Item 1. Financial Statements
Item 1. Financial Statements
LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
(in thousands, except per share amounts)
Revenue $ 182,453 $ 261,923 $ 382,961 $ 545,101
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)
9,302 14,574 23,062 30,135
Selling and marketing expense 116,065 184,537 253,176 388,694
General and administrative expense 29,160 40,291 65,843 76,268
Product development 10,601 14,318 25,256 28,370
Depreciation 4,684 4,896 9,479 9,750
Amortization of intangibles 1,982 7,075 4,031 14,992
Restructuring and severance 3,558 135 8,012 3,760
Litigation settlements and contingencies 488 ( 7 ) 500 ( 34 )
Total costs and expenses 175,840 265,819 389,359 551,935
Operating income (loss) 6,613 ( 3,896 ) ( 6,398 ) ( 6,834 )
Other income (expense), net:
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) 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:
Basic 12,915 12,723 12,881 12,812
Diluted 12,915 12,723 12,912 12,812
Net (loss) income per share:
Basic $ ( 0.01 ) $ ( 0.63 ) $ 1.04 $ ( 1.47 )
Diluted $ ( 0.01 ) $ ( 0.63 ) $ 1.03 $ ( 1.47 )
The accompanying notes to consolidated financial statements are an integral part of these statements.
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LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30,
2023 December 31,
2022
(in thousands, except par value and share amounts)
ASSETS:
Cash and cash equivalents $ 162,641 $ 298,845
Restricted cash and cash equivalents 34 124
Accounts receivable (net of allowance of $ 2,609 and $ 2,317 , respectively)
75,710 83,060
Prepaid and other current assets 26,045 26,250
Assets held for sale (Note 7)
— 5,689
Total current assets 264,430 413,968
Property and equipment (net of accumulated depreciation of $ 35,865 and $ 33,851 , respectively)
56,549 59,160
Operating lease right-of-use assets 64,415 67,050
Goodwill 420,139 420,139
Intangible assets, net 54,284 58,315
Equity investments 173,140 174,580
Other non-current assets 6,182 6,101
Total assets $ 1,039,139 $ 1,199,313
LIABILITIES:
Current portion of long-term debt $ 2,500 $ 2,500
Accounts payable, trade 3,174 2,030
Accrued expenses and other current liabilities 74,204 75,095
Liabilities held for sale (Note 7)
— 2,909
Total current liabilities 79,878 82,534
Long-term debt 625,240 813,516
Operating lease liabilities 84,599 88,232
Deferred income tax liabilities 7,369 6,783
Other non-current liabilities 338 308
Total liabilities 797,424 991,373
Commitments and contingencies (Note 14)
SHAREHOLDERS' EQUITY:
Preferred stock $ 0.01 par value; 5,000,000 shares authorized; none issued or outstanding
— —
Common stock $ 0.01 par value; 50,000,000 shares authorized; 16,323,675 and 16,167,184 shares issued, respectively, and 12,968,209 and 12,811,718 shares outstanding, respectively
163 162
Additional paid-in capital 1,209,687 1,189,255
Accumulated deficit ( 701,957 ) ( 715,299 )
Treasury stock; 3,355,466 and 3,355,466 shares, respectively
( 266,178 ) ( 266,178 )
Total shareholders' equity 241,715 207,940
Total liabilities and shareholders' equity $ 1,039,139 $ 1,199,313
The accompanying notes to consolidated financial statements are an integral part of these statements.
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LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Common Stock Treasury Stock
Total Number
of Shares Amount Additional
Paid-in
Capital Accumulated
Deficit Number
of Shares Amount
(in thousands)
Balance as of December 31, 2022 $ 207,940 16,167 $ 162 $ 1,189,255 $ ( 715,299 ) 3,355 $ ( 266,178 )
Net income and comprehensive income 13,457 — — — 13,457 — —
Non-cash compensation 11,274 — — 11,274 — — —
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes ( 1,693 ) 98 1 ( 1,694 ) — — —
Other 1 — — 1 — — —
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
Total Number
of Shares Amount Additional
Paid-in
Capital Accumulated
Deficit Number
of Shares Amount
(in thousands)
Balance as of December 31, 2021 $ 447,992 16,071 $ 161 $ 1,242,794 $ ( 571,794 ) 2,976 $ ( 223,169 )
Net loss and comprehensive loss ( 10,826 ) — — — ( 10,826 ) — —
Non-cash compensation 15,080 — — 15,080 — — —
Purchase of treasury stock ( 43,009 ) — — — — 379 ( 43,009 )
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes ( 3,086 ) 49 — ( 3,086 ) — — —
Cumulative effect adjustment due to ASU 2020-06 ( 65,303 ) — — ( 109,750 ) 44,447 — —
Balance as of March 31, 2022 $ 340,848 16,120 $ 161 $ 1,145,038 $ ( 538,173 ) 3,355 $ ( 266,178 )
Net income and comprehensive income ( 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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LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2023 2022
(in thousands)
Cash flows from operating activities:
Net income (loss) and comprehensive income (loss) $ 13,342 $ ( 18,864 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss on impairments and disposal of assets 5,167 3,427
Amortization of intangibles 4,031 14,992
Depreciation 9,479 9,750
Non-cash compensation expense 21,473 32,415
Deferred income taxes 586 ( 2,026 )
Bad debt expense 1,894 2,029
Amortization of debt issuance costs 2,736 4,454
Write-off of previously-capitalized debt issuance costs 2,373 —
Amortization of debt discount — 1,475
Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities ( 1,923 ) ( 333 )
Gain on settlement of convertible debt ( 34,308 ) —
Loss on impairment of investments 1,440 —
Changes in current assets and liabilities:
Accounts receivable 6,809 ( 19,812 )
Prepaid and other current assets 280 ( 5,593 )
Accounts payable, accrued expenses and other current liabilities ( 4,337 ) ( 5,226 )
Income taxes receivable ( 227 ) ( 293 )
Other, net ( 591 ) ( 302 )
Net cash provided by operating activities 28,224 16,093
Cash flows from investing activities:
Capital expenditures ( 4,853 ) ( 6,346 )
Equity investments — ( 16,440 )
Net cash used in investing activities ( 4,853 ) ( 22,786 )
Cash flows from financing activities:
Proceeds from term loan — 250,000
Repayment of term loan ( 1,250 ) —
Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options ( 1,042 ) ( 2,745 )
Purchase of treasury stock — ( 43,009 )
Repurchase of 0.50 % Convertible Senior Notes
( 156,294 ) —
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
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 162,675 $ 279,233
The accompanying notes to consolidated financial statements are an integral part of these statements.
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1— ORGANIZATION
Company Overview
LendingTree, Inc. is the parent of LT Intermediate Company, LLC, which holds all of the outstanding ownership interests of LendingTree, LLC, and LendingTree, LLC owns several companies (collectively, “LendingTree” or the “Company”).
LendingTree operates what it believes to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions. The Company offers consumers tools and resources, including free credit scores, that facilitate comparison-shopping for mortgage loans, home equity loans and lines of credit, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes, sales of insurance policies, and other related offerings. The Company primarily seeks to match in-market consumers with multiple providers on its marketplace who can provide them with competing quotes for loans, deposit products, insurance, or other related offerings they are seeking. The Company also serves 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 it generates with these providers.
The consolidated financial statements include the accounts of LendingTree and all its wholly-owned entities. Intercompany transactions and accounts have been eliminated.
Basis of Presentation
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 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”). The accompanying consolidated financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. 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 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
Accounting Estimates
Management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates.
Significant estimates underlying the accompanying consolidated financial statements include: the recoverability of long-lived assets, goodwill and intangible assets; the determination of income taxes payable and deferred income taxes, including related valuation allowances; fair value of assets acquired in a business combination; litigation accruals; contract assets; various other allowances, reserves and accruals; assumptions related to the determination of stock-based compensation; and the determination of right-of-use assets and lease liabilities.
The Company considered the impact of the current economic conditions, including interest rates, inflation, and the COVID-19 pandemic on the assumptions and estimates used when preparing its consolidated financial statements including, but not limited to, the allowance for doubtful accounts, valuation allowances, contract asset, and the recoverability of long-lived assets, goodwill and intangible assets. These assumptions and estimates may change as new events occur and additional
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
information is obtained. If economic conditions worsen, such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity.
Certain Risks and Concentrations
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 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. The Company requires certain Network Partners to maintain security deposits with the Company, which, in the event of non-payment, would be applied against any accounts receivable outstanding.
Due to the nature of the mortgage lending industry, interest rate fluctuations may negatively impact future revenue from the Company's marketplace.
Lenders and lead purchasers participating on the Company's marketplace can offer their products directly to consumers through brokers, mass marketing campaigns or through other traditional methods of credit distribution. These lenders and lead purchasers can also offer their products online, either directly to prospective borrowers, through one or more online competitors, or both. If a significant number of potential consumers are able to obtain loans and other products from Network Partners without utilizing the Company's services, the Company's ability to generate revenue may be limited. Because the Company does not have exclusive relationships with the Network Partners whose loans and other financial products are offered on its online marketplace, consumers may obtain offers from these Network Partners without using its service.
Other than a support services office in India, the Company's operations are geographically limited to and dependent upon the economic condition of the United States.
Litigation Settlements and Contingencies
Litigation settlements and contingencies consists of expenses related to actual or anticipated litigation settlements.
Recently Adopted Accounting Pronouncements
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. 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 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 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 the Company's consolidated financial statements.
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3— REVENUE
Revenue is as follows (in thousands) :
Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
Home $ 41,563 $ 73,938 $ 85,238 $ 175,882
Credit cards 21,083 27,306 39,371 57,128
Personal loans 28,137 42,298 51,736 77,508
Other Consumer 33,257 36,540 71,079 72,576
Total Consumer 82,477 106,144 162,186 207,212
Insurance 58,398 81,756 135,480 161,794
Other 15 85 57 213
Total revenue $ 182,453 $ 261,923 $ 382,961 $ 545,101
The Company derives its revenue primarily from match fees and closing fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised services have transferred to the customer. The Company's services are generally transferred to the customer at a point in time.
Revenue from Home products is primarily generated from upfront match fees paid by mortgage Network Partners that receive a loan request, and in some cases upfront fees for clicks or call transfers. Match fees and upfront fees for clicks and call transfers are earned through the delivery of loan requests that originated through the Company's websites or affiliates. The Company recognizes revenue at the time a loan request is delivered to the customer, provided that no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a loan request to the customer.
Revenue from Consumer products is generated by match and other upfront fees for clicks or call transfers, as well as from closing fees, approval fees and upfront service and subscription fees. Closing fees are derived from lenders on certain auto loans, business loans, personal loans, and student loans when the lender funds a loan with the consumer. Approval fees are derived from credit card issuers when the credit card consumer receives card approval from the credit card issuer. Upfront service fees and subscription fees are derived from consumers in the Company's credit services product. Upfront fees paid by consumers are recognized as revenue over the estimated time the consumer will remain a customer and receive services. 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. The Company's contractual right to closing fees and approval fees is not contemporaneous with the satisfaction of the performance obligation to deliver a loan request or a credit card consumer to the customer. As such, the Company records a contract asset at each reporting period-end related to the estimated variable consideration on closing fees and approval fees for which the Company has satisfied the related performance obligation but are still pending the loan closing or credit card approval before the Company has a contractual right to payment. This estimate is based on the Company's historical closing rates and historical time between when a consumer request for a loan or credit card is delivered to the lender or card issuer and when the loan is closed by the lender or approved by the card issuer.
Revenue from the Company's Insurance products is primarily generated from upfront match fees and upfront fees for website clicks or fees for calls. Match fees and upfront fees for clicks and call transfers are earned through the delivery of consumer requests that originated through the Company's websites or affiliates. The Company recognizes revenue at the time a consumer request is delivered to the customer, provided that no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a 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 $ 13.5 million and $ 12.2 million at June 30, 2023 and December 31, 2022, respectively.
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 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
Total cash, cash equivalents, restricted cash and restricted cash equivalents consist of the following (in thousands) :
June 30,
2023 December 31,
2022
Cash and cash equivalents $ 162,641 $ 298,845
Restricted cash and cash equivalents 34 124
Total cash, cash equivalents, restricted cash and restricted cash equivalents $ 162,675 $ 298,969
NOTE 5— ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts.
The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, previous loss history, current and expected economic conditions and the specific customer's current and expected ability to pay its obligation. Accounts receivable are considered past due when they are outstanding longer than the contractual payment terms. Accounts receivable are written off when management deems them uncollectible.
A reconciliation of the beginning and ending balances of the allowance for doubtful accounts is as follows (in thousands) :
Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
Balance, beginning of the period $ 2,688 $ 1,803 $ 2,317 $ 1,456
Charges to earnings 931 1,179 1,894 2,029
Write-off of uncollectible accounts receivable ( 1,010 ) ( 682 ) ( 1,973 ) ( 1,185 )
Assets held for sale (Note 7)
— — 371 —
Balance, end of the period $ 2,609 $ 2,300 $ 2,609 $ 2,300
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6— GOODWILL AND INTANGIBLE ASSETS
The balance of goodwill, net and intangible assets, net is as follows (in thousands) :
June 30,
2023 December 31,
2022
Goodwill $ 903,227 $ 903,227
Accumulated impairment losses ( 483,088 ) ( 483,088 )
Net goodwill $ 420,139 $ 420,139
Intangible assets with indefinite lives $ 10,142 $ 10,142
Intangible assets with definite lives, net 44,142 48,173
Total intangible assets, net $ 54,284 $ 58,315
Goodwill and Indefinite-Lived Intangible Assets
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. The quantitative goodwill impairment test found that the fair value of each reporting unit exceeded its carrying amount, indicating no goodwill impairment. The Company will monitor the recovery of the Insurance reporting unit and the Mortgage reporting unit. The property and casualty auto industry is experiencing challenges caused by inflation, supply chain challenges, and rising severity and frequency of claims. Additionally, the significant increase in mortgage interest rates have had a negative impact on the Mortgage reporting unit. Changes in the timing of the recovery compared to current expectations could cause an impairment to the Insurance or Mortgage reporting unit.
Intangible assets with indefinite lives relate to the Company's trademarks.
Intangible Assets with Definite Lives
Intangible assets with definite lives relate to the following (in thousands) :
Cost Accumulated
Amortization Net
Customer lists 77,300 ( 33,830 ) 43,470
Trademarks and tradenames 9,100 ( 8,428 ) 672
Balance at June 30, 2023 $ 86,400 $ ( 42,258 ) $ 44,142
Cost Accumulated
Amortization Net
Customer lists $ 77,300 $ ( 30,775 ) $ 46,525
Trademarks and tradenames 10,100 ( 8,452 ) 1,648
Balance at December 31, 2022 $ 87,400 $ ( 39,227 ) $ 48,173
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of June 30, 2023, future amortization is estimated to be as follows (in thousands) :
Amortization Expense
Remainder of current year $ 3,664
Year ending December 31, 2024 5,889
Year ending December 31, 2025 5,830
Year ending December 31, 2026 5,504
Year ending December 31, 2027 5,198
Thereafter 18,057
Total intangible assets with definite lives, net $ 44,142
See Note 7—Assets and Liabilities Held for Sale for intangible assets with definite lives classified as held for sale.
NOTE 7— ASSETS AND LIABILITIES HELD FOR SALE
In the fourth quarter of 2022, the Company approved a plan to sell its Ovation credit services business, an asset group associated with the Company's Consumer segment. The asset group was expected to be sold in 2023 to an unrelated third party and is classified, at its carrying value, as current assets held for sale and current liabilities held for sale in the consolidated balance sheet as of December 31, 2022.
In the first quarter of 2023, the third party withdrew the letter of intent to purchase the asset group held for sale. The Company made the decision to close the Ovation credit services business. 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 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) :
December 31, 2022
Accounts receivable, net of allowance $ 1,353
Prepaid and other current assets 79
Property and equipment, net of accumulated depreciation of $ 1,102
1,665
Operating lease right-of-use assets 436
Intangible assets, net of accumulated amortization of $ 3,857
2,143
Other non-current assets 13
Total assets held for sale $ 5,689
Accounts payable, trade $ 253
Accrued expenses and other current liabilities 2,551
Operating lease liabilities 105
Total liabilities held for sale $ 2,909
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LENDINGTREE, INC. AND SUBSIDIARIES
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
Accrued expenses and other current liabilities consist of the following (in thousands) :
June 30,
2023 December 31,
2022
Accrued advertising expense $ 35,294 $ 37,703
Accrued compensation and benefits 10,497 11,444
Accrued professional fees 1,387 1,393
Customer deposits and escrows 7,459 7,273
Contribution to LendingTree Foundation — 500
Current lease liabilities 8,777 8,513
Accrued restructuring and severance 2,608 304
Other 8,182 7,965
Total accrued expenses and other current liabilities $ 74,204 $ 75,095
See Note 7—Assets and Liabilities Held for Sale for accrued expenses and other current liabilities classified as held for sale.
NOTE 10— SHAREHOLDERS' EQUITY
Basic and diluted income per share was determined based on the following share data (in thousands) :
Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
Weighted average basic common shares 12,915 12,723 12,881 12,812
Effect of stock options — — 10 —
Effect of dilutive share awards — — 21 —
Weighted average diluted common shares 12,915 12,723 12,912 12,812
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. 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
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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. See Note 13—Debt for additional information. On January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method. Following the adoption, the if-converted method is used for diluted net income per share calculation of our convertible notes. Prior to the adoption of ASU 2020-06 the dilutive impact of the convertible notes was calculated using the treasury stock method. See Note 2—Significant Accounting Policies for additional information.
Approximately 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 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
Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations and comprehensive income (in thousands) :
Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
Cost of revenue $ 31 $ 442 $ 245 $ 835
Selling and marketing expense 1,336 2,285 3,080 4,324
General and administrative expense 6,550 11,873 13,893 21,473
Product development 1,287 2,735 3,189 4,700
Restructuring and severance 995 — 1,066 1,083
Total non-cash compensation $ 10,199 $ 17,335 $ 21,473 $ 32,415
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock Options
A summary of changes in outstanding stock options is as follows:
Number of Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value (a)
(per option) (in years) (in thousands)
Options outstanding at January 1, 2023 805,079 $ 155.10
Granted — —
Exercised — —
Forfeited ( 7,763 ) 132.89
Expired ( 49,250 ) 224.70
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.
Stock Options with Market Conditions
A summary of changes in outstanding stock options with market conditions at target is as follows:
Number of Options with Market Conditions Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value (a)
(per option) (in years) (in thousands)
Options outstanding at January 1, 2023 734,685 $ 230.79
Granted — —
Exercised — —
Forfeited — —
Expired ( 16,247 ) 308.96
Options outstanding at June 30, 2023 718,438 229.02 5.18 $ —
Options exercisable at June 30, 2023 481,669 $ 195.10 4.10 $ —
(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.
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.
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Restricted Stock Units
A summary of changes in outstanding nonvested restricted stock units (“RSUs”) is as follows:
RSUs
Number of Units Weighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 2023 485,053 $ 127.46
Granted 389,738 32.71
Vested ( 175,087 ) 138.76
Forfeited ( 104,948 ) 74.16
Nonvested at June 30, 2023 594,756 $ 71.79
Restricted Stock Units with Performance Conditions
A summary of changes in outstanding nonvested RSUs with performance conditions is as follows:
RSUs with Performance Conditions
Number of Units Weighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 2023 16,000 $ 83.25
Granted — —
Vested — —
Forfeited ( 16,000 ) 83.25
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 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. Under the terms of the ESPP, eligible employees are granted options to purchase shares of the Company's common stock at 85 % of the lesser of (1) the fair market value at time of grant or (2) the fair market value at time of exercise. The offering periods and purchase periods are typically six-month periods ending on June 30 and December 31 of each year. 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:
Six Months Ended
June 30,
2023 2022
Expected term (1)
0.50 years 0.50 years
Expected dividend (2)
— —
Expected volatility (3)
82 % 49 %
Risk-free interest rate (4)
4.76 % 0.19 %
(1) The expected term was calculated using the time period between the grant date and the purchase date.
(2) No dividends are expected to be paid, resulting in a zero expected dividend rate.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(3) The expected volatility rate is based on the historical volatility of the Company's common stock.
(4) The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the employee stock purchase rights, in effect at the grant date.
NOTE 12— INCOME TAXES
Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
(in thousands, except percentages)
Income tax (expense) benefit $ ( 227 ) $ 2,339 $ ( 622 ) $ 1,957
Effective tax rate 202.7 % 22.5 % 4.5 % 9.4 %
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
June 30,
2023 2022 2023 2022
(in thousands)
Income tax benefit - excluding excess tax expense on stock compensation $ ( 227 ) $ 2,777 $ ( 622 ) $ 4,863
Excess tax expense on stock compensation — ( 438 ) — ( 2,906 )
Income tax (expense) benefit $ ( 227 ) $ 2,339 $ ( 622 ) $ 1,957
NOTE 13— DEBT
Convertible Senior Notes
2025 Notes
On July 24, 2020, the Company issued $ 575.0 million aggregate principal amount of its 0.50 % Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) in a private placement. The 2025 Notes bear interest at a rate of 0.50 % per year, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2021. The 2025 Notes will mature on July 15, 2025, unless earlier repurchased, redeemed or converted. The initial conversion rate of the 2025 Notes is 2.1683 shares of the Company's common stock per $1,000 principal amount of 2025 Notes (which is equivalent to an initial conversion price of approximately $ 461.19 per share).
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
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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) :
June 30,
2023 December 31,
2022
Gross carrying amount $ 384,398 $ 575,000
Debt issuance costs 4,158 7,734
Net carrying amount $ 380,240 $ 567,266
2022 Notes
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.
Convertible Note Hedge and Warrant Transactions
2020 Hedge and Warrants
On July 24, 2020, in connection with the issuance of the 2025 Notes, the Company entered into Convertible Note Hedge (the “2020 Hedge”) and warrant transactions with respect to the Company’s common stock.
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 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.
On July 24, 2020, the Company sold to the counterparties, warrants (the “2020 Warrants”) to acquire 1.2 million shares of the Company's common stock at an initial strike price of $ 709.52 per share, which represents a premium of 100 % over the last reported sale price of the common stock of $ 354.76 on July 21, 2020. If the market price per share of the common stock, as measured under the terms of the 2020 Warrants, exceeds the strike price of the 2020 Warrants, the 2020 Warrants could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the 2020 Warrants in cash.
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.
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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.
Credit Facility
On September 15, 2021, the Company entered into a credit agreement (the “Credit Agreement”), consisting of a $ 200.0 million revolving credit facility (the “Revolving Facility”), which matures on September 15, 2026, and a $ 250.0 million delayed draw term loan facility (the “Term Loan Facility” and together with the Revolving Facility, the “Credit Facility”), which matures on September 15, 2028.
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 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
Overview
LendingTree is involved in legal proceedings on an ongoing basis. 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 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 June 30, 2023. See Note 13—Debt for additional information on the convertible notes and warrants.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 16— SEGMENT INFORMATION
The Company manages its business and reports its financial results through the following three operating and reportable segments: Home, Consumer, and Insurance. Characteristics which were relied upon in making the determination of the reportable segments include the nature of the products, the organization's internal structure, and the information that is regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources.
The Home segment includes the following products: purchase mortgage, refinance mortgage, and home equity loans and lines of credit. The Company ceased offering reverse mortgage loans in the fourth quarter of 2022. The Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products such as credit repair and debt settlement. The Insurance segment consists of insurance quote products and sales of insurance policies in the agency businesses.
The following tables are a reconciliation of segment profit, which is the Company's primary segment profitability measure, to income before income taxes. Segment marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses, that are directly attributable to the segments' products. This measure excludes overhead, fixed costs and personnel-related expenses.
Three Months Ended June 30, 2023
Home Consumer Insurance Other Total
(in thousands)
Revenue $ 41,563 $ 82,477 $ 58,398 $ 15 $ 182,453
Segment marketing expense 28,216 41,807 33,647 274 103,944
Segment profit (loss) 13,347 40,670 24,751 ( 259 ) 78,509
Cost of revenue 9,302
Brand and other marketing expense 12,121
General and administrative expense 29,160
Product development 10,601
Depreciation 4,684
Amortization of intangibles 1,982
Restructuring and severance 3,558
Litigation settlements and contingencies 488
Operating income 6,613
Interest expense, net ( 6,940 )
Other income 439
Income before income taxes $ 112
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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
Other income 2,273
Income before income taxes $ 13,964
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Six Months Ended June 30, 2022
Home Consumer Insurance Other Total
(in thousands)
Revenue $ 175,882 $ 207,212 $ 161,794 $ 213 $ 545,101
Segment marketing expense 113,233 120,117 118,107 415 351,872
Segment profit (loss) 62,649 87,095 43,687 ( 202 ) 193,229
Cost of revenue 30,135
Brand and other marketing expense 36,822
General and administrative expense 76,268
Product development 28,370
Depreciation 9,750
Amortization of intangibles 14,992
Restructuring and severance 3,760
Litigation settlements and contingencies ( 34 )
Operating loss ( 6,834 )
Interest expense, net ( 14,270 )
Other income 283
Loss before income taxes $ ( 20,821 )
NOTE 17— RESTRUCTURING ACTIVITIES
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 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.
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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 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 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 ) —
2022 action
Employee separation payments 304 25 $ ( 273 ) — 56
$ 304 $ 7,416 $ ( 4,612 ) $ ( 1,066 ) $ 2,042
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