UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, ~~2019~~2020

Oror



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-34063

LendingTree, Inc.

(Exact name of Registrant as specified in its charter)



Delaware		26-2414818
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

11115 Rushmore Drive, Charlotte, North Carolina 28277

(Address of principal executive offices)(Zip Code)

(704) 541-5351

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	TREE	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July ~~19, 2019,~~29, 2020, there were ~~12,988,997~~13,115,157 shares of the registrant's common stock, par value $.01 per share, outstanding, excluding treasury shares.

TABLE OF CONTENTS

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
	(in thousands, except per share amounts)												(in thousands, except per share amounts)
Revenue	$	278,421		$	184,101		$	540,811		$	365,136		$	184,326		$	278,421		$	467,410		$	540,811
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	16,310			6,043			33,980			11,739			13,464			16,310			27,716			33,980
Selling and marketing expense	191,629			123,946			366,520			249,990			113,921			191,629			309,459			366,520
General and administrative expense	27,951			24,759			59,068			47,573			28,489			27,951			60,571			59,068
Product development	10,175			5,967			20,341			12,227			10,812			10,175			21,775			20,341
Depreciation	2,559			1,633			5,041			3,304			3,550			2,559			6,928			5,041
Amortization of intangibles	14,280			3,964			27,707			7,927			13,756			14,280			27,513			27,707
Change in fair value of contingent consideration	2,790			(167		)	17,382			(908		)	9,175			2,790			1,053			17,382
Severance	403			3			457			3			32			403			190			457
Litigation settlements and contingencies	8			(170		)	(199		)	(192		)	(1,325		)	8			(996		)	(199		)
Total costs and expenses	266,105			165,978			530,297			331,663			191,874			266,105			454,209			530,297
Operating income	12,316			18,123			10,514			33,473
Operating (loss) income													(7,548		)	12,316			13,201			10,514
Other (expense) income, net:
Interest expense, net	(5,095		)	(2,924		)	(10,563		)	(5,912		)	(4,955		)	(5,095		)	(9,789		)	(10,563		)
Other income (expense)	71			(71		)	139			(37		)
Income before income taxes	7,292			15,128			90			27,524
Other income													7			71			7			139
(Loss) income before income taxes													(12,496		)	7,292			3,419			90
Income tax benefit	5,689			29,721			13,441			53,182			3,880			5,689			6,941			13,441
Net income from continuing operations	12,981			44,849			13,531			80,706
Net (loss) income from continuing operations													(8,616		)	12,981			10,360			13,531
Loss from discontinued operations, net of tax	(763		)	(2,302		)	(1,825		)	(6,635		)	(21,141		)	(763		)	(25,716		)	(1,825		)
Net income and comprehensive income	$	12,218		$	42,547		$	11,706		$	74,071
Net (loss) income and comprehensive (loss) income													$	(29,757	)	$	12,218		$	(15,356	)	$	11,706

Weighted average shares outstanding:
Basic	12,805			12,416			12,762			12,254			12,984			12,805			12,971			12,762
Diluted	14,908			14,147			14,622			14,527			12,984			14,908			13,954			14,622
Income per share from continuing operations:
(Loss) income per share from continuing operations:
Basic	$	1.01		$	3.61		$	1.06		$	6.59		$	(0.66	)	$	1.01		$	0.80		$	1.06
Diluted	$	0.87		$	3.17		$	0.93		$	5.56		$	(0.66	)	$	0.87		$	0.74		$	0.93
Loss per share from discontinued operations:
Basic	$	(0.06	)	$	(0.19	)	$	(0.14	)	$	(0.54	)	$	(1.63	)	$	(0.06	)	$	(1.98	)	$	(0.14	)
Diluted	$	(0.05	)	$	(0.16	)	$	(0.12	)	$	(0.46	)	$	(1.63	)	$	(0.05	)	$	(1.84	)	$	(0.12	)
Net income per share:
Net (loss) income per share:
Basic	$	0.95		$	3.43		$	0.92		$	6.04		$	(2.29	)	$	0.95		$	(1.18	)	$	0.92
Diluted	$	0.82		$	3.01		$	0.80		$	5.10		$	(2.29	)	$	0.82		$	(1.10	)	$	0.80

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

Table of Contents

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
	(in thousands, except par value and share amounts)						(in thousands, except par value and share amounts)
ASSETS:
Cash and cash equivalents	$	51,332		$	105,102		$	101,764		$	60,243
Restricted cash and cash equivalents	58			56			94			96
Accounts receivable (net of allowance of $1,676 and $1,143, respectively)	139,778			91,072
Accounts receivable (net of allowance of $1,756 and $1,466, respectively)							77,037			113,487
Prepaid and other current assets	12,440			16,428			25,654			15,516
Assets held for sale (Note 6)	—			21,328
Current assets of discontinued operations (Note 17)	2,227			185
Current assets of discontinued operations							84			84
Total current assets	205,835			234,171			204,633			189,426
Property and equipment (net of accumulated depreciation of $14,449 and $13,887 respectively)	28,874			23,175
Property and equipment (net of accumulated depreciation of $20,971 and $17,979, respectively)							34,735			31,363
Operating lease right-of-use assets							87,892			25,519
Goodwill	419,984			348,347			420,139			420,139
Intangible assets, net	209,592			205,699			154,067			181,580
Deferred income tax assets	93,014			79,289			84,160			87,664
Equity investment (Note 7)							80,000			—
Other non-current assets	20,033			2,168			5,192			4,330
Non-current assets of discontinued operations	3,266			3,266			16,759			7,948
Total assets	$	980,598		$	896,115		$	1,087,577		$	947,969

LIABILITIES:
Revolving credit facility	$	115,000		$	125,000		$	130,000		$	75,000
Accounts payable, trade	17,447			15,074			8,792			2,873
Accrued expenses and other current liabilities	130,323			93,190			88,569			112,755
Current contingent consideration	29,548			11,080			19,029			9,028
Current liabilities of discontinued operations (Note 17)	15,809			17,609
Current liabilities of discontinued operations							63,006			31,050
Total current liabilities	308,127			261,953			309,396			230,706
Long-term debt	257,582			250,943			271,378			264,391
Operating lease liabilities							86,649			21,358
Non-current contingent consideration	20,671			27,757			9,488			24,436
Deferred income tax liabilities	711			894
Other non-current liabilities	19,620			8,360			4,689			4,752
Total liabilities	606,711			549,907			681,600			545,643
Commitments and contingencies (Note 14)
Commitments and contingencies (Note 15)
SHAREHOLDERS' EQUITY:
Preferred stock $.01 par value; 5,000,000 shares authorized; none issued or outstanding	—			—			—			—
Common stock $.01 par value; 50,000,000 shares authorized; 15,603,806 and 15,428,351 shares issued, respectively, and 12,967,718 and 12,809,764 shares outstanding, respectively	156			154
Common stock $.01 par value; 50,000,000 shares authorized; 15,730,643 and 15,676,819 shares issued, respectively, and 13,089,325 and 13,035,501 shares outstanding, respectively							157			157
Additional paid-in capital	1,154,174			1,134,227			1,196,990			1,177,984
Accumulated deficit	(598,776		)	(610,482		)	(608,009		)	(592,654		)
Treasury stock; 2,636,088 and 2,618,587 shares, respectively	(181,667		)	(177,691		)
Treasury stock; 2,641,318 shares							(183,161		)	(183,161		)
Total shareholders' equity	373,887			346,208			405,977			402,326
Total liabilities and shareholders' equity	$	980,598		$	896,115		$	1,087,577		$	947,969

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

Table of Contents

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

Common Stock Treasury Stock
Total
Number
of Shares
Amount
Additional
Paid-in
Capital

Accumulated
Deficit

Number
of Shares
Amount
(in thousands)
Balance as of December 31, 2018 $ 346,208
15,428
$ 154
$ 1,134,227
$ (610,482 ) 2,618
$ (177,691 )
Net loss and comprehensive loss (512 ) —
—
—
(512 ) —
—
Non-cash compensation 14,053
—
—
14,053
—
—
—
Purchase of treasury stock (3,976 ) —
—
—
—
18
(3,976 )
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes (3,585 ) 87
1
(3,586 ) —
—
—
Balance as of March 31, 2019 $ 352,188
15,515
$ 155
$ 1,144,694
$ (610,994 ) 2,636
$ (181,667 )
Net income and comprehensive income 12,218
—
—
—
12,218
—
—
Non-cash compensation 15,982
—
—
15,982
—
—
—
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes (6,501 ) 89
1
(6,502 ) —
—
—
Balance as of June 30, 2019 $ 373,887
15,604
$ 156
$ 1,154,174
$ (598,776 ) 2,636
$ (181,667 )



				Common Stock									Treasury Stock
	Total			Number of Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Number of Shares	Amount
	(in thousands)
Balance as of December 31, 2019	$	402,326		15,677	$	157	$	1,177,984		$	(592,654	)	2,641	$	(183,161	)
Net income and comprehensive income	14,401			—	—		—			14,401			—	—
Non-cash compensation	11,917			—	—		11,917			—			—	—
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes	(5,087		)	27	—		(5,087		)	—			—	—
Other	—			—	—		(1		)	1			—	—
Balance as of March 31, 2020	$	423,557		15,704	$	157	$	1,184,813		$	(578,252	)	2,641	$	(183,161	)
Net loss and comprehensive loss	(29,757		)	—	—		—			(29,757		)	—	—
Non-cash compensation	13,158			—	—		13,158			—			—	—
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes	(981		)	27	—		(981		)	—			—	—
Balance as of June 30, 2020	$	405,977		15,731	$	157	$	1,196,990		$	(608,009	)	2,641	$	(183,161	)


				Common Stock									Treasury Stock										Common Stock									Treasury Stock
	Total			Number of Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Number of Shares	Amount			Noncontrolling Interest			Total			Number of Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Number of Shares	Amount
	(in thousands)																			(in thousands)
Balance as of December 31, 2017	$	294,874		14,218	$	142	$	1,087,582		$	(708,354	)	2,239	$	(85,085	)	$	589
Net income and comprehensive income	31,524			—	—		—			31,524			—	—			—
Balance as of December 31, 2018																				$	346,208		15,428	$	154	$	1,134,227		$	(610,482	)	2,618	$	(177,691	)
Net loss and comprehensive loss																				(512		)	—	—		—			(512		)	—	—
Non-cash compensation	11,109			—	—		11,109			—			—	—			—			14,053			—	—		14,053			—			—	—
Purchase of treasury stock	(11,000		)	—	—		—			—			30	(11,000		)	—			(3,976		)	—	—		—			—			18	(3,976		)
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes	2,057			473	5		2,052			—			—	—			—			(3,585		)	87	1		(3,586		)	—			—	—
Cumulative effect adjustment due to ASU 2014-09	1,373			—	—		—			1,373			—	—			—
Noncontrolling interest	(34		)	—	—		—			—			—	—			(34		)
Balance as of March 31, 2018	$	329,903		14,691	$	147	$	1,100,743		$	(675,457	)	2,269	$	(96,085	)	$	555
Balance as of March 31, 2019																				$	352,188		15,515	$	155	$	1,144,694		$	(610,994	)	2,636	$	(181,667	)
Net income and comprehensive income	42,547			—	—		—			42,547			—	—			—			12,218			—	—		—			12,218			—	—
Non-cash compensation	11,178			—	—		11,178			—			—	—			—			15,982			—	—		15,982			—			—	—
Purchase of treasury stock	(35,003		)	—	—		—			—			127	(35,003		)	—
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes	(1,225		)	447	4		(1,229		)	—			—	—			—			(6,501		)	89	1		(6,502		)	—			—	—
Issuance of 0.625% Convertible Senior Notes, net	(4		)	—	—		(4		)	—			—	—			—
Noncontrolling interest	32			—	—		—			—			—	—			32
Balance as of June 30, 2018	$	347,428		15,138	$	151	$	1,110,688		$	(632,910	)	2,396	$	(131,088	)	$	587
Balance as of June 30, 2019																				$	373,887		15,604	$	156	$	1,154,174		$	(598,776	)	2,636	$	(181,667	)

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

Table of Contents

LENDINGTREE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
	(in thousands)						(in thousands)
Cash flows from operating activities attributable to continuing operations:
Net income and comprehensive income	$	11,706		$	74,071
Net (loss) income and comprehensive (loss) income							$	(15,356	)	$	11,706
Less: Loss from discontinued operations, net of tax	1,825			6,635			25,716			1,825
Income from continuing operations	13,531			80,706			10,360			13,531
Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations:
(Gain) loss on impairments and disposal of assets	(1,729		)	1,889
Loss (gain) on impairments and disposal of assets							552			(1,729		)
Amortization of intangibles	27,707			7,927			27,513			27,707
Depreciation	5,041			3,304			6,928			5,041
Rental amortization of intangibles and depreciation	—			396
Non-cash compensation expense	30,035			22,287			25,075			30,035
Deferred income taxes	(13,624		)	(56,197		)	(7,000		)	(13,624		)
Change in fair value of contingent consideration	17,382			(908		)	1,053			17,382
Bad debt expense	1,282			513			949			1,282
Amortization of debt issuance costs	970			865			1,158			970
Amortization of convertible debt discount	5,929			5,623			6,250			5,929
Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities							1,956			184
Changes in current assets and liabilities:
Accounts receivable	(48,396		)	(26,841		)	35,501			(48,396		)
Prepaid and other current assets	(190		)	(787		)	1,369			(190		)
Accounts payable, accrued expenses and other current liabilities	28,192			(3,970		)	(19,134		)	28,105
Current contingent consideration	(3,000		)	(21,900		)	(2,670		)	(3,000		)
Income taxes receivable	4,388			2,522			63			4,388
Other, net	357			(165		)	(2,007		)	260
Net cash provided by operating activities attributable to continuing operations	67,875			15,264			87,916			67,875
Cash flows from investing activities attributable to continuing operations:
Capital expenditures	(9,769		)	(6,747		)	(9,108		)	(9,769		)
Proceeds from sale of fixed assets	24,062			—			—			24,062
Equity investment							(80,000		)	—
Acquisition of ValuePenguin, net of cash acquired	(105,578		)	—			—			(105,578		)
Acquisition of QuoteWizard, net of cash acquired	447			—			—			447
Acquisition of Ovation, net of cash acquired	—			(11,683		)
Acquisition of SnapCap	—			(10		)
Other investing activities	—			(1		)
Net cash used in investing activities attributable to continuing operations	(90,838		)	(18,441		)	(89,108		)	(90,838		)
Cash flows from financing activities attributable to continuing operations:
Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options	(7,646		)	895			(6,068		)	(7,646		)
Contingent consideration payments	(3,000		)	(25,600		)	(3,330		)	(3,000		)
Net repayment of revolving credit facility	(10,000		)	—
Net proceeds from (repayment of) revolving credit facility							55,000			(10,000		)
Payment of debt issuance costs	(31		)	(84		)	(306		)	(31		)
Purchase of treasury stock	(3,976		)	(47,101		)	—			(3,976		)
Net cash used in financing activities attributable to continuing operations	(24,653		)	(71,890		)
Total cash used in continuing operations	(47,616		)	(75,067		)
Other financing activities							(14		)	—
Net cash provided by (used in) financing activities attributable to continuing operations							45,282			(24,653		)
Total cash provided by (used in) continuing operations							44,090			(47,616		)
Discontinued operations:
Net cash used in operating activities attributable to discontinued operations	(6,152		)	(4,224		)	(2,571		)	(6,152		)
Total cash used in discontinued operations	(6,152		)	(4,224		)	(2,571		)	(6,152		)
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents	(53,768		)	(79,291		)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents							41,519			(53,768		)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	105,158			372,641			60,339			105,158
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	51,390		$	293,350		$	101,858		$	51,390

Non-cash investing activities:
Capital additions from tenant improvement allowance	$	1,111		$	—		$	—		$	1,111

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

Table of Contents

LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—ORGANIZATION

Company Overview

LendingTree, Inc. ~~("LendingTree" or the "Company"),~~ is currently the parent of LendingTree, LLC and several companies owned by LendingTree, ~~LLC.~~LLC (collectively, "LendingTree" or the "Company").

LendingTree operates what it believes to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions. The Company offers consumers tools and resources, including free credit scores, that facilitate comparison-shopping for mortgage loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings. The Company primarily seeks to match in-market consumers with multiple providers on its marketplace who can provide them with competing quotes for loans, deposit products, insurance or other related offerings they are seeking. The Company also serves as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries it generates with these providers.

The consolidated financial statements include the accounts of LendingTree and all its wholly-owned ~~entities.~~entities, except Home Loan Center, Inc. ("HLC") subsequent to its bankruptcy filing on July 21, 2019 which resulted in the Company's loss of a controlling interest in HLC under applicable accounting standards. Intercompany transactions and accounts have been eliminated.

Discontinued Operations

The LendingTree Loans business, which consisted of originating various consumer mortgage loans through HLC (the "LendingTree Loans Business"), is presented as discontinued operations in the accompanying consolidated balance sheets, consolidated statements of operations and comprehensive income and consolidated cash flows for all periods presented. The notes accompanying these consolidated financial statements reflect the Company's continuing operations and, unless otherwise noted, exclude information related to the discontinued operations. See Note 1718—Discontinued Operations ~~and Note 18~~—~~Subsequent Event~~ for additional information.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements as of June 30, ~~2019~~2020 and for the three and six months ended June 30, ~~2019~~2020 and ~~2018~~2019, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). In the opinion of management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented. The results for the three and six months ended June 30, ~~2019~~2020 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2019~~,2020, or any other period. The accompanying consolidated balance sheet as of December 31, ~~2018~~2019 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, ~~2018~~2019 (the ~~"2018~~"2019 Annual Report"). The accompanying consolidated financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in the ~~2018~~2019 Annual Report.

NOTE 2—SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

Management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates.

Significant estimates underlying the accompanying consolidated financial statements, including discontinued operations, include: ~~loan loss obligations;~~ the recoverability of long-lived assets, goodwill and intangible assets; the determination of income taxes payable and deferred income taxes, including related valuation allowances; fair value of assets acquired in a business combination; contingent consideration related to business combinations; litigation accruals; HLC ownership related claims; contract assets; various other ~~allowances, reserves and accruals; and assumptions related to the determination of stock-based compensation.~~

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

allowances, reserves and accruals; assumptions related to the determination of stock-based compensation; and the determination of the right-of-use assets and lease liabilities.

The Company considered the impact of COVID-19 on the assumptions and estimates used when preparing its quarterly financial statements including, but not limited to, our allowance for doubtful accounts, valuation allowances, contract asset and contingent consideration. These assumptions and estimates may change as new events occur and additional information is obtained. If economic conditions caused by COVID-19 do not recover as currently estimated by management, such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity.

Certain Risks and Concentrations

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

Financial instruments, which potentially subject the Company to concentration of credit risk at June 30, ~~2019~~,2020, consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet. Cash and cash equivalents are in excess of Federal Deposit Insurance Corporation insurance limits, but are maintained with quality financial institutions of high credit. The Company ~~generally~~ requires certain ~~network partners~~Network Partners to maintain security deposits with the Company, which in the event of non-payment, would be applied against any accounts receivable outstanding.

Due to the nature of the mortgage lending industry, interest rate fluctuations may negatively impact future revenue from the Company's marketplace.

Lenders and lead purchasers participating on the Company's marketplace can offer their products directly to consumers through brokers, mass marketing campaigns or through other traditional methods of credit distribution. These lenders and lead purchasers can also offer their products online, either directly to prospective borrowers, through one or more online competitors, or both. If a significant number of potential consumers are able to obtain loans and other products from ~~network partners~~Network Partners without utilizing the Company's services, the Company's ability to generate revenue may be limited. Because the Company does not have exclusive relationships with the ~~network partners~~Network Partners whose loans and other financial products are offered on its online marketplace, consumers may obtain offers from these ~~network partners~~Network Partners without using its services.

Other than a support services office in India, the Company's operations are geographically limited to and dependent upon the economic condition of the United States.

Litigation Settlements and Contingencies

Litigation settlements and contingencies consists of expenses related to actual or anticipated litigation settlements.

~~Recent~~Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. ~~Early adoption is permitted, including adoption in any interim period.~~ The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company ~~is evaluating~~adopted ASU 2018-15 in the ~~impact~~first quarter of 2020 using the prospective approach. Subsequent to the adoption of this ASU, ~~will~~capitalizable implementation costs incurred in a hosting arrangement that is a service contract are recorded within prepaid and other current assets and other non-current assets on the consolidated balance sheet. The expense related to these capitalized implementation costs are included within general and administrative expense on the consolidated statement of operations and comprehensive income. The adoption of ASU 2018-15 did not have a material impact on ~~its~~the consolidated financial statements as of June 30, 2020 and ~~whether to early adopt.~~for the three and six months ended June 30, 2020.

In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds certain disclosure requirements in Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurement. This ASU is effective for annual and interim reporting periods beginning after December 15, ~~2019, with early adoption permitted. Entities are permitted to adopt any removed or modified disclosures and delay adoption of the additional disclosures until the effective date of the ASU.~~2019. Certain amendments must be applied prospectively while others are to be applied on a retrospective basis to all periods presented. The Company ~~is evaluating~~adopted ASU 2018-13 in the ~~impact this ASU will have on its consolidated financial statements and whether to early adopt.~~first quarter of 2020. See Note 16—Fair Value Measurements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In January 2017, the FASB issued ASU 2017-04, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2 of the goodwill impairment test). Instead, an impairment charge will be based on the excess of the carrying amount over the fair value. This ASU is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. ~~Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017.~~ The Company ~~is evaluating~~adopted ASU 2017-04 in the ~~impact this ASU will have on its consolidated financial statements and whether to early adopt.~~first quarter of 2020.

In June 2016, the FASB issued ASU 2016-13, which requires entities to measure expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU introduces ASC Topic 326, Financial Instruments—Credit Losses, which replaces the existing incurred loss model and is applicable to financial assets measured at amortized cost, including trade receivables and certain other financial assets that have the contractual right to receive cash. ASC Topic 326 is effective for annual and interim reporting periods beginning after December 15, 2019. The guidance must be adopted using a modified retrospective transition. The Company adopted ASC Topic 326 as of January 1, 2020, which did not result in any cumulative effect adjustment to the opening balance of accumulated deficit in the period of adoption.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes, and clarifies certain aspects of the current guidance to improve consistency among reporting entities. This ASU is effective for annual and interim reporting periods beginning after December 15, ~~2019.~~2020. Early adoption is permitted, ~~beginning after December 15, 2018,~~ including adoption in interim periods. ~~The guidance~~Entities electing early adoption must adopt all amendments in the same period. Most amendments must be ~~adopted~~

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~using~~applied prospectively while others are to be applied on a retrospective basis for all periods presented or a modified retrospective ~~transition.~~basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is evaluating the impact this ASU will have on its consolidated financial statements and whether to early adopt.

In February 2016, the FASB issued ASU 2016-02 related to lease accounting guidance. This ASU introduces ASC Topic 842, Leases, which supersedes ASC Topic 840, Leases. In 2018 and 2019, the FASB issued final amendments clarifying certain narrow aspects of implementing ASU 2016-02, including clarifications related to the rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate, transition disclosures and certain other transition matters. The clarification ASUs also provided an optional transition method that allows entities to initially apply the lease accounting transition requirements at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption without restating comparative prior periods presented. The clarification ASUs must be adopted concurrently with the adoption of ASU 2016-02 (collectively, "ASC Topic 842").

The Company has adopted ASC Topic 842 as of January 1, 2019 using the optional transition method to apply the new requirements at the adoption date without restating comparative prior periods presented. The adoption resulted in the increase in total assets and total liabilities of $8.8 million as of January 1, 2019 related to operating leases greater than one year in duration for which the Company is the lessee, with no cumulative effect adjustment to the opening balance of accumulated deficit. As part of the transition, the Company has elected the package of practical expedients which allows the Company to not reassess whether expired or existing contracts contain leases, lease classification for expired or existing leases, and initial direct costs for existing leases. Additionally, the Company has elected an accounting policy to not record short-term leases, which are leases with an initial term of twelve months or fewer, on the balance sheet.

NOTE 3—REVENUE

Revenue is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Revenue:
Mortgage products	$	54,618	$	66,948	$	100,602	$	140,410
Non-mortgage products
Home									$	74,123	$	71,756	$	153,297	$	135,193
Credit cards	56,045		38,747		110,551		84,879		7,194		56,045		58,780		110,551
Personal loans	41,109		36,210		73,640		62,175		8,827		41,109		40,336		73,640
Other Consumer									21,097		31,809		57,926		65,501
Total Consumer									37,118		128,963		157,042		249,692
Insurance	71,941		13		139,033		26		72,919		71,941		155,656		139,033
Other	54,708		42,183		116,985		77,646		166		5,761		1,415		16,893
Total non-mortgage products	223,803		117,153		440,209		224,726
Total revenue	$	278,421	$	184,101	$	540,811	$	365,136	$	184,326	$	278,421	$	467,410	$	540,811

The Company derives its revenue primarily from match fees and closing fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised services have transferred to the customer. The Company's services are generally transferred to the customer at a point in time.

Revenue ~~within the mortgage product category~~from Home products is primarily generated from upfront match fees paid by mortgage Network Partners that receive a loan request, and in some cases upfront fees for clicks or call transfers. Match fees and upfront fees for clicks and call transfers are earned through the delivery of loan requests that originated through the Company's websites or affiliates. The Company recognizes revenue at the time a loan request is delivered to the customer, provided that no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a loan request to the customer.

~~In addition to~~Revenue from Consumer products is generated by match and other upfront fees ~~revenue within the non-mortgage product category is also generated~~for clicks or call transfers, as well as from closing fees, approval fees and ~~approval~~upfront service and subscription fees. Closing fees are derived from lenders on certain auto loans, business loans, personal loans and student loans when the lender funds a loan with the consumer. Approval fees are derived from credit card issuers when the credit card consumer receives card approval from the credit card issuer. ~~The Company recognizes revenue on closing~~Upfront service fees and ~~approval fees~~

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

subscription fees are derived from consumers in the Company's credit services product. Upfront fees paid by consumers are recognized as revenue over the estimated time the consumer will remain a customer and receive services. Subscription fees are recognized over the period a consumer is receiving services.

The Company recognizes revenue on closing fees and approval fees at the point when a loan request or a credit card consumer is delivered to the customer. The Company's contractual right to closing fees and approval fees is not contemporaneous with the satisfaction of the performance obligation to deliver a loan request or a credit card consumer to the customer. As such, the Company records a contract asset at each reporting period-end related to the estimated variable consideration on closing fees and approval fees for which the Company has satisfied the related performance obligation, but are still pending the loan closing or credit card approval before the Company has a contractual right to payment. This estimate is based on the Company's historical closing rates and historical time between when a consumer request for a loan or credit card is delivered to the lender or card issuer and when the loan is closed by the lender or approved by the card issuer.

Revenue from the Company's ~~insurance business~~Insurance products is primarily generated from upfront match fees, and upfront fees for website clicks or fees for calls. Match fees and upfront fees for clicks and call transfers are earned through the delivery of consumer requests that originated through the Company's websites or affiliates. The Company recognizes revenue at the time a consumer request is delivered to the customer, provided that no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a consumer request to the customer.

Upfront fees and subscription fees are derived from consumers in the Company's credit services business. Upfront fees paid by consumers are recognized as revenue over the estimated time the consumer will remain a customer and receive services. Subscription fees are recognized over the period a consumer is receiving services.

The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration was ~~$5.3~~$6.5 million ~~and $4.8 million on~~at each of June 30, ~~2019~~2020 and December 31, ~~2018, respectively.~~2019.

The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers in the Company's ~~credit services~~Consumer business was ~~$0.8~~$0.9 million and ~~$0.4~~$0.6 million at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. During the second quarter and first six months of 2020, the Company recognized revenue of $0.1 million and $0.6 million, respectively, that was included in the contract liability balance at December 31, 2019. During the second quarter and first six months of 2019, the Company recognized revenue of $0.1 million and $0.4 million, respectively, that was included in the contract liability balance at December 31, 2018.

Revenue recognized in any reporting period includes estimated variable consideration for which the Company has satisfied the related performance obligations, but are still pending the occurrence or non-occurrence of a future event outside the Company's control (such as lenders providing loans to consumers or credit card approvals of consumers) before the Company has a contractual right to payment. The Company recognized ~~an increase~~increases to such revenue from prior periods of ~~$0.5~~$0.3 million and ~~$0.2~~$0.5 million in the second quarters of ~~2019~~2020 and ~~2018,~~2019, respectively.

NOTE 4—CASH AND RESTRICTED CASH

Total cash, cash equivalents, restricted cash and restricted cash equivalents consist of the following (in thousands):


	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Cash and cash equivalents	$	51,332	$	105,102	$	101,764	$	60,243
Restricted cash and cash equivalents	58		56		94		96
Total cash, cash equivalents, restricted cash and restricted cash equivalents	$	51,390	$	105,158	$	101,858	$	60,339

NOTE 5—ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts.

The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, previous loss history, current and expected economic conditions and the specific customer's current and expected ability to pay its obligation. Accounts receivable are considered past due when they are outstanding longer than the contractual payment terms. Accounts receivable are written off when management deems them uncollectible.

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of the beginning and ending balances of the allowance for doubtful accounts is as follows (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Balance, beginning of the period	$	2,021		$	1,370		$	1,466		$	1,143
Charges to earnings	69			772			949			1,282
Write-off of uncollectible accounts receivable	(337		)	(473		)	(669		)	(761		)
Recoveries collected	3			7			10			12
Balance, end of the period	$	1,756		$	1,676		$	1,756		$	1,676

NOTE 5—6—GOODWILL AND INTANGIBLE ASSETS

The balance of goodwill and intangible assets, net is as follows (in thousands):

Goodwill Accumulated Impairment Loss Net Goodwill
Balance at December 31, 2018 $ 831,435
$ (483,088 ) $ 348,347
Acquisition of Ovation 20
—
20
Acquisition of QuoteWizard 173
—
173
Acquisition of ValuePenguin 71,444
—
71,444
Balance at June 30, 2019 $ 903,072
$ (483,088 ) $ 419,984

~~The balance of intangible assets, net is as follows~~ ~~(in thousands)~~:


					June 30, 2020			December 31, 2019
Goodwill					$	903,227		$	903,227
Accumulated impairment losses					(483,088		)	(483,088		)
Net goodwill					$	420,139		$	420,139
	June 30, 2019		December 31, 2018
Intangible assets with indefinite lives	$	10,142	$	10,142	$	10,142		$	10,142
Intangible assets with definite lives, net	199,450		195,557		143,925			171,438
Total intangible assets, net	$	209,592	$	205,699	$	154,067		$	181,580

Goodwill and Indefinite-Lived Intangible Assets

The Company's goodwill isat each of June 30, 2020 and December 31, 2019 consists of $59.3 million associated with ~~its one reportable~~the Home segment, $166.1 million associated with the Consumer segment, and $194.7 million associated with the Insurance segment.

Intangible assets with indefinite lives relate to the Company's trademarks.

Intangible Assets with Definite Lives

Intangible assets with definite lives relate to the following (in thousands):

Cost
Accumulated
Amortization
Net
Technology $ 116,600
$ (35,149 ) $ 81,451
Customer lists 80,200
(11,800 ) 68,400
Trademarks and tradenames 18,042
(5,479 ) 12,563
Website content 51,000
(13,967 ) 37,033
Other 256
(253 ) 3
Balance at June 30, 2019 $ 266,098
$ (66,648 ) $ 199,450

Cost
Accumulated
Amortization
Net
Technology $ 112,400
$ (21,022 ) $ 91,378
Customer lists 80,200
(7,746 ) 72,454
Trademarks and tradenames 16,742
(3,730 ) 13,012
Website content 24,900
(6,192 ) 18,708
Other 256
(251 ) 5
Balance at December 31, 2018 $ 234,498
$ (38,941 ) $ 195,557

~~See Note 6—Assets Held for Sale for tenant leases classified as held for sale during 2018, which were sold to an unrelated third party in the second quarter of 2019.~~



	Cost		Accumulated Amortization			Net
Technology	$	116,200	$	(63,126	)	$	53,074
Customer lists	77,300		(15,506		)	61,794
Trademarks and tradenames	17,200		(8,177		)	9,023
Website content	51,000		(30,967		)	20,033
Other	5		(4		)	1
Balance at June 30, 2020	$	261,705	$	(117,780	)	$	143,925

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



	Cost		Accumulated Amortization			Net
Technology	$	116,200	$	(48,938	)	$	67,262
Customer lists	77,300		(12,452		)	64,848
Trademarks and tradenames	17,200		(6,407		)	10,793
Website content	51,000		(22,467		)	28,533
Other	5		(3		)	2
Balance at December 31, 2019	$	261,705	$	(90,267	)	$	171,438

Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of June 30, ~~2019~~2020, future amortization is estimated to be as follows (in thousands):


	Amortization Expense		Amortization Expense
Remainder of current year	$	27,564	$	25,565
Year ending December 31, 2020	53,179
Year ending December 31, 2021	42,839		42,738
Year ending December 31, 2022	25,356		25,256
Year ending December 31, 2023	8,702		8,602
Year ending December 31, 2024			6,747
Thereafter	41,810		35,017
Total intangible assets with definite lives, net	$	199,450	$	143,925

NOTE ~~6—ASSETS HELD FOR SALE~~7—EQUITY INVESTMENT

~~In December 2016,~~On February 28, 2020, the Company acquired ~~two office buildings~~an equity interest in ~~Charlotte, North Carolina~~Stash Financial, Inc. (“Stash”) for ~~$23.5 million in cash, which included $0.1 million in acquisition-related costs which were capitalized.~~ $80.0 million. Stash is a consumer investing and banking platform. Stash brings together banking, investing, and education into one seamless experience offering a full-suite of personal investment accounts, Traditional and Roth IRAs, custodial investment accounts, and banking services, including checking accounts and debit cards with a Stock-Back^® rewards program.

The ~~buildings were acquired with the intent to use such buildings as the Company's corporate headquarters~~Stash equity securities do not have a readily determinable fair value and, ~~rent any unused space.~~

In November 2018, the Company's Board of Directors approved a plan to sell the two office buildings. The properties were classified as current assets held for sale in the consolidated balance sheet for December 31, 2018. In February 2019,upon acquisition, the Company ~~agreed~~elected the measurement alternative to ~~sell these buildings~~value its securities. The Stash equity securities will be carried at cost and subsequently marked to ~~an unrelated third party, which agreement was amended~~market upon observable market events with any gains or losses recorded in March 2019. The sale was finalized in the second quarter of 2019 for a sale price of $24.4 million, and the Company incurred closing fees of $0.3 million. The Company recognized a gain of $2.7 million on the sale within general and administrative expenseoperating income in the consolidated statement of ~~operations and comprehensive income. The properties were associated with the Company's one reportable segment.~~

~~Property and equipment classified as held for sale at December 31, 2018 is as follows~~ ~~(in thousands)~~:

Amount
Land $ 5,818
Building 14,984
Site improvements 950
Computer equipment and capitalized software 166
Furniture and other equipment 145
Total gross property and equipment 22,063
Accumulated depreciation (1,278 )
Total property and equipment, net $ 20,785

~~Intangible assets classified as held for sale at December 31, 2018 is as follows~~ ~~(in thousands)~~:

Amount
Tenant leases $ 961
Total gross intangible assets 961
Accumulated amortization (468 )
Total intangible assets, net $ 493

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~NOTE 7—BUSINESS ACQUISITIONS~~

~~2019 Acquisition~~

~~ValuePenguin~~

On January 10, 2019, the Company acquired Value Holding, Inc., the parent company of ValuePenguin Inc. ("ValuePenguin"), a personal finance website that offers consumers objective analysis on a variety of financial topics from insurance to credit cards. The Company made an upfront cash payment of $106.1 million at the closing of the transaction, funded through $90.0 million drawn on the Company's Revolving Credit Facility and the balance using cash on hand. The purchase price of $106.2 million is comprised of the upfront cash payment of $106.1 million and a $0.1 million post-closing payment for working capital settlement.

~~The acquisition has been accounted for as a business combination. The preliminary allocation of purchase price to the assets acquired and liabilities assumed is as follows (in thousands):~~

Preliminary Fair Value
Net working capital $ 2,796
Fixed assets 68
Intangible assets 31,600
Goodwill 71,444
Net noncurrent assets 324
Total purchase price $ 106,232

The Company primarily used the income approach for the valuation as appropriate, and used valuation inputs in these models and analyses that were based on market participant assumptions. Market participants are buyers and sellers unrelated to the Company and fair value is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction at the measurement date.

The acquired intangible assets are definite-lived assets consisting of developed technology, content and trademarks and tradenames. The estimated fair values of the developed technology were determined using cost replacement analysis, the content was determined using excess earnings analysis, and the trademarks and tradenames were determined using relief from royalty analysis. The fair value of the intangible assets with definite lives are as follows ~~(dollars in thousands)~~:

Preliminary Fair Value
Weighted Average
Amortization Life
Technology $ 4,200
3 years
Content 26,100
3 years
Trademarks and tradenames 1,300
5 years
Total intangible assets $ 31,600
3.1 years

operations. As of June 30, ~~2019,~~2020, there have been no observable market events that would result in upward or downward adjustments in the fair value and there have been no impairments to the original cost of $80.0 million.

NOTE 8—BUSINESS ACQUISITIONS

Changes in Contingent Consideration

In 2018, the Company ~~has not completed its determination~~acquired all of the ~~final allocation~~outstanding equity interests of QuoteWizard.com, LLC (“QuoteWizard”) and Ovation Credit Services, Inc. (“Ovation”).

In 2017, the Company acquired certain assets of Snap Capital LLC, which does business under the name SnapCap (“SnapCap”) and all of the ~~purchase price to~~assets of Deposits Online, LLC, which does business under the assets and liabilities of the acquisition. The final allocation of purchase price is expected to be finalized in 2019. Any adjustment to the assets and liabilities assumed with the acquisition will adjust goodwill.name DepositAccounts.com (“DepositAccounts”).

The Company ~~recorded preliminary goodwill~~will make an earnout payment of ~~$71.4~~$4.4 million ~~which represents~~based on the ~~excess~~achievement of certain defined operating metrics for Ovation, and payments ranging from 0 to $46.8 million based on the ~~purchase price over the estimated fair value~~achievement of ~~tangible and intangible assets acquired, net of the liabilities assumed. The goodwill is primarily attributable to ValuePenguin as a going concern, which represents the ability of~~certain defined performance targets for QuoteWizard. During 2020, the Company ~~to earn a higher return on~~made the ~~collection of assets and business of ValuePenguin than if those assets and business were to be acquired and managed separately. The benefit of access~~final earnout payments related to the ~~workforce is an additional element~~achievement of ~~goodwill. The goodwill is recorded in the Company’s one reportable segment. For income tax purposes, the Company preliminarily accounted~~certain defined earnings targets for the acquisition as an asset purchase which would indicate the goodwill will be tax deductible. As of June 30, 2019, the Company has completed the assessment of this election to treat the acquisition as an asset purchase and the election will be timely filed.SnapCap.

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsequent to the acquisition date, the Company’s consolidated results of operations include the results of the acquired ValuePenguin business. In the second quarter and first six months of 2019, the Company’s consolidated results of operations include revenue of $5.5 million and $10.9 million, respectively, and net income from continuing operations of $1.2 million and $3.1 million, respectively. Acquisition-related costs were $0.1 millionChanges in the ~~first six months of 2019 and are included in general and administrative expense on the consolidated statement of operations and comprehensive income.~~

~~2018 Acquisitions~~

~~QuoteWizard~~

On October 31, 2018, the Company acquired QuoteWizard.com, LLC ("QuoteWizard"), one of the largest insurance comparison marketplaces in the growing online insurance advertising market. QuoteWizard services clients by driving consumers to insurance companies’ websites, providing leads to agents and carriers, as well as phone transfers of consumers into carrier call centers.

The Company paid $299.9 million in initial cash consideration, funded through $174.9 million of cash on hand and $125.0 million drawn on the Revolving Credit Facility, and could make up to three additional earnout payments, each ranging from zero to $23.4 million, based on certain defined operating results during the earnout periods November 1, 2018 through October 31, 2019, November 1, 2019 through October 31, 2020, and November 1, 2020 through October 31, 2021. These additional payments, to the extent earned, will be payable in cash. The purchase price of $313.4 million is comprised of the upfront cash payment of $299.9 million, $13.9 million for the estimated fair value of ~~the earnout payments, and a $0.4 million post-closing receipt for working capital settlement.~~contingent consideration is summarized as follows (in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020			2019
QuoteWizard	$	8,058	$	2,534		$	(204	)	$	16,893
Ovation	1,039		634			1,180			(14		)
SnapCap	78		(142		)	77			1,450
DepositAccounts	—		(236		)	—			(947		)
Total changes in fair value of contingent consideration	$	9,175	$	2,790		$	1,053		$	17,382

As of June 30, ~~2019,~~2020, the estimated fair value of the contingent consideration for the QuoteWizard acquisition totaled ~~$37.6~~$24.2 million, of which ~~$22.4~~$14.7 million is included in current contingent consideration and ~~$15.2~~$9.5 million is included in non-current contingent consideration in the accompanying consolidated balance sheet. The estimated fair value of the contingent consideration payments is determined using an option pricing model. The estimated value of the contingent consideration is based upon available information and certain assumptions, known at the time of this report, which management believes are reasonable.

As of June 30, 2020, the estimated fair value of the contingent consideration for the Ovation acquisition totaled $4.3 million, which is included in current contingent consideration in the accompanying consolidated balance sheet. The estimated fair value of the contingent consideration payment is based on the $4.4 million achieved target discounted from the payment due date to June 30, 2020.

As of June 30, 2020, 0 liability remains outstanding for the DepositAccounts acquisition in the accompanying consolidated balance sheet for the final contingent consideration payment based on Federal Funds interest rates and the earnout is complete.

Any differences in the actual contingent consideration payments will be recorded in operating income in the consolidated statements of operations and comprehensive income. During the second quarter and first six months of 2019, the Company recorded $2.5 million and $16.9 million, respectively, of contingent consideration expense in the consolidated statements of operations and comprehensive income due to the change in estimated fair value of the contingent consideration.

~~The acquisition has been accounted for as a business combination. The preliminary allocation of purchase price to the assets acquired and liabilities assumed is as follows~~ ~~(in thousands)~~:

Preliminary Fair Value
Net working capital $ 8,381
Fixed assets 1,509
Intangible assets 120,400
Goodwill 183,036
Other noncurrent assets 29
Total purchase price $ 313,355

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

The acquired intangible assets are definite-lived assets consisting of developed technology, customer relationships, content and trademarks and tradenames. The estimated fair values of the developed technology were determined using excess earnings analysis, the customer relationships were determined using the distributor method, the content was determined using cost replacement analysis, and the trademarks and tradenames were determined using relief from royalty analysis. The fair value of the intangible assets with definite lives are as follows ~~(dollars in thousands)~~:

Preliminary Fair Value
Weighted Average
Amortization Life
Technology $ 68,900
4 years
Customer lists 42,700
14.7 years
Content 1,000
3 years
Trademarks and tradenames 7,800
5 years
Total intangible assets $ 120,400
7.9 years

As of June 30, 2019, the Company has not completed its determination of the final allocation of the purchase price to the assets and liabilities of the acquisition. The final allocation of purchase price is expected to be finalized in the third quarter of 2019. Any adjustment to the assets and liabilities assumed with the acquisition will adjust goodwill.

The Company recorded preliminary goodwill of $183.0 million, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed. The goodwill is primarily attributable to QuoteWizard as a going concern, which represents the ability of the Company to earn a higher return on the collection of assets and business of QuoteWizard than if those assets and business were to be acquired and managed separately. The benefit of access to the workforce is an additional element of goodwill. The goodwill is recorded in the Company’s one reportable segment. For income tax purposes, the acquisition was an asset purchase and the goodwill will be tax deductible.

The unaudited pro forma financial results for the second quarter and first six months of 2018 below combine the consolidated results of the Company and QuoteWizard, giving effect to the acquisition as if it had been completed on January 1, 2017. This unaudited pro forma financial information is presented for informational purposes only and is not indicative of future operations or results had the acquisition been completed as of January 1, 2017, or any other date.

The unaudited pro forma financial results include adjustments for additional amortization expense based on the fair value of the intangible assets with definite lives and their estimated useful lives, as well as changes in depreciation expense associated with the change in fair value of the property, plant and equipment recorded in relation to the acquisition. Interest expense was adjusted to eliminate historical interest associated with QuoteWizard's revolving credit facility and notes payable that were not assumed with the acquisition, as well as reflect incremental interest expense associated with debt issued to finance the acquisition. The provision for income taxes from continuing operations has also been adjusted to reflect taxes on the historical results of operations of QuoteWizard. QuoteWizard did not pay taxes at the entity level as it was a limited liability company whose members elected for it to be taxed as a partnership.

Three Months Ended
June 30, 2018

Six Months Ended
June 30, 2018
(in thousands)
Pro forma revenue $ 221,839
$ 440,596
Pro forma net income from continuing operations $ 42,813
$ 78,413

Acquisition-related costs incurred by the Company and QuoteWizard that are directly attributable to the acquisition, and which will not have an ongoing impact, have been eliminated from the unaudited pro forma net income from continuing operations for the second quarter and first six months of 2018.

~~Ovation~~

On June 11, 2018, the Company acquired Ovation Credit Services, Inc., a leading provider of credit services with a strong customer service reputation. Ovation utilizes a proprietary software application that facilitates the credit repair process and is integrated directly with certain credit bureaus while educating consumers on credit improvement via ongoing outreach with Ovation case advisors. The proprietary software application offers consumers a simple, streamlined process to identify, dispute, and correct inaccuracies within their credit reports.

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

The Company paid $12.2 million in initial cash consideration and could make up to two additional earnout payments, each ranging from zero to $4.375 million, based on certain defined operating metrics during the earnout periods July 1, 2018 through June 30, 2019 and July 1, 2019 through June 30, 2020. These additional payments, to the extent earned, will be payable in cash. The purchase price of $17.9 million is comprised of the upfront cash payment of $12.2 million, $5.8 million for the estimated fair value of the earnout payments, and a $0.1 million post-closing receipt for working capital settlement.

As of June 30, 2019, the estimated fair value of the contingent consideration totaled $7.4 million, of which $4.3 million is included in current contingent consideration and $3.1 million is included in non-current contingent consideration in the accompanying consolidated balance sheet. The estimated fair value of the contingent consideration payments is determined using an option pricing model. The estimated value of the contingent consideration is based upon available information and certain assumptions, known at the time of this report, which management believes are reasonable. Any differences in the actual contingent consideration payments will be recorded in operating income in the consolidated statements of operations and comprehensive income. During the second quarter of 2019, the Company recorded contingent consideration expense of $0.6 million in the consolidated statement of operations and comprehensive income due to the change in estimated fair value of the contingent consideration.

The acquisition has been accounted for as a business combination. In the second quarter of 2019, the Company completed the determination of the final allocation of purchase price to the assets acquired and liabilities assumed as follows ~~(in thousands)~~:

Fair Value
Net working capital $ 303
Fixed assets 76
Intangible assets 8,900
Goodwill 11,280
Net deferred tax liabilities (2,688 )
Total purchase price $ 17,871

The acquired intangible assets are definite-lived assets consisting of developed technology, customer relationships and trademarks and tradenames. The estimated fair values of the developed technology were determined using excess earnings analysis, the customer relationships were determined using cost savings analysis and the trademarks and tradenames were determined using relief from royalty analysis. The fair value of the intangible assets with definite lives are as follows ~~(dollars in thousands)~~:

Fair Value
Weighted Average
Amortization Life
Technology $ 6,000
7 years
Customer lists 1,900
1 year
Trademarks and tradenames 1,000
4 years
Total intangible assets $ 8,900
5.4 years

The Company recorded goodwill of $11.3 million, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed. The goodwill is primarily attributable to Ovation as a going concern, which represents the ability of the Company to earn a higher return on the collection of assets and business of Ovation than if those assets and business were to be acquired and managed separately. The benefit of access to the workforce is an additional element of goodwill. The goodwill is recorded in the Company’s one reportable segment. For income tax purposes, the acquisition was an equity purchase and the goodwill will not be tax deductible.

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Changes in Contingent Consideration~~

~~SnapCap~~

On September 19, 2017, the Company acquired certain assets of Snap Capital LLC, which does business under the name SnapCap (“SnapCap”). SnapCap, a tech-enabled online platform, connects business owners with lenders offering small business loans, lines of credit and merchant cash advance products through a concierge-based sales approach.

The Company paid $11.9 million of initial cash consideration and could make up to three additional contingent consideration payments, each ranging from zero to $3.0 million, based on certain defined operating results during the periods of October 1, 2017 through September 30, 2018, October 1, 2018 through September 30, 2019 and October 1, 2019 through March 31, 2020. These additional payments, to the extent earned, will be payable in cash.

In the first quarter of 2019, the Company paid $3.0 million related to the earnout payment for the period of October 1, 2017 through September 30, 2018, which is included within cash flows from financing activities on the consolidated statement of cash flows.

As of June 30, 2019, the estimated fair value of the contingent consideration totaled $5.2 million, of which $2.9 million is included in current contingent consideration and $2.3 million is included in non-current contingent consideration in the accompanying consolidated balance sheet. The estimated fair value of the contingent consideration payments is determined using an option pricing model. The estimated value of the contingent consideration is based upon available information and certain assumptions, known at the time of this report, which management believes are reasonable. Any differences in the actual contingent consideration payments will be recorded in operating income in the consolidated statements of operations and comprehensive income. During the second quarter and first six months of 2019, the Company recorded a gain of $0.1 million and contingent consideration expense of $1.5 million, respectively, in the consolidated statements of operations and comprehensive income due to the change in estimated fair value of the contingent consideration.

~~DepositAccounts~~

On June 14, 2017, the Company acquired substantially all of the assets of Deposits Online, LLC, which does business under the name DepositAccounts.com (“DepositAccounts”). DepositAccounts is a leading consumer-facing media property in the depository industry and is one of the most comprehensive sources of depository deals and analysis on the Internet, covering all major deposit product categories through editorial content, programmatic rate tables and user-generated content.

The Company paid $24.0 million of initial cash consideration and could make additional contingent consideration payments of up to $9.0 million. The potential contingent consideration payments are comprised of (i) up to seven payments of $1.0 million each based on specified increases in Federal Funds interest rates during the period commencing on the closing date and ending on June 30, 2020 and (ii) a one-time performance payment of up to $2.0 million based on the net revenue of deposit products during the period of January 1, 2018 through December 31, 2018. These additional payments, to the extent earned, will be payable in cash.

In the third quarter of 2017, the Company made a payment of $1.0 million associated with a specified increase in the Federal Funds rate in June 2017. In each of the four quarters of 2018, the Company paid $1.0 million associated with specified increases in the Federal Funds rate in December 2017, March 2018, June 2018 and September 2018, respectively. In the first quarter of 2019, the Company paid $1.0 million associated with a specified increase in the Federal Funds rate in December 2018. In the second quarter of 2019, the Company paid $2.0 million associated with the one-time performance payment based on the net revenue of deposit products during the period of January 1, 2018 through December 31, 2018. The contingent consideration paid in the first six months of 2019 is included within cash flows from operating activities on the consolidated statement of cash flows.

The estimated fair value of the portion of the contingent consideration payments based on increases in interest rates is determined using a scenario approach based on the interest rate forecasts of Federal Open Market Committee participants. The estimated value of the contingent consideration is based upon available information and certain assumptions, known at the time of this report, which management believes are reasonable. Any differences in the actual contingent consideration payments will be recorded in operating income in the consolidated statements of operations and comprehensive income. As of June 30, 2019, no liability has been recorded in the accompanying consolidated balance sheet for the remaining contingent consideration payment based on Federal Funds interest rates. Accordingly, during the second quarter and first six months of 2019, the Company recorded gains of $0.2 million and $1.0 million, respectively, in the consolidated statements of operations and comprehensive income due to the change in estimated fair value of the contingent consideration.

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Pro forma Financial Results~~

The unaudited pro forma financial results for the first six months of 2019 and the second quarter and first six months of 2018 combine the consolidated results of the Company and Ovation, Student Loan Hero, Inc. (“Student Loan Hero”), QuoteWizard and ValuePenguin, giving effect to the acquisitions as if the Ovation, Student Loan Hero and QuoteWizard acquisitions had been completed on January 1, 2017, and as if the ValuePenguin acquisition had been completed on January 1, 2018. This unaudited pro forma financial information is presented for informational purposes only and is not indicative of future operations or results had the acquisitions been completed as of January 1, 2017 or 2018, or any other date.

The unaudited pro forma financial results include adjustments for additional amortization expense based on the fair value of the intangible assets with definite lives and their estimated useful lives. Depreciation expense and interest expense was adjusted for the impact of the QuoteWizard acquisition, as described above. Interest expense was also adjusted to reflect incremental interest associated with debt issued to finance the ValuePenguin acquisition. The provision for income taxes from continuing operations has been adjusted to reflect taxes on the historical results of operations of QuoteWizard. QuoteWizard did not pay taxes at the entity level as it was a limited liability company whose members elected for it to be taxed as a partnership.

Three Months Ended
June 30,

Six Months Ended
June 30,
2018 2019 2018
(in thousands)
Pro forma revenue $ 234,264
$ 541,326
$ 464,148
Pro forma net income from continuing operations $ 44,314
$ 13,250
$ 79,902

The unaudited pro forma net income from continuing operations in the first six months of 2019 includes the aggregate after tax contingent consideration expense associated with the DepositAccounts, SnapCap, Ovation and QuoteWizard earnouts of $12.6 million. The unaudited pro forma net income from continuing operations in the second quarter and first six months of 2018 includes the aggregate after tax contingent consideration gain associated with the DepositAccounts and SnapCap earnouts of $0.3 million and $1.1 million, respectively.

The unaudited pro forma net income from continuing operations for the first six months of 2018 has been adjusted to include acquisition-related costs of $0.6 million incurred by the Company that are directly attributable to the ValuePenguin acquisition, and which will not have an ongoing impact. Accordingly, such acquisition-related costs have been eliminated from the unaudited pro forma net income from continuing operations for the first six months of 2019. Acquisition-related costs incurred by the Company, Student Loan Hero and QuoteWizard that are directly attributable to the Ovation, Student Loan Hero and QuoteWizard acquisitions, and which will not have an ongoing impact, have been eliminated from the unaudited pro forma net income from continuing operations for the second quarter and first six months of 2018.

NOTE 8—9—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (in thousands):


	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Accrued advertising expense	$	77,692	$	60,268	$	46,114	$	65,836
Accrued compensation and benefits	14,074		6,381		10,068		10,540
Accrued professional fees	1,619		2,549		2,188		1,560
Customer deposits and escrows	7,029		6,913		8,768		6,920
Contribution to LendingTree Foundation	3,333		3,333		3,333		3,333
Current lease liabilities	5,447		—		5,923		6,885
Other	21,129		13,746		12,175		17,681
Total accrued expenses and other current liabilities	$	130,323	$	93,190	$	88,569	$	112,755

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

NOTE 9—10—LEASES

The Company is a lessee to leases of corporate offices and certain office equipment. The majority of leases for corporate offices include ~~one~~1 or more options to renew, with renewal terms ranging from ~~one~~two to five years. These renewal options have not been included in the calculation of right-of-use assets and lease liabilities, as the Company is not reasonably certain of the exercise of these renewal options. The Company used its incremental borrowing rate to calculate the right-of-use asset and lease liability for each lease.

Table of Contents

LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, ~~2019, right-of use~~2020, right-of-use assets ~~totaling $17.9~~totaled $87.9 million ~~are included in other non-current assets~~ and lease liabilities, ~~totaling $20.6 million are~~the current portion of which is included in accrued expenses and other current liabilities ~~and other non-current liabilities~~ in the accompanying balance ~~sheet.~~

sheet, totaled $92.6 million. At December 31, 2019, right-of-use assets totaled $25.5 million and lease liabilities totaled $28.2 million. During the second quarter of ~~2019,~~2020 the ~~Company recognized an impairment loss~~right-of-use assets and lease liabilities increased $65.7 million due to commencement of ~~$0.5 million within general and administrative expense on~~ the ~~consolidated statements of operations and comprehensive income,~~lease, as defined under ASC Topic 842, Leases, for the ~~right-of-use asset related to an office lease. The Company vacated the office space~~Company’s new principal executive offices currently under construction in Charlotte, North Carolina, occurring during the second ~~quarter of 2019 and adjusted the right-of-use asset to its fair value based on estimated sublease income.~~quarter.

Lease expense, which is included in general and administrative expense on the accompanying consolidated statements of operations and comprehensive income, consists of the following (in thousands):


					Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019		2020		2019		2020		2019
Operating lease cost	$	1,467	$	2,730	$	2,140	$	1,467	$	3,994	$	2,730
Short-term lease cost	9		48		17		9		38		48
Total lease cost	$	1,476	$	2,778	$	2,157	$	1,476	$	4,032	$	2,778

Weighted average remaining lease term and discount rate for operating leases are as follows:



	~~June 30, 2019~~
~~Weighted average remaining lease term~~	~~4.2 years~~
~~Weighted average discount rate~~	~~5.0~~	%



	June 30, 2020		December 31, 2019
Weighted average remaining lease term	14.0 years		5.0 years
Weighted average discount rate	5.0	%	4.7	%

Supplemental cash flow information related to leases is as follows (in thousands):


			Six Months Ended June 30,
	Six Months Ended June 30, 2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,581	$	4,056	$	2,581
Right-of-use assets obtained in exchange for new operating lease liabilities	$	11,398	$	65,740	$	11,398

Maturities of lease liabilities as of June 30, ~~2019 is~~2020 are as follows (in thousands):


	Operating Leases		Operating Leases
Remainder of current year	$	3,159	$	4,052
Year ending December 31, 2020	6,152
Year ending December 31, 2021	4,249		8,595
Year ending December 31, 2022	3,912		12,530
Year ending December 31, 2023	3,560		12,409
Year ending December 31, 2024			10,885
Thereafter	1,944		105,398
Total lease payments	22,976		153,869
Less: Interest	2,416		47,219
Less: Tenant improvement allowances			14,078
Present value of lease liabilities	$	20,560	$	92,572

Rental income of $0.1 million and $0.3 million in the second quarter and first six months of 2019, respectively, is included in other income on the accompanying consolidated statements of operations and comprehensive income.

1914

Table of Contents

LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Future minimum payments as of December 31, 2018 under operating lease agreements having an initial or remaining non-cancelable lease term in excess of one year are as follows~~ ~~(in thousands)~~:

Amount
Year ending December 31, 2019 $ 4,406
Year ending December 31, 2020 3,188
Year ending December 31, 2021 1,094
Year ending December 31, 2022 736
Year ending December 31, 2023 228
Total $ 9,652

The Company operated as a lessor in connection with the office buildings in Charlotte, North Carolina acquired in December 2016. The properties were sold in the second quarter of 2019 to an unrelated third party. ~~See~~ ~~Note 6—Assets Held for Sale for further information.~~

Rental income of $0.1 million and $0.3 million in the second quarter and first six months of 2019, respectively, and $0.3 million and $0.5 million in the second quarter and first six months of 2018, respectively, is included in other income on the accompanying consolidated statements of operations and comprehensive income.

NOTE ~~10—~~11—SHAREHOLDERS' EQUITY

Basic and diluted income per share was determined based on the following share data (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,		Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018	2020	2019	2020	2019
Weighted average basic common shares	12,805	12,416	12,762	12,254	12,984	12,805	12,971	12,762
Effect of stock options	810	1,176	777	1,363	—	810	592	777
Effect of dilutive share awards	194	135	191	177	—	194	91	191
Effect of Convertible Senior Notes and warrants	1,099	420	892	733	—	1,099	300	892
Weighted average diluted common shares	14,908	14,147	14,622	14,527	12,984	14,908	13,954	14,622

For the three months ended June 30, 2020, the Company had a loss from continuing operations and, as a result, no potentially dilutive securities were included in the denominator for computing diluted loss per share, because the impact would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding was used to compute loss per share. Approximately 0.8 million shares related to potentially dilutive securities were excluded from the calculation of diluted loss per share for the three months ended June 30, 2020, because their inclusion would have been anti-dilutive. For the three months ended June 30, 2020, the weighted average shares that were anti-dilutive included options to purchase 0.7 million shares of common stock and 0.1 million restricted stock units. For the six months ended June 30, 2020, the weighted average shares that were anti-dilutive included options to purchase 0.2 million shares of common stock.

For each of the three and six months ended June 30, 2019, the weighted average shares that were anti-dilutive included options to purchase 0.1 million shares of common stock.

The convertible notes and ~~therefore~~the warrants issued by the Company could be converted into the Company’s common stock, subject to certain contingencies. See Note 14—Debt and Note 19—Subsequent Events for additional information. Shares of the Company's common stock associated with the warrants were excluded from the calculation of diluted income per share ~~included options to purchase 0.1 million shares of common stock. For each of~~for the ~~three and~~ six months ended June 30, ~~2018, the weighted average shares that~~2020 as they were anti-dilutive ~~and therefore excluded from~~since the ~~calculation~~strike price of ~~diluted income per share, included options to purchase 0.4 million shares of common stock.~~

~~The 0.625% Convertible Senior Notes due June 1, 2022 and~~ the warrants ~~issued by~~was greater than the ~~Company in 2017 could be converted into~~average market price of the ~~Company’s~~Company's common stock induring the ~~future, subject to certain contingencies.~~ ~~See~~ ~~Note 13—Debt for additional information.~~period.

Common Stock Repurchases

In each of February 2018 and February 2019, the board of directors authorized and the Company announced the repurchase of up to $100.0 million and $150.0 million, respectively, of LendingTree's common stock. During the first six months of 2019, ~~and 2018,~~ the Company purchased 17,501 ~~and 156,731~~ shares ~~respectively,~~ of its common stock for aggregate consideration of $4.0 ~~million and $46.0 million, respectively.~~million. At June 30, ~~2019,~~2020, approximately ~~$181.2~~$179.7 million of the previous authorizations to repurchase common stock remain available.

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

NOTE ~~11—~~12—STOCK-BASED COMPENSATION

Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations and comprehensive income (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Cost of revenue	$	197	$	79	$	350	$	137	$	333	$	197	$	575	$	350
Selling and marketing expense	2,283		1,433		4,032		2,934		1,597		2,283		2,753		4,032
General and administrative expense	11,686		8,490		21,907		17,229		9,729		11,686		18,852		21,907
Product development	1,816		1,176		3,746		1,987		1,499		1,816		2,895		3,746
Total non-cash compensation	$	15,982	$	11,178	$	30,035	$	22,287	$	13,158	$	15,982	$	25,075	$	30,035

Table of Contents

LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options

A summary of changes in outstanding stock options is as follows:


	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)		Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)
			(per option)		(in years)	(in thousands)				(per option)		(in years)	(in thousands)
Options outstanding at January 1, 2019	940,533		$	65.12
Options outstanding at January 1, 2020								777,871		$	69.87
Granted ^(b)	42,017		322.17					73,737		276.38
Exercised	(108,418	)	41.36					(20,141	)	73.09
Forfeited	(25,270	)	334.52					(503	)	297.63
Expired	—		—					(1,974	)	352.10
Options outstanding at June 30, 2019	848,862		72.86		4.82	$	294,700
Options exercisable at June 30, 2019	701,319		$	35.97	3.99	$	269,348
Options outstanding at June 30, 2020								828,990		87.36		4.23	$	169,184
Options exercisable at June 30, 2020								670,266		$	45.85	3.16	$	164,215

(a)

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of ~~$420.03~~$289.53 on the last trading day of the quarter ended June 30, ~~2019~~2020 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on June 30, ~~2019.~~2020. The intrinsic value changes based on the market value of the Company's common stock.

(b)

During the six months ended June 30, ~~2019,~~2020, the Company granted stock options to certain employees and members of the board of directors with a weighted average grant date fair value per share of ~~$166.39,~~$138.75, calculated using the Black-Scholes option pricing model, which vesting periods include (a) immediate vesting on grant date (b) 1 year from grant date (c) three years from grant date and (d) four years from grant date.

For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options was estimated using the Black-Scholes option pricing model, which requires the use of various key assumptions. The weighted average assumptions used are as follows:



Expected term ⁽¹⁾	5.00 - 6.25 years
Expected dividend ⁽²⁾	—
Expected volatility ⁽³⁾	5152 - ~~55%~~60%
Risk-free interest rate ⁽⁴⁾	~~1.88%~~0.33 - ~~2.55%~~0.96%


(1)	The expected term of stock options granted was calculated using the "Simplified Method," which utilizes the midpoint between the weighted average time of vesting and the end of the contractual term. This method was utilized for the stock options due to a lack of historical exercise behavior by the Company's employees.

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~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~


(2)	For all stock options granted in ~~2019, no~~2020, 0 dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.


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


(4)	The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options with ~~Performance~~Market Conditions

A summary of changes in outstanding stock options with ~~performance~~market conditions at target is as follows:


	Number of Options with Performance Conditions		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)		Number of Options with Market Conditions	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)
			(per option)		(in years)	(in thousands)			(per option)		(in years)	(in thousands)
Options outstanding at January 1, 2019	37,877		$	308.90
Options outstanding at January 1, 2020								463,440	$	204.31
Granted(b)	—		—					19,126	275.82
Exercised	—		—					—	—
Forfeited	—		—					—	—
Expired	(11,876	)	308.90					—	—
Options outstanding at June 30, 2019	26,001		308.90		1.08	$	2,889
Options exercisable at June 30, 2019	—		$	—	0.00	$	—
Options outstanding at June 30, 2020								482,566	207.14		7.27	$	42,839
Options exercisable at June 30, 2020								—	$	—	0.00	$	—

(a)

~~Stock Options with Market Conditions~~

~~A summary of changes in outstanding stock options with market conditions at target is as follows:~~

Number of Options with Market Conditions
Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value^(a)
(per option) (in years) (in thousands)
Options outstanding at January 1, 2019 447,193
$ 200.51

Granted^(b)
16,247
308.96

Exercised —
—

Forfeited —
—

Expired —
—

Options outstanding at June 30, 2019 463,440
204.31
8.17 $ 99,974
Options exercisable at June 30, 2019 —
$ —
0.00 $ —

~~(a)~~

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $420.03 on the last trading day of the quarter ended June 30, 2019 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on June 30, 2019. The intrinsic value changes based on the market value of the Company's common stock.

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~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~


(b)	During the six months ended June 30, ~~2019,~~2020, the Company granted stock options with a grant date fair value per share of ~~$230.81,~~$196.07, calculated using the Monte Carlo simulation model, which has a vesting date of March 31, ~~2023.~~2024.

For purposes of determining stock-based compensation expense, the grant date fair value per share of the stock options was estimated using the Monte Carlo simulation model, which requires the use of various key assumptions. The assumptions used are as follows:



Expected term ⁽¹⁾	7.00 years
Expected dividend ⁽²⁾	—
Expected volatility ⁽³⁾	51%
Risk-free interest rate ⁽⁴⁾	~~2.54%~~1.03%


(1)	The expected term of stock options with a market condition granted was calculated using the midpoint between the time of vesting and the end of the contractual term.


(2)	For all stock options with a market condition granted in ~~2019, no~~2020, 0 dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.


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


(4)	The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

A maximum of ~~773,945~~805,885 shares may be earned for achieving superior performance up to 167% of the target number of shares. As of June 30, ~~2019,~~2020, performance-based nonqualified stock options with a market condition of 481,669 had been earned, which have a vest date of September 30, 2022.

~~Restricted Stock Units~~

~~A summary of changes in outstanding nonvested restricted stock units ("RSUs") is as follows:~~

RSUs
Number of Units Weighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 2019 201,568
$ 225.48
Granted 53,696
314.85
Vested (66,751 ) 190.73
Forfeited (21,905 ) 292.43
Nonvested at June 30, 2019 166,608
$ 259.40

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Stock Units

A summary of changes in outstanding nonvested restricted stock units ("RSUs") is as follows:



	RSUs
	Number of Units		Weighted Average Grant Date Fair Value
			(per unit)
Nonvested at January 1, 2020	144,939		$	267.85
Granted	105,178		275.27
Vested	(56,019	)	238.08
Forfeited	(7,637	)	275.24
Nonvested at June 30, 2020	186,461		$	280.71

Restricted Stock Units with Performance Conditions

A summary of changes in outstanding nonvested RSUs with performance conditions is as follows:


	RSUs with Performance Conditions				RSUs with Performance Conditions
	Number of Units		Weighted Average Grant Date Fair Value		Number of Units		Weighted Average Grant Date Fair Value
			(per unit)				(per unit)
Nonvested at January 1, 2019	92,481		$	182.28
Nonvested at January 1, 2020					14,647		$	210.55
Granted	—		—		—		—
Vested	(40,458	)	204.78		(1,992	)	125.75
Forfeited	(30,956	)	212.35		—		—
Nonvested at June 30, 2019	21,067		$	214.19
Nonvested at June 30, 2020					12,655		$	223.90

Restricted Stock Awards with Performance Conditions

A summary of changes in outstanding nonvested restricted stock awards ("RSAs") with performance conditions is as follows:


	RSAs with Performance Conditions				RSAs with Performance Conditions
	Number of Awards		Weighted Average Grant Date Fair Value		Number of Awards		Weighted Average Grant Date Fair Value
			(per unit)				(per unit)
Nonvested at January 1, 2019	71,412		$	340.25
Nonvested at January 1, 2020					47,608		$	340.25
Granted	—		—		—		—
Vested	(11,902	)	340.25		(11,902	)	340.25
Forfeited	—		—		—		—
Nonvested at June 30, 2019	59,510		$	340.25
Nonvested at June 30, 2020					35,706		$	340.25

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Stock Awards with Market Conditions

A summary of changes in outstanding nonvested RSAs with market conditions at target is as follows:


	RSAs with Market Conditions			RSAs with Market Conditions
	Number of Awards	Weighted Average Grant Date Fair Value		Number of Awards	Weighted Average Grant Date Fair Value
		(per unit)			(per unit)
Nonvested at January 1, 2019	26,674	$	340.25
Nonvested at January 1, 2020				26,674	$	340.25
Granted	—	—		—	—
Vested	—	—		—	—
Forfeited	—	—		—	—
Nonvested at June 30, 2019	26,674	$	340.25
Nonvested at June 30, 2020				26,674	$	340.25

A maximum of 44,545 shares may be earned for achieving superior performance up to 167% of the target number of shares. As of June 30, ~~2019,~~2020, performance-based restricted stock awards with a market condition of 29,601 had been earned, which have a vest date of September 30, 2022.

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~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

NOTE ~~12—~~13—INCOME TAXES


	Three Months Ended June 30,						Six Months Ended June 30,					Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019		2018			2020			2019			2020			2019
	(in thousands, except percentages)											(in thousands, except percentages)
Income tax benefit	$	5,689		$	29,721		$	13,441	$	53,182		$	3,880		$	5,689		$	6,941		$	13,441
Effective tax rate	(78.0		)%	(196.5		)%	N/A		(193.2		)%	31.0		%	(78.0		)%	(203.0		)%	N/A

For the second quarter and first six months of 2020, the effective tax rate varied from the federal statutory rate of 21% in part due to a tax benefit of $0.8 million and $1.8 million, respectively, recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes. The effective tax rate for the first six months of 2020 was also impacted by a tax benefit of $6.1 million for the impact of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, as described below.

On March 27, 2020, President Trump signed into law the CARES Act. This legislation is an economic relief package in response to the public health and economic impacts of COVID-19 and includes various provisions that impact the Company, including, but not limited to, modifications for net operating losses, accelerated timeframe for refunds associated with prior minimum taxes and modifications of the limitation on business interest.

The Company revalued deferred tax assets related to net operating losses in light of the changes in the CARES Act, and recorded a net tax benefit of $6.1 million during the first six months of 2020. These deferred tax assets are being revalued, as they will be carried back to 2016 and 2017, which are tax periods prior to the Tax Cuts and Jobs Act ("TCJA") when the federal statutory tax rate was 35% versus the 21% federal statutory tax rate in effect after the enactment of the TCJA.

For the second quarter and first six months of 2019, the effective tax rate varied from the federal statutory rate of 21% primarily due to a tax benefit of $7.7 million and $13.7 million, respectively, recognized for excess tax benefits ~~due to~~resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

~~For the second quarter and first six months~~

Table of 2018, the effective tax rate varied from the federal statutory rate of 21% primarily due to a tax benefit of $33.7 million and $60.9 million, respectively, recognized for excess tax benefits due to employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.Contents

LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018			2019			2018			2020		2019			2020			2019
	(in thousands)												(in thousands)
Income tax expense - excluding excess tax benefit on stock compensation	$	(2,034	)	$	(3,946	)	$	(284	)	$	(7,688	)
Income tax benefit (expense) - excluding excess tax benefit on stock compensation and CARES Act													$	3,127	$	(2,034	)	$	(970	)	$	(284	)
Excess tax benefit on stock compensation	7,723			33,667			13,725			60,870			753		7,723			1,807			13,725
Income tax benefit from CARES Act													—		—			6,104			—
Income tax benefit	$	5,689		$	29,721		$	13,441		$	53,182		$	3,880	$	5,689		$	6,941		$	13,441

NOTE ~~13—~~14—DEBT

Convertible Senior Notes

On May 31, 2017, the Company issued $300.0 million aggregate principal amount of its 0.625% Convertible Senior Notes due June 1, 2022 (the ~~“Notes”~~“2022 Notes”) in a private placement. The 2022 Notes bear interest at a rate of 0.625% per year, payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2017. The 2022 Notes will mature on June 1, 2022, unless earlier repurchased or converted.

The initial conversion rate of the 2022 Notes is 4.8163 shares of Common Stock per $1,000 principal amount of 2022 Notes (which is equivalent to an initial conversion price of approximately $207.63 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a fundamental change prior to the maturity of the 2022 Notes, the Company will, in certain circumstances, increase the conversion rate by a specified number of additional shares for a holder that elects to convert the 2022 Notes in connection with such fundamental change. Upon conversion, the 2022 Notes will settle for cash, shares of the Company’s stock, or a combination thereof, at the Company’s option. It is the intent of the Company to settle the principal amount of the 2022 Notes in cash and any conversion premium in shares of its common stock.

The 2022 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2022 Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness, including borrowings under the senior secured ~~Revolving Credit Facility,~~revolving credit facility, described below, to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.

Prior to the close of business on the business day immediately preceding February 1, 2022, the 2022 Notes will be convertible at the option of the holders thereof only under the following circumstances:

during any calendar quarter commencing after the calendar quarter ending on September 30, 2017 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive)

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~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

during the 30 consecutive trading day period ending on, and including the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

during the ~~five~~5 business day period after any ~~five~~5 consecutive trading day period in which, for each trading day of that period, the trading price (as defined in the 2022 Notes) per $1,000 principal amount of 2022 Notes for such trading day was less than 98% of the product of the last reported sale price of the Common Stock and the conversion rate on each such trading day; or

upon the occurrence of specified corporate events including but not limited to a fundamental change.

Holders of the 2022 Notes ~~became~~were not entitled to convert the 2022 Notes ~~on January 1, 2018, based on the last reported sales price of the Company's common stock, for at least 20 trading days (whether or not consecutive)~~ during the period of 30 consecutive trading days ending on December 31, 2017, being greater than or equal to 130% of the conversion price of the Notes on each applicable trading day. Holders of the Notes continued to have such right untilcalendar quarter ended June 30, ~~2018, based on~~2020 as the last reported sales price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on March 31, ~~2018, being~~2020, was not greater than or equal to 130% of the conversion price of the 2022 Notes on each applicable trading day. Holders of the 2022 Notes ~~were~~are not entitled to convert the 2022 Notes ~~from July 1, 2018 to March 31, 2019. Holders of~~during the ~~Notes became entitled to convert the Notes on April 1, 2019, based on~~calendar quarter ended September 30, 2020 as the last reported sales price of the Company's common stock, for at least 20 trading ~~days (whether or not consecutive) during the period~~

Table of 30 consecutive trading days ending on March 31, 2019, being greater than or equal to 130% of the conversion price of the Notes on each applicable trading day. Holders of the Notes will continue to have such right until September 30, 2019, based on the last reported sales price of the Company's common stock, for at least 20 trading Contents

LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

days (whether or not consecutive) during the period of 30 consecutive trading days ending on June 30, ~~2019, being~~2020, was not greater than or equal to 130% of the conversion price of the 2022 Notes on each applicable trading day.

On or after February 1, 2022, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2022 Notes, holders of the 2022 Notes may convert all or a portion of their 2022 Notes regardless of the foregoing conditions.

The Company may not redeem the 2022 Notes prior to the maturity date and no sinking fund is provided for the 2022 Notes. Upon the occurrence of a fundamental change prior to the maturity date of the 2022 Notes, holders of the 2022 Notes may require the Company to repurchase all or a portion of the 2022 Notes for cash at a price equal to 100% of the principal amount of the 2022 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

If the market price per share of the Common Stock, as measured under the terms of the 2022 Notes, exceeds the conversion price of the 2022 Notes, the 2022 Notes could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the principal amount of the 2022 Notes and any conversion premium in cash.

The initial measurement of convertible debt instruments that may be settled in cash ~~are~~is separated into a debt and an equity component whereby the debt component is based on the fair value of a similar instrument that does not contain an equity conversion option. The separate components of debt and equity of the Company’s 2022 Notes were determined using an interest rate of 5.36%, which reflects the nonconvertible debt borrowing rate of the Company at the date of issuance. As a result, the initial components of debt and equity were $238.4 million and $61.6 million, respectively.

Financing costs related to the issuance of the 2022 Notes were approximately $9.3 million of which $7.4 million were allocated to the liability component and are being amortized to interest expense over the term of the debt and $1.9 million were allocated to the equity component.

In the first six months of 2020, the Company recorded interest expense on the 2022 Notes of $7.9 million which consisted of $0.9 million associated with the 0.625% coupon rate, $6.3 million associated with the accretion of the debt discount, and $0.7 million associated with the amortization of the debt issuance costs. In the first six months of 2019, the Company recorded interest expense on the 2022 Notes of $7.5 million which consisted of $0.9 million associated with the 0.625% coupon rate, $5.9 million associated with the accretion of the debt discount, and $0.7 million associated with the amortization of the debt issuance costs. In the first six months of 2018, the Company recorded interest expense on the Notes of $7.2 million which consisted of $0.9 million associated with the 0.625% coupon rate, $5.6 million associated with the accretion of the debt discount, and $0.7 million associated with the amortization of the debt issuance costs. The debt discount is being amortized over the term of the debt.

As of June 30, ~~2019,~~2020, the fair value of the 2022 Notes is estimated to be approximately ~~$628.3~~$430.5 million using the Level 1 observable input of the last quoted market price onfor the quarter ended June ~~28, 2019.~~30, 2020.

A summary of the gross carrying amount, unamortized debt cost, debt issuance costs and net carrying value of the liability component of the 2022 Notes are as follows (in thousands):



	June 30, 2020		December 31, 2019
Gross carrying amount	$	299,977	$	299,991
Unamortized debt discount	25,537		31,789
Debt issuance costs	3,062		3,811
Net carrying amount	$	271,378	$	264,391

On July 24, 2020, the Company repurchased approximately $130.3 million principal amount of the 2022 Notes through separate and individually-negotiated transactions with certain holders of the 2022 Notes. See Note 19—Subsequent Events for additional information.

Convertible Note Hedge and Warrant Transactions

On May 31, 2017, in connection with the issuance of the 2022 Notes, the Company entered into Convertible Note Hedge (the “2017 Hedge”) and Warrant transactions with respect to the Company’s common stock. The Company used approximately $18.1 million of the net proceeds from the 2022 Notes to pay for the cost of the 2017 Hedge, after such cost was partially offset by the proceeds from the 2017 Warrants transactions.

2621

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30,
2019 December 31,
2018
Gross carrying amount $ 300,000
$ 300,000
Unamortized debt discount 37,877
43,805
Debt issuance costs 4,541
5,252
Net carrying amount $ 257,582
$ 250,943

~~Convertible Note Hedge and Warrant Transactions~~

On May 31, 2017, in connection with the issuance of the Notes, the Company entered into Convertible Note Hedge (the “Hedge”) and Warrant transactions with respect to the Company’s common stock. The Company used approximately $18.1 million of the net proceeds from the Notes to pay for the cost of the Hedge, after such cost was partially offset by the proceeds from the Warrant transactions.

On May 31, 2017, the Company paid $61.5 million to the counterparties for the 2017 Hedge transactions. The 2017 Hedge transactions cover approximately 1.4 million shares of the Company’s common stock, the same number of shares initially underlying the 2022 Notes, and are exercisable upon any conversion of the 2022 Notes. The 2017 Hedge ~~Transactions~~transactions are expected generally to reduce the potential dilution to the Common Stock upon conversion of the 2022 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2022 Notes, as the case may be, in the event that the market price per share of Common Stock, as measured under the terms of the 2017 Hedge transactions, is greater than the strike price of the 2017 Hedge transactions, which initially corresponds to the initial conversion price of the 2022 Notes, or approximately $207.63 per share of Common Stock. The 2017 Hedge transactions will expire upon the maturity of the Notes.

On May 31, 2017, the Company sold to the counterparties, warrants (the ~~"Warrants"~~“2017 Warrants”) to acquire 1.4 million shares of Common Stock at an initial strike price of $266.39 per share, which represents a premium of 70% over the reported sale price of the Common Stock of $156.70 on May 24, 2017. On May 31, 2017, the Company received aggregate proceeds of approximately $43.4 million from the sale of the 2017 Warrants.

If the market price per share of the Common Stock, as measured under the terms of the 2017 Warrants, exceeds the strike price of the 2017 Warrants, the 2017 Warrants could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the 2017 Warrants in cash.

The 2017 Hedge and ~~Warrant~~2017 Warrants transactions are indexed to, and potentially settled in, the Company's common stock and the net cost of $18.1 million has been recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity.

To the extent of the repurchases of the 2022 Notes noted above, the Company entered into agreements with the counterparties for the 2017 Hedge and 2017 Warrants transactions to terminate a portion of the existing call spread transactions effective July 24, 2020 in notional amounts corresponding to the principal amount of the 2022 Notes repurchased. See Note 19—Subsequent Events for additional information.

Senior Secured Revolving Credit Facility

On ~~November 21, 2017,~~December 10, 2019, the Company's wholly-owned subsidiary, LendingTree, LLC, entered into an amended and restated ~~$250.0~~$500.0 million five-year senior secured revolving credit facility (the "Amended Revolving Credit Facility") which ~~matures on November 21, 2022~~amended and restated the Company's previous $350.0 million five-year senior secured revolving credit facility (the ~~“Revolving~~“2017 Revolving Credit Facility”). ~~Under certain conditions, the Company will be permitted to add one or more term loans and/or increase revolving commitments under the~~The Amended Revolving Credit Facility by an additional $100.0 million or a greater amount provided that a total consolidated senior secured debt to EBITDA ratio does not exceed 2.50 to 1.00. On October 26, 2018, the Company amended the Revolving Credit Facility to increase the borrowing capacity by $100.0 million to $350.0 million. Pricing and other terms and conditions of the Revolving Credit Facility remain unchanged.matures on December 10, 2024. Borrowings under the Amended Revolving Credit Facility can be used to finance working capital needs, capital expenditures and general corporate purposes, including to finance permitted acquisitions. As of June 30, 2020, the Company had a $130.0 million, 30-day borrowing outstanding under the Amended Revolving Credit Facility bearing interest at the LIBO rate option of 1.44%. As of December 31, 2019, the Company had ~~$115.0~~$75.0 million in borrowings outstanding under the Amended Revolving Credit Facility at the LIBO rate option with a weighted average interest rate of ~~3.91%~~3.01%, consisting of a ~~$65.0~~$50.0 million 31-day borrowing and a ~~$50.0~~$25.0 million 31-day borrowing. ~~As of December 31, 2018,~~

See Note 19—Subsequent Events for activity related to the ~~Company had a $125.0 million, 31-day borrowing outstanding under the~~Amended Revolving Credit Facility ~~bearing interest at the LIBO rate option of 4.02%.~~in July 2020.

Up to $10.0 million of the Amended Revolving Credit Facility will be available for short-term loans, referred to as swingline loans. Under certain conditions, the Company will be permitted to add one or more term loans and/or increase revolving commitments under the Amended Revolving Credit Facility by an additional amount equal to the greater of $185.0 million or 100% of Consolidated EBITDA as defined, or a greater amount provided that a total consolidated senior secured debt to EBITDA ratio does not exceed 2.50 to 1.00. Additionally, up to $10.0 million of the Amended Revolving Credit Facility will be available for the issuance of letters of credit.

~~Table~~ At each of ~~Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

June 30, 2020 and December 31, 2019, the Company had outstanding one letter of credit issued in the amount of $0.2 million.

The Company’s borrowings under the Amended Revolving Credit Facility bear interest at annual rates that, at the Company’s option, will be either:

a base rate generally defined as the sum of (i) the greater of (a) the prime rate of ~~SunTrust~~Truist Bank, (b) the federal funds effective rate plus 0.5% and (c) the LIBO rate (defined below) on a daily basis applicable for an interest period of one month plus 1.0% and (ii) an applicable percentage of 0.25% to 1.0% based on a total consolidated debt to EBITDA ratio; or

a LIBO rate generally defined as the sum of (i) the rate for Eurodollar deposits in the applicable currency and (ii) an applicable percentage of 1.25% to 2.0% based on a total consolidated debt to EBITDA ratio.

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LENDINGTREE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All swingline loans bear interest at the base rate defined above. Interest on the Company’s borrowings are payable quarterly in arrears for base rate loans and on the last day of each interest rate period (but not less often than three months) for LIBO rate loans.

The Amended Revolving Credit Facility contains a restrictive financial covenant, which initially limits the total consolidated debt to EBITDA ratio to 4.5, with step downs to 4.0 over time, except that this may increase by 0.5 for the four fiscal quarters following a material acquisition. In addition, the Amended Revolving Credit Facility contains customary affirmative and negative covenants in addition to events of default for a transaction of this type that, among other things, restrict additional indebtedness, liens, mergers or certain fundamental changes, asset dispositions, dividends, stock repurchases and other restricted payments, transactions with affiliates, sale-leaseback transactions, hedging transactions, loans and investments and other matters customarily restricted in such agreements. The Company was in compliance with all covenants at June 30, ~~2019.~~2020.

The Amended Revolving Credit Facility requires LendingTree, LLC to pledge as collateral, subject to certain customary exclusions, substantially all of its assets, including 100% of its equity in all of its domestic subsidiaries and 66% of the voting equity, and 100% of the non-voting equity, in all of its material foreign subsidiaries (of which there are currently none). The obligations under this facility are unconditionally guaranteed on a senior basis by LendingTree, Inc. and material domestic subsidiaries of LendingTree, LLC, which guaranties are secured by a pledge as collateral, subject to certain customary exclusions, of 100% of each such guarantor's assets, including 100% of each such guarantor’s equity in all of its domestic subsidiaries and 66% of the voting equity, and 100% of the non-voting equity, in all of its material foreign subsidiaries (of which there are currently none).

The Company is required to pay an unused commitment fee quarterly in arrears on the difference between committed amounts and amounts actually borrowed under the Amended Revolving Credit Facility equal to an applicable percentage of 0.25% to 0.45% per annum based on a total consolidated debt to EBITDA ratio. The Company is required to pay a letter of credit participation fee and a letter of credit fronting fee quarterly in arrears. The letter of credit participation fee is based upon the aggregate face amount of outstanding letters of credit at an applicable percentage of 1.25% to 2.0% based on a total consolidated debt to EBITDA ratio. The letter of credit fronting fee is 0.125% per annum on the face amount of each letter of credit.

In addition to the remaining unamortized debt issuance costs associated with the original revolving credit facility ~~entered into on October 22, 2015~~ and the Revolving Credit Facility, debt issuance costs of ~~$0.5~~$2.8 million related to the ~~October 2018 amendment~~Amended Revolving Credit Facility entered into on December 10, 2019 are being amortized to interest expense over the life of the Amended Revolving Credit Facility, and are included in prepaid and other current assets and other non-current assets in the Company's consolidated balance sheet.

In the first six months of 2020, the Company recorded interest expense related to the Amended Revolving Credit Facility of $2.1 million which consisted of $1.1 million associated with borrowings bearing interest at the LIBO rate, $0.5 million in unused commitment fees, and $0.5 million associated with the amortization of the debt issuance costs. In the first six months of 2019, the Company recorded interest expense related to the ~~Revolving Credit Facility~~revolving credit facility of $3.8 million which consisted of $3.2 million associated with borrowings bearing interest at the LIBO rate, $0.3 million in unused commitment fees, and $0.3 million associated with the amortization of the debt issuance costs. In the first six months of 2018, the Company recorded interest expense related to the Revolving Credit Facility of $0.4 million in unused commitment fees and $0.2 million associated with the amortization of the debt issuance costs.

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~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

NOTE ~~14—~~15—CONTINGENCIES

Overview

LendingTree is involved in legal proceedings on an ongoing basis. In assessing the materiality of a legal proceeding, the Company evaluates, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs (e.g., injunctive relief) that may require it to change its business practices in a manner that could have a material and adverse impact on the Company's business. With respect to the matters disclosed in this Note ~~14,~~15, unless otherwise indicated, the Company is unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.

As of June 30, ~~2019,~~2020, the Company had litigation settlement accruals of $0.1 million and ~~$8.0~~$62.3 million in continuing operations and discontinued operations, respectively. As of December 31, ~~2018,~~2019, the Company had litigation settlement accruals of $0.2 million and ~~$8.0~~$31.0 million in continuing operations and discontinued operations, respectively. The litigation settlement accruals relate to litigation matters that were either settled or a firm offer for settlement was extended, thereby establishing an accrual amount that is both probable and reasonably estimable. See Note 18—Discontinued Operations for additional information.

~~Specific Matters~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 16—FAIR VALUE MEASUREMENTS

Other than the convertible notes and warrants, as well as the equity interest in Stash, the carrying amounts of the Company's financial instruments are equal to fair value at June 30, 2020. See Note 14—Debt and Note 19—Subsequent Events for additional information on the convertible notes and warrants, and see Note7—Equity Investment for additional information on the equity interest in Stash.

Contingent consideration payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The changes in the fair value of the Company's Level 3 liabilities are as follows (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Contingent consideration, beginning of period	$	22,342		$	49,429		$	33,464		$	38,837
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Total net losses (gains) included in earnings (realized and unrealized)	9,175			2,790			1,053			17,382
Purchases, sales and settlements:
Additions	—			—			—			—
Payments	(3,000		)	(2,000		)	(6,000		)	(6,000		)
Contingent consideration, end of period	$	28,517		$	50,219		$	28,517		$	50,219

The contingent consideration liability at June 30, 2020 is the estimated fair value of the earnout payments of the Ovation and QuoteWizard acquisitions.

The Company will make an earnout payment of $4.4 million based on the achievement of certain defined operating metrics for Ovation, and payments ranging from 0 to $46.8 million based on the achievement of certain defined performance targets for QuoteWizard. See Note 8—Business Acquisitions for additional information on the contingent consideration for each of these respective acquisitions.

The significant unobservable inputs used to calculate the fair value of the contingent consideration are estimated future cash flows for the acquisitions and the discount rate. Actual results will differ from the projected results and could have a significant impact on the estimated fair value of the contingent considerations. Additionally, as the liability is stated at present value, the passage of time alone will increase the estimated fair value of the liability each reporting period. Any changes in fair value will be recorded in operating income in the consolidated statements of operations and comprehensive income.

The following table provides quantitative information about Level 3 fair value measurements.



	Fair Value at June 30, 2020		Valuation Technique	Unobservable Input	Range (Weighted Average)^(a)
	(in thousands)
Contingent consideration	$	28,517	Option pricing model	Operating results growth rate	20.7% - 28.4% (24.6%)
				Discount rate	8.1	%

(a) Discount rates were weighted by the relative undiscounted value of expected earnout payments. Other unobservable inputs were weighted by the relative maximum potential earnout payments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17—SEGMENT INFORMATION

The Company manages its business and reports its financial results through the following 3 operating and reportable segments: Home, Consumer and Insurance. Characteristics which were relied upon in making the determination of the reportable segments include the nature of the products, the organization's internal structure, and the information that is regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources. The Company changed its reportable segments in the fourth quarter of 2019 and previously reported segment results have been revised to conform to the Company's reportable segments at June 30, 2020.

The Home segment includes the following products: purchase mortgage, refinance mortgage, home equity loans and lines of credit, reverse mortgage loans, and real estate. The Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products such as credit repair and debt settlement. The Insurance segment consists of insurance quote products. Revenue from the resale of online advertising space to third parties and revenue from home improvement referrals, and the related variable marketing and advertising expenses, are included within the Other category.

The following tables are a reconciliation of segment profit, which is the Company's primary segment profitability measure, to income before income taxes and discontinued operations. Segment cost of revenue and marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing and related expenses, that are directly attributable to the segments' products. This measure excludes overhead, fixed costs and personnel-related expenses. For the Other category, segment cost of revenue and marketing expense also includes the portion of cost of revenue attributable to costs paid for advertising re-sold to third parties. The Company ceased reselling online advertising space during the first quarter of 2020.



	Three Months Ended June 30, 2020
	Home		Consumer		Insurance		Other		Total
	(in thousands)
Revenue	$	74,123	$	37,118	$	72,919	$	166	$	184,326
Segment marketing expense	35,397		17,716		42,797		85		95,995
Segment profit (loss)	38,726		19,402		30,122		81		88,331
Cost of revenue									13,464
Brand and other marketing expense									17,926
General and administrative expense									28,489
Product development									10,812
Depreciation									3,550
Amortization of intangibles									13,756
Change in fair value of contingent consideration									9,175
Severance									32
Litigation settlements and contingencies									(1,325		)
Operating loss									(7,548		)
Interest expense, net									(4,955		)
Other income									7
Loss before income taxes and discontinued operations									$	(12,496	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



	Three Months Ended June 30, 2019
	Home		Consumer		Insurance		Other		Total
	(in thousands)
Revenue	$	71,756	$	128,963	$	71,941	$	5,761	$	278,421
Segment cost of revenue and marketing expense	47,546		78,192		43,135		5,416		174,289
Segment profit	24,210		50,771		28,806		345		104,132
Cost of revenue (exclusive of cost of advertising re-sold to third parties included above)									11,257
Brand and other marketing expense									22,393
General and administrative expense									27,951
Product development									10,175
Depreciation									2,559
Amortization of intangibles									14,280
Change in fair value of contingent consideration									2,790
Severance									403
Litigation settlements and contingencies									8
Operating income									12,316
Interest expense, net									(5,095		)
Other income									71
Income before income taxes and discontinued operations									$	7,292



	Six Months Ended June 30, 2020
	Home		Consumer		Insurance		Other			Total
	(in thousands)
Revenue	$	153,297	$	157,042	$	155,656	$	1,415		$	467,410
Segment cost of revenue and marketing expense	78,660		94,541		95,001		1,662			269,864
Segment profit (loss)	74,637		62,501		60,655		(247		)	197,546
Cost of revenue (exclusive of cost of advertising re-sold to third parties included above)										26,630
Brand and other marketing expense										40,681
General and administrative expense										60,571
Product development										21,775
Depreciation										6,928
Amortization of intangibles										27,513
Change in fair value of contingent consideration										1,053
Severance										190
Litigation settlements and contingencies										(996		)
Operating income										13,201
Interest expense, net										(9,789		)
Other income										7
Income before income taxes and discontinued operations										$	3,419

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



	Six Months Ended June 30, 2019
	Home		Consumer		Insurance		Other		Total
	(in thousands)
Revenue	$	135,193	$	249,692	$	139,033	$	16,893	$	540,811
Segment cost of revenue and marketing expense	87,062		144,947		82,363		15,789		330,161
Segment profit	48,131		104,745		56,670		1,104		210,650
Cost of revenue (exclusive of cost of advertising re-sold to third parties included above)									21,591
Brand and other marketing expense									48,748
General and administrative expense									59,068
Product development									20,341
Depreciation									5,041
Amortization of intangibles									27,707
Change in fair value of contingent consideration									17,382
Severance									457
Litigation settlements and contingencies									(199		)
Operating income									10,514
Interest expense, net									(10,563		)
Other income									139
Income before income taxes and discontinued operations									$	90

NOTE 18—DISCONTINUED OPERATIONS

The LendingTree Loans Business is presented as discontinued operations in the accompanying financial statements. The LendingTree Loans Business originated various consumer mortgage loans through HLC. On June 6, 2012, the Company sold substantially all of the operating assets of HLC, including the LendingTree Loans Business, for $55.9 million in cash to a wholly-owned subsidiary of Discover Financial Services ("Discover"). Discover generally did not assume liabilities of HLC that arose before the closing date, except for certain liabilities directly related to assets Discover acquired. Of the purchase price received, a portion was deposited in escrow in accordance with the purchase agreement with Discover for certain loan loss obligations that remained with HLC following the sale. During 2018, the remaining funds in escrow were released to HLC in accordance with the terms of the purchase agreement with Discover.

Upon closing of the sale of substantially all of the operating assets of HLC on June 6, 2012, HLC ceased to originate consumer loans. Certain liability for losses on previously sold loans remains with HLC.

Litigation settlements and contingencies and legal fees associated with ongoing related bankruptcy and legal proceedings against the Company are included in discontinued operations in the accompanying financial statements.

Home Loan Center, Inc. Bankruptcy Filing

On June 21, 2019, the U.S. District Court of Minnesota entered judgment in ResCap Liquidating Trust v. Home Loan Center, Inc., against HLC for $68.5 million, see Litigation Related to Discontinued Operations below. The judgment against HLC exceeded the assets of HLC, which were $11.2 million at July 21, 2019, including cash of $5.9 million. On July 19, 2019, HLC appealed the judgment to the United States Court of Appeals for the Eighth Circuit.

On July 21, 2019, at the direction of the sole independent director of HLC, HLC voluntarily filed a petition under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the U.S. Bankruptcy Court in the Northern District of California in San Jose, California (the “Bankruptcy Court”) in order to preserve assets for the benefit of all creditors of HLC. On September 16, 2019, the Bankruptcy Court converted the bankruptcy to Chapter 7 of the Bankruptcy Code and appointed a Trustee to liquidate HLC's assets.

HLC’s filing under the Bankruptcy Code creates an automatic stay of enforcement of the judgment entered against HLC by the Minnesota court in ResCap Liquidating Trust v. Home Loan Center, Inc. described above and in Litigation Related to Discontinued Operations below. As a result of the voluntary petition, LendingTree, LLC was, as of the initial July 21, 2019

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

bankruptcy petition filing date, no longer deemed to have a controlling interest in HLC under applicable accounting standards. As a result, HLC and its consolidated subsidiary were deconsolidated from the Company’s consolidated financial statements as of July 21, 2019. The effect of such deconsolidation was the elimination of the consolidated assets and liabilities of HLC (and its consolidated subsidiary) from the Company’s consolidated balance sheets. Upon deconsolidation, in the third quarter of 2019 the Company recognized a loss of $5.5 million which includes a net gain of $4.5 million related to the removal of HLC's (and its consolidated subsidiary's) assets and liabilities and the recognition of a liability of $10.0 million related to LendingTree LLC's ownership in HLC. No consideration was received by the Company as a result of the deconsolidation.

HLC has indicated that it believes that it has claims against HLC’s sole shareholder, LendingTree, LLC, and certain of its officers and directors, relating to the declaration of a dividend by HLC in January 2016 of $40.0 million. The Company is obligated to advance any expenses to the officers and directors related to these claims and to indemnify them to the maximum extent permitted by law. LendingTree, LLC believes the declaration of the dividend was proper, that the amounts paid to LendingTree, LLC following such declaration are not subject to recovery by HLC and that any claims by HLC relating to such dividend declaration are without merit. During the second quarter of 2020, LendingTree, LLC and HLC entered into a settlement agreement, subject to the approval of the bankruptcy court in the HLC Bankruptcy, in the amount of $36.0 million for the release of any and all claims against the Company defendants by HLC, including the dividend claim. The bankruptcy court held a hearing on July 16, 2020 on the motion to approve the settlement to which no objections were made, and approved the settlement the same day. A liability of $36.0 million is included in the accompanying consolidated balance sheet as of June 30, 2020 related to LendingTree LLC's ownership in HLC. The $36.0 million settlement payment was made in July 2020. HLC’s voluntary petition under the Bankruptcy Code does not represent an event of default under LendingTree, LLC’s Second Amended and Restated Credit Agreement dated as of December 10, 2019 or the Company’s indenture dated May 31, 2017 with respect to the Company’s 0.625% Convertible Senior Notes due 2022.

Litigation Related to Discontinued Operations

Residential Funding Company

ResCap Liquidating Trust v. Home Loan Center, Inc., Case No. 14-cv-1716 (U.S. Dist. Ct., Minn.), successor to Residential Funding Company, LLC v Home Loan Center, Inc., No. 13-cv-3451 (U.S. Dist. Ct., Minn.). On or about December 16, 2013, Home Loan Center, Inc. was served in the original captioned matter, which involves claims of Residential Funding Company, LLC ("RFC") for damages for breach of contract and indemnification for certain residential mortgage loans as well as residential mortgage-backed securitizations ("RMBS") containing mortgage loans. RFC ~~asserts~~asserted that, beginning in 2008, RFC faced massive repurchase demands and lawsuits from purchasers or insurers of the loans and RMBS that RFC had sold. RFC filed for bankruptcy protection in May 2012. Plaintiff ~~alleges~~alleged that, after RFC filed for Chapter 11 protection, hundreds of proofs of claim were filed, many of which mirrored the litigation filed against RFC prior to its bankruptcy.

In December 2013, the United States Bankruptcy Court for the Southern District of New York entered an Order confirming the Second Amended Joint Chapter 11 Plan Proposed by Residential Capital, LLC et al. and the Official Committee of Unsecured Creditors. Plaintiff then began filing substantially similar complaints against approximately 80 of the loan originators from whom RFC had purchased loans, including HLC, in federal and state courts in Minnesota and New York. In each case, ~~Plaintiff claims~~plaintiff claimed that the defendant is liable for a portion of the global settlement in RFC’s bankruptcy.

Plaintiff asserted ~~two~~2 claims against HLC: (1) breach of contract based on HLC’s alleged breach of representations and warranties concerning the quality and characteristics of the mortgage loans it sold to RFC; and (2) contractual indemnification for alleged liabilities, losses, and damages incurred by RFC arising out of purported defects in loans that RFC purchased from HLC and sold to third parties. Plaintiff alleged that the “types of defects” contained in the loans it purchased from HLC included “income misrepresentation, employment misrepresentation, appraisal misrepresentations or inaccuracies, undisclosed debt, and missing or inaccurate documents.” Plaintiff sought damages of up to $61.0 million plus attorney's fees and prejudgment interest.

HLC denied the material allegations of the complaint and asserted numerous defenses thereto. The matter went to trial in the fourth quarter of 2018 and the jury returned a verdict of $28.7 million in favor of ~~Plaintiff.~~plaintiff. On June 21, 2019, the U.S. District Court in Minnesota entered judgment against HLC for $68.5 million. The judgment is comprised of: (i) $28.7 million in damages awarded by the jury; (ii) $14.1 million in pre-verdict interest; (iii) $23.1 million in attorneys' fees and costs, and (iv) $2.6 million in post-verdict, prejudgment interest. On July 21, 2019, at the direction of HLC’s sole independent director, HLC voluntarily filed a petition under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”), with the U.S. Bankruptcy Court in the Northern District of California in San Jose, California, in order to preserve assets for the benefit of all creditors of HLC. The filing does not include as debtors LendingTree, Inc., LendingTree, LLC or any of their respective subsidiaries engaged in continuing operations. HLC’s filing under the Bankruptcy Code creates an automatic stay of enforcement of the judgment entered against HLC by the U.S. District Court in Minnesota. HLC has filed a motion for relief from stay to appeal that judgement and has asserted that it has strong grounds for such appeal. See Note 18—Subsequent Event to the consolidated financial statements included elsewhere in this report for further information on the bankruptcy filing by HLC.

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HLC’s filing under the Bankruptcy Code discussed above in Home Loan Center, Inc. Bankruptcy Filing creates an automatic stay of enforcement of the judgment entered against HLC by the U.S. District Court in Minnesota. On August 27, 2019, plaintiff filed a lawsuit captioned ResCap Liquidating Trust v. LendingTree, LLC, et al., Case No. 19-cv-2360 (U.S. Dist. Ct., Minn.), seeking to hold the Company liable for the judgment against HLC, under assumption of liability, agency and alter ego theories. The Company ~~estimates~~believes that these claims lack merit. On October 17, 2019, the ~~range of HLC’s potential losses~~Company filed a motion to dismiss the liability and agency claims, and oral arguments with respect to such motion were held on January 10, 2020. On March 20, 2020, the court denied the Company's motion to dismiss, or in the ~~RFC matter~~alternative, to ~~be $0.0~~compel arbitration, and on April 3, 2020, the Company appealed the court's findings with respect to the Company's request to compel arbitration of the first count of the lawsuit. On June 17, 2020, the Company entered into a settlement agreement with ResCap, pursuant to which, the Company agreed to, among other things, pay ResCap $58.5 million, ~~to $68.5 million. An estimated liability of $7.0 million for this matter is included~~less any amounts ResCap receives in the ~~accompanying consolidated balance sheet as~~HLC bankruptcy, in exchange for, among other things, ResCap releasing any and all claims against the Company, and the Company’s directors and officers, including any claims asserted in ResCap v. LendingTree. Pursuant to the settlement agreement, the Company will be responsible for the difference of ~~June 30, 2019.~~$58.5 million minus the amount that ResCap receives through the HLC Bankruptcy. In July 2020, the Company made a $26.5 million payment to the ResCap Liquidating Trust.

Lehman Brothers Holdings, Inc.

Lehman Brothers Holdings Inc. v. 1st Advantage Mortgage, LLC et al., Case No. 08-13555 (SCC), Adversary Proceeding No. 16-01342 (SCC) (Bankr. S.D.N.Y.). In February 2016, Lehman Brothers Holdings, Inc. (“LBHI”) filed an Adversary Complaint against HLC and approximately 149 other defendants (the "Complaint"). In December 2018, LBHI amended its complaint against HLC. The amended complaint references approximately 370 allegedly defective mortgage loans sold by HLC with purported "Claim Amounts" totaling $40.2 million. LBHI alleges it settled all such claims and is seeking indemnification from HLC for LBHI’s purported losses and liabilities associated with such settlements, plus prejudgment interest, attorneys’ fees, litigation costs and other expenses. The amended complaint does not specify the amount of LBHI’s purported damages. On December 4, 2019, LBHI filed a $44.7 million proof of claim in HLC’s bankruptcy seeking recovery for the claims asserted in the lawsuit. The Company believes that these claims lack merit and understands that HLC intends to defend this action vigorously.

HLC’s filing under the Bankruptcy Code discussed above in Home Loan Center, Inc. Bankruptcy Filing creates an automatic stay of this proceeding. On June 11, 2020, LBHI filed a lawsuit captioned Lehman Brothers Holdings Inc. v. LendingTree, LLC, et al., Case No. 20-cv-01351 (U.S. Dist. Ct., Minn.), seeking to hold the Company liable for their allowed bankruptcy claim of $13.3 million, under assumption of liability, agency and alter ego theories. The Company believes that these claims lack merit and intends to defend this action vigorously. ~~An estimated liability~~

Financial Information of ~~$1.0 million for this matter is included~~Discontinued Operations

The components of net loss reported as discontinued operations in the accompanying consolidated ~~balance sheet as~~statements of ~~June 30, 2019.~~

~~NOTE 15—FAIR VALUE MEASUREMENTS~~

~~Other than the 0.625% Convertible Senior Notes~~operations and ~~the Warrants, the carrying amounts of the Company's financial instruments are equal to fair value at June 30, 2019.~~ ~~See~~ ~~Note 13—Debt for additional information on the 0.625% Convertible Senior Notes and the Warrants.~~

Three Months Ended
June 30, Six Months Ended
June 30,
2019 2018 2019 2018
Contingent consideration, beginning of period $ 49,429
$ 33,108
$ 38,837
$ 57,349
Transfers into Level 3 —
—
—
—
Transfers out of Level 3 —
—
—
—
Total net losses (gains) included in earnings (realized and unrealized) 2,790
(167 ) 17,382
(908 )
Purchases, sales and settlements:
Additions —
5,800
—
5,800
Payments (2,000 ) (23,500 ) (6,000 ) (47,000 )
Contingent consideration, end of period $ 50,219
$ 15,241
$ 50,219
$ 15,241



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenue	$	—		$	—		$	—		$	—

Loss before income taxes	(28,424		)	(966		)	(34,526		)	(2,310		)
Income tax benefit	7,283			203			8,810			485
Net loss	$	(21,141	)	$	(763	)	$	(25,716	)	$	(1,825	)

~~The contingent consideration liability at June 30, 2019 is the estimated fair value~~Losses from discontinued operations included all activity of ~~the earnout payments of the DepositAccounts, SnapCap, Ovation~~HLC prior to bankruptcy, including litigation settlements, contingencies and ~~QuoteWizard acquisitions.~~

The Company will make payments ranging from zero to $1.0 million based on the achievement of defined milestone targets for DepositAccounts, payments ranging from zero to $6.0 million based on the achievement of certain defined earnings targets for SnapCap, payments ranging from $4.4 million to $8.8 million based on the achievement of certain defined operating metrics for Ovation, and payments ranging from zero to $70.2 million based on the achievement of certain defined performance targets for QuoteWizard. ~~See~~ ~~Note 7—Business Acquisitions for additional information on the contingent consideration for each of these respective acquisitions.~~legal fees associated with legal proceedings.

The ~~significant unobservable inputs used~~results of discontinued operations also include litigation settlements and contingencies and legal fees associated with ongoing legal proceedings against LendingTree Inc. or LendingTree LLC that arose due to ~~calculate~~ the ~~fair value of~~LendingTree Loans Business or the contingent consideration are estimated future cash flows for the acquisitions, estimated customer growth rates, estimated date and likelihood of an increase in interest rates and the discount rate. Actual results will differ from the projected results and could have a significant impact on the estimated fair value of the contingent considerations. Additionally, as the liability is stated at present value, the passage of time alone will increase the estimated fair value of the liability each reporting period. Any changes in fair value will be recorded in operating income in the consolidated statements of operations and comprehensive income.HLC bankruptcy filing.

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NOTE ~~16—SEGMENT INFORMATION~~19—SUBSEQUENT EVENTS

~~The Company has one reportable segment.~~

~~Mortgage and non-mortgage product revenue is as follows~~ ~~(in thousands)~~:

Three Months Ended
June 30, Six Months Ended
June 30,
2019 2018 2019 2018
Mortgage products $ 54,618

$ 66,948

$ 100,602

$ 140,410
Non-mortgage products 223,803

117,153

440,209

224,726
Total revenue $ 278,421

$ 184,101

$ 540,811

$ 365,136

~~NOTE 17—DISCONTINUED OPERATIONS~~

~~The revenue and net loss reported as discontinued operations in the accompanying consolidated statements of operations and comprehensive income are as follows~~ ~~(in thousands)~~:

Three Months Ended
June 30, Six Months Ended
June 30,
2019 2018 2019 2018
Revenue $ —
$ —
$ —
$ —

Loss before income taxes $ (966 ) $ (2,914 ) $ (2,310 ) $ (8,399 )
Income tax benefit 203
612
485
1,764
Net loss $ (763 ) $ (2,302 ) $ (1,825 ) $ (6,635 )

During the second quarters and first six months of 2019 and 2018, loss from discontinued operations was primarily due to litigation settlements and contingencies and legal fees associated with ongoing legal proceedings.

~~LendingTree Loans~~

On June 6, 2012, the Company sold substantially all of the operating assets of its LendingTree Loans business for $55.9 million in cash to a wholly-owned subsidiary of Discover Financial Services ("Discover"). Discover generally did not assume liabilities of the LendingTree Loans business that arose before the closing date, except for certain liabilities directly related to assets Discover acquired. Of the purchase price received, a portion was deposited in escrow in accordance with the agreement with Discover for certain loan loss obligations that remain with the Company following the sale. During the second quarter of 2018, the remaining funds in escrow were released to the Company in accordance with the terms of the agreement with Discover.

~~Significant Assets and Liabilities of LendingTree Loans~~

Upon closing of the sale of substantially all of the operating assets of the LendingTree Loans business on June 6, 2012, LendingTree Loans ceased to originate consumer loans. Liability for losses on previously sold loans will remain with LendingTree Loans and are discussed below.

~~Loan Loss Obligations~~

LendingTree Loans sold loans it originated to investors on a servicing-released basis, so the risk of loss or default by the borrower was generally transferred to the investor. However, LendingTree Loans was required by these investors to make certain representations and warranties relating to credit information, loan documentation and collateral. These representations and warranties may extend through the contractual life of the loan. Subsequent to the loan sale, if underwriting deficiencies, borrower fraud or documentation defects are discovered in individual loans, LendingTree Loans may be obligated to repurchase the respective loan or indemnify the investors for any losses from borrower defaults if such deficiency or defect cannot be cured within the specified period following discovery.

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

HLC, a subsidiary of the Company, continues to be liable for these indemnification obligations, repurchase obligations and premium repayment obligations following the sale of substantially all of the operating assets of its LendingTree Loans business in the second quarter of 2012.

~~The following table represents the aggregate loans sold, subsequent settlements and remaining unsettled loans.~~

Number of Loans Original Issue Balance
(in thousands) (in billions)
Loans sold by HLC 234
$ 38.9
Subsequent settlements (172 ) (28.8 )
Remaining unsettled balance as of June 30, 2019 62
$ 10.1

During the fourth quarter of 2015, LendingTree Loans completed a settlement agreement for $0.6 million with one of the investors to which it had sold loans. This investor accounted for approximately 10% of the total number of loans sold and 12% of the original issue balance. This settlement related to all existing and future losses on loans sold to this investor.

During the fourth quarter of 2014, LendingTree Loans completed a settlement agreement for $5.4 million with the largest investor to which it had sold loans. This investor accounted for approximately 40% of both the total number of loans sold and the original issue balance. This settlement related to all existing and future losses on loans sold to this investor.

~~In the second quarter of 2014, LendingTree Loans completed settlements with two buyers of previously purchased loans.~~

The Company has been negotiating with certain of the remaining secondary market purchasers to settle any existing and future contingent liabilities, but it may not be able to complete such negotiations on acceptable terms, or at all. Because LendingTree Loans does not service the loans it sold, it does not maintain nor generally have access to the current balances and loan performance data with respect to the individual loans previously sold to investors. Accordingly, LendingTree Loans is unable to determine, with precision, its maximum exposure for breaches of the representations and warranties it made to the investors that purchased such loans.

The Company uses a settlement discount framework for evaluating the adequacy of the reserve for loan losses. This model estimates lifetime losses on the population of remaining loans originated and sold by LendingTree Loans using actual defaults for loans with similar characteristics and projected future defaults. It also considers the likelihood of claims expected due to alleged breaches of representations and warranties made by LendingTree Loans and the percentage of those claims investors estimate LendingTree Loans may agree to repurchase. A settlement discount factor is then applied to the result of the foregoing to reflect publicly-announced bulk settlements for similar loan types and vintages, the Company's own settlement experience, as well as LendingTree Loans' non-operating status, in order to estimate a range of potential obligation.

The estimated range of remaining loan losses using this settlement discount framework was determined to be $4.3 million to $7.9 million at June 30, 2019. The reserve balance recorded as of June 30, 2019 was $7.6 million. Management has considered both objective and subjective factors in the estimation process, but given current general industry trends in mortgage loans as well as housing prices and market expectations, actual losses related to LendingTree Loans' obligations could vary significantly from the obligation recorded as of the balance sheet date or the range estimated above.

~~Additionally, LendingTree has guaranteed certain loans sold to~~ ~~two~~ ~~investors in the event that LendingTree Loans is unable to satisfy its repurchase and warranty obligations related to such loans.~~

~~Based on historical experience, it is anticipated that LendingTree Loans will continue to receive repurchase requests and incur losses on loans sold in prior years.~~

~~The activity related to loss reserves on previously sold loans is as follows~~ ~~(in thousands)~~:

Three Months Ended
June 30, Six Months Ended
June 30,
2019 2018 2019 2018
Loan loss reserve, beginning of period $ 7,554
$ 7,554
$ 7,554
$ 7,554
Provisions —
—
—
—
Charge-offs to reserves —
—
—
—
Loan loss reserve, end of period $ 7,554
$ 7,554
$ 7,554
$ 7,554

~~Table of Contents~~

~~LENDINGTREE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~The liability for losses on previously sold loans is presented as current liabilities of discontinued operations in the accompanying consolidated balance sheets as of~~ ~~June 30, 2019~~ ~~and~~ ~~December 31, 2018~~.

~~See~~ ~~Note 18~~—~~Subsequent Event for additional information.~~

~~NOTE 18—SUBSEQUENT EVENT~~Senior Secured Revolving Credit Facility

On July 21, ~~2019, at~~2020, the ~~direction~~Company executed a temporary amendment to its Amended Revolving Credit Facility to provide for certain covenant relief, primarily to facilitate the issuance of convertible notes outlined below, the repurchase of a portion of the ~~sole independent director of~~2022 Notes, and to pay down existing borrowings under the ~~Company’s Home Loan Center, Inc. (“HLC”) subsidiary, HLC voluntarily filed~~credit facility.

The amendment amends the existing credit agreement to, among other things: (i) temporarily replace the total consolidated debt to EBITDA ratio covenant with a ~~petition under Chapter 11 of~~consolidated liquidity covenant requiring the Company to maintain unrestricted cash and cash equivalents in the United States ~~Bankruptcy Code~~plus amounts available and permitted to be drawn under the Amended Revolving Credit Facility to be no less than $200.0 million; (ii) impose additional limitations on certain restricted payments during such temporary period; and (iii) increase the applicable margins to (x) 2.25% for loans based on the LIBO rate and (y) 1.25% for loans based on the base rate, subject to a 0.75% floor, and unused commitment fees to 0.50% under the Amended Revolving Credit Facility during the temporary period. These amendments shall apply from the effective date through the fiscal quarter ending June 30, 2021, unless terminated in advance by the Company.

During July 2020, the Company made net repayments of $130.0 million on its Amended Revolving Credit Facility, which represented the outstanding balance.

Convertible Senior Notes

On July 24, 2020, the Company issued $575.0 million aggregate principal amount of its 0.50% Convertible Senior Notes due July 15, 2025 (the ~~“Bankruptcy Code”~~“2025 Notes”), in a private placement, for estimated net proceeds of approximately $559.8 million. The 2025 Notes bear interest at a rate of 0.50% per year, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2021. The 2025 Notes will mature on July 15, 2025, unless earlier repurchased, redeemed or converted. The initial conversion rate of the 2025 Notes is 2.1683 shares of Common Stock per $1,000 principal amount of 2025 Notes (which is equivalent to an initial conversion price of approximately $461.19 per share).

On July 24, 2020, the Company used approximately $234.0 million of the net proceeds from the issuance of the 2025 Notes to repurchase approximately $130.3 million principal amount of the 2022 Notes through separate and individually-negotiated transactions with certain holders of the 2022 Notes.

On July 24, 2020, in connection with the ~~U.S. Bankruptcy Court in the Northern District of California in San Jose, California (the “Bankruptcy Court”), in order to preserve assets for the benefit of all creditors of HLC.~~

~~On June 21, 2019, the U.S. District Court of Minnesota entered judgment in~~ ~~ResCap Liquidating Trust v. Home Loan Center, Inc.~~, against HLC for $68.5 million, see Note 14—Contingencies. The judgment against HLC exceeded the assets of HLC, which were approximately $11.4 million at July 21, 2019, including cash of approximately $5.9 million, which approximate the assets of HLC as of June 30, 2019.

The bankruptcy filing does not include as debtors LendingTree, Inc., LendingTree, LLC or any of their respective subsidiaries engaged in continuing operations. HLC’s filing under the Bankruptcy Code creates an automatic stay of enforcementissuance of the ~~judgment entered against HLC by the Minnesota court in~~ ~~ResCap Liquidating Trust v. Home Loan Center, Inc.~~ ~~described in Note 14—Contingencies. HLC’s independent director has advised~~2025 Notes, the Company ~~that HLC, as debtor-in-possession in bankruptcy, intends to pursue an appeal of the judgment~~ entered in ~~ResCap Liquidating Trust v. Home Loan Center, Inc~~.

As a result of the voluntary petition, the Company was, as of the July 21, 2019 bankruptcy petition filing date, no longer deemed to have a controlling interest in HLC under applicable accounting standards. As a result, HLCinto Convertible Note Hedge (the “2020 Hedge”) and its consolidated subsidiary will be deconsolidated from the Company’s consolidated financial statements beginning with the consolidated financial statements for the third quarter of 2019. The effect of such deconsolidation will be elimination of the consolidated assets and liabilities of HLC (and its consolidated subsidiary) from the Company’s consolidated balance sheets and could result in a gain or loss in the third quarter of 2019. Additionally, any successful claims asserted against LendingTree Inc. or LendingTree LLC, such as the claim described below, could also affect any resulting gain or loss upon deconsolidation.

In its filings with the Bankruptcy Court, HLC has indicated that it believes that it has claims against HLC’s sole shareholder, the Company’s operating subsidiary LendingTree, LLC, and its former sole directorWarrant (the Company’s Chairman and Chief Executive Officer), relating to the declaration of a dividend by HLC in January 2016 of $40.0 million. The Company is obligated to advance any expenses to HLC’s former sole director related to these claims and to indemnify such former sole director to the maximum extent permitted by law. The Company believes the declaration of the dividend was proper, that the amounts paid to LendingTree, LLC following such declaration are not subject to recovery by HLC and that any claims by HLC relating to such dividend declaration are without merit. The Company has commenced settlement talks with HLC, and if the Company is not able to settle HLC’s claims relating to such dividend declaration on terms the Company deems acceptable, the Company intends to vigorously contest such claims. Any settlement agreement with HLC that the Company might enter into would be subject to approval by the Bankruptcy Court.

HLC’s voluntary petition under the Bankruptcy Code does not represent an event of default under LendingTree, LLC’s Amended and Restated Credit Agreement dated as of November 21, 2017 or the Company’s indenture dated May 31, 2017“2020 Warrants”) transactions with respect to the Company’s ~~0.625% Convertible Senior~~common stock. The Company used approximately $63.0 million of the net proceeds from the 2025 Notes ~~due 2022.~~to pay for the cost of the 2020 Hedge, after such cost was partially offset by the proceeds from the 2020 Warrants transactions. The 2020 Warrants have a strike price of $709.52 per share, which represents a premium of 100% over the reported sale price of the Common Stock of $354.76 on July 21, 2020.

To the extent of the repurchases of the 2022 Notes noted above, the Company entered into agreements with the counterparties for the 2017 Hedge and 2017 Warrants transactions to terminate a portion of the existing call spread transactions effective July 24, 2020 in notional amounts corresponding to the principal amount of the 2022 Notes repurchased. The Company received approximately $15.6 million as a result of terminating such portions of the 2017 Hedge and 2017 Warrants.

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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 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 ~~identify~~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 and Part I, Item 1A. Risk Factors of the ~~2018~~2019 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 report 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 report. 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 LendingTree, LLC and several companies owned by LendingTree, LLC.

~~LendingTree operates~~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, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes and other related offerings. In addition, we offer tools and resources, including free credit scores, that facilitate comparison shopping for loans, deposit products, insurance and other offerings. We seek to match consumers with multiple providers, who can offer them competing quotes for the product, or products, they are seeking. We 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 ~~partners.~~Network Partners.

Our My LendingTree platform offers a personalized ~~loan~~ comparison-shopping experience by providing free credit scores and credit score analysis. This platform enables us to observe consumers' credit profiles and then identify and alert them to loans and other offerings on our marketplace that may be more favorable than the terms they may have at a given point in time. This is designed to provide consumers with measurable savings opportunities over their lifetimes.



	Three Months Ended June 30,
My LendingTree	2020			2019			% Change
Cumulative Sign-ups as of quarter-end (in millions)	15.2			12.1			26	%

Revenue Contribution (in thousands)	$	9,139		$	20,246		(55	)%
% of total revenue	4.9		%	7.3		%

We are focused on developing new product offerings and enhancements to improve the experiences that consumers and Network Partners have 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, and to leverage the widespread recognition of the LendingTree brand to effect this strategy.

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We believe the consumer and small business financial services industry is still in the early stages of a fundamental shift to online product offerings, similar to the shift that started in retail and travel many years ago and is now well established. We believe that like retail and travel, as consumers continue to move ~~toward~~towards online shopping and transactions for financial services, suppliers will increasingly shift their product offerings and advertising budgets toward the online channel. We believe the strength of our brands and of our partner network place us in a strong position to continue to benefit from this market shift.

The LendingTree Loans business is presented as discontinued operations in the accompanying consolidated balance sheets, consolidated statements of operations and comprehensive income and consolidated cash flows for all periods presented. Except for the discussion under the heading "Discontinued Operations," the analysis within Management's Discussion and Analysis of Financial Condition and Results of Operations reflects our continuing operations.

Economic Conditions

~~Table~~During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of ~~Contents~~

a novel strain of coronavirus ("COVID-19"). The pandemic has significantly impacted the economic conditions in the U.S., as federal, state and local governments react to the public health crisis, creating significant uncertainties in the U.S. economy. The downstream impact of social distancing and related economic pullback are affecting our business and marketplace participants to varying degrees. We are continuously monitoring the impacts of the current economic conditions related to the COVID-19 pandemic and the effect on our business, financial condition and results of operations. Of our three reportable segments, the Consumer segment has been and is expected to be most impacted as unsecured credit and the flow of capital in certain areas of the market have contracted. Within our Consumer segment we have seen reductions of over 70% in near-term lender demand for our services reflecting those lenders' uncertainty over the length and depth of the economic recession. The impact to our Home and Insurance segments has been and is anticipated to be much less substantial. Most of our selling and marketing expenses are variable costs that we adjust dynamically in relation to revenue opportunities to profitably meet demand. Thus, as our revenue is negatively impacted during the recession, we anticipate our marketing expenses will continue to generally decrease in line with revenue.

Segment Reporting

We have three reportable segments: Home, Consumer and Insurance. We changed our reportable segments in the fourth quarter of 2019, and prior period results have been reclassified to conform with this change in reportable segments.

Recent Business Acquisitions

On January 10, 2019, we acquired Value Holding Inc., the parent company of ValuePenguin Inc. ~~("ValuePenguin"~~(“ValuePenguin”), a personal finance website that offers consumers objective analysis on a variety of financial topics from insurance to credit cards for $106.2 million. ~~We believe that combining~~Combining ValuePenguin’s high-quality content and search engine optimization capability with ~~recently acquired~~ proprietary technology and insurance carrier network from ~~QuoteWizard.com, LLC ("QuoteWizard")~~QuoteWizard enables us to provide immense value to carriers and agents. This strategic acquisition positions us to achieve further scale in the insurance space as well as the broader financial services industry.

On ~~October 31, 2018,~~February 28, 2020, we acquired ~~QuoteWizard, one of the largest insurance comparison marketplaces~~an equity interest in the growing online insurance advertising market, for $299.5 million in cash and potential contingent consideration payments of up to $70.2 million through October 2021, subject to achieving specific targets. QuoteWizard services clients by driving consumers to insurance companies’ websites, providing leads to agents and carriers, as well as phone transfers of consumers into carrier call centers. This acquisition has established LendingTree as a leading player in the online insurance advertising industry, while continuing our ongoing diversification within the financial services category.

~~On July 23, 2018, we acquired Student Loan Hero,~~Stash Financial, Inc. (“~~Student Loan Hero”~~Stash”) for ~~$62.7 million in cash,~~$80.0 million. Stash is a consumer investing and banking platform. Stash brings together banking, investing, and education into one seamless experience offering a full-suite of ~~which $2.3 million was recognized as severance expense in our consolidated statements of operations~~personal investment accounts, Traditional and ~~comprehensive income. Student Loan Hero, a personal finance website dedicated to helping student loan borrowers manage their student debt, offers current~~Roth IRAs, custodial investment accounts, and ~~former students in-depth financial comparison tools, educational resources,~~banking services, including checking accounts and unbiased, personalized advice. This strategic transaction allows us to scale our student loan business and provide consumers with the tools and resources to better understand their personal finances and make smarter financial decisions.

~~On June 11, 2018, we acquired Ovation Credit Services, Inc. (“Ovation”), a leading provider of credit services~~debit cards with a strong customer service reputation for $12.1 million in cash and potential contingent consideration payments of up to $8.75 million through June 2020, subject to achieving specified targets. Ovation utilizes a proprietary software application that facilitates the credit repair process and is integrated directly with certain credit bureaus while educating consumers on credit improvement via ongoing outreach with Ovation case advisors. The proprietary software application offers consumers a simple, streamlined process to identify, dispute, and correct inaccuracies within their credit reports. Ovation's experienced management team, strong credit bureau relationships and customized software platform enable us to help more consumers achieve their original financial goals through the LendingTree platform.

~~These acquisitions continue our diversification strategy.~~Stock-Back^® rewards program.

North Carolina Office Properties

In December 2016, we completed the acquisition of two office buildings in Charlotte, North Carolina, for $23.5 million in cash. The buildings were acquired with the intent to use such buildings as our corporate headquarters and rent any unused space. In November 2018, the office buildings were classified as held for sale. In ~~February~~May 2019, ~~the Company agreed to sell~~we sold these buildings to an unrelated third party ~~which agreement was amended in March 2019. The sale was finalized in the second quarter of 2019~~ for a sale price of $24.4 ~~million, and the Company incurred closing fees of $0.3~~ million. ~~For additional information, see Note 6—Assets Held for Sale in the notes to the consolidated financial statements included elsewhere in this report.~~

With our expansion in North Carolina, in December 2016, we received a grant from the state that provides up to $4.9 million in reimbursements over 12 years beginning in 2017 for investing in real estate and infrastructure in addition to increasing jobs in North Carolina at specific targeted levels through 2020, and maintaining the jobs thereafter. Additionally, the city of Charlotte and the county of Mecklenburg provided a grant that will be paid over five years and is based on a percentage of new property tax we pay on the development of a corporate headquarters. In December 2018, we received an additional grant from the state that provides up to $8.4 million in reimbursements over 12 years beginning in 2020 for increasing jobs in North Carolina at specific targeted levels through 2023, and maintaining the jobs thereafter.

~~Seasonality~~

Revenue in our lending business is subject to cyclical and seasonal trends. Home sales (and purchase mortgages) typically rise during the spring and summer months and decline during the fall and winter months, while refinancing and home equity activity is principally driven by mortgage interest rates as well as real estate values. However, in certain historical periods additional factors affecting the mortgage and real estate markets, such as the 2008-2009 financial crisis and ensuing recession have impacted customary seasonal trends.

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We anticipate revenue in our newer products to be cyclical as well; however, we have limited historical data to predict the nature and magnitude of this cyclicality. Based on industry data, we anticipate as our personal loan product matures we will experience less consumer demand during the fourth and first quarters of each year. We also anticipate less consumer demand for credit cards in the fourth quarter of each year and we anticipate higher consumer demand for deposit accounts in the first quarter of each year. The majority of consumer demand for in-school student loan products occurs in the third quarter coinciding with collegiate enrollment in late summer. Other factors affecting our business include macro factors such as credit availability in the market, interest rates, the strength of the economy and employment.

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 can be adversely affected by the overall reduced demand for refinancing in a rising rate environment. ~~These factors combined to cause lower revenue earned per consumer for mortgage products in the second quarter of 2019 compared to the prior year quarter.~~

We dynamically adjust selling and marketing expenditures in all interest rate environments to optimize our results against these variables.

According to Freddie Mac, 30-year mortgage interest rates ~~have decreased steadily~~declined during ~~2019~~2020 to a monthly average of ~~3.80%~~3.16% in June ~~2019.~~2020. On a quarterly basis, 30-year mortgage interest rates in the second quarter of ~~2019~~2020 averaged ~~4.00%~~3.23%, as compared to ~~4.54%~~4.00% in the second quarter of ~~2018~~2019 and ~~4.37%~~3.51% in the first quarter of ~~2019.~~2020.

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Typically, as mortgage interest rates decline, there are more consumers in the marketplace seeking refinancings and, accordingly, the mix of mortgage origination dollars ~~moves~~will move towards refinance mortgages. According to Mortgage Bankers Association ("MBA") data, total refinance origination dollars ~~remained relatively consistent at 29%~~increased to 63% of total mortgage origination dollars in the second quarter of ~~2019~~2020 compared to ~~30%~~54% in the first quarter of ~~2019, while~~2020. In the second quarter of 2020, total ~~purchase~~refinance origination dollars ~~was 71%~~increased 297% to $580 million from the second quarter of ~~total~~2019 and 90% from the first quarter of 2020. Industry-wide mortgage origination ~~dollars~~volume in the second quarter of ~~2019 compared to 70% in the first quarter of 2019. In the second quarter of 2019, total refinance origination dollars increased 24%~~2020 was up 85% from the second quarter of ~~2018 and 51% from~~2019.

In July 2020, the ~~first quarter of 2019.~~

~~Looking forward,~~ MBA ~~is projecting~~projected 30-year mortgage interest rates to remain relatively consistent through the end of the year. According to MBA projections, ~~refinance origination dollars is projected to increase to 33% of total mortgage origination dollars in~~ the ~~third quarter of 2019. The~~ refinance share of total mortgage origination dollars is projected to represent approximately ~~30%~~54% for ~~2019, compared to 28% for 2018.~~2020.

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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 the National Association of Realtors ("NAR"), ~~falling interest rates contributed~~existing-home sales rebounded at the end of the second quarter of 2020 after three straight months of sales decline caused by the ongoing COVID-19 pandemic. Existing-home sales decreased 21% in the second quarter of 2020 compared to ~~an increase in home sales in~~the first quarter of 2020, and decreased 18% compared to the second quarter of 2019. The NAR expects a ~~minimal~~continued increase in ~~existing home~~existing-home sales as long as mortgage rates remain low and job gains continue, but predicts an overall decrease of 3% in ~~2019 from 2018.~~2020 compared to 2019.

Results of Operations for the Three and Six Months ended June 30, ~~2019~~2020 and ~~2018~~2019


	Three Months Ended June 30,											Six Months Ended June 30,											Three Months Ended June 30,											Six Months Ended June 30,
	2019			2018			$ Change			% Change		2019			2018			$ Change			% Change		2020			2019			$ Change			% Change		2020			2019			$ Change			% Change
	(Dollars in thousands)																						(Dollars in thousands)
Mortgage products	$	54,618		$	66,948		$	(12,330	)	(18	)%	$	100,602		$	140,410		$	(39,808	)	(28	)%
Non-mortgage products	223,803			117,153			106,650			91	%	440,209			224,726			215,483			96	%
Home																							$	74,123		$	71,756		$	2,367		3	%	$	153,297		$	135,193		$	18,104		13	%
Consumer																							37,118			128,963			(91,845		)	(71	)%	157,042			249,692			(92,650		)	(37	)%
Insurance																							72,919			71,941			978			1	%	155,656			139,033			16,623			12	%
Other																							166			5,761			(5,595		)	(97	)%	1,415			16,893			(15,478		)	(92	)%
Revenue	278,421			184,101			94,320			51	%	540,811			365,136			175,675			48	%	184,326			278,421			(94,095		)	(34	)%	467,410			540,811			(73,401		)	(14	)%
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	16,310			6,043			10,267			170	%	33,980			11,739			22,241			189	%	13,464			16,310			(2,846		)	(17	)%	27,716			33,980			(6,264		)	(18	)%
Selling and marketing expense	191,629			123,946			67,683			55	%	366,520			249,990			116,530			47	%	113,921			191,629			(77,708		)	(41	)%	309,459			366,520			(57,061		)	(16	)%
General and administrative expense	27,951			24,759			3,192			13	%	59,068			47,573			11,495			24	%	28,489			27,951			538			2	%	60,571			59,068			1,503			3	%
Product development	10,175			5,967			4,208			71	%	20,341			12,227			8,114			66	%	10,812			10,175			637			6	%	21,775			20,341			1,434			7	%
Depreciation	2,559			1,633			926			57	%	5,041			3,304			1,737			53	%	3,550			2,559			991			39	%	6,928			5,041			1,887			37	%
Amortization of intangibles	14,280			3,964			10,316			260	%	27,707			7,927			19,780			250	%	13,756			14,280			(524		)	(4	)%	27,513			27,707			(194		)	(1	)%
Change in fair value of contingent consideration	2,790			(167		)	2,957			1,771	%	17,382			(908		)	18,290			2,014	%	9,175			2,790			6,385			229	%	1,053			17,382			(16,329		)	(94	)%
Severance	403			3			400			13,333	%	457			3			454			15,133	%	32			403			(371		)	(92	)%	190			457			(267		)	(58	)%
Litigation settlements and contingencies	8			(170		)	178			105	%	(199		)	(192		)	(7		)	(4	)%	(1,325		)	8			(1,333		)	N/A		(996		)	(199		)	(797		)	(401	)%
Total costs and expenses	266,105			165,978			100,127			60	%	530,297			331,663			198,634			60	%	191,874			266,105			(74,231		)	(28	)%	454,209			530,297			(76,088		)	(14	)%
Operating income	12,316			18,123			(5,807		)	(32	)%	10,514			33,473			(22,959		)	(69	)%
Operating (loss) income																							(7,548		)	12,316			(19,864		)	(161	)%	13,201			10,514			2,687			26	%
Other (expense) income, net:
Interest expense, net	(5,095		)	(2,924		)	2,171			74	%	(10,563		)	(5,912		)	4,651			79	%	(4,955		)	(5,095		)	(140		)	(3	)%	(9,789		)	(10,563		)	(774		)	(7	)%
Other income (expense)	71			(71		)	(142		)	(200	)%	139			(37		)	(176		)	(476	)%
Income before income taxes	7,292			15,128			(7,836		)	(52	)%	90			27,524			(27,434		)	(100	)%
Other income																							7			71			(64		)	(90	)%	7			139			(132		)	(95	)%
(Loss) income before income taxes																							(12,496		)	7,292			(19,788		)	(271	)%	3,419			90			3,329			3,699	%
Income tax benefit	5,689			29,721			(24,032		)	(81	)%	13,441			53,182			(39,741		)	(75	)%	3,880			5,689			(1,809		)	(32	)%	6,941			13,441			(6,500		)	(48	)%
Net income from continuing operations	12,981			44,849			(31,868		)	(71	)%	13,531			80,706			(67,175		)	(83	)%
Net (loss) income from continuing operations																							(8,616		)	12,981			(21,597		)	(166	)%	10,360			13,531			(3,171		)	(23	)%
Loss from discontinued operations, net of tax	(763		)	(2,302		)	(1,539		)	(67	)%	(1,825		)	(6,635		)	(4,810		)	(72	)%	(21,141		)	(763		)	20,378			2,671	%	(25,716		)	(1,825		)	23,891			1,309	%
Net income and comprehensive income	$	12,218		$	42,547		$	(30,329	)	(71	)%	$	11,706		$	74,071		$	(62,365	)	(84	)%
Net (loss) income and comprehensive (loss) income																							$	(29,757	)	$	12,218		$	(41,975	)	(344	)%	$	(15,356	)	$	11,706		$	(27,062	)	(231	)%

Revenue

Revenue decreased in the second quarter and first six months of 2020 compared to the second quarter and first six months of 2019 due to decreases in our Consumer segment and Other category, partially offset by increases in our Home and Insurance segments.

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~~Revenue~~

~~Revenue increased in~~Our Consumer segment includes the second quarter and first six months of 2019 compared to the second quarter and first six months of 2018 due to increases in our non-mortgage products of $106.7 million and $215.5 million, respectively, partially offset by decreases in our mortgage products of $12.3 million and $39.8 million, respectively.

~~Our non-mortgage products include the~~ following ~~non-mortgage lending~~ products: credit cards, personal loans, ~~home equity loans and lines of credit,~~ small business loans, student loans, ~~reverse mortgage~~auto loans, ~~and auto loans. Our non-mortgage products also include insurance quotes,~~ deposit accounts, ~~home improvement referrals~~ and other credit products such as credit repair and debt settlement. ~~Revenue earned through resale of online advertising space to third parties is also included in non-mortgage products.~~ Many of our ~~non-mortgage~~Consumer segment products are not individually significant to revenue. ~~The increase in revenue~~Revenue from our ~~non-mortgage products~~Consumer segment decreased in the second quarter and first six months of ~~2019~~2020 from the second quarter and first six months of ~~2018 is~~2019, primarily due to ~~increases~~decreases in our ~~insurance,~~ credit cards, personal loans, ~~credit services, student loans and~~ small business loans ~~products, as well as resold advertising space.~~

~~Revenue from our insurance product increased to $71.9 million in the second quarter of 2019~~ and ~~$139.0 million in the first six months of 2019 from immaterial amounts in the second quarter and first six months of 2018, due to the acquisition of QuoteWizard in the fourth quarter of 2018.~~student loans products.

Revenue from our credit cards product ~~increased $17.3~~decreased $48.8 million to $7.2 million in the second quarter of 2020 from $56.0 million in the second quarter of 2019, ~~from $38.7~~or 87%, and decreased $51.8 million to $58.8 million in the ~~second quarter~~first six months of ~~2018, or 45%, and increased $25.7 million to~~2020 from $110.6 million in the first six months of 2019, ~~from $84.9 million in the first six months of 2018,~~ or ~~30%~~47%, primarily due to ~~increases~~the impact of economic conditions related to the COVID-19 pandemic that caused a decrease in the number of approvals and ~~an increase~~a decrease in revenue earned per approval.

Revenue from our personal loans product ~~increased $4.9~~decreased $32.3 million to $8.8 million in the second quarter of 2020 from $41.1 million in the second quarter of 2019, ~~from $36.2~~or 79%, and decreased $33.3 million to $40.3 million in the ~~second quarter~~first six months of ~~2018, or 14%, and increased $11.4 million to~~2020 from $73.6 million in the first six months of 2019, ~~from $62.2 million~~or 45%, primarily due to the impact of economic conditions related to the COVID-19 pandemic that caused a contraction in the ~~first six months~~flow of ~~2018, or 18%, due to an increased number of consumers completing request forms as a result of increased lender demand~~capital and ~~corresponding increases in selling and marketing efforts, partially offset by~~ a decrease in revenue earned per consumer.

For the periods presented, no other ~~non-mortgage product~~products in our Consumer segment represented more than 10% of ~~revenue,~~revenue; however, certain other ~~non-mortgage~~Consumer products experienced notable ~~increases.~~changes primarily due to the impact of economic conditions related to the COVID-19 pandemic. Revenue from ~~the resale of online advertising space to third parties increased by $5.0~~our small business loans product decreased $8.5 million in the second quarter of ~~2019~~2020 compared to the second quarter of ~~2018~~2019 and ~~$13.4~~decreased $4.1 million in the first six months of ~~2019~~2020 compared to the first six months of ~~2018.~~2019, due to a contraction in the flow of capital and a decrease in revenue earned per consumer. Revenue from our ~~credit services~~student loans product ~~increased by $4.4~~decreased $2.3 million in the second quarter of ~~2019~~2020 compared to the second quarter of ~~2018~~2019 and ~~increased by $9.6~~decreased $5.6 million in the first six months of ~~2019~~2020 compared to the first six months of ~~2018, primarily~~2019, due to the acquisition of Ovation in June 2018. Revenue from our student loans product increased by $3.0 million in the second quarter of 2019 compared to the second quarter of 2018 and increased by $8.2 million in the first six months of 2019 compared to the first six months of 2018, due to increased consumers and increased revenue earned per consumer, primarily due to the acquisition of Student Loan Hero in July 2018. Revenue from our small business loans product increased by $4.3 million in the second quarter of 2019 compared to the second quarter of 2018 and increased by $9.4 million in the first six months of 2019 compared to the first six months of 2018, due to increasesa decrease in the number of consumers on our marketplace seeking ~~business loans and increases~~student loans.

The ongoing COVID-19 pandemic is anticipated to significantly impact our Consumer product revenues in ~~selling and marketing efforts, partially offset by a decrease in revenue earned per consumer.~~

~~We believe~~ the ~~market for our non-mortgage products remains under-penetrated and we believe long-term growth prospects are strong for non-mortgage products. A~~near-term due to the significant industry-wide contraction in the availability of capital for ~~non-mortgage~~ products ~~would likely adversely affect our non-mortgage product revenues.~~in the Consumer segment, specifically credit cards, small business loans and personal loans, as discussed above.

Our Home segment includes the following products: purchase mortgage, refinance mortgage, home equity loans and lines of credit, reverse mortgage loans, and real estate. Revenue from our ~~mortgage products decreased~~Home segment increased $2.4 million in the second quarter of 2020 from the second quarter of 2019, or 3%, and increased $18.1 million in the first six months of 2020 from the first six months of 2019, or 13%, primarily due to an increase in revenue from our refinance mortgage product, partially offset by decreases in our purchase mortgage and home equity loans and lines of credit products. Revenue from our refinance mortgage product increased $22.3 million in the second quarter of 2020 compared to the second quarter of ~~2018~~2019, and increased $48.2 million in the first six months of ~~2019~~2020 compared to the first six months of ~~2018~~2019, primarily due to decreases in revenue from both our refinance and purchase products. Revenue from our refinance product decreased $2.5 million in the second quarter of 2019 compared to the second quarter of 2018 due to a decrease in revenue earned per consumer and decreased $23.0 million in the first six months of 2019 compared to the first six months of 2018 due to a decreasean increase in the number of consumers completing request forms ~~as well as~~resulting from increased refinancing activity in a declining interest rate environment, partially offset by a decrease in revenue earned per consumer. Revenue from our purchase mortgage product decreased ~~$9.8~~$10.3 million in the second quarter of 2020 compared to the second quarter of 2019 and decreased $15.2 million in the first six months of 2020 compared to the first six months of 2019. Revenue from our home equity loans and lines of credit product decreased $8.6 million in the second quarter of 2020 compared to the second quarter of 2019 and decreased $13.2 million in the first six months of 2020 compared to the first six months of 2019. Revenue from our purchase mortgage and home equity loans and lines of credit products decreased due to a shift in lender focus toward refinance products as well as decreases in revenue earned per consumer.

Revenue from our Insurance segment increased $1.0 million to $72.9 million in the second quarter of 2020 from $71.9 million in the second quarter of 2019, ~~compared~~or 1%, and increased $16.6 million to $155.7 million in the ~~second quarter~~first six months of ~~2018 and decreased $16.8~~2020 from $139.0 million in the first six months of 2019, ~~compared to the first six months of 2018~~or 12%, due to ~~a decrease~~increases in the number of consumers ~~completing request forms, as well as~~seeking insurance coverage, partially offset by a decrease in revenue earned per consumer.

Our Other category primarily includes revenue from the resale of online advertising space to third parties and revenue from home improvement referrals. Revenue in the Other category decreased $5.6 million in the second quarter of 2020 compared to the second quarter of 2019, and decreased $15.5 million in the first six months of 2020 compared to the first six months of 2019, as we ceased offering home improvement referrals during the first quarter of 2019 and ceased reselling online advertising space during the first quarter of 2020.

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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, costs for online advertising resold to third parties, credit scoring fees, credit card fees, website network hosting and server fees.

Cost of revenue ~~increased~~decreased in the second quarter of ~~2019~~2020 from the second quarter of ~~2018,~~2019, primarily due to a $5.1 million decrease for the cost of resold advertising space. We ceased reselling online advertising space during the first quarter of 2020. This was partially offset by a $1.1 million increase in website network hosting and server fees and a $0.7 million increase in compensation and benefits as a result of increases in headcount. Cost of revenue decreased in the first six months of ~~2019~~2020 from the first six months of ~~2018,~~2019, primarily due to ~~increases in compensation and benefits from increased headcount~~a $11.3 million decrease for the cost of ~~$3.3 million and $6.4 million, respectively, and~~resold advertising space, partially offset by increases in website network hosting and server fees, compensation and benefits, and credit card fees of ~~$0.9~~$2.0 million, $1.8 million and ~~$1.4~~$1.0 million, respectively. Cost of revenue in the second quarter and first six months of 2019 also includes $5.1 million and $12.4 million for the cost of resold advertising space. Online advertising space resold to third parties in the second quarter and first six months of 2018 was not significant.

Cost of revenue as a percentage of revenue increased to 7% in the second quarter of 2020 compared to 6% in the second quarter of 2019, and remained consistent at 6% in each of the first six months of ~~2019 compared to 3% in the second quarter~~2020 and ~~first six months of 2018, due to the items above.~~2019.

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.

~~The increases in selling~~Selling and marketing expense decreased in the second quarter and first six months of ~~2019~~2020 compared to the second quarter and first six months of ~~2018 were~~2019 primarily due to ~~increases~~decreases in advertising and promotional expense of ~~$63.2~~$77.7 million and ~~$107.7~~$56.5 million, respectively, as discussed below. Selling and marketing expense also increased in the second quarter and first six months of 2019 compared to the second quarter and first six months of 2018 due to increases in compensation and benefits of $4.5 million and $8.8 million, respectively, as a result of increases in headcount.

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


	Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended June 30,									Six Months Ended June 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change		2020		2019		$ Change			% Change		2020		2019		$ Change			% Change
	(Dollars in thousands)																(Dollars in thousands)
Online	$	169,779	$	113,289	$	56,490	50	%	$	318,718	$	224,709	$	94,009	42	%	$	96,416	$	169,779	$	(73,363	)	(43	)%	$	269,497	$	318,718	$	(49,221	)	(15	)%
Broadcast	6,398		195		6,203		3,181	%	16,933		3,435		13,498		393	%	3,154		6,398		(3,244		)	(51	)%	9,478		16,933		(7,455		)	(44	)%
Other	3,373		2,891		482		17	%	6,485		6,259		226		4	%	2,259		3,373		(1,114		)	(33	)%	6,621		6,485		136			2	%
Total advertising expense	$	179,550	$	116,375	$	63,175	54	%	$	342,136	$	234,403	$	107,733	46	%	$	101,829	$	179,550	$	(77,721	)	(43	)%	$	285,596	$	342,136	$	(56,540	)	(17	)%

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 ~~both mortgage~~our Home, Consumer and ~~non-mortgage products.~~Insurance segments.

We ~~increased~~decreased our advertising expenditures in the second quarter and first six months of ~~2019~~2020 compared to the second quarter and first six months of ~~2018~~2019 in ~~order~~response to ~~generate additional consumer inquiries to meet the increased~~changes in Network Partner demand ~~of Network Partners~~ on our ~~marketplace.~~marketplace as a result of the ongoing COVID-19 pandemic discussed above. We will continue to adjust selling and marketing expenditures dynamically in relation to this and 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.

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General and administrative expense increased in the second quarter of 2019 from the second quarter of 2018, and in the first six months of 2019 from the first six months of 2018, primarily due to increases in compensation and benefits of $2.6 million and $5.9 million, respectively, as a result of increases in headcount. General and administrative expense also increased in the second quarter of 2019 from the second quarter of 2018, and in the first six months of 2019 from the first six months of 2018, due to increases in facilities expense of $1.2 million and $2.1 million, respectively, and increases in technology expense of $1.3 million and $2.2 million, respectively. General and administrative expenseremained relatively consistent in the second quarter and first six months of ~~2018 includes a charge of $1.6 million due to the write-off of certain fixed assets. The increases in general and administrative expense in the second quarter and first six months of 2019~~2020 compared to the second quarter and first six months of ~~2018 is partially offset by~~2019. The second quarter and first six months of 2019 benefited from a $2.7 million gain on the sale of two office buildings. Additionally, travel and entertainment expense decreased $1.5 million in the second quarter of 2020 compared to the second quarter of 2019. General and administrative expenses decreased in the first six months of 2020 compared to the first six months of 2019 due to decreases in compensation and benefits, travel and entertainment expense and other taxes of $3.4 million, $1.8 million and $1.4 million, respectively. In addition to the change in general and administrative expenses due to the gain on the sale of the office buildings in ~~Charlotte, North Carolina.~~2019, general and administrative expenses increased in the first six months of 2020 compared to the first six months of 2019 due to increases in professional fees, technology expense and facilities expense of $3.2 million, $1.6 million and $1.2 million, respectively.

General and administrative expense as a percentage of revenue ~~decreased~~increased to 16% and 13% in the second quarter and first six months of 2020, respectively, compared to 10% and 11% in the second quarter and first six months of 2019, ~~respectively, compared to 13% in the second quarter and first six months of 2018.~~respectively.

Product development

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

Product development expense increased in the second quarter and first six months of ~~2019~~2020 compared to the second quarter and first six months of ~~2018,~~2019 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 ~~lenders.~~Network Partners.

Depreciation

The increase in depreciation expense in the second quarter and first six months of ~~2019~~2020 compared to the second quarter and first six months of ~~2018~~2019 was primarily the result of higher investment in internally developed software in recent years, to support the growth of our business.

~~Amortization of intangibles~~Contingent consideration

~~Amortization of intangibles increased in~~During the second quarter and first six months of ~~2019 compared~~2020, we recorded aggregate contingent consideration expense of $9.2 million and $1.1 million, respectively, due to adjustments in the estimated fair value of the earnout payments related to our recent acquisitions. For the second quarter of 2020, the contingent consideration expense for the QuoteWizard, Ovation and SnapCap acquisitions was $8.1 million, $1.0 million and $0.1 million, respectively. For the first six months of ~~2018 primarily due to intangible assets associated with our business~~2020, the contingent consideration expense for the Ovation and SnapCap acquisitions ~~in 2018~~was $1.2 million and ~~2019.~~

~~Contingent~~$0.1 million, respectively, partially offset by a contingent consideration gain for the QuoteWizard acquisition of $0.2 million.

During the second quarter and first six months of 2019, we recorded aggregate contingent consideration expense of $2.8 million and $17.4 million, respectively, due to adjustments in the estimated fair value of the earnout payments related to our recent acquisitions. For the second quarter of 2019, the contingent consideration expense for the QuoteWizard and Ovation acquisitions was $2.5 million and $0.6 million, respectively. This was partially offset by contingent consideration gains recorded for the SnapCap and DepositAccounts acquisitions of $0.1 million and $0.2 million, respectively. For the first six months of 2019, the contingent consideration expense for the QuoteWizard and SnapCap acquisitions was $16.9 million and $1.5 million, respectively. This was partially offset by a contingent consideration gain recorded for the DepositAccounts acquisition of ~~$1.0~~$0.9 million.

~~During~~Income tax expense

For the second quarter and first six months of ~~2018, we recorded aggregate gains~~2020, the effective tax rate varied from the federal statutory rate of ~~$0.2~~21% in part due to a tax benefit of $0.8 million and ~~$0.9~~$1.8 million, respectively, ~~primarily due to adjustments~~recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the ~~estimated fair value~~effect of ~~the earnout payments related to our recent acquisitions. For the second quarter of 2018, we recorded a $0.8 million gain~~state taxes. The effective tax rate for ~~the SnapCap acquisition. This was partially offset by contingent consideration expense for the CompareCards and DepositAccounts acquisitions of $0.2 million and $0.4 million, respectively. For~~ the first six months of ~~2018, we~~2020 was also impacted by a tax benefit of $6.1 million for the impact of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, as described below.

On March 27, 2020, President Trump signed into law the CARES Act. This legislation is an economic relief package in response to the public health and economic impacts of COVID-19 and includes various provisions that impact us, including, but not limited to, modifications for net operating losses, accelerated timeframe for refunds associated with prior minimum taxes and modifications of the limitation on business interest.

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We revalued deferred tax assets related to net operating losses in light of the changes in the CARES Act, and recorded a ~~$2.9~~net tax benefit of $6.1 million ~~gain for~~during the ~~SnapCap acquisition. This~~first six months of 2020. These deferred tax assets are being revalued, as they will be carried back to 2016 and 2017, which are tax periods prior to the Tax Cuts and Jobs Act ("TCJA") when the federal statutory tax rate was ~~partially offset by contingent consideration expense for~~35% versus the ~~CompareCards and DepositAccounts acquisitions~~21% federal statutory tax rate in effect after the enactment of ~~$0.7 million and $1.3 million, respectively.~~

~~Income tax expense~~the TCJA.

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For the second quarter and first six months of 2018, the effective tax rate varied from the federal statutory rate of 21% primarily due to a tax benefit of $33.7 million and $60.9 million, respectively, recognized for excess tax benefits due to employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes.

~~There have been no changes to our valuation allowance assessment for the second quarter of 2019.~~

Discontinued operations

~~Losses from~~The results of discontinued operations ~~are attributable to losses associated with~~include the results of the LendingTree Loans business formerly operated by our wholly-owned subsidiary, Home Loan Center, Inc., or ~~HLC, subsidiary.~~HLC. The sale of substantially all of the assets of HLC, including the LendingTree Loans business, was completed on June 6, 2012. ~~Losses~~HLC filed a petition under Chapter 11 of the United States Bankruptcy Code on July 21, 2019, which was converted to Chapter 7 of the United States Bankruptcy Code on September 16, 2019.

As a result of the voluntary bankruptcy petition, as of the initial July 21, 2019 bankruptcy petition filing date, HLC and its consolidated subsidiary were deconsolidated from ~~discontinued operations~~LendingTree’s consolidated financial statements. The effect of such deconsolidation was the elimination of the consolidated assets and liabilities of HLC (and its consolidated subsidiary) from LendingTree’s consolidated balance sheets.

Prior to the bankruptcy filing, losses from the LendingTree Loans business were primarily due to litigation settlements and contingencies and legal fees associated with ongoing legal proceedings.

The results of discontinued operations include litigation settlements and contingencies and legal fees associated with ongoing legal proceedings against LendingTree Inc. or LendingTree LLC that arose due to the LendingTree Loans business or the HLC bankruptcy filing.

See Note 18—~~Subsequent Event~~Discontinued Operations to the consolidated financial statements included elsewhere in this report for ~~a discussion of the filing under Chapter 11 of the United States Bankruptcy Code by HLC on July 21, 2019,~~more information, including the ~~anticipated~~ accounting effect of HLC’s bankruptcy filing on our ~~future~~ consolidated financial statements.

Segment Profit



	Three Months Ended June 30,									Six Months Ended June 30,
	2020		2019		$ Change			% Change		2020			2019		$ Change			% Change
	(Dollars in thousands)
Home	$	38,726	$	24,210	$	14,516		60	%	$	74,637		$	48,131	$	26,506		55	%
Consumer	19,402		50,771		(31,369		)	(62	)%	62,501			104,745		(42,244		)	(40	)%
Insurance	30,122		28,806		1,316			5	%	60,655			56,670		3,985			7	%
Other	81		345		(264		)	(77	)%	(247		)	1,104		(1,351		)	(122	)%
Segment profit	$	88,331	$	104,132	$	(15,801	)	(15	)%	$	197,546		$	210,650	$	(13,104	)	(6	)%

~~See also Part II, Item 1A.~~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. ~~Risk Factors~~See ~~below~~Note 17—Segment Information in the notes to the consolidated financial statements for ~~further~~additional information on ~~risks associated~~segments and a reconciliation of segment profit to pre-tax income from continuing operations.

Consumer segment profit decreased $31.4 million in the second quarter of 2020 from the second quarter of 2019, and decreased $42.2 million in the first six months of 2020 from the first six months of 2019, primarily due to decreases in revenue, partially offset by corresponding decreases in selling and marketing expense. The biggest challenge facing many of our consumer Network Partners, and in turn our own business, is a lack of visibility into the true health of consumer balance sheets. Credit performance across consumer lenders of varying shapes and sizes has seemingly fared better than expected, and unemployment has begun to improve after peaking at nearly 15% in April. But questions remain as to the impact on these trends from government stimulus, forbearance and deferment programs offered by the lenders, and ultimately, our country's ability to re-open safely.

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Credit card issuers and personal loan lenders appetite for risk is temporarily diminished until there is further evidence of economic stabilization. We do believe the revenue opportunity in our Consumer segment has hit the trough as many of our consumer Network Partners who initially paused entirely are beginning to return to the platform. In most cases, those consumer Network Partners are returning to reach narrower bands of consumers, with ~~HLC’s bankruptcy filing.~~much stricter credit standards, smaller budgets, and less aggressive bids.

Home segment profit increased $14.5 million in the second quarter of 2020 from the second quarter of 2019, and increased $26.5 million in the first six months of 2020 from the first six months of 2019, due to increases in revenue and decreases in selling and marketing expense. Historically, as explained, in periods similar to those experienced in the second quarter of 2020 with sharp declines in interest rates and increased consumer interest, our mortgage Network Partners become inundated with more organic volume than they can process and their demand for our services diminishes for a period of time. While that dynamic has remained very relevant for us in the second quarter, our improved ability to withstand it is evident. We've developed differentiated offerings and price points for mortgage Network Partners to better serve a wider array of their needs. Our Home segment has benefited from a decrease in unit marketing costs during the COVID-19 pandemic. With heightened interest in refinancing and home-buying activity, we managed to meet the demand of our Network Partners in an optimized and cost-efficient way. We expect Home unit marketing costs in the third quarter of 2020 to return to levels experienced prior to the second quarter of 2020.

Insurance segment profit increased $1.3 million in the second quarter of 2020 from the second quarter of 2019 due to an increase in revenue and a decrease in selling and marketing expense, and increased $4.0 million in the first six months of 2020 from the first six months of 2019 due to an increase in revenue, partially offset by corresponding increases in selling and marketing expense. At the end of the first quarter of 2020, we noted a slowdown in consumers searching for auto insurance which we attributed to slumping car sales amid the pandemic. While those trends have steadily begun to recover since early April, reduced search engine traffic has continued to present a modest headwind to achieving the levels of growth in the Insurance segment that we've historically experienced and we have taken on several initiatives to combat these trends. We've seen demonstrable traffic growth through several non-search channels and the agent portion of the Insurance segment is achieving record-highs as agents find increasing value in our services in a remote work environment.

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 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 from continuing operations adjusted to exclude interest, income tax, amortization of intangibles and depreciation, and to further exclude (1) non-cash compensation expense, (2) non-cash impairment charges, (3) gain/loss on disposal of assets, (4) restructuring and severance expenses, (5) litigation settlements and contingencies, (6) acquisitions and dispositions income or expense (including with respect to changes in fair value of contingent consideration), and (7) 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 ~~in this report,~~below, there are no adjustments for one-time items.

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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. 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.

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The following table is a reconciliation of net income from continuing operations to Adjusted EBITDA (in thousands).


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Net income from continuing operations	$	12,981		$	44,849		$	13,531		$	80,706
Net (loss) income from continuing operations													$	(8,616	)	$	12,981		$	10,360		$	13,531
Adjustments to reconcile to Adjusted EBITDA:
Amortization of intangibles	14,280			3,964			27,707			7,927			13,756			14,280			27,513			27,707
Depreciation	2,559			1,633			5,041			3,304			3,550			2,559			6,928			5,041
Severance	403			3			457			3			32			403			190			457
(Gain) loss on impairments and disposal of assets	(2,196		)	1,797			(1,978		)	1,889
Loss (gain) on impairments and disposal of assets													22			(2,196		)	552			(1,978		)
Non-cash compensation expense	15,982			11,178			30,035			22,287			13,158			15,982			25,075			30,035
Change in fair value of contingent consideration	2,790			(167		)	17,382			(908		)	9,175			2,790			1,053			17,382
Acquisition expense	60			625			179			687			20			60			2,200			179
Litigation settlements and contingencies	8			(170		)	(199		)	(192		)	(1,325		)	8			(996		)	(199		)
Interest expense, net	5,095			2,924			10,563			5,912			4,955			5,095			9,789			10,563
Rental amortization of intangibles and depreciation	—			194			—			396
Income tax benefit	(5,689		)	(29,721		)	(13,441		)	(53,182		)	(3,880		)	(5,689		)	(6,941		)	(13,441		)
Adjusted EBITDA	$	46,273		$	37,109		$	89,277		$	68,829		$	30,847		$	46,273		$	75,723		$	89,277

Financial Position, Liquidity and Capital Resources

General

As of June 30, ~~2019,~~2020, we had ~~$51.3~~$101.8 million of cash and cash equivalents, compared to ~~$105.1~~$60.2 million of cash and cash equivalents as of December 31, ~~2018.~~2019.

In ~~the first six months of 2019, we purchased an aggregate of 17,501 shares of our common stock pursuant to a stock repurchase program for $4.0 million.~~

In May 2019, we completed the sale of two office buildings in Charlotte, North Carolina to an unrelated third party for a sale price of $24.4 million. We received proceeds of $24.1 million, net of closing fees of $0.3 million.

~~In January 2019,~~February 2020, we acquired ~~ValuePenguin~~an equity interest in Stash for ~~$106.2 million in cash.~~$80.0 million. The ~~acquisition~~investment was funded through ~~$90.0~~$80.0 million drawn on our Amended Revolving Credit ~~Facility and~~Facility. See Note 7—Equity Investment to the ~~balance using cash on hand.~~consolidated financial statements included elsewhere in this report for more information.

During the first six months of ~~2019,~~2020, we paid down ~~$100.0~~$25.0 million on our Amended Revolving Credit Facility. We made net repayments of $130.0 million on our Amended Revolving Credit Facility in July 2020.

During the first six months of ~~2019,~~2020, we made atwo contingent consideration ~~payment~~payments of $3.0 million each, related to the prior acquisition of ~~SnapCap and total contingent consideration payments of $3.0 million related to the prior acquisition of DepositAccounts.~~

SnapCap. We could make additional potential contingent consideration payments of up to ~~$1.0 million for DepositAccounts, $6.0 million for SnapCap, $8.8~~$4.4 million for Ovation and ~~$70.2~~$46.8 million for QuoteWizard.

In July 2020, we made litigation settlement payments of $26.5 million to the ResCap Liquidating Trust and $36.0 million to the HLC bankruptcy Trustee for the matters noted in Note 18—Discontinued Operations.

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In July 2020, we issued $575.0 million of our 0.50% Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) for estimated net proceeds of approximately $559.8 million. We used approximately $63.0 million of the net proceeds to enter into Convertible Note Hedge and Warrant transactions. Further, we used approximately $234.0 million of the net proceeds to repurchase approximately $130.3 million principal amount of our 0.625% Convertible Senior Notes due June 1, 2022 (the “2022 Notes”). To the extent of the repurchases of the 2022 Notes, we received approximately $15.6 million as a result of terminating a corresponding portion of the Convertible Note Hedge and Warrant transactions entered into on May 31, 2017. See Note 19—Subsequent Events for additional information.

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. Our ~~amended and restated~~ revolving credit facility described below is an additional potential source of liquidity. We will continue to monitor the impact of the ongoing COVID-19 pandemic on our liquidity and capital resources. We expect our cashflow from operating activities to be negatively impacted by the economic recession.

Senior Secured Revolving Credit Facility

On ~~October 26, 2018,~~December 10, 2019, we entered into an amended ~~our~~and restated $500.0 million five-year senior secured revolving credit facility, which matures on ~~November 21, 2022~~December 10, 2024 (the ~~“Revolving~~“Amended Revolving Credit Facility”) ~~to increase its borrowing capacity by $100.0 million to $350.0 million.~~. Borrowings under the Amended Revolving Credit Facility can be used to finance working capital needs, capital expenditures and general corporate purposes, including to finance permitted acquisitions. AsIn July 2020, we executed a temporary amendment to the Amended Revolving Credit Facility to provide for certain covenant relief, primarily to facilitate the issuance of ~~July 26, 2019, we have $100.0 million~~the 2025 Notes, the repurchase of a portion of the 2022 Notes, and to pay down existing borrowings under the credit facility.

As of August 4, 2020, we have a $0.2 million letter of credit under the Amended Revolving Credit Facility.

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The remaining borrowing capacity at August 4, 2020 is $499.8 million.

Cash Flows from Continuing Operations

Our cash flows attributable to continuing operations are as follows:


	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
	(in thousands)						(in thousands)
Net cash provided by operating activities	$	67,875		$	15,264		$	87,916		$	67,875
Net cash used in investing activities	(90,838		)	(18,441		)	(89,108		)	(90,838		)
Net cash used in financing activities	(24,653		)	(71,890		)
Net cash provided by (used in) financing activities							45,282			(24,653		)

Cash Flows from Operating Activities

Our largest source of cash provided by our operating activities is revenues generated by our ~~mortgage and non-mortgage~~ 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, certain contingent consideration payments, and income taxes.

Net cash provided by operating activities attributable to continuing operations increased in the first six months of ~~2019~~2020 from the first six months of ~~2018~~2019 primarily due ~~primarily~~ to ~~an increase~~changes in ~~revenue,~~accounts receivable, partially offset by ~~an increase in selling and marketing expense and cost of revenue. Additionally, cash from changes in working capital increased primarily as a result of~~ changes in accounts payable, accrued expenses and other current ~~liabilities,~~liabilities. The first six months of 2020 also experienced a decrease in revenue, partially offset by ~~changes~~a corresponding decrease in ~~accounts receivable.~~ selling and marketing expense, compared to the first six months of 2019.

Cash ~~flows~~Flows from ~~operating~~Investing Activities

Net cash used in investing activities attributable to continuing operations in the first six months of ~~2018 also included the $21.9~~2020 of $89.1 million ~~portion~~consisted of the ~~CompareCards earnout payment made~~purchase of an $80.0 million equity interest in ~~the second quarter~~Stash and capital expenditures of ~~2018 in excess of the contingent consideration liability recognized at the acquisition date.~~

~~Cash Flows from Investing Activities~~$9.1 million primarily related to internally developed software.

Net cash used in investing activities attributable to continuing operations in the first six months of 2019 of $90.8 million consisted primarily of the acquisition of ValuePenguin for $105.6 million, net of cash acquired, and capital expenditures of $9.8

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million primarily related to internally developed software. This was partially offset by proceeds of $24.1 million on the sale of two office buildings, net of closing expenses.

Cash Flows from Financing Activities

Net cash ~~used in investing~~provided by financing activities attributable to continuing operations in the first six months of ~~2018~~2020 of ~~$18.4~~$45.3 million consisted primarily of ~~the acquisition~~$55.0 million of ~~Ovation for $11.7~~net proceeds from our Amended Revolving Credit Facility, partially offset by $6.1 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of ~~cash acquired,~~proceeds from the exercise of stock options, and ~~capital expenditures of $6.7~~$3.3 million ~~primarily~~ related to ~~internally developed software.~~

~~Cash Flows from Financing Activities~~contingent consideration payments for SnapCap.

Net cash used in financing activities attributable to continuing operations in the first six months of 2019 of $24.7 million consisted primarily of $10.0 million of net repayments on our 2017 Revolving Credit Facility, $4.0 million for the repurchase of our common stock, $7.6 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options, and a $3.0 million of contingent consideration ~~payments~~payment for SnapCap.

Net cash used in financing activities attributable to continuing operations in the first six months of 2018 of $71.9 million consisted primarily of $25.6 million of contingent consideration payments for CompareCards, DepositAccounts and SimpleTuition and $47.1 million for the repurchase of our stock.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements other than a letter of credit and our funding commitments pursuant to our surety bonds, none of which have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

New Accounting Pronouncements

For information regarding new accounting pronouncements, see Note 2—Significant Accounting Policies, in Part I, Item 1 Financial Statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Other than our Amended Revolving Credit Facility, we do not have any financial instruments that are exposed to significant market risk. We maintain our cash and cash equivalents in bank deposits and short-term, highly liquid money market investments. A hypothetical 100-basis point increase or decrease in market interest rates would not have a material impact on the fair value of our cash equivalents securities, or our earnings on such cash equivalents, but would have an effect on the interest paid on borrowings under the Amended Revolving Credit Facility, if any. As of ~~July 26, 2019,~~August 4, 2020, there ~~was $100.0 million borrowed~~were no borrowings under the Amended Revolving Credit Facility. If the LIBO rate increased by 100-basis points, our annual interest expense would increase by approximately $1.0 million. Increases in the Federal Funds interest rates may also affect potential contingent consideration payments to DepositAccounts. ~~See~~ ~~Note 7—Business Acquisitions—Changes in Contingent Consideration—DepositAccounts in Part I, Item 1.~~ ~~Financial Statements~~.

Fluctuations in interest rates affect consumer demand for new mortgages and the level of refinancing activity which, in turn, affects lender demand for mortgage leads. 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 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 can be adversely affected by the overall reduced demand for refinancing in a rising rate environment. See also the risk factor "Adverse conditions in the primary and secondary mortgage markets, as well as the general economy, could materially and adversely affect our business, financial condition and results of operations," in Part I, Item 1A (Risk Factors) in our 2018 Annual Report.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), management, with the participation of our principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer), evaluated, as of the end of the period covered by this report, the effectiveness of our disclosure controls and procedures

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as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective, as of June 30, ~~2019,~~2020, to reasonably ensure that information required to be disclosed and filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that management will be timely alerted to material information required to be included in our periodic reports filed with the Securities and Exchange Commission.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are party to litigation involving property, contract, intellectual property and a variety of other claims. The amounts that may be recovered in such matters may be subject to insurance coverage. We have provided information about certain legal proceedings in which we are involved in Part I, Item 3. Legal Proceedings of our ~~2018~~2019 Annual Report and updated that information in Note 1415—Contingencies and Note 18—Discontinued Operations to the consolidated financial statements included elsewhere in this report.

Item 1A. Risk Factors

Other than the risk factor set forth below, there have been no material changes to the risk factors included in Part I, Item 1A. Risk Factors of our ~~2018~~2019 Annual Report.

~~We are subject to risks relating to the bankruptcy of~~The COVID-19 pandemic has impacted our ~~Home Loan Center, Inc. subsidiary, including risks of claims against us and our operating subsidiaries~~

Our subsidiary Home Loan Center, Inc., or HLC, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, which we refer to as the Bankruptcy Code, in order to preserve assets for the benefit of all creditors of HLC. We refer to HLC’s filingbusiness, and the ~~subsequent process under the Bankruptcy Code as the HLC bankruptcy.~~

In its filings with the Bankruptcy Court, HLC has indicated that it believes it has claims against HLC’s sole shareholder, our operating subsidiary LendingTree, LLC, and its former sole director (our Chairman and Chief Executive Officer), relating to the declaration of a dividend by HLC in January 2016 of $40.0 million. We believe the declaration of the dividend was proper, that the amounts paid to LendingTree, LLC following such declaration are not subject to recovery by HLC and that any claims by HLC relating to the dividend declaration are without merit. We have commenced settlement talks with HLC, and if we are not able to settle HLC’s claims relating to such dividend declaration on terms we deem acceptable, we intend to vigorously contest such claims. Any settlement agreement with HLC we might enter into would be subject to approval by the Bankruptcy Court, which may not be obtained. See Note 18—Subsequent Event to the consolidated financial statements included elsewhere in this report for a discussion of the anticipated accounting effect of HLC’s bankruptcy filing on our future consolidated financial statements.

It is possible that the HLC bankruptcy will lead other creditors of HLC to assert claims directly against our company or one or more of our wholly-owned subsidiaries not included as debtors in the HLC bankruptcy, which we refer to as non-debtor parties, on various legal theories. While we are not aware of a basis for any material claims of this nature, any such assertions of claims by HLC creditors may require significant effort (including management time), resources and money to defend and could result in losses to us. Moreover, our management may be required to spend a significant amount of time and effort dealing with the HLC bankruptcy, which could have an adverseultimate impact on our ~~ability~~business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to ~~execute~~the pandemic.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. As a result, the demand for our products, in particular in our Consumer segment, has been and may continue to be significantly impacted. Within our Consumer segment we have seen reductions of over 70% in near-term lender demand for our services reflecting those lenders' uncertainty over the length and depth of the economic recession. Our business operations may also be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic. The extent to which the COVID-19 pandemic impacts our business, ~~plan~~financial condition and ~~operations.~~results of operations, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

In each of February 2018 and February 2019, the board of directors authorized and we announced a stock repurchase program which allowed for the repurchase of up to $100.0 million and $150.0 million, respectively, of our common stock. Under this program, we can repurchase stock in the open market or through privately-negotiated transactions. We have used available cash to finance these repurchases. We will determine the timing and amount of any additional repurchases based on our evaluation of market conditions, applicable SEC guidelines and regulations, and other factors. This program may be suspended or discontinued at any time at the discretion of our board of directors. NoDuring the quarter ended June 30, 2020, no shares of common stock were repurchased under the stock repurchase ~~program during the quarter ended June 30, 2019.~~program. As of July ~~19, 2019~~29, 2020, approximately ~~$181.2~~$179.7 million remains authorized for share repurchase.

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Additionally, the LendingTree Sixth Amended and Restated 2008 Stock and Award Incentive Plan and the LendingTree 2017 Inducement Grant Plan allow employees to forfeit shares of our common stock to satisfy federal and state withholding obligations upon the exercise of stock options, the settlement of restricted stock unit awards and the vesting of restricted stock awards granted to those individuals under the plans. During the quarter ended June 30, ~~2019, 7,741~~2020, 7,724 shares were purchased related to these obligations under the LendingTree Sixth Amended and Restated 2008 Stock and Award Incentive Plan and ~~14,998~~711 shares were purchased related to these obligations under the LendingTree 2017 Inducement Grant Plan. The withholding of those shares does not affect the dollar amount or number of shares that may be purchased under the stock repurchase program described above.

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The following table provides information about the company's purchases of equity securities during the quarter ended June 30, ~~2019.~~2020.

Period
Total Number of
Shares Purchased ⁽¹⁾

Average Price
Paid per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs ⁽²⁾

Approximate
Dollar Value of Shares
that May Yet be
Purchased Under the
Plans or Programs
(in thousands)
4/1/19 - 4/30/19 1,715
$ 367.69
—
$ 181,167
5/1/19 - 5/31/19 2,026
$ 379.52
—
$ 181,167
6/1/19 - 6/30/19 18,998
$ 412.13
—
$ 181,167
Total 22,739
$ 405.88
—
$ 181,167



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
					(in thousands)
4/1/20 - 4/30/20	480	$	195.19	—	$	179,673
5/1/20 - 5/31/20	870	$	245.33	—	$	179,673
6/1/20 - 6/30/20	7,085	$	279.74	—	$	179,673
Total	8,435	$	271.38	—	$	179,673

(1)

During April ~~2019,~~2020, May ~~2019~~2020 and June ~~2019, 1,715~~2020, 480 shares, ~~2,026~~870 shares and ~~18,998~~7,085 shares, respectively (totaling ~~22,739~~8,435 shares), were purchased to satisfy federal and state withholding obligations of our employees upon the settlement of restricted stock units and restricted stock awards, all in accordance with our Sixth Amended and Restated 2008 Stock and Award Incentive Plan and 2017 Inducement Grant Plan, as described above.


(2)	See the narrative disclosure above the table for further description of our publicly announced stock repurchase program.

Item 5. Other Information

None.

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Item 6. Exhibits



Exhibit	Description	Location

3.1	Amended and Restated Certificate of Incorporation of LendingTree, Inc.	Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed August 25, 2008
3.2	Fourth Amended and Restated By-laws of LendingTree, Inc.	Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed November 15, 2017
10.1	~~First Amendment to Credit Agreement~~Form of Notice of Stock Option Award Granted Under the LendingTree, Inc. 2008 Stock and Annual Incentive Plan	~~Exhibit 10.1~~†
10.2	Form of Notice of Restricted Stock Unit Award Granted Under the LendingTree, Inc. 2008 Stock and Annual Incentive Plan	†
10.3	Form of Notice of Stock Option Award Granted to Non-Employee Directors Under the ~~Registrant's Current Report on~~ LendingTree, Inc. 2008 Stock and Annual Incentive Plan	†
10.4	Form ~~8-K filed June 28, 2019~~of Notice of Restricted Stock Unit Award Granted to Non-Employee Directors Under the LendingTree, Inc. 2008 Stock and Annual Incentive Plan	†
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	†
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	†
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	††
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	††
101.INS	XBRL Instance Document — The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	†††
101.SCH	XBRL Taxonomy Extension Schema Document	†††
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	†††
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	†††
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	†††
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	†††
104	Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101)	†††

† Filed ~~herewith~~herewith.

†† Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

††† Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~July 26, 2019~~August 4, 2020



	LENDINGTREE, INC.

	By:	/s/ J.D. MORIARTY
		J.D. Moriarty
		Chief Financial Officer
		(principal financial officer and duly authorized officer)

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		Page Number
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3431
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4442
Item 4.	Controls and Procedures	4442

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	4544
Item 1A.	Risk Factors	4544
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4544
Item 5.	Other Information	4645
Item 6.	Exhibits	4746



	Goodwill		Accumulated Impairment Loss			Net Goodwill
Balance at December 31, 2018	$	831,435	$	(483,088	)	$	348,347
Acquisition of Ovation	20		—			20
Acquisition of QuoteWizard	173		—			173
Acquisition of ValuePenguin	71,444		—			71,444
Balance at June 30, 2019	$	903,072	$	(483,088	)	$	419,984



	Amount
Land	$	5,818
Building	14,984
Site improvements	950
Computer equipment and capitalized software	166
Furniture and other equipment	145
Total gross property and equipment	22,063
Accumulated depreciation	(1,278		)
Total property and equipment, net	$	20,785



	Amount
Tenant leases	$	961
Total gross intangible assets	961
Accumulated amortization	(468		)
Total intangible assets, net	$	493



	Preliminary Fair Value
Net working capital	$	2,796
Fixed assets	68
Intangible assets	31,600
Goodwill	71,444
Net noncurrent assets	324
Total purchase price	$	106,232



	Preliminary Fair Value		Weighted Average Amortization Life
Technology	$	4,200	3 years
Content	26,100		3 years
Trademarks and tradenames	1,300		5 years
Total intangible assets	$	31,600	3.1 years



	Preliminary Fair Value
Net working capital	$	8,381
Fixed assets	1,509
Intangible assets	120,400
Goodwill	183,036
Other noncurrent assets	29
Total purchase price	$	313,355



	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
	(in thousands)
Pro forma revenue	$	221,839	$	440,596
Pro forma net income from continuing operations	$	42,813	$	78,413



	Fair Value
Net working capital	$	303
Fixed assets	76
Intangible assets	8,900
Goodwill	11,280
Net deferred tax liabilities	(2,688		)
Total purchase price	$	17,871



	Amount
Year ending December 31, 2019	$	4,406
Year ending December 31, 2020	3,188
Year ending December 31, 2021	1,094
Year ending December 31, 2022	736
Year ending December 31, 2023	228
Total	$	9,652



	Number of Loans		Original Issue Balance
	(in thousands)		(in billions)
Loans sold by HLC	234		$	38.9
Subsequent settlements	(172	)	(28.8		)
Remaining unsettled balance as of June 30, 2019	62		$	10.1