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, 2024 (the “2024 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. Our online consumer platform provides consumers with access to product offerings from our Network Partners, including mortgage loans, home equity loans and lines of credit, auto loans, credit cards, deposit accounts, personal loans, small business loans, insurance quotes, sales of insurance policies and other related offerings. In addition, we offer consumers tools and resources, including free credit scores, that facilitate comparison shopping for loans, deposit products, insurance, and other offerings. We seek to match to match consumers with multiple providers, who can provide them competing quotes for the product(s) they are seeking. We also serve as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries we generate with these Network Partners. Our Spring 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 insurance industries are 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. 21 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 2024 Annual Report for additional information. During the first quarter of 2025, 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 have remained relatively consistent in the first quarter of 2025 compared to the fourth quarter of 2024 and the first quarter of 2024, but nearly doubled compared to the first quarter of 2022. 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 remain at relatively elevated levels and we continue to be optimistic about 2025. Segment Reporting We have three reportable segments: Home, Consumer, and Insurance. Recent Mortgage Interest Rate Trends Interest rate and market risks are substantial in the mortgage lead generation business. Short-term fluctuations in mortgage interest rates primarily affect consumer demand for mortgage refinancings, while long-term fluctuations in mortgage interest rates, coupled with the U.S. 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 refinancings, which in turn leads to increased traffic to our website and decreased selling and marketing efforts associated with that traffic. At the same time, lender demand for leads from third-party sources typically decreases, as there are more consumers in the marketplace seeking 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 6.72% in December 2024 to 6.65% in March 2025. On a quarterly basis, 30-year mortgage interest rates increased in the first quarter of 2025 to an average 6.82%, from 6.65% in the fourth quarter of 2024. The quarterly average was up slightly in the first quarter of 2025 compared to 6.75% in the first quarter of 2024. 22 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 decreased to 29% of total mortgage origination dollars in the first quarter of 2025 compared to 38% in the fourth quarter of 2024 and increased from 23% in the first quarter of 2024. In the first quarter of 2025, total refinance origination dollars decreased 41% from the fourth quarter of 2024 and increased 30% from the first quarter of 2024. Industry-wide mortgage origination dollars in the first quarter of 2025 decreased 22% from the fourth quarter of 2024, but increased 2% from first quarter of 2024. 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 33% for 2025 compared to 28% in 2024. 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 1% in the first quarter of 2025 compared to the fourth quarter of 2024, and increased 1% compared to the first quarter of 2024. Fannie Mae predicts an overall increase in existing-home sales of approximately 3.1% in 2025 compared to 2024. 23 Table of Contents Spring TM We consider certain metrics related to LendingTree Spring ("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 0.8 million new users in the first quarter of 2025, bringing cumulative sign-ups to 32.1 million at March 31, 2025. 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 $3.7 million of revenue, or 2% of total revenue, in the first quarter of 2025 to registered Spring users who initiated their transaction from the Spring platform. During the first quarter of 2025, approximately 0.2 million Spring users initiated a transaction from the Spring platform that contributed to revenue. Debt Activity In March 2025, we drew $50.0 million on our 2024 Term Loan (as defined below) delayed draw facility and incurred fees of $0.5 million associated with the borrowing. Additionally, we repurchased $20.0 million in principal amount of our 0.50% Convertible Senior Notes due July 15, 2025 ("2025 Notes"), through individual privately-negotiated transactions with certain holders of such notes, for approximately $19.7 million in cash plus accrued and unpaid interest. 24 Table of Contents Results of Operations for the Three Months ended March 31, 2025 and 2024 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 March 31, 2025 2024 $ Change % Change (Dollars in thousands) Home $ 37,019 $ 30,443 $ 6,576 22 % Consumer 56,033 51,451 4,582 9 % Insurance 146,652 85,872 60,780 71 % Other 24 2 22 1,100 % Revenue 239,728 167,768 71,960 43 % Costs and expenses: Cost of revenue (exclusive of depreciation and amortization shown separately below) 9,908 8,545 1,363 16 % Selling and marketing expense 172,751 108,176 64,575 60 % General and administrative expense 30,660 25,796 4,864 19 % Product development 11,904 11,857 47 — % Depreciation 4,297 4,667 (370) (8) % Amortization of intangibles 1,307 1,489 (182) (12) % Restructuring and severance 798 23 775 3,370 % Litigation settlements and contingencies 15,212 36 15,176 42,156 % Total costs and expenses 246,837 160,589 86,248 54 % Operating (loss) income (7,109) 7,179 (14,288) (199) % Other income (expense), net: Interest expense, net (9,084) (6,638) 2,446 37 % Other income 1,388 1,034 354 34 % (Loss) income before income taxes (14,805) 1,575 (16,380) (1,040) % Income tax benefit (expense) 2,430 (559) (2,989) (535) % Net (loss) income and comprehensive (loss) income $ (12,375) $ 1,016 $ (13,391) (1,318) % Revenue Revenue increased in the first quarter of 2025 compared to the first quarter of 2024 due to increases in our Insurance, Home and Consumer segments. Revenue from our Insurance segment increased $60.8 million, or 71%, to $146.7 million in the first quarter of 2025 from $85.9 million in the first quarter of 2024. The increase in revenue was due to a 41% increase in revenue earned per consumer, representing $34.8 million of the increase and a 22% increase in volume, representing $26.0 million of the increase. We measure volume for insurance product as the number of consumer request forms and in certain cases of re-engagement with a consumer, the number of subsequent consumer engagements through our platform. Our Home segment includes the following products: purchase mortgage, refinance mortgage, and home equity loans and lines of credit. Revenue from our Home segment increased $6.6 million, or 22%, in the first quarter of 2025 from the first quarter of 2024 due to increases in revenue from our home equity loans and mortgage products. Revenue from our home equity loans and lines of credit product increased $5.0 million, or 24%, to $25.8 million in the first quarter of 2025 from $20.8 million in the first quarter of 2024. The increase in revenue was due to a 50% increase in volume, 25 Table of Contents representing an increase of $8.6 million, partially offset by a 17% decrease in revenue earner per consumer, representing a decrease of $3.6 million. We measure volume for our home equity loans and lines of credit as the number of consumers completing request forms. Revenue from our mortgage products increased $1.6 million, or 16%, to $11.2 million in the first quarter of 2025 from $9.6 million in the first quarter of 2024. The increase in revenue was due to our refinance mortgage product which increased $1.6 million in the first quarter of 2025 compared to the first quarter of 2024 due to increases in the number of consumers completing request forms and an increase in revenue earned per consumer. While we experienced a slight increase in mortgage revenue, increased mortgage rates continue to cause reduced refinance volumes and continue to put pressure on purchase activity. We measure volume for our mortgage products as the number of consumers completing request forms. Our Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products. Many of our Consumer segment products are not individually significant to revenue. Revenue from our Consumer segment increased $4.6 million, or 9%, in the first quarter of 2025 from the first quarter of 2024 primarily due to increases in our personal loans and small business loans products, partially offset by decreases in our credit cards and other credit products. Revenue from our personal loans product increased $3.3 million, or 16%, to $23.4 million in the first quarter of 2025 from $20.1 million in the first quarter of 2024. The increase in revenue was due to a 36% increase in volume, representing $6.2 million of an increase, partially offset by a 14% decrease in revenue earned per consumer, representing $2.9 million of a decrease. We measure volume for our personal loans product as the number of unique consumers completing request forms. For the periods presented, no other products in our Consumer segment represented more than 10% of revenue; however, certain other Consumer products experienced notable changes. Revenue from small business increased $6.4 million, or 48%, in the first quarter of 2025 compared to the first quarter of 2024 due increases in the number of consumers completing request forms and in revenue earned per consumer. Revenue from credit cards decreased $3.7 million, or 48%, in the first quarter of 2025 compared to the first quarter of 2024 primarily due to decreases in the number of consumer clicks and revenue earned per click. Revenue from other credit products decreased $1.2 million, or 31%, in the first quarter of 2025 compared to the first quarter of 2024 due to a decrease in revenue earned per consumer. 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 in the first quarter of 2025 from the first quarter of 2024 by $1.4 million, primarily due to an increase in compensation and benefits of $0.9 million. Cost of revenue as a percentage of revenue decreased to 4% in the first quarter of 2025 compared to 5% in the first quarter of 2024. 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 first quarter of 2025 compared to the first quarter 2024 by $64.6 million primarily due to the changes in advertising and promotional expense discussed below. Additionally, compensation and benefits increased $0.9 million in the first quarter of 2025 compared to the first quarter 2024. 26 Table of Contents Advertising and promotional expense is the largest component of selling and marketing expense, and is comprised of the following: Three Months Ended March 31, 2025 2024 $ Change % Change (Dollars in thousands) Online $ 161,075 $ 97,515 $ 63,560 65 % Broadcast — 11 (11) (100) % Other 926 795 131 16 % Total advertising expense $ 162,001 $ 98,321 $ 63,680 65 % 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 first quarter of 2025 compared to the first quarter of 2024 in response to changes in Network Partner demand on our marketplace. We will continue to adjust selling and marketing expenditures dynamically in response to anticipated revenue opportunities. General and administrative expense General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in finance, legal, tax, corporate information technology, human resources and executive management functions, as well as facilities and infrastructure costs and fees for professional services. General and administrative expense increased $4.9 million in the first quarter of 2025 compared to the first quarter of 2024. Compensation and benefits increased in the first quarter of 2025 compared to the first quarter of 2024 by $4.8 million, primarily due to an increase in non-cash compensation of $3.0 million. For additional information, see Note—9-Stock-Based Compensation in the notes to the consolidated financial statements included elsewhere in this report. Non-cash compensation expense is excluded from Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”), as discussed below. General and administrative expense as a percentage of revenue in the first quarter of 2025 was 13% compared to 15% for the first quarter of 2024. 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 first quarter of 2025 compared to the first quarter of 2024 as we continued to invest in internal development of new and enhanced features, functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners. 27 Table of Contents Litigation Settlements and Contingencies In the first quarter of 2025, we incurred $15.2 million of expenses for litigation contingencies due to the Mantha litigation. See Note 12—Contingencies in the notes to the consolidated financial statements for additional information on litigation matters. Interest expense, net In March 2024 and March 2025, we drew $125.0 million and $50.0 million, respectively, on the 2024 Term Loan and incurred $3.4 million of interest expense in the first quarter of 2025 as a result of the 2024 Term Loan. In the first quarter of 2025, we repurchased approximately $20.0 million in principal amount of our 0.50% Convertible Senior Notes due July 15, 2025 (the "2025 Notes") for $19.7 million plus accrued and unpaid interest. As a result of the repurchase, we recognized a gain on the extinguishment of $0.3 million, which is included in interest expense, net in the consolidated statement of operations and comprehensive income. See Note 11—Debt for additional information. Other income Other income primarily consists of dividend income. Income tax benefit (expense) For the first quarter of 2025 and 2024, 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. 28 Table of Contents Segment Profit Three Months Ended March 31, 2025 2024 $ Change % Change (Dollars in thousands) Home Revenue $ 37,019 $ 30,443 $ 6,576 22 % Segment marketing expense (1) 23,873 20,833 3,040 15 % Segment profit 13,146 9,610 3,536 37 % Segment margin 36% 32% Consumer Revenue 56,033 51,451 4,582 9 % Segment marketing expense (1) 28,896 24,011 4,885 20 % Segment profit 27,137 27,440 (303) (1) % Segment margin 48% 53% Insurance Revenue 146,652 85,872 60,780 71 % Segment marketing expense (1) 107,942 52,423 55,519 106 % Segment profit 38,710 33,449 5,261 16 % Segment margin 26% 39% Other Revenue 24 2 22 1,100 % Segment marketing expense (1) 36 (21) 57 271 % Segment profit (12) 23 (35) (152) % Total Revenue 239,728 167,768 71,960 43 % Segment marketing expense (1) 160,747 97,246 63,501 65 % Segment profit $ 78,981 $ 70,522 $ 8,459 12 % Segment margin 33% 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 14—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 Revenue in the Home segment increased 22% to $37.0 in the first quarter of 2025 and segment profit increased 37% to $13.1 million in the first quarter of 2025 compared to the first quarter of 2024. Segment margin increased to 36% in the first quarter of 2025 compared to 32% in the first quarter of 2024, primarily due to a change in product mix. Home equity revenue of $25.8 million in the first quarter of 2025 increased $5.0 million from $20.8 million in the first quarter of 2024. Our outlook for home equity remains positive. According to TransUnion, at the end of 2024 total tappable home equity in the U.S. was $20.9 trillion, up 3% compared to 2023 and an increase of 63% since the end of 2017. The historically high level of home equity drove 10% loan origination growth in the fourth quarter of 2024 compared to the fourth quarter of 2023, as measured by number of new accounts. 29 Table of Contents Within Home, our core mortgage business generated revenue of $11.2 million in the first quarter of 2025, up 16% from the first quarter of 2024. 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. The environment for the purchase mortgage market is beginning to improve. According to the National Association of Realtors, inventory of existing homes for sale in the U.S. increased to 1.33 million units, or 20%, in March of 2025 compared to March of 2024, and has grown by a double-digit percentage each month dating back to March of 2024. Annual home price growth has slowed to 3% most recently, following several years of double-digit annual growth that began during the summer of 2020. Persistently higher mortgage rates and increased economic uncertainty stemming from U.S. policy are currently having an offsetting impact on the inventory and price benefits. Our mortgage business is directly impacted by the mortgage market in which we participate. Consumer Revenue in our Consumer segment increased 9% to $56.0 million in the first quarter of 2025 from the first quarter of 2024, and segment profit decreased 1% to $27.1 million in the first quarter of 2025 from the first quarter of 2024. Segment margin was 48% in the first quarter of 2025 compared to 53% in the first quarter of 2024 primarily due to decline in revenue earned per consumer on certain products as well as a change in mix shift in the product revenue. Underwriting criteria for lenders on our network was broadly stable in the first quarter, as a positive employment environment and lower pace of inflation compared to more recent periods presents an attractive underwriting environment for many loan types. Personal loans revenue of $23.4 million in the first quarter of 2025 increased 16% from the first quarter of 2024 as consumers completing request forms increased 34%. In March last year we saw appetite from many personal loan originators begin to firm following a prolonged period of historically high consumer price inflation. We responded by leaning into targeted marketing spend for the product to capitalize on the improving fundamentals, which we credit for the recent consistent growth in the business. We remain optimistic that the combination of record consumer credit card debt outstanding and a stable underwriting backdrop will drive forward growth. Small business revenue increased 48% in the first quarter of 2025 from the first quarter of 2024 due to increases in the number of consumers completing request forms and in revenue earned per consumer. The investment to grow our concierge sales team has strengthened our renewal and lender bonus revenue streams. Improved unit economics from this investment has allowed us to increase our marketing spend to capture more high-intent small business owners searching for new loans. We forecast the small business product will generate record revenue in 2025. See the section titled "Revenue" above for additional discussion of product revenues within the Consumer segment. Insurance Insurance revenue increased 71% to $146.7 million in the first quarter of 2025 from the first quarter of 2024 and segment profit increased 16% to $38.7 million in the first quarter of 2025 from the first quarter of 2024. Carrier demand for new auto insurance customers has been strong, with volume increasing 22% in the first quarter of 2025 compared to the first quarter of 2024, 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. Our Insurance segment was negatively impacted in the first quarter of 2025 by the implementation of changes to our consumer experience to comply with the FCC's one-to-one consent rule. However, following a Federal appeals court opinion that struck down the rule at the end of January of 2025, we were able to revert to our previous experience. Our Insurance segment margin decreased to 26% in the first quarter of 2025 compared to 39% in the first quarter of 2024. In the first quarter of 2024, we were able to exit from our highest cost marketing channels and continue to meet the decreased level of demand. Throughout 2024, we re-entered those marketing channels to fill the increase in carrier demand, which has resulted in lower segment profit margin. We expect the Insurance segment will return to a more normalized growth pattern in 2025 following a historic year of performance last year. As the pace of growth moderates, we are focused on optimizing our marketing mix and growing channels outside of internet search. Our goal is to retain the same level of quality, high-intent consumer traffic while seeking to lower our overall marketing cost to improve margin in this business. 30 Table of Contents 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. 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 March 31, 2025 2024 (in thousands) Revenue $ 239,728 $ 167,768 Variable marketing expense 162,001 98,321 Variable marketing margin $ 77,727 $ 69,447 Below is a reconciliation of selling and marketing expense, the most directly comparable GAAP measure, to variable marketing expense: Three Months Ended March 31, 2025 2024 (in thousands) Selling and marketing expense $ 172,751 $ 108,176 Non-variable selling and marketing expense (10,750) (9,855) Variable marketing expense $ 162,001 $ 98,321 31 Table of Contents The following is a reconciliation of net (loss) income, the most directly comparable GAAP measure, to variable marketing margin: Three Months Ended March 31, 2025 2024 (in thousands) Net (loss) income $ (12,375) $ 1,016 Adjustments to reconcile to variable marketing margin: Cost of revenue 9,908 8,545 Non-variable selling and marketing expense (1) 10,750 9,855 General and administrative expense 30,660 25,796 Product development 11,904 11,857 Depreciation 4,297 4,667 Amortization of intangibles 1,307 1,489 Restructuring and severance 798 23 Litigation settlements and contingencies 15,212 36 Interest expense, net 9,084 6,638 Other income (1,388) (1,034) Income tax (benefit) expense (2,430) 559 Variable marketing margin $ 77,727 $ 69,447 (1) Represents the portion of selling and marketing expense not attributable to variable costs paid for advertising, direct marketing and related expenses. Includes overhead, fixed costs and personnel-related expenses. Adjusted 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. 32 Table of Contents 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. The following table is a reconciliation of net (loss) income, the most directly comparable GAAP measure, to Adjusted EBITDA. Three Months Ended March 31, 2025 2024 (in thousands) Net (loss) income $ (12,375) $ 1,016 Adjustments to reconcile to Adjusted EBITDA: Amortization of intangibles 1,307 1,489 Depreciation 4,297 4,667 Restructuring and severance 798 23 Loss on impairments and disposal of assets 254 368 Non-cash compensation expense 9,867 7,789 Litigation settlements and contingencies 15,212 36 Interest expense, net 9,084 6,638 Dividend income (1,388) (1,034) Income tax (benefit) expense (2,430) 559 Adjusted EBITDA $ 24,626 $ 21,551 Financial Position, Liquidity and Capital Resources General As of March 31, 2025, we had $126.4 million of cash and cash equivalents, compared to $106.6 million of cash and cash equivalents as of December 31, 2024. In the first quarter of 2025, we repurchased approximately $20.0 million in principal amount of our 2025 notes for $19.7 million resulting in a gain on the extinguishment of $0.3 million which is included in interest expense, net in the consolidated statement of operations and comprehensive income. In March 2025, we drew the remaining $50.0 million of the 2024 Term Loan delayed draw. We expect our cash and cash equivalents and cash flows from operations 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 March 31, 2025, we have $95.3 million outstanding on the 2025 Notes. We intend to use cash on hand and future cash flows from operations for the repayment of the 2025 Notes, due July 15, 2025. For more information, see Note 11—Debt, in the notes to the consolidated financial statements included elsewhere in this report. 33 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 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 2024 or in the first quarter of 2025. 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 the Company’s 0.625% Convertible Senior Notes due June 1, 2022, 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 May 2, 2025, we have outstanding $243.1 million under the 2021 Term Loan. As of March 31, 2025, 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 and drew the remaining $50.0 million on March 27, 2025. The proceeds of the 2024 Term Loan can 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 $4.8 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 May 2, 2025, the Company had $162.5 million borrowings outstanding under the 2024 Term Loan. See Note 11—Debt for additional information. Cash Flows Our cash flows are as follows: Three Months Ended March 31, 2025 2024 (in thousands) Net cash (used in) provided by operating activities $ (210) $ 5,708 Net cash used in investing activities (3,414) (2,746) Net cash provided by financing activities 23,420 115,743 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. 34 Table of Contents Net cash (used in) provided by operating activities decreased in the first three months of 2025 from the first three months of 2024 primarily due to unfavorable changes in accounts payable, accrued expenses and other current liabilities, prepaid expenses and other current assets, and income taxes, partially offset by favorable changes in accounts receivable. Cash Flows from Investing Activities Net cash used in investing activities in the first three months of 2025 and 2024 of $3.4 million and $2.7 million, respectively, consisted of capital expenditures primarily related to internally developed software. Cash Flows from Financing Activities Net cash provided by financing activities in the first three months of 2025 of $23.4 million consisted primarily of the $49.5 million net proceeds from the 2024 Term Loan delayed draw partially offset by repurchases of our 2025 Notes for $19.7 million, term loan repayments of $3.8 million and $2.6 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options. Net cash provided by financing activities in the first three months of 2024 of $115.7 million consisted primarily of the $117.8 million net proceeds for the 2024 Term Loan partially offset by $1.4 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options. New Accounting Pronouncements For information regarding new accounting pronouncements, See Note 2 — Significant Accounting Policies, in Part I, Item 1 consolidated financial statements of this Quarterly Report on Form 10-Q.