LendingTree, Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Cautionary Statement Regarding Forward-Looking Information This report contains “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements related to our anticipated financial performance, business prospects and strategy; anticipated trends and prospects in the various industries in which our businesses operate; new products, services and related strategies; and other similar matters. These forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. The use of words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans” and “believes,” among others, generally identifies forward-looking statements. Actual results could differ materially from those contained in the forward-looking statements. Factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include those matters discussed or referenced in Part II, Item 1A. Risk Factors included elsewhere in this Quarterly Report on Form 10-Q and Part I, Item 1A. Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report"). Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this Quarterly Report on Form 10-Q may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of LendingTree, Inc.'s management as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results or expectations, except as required by law. 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. We operate what we believe to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions. We offer 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. We primarily seek to match in-market consumers with multiple providers on our marketplace who can provide them competing quotes for loans, deposit products, insurance or other related offerings they are seeking. We also serve as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries we generate with these providers. Our Spring TM platform offers a personalized comparison-shopping experience, financial health advice and credit simulations by providing free credit scores and credit score analysis. This authenticated and secure platform enables us to monitor consumers' credit profiles, identify and alert them to changes in their financial health, and to recommend loans and other offerings on our marketplace that may be more favorable than the terms they may have at a given point in time. Customers can track the progress of their financial health over time based on actions they have taken and see recommended credit score improvement actions, and loans or other products offered by LendingTree. We are focused on developing new product offerings and enhancements to improve the experience of consumers and Network Partners as they interact with us. By expanding our portfolio of financial services offerings, we are growing and diversifying our business and sources of revenue. We intend to capitalize on our expertise in performance marketing, product development and technology by leveraging the widespread recognition of the LendingTree brand. We believe the consumer and small business financial services industry is in the middle stages of a fundamental shift to online product offerings, similar to the shift that started in retail and travel many years ago and is now well established. We believe that like retail and travel, as consumers continue to move towards online shopping and transactions for financial services, suppliers will increasingly shift their product offerings and advertising budgets toward the online channel. We believe the strength of our brands and of our Network Partners place us in a strong position to continue to benefit from this market shift. 24 Table of Contents Economic Conditions We continue to monitor the current global economic environment, specifically including inflationary pressures and interest rates, and any resulting impacts on our financial position and results of operations. Refer to Part I, Item 1A. “Risk Factors” of our 2023 Annual Report for additional information. During 2024, the challenging interest rate environment and inflationary pressures have continued to present challenges for many of our mortgage lending partners. In our Home segment, mortgage rates decreased slightly in the third quarter of 2024 compared to the fourth quarter of 2023, but more than doubled compared to the low rates seen in the third quarter of 2021. The increased mortgage rates continue to cause reduced refinance volumes and continue to put pressure on purchase activity. In our Insurance segment, demand from our carrier partners has increased significantly and we continue to be optimistic about the remainder of 2024. Segment Reporting We have three reportable segments: Home, Consumer, and Insurance. Recent Mortgage Interest Rate Trends Interest rate and market risks can be substantial in the mortgage lead generation business. Short-term fluctuations in mortgage interest rates primarily affect consumer demand for mortgage refinancings, while long-term fluctuations in mortgage interest rates, coupled with the U.S. real estate market, affect consumer demand for new mortgages. Consumer demand, in turn, affects lender demand for mortgage leads from third-party sources, as well as our own ability to attract online consumers to our website. Typically, when interest rates decline, we see increased consumer demand for mortgage refinancing, which in turn leads to increased traffic to our website and decreased selling and marketing efforts associated with that traffic. At the same time, lender demand for leads from third-party sources typically decreases, as there are more consumers in the marketplace seeking refinancings and, accordingly, lenders receive more organic mortgage lead volume. Due to lower lender demand, our revenue earned per consumer typically decreases, but with correspondingly lower selling and marketing costs. Conversely, when interest rates increase, we typically see decreased consumer demand for mortgage refinancing, leading to decreased traffic to our website and higher associated selling and marketing efforts associated with that traffic. At the same time, lender demand for leads from third-party sources typically increases, as there are fewer consumers in the marketplace and, accordingly, the supply of organic mortgage lead volume decreases. Due to high lender demand, we typically see an increase in the amount lenders will pay per matched lead, which often leads to higher revenue earned per consumer. However, increases in the amount lenders will pay per matched lead in this situation is limited by the overall cost models of our lenders, and our revenue earned per consumer may be adversely affected by the overall reduced demand for refinancing in a rising rate environment. We dynamically adjust selling and marketing expenditures in all interest rate environments to optimize our results against these variables. According to Freddie Mac, the monthly average 30-year mortgage interest rates decreased from a monthly average of 6.82% in December 2023 to a monthly average of 6.18% in September 2024. On a quarterly basis, 30-year mortgage interest rates in the third quarter of 2024 averaged 6.51%, compared to 7.04% in the third quarter of 2023 and 7.29% in the fourth quarter of 2023. 25 Table of Contents Typically, as mortgage interest rates rise, there are fewer consumers in the marketplace seeking refinancings and, accordingly, the mix of mortgage origination dollars will move toward purchase mortgages. According to Mortgage Bankers Association (“MBA”) data, total refinance origination dollars increased to 25% of total mortgage origination dollars in the third quarter of 2024 compared to 15% in the fourth quarter of 2023 and 14% in the third quarter of 2023. In the third quarter of 2024, total refinance origination dollars increased 135% from the fourth quarter of 2023 and increased 118% from the third quarter of 2023. Industry-wide mortgage origination dollars in the third quarter of 2024 increased 35% from the fourth quarter of 2023 and increased 21% from third quarter of 2023. According to MBA projections, the mix of mortgage origination dollars is expected to continue to be weighted towards purchase mortgages with the refinance share representing approximately 28% for 2024 compared to 15% in 2023. The U.S. Real Estate Market The health of the U.S. real estate market and interest rate levels are the primary drivers of consumer demand for new mortgages. Consumer demand, in turn, affects lender demand for purchase mortgage leads from third-party sources. Typically, a strong real estate market will lead to reduced lender demand for leads, as there are more consumers in the marketplace seeking financing and, accordingly, lenders receive more organic lead volume. Conversely, a weaker real estate market will typically lead to an increase in lender demand, as there are fewer consumers in the marketplace seeking mortgages. According to Fannie Mae data, existing home sales increased approximately 1% in the third quarter of 2024 compared to the fourth quarter of 2023, and decreased approximately 2% compared to the third quarter of 2023. Fannie Mae predicts an overall decrease in existing-home sales of approximately 1% in 2024 compared to 2023. 26 Table of Contents Spring TM We consider certain metrics related to LendingTree Spring TM ("Spring") set forth below to help us evaluate our business and growth trends and assess operational efficiencies. We believe our Spring platform drives repeat user engagement resulting in lower acquisition costs and increases consumer lifetime value. The calculation of the metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors. We added 1.2 million net new users in the third quarter of 2024, bringing cumulative active users to 30.7 million as of September 30, 2024. We calculate the number of Spring users at a period end as the number of users that had an active account at any point during the quarter that includes the period end date. Users that deactivated their accounts prior to the most recent quarter are no longer considered in the user base at the end of the most recent quarter. We attribute approximately $5.8 million of revenue, or 2% of total revenue, in the third quarter of 2024 to registered Spring users who initiated their transaction from the Spring platform. During the third quarter of 2024, approximately 0.3 million Spring users initiated a transaction from the Spring platform that contributed to revenue. Cost Reductions and Simplification of Business On March 24, 2023, we committed to a workforce reduction plan (the “Reduction Plan”), to reduce operating costs, which included the elimination of approximately 13% of our workforce. As a result of the Reduction Plan, we incurred approximately $5.3 million in severance charges in connection with the workforce reduction, $4.3 million of which was incurred in the first quarter of 2023 and $1.0 million was incurred in the second quarter of 2023. Part of this Reduction Plan included the shut down of our LendingTree customer call center as well as our Medicare insurance agency operations within QuoteWizard. We estimate the Reduction Plan reduced annual compensation expense by approximately $14 million, comprised of $2 million in cost of revenue, $4 million in selling and marketing expense, $3 million in general and administrative expense, and $5 million in product development. Separately, in 2023, we made the decision to close our Ovation credit services business, an asset group within our Consumer segment, by mid- 2023. As a result, we recorded an asset impairment charge of $4.2 million in the first quarter of 2023 related to the write-off of certain long-term assets. Additionally, we incurred $2.1 million in severance charges in the second quarter of 2023 in connection with cash expenditures for employee separation costs. We acquired Ovation in 2018 to better serve those customers who come to LendingTree and receive suboptimal offers of credit. The business grew for a number of years before running into challenges in the wake of COVID-19, and more recently the industry has faced increased regulatory pressure. The business was capital-intensive, required elevated overhead, and future prospects were becoming uncertain. The Ovation business accounted for approximately 3% of total revenue and 3% of total costs and expenses, with an immaterial impact to net income on the consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2022. Regulations Our revenue and earnings may fluctuate from time to time as a result of changes to federal, state, and industry-based laws and regulations, or changes to standards concerning the enforcement thereof. On January 26, 2024, the U.S. Federal Communications Commission (the “FCC”) published regulations which, among other things, amend the consent requirements of the Telephone Consumer Protection Act of 1991 to close what the FCC refers to as the “lead generator loophole” by requiring “one-to-one consent” for outbound telemarketing calls or texts made using an automatic telephone dialing system or pre-recorded or artificial voice messages to wireless or residential numbers. The new “one-to-one consent” rule is scheduled to take effect on January 27, 2025. Although it remains unclear how these changes may ultimately be interpreted by courts or further revised by regulators, we anticipate that the required changes could have an adverse impact on the market for financial product and insurance quote requests and will require us and our third-party sources to modify our marketing practices and policies. While we have been proactively working to enhance our due diligence, contractual requirements, and oversight of lead generators, and will continue to analyze our marketing practices and policies and update as appropriate to mitigate the impact on our business and to ensure continuing compliance with the new rules, it is not possible to ensure that all lead generators and employees will comply with our policies and procedures at all times, which may result in potential litigation and regulatory exposure. 27 Table of Contents Results of Operations for the Three and Nine Months ended September 30, 2024 and 2023 Our discussion within Revenue provides the details of consolidated revenue by segment and significant products. In this section, we describe overall changes in revenue in our segments and significant products within each segment and increases or decreases in revenue from the prior period. We also provide insight into how changes in price and volume in each significant product impacted product revenue. Our Segment Profit is a discussion of profitability within each segment of the business. It is impacted by segment revenues as well as segment cost of revenue and marketing expenses. In Segment Profit, we provide a discussion of the business within each segment, addressing both Company and market impacts on the profitability of each segment in addition to a discussion of segment margin. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 $ Change % Change 2024 2023 $ Change % Change (Dollars in thousands) Home $ 32,248 $ 33,390 $ (1,142) (3) % $ 94,857 $ 118,628 $ (23,771) (20) % Consumer 59,474 67,253 (7,779) (12) % 166,826 229,439 (62,613) (27) % Insurance 169,065 54,536 114,529 210 % 377,008 190,016 186,992 98 % Other 2 9 (7) (78) % 6 66 (60) (91) % Revenue 260,789 155,188 105,601 68 % 638,697 538,149 100,548 19 % Costs and expenses: Cost of revenue (exclusive of depreciation and amortization shown separately below) 9,372 7,570 1,802 24 % 26,328 30,632 (4,304) (14) % Selling and marketing expense 193,542 97,244 96,298 99 % 450,105 350,420 99,685 28 % General and administrative expense 26,680 26,380 300 1 % 79,594 92,223 (12,629) (14) % Product development 11,190 10,840 350 3 % 33,421 36,096 (2,675) (7) % Depreciation 4,584 4,760 (176) (4) % 13,852 14,239 (387) (3) % Amortization of intangibles 1,466 1,981 (515) (26) % 4,422 6,012 (1,590) (26) % Goodwill impairment — 38,600 (38,600) (100) % — 38,600 (38,600) (100) % Restructuring and severance 273 1,955 (1,682) (86) % 498 9,967 (9,469) (95) % Litigation settlements and contingencies 3,762 (150) 3,912 2,608 % 3,791 350 3,441 983 % Total costs and expenses 250,869 189,180 61,689 33 % 612,011 578,539 33,472 6 % Operating income (loss) 9,920 (33,992) 43,912 129 % 26,686 (40,390) 67,076 166 % Other income (expense), net: Interest (expense) income, net (10,060) (7,097) (2,963) (42) % (17,899) 10,992 (28,891) (263) % Other expense (57,391) (110,910) 53,519 48 % (55,305) (108,637) 53,332 49 % Loss before income taxes (57,531) (151,999) 94,468 62 % (46,518) (138,035) 91,517 66 % Income tax (expense) benefit (447) 3,534 3,981 113 % (2,692) 2,912 5,604 192 % Net loss and comprehensive loss $ (57,978) $ (148,465) $ 90,487 61 % $ (49,210) $ (135,123) $ 85,913 64 % Revenue Revenue increased in the third quarter and first nine months of 2024 compared to the third quarter and first nine months of 2023 due to increases in our Insurance segment partially offset by decreases in our Home and Consumer segments. Our 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 credit repair business was closed at the end of the second quarter of 2023. Many of our Consumer segment products are not individually significant to revenue. Revenue from our Consumer segment decreased $7.8 million, or 12%, in the third quarter of 2024 from the third quarter of 2023 primarily due to a decrease in credit cards, partially offset by increases in business loans and personal loans. 28 Table of Contents Revenue from our Consumer segment decreased $62.6 million, or 27%, in the first nine months of 2024 from the first nine months of 2023 primarily due to decreases in each of our consumer products, primarily our credit cards and other credit products. Revenue from our personal loans product increased $1.3 million, or 5%, to $27.8 million in the third quarter of 2024 from $26.5 million in the third quarter of 2023. The increase in revenue was due to a 31% increase in volume, representing $6.5 million , partially offset by a 20% decrease in revenue earned per consumer, representing $5.2 million. Revenue from our personal loans product decreased $3.4 million, or 4%, to $74.9 million in the first nine months of 2024 from $78.3 million in the first nine months of 2023. The decrease in revenue was due to an 18% decrease in revenue earned per consumer, representing $14.0 million of the decrease, partially offset by a 16% increase in volume, representing $10.6 million of an increase. We measure volume for our personal loans product as the number of unique consumers completing request forms. For the current periods, no other products in our Consumer segment represented more than 10% of revenue; however, certain other Consumer products experienced notable changes. Revenue from our credit cards product decreased $8.5 million, or 58%, in the third quarter of 2024 compared to the third quarter of 2023 and decreased $34.6 million, or 64%, in the first nine months of 2024 compared to the first nine months of 2023 due to a decrease in volume and revenue earned per click. We measure volume for our credit cards product as the number of consumers clicking through to a card issuer. Revenue from our small business loans product increased $3.7 million, or 32%, in the third quarter of 2024 compared to the third quarter of 2023 primarily due to an increase in revenue earned per consumer. Revenue from our other credit products decreased $12.4 million, or 46%, in the first nine months of 2024 compared to the first nine months of 2023 due to the closure of our Ovation credit services business at the end of the second quarter of 2023. Revenue from our deposits product decreased $6.2 million or 45%, in the first nine months of 2024 compared to the first nine months of 2023 due to a decrease in volume and revenue earned per consumer. Our Home se gment includes the following products: purchase mortgage, refinance mortgage, and home equity loans and lines of credit. Revenue from our Home segment decreased $1.1 million, or 3%, in the third quarter of 2024 from the third quarter of 2023 primarily due to a decrease in mortgage products partially offset by an increase in our home equity loans product, and decreased $23.8 million, or 20%, in the first nine months of 2024 from the first nine months of 2023 due to decreases in revenue from each of our Home products. Revenue from our mortgage products decreased $2.1 million, or 16%, to $11.2 million in the third quarter of 2024 from $13.3 million in the third quarter of 2023. The decrease in revenue was due to a 12% decrease in volume, representing $1.6 million of the decrease, and a 4% decrease in revenue earned per consumer, representing $0.5 million of the decrease. Revenue from our mortgage products decreased $18.5 million, or 37%, to $31.1 million in the first nine months of 2024 from $49.5 million in the first nine months of 2023. The decrease in revenue was due to a 30% decrease in volume, representing $13.4 million of the decrease, and a 10% decrease in revenue earned per consumer, representing $5.1 million of the decrease. We measure volume for our mortgage products as the number of consumers completing request forms. Revenue from our purchase mortgage product decreased $10.8 million in the first nine months of 2024 compared to the first nine months of 2023 primarily due to a decrease in the number of consumers completing request forms and a decrease in revenue earned per consumer. Revenue from our refinance mortgage product decreased $7.7 million in the first nine months of 2024 compared to the first nine months of 2023 due to a decrease in the number of consumers completing request forms and a decrease in revenue earned per consumer, as interest rates have risen. Revenue from our home equity loans product decreased $5.3 million, or 8%, to $63.8 million in the first nine months of 2024 from $69.1 million in the first nine months of 2023. The decrease in revenue was due to a 19% decrease in revenue earned per consumer, representing $13.3 million of the decrease, partially offset by a 14% increase in volume, representing a $8.0 million increase. We measure volume for our home equity loans and lines of credit products as the number of consumers completing request forms. Revenue from our Insurance segment increased $114.5 million, or 210%, to $169.1 million in the third quarter of 2024 from $54.5 million in the third quarter of 2023. The increase in revenue was due to a 107% increase in revenue earned per consumer, representing $58.1 million of the increase, and a 50% increase in volume, representing $56.4 million of the increase. Revenue from our Insurance segment increased $187.0 million, or 98%, to $377.0 million in the first nine months of 2024 from $190.0 million in the first nine months of 2023. The increase in revenue was due to a 54% increase in revenue earned per consumer, representing $102.3 million of the increase, and a 29% increase in volume, representing $84.7 million of the 29 Table of Contents increase. We measure volume for our insurance product as the number of consumer request forms and in certain cases re-engagement with a consumer, the number of such subsequent consumer engagements through our platform. Cost of revenue Cost of revenue consists primarily of costs associated with compensation and other employee-related costs (including stock-based compensation) relating to internally-operated customer call centers, third-party customer call center fees, credit scoring fees, credit card fees, website network hosting, and server fees. Cost of revenue increased $1.8 million in the third quarter of 2024 from the third quarter of 2023 primarily due to increases in direct costs associated with credit scoring and credit card fees, and compensation and benefits. Cost of revenue decreased $4.3 million in the first nine months of 2024 from the first nine months of 2023 primarily due to a decrease in compensation and benefits of $3.9 million. The decreases in the first nine months are primarily due to the Reduction Plan at the end of the first quarter of 2023, including shutting down the LendingTree customer call center, and the closure of the credit repair business at the end of the second quarter of 2023. Cost of revenue as a percentage of revenue decreased to 4% in the third quarter of 2024 compared to 5% in the third quarter of 2023, and decreased to 4% in the first nine months of 2024 compared to 6% in the first nine months of 2023. Selling and marketing expense Selling and marketing expense consists primarily of advertising and promotional expenditures and compensation and other employee-related costs (including stock-based compensation) for personnel engaged in sales or marketing functions. Advertising and promotional expenditures primarily include online marketing, as well as television, print, and radio spending. Advertising production costs are expensed in the period the related ad is first run. Selling and marketing expense increased in the third quarter of 2024 compared to the third quarter 2023 by $96.3 million, and increased $99.7 million in the first nine months of 2024 compared to the first nine months of 2023 primarily due to the changes in advertising and promotional expense discussed below. Additionally, compensation and benefits decreased $3.7 million in the first nine months of 2024 compared to the first nine months of 2023. Advertising and promotional expense is the largest component of selling and marketing expense, and is comprised of the following: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 $ Change % Change 2024 2023 $ Change % Change (Dollars in thousands) Online $ 182,690 $ 86,524 $ 96,166 111 % $ 418,262 $ 311,598 $ 106,664 34 % Broadcast 17 61 (44) (72) % 37 281 (244) (87) % Other 859 854 5 1 % 2,835 5,917 (3,082) (52) % Total advertising expense $ 183,566 $ 87,439 $ 96,127 110 % $ 421,134 $ 317,796 $ 103,338 33 % In the periods presented, advertising and promotional expenses are equivalent to the non-GAAP measure variable marketing expense. See Variable Marketing Expense and Variable Marketing Margin below for additional information. Revenue is primarily driven by Network Partner demand for our products, which is matched to corresponding consumer requests. We adjust our selling and marketing expenditures dynamically in relation to anticipated revenue opportunities in order to ensure sufficient consumer inquiries to profitably meet such demand. An increase in a product’s revenue is generally met by a corresponding increase in marketing spend, and conversely a decrease in a product’s revenue is generally met by a corresponding decrease in marketing spend. This relationship exists for our Home, Consumer, and Insurance segments. We adjusted our advertising expenditures in the third quarter and first nine months of 2024 compared to the third quarter and first nine months of 2023 in response to changes in Network Partner demand on our marketplace. We will continue to adjust selling and marketing expenditures dynamically in response to anticipated revenue opportunities. 30 Table of Contents General and administrative expense General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in finance, legal, tax, corporate information technology, human resources and executive management functions, as well as facilities and infrastructure costs and fees for professional services. General and administrative expense remained relatively consistent in the third quarter of 2024 from the third quarter of 2023. General and administrative expense decreased in the first nine months of 2024 from the first nine months of 2023 primarily due to a decrease in compensation and benefits of $5.5 million, a decrease in fees and other charges of $1.5 million and a decrease in facilities expenses of $1.5 million. Additionally, we incurred a $4.2 million loss on the impairment of assets for our Ovation business in the first nine months of 2023. General and administrative expense as a percentage of revenue decreased to 10% in the third quarter of 2024 compared to 17% in the third quarter of 2023, and decreased to 12% in the first nine months of 2024 compared to 17% in the first nine months of 2023. Product development Product development expense consists primarily of compensation and other employee-related costs (including stock-based compensation) and third-party labor costs that are not capitalized, for employees and consultants engaged in the design, development, testing and enhancement of technology. Product development expense remained consistent in the third quarter of 2024 compared to the third quarter of 2023. Product development expense decreased in the first nine months of 2024 compared to the first nine months of 2023 primarily due to the Reduction Plan at the end of the first quarter of 2023. We continued to invest in internal development of new and enhanced features, functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners. Amortization of intangibles The decrease in amortization of intangibles in the third quarter and first nine months of 2024 compared to the third quarter and first nine months of 2023 was primarily due to certain intangible assets associated with our recent business acquisitions becoming fully amortized. Goodwill impairment In the third quarter of 2023, we incurred a goodwill impairment charge of $38.6 million in our Insurance reporting unit. See Note 6 - Goodwill and Intangible Assets, in Part I. Item 1 Financial Statements, for additional information. Restructuring and severance During September 2023, we completed workforce reductions of 14 employees. We incurred approximately $0.9 million in severance charges in connection with the workforce reductions, consisting of cash expenditures for employee separation costs of approximately $0.7 million in the third quarter of 2023 and non-cash charges for the accelerated vesting of certain equity awards of approximately $0.2 million through the fourth quarter of 2023. The cash payments were completed by the third quarter of 2024. On March 24, 2023, we committed to the Reduction Plan to reduce operating costs, which included the elimination of approximately 13% of our workforce. As a result of the Reduction Plan, we incurred 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. We 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. We made the decision to close the Ovation credit services business by mid-2023 and all operations ceased in August 2023. We incurred $2.1 million of restructuring expense related to the Ovation closure in the second quarter of 2023 in connection with cash expenditures for employee separation costs. 31 Table of Contents Interest (expense) income In March 2024, we drew $125.0 million on a first lien term loan facility and incurred $3.8 million and $8.0 million of interest expense in the third quarter of 2024 and first nine months of 2024, respectively. In the third quarter of 2024, we repurchased approximately $7.6 million in principal amount of our 0.50% Convertible Senior Notes due July 15, 2025 (the "2025 Notes") for $7.2 million. As a result of the repurchase, we recognized a gain on the extinguishment of $0.5 million and an immaterial loss on the write-off of unamortized debt issuance costs, both of which are included in interest (expense) income, net in the consolidated statements of operations and comprehensive income. In the second quarter of 2024, we repurchased approximately $161.3 million in principal amount of our 2025 Notes for $151.7 million plus accrued and unpaid interest of approximately $0.3 million. As a result of the repurchase, we recognized a gain on the extinguishment of $9.6 million and a loss on the write-off of unamortized debt issuance costs of $1.0 million, both of which are included in interest (expense) income, net in the consolidated statements of operations and comprehensive income. In the first quarter of 2023, we repurchased approximately $190.6 million in principal amount of our 2025 Notes for $156.3 million plus accrued and unpaid interest of approximately $0.1 million. As a result of the repurchase, we recognized a gain on the extinguishment of $34.3 million, a loss on the write-off of unamortized debt issuance costs of $2.4 million, and incurred debt repayment costs of $1.0 million, all of which are included in interest (expense) income, net in the consolidated statements of operations and comprehensive income. See Note 12—Debt, in Part I. Item 1 Financial Statements, for additional information. Other expense In the third quarter of 2024, we incurred impairment charges of $58.4 million related to two investments in equity securities. In the third quarter of 2023, we incurred an impairment charge of $113.1 million related to an investment in equity securities. See Note 7 - Equity Investment, in Part I. Item 1 Financial Statements, for additional information. Income tax expense For the third quarter and first nine months of 2024 and 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. 32 Table of Contents Segment Profit Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 $ Change % Change 2024 2023 $ Change % Change (Dollars in thousands) Home Revenue $ 32,248 $ 33,390 $ (1,142) (3) % $ 94,857 $ 118,628 $ (23,771) (20) % Segment marketing expense (1) 22,993 22,095 898 4 % $ 66,703 $ 78,878 $ (12,175) (15) % Segment profit $ 9,255 $ 11,295 $ (2,040) (18) % $ 28,154 $ 39,750 $ (11,596) (29) % Segment margin 29% 34% 30% 34% Consumer Revenue 59,474 67,253 (7,779) (12) % 166,826 229,439 (62,613) (27) % Segment marketing expense (1) 31,491 32,826 (1,335) (4) % 84,491 119,466 (34,975) (29) % Segment profit 27,983 34,427 (6,444) (19) % 82,335 109,973 (27,638) (25) % Segment margin 47% 51% 49% 48% Insurance Revenue 169,065 54,536 114,529 210 % 377,008 190,016 186,992 98 % Segment marketing expense (1) 127,622 31,177 96,445 309 % 265,751 111,754 153,997 138 % Segment profit 41,443 23,359 18,084 77 % 111,257 78,262 32,995 42 % Segment margin 25% 43% 30% 41% Other Revenue 2 9 (7) (78) % 6 66 (60) (91) % Segment marketing expense (1) 45 21 24 114 % 104 516 (412) (80) % Other (43) (12) (31) (258) % (98) (450) 352 78 % Total Revenue 260,789 155,188 105,601 68 % 638,697 538,149 100,548 19 % Segment marketing expense (1) 182,151 86,119 96,032 112 % 417,049 310,614 106,435 34 % Segment profit $ 78,638 $ 69,069 $ 9,569 14 % $ 221,648 $ 227,535 $ (5,887) (3) % Segment margin 30% 45% 35% 42% (1) Segment marketing expense represents the potion 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 costs. Segment profit is our primary segment operating metric. Segment profit is calculated as segment revenue less segment selling and marketing expenses attributed to variable costs paid for advertising, direct marketing and related expenses that are directly attributable to the segments' products. See Note 15—Segment Information in the notes to the consolidated financial statements for additional information on segments and a reconciliation of segment profit to pre-tax income. Home Home segment revenue decreased 3% to $32.2 million in the third quarter of 2024 from the third quarter of 2023 and segment profit decreased 18% to $9.3 million in the third quarter of 2024 from the third quarter of 2023. Segment margin declined to 29% in the third quarter of 2024 compared to 34% in the third quarter of 2023, primarily due to a decline in revenue earned per consumer, due to a decline in close rates at our lender partners. Home equity revenue of $21.0 million in the third quarter of 2024 increased $0.9 million from $20.1 million in the third quarter of 2023. Volume of home equity consumers completing request forms increased 25% in the third quarter of 2024 33 Table of Contents compared to the third quarter of 2023, however, a 17% decline in revenue earned per consumer partially offset this volume growth. Within Home, our core mortgage business generated revenue of $11.2 million in the third quarter of 2024, down 16% from the third quarter of 2023. Our refinance product within our mortgage business matches consumers in the market looking to refinance their existing mortgages with our network lenders. Our purchase product within our mortgage business matches consumers in the market looking to buy a new home with our network lenders. Our mortgage business is directly impacted by the mortgage market in which we participate. Our mortgage business continues to see headwinds from a lack of in-the-money refinance borrowers given the current higher level of mortgage rates, and subdued home sales have pressured the volume of consumers searching for purchase loans. We believe financial market expectations for continued decreases in interest rates may benefit the mortgage and home equity lending environment and our Home segment. Consumer Our Consumer segment revenue decreased 12% to $59.5 million in the third quarter of 2024 from the third quarter of 2023, and segment profit decreased 19% to $28.0 million in the third quarter of 2024 from the third quarter of 2023 due to the decline in revenue. Segment margin was 47% in the third quarter of 2024 compared to 51% in the third quarter of 2023 primarily due to a decline in revenue earned per consumer on certain products as well as a change in mix shift in the product revenue. Personal loans revenue of $27.8 million in the third quarter of 2024 increased 5% from the third quarter of 2023 as lending standards remain restrictive at our lender partners. If financial market expectations for decreases in short-term interest rates remain as projected, we believe this would likely benefit our personal loans product in future quarters. Small business revenue increased 32% in the third quarter of 2024 from the third quarter of 2023, as the lending appetite has remained stable from our partners. Additionally, the revenue growth has allowed us to invest more into marketing spend to capture high quality business owners searching for loans. See the section titled "Revenue" above for additional discussion of declines in product revenues within the Consumer segment. Insurance Insurance revenue increased 210% to $169.1 million in the third quarter of 2024 from the third quarter of 2023 and segment profit increased 77% to $41.4 million in the third quarter of 2024 from the third quarter of 2023. Carrier demand for new auto insurance customers has been strong, with volume increasing 50% in the third quarter of 2024 compared to the third quarter of 2023, as two years of compounded premium rate increases combined with declines in the price of used vehicles and replacement parts has created a favorable underwriting environment. Segment margin declined to 25% in the third quarter of 2024 from 43% in the third quarter of 2023. In 2023, we were able to exit from our highest cost marketing channels and continue to meet the decreased level of demand. In 2024, we re-entered those marketing channels to fill the increase in carrier demand, which has resulted in lower segment profit margin. Variable Marketing Expense and Variable Marketing Margin We report variable marketing expense and variable marketing margin as supplemental measures to accounting principles generally accepted in the United States of America ("GAAP".) These related measures are the primary metrics by which we measure the effectiveness of our marketing efforts. Variable marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing, and related expenses, and excludes overhead, fixed costs, and personnel-related expenses. Variable marketing margin is a measure of the efficiency of our operating model, measuring revenue after subtracting variable marketing expense. Our operating model is highly sensitive to the amount and efficiency of variable marketing expenditures, and our proprietary systems are able to make rapidly changing decisions concerning the deployment of variable marketing expenditures (primarily but not exclusively online and mobile advertising placement) based on proprietary and sophisticated analytics. We believe that investors should have access to the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. We provide and encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures discussed below. 34 Table of Contents Variable marketing expense is defined as the expense attributable to variable costs paid for advertising, direct marketing and related expenses, and excluding overhead, fixed costs and personnel-related expenses. The majority of these variable advertising costs are expressly intended to drive traffic to our websites and these variable advertising costs are included in selling and marketing expense on our consolidated statements of operations and comprehensive income. Variable marketing margin is defined as revenue less variable marketing expense. The following shows the calculation of variable marketing margin: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Revenue $ 260,789 $ 155,188 $ 638,697 $ 538,149 Variable marketing expense 183,566 87,439 421,134 317,796 Variable marketing margin $ 77,223 $ 67,749 $ 217,563 $ 220,353 Below is a reconciliation of selling and marketing expense, the most directly comparable GAAP measure, to variable marketing expense: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Selling and marketing expense $ 193,542 $ 97,244 $ 450,105 $ 350,420 Non-variable selling and marketing expense (9,976) (9,805) (28,971) (32,624) Variable marketing expense $ 183,566 $ 87,439 $ 421,134 $ 317,796 The following is a reconciliation of net loss, the most directly comparable GAAP measure, to variable marketing margin: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Net loss $ (57,978) $ (148,465) $ (49,210) $ (135,123) Adjustments to reconcile to variable marketing margin: Cost of revenue 9,372 7,570 26,328 30,632 Non-variable selling and marketing expense (1) 9,976 9,805 28,971 32,624 General and administrative expense 26,680 26,380 79,594 92,223 Product development 11,190 10,840 33,421 36,096 Depreciation 4,584 4,760 13,852 14,239 Amortization of intangibles 1,466 1,981 4,422 6,012 Goodwill impairment — 38,600 — 38,600 Restructuring and severance 273 1,955 498 9,967 Litigation settlements and contingencies 3,762 (150) 3,791 350 Interest expense (income), net 10,060 7,097 17,899 (10,992) Other expense 57,391 110,910 55,305 108,637 Income tax expense (benefit) 447 (3,534) 2,692 (2,912) Variable marketing margin $ 77,223 $ 67,749 $ 217,563 $ 220,353 (1) Represents the portion of selling and marketing expense not attributable to variable costs paid for advertising, direct marketing and related expenses. Includes overhead, fixed costs and personnel-related expenses. 35 Table of Contents Adjusted EBITDA We report Adjusted EBITDA as a supplemental measure to GAAP. This measure is the primary metric by which we evaluate the performance of our businesses, on which our marketing expenditures and internal budgets are based and by which, in most years, management and many employees are compensated. We believe that investors should have access to the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. We provide and encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures discussed below. Definition of Adjusted EBITDA We report Adjusted EBITDA as net income adjusted to exclude interest, income tax, amortization of intangibles and depreciation, and to further exclude (1) non-cash compensation expense, (2) non-cash impairment charges, (3) gain/loss on disposal of assets, (4) gain/loss on investments, (5) restructuring and severance expenses, (6) litigation settlements and contingencies, (7) acquisitions and dispositions income or expense (including with respect to changes in fair value of contingent consideration), (8) contributions to the LendingTree Foundation, (9) dividend income, and (10) one-time items. Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses, including depreciation, non-cash compensation and acquisition-related accounting. We endeavor to compensate for the limitations of the non-GAAP measures presented by also providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. These non-GAAP measures may not be comparable to similarly titled measures used by other companies. One-Time Items Adjusted EBITDA is adjusted for one-time items, if applicable. Items are considered one-time in nature if they are non-recurring, infrequent, or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. For the periods presented below, there are no adjustments for one-time items. Non-Cash Expenses that are Excluded from Adjusted EBITDA Non-cash compensation expense consists principally of expense associated with grants of restricted stock, restricted stock units and stock options, some of which awards have performance-based vesting conditions. Non-cash compensation expense also includes expense associated with employee stock purchase plans. These expenses are not paid in cash, and we include the related shares in our calculations of fully diluted shares outstanding. Upon settlement of restricted stock units, exercise of certain stock options or vesting of restricted stock awards, the awards may be settled, on a net basis, with us remitting the required tax withholding amount from our current funds. Amortization of intangibles are non-cash expenses relating primarily to intangible assets acquired through acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as purchase agreements, technology and customer relationships, are valued and amortized over their estimated lives. 36 Table of Contents The following table is a reconciliation of net loss, the most directly comparable GAAP measure, to Adjusted EBITDA. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Net loss $ (57,978) $ (148,465) $ (49,210) $ (135,123) Adjustments to reconcile to Adjusted EBITDA: Amortization of intangibles 1,466 1,981 4,422 6,012 Depreciation 4,584 4,760 13,852 14,239 Restructuring and severance 273 1,955 498 9,967 Loss on impairments and disposal of assets 6 88 787 5,255 Loss on impairment of equity investments 58,376 113,064 58,376 114,504 Goodwill impairment — 38,600 — 38,600 Non-cash compensation expense 6,859 8,592 22,085 28,999 Acquisition expense — — — (5) Litigation settlements and contingencies 3,762 (150) 3,791 350 Interest expense (income), net 10,060 7,097 17,899 (10,992) Dividend income (982) (2,154) (3,241) (5,867) Income tax expense (benefit) 447 (3,534) 2,692 (2,912) Adjusted EBITDA $ 26,873 $ 21,834 $ 71,951 $ 63,027 Financial Condition, Liquidity and Capital Resources General As of September 30, 2024, we had $96.8 million of cash and cash equivalents, compared to $112.1 million of cash and cash equivalents as of December 31, 2023. In the third quarter of 2024, we repurchased approximately $7.6 million in principal amount of our 2025 Notes for $7.2 million. As a result of the repurchase, we recognized a gain on the extinguishment of $0.5 million and an immaterial loss on the write-off of unamortized debt issuance costs, both of which are included in interest (expense) income, net in the consolidated statements of operations and comprehensive income. In the second quarter of 2024, we repurchased approximately $161.3 million in principal amount of our 2025 Notes for $151.7 million plus accrued and unpaid interest of approximately $0.3 million. As a result of the repurchase, we recognized a gain on the extinguishment of $9.6 million and a loss on the write-off of unamortized debt issuance costs of $1.0 million, both of which are included in interest (expense) income, net in the consolidated statements of operations and comprehensive income. We expect our cash and cash equivalents, cash flows from operations and available borrowings under our credit facilities to be sufficient to fund our operating needs for the next twelve months and beyond. We will continue to monitor the impact of the current economic conditions, including interest rates and inflation on our liquidity and capital resources. As of September 30, 2024, we have $115.3 million outstanding on the 2025 Notes. We intend to use cash on hand, available borrowings of $50.0 million from the 2024 Term Loan (as defined below), and future cash flows from operations for the repayment of the 2025 Notes. 37 Table of Contents Equity Distribution Agreement In July 2024, we entered into an Equity Distribution Agreement in connection with the establishment of an ATM Equity Program (as defined in the 2024 Term Loan (as defined herein) agreement) under which we may sell up to an aggregate of $50.0 million of shares of the our common stock. No sales were made under the Equity Distribution Agreement during the three months ended September 30, 2024. Credit Facilities On September 15, 2021, we entered into a credit agreement (the “Credit Agreement”), consisting of a $200.0 million revolving credit facility (the “Revolving Facility”), which matures on September 15, 2026, and a $250.0 million delayed draw term loan facility (the “2021 Term Loan” and together with the Revolving Facility, the “Credit Facility”), which matures on September 15, 2028. The proceeds of the Revolving Facility can be used to finance working capital, for general corporate purposes and any other purpose not prohibited by the Credit Agreement. We borrowed $250.0 million under the delayed draw term loan on May 31, 2022 and used $170.2 million of the proceeds to settle our 0.625% Convertible Senior Notes due June 1, 2022 ("2022 Notes"), including interest. The remaining proceeds of $79.8 million may be used for general corporate purposes and any other purposes not prohibited by the Credit Agreement. As of November 1, 2024, we have outstanding $244.4 million under the 2021 Term Loan and the remaining borrowing capacity under the Revolving Facility is $200.0 million. As of September 30, 2024, we have $20.0 million available for borrowing under the Revolving Facility. On March 27, 2024, we entered a first lien term loan facility (the “2024 Term Loan”), consisting of $175.0 million which matures on March 27, 2031. We drew $125.0 million of the 2024 Term Loan upon closing while the remaining $50.0 million will be available as a delayed draw term loan until March 27, 2025. The proceeds of the 2024 Term Loan were used to pay fees and expenses incurred in connection with the closing of the 2024 Term Loan and delayed draw term loan, and will be used for working capital and general corporate purposes, which may include repayment of our 2025 Notes. The funding had a $3.1 million original issue discount and associated debt issuance costs of $4.3 million. We filed an ATM Shelf Registration (as defined in the 2024 Term Loan agreement) with the SEC in the third quarter of 2024. In the event of a default in the minimum Consolidated EBITDA (as defined in the 2024 Term Loan agreement) covenant in the 2024 Term Loan, we are required to utilize the ATM Equity Program (as defined in the 2024 Term Loan agreement) to sell common stock and use the proceeds to cure the event of default in the minimum Consolidated EBITDA covenant. Additionally, we may use the ATM Equity Program to maintain the $40.0 million minimum cash balance requirement in the 2024 Term Loan. As of November 1, 2024, we had $118.8 million borrowings outstanding under the 2024 Term Loan. See Note 12—Debt, in Part I. Item 1 Financial Statements, for additional information. Cash Flows Our cash flows are as follows: Nine Months Ended September 30, 2024 2023 (in thousands) Net cash provided by operating activities $ 46,022 $ 46,692 Net cash used in investing activities (8,396) (9,928) Net cash used in financing activities (52,894) (160,150) Cash Flows from Operating Activities Our largest source of cash provided by our operating activities is revenues generated by our products. Our primary uses of cash from our operating activities include advertising and promotional payments. In addition, our uses of cash from operating activities include compensation and other employee-related costs, other general corporate expenditures, litigation settlements and contingencies, and income taxes. 38 Table of Contents Net cash provided by operating activities remained relatively consistent in the first nine months of 2024 from the first nine months of 2023 primarily due to unfavorable changes in accounts receivable, partially offset by favorable changes in accounts payable, accrued expenses and other current liabilities. Cash Flows from Investing Activities Net cash used in investing activities in the first nine months of 2024 and 2023 consisted of capital expenditures primarily related to internally developed software. Cash Flows from Financing Activities Net cash used in financing activities in the first nine months of 2024 consisted primarily of the repurchase of the 2025 Notes for $158.8 million, term loan repayments of $8.8 million and $2.8 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options offset by $117.8 million net proceeds from the 2024 Term Loan. Net cash used in financing activities in the first nine months of 2023 consisted primarily of the repurchase of the 2025 Notes for $156.3 million. New Accounting Pronouncements and Critical Accounting Estimates For information regarding new accounting pronouncements and critical accounting estimates, see Note 2 — Significant Accounting Policies, in Part I, Item 1 Financial Statements .