the event that the market price per share of common stock, as measured under the terms of the 2020 Hedge transactions, is greater than the strike price of the 2020 Hedge transactions, which initially corresponds to the initial conversion price of the 2025 Notes, or approximately $ 461.19 per share of common stock.

The 2020 Hedge transactions are expected generally to reduce the potential dilution to the Company's common stock upon conversion of the 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2025 Notes, as the case may be, in the event that the market price per share of common stock, as measured under the terms of the 2020 Hedge transactions, is greater than the strike price of the 2020 Hedge transactions, which initially corresponds to the initial conversion price of the 2025 Notes, or approximately $ 461.19 per share of common stock.

The 2020 Hedge transactions will expire upon the maturity of the 2025 Notes.

2 unchanged sentences

In connection with the March 8, 2023 repurchases of the 2025 Notes noted above, the Company entered into agreements with the counterparties for the 2020 Hedge and 2020 Warrants transactions to terminate a portion of these call spread transactions effective March 8, 2023 in notional amounts corresponding to the principal amount of the 2025 Notes repurchased.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsequent to such termination, the outstanding portion of the 2020 Hedge covers 0.8 million shares of the Company's common stock and 2020 Warrants to acquire 0.8 million shares of the Company's common stock remain outstanding.

1 unchanged sentence

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

As of March 31, 2023, the Company had $ 248.1 million of borrowings outstanding under the Term Loan Facility bearing interest at the LIBO option rate of 8.6 % and had no borrowings under the Revolving Facility.

As of June 30, 2023, the Company had $ 247.5 million of borrowings outstanding under the Term Loan Facility bearing interest at the LIBO option rate of 9.0 % and had no borrowings under the Revolving Facility.

As of December 31, 2022, the Company had $ 248.8 million of borrowings outstanding under the Credit Facility and no borrowings under the Revolving Facility.

As of March 31, 2023, borrowings of $ 2.5 million under the Term Loan Facility are recorded as current portion of long-term debt on the consolidated balance sheet.

At each of March 31, 2023 and December 31, 2022, the Company had outstanding one letter of credit issued in the amount of $ 0.2 million.

The Company was in compliance with all covenants at March 31, 2023.

In the first three months of 2023, the Company recorded interest expense related to its Revolving Facility of $ 0.4 million which consisted of $ 0.2 million in unused commitment fees, and $ 0.2 million associated with the amortization of the debt issuance costs.

In the first three months of 2023, the Company recorded interest expense related to the Term Loan Facility of $ 5.2 million associated with borrowings bearing interest at the LIBO rate.

In the first three months of 2022, the Company recorded interest expense related to its revolving credit facilities of $ 0.4 million which consisted of $ 0.2 million in unused commitment fees, and $ 0.2 million associated with the amortization of the debt issuance costs.

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

As of June 30, 2023, borrowings of $ 2.5 million under the Term Loan Facility are recorded as current portion of long-term debt on the consolidated balance sheet.

At each of June 30, 2023 and December 31, 2022, the Company had outstanding one letter of credit issued in the amount of $ 0.2 million.

The Company was in compliance with all covenants at June 30, 2023.

In the first six months of 2023, the Company recorded interest expense related to its Revolving Facility of $ 0.7 million which consisted of $ 0.2 million in unused commitment fees and $ 0.5 million associated with the amortization of the debt issuance costs.

In the first six months of 2023, the Company recorded interest expense related to the Term Loan Facility of $ 10.7 million associated with borrowings bearing interest at the LIBO rate.

In the first six months of 2022, the Company recorded interest expense related to its revolving credit facilities of $ 0.7 million which consisted of $ 0.2 million in unused commitment fees, and $ 0.5 million associated with the amortization of the debt issuance costs.

In the first six months of 2022, the Company recorded interest expense related to the Term Loan Facility of $ 9.6 million which consisted of $ 1.0 million associated with borrowings bearing interest at the LIBO rate, $ 5.1 million in unused commitment fees, $ 2.0 million associated with the amortization of the debt issuance costs, and $ 1.5 million associated with the amortization of the original issue discount.

NOTE 14— CONTINGENCIES

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In assessing the materiality of a legal proceeding, the Company evaluates, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs (e.g., injunctive relief) that may require it to change its business practices in a manner that could have a material and adverse impact on the Company's business.

With respect to the matters disclosed in this Note 13,

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

unless otherwise indicated, the Company is unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.

As of March 31, 2023 and December 31, 2022, the Company had litigation settlement accruals of $ 0.2 million and $ 0.1 million, respectively.

With respect to the matters disclosed in this Note 14, unless otherwise indicated, the Company is unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.

As of June 30, 2023 and December 31, 2022, the Company had litigation settlement accruals of $ 0.6 million and $ 0.1 million, respectively.

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

NOTE 15— FAIR VALUE MEASUREMENTS

Other than the convertible notes and warrants, as well as the equity interests, the carrying amounts of the Company's financial instruments are equal to fair value at March 31, 2023.

Other than the convertible notes and warrants, as well as the equity interests, the carrying amounts of the Company's financial instruments are equal to fair value at June 30, 2023.

See Note 13—Debt for additional information on the convertible notes and warrants.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 16— SEGMENT INFORMATION

11 unchanged sentences

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Home Consumer Insurance Other Total

11 unchanged sentences

Litigation settlements and contingencies 488

Operating income 6,613

Interest expense, net ( 6,940 )

Other income 439

Income before income taxes $ 112

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended June 30, 2022

Home Consumer Insurance Other Total

(in thousands)

Revenue $ 73,938 $ 106,144 $ 81,756 $ 85 $ 261,923

Segment marketing expense 47,198 61,556 59,172 232 168,158

Segment profit (loss) 26,740 44,588 22,584 ( 147 ) 93,765

Cost of revenue 14,574

Brand and other marketing expense 16,379

General and administrative expense 40,291

Product development 14,318

Depreciation 4,896

Amortization of intangibles 7,075

Restructuring and severance 135

Litigation settlements and contingencies ( 7 )

Operating loss ( 3,896 )

Interest expense, net ( 6,765 )

Other income 284

Loss before income taxes $ ( 10,377 )

Six Months Ended June 30, 2023

Home Consumer Insurance Other Total

(in thousands)

Revenue $ 85,238 $ 162,186 $ 135,480 $ 57 $ 382,961

Segment marketing expense 56,783 86,640 80,577 495 224,495

Segment profit (loss) 28,455 75,546 54,903 ( 438 ) 158,466

Cost of revenue 23,062

Brand and other marketing expense 28,681

General and administrative expense 65,843

Product development 25,256

Depreciation 9,479

Amortization of intangibles 4,031

Restructuring and severance 8,012

Litigation settlements and contingencies 500

Operating loss ( 6,398 )

Interest income, net 18,089

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Home Consumer Insurance Other Total

16 unchanged sentences

NOTE 17— RESTRUCTURING ACTIVITIES

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

On April 6, 2023, the Company made the decision to close the Ovation credit services business ( the "Ovation Closure".) The Ovation Closure includes the elimination of approximately 197 employees, or 18 %, of the Company's current workforce.

As a result of the Ovation Closure, the Company incurred $ 2.1 million in restructuring expense in connection with cash expenditures for employee separation costs.

The Ovation Closure, including cash payments, is expected to be completed by the first quarter of 2024.

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

The Reduction Plan includes the elimination of approximately 162 employees, or 13 %, of the Company’s current workforce.

As a result of the Reduction Plan, the Company estimates that it will incur approximately $ 5.3 million in severance charges in connection with the workforce reduction, consisting of cash expenditures for employee separation costs of approximately $ 4.3 million and non-cash charges for the accelerated vesting of certain equity awards of approximately $ 1.0 million.

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

The Reduction Plan, including cash payments, is expected to be completed by the end of the second quarter of 2024.

The Company has incurred restructuring expense of $ 4.3 million in the first quarter of 2023 and an additional $ 1.0 million of restructuring expense in the second quarter of 2023 related to the Reduction Plan.

The Reduction Plan, including cash payments, is expected to be substantially completed by the end of the second quarter of 2024.

LENDINGTREE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

In the first quarter of 2022, the Company incurred total expense of $ 3.6 million consisting of employee separation costs of $ 2.5 million and non-cash compensation expense of $ 1.1 million due to the accelerated vesting of certain equity awards.

In the first six months of 2022, 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 for 2022 actions are expected to be paid by the third quarter of 2023.

Accrued Balance at December 31, 2022

Income Statement Impact Payments Non-Cash Accrued Balance at March 31, 2023

Income Statement Impact Payments Non-Cash Accrued Balance at June 30, 2023

Q2 2023 action

Employee separation payments $ — $ 2,064 $ ( 1,404 ) $ — $ 660

Q1 2023 action

Employee separation payments — 4,261 ( 2,935 ) — 1,326

Non-cash compensation — 1,066 — ( 1,066 ) —

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements