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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________
FORM 10-K
__________________________________________________
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the transition period from to
Commission File No. 001-34063
__________________________________________________
LendingTree, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
26-2414818
(I.R.S. Employer Identification No.)
1415 Vantage Park Dr., Suite 700, Charlotte, North Carolina 28203
(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
Common Stock, $0.01 par value per share
Trading Symbol(s)
TREE
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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.
(Check one):
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2021, the aggregate market value of the voting common stock held by non-affiliates of the Registrant was approximately $2,437 million. For the purposes of
the foregoing calculation only, all directors and executive officers of the Registrant and a single stockholder who owned in excess of 20% of the voting common stock are
assumed to be affiliates of the Registrant.
As of February 18, 2022, there were 12,966,728 shares of the Registrant's common stock, par value $.01 per share, outstanding.
Portions of the Registrant's proxy statement for its 2022 Annual Meeting of Stockholders are incorporated by reference into Part III herein. Such proxy statement will be filed
with the U.S. Securities and Exchange Commission within 120 days of the Registrant's fiscal year ended December 31, 2021.
Documents Incorporated By Reference:
Table of Contents
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
TABLE OF CONTENTS
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART III
Item 15.
Item 16.
Exhibits, Financial Statement Schedules
Form 10-K Summary
PART IV
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3
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34
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50
96
96
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97
98
98
98
98
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This annual report on Form 10-K for the fiscal year ended December 31, 2021 (the "Annual Report") contains "forward-looking statements" within the
meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. 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 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 below, including in Item 1A. Risk Factors.
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.
Summary of Risk Factors
Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the
risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the
heading “Risk Factors” and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before
making an investment decision regarding our common stock.
• Adverse conditions in the primary and secondary mortgage markets, as well as the general economy, could have a material adverse effect on our
business, financial condition and results of operations.
• We depend on the financial strength of our Network Partners and our relationships with them and any adverse changes in these relationships could
adversely affect our business, financial condition and results of operations.
•
Failure to maintain our reputation and brand recognition and attract and retain consumers in a cost-effective manner could materially and adversely
affect our business, financial condition and results of operations. As such, adverse publicity from litigation or governmental investigations could
impact our business and financial condition and results of operations.
• We depend on search engines, online advertising and other online sources to attract visitors to our websites, and if we are unable to attract these
visitors and convert them into consumer requests for our Network Partners in a cost-effective manner, our business and financial results may be
harmed.
• Our credit card product offering is subject to particular risks.
• Our insurance business, QuoteWizard, is significant to our revenue, and operational issues in this business could have a material impact on our results
of operations.
• Our personal loan product is a key product within our Consumer segment. If lenders participating on our marketplace decide to reduce their offerings
of personal loans or if such loans become unattractive to consumers because of higher interest rates demanded by lenders or other reasons, then our
results of operations and future growth prospects could be materially and adversely affected.
•
•
The COVID-19 pandemic impacted our business, and the ultimate impact on our 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 the pandemic.
The intended benefits of acquisitions may not be realized and acquisitions or strategic investments that we pursue may not be successful and could
disrupt our business and harm our financial condition.
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•
If we fail to manage our growth effectively, our business and results of operations could be harmed.
• We rely on the performance of highly skilled personnel and if we are unable to attract, retain, develop and motivate well-qualified employees, our
business and results of operations could be harmed.
• A significant portion of our total revenue has, in the past, derived from one Network Partner, and our results from operations could be adversely
affected and stockholder value harmed if we lose significant business from this Network Partner.
• We participate in a highly competitive market, and pressure from existing and new competitors may materially and adversely affect our business,
results of operations and financial condition. If any of our competitors are more successful than we are at attracting and retaining customers or
Network Partners, our business, financial condition and results of operations could be materially and adversely affected.
• Our success depends, in part, on the integrity of our systems and infrastructures. System interruption and the lack of integration and redundancy in
these systems and infrastructures may have a material and adverse impact on our business, financial condition and results of operations.
•
•
Breaches or failures of our systems or website security, the theft, unauthorized access, acquisition, use, disclosure, modification or misappropriation
of personal information, the occurrence of fraudulent activity, or other data security-related incidents may have a material and adverse impact on our
business, financial condition and results of operations.
Failure to comply with past, existing or new laws, rules and regulations, or to obtain and maintain required licenses, could materially and adversely
affect our business, financial condition and results of operations.
• Our collection, use, storage, disclosure, transfer and other processing of personal information could give rise to significant costs and liabilities,
including as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights, which may have a
material and adverse impact on our business, financial condition and results of operations.
• We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing
business.
•
Failure to obtain proper business licenses or other documentation or to otherwise comply with local laws and requirements regarding marketing, sales
or services, may result in civil or criminal penalties and restrictions on our ability to conduct business in that jurisdiction.
• Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect
our operating results and financial condition.
• We may fail to adequately obtain, maintain, enforce and protect our intellectual property and similar proprietary rights or may be accused of
infringing, misappropriating or otherwise violating intellectual property or similar proprietary rights of third parties.
•
•
•
•
In the ordinary course of business, we are party to litigation involving contract, intellectual property and a variety of other claims, which could
adversely affect our business and financial condition.
If our Network Partners fail to produce required documents for examination by, or other affiliated parties fail to make certain filings with, state
regulators, we may be subject to fines, forfeitures and the revocation of required licenses.
The possibility of additional future regulations, changing rule interpretations and examinations by regulatory agencies may result in more stringent
compliance standards and could adversely affect the results of our operations.
Fluctuations in our operating results, quarter to quarter earnings and other factors may result in significant decreases in the price of our common
stock.
• One holder of our common stock owns a substantial portion of our outstanding common stock, which concentrates voting control and limits your
ability to influence corporate matters.
• Our financial results fluctuate as a result of seasonality, which may make it difficult to predict our future performance and may adversely affect our
common stock price.
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•
The conditional conversion feature of our outstanding convertible senior notes, if triggered, may adversely affect our financial condition and
operating results.
• We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes upon a fundamental
change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.
• Our hedge and warrant transactions may affect the value of the Notes and our common stock.
PART I
ITEM 1. Business
Our Company
LendingTree, Inc. ("LendingTree", the "Company", "we" or "us") operates 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. Through multiple branded marketplaces, LendingTree empowers consumers
to shop for financial services the same way they would shop for airline tickets or hotel stays, comparing multiple offers from a nationwide network of over
500 partners (which we refer to as "Network Partners") in one simple search, and choose the option that best fits their financial needs. Services include
mortgage loans, mortgage refinances, 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, sales of insurance policies 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 believe our platform, consisting of a deep network
of Network Partners across a broad array of financial products, differentiates us from other loan or insurance comparison-shopping marketplaces which may
focus on fewer product offerings or partner with fewer service providers.
Our strategically designed and executed advertising and marketing campaigns (which we refer to as performance marketing) span a wide array of digital
and traditional media acquisition channels and promote our LendingTree and other brands and product offerings. Our marketing efforts are designed to attract
consumers to our websites, mobile applications and toll-free telephone numbers. Interested consumers complete inquiry forms, providing detailed information
about themselves and the loans or other offerings they are seeking. We refer to such consumer inquiries as consumer requests. We then match these consumer
requests with Network Partners in our marketplace that are seeking to serve these consumers' needs. We generate revenue from our Network Partners,
generally at the time of transmitting a consumer request to them, in the form of a match fee. In certain instances outside our mortgage business, we charge
other kinds of fees, such as closed loan or closed sale fees. In addition to our primary consumer request data referral business, we also match consumers with
Network Partners by offering consumers the ability to click from our website to a Network Partner’s website or by calls for which Network Partners pay either
front-end or back-end fees.
We are continually working to improve the consumer experience. We have made investments in technologically-adept personnel and we use in-market
real-time testing to improve our digital platforms. Additionally, we work with our Network Partners, including providing training and other resources, to
improve the consumer experience throughout the process. Further, we have been building and improving our My LendingTree platform, which provides a
relationship-based consumer experience, rather than just a transaction-based experience.
Evolution and Future Growth of Our Business
At its inception, our original business was to serve consumers seeking home mortgage loans by matching them with various lenders. We launched the
LendingTree brand nationally in 1998 and, over the last twenty-plus years, we have invested significantly in this brand to gain widespread consumer
recognition.
More recently, we have actively sought to expand the suite of financial services offerings we provide to consumers, in order to both leverage the
applicability of the LendingTree brand as well as more fully serve the needs of consumers and Network Partners. We believe that consumers with existing
LendingTree-branded associations will be more likely to utilize our other service offerings than those of other providers whose brands consumers may not
recognize.
Our My LendingTree platform offers a personalized comparison-shopping experience, by providing free credit scores and credit score analysis. This
platform enables us to monitor 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 have at a given point in time. This is designed to provide consumers with measurable savings opportunities over their lifetimes.
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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.
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 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.
Recent Business Acquisitions
On February 28, 2020, we acquired an equity interest in Stash Financial, Inc. (“Stash”). Stash is a consumer investing and banking platform. Stash brings
together banking, investing, and financial services 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.
On January 10, 2019, we 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. Combining ValuePenguin’s high-quality content and search engine
optimization capability with proprietary technology and insurance carrier network from QuoteWizard.com, LLC ("QuoteWizard") enables us to provide
immense value to insurance carriers and agents. This strategic acquisition positions us to achieve further scale in the insurance space as well as the broader
financial services industry.
These acquisitions continue our diversification strategy.
Economic Conditions
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of 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 various lockdown orders 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 was the most impacted as unsecured credit and the flow of capital in certain areas of the market
contracted. The impact to our Home and Insurance segments was much less substantial. We believe our three reportable segments have generally recovered
from the impacts of the pandemic. 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 was negatively impacted during the recession, our marketing expenses generally decreased in
line with revenue.
Segment Reporting
We have three reportable segments: Home, Consumer and Insurance.
Products
Our Home segment includes the following products: purchase mortgage, refinance mortgage, home equity loans and lines of credit, reverse mortgage
loans, and real estate. Our Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans,
deposit accounts, and other credit products such as credit repair and debt settlement. Our Insurance segment consists of insurance quote products and
insurance policies in our agency businesses. Revenue within the Other category includes revenue from the resale of online advertising space to third parties
and revenue from home improvement referrals. 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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Segment revenue is as follows (in thousands):
Home
Consumer
Insurance
Other
Total revenue
For the Year Ended December 31,
2020
2021
$
$
441,738
329,945
326,153
663
1,098,499
$
$
320,992
253,198
333,765
2,035
909,990
$
$
2019
277,935
515,037
284,792
28,839
1,106,603
LendingTree does not charge consumers for the use of our services, except for credit repair services. Revenues from our Home products are mostly
derived from upfront match fees paid by Network Partners that receive a consumer request, and in some cases upfront fees for clicks or call transfers. Because
a given consumer request form can be matched with more than one Network Partner, up to five match fees may be generated from a single consumer request
form. Revenues from our Consumer products are generally derived from upfront match fees paid on delivery of a consumer request, click or call and closed
loan fees. For our credit card product, we send click traffic to issuers and are generally paid per card approval. Revenues from our Insurance products are
primarily derived from upfront match fees, and upfront fees for website clicks or fees for calls, earned through the delivery of consumer requests, as well as
commissions earned on policy sales in our agency businesses.
For the year ended December 31, 2021, no Network Partners accounted for more than 10% of total consolidated revenue. For the years ended December
31, 2020 and 2019, one Network Partner, Progressive Casualty Insurance, accounted for 15% and 12%, respectively, of total consolidated revenue, all of
which was recorded within our Insurance segment.
Home Segment
We partner with lenders throughout the United States to provide full geographic lending coverage and to offer a complete suite of loan offerings on our
marketplace. To participate on our marketplace, lenders are required to enter into contracts with us that state the terms and conditions for such participation,
although these contracts generally may be terminated for convenience by either party. We perform certain due diligence procedures on prospective new
lenders, including screening against a national anti-fraud database maintained by the Mortgage Asset Research Institute, which helps manage our risk
exposure. The data is utilized to determine whether a lender and its principals are eligible to participate on our marketplace and have not been convicted of
and/or penalized for fraudulent activity.
Consumers seeking purchase or refinance mortgages through our loan marketplace can receive multiple conditional loan offers from participating lenders
in response to a single consumer request form. We refer to the process by which we match consumers and Network Partners as the matching process. This
matching process consists of the following steps:
(1) Consumer Request. Consumers complete a single request form with information regarding the type of mortgage loan product they are seeking, loan
preferences and other data. Consumers also consent to a soft inquiry regarding their credit.
(2) Consumer Request Form Matching and Transmission. Our proprietary systems and technology match a given consumer's request form data,
credit profile and geographic location against certain pre-established criteria of Network Partners, which may be modified from time to time. Once a
given request passes through the matching process, the request is automatically transmitted to up to five participating Network Partners.
(3) Lender Evaluation and Response. Network Partners that receive a consumer request form evaluate the information contained in it to determine
whether to make a conditional loan offer.
(4) Communication of a Conditional Offer. All matched Network Partners and any conditional offers are presented to the consumer upon completion
of the consumer request form. Consumers can return to the site and view their offer(s) at any time by logging in to their My LendingTree profile.
Additionally, matched lenders and offers are also sent to the email address associated with the consumer request.
We also offer consumers other mortgage products such as:
• An alternative matching process, which provides them with lender contact information rather than conditional offers from Network Partners.
• A "rate table" loan marketplace, where consumers can enter their loan and credit profile and dynamically view real-time rates or other relevant
information from lenders without entering their contact information.
Other Home lending products on our online marketplace include the following:
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• Home equity loans and lines of credit, which enable home owners to borrow against the equity in their home, as measured by the difference between
the market value of the home and any existing loans secured by the home. Home equity loans are one-time lump sum loans, whereas a home equity
line of credit reflects a line of revolving credit where the borrower has flexibility to draw down and repay the line over time.
•
Reverse mortgage loans, which are a loan product available to qualifying homeowners age 62 or older.
In addition, we offer real estate brokerage services, through which consumers are matched with local realtors who can assist them in their home purchase
or sale efforts. We generate revenue from real estate brokerage services through match fees paid to us by real estate brokers participating in our online
marketplace.
Consumer Segment
Consumer lending products on our online marketplace include information, tools and access to multiple conditional loan offers for the following:
• Auto, which includes our auto refinance and purchase loan products. Auto loans enable consumers to purchase new or used vehicles or refinance an
existing loan secured by an automobile.
Credit cards, which include offerings from most major card issuers.
Personal loans, which are unsecured obligations generally carrying shorter terms and smaller loan amounts than home mortgages.
Small business loans, which include a broad array of financing types, including but not limited to loans secured by working capital, equipment, real
estate and other forms of financing, provided to small and medium-sized businesses.
Student loans, which includes both new loans to finance an education and related expenses, as well as refinancing of existing loans.
•
•
•
•
Non-lending Consumer products also includes information, tools and access to the following:
• Deposit accounts, through which consumers can access depository deals and analysis covering all major deposit product categories.
•
Credit repair, through which consumers can obtain assistance improving their credit profiles, in order to expand and improve loan and other financial
product opportunities available to them. Our Ovation business is a leading provider of credit services with a strong customer service reputation.
• Debt relief services, through which consumers can obtain assistance negotiating existing loans.
We refer to the various purchasers of leads from our other marketplaces as lead purchasers. We generate revenue from the deposit account product from a
consumer clicking from our website through to a financial institution's website. We generate revenue from credit repair and debt relief services through
subscription fees from consumers that enroll in our credit repair product, or a fee for a customer referral to a service provider partner or through a fee at the
time a consumer enrolls in a program with one of our Network Partners.
Insurance Segment
Our Insurance segment includes information, tools and access to insurance quote products, including automobile, home, health and Medicare, through
which consumers are matched with insurance lead aggregators to obtain insurance offers, as well as insurance policies in our agency businesses. Our
QuoteWizard business is one of the largest insurance comparison marketplaces in the growing online insurance advertising market. We also purchased
ValuePenguin, a personal finance website that offers consumers objective analysis on a variety of financial topics from insurance to credit cards, in the first
quarter of 2019.
Other Products
Other products not included in the Home, Consumer and Insurance segments includes:
• Home improvement services, through which consumers had the opportunity to research and find home improvement professional services. Effective
in the first quarter of 2019, we no longer offer home improvement services.
•
Revenue earned through resale of online advertising space to third parties is also classified in other products. Effective in the first quarter of 2020, we
no longer resell online advertising space.
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We intend to continue adding new offerings for consumers, small businesses and Network Partners on our online marketplace, in order to grow and
diversify our sources of revenue. We may develop such new offerings through internal product development efforts, strategic business relationships with third
parties and/or acquisitions.
Seasonality
Revenue in our Home segment 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 related recession as well as the economic conditions related to the COVID-19 pandemic, have impacted customary seasonal trends.
We anticipate revenue in our newer products, primarily within the Consumer segment, 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 that 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 businesses include macro factors such as
credit availability in the market, interest rates, the strength of the economy and employment.
Competition
Our businesses compete with other online marketing companies, including online intermediaries that operate network-type arrangements. We also face
competition from lenders and insurance agents that source consumers directly. These companies typically operate consumer-branded websites and attract
consumers via online banner ads, keyword placement on search engines, direct mail, television ads, retail branches, realtors, brokers, radio and other sources,
partnerships with affiliates and business development arrangements with others, including major online portals.
Corporate History
LendingTree, Inc. is the parent of LT Intermediate Company, LLC, which holds all of the outstanding ownership interests of LendingTree, LLC, and
LendingTree, LLC owns several companies. We were originally incorporated in the state of Delaware in June 1996 and commenced nationwide operations in
July 1998.
In May 2003, IAC/InterActiveCorp ("IAC") acquired LendingTree, LLC, which at the time of the acquisition was known as LendingTree, Inc. Following
the acquisition, in December 2004, IAC converted LendingTree, Inc. to a Delaware limited liability company, LendingTree, LLC.
In April 2008, IAC formed Tree.com, Inc. (now known as LendingTree, Inc.), a Delaware corporation, which held all of the ownership interests of
LendingTree, LLC. In August 2008, Tree.com Inc., including its wholly-owned subsidiary, LendingTree, LLC, was spun off from IAC and became the
separately publicly-traded company that we are today.
Effective January 1, 2015, we changed our name from Tree.com, Inc. to LendingTree, Inc.
Regulation and Legal Compliance
We market and provide services in heavily regulated industries through a number of different online and offline channels across the United States. As a
result, we are subject to a variety of federal and state laws and regulations, including:
•
•
•
•
The Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, Fair and Accurate Credit Transactions Act of 2003
("FACTA"), the Fair Housing Act, the Real Estate Settlement Procedures Act (“RESPA”), and similar state laws, all of which place certain
restrictions on the manner in which consumer loans are marketed and originated, and some of which impose restrictions on the amount and nature of
fees that may be charged to lenders and real estate professionals for providing or obtaining consumer loan requests;
The Dodd-Frank Wall Street Reform and Consumer Protection Act, which imposes, among other things, limitations on fees charged by mortgage
lenders, and requirements related to mortgage disclosures;
Federal and State licensing laws;
Federal and state laws, which impose restrictions on activities conducted through telephone, mail, email, mobile device or the Internet, including the
Telemarketing Sales Rule ("TSR"), the Telephone Consumer Protection Act ("TCPA"), the Controlling the Assault of Non-Solicited Pornography and
Marketing Act of 2003 ("CAN-SPAM") and the Federal Trade Commission Act;
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•
•
Federal and state laws relating to offering of credit repair services to consumers, including such laws that impose restrictions on the usage and storage
of consumer credit information such as the Credit Repair Organizations Act ("CROA") and the Fair Credit Reporting Act; and
Federal and state laws and regulations relating to data privacy and security, including the Gramm-Leach-Bliley Act (“GLBA”), which may impact
how we collect, use, store, share and otherwise process personal information of consumers and other individuals.
Intellectual Property
We believe that our intellectual property and proprietary rights are vital to our success. To protect our intellectual property and proprietary rights in our
brand, technology, products, services, data, improvements and inventions, we rely on a combination of patent, trademark, copyright, trade secret, and other
laws, as well as contractual restrictions on disclosure, such as confidentiality agreements with strategic partners, employees, consultants and other third
parties. However, we cannot guarantee that such laws or contractual restrictions will provide us with sufficient protection or that we have entered into
confidentiality agreements with each party that has or may have had access to our confidential or proprietary information, know-how or trade secrets.
As we develop or identify new or improved proprietary technologies, we seek patent protection in the United States and abroad, as appropriate. As of
December 31, 2021, we owned one issued U.S. patent related to the system and method for collecting financial information over a global communications
network, which expires in 2032. We also own one provisional U.S. patent related to systems and methods for optimizing software development and testing
which expires in October 2022, at which time a non-provisional patent application will be filed.
Many of our services are offered under proprietary trademarks and service marks. We believe that our LendingTree trademark, which is applied to all of
our services, including our acquired businesses, creates positive responses in network partners and consumers. We generally apply to register or secure by
contract our principal trademarks and service marks as they are developed and used. As of December 31, 2021, we owned 41 trademarks and service marks,
35 of which are registered with the United States Patent and Trademark Office ("USPTO"), and six of which have applications pending with the USPTO but
have not yet been registered. These registrations can typically be renewed at 10-year intervals.
In addition, we reserve and register domain names when and where we deem appropriate. As of December 31, 2021, we owned approximately 1,600
registered domain names. We also have agreements with third parties that provide for the licensing of patented, copyrighted and other proprietary technology
used in our business.
Our success will significantly depend on our ability to obtain, maintain, enforce and protect our intellectual property and proprietary rights and operate
our business without infringing, misappropriating or otherwise violating any intellectual property or proprietary rights of third parties. However, there can be
no assurance that our efforts will be successful. Even if our efforts are successful, we may incur significant costs in defending our intellectual property and
proprietary rights or combatting allegations by third parties. From time to time, we may be subject to legal proceedings or claims, or threatened legal
proceedings or claims, including allegations of infringement, misappropriation or other violations of third-party patents, trademarks, copyrights, trade secrets
or other intellectual property or proprietary rights of third parties. In addition, the use of litigation and other dispute resolution processes, such as Uniform
Domain Name Dispute Resolution, may be necessary for us to enforce our intellectual property rights, including our trade secrets, or to determine the validity
and scope of intellectual property or proprietary rights claimed by others. See "Risk Factors" for a more comprehensive description of risks related to our
intellectual property.
Human Capital Resources
We are committed to investing in our employees, and nurturing an entrepreneurial and dynamic work environment. We achieve this through dedication to
our core principles which include: building truly outstanding products, being open and candid, acting with urgency and creativity, taking charge, setting goals
and being accountable, and committing to excellence. Employees are stockholders of the Company, allowing them to take charge and have a direct impact on
company choices. We provide individual, career and leadership development opportunities to strengthen skills. We have implemented strong policies and
practices to foster a safe and inclusive workplace allowing employees to develop and reach their full potential, and although our employees hold many values
in common, our leadership team actively works to attract, develop, and retain talent from a range of backgrounds and experiences in order to benefit from
diverse perspectives. The Company and our employees are committed to helping our communities thrive through a variety of Company-sponsored annual and
ongoing community outreach efforts.
As of December 31, 2021, we had 1,425 employees, of which approximately 1,407 are full-time and 18 are temporary or part-time. None of our
employees are represented under collective bargaining agreements, and we consider our relations with employees and independent contractors to be good.
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Additional Information
Website and Public Filings
We maintain a corporate website at www.lendingtree.com and an investor relations website at investors.lendingtree.com. None of the information on or
accessible through our websites is incorporated by reference in this report, or in any other filings with, or in any information furnished or submitted to, the
Securities and Exchange Commission (the "SEC").
We make available, free of charge through our website, our reports on Forms 10-K, 10-Q and 8-K, our proxy statement for the annual shareholders'
meeting and beneficial ownership reports on Forms 3, 4 and 5 as soon as reasonably practicable after we file such material with, or furnish such material to,
the SEC. Our filings with the SEC are available to the public at the SEC's website at www.sec.gov.
Code of Business Conduct and Ethics
Our code of business conduct and ethics, which applies to all employees, including all executive officers and senior financial officers and directors, is
posted on the investor relations section of our website. This is our code of ethics pursuant to Item 406 of SEC Regulation S-K and the rules of the Nasdaq
Stock Market. Any amendments to or waivers of the code of business conduct and ethics that are of the type described in Item 406(b) and (d) of Regulation S-
K will be disclosed on our website or in public filings to the extent required by the applicable rules.
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ITEM 1A. Risk Factors
Risk Factors
Investing in our common stock involves a high degree of risk. Before making an investment decision, you should carefully consider the risks described
below, together with all of the other information included in this annual report and the information incorporated by reference herein. If any of the risks
described below, or incorporated by reference into this annual report actually occur, our business, financial condition or results of operations could suffer. In
that case, the trading price of our common stock may decline and you may lose all or part of your investment. The risks and uncertainties we have described
are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business,
financial condition and results of operations. Certain statements below are forward-looking statements. See the information included under the heading
"Cautionary Statement Regarding Forward-Looking Information" included elsewhere in this annual report.
Risks Related to our Business
Adverse conditions in the primary and secondary mortgage markets, as well as the general economy, could have a material adverse effect on our business,
financial condition and results of operations.
Constraints in the primary and secondary mortgage markets in the past have had, and may in the future have, an adverse effect on our business, financial
condition and results of operations. Generally, increases in interest rates adversely affect the ability of our mortgage Network Partners to close loans, and
adverse economic trends limit the ability of our mortgage Network Partners to offer home loans other than low-margin conforming loans. Our businesses may
experience a decline in demand for their offerings due to decreased consumer demand as a result of the conditions described above, now or in the future. The
decreased consumer demand for mortgage refinancing typically leads to decreased traffic to our website and higher associated selling and marketing efforts
associated with that traffic. While higher lender demand during these periods often leads to an increase in the amount lenders will pay per matched lead and
higher revenue earned per consumer, 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 interest rate environment.
Conversely, during periods with decreased interest rates, mortgage Network Partners have less incentive to use our marketplaces, or in the case of sudden
increases in consumer demand, our mortgage Network Partners may lack the ability to support sudden increases in volume. Situations like this could have a
material adverse effect on our business, financial condition and results of operations.
We depend on the financial strength of our Network Partners and our relationships with them, and any adverse changes in these relationships could
adversely affect our business, financial condition and results of operations.
Our success depends in significant part on the financial strength of lenders, insurers and lead purchasers participating on our marketplaces and continuing
relationships with such lenders, insurers and lead purchases. Network Partners could, for any reason, experience financial difficulties and cease participating
on our marketplaces, fail to pay match and/or closing fees when due and/or drop the quality of their services to consumers. We could also have commercial or
other disputes with such Network Partners from time to time. The occurrence of one or more of these events with a significant number of Network Partners
could, alone or in combination, have a material and adverse effect on our business, financial condition and results of operations.
If we fail to meet certain metrics required by Network Partners, then our business and financial results may be harmed.
We compete against other online marketing companies in significant part based on the quality and convertibility of the leads we generate. Network
Partners have expectations as to the quality and conversion rate of the leads that we generate, and such expectations could change over time. The leads that we
supply to Network Partners may not meet the expectations that they have for such leads. Conversion rates for leads may be impacted by factors other than the
lead quality, many of which are outside our control. Such factors include competition in lending and insurance markets and sales and marketing practices of
Network Partners. Failure to meet the expectations of Network Partners in terms of quality and convertibility of leads may result in reduced fees paid to us by
such Network Partners, or in extreme cases, the loss of one or more Network Partners, which could materially and adversely affect our business, financial
condition and results of operations.
Failure to maintain our reputation and brand recognition and attract and retain consumers in a cost-effective manner could materially and adversely
affect our business, financial condition and results of operations. As such, adverse publicity from litigation or governmental investigations could impact
our business and financial condition and results of operations.
In order to attract visitors to our websites, convert these visitors into loan or other financial product requests for our Network Partners and lead purchasers
and generate repeat visits from consumers, our businesses must promote and maintain
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their reputations and various brands. Brand promotion and maintenance requires the expenditure of considerable money and resources for online and offline
advertising, marketing and related efforts, as well as the continued provision and introduction of high-quality products and services that meet the needs of
consumers at competitive prices, the ability to maintain consumers' trust, and the ability to successfully differentiate our brand, products and services from
those of our competitors.
Brand recognition is a key differentiating factor among providers of online services. We believe that continuing to build and maintain the recognition of
our various brands is critical to achieving increased demand for the services provided by our businesses. Accordingly, we have spent, and expect to continue to
spend, significant amounts on, and devote significant resources to, branding, advertising and other marketing initiatives, which may not be successful or cost-
effective. Our brand promotion activities may not generate consumer awareness or yield increased revenue, and even if they do, any increased revenue may
not offset the expenses we incur in building our brand.
Adverse publicity and the potential corresponding impact on our reputation may be accelerated and amplified by the widespread use of social media
platforms. Furthermore, adverse publicity, from legal proceedings against us or our businesses, including governmental proceedings and consumer class action
or other litigation, or the disclosure of information from security breaches or other incidents, could negatively impact our reputation and our various brands,
which could materially and adversely affect our business and financial condition and results of operations. In addition, the actions of our third-party marketing
partners who engage in advertising on our behalf could negatively impact our reputation and our various brands.
The failure of our businesses to maintain or enhance the reputation and recognition of their respective brands and attract and retain consumers in a cost-
effective manner could materially and adversely affect our business, financial condition and results of operations.
We depend on search engines, online advertising and other online sources to attract visitors to our websites, and if we are unable to attract these visitors
and convert them into consumer requests for our Network Partners in a cost-effective manner, our business and financial results may be harmed.
Our success depends on our ability to attract online consumers to our websites and convert them into customers in a cost-effective manner. We depend, in
part, on search engines, online advertising and other online sources for our website traffic. We are included in search results as a result of both paid search
listings, where we purchase specific search terms that result in the inclusion of our advertisement, and, separately, organic searches, that depend upon the
searchable content on our sites. Search engines and other online sources revise their algorithms, and introduce new advertising products, from time to time in
an attempt to optimize their search results.
If one or more of the search engines or other online sources on which we rely for website traffic were to modify its general methodology for how it
displays our websites, resulting in fewer consumers clicking through to our websites, our business could suffer. In addition, if our online advertisements are
not able to reach certain consumers due to consumers' use of ad-blocking software or other ad-blocking capabilities, our business could suffer. Furthermore, if
any free search engine traffic on which we rely begins charging fees for listing or placement, or if one or more of the search engines or other online sources on
which we rely for purchased listings, modifies or terminates its relationship with us, our expenses could rise, we could lose customers, and traffic to our
websites could decrease, all of which could have a material adverse effect on our business, financial condition and results of operations.
Our credit card product offering is subject to particular risks.
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adverse conditions in the economy may affect credit card issuers and their willingness to issue new credit;
credit losses among credit card issuers may increase beyond normal and budgeted levels which could cause a reduction in demand;
interest rate increases may make balance transfer cards less profitable for issuers;
credit card issuers and other advertisers in the business verticals in which we operate may be unwilling to advertise on our websites or mobile
applications;
changes in application approval rates by credit card issuer customers;
increased competition and its effect on our website traffic, click-through rates, advertising rates, revenue, margins, and market share;
ability to provide competitive service to credit card issuers and to consumers using our online offerings and other platforms;
credit card issuers may determine that the online digital marketing channel is no longer a viable marketing platform for generating new credit card
customers;
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•
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our ability to maintain brand recognition for both LendingTree and CompareCards and to effectively leverage the LendingTree brand with the
CompareCards brand; and
our ability to develop new products and services and enhance existing ones.
If our credit card product is impacted by the risks described above, then our results of operations and future growth prospects could be materially and
adversely affected.
Our insurance business, QuoteWizard, is significant to our revenue, and operational issues in this business could have a material impact on our results of
operations.
The QuoteWizard business poses risks for our ongoing operations, including, among others:
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adverse conditions in the economy may affect insurance carriers and their willingness to issue policies;
covered losses among insurance carriers may increase beyond normal and budgeted levels which could cause a reduction in demand for leads;
insurance carriers and other advertisers in the business verticals in which we or QuoteWizard operate may be unwilling to advertise on our or
QuoteWizard’s websites or mobile applications;
• major publishers may determine they no longer want QuoteWizard as an advertising partner;
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changes in underwriting approval rates by insurance carrier customers;
increased competition and its effect on our or QuoteWizard’s website traffic, click-through rates, advertising rates, revenue, margins, and market
share;
the cost of media may rise at a faster pace than QuoteWizard's monetization of traffic;
ability to provide competitive service to insurance carriers and to consumers using QuoteWizard’s and our online offerings and other platforms;
insurance carriers may determine that the online digital marketing channel is no longer a viable marketing platform for generating new insurance
customers;
government regulatory agencies may hinder or disallow the operation of QuoteWizard's marketplace;
new government regulations and/or laws that affect the ability of private insurance carriers to market products directly to the consumer;
new government regulations and/or laws that would replace private insurance programs with government run programs;
our ability to maintain brand recognition for both LendingTree and QuoteWizard and to effectively leverage the LendingTree brand with the
QuoteWizard brand;
our ability to develop new products and services and enhance existing ones;
our ability to retain key employees of QuoteWizard;
costs and expenses associated with any undisclosed or potential liabilities;
that the business acquired in the acquisition may not continue to perform as well as anticipated; and
assumed liabilities associated with QuoteWizard’s historical operations, including liabilities arising from data privacy and security laws and
regulations or security breaches.
If the QuoteWizard business is impacted by the risks described above, then our results of operations and future growth prospects could be materially and
adversely affected.
Our insurance agency businesses pose unique risks.
Our Medicare and Property and Casualty insurance agency businesses employ a different business model than the rest of our businesses and are subject to
unique risks because of our role in selling insurance policies direct to consumers. In that role, we act as agents of insurance carriers or of other insurance
agents, known as uplines, that we contract with. We must secure and maintain contracts with those carriers and agents, and our individual agents must be state-
licensed. Our revenues are generated from sales commissions which are based upon the insurance premiums of policies sold and our models to determine the
appropriate policies for consumers. Our models could be incorrect, and we could generate less revenue than expected. We could also lose appointments with
carriers or uplines that affect our ability to sell policies and generate revenue. Carrier losses, which could result from increased repair time and costs due to
inflation and supply chain issues in the automotive and housing
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industries, among other issues, could cause carriers to reduce commissions or increase premiums, both of which would have a negative effect on us. Insurance
carriers could increase premiums to the point where we cannot profitably sell policies or consumers make the decision to forego the purchase of insurance.
Our licensed insurance agents are critical to our agency business, and our inability to attract and retain effective agents or for them to obtain or retain their
licenses to sell policies could have a negative impact on our results of operation.
Our personal loan product is a key product within our Consumer segment. If lenders participating on our marketplace decide to reduce their offerings of
personal loans or if such loans become unattractive to consumers because of higher interest rates demanded by lenders or other reasons, then our results
of operations and future growth prospects could be materially and adversely affected.
Personal loans are unsecured obligations and generally carry shorter terms and smaller loan amounts than mortgages. Because they are unsecured, they
are generally riskier assets for lenders than mortgages or other secured loans. Consumer demand for unsecured loans offered on our marketplace is often for
refinancing of higher interest credit card debt or for a lower interest alternative to credit card debt for a contemplated large purchase that would otherwise be
purchased with a credit card. Lenders participating on our marketplace may reduce their willingness to make personal loans at more attractive interest rates
than credit card debt and may for that reason, or for any other reason, reduce their demand for requests generated from our personal loan marketplace. Reasons
that lenders might reduce their willingness to make personal loans at attractive interest rates may include regulatory changes, stricter institutional lending
criteria, a lack of adequate funding sources or capital for loan originations, or increased borrower default levels, which may occur upon adverse changes in
regional, national or global economic conditions. Additionally, lenders may tighten their underwriting standards, making it more difficult for consumers to
qualify for personal loans. Personal loan lenders are increasingly focused on profitability and are attempting to reduce their acquisition costs of new
customers. If lenders participating on our marketplace decide to reduce their offerings of personal loans, tighten their underwriting standards, or if personal
loans become unattractive to consumers because of higher interest rates demanded by lenders or other reasons, then our results of operations and future growth
prospects could be materially and adversely affected.
Any adverse changes in relationships with our Network Partners, or failure to meet certain metrics required by Network Partners, could adversely affect
our business. Network Partners affiliated with our marketplaces are not precluded from offering products and services outside of our marketplaces, or
obtaining products and services from our competitors.
Because our businesses do not have exclusive relationships with Network Partners, consumers may obtain loans, insurance and other financial products
from these third-party service providers without having to use our marketplaces. Network Partners can offer loans, insurance and other financial products
directly to consumers through their own marketing campaigns or other traditional methods of distribution, such as referral arrangements, physical store-front
operations or broker agreements. Network Partners may also offer loans, insurance and other financial products and services to prospective customers online
directly, through one or more online competitors of our businesses, or both. If a significant number of consumers seek loans, insurance and other financial
products and services directly from Network Partners or through our competitors as opposed to through our marketplaces, our business, financial condition
and results of operations could be materially and adversely affected.
The COVID-19 pandemic impacted our business, and the ultimate impact on our 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 the pandemic.
The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, created significant volatility and disruption in
financial markets, and, at times, increased unemployment levels. In addition, the pandemic resulted in temporary closures of many businesses and the
institution of various lockdown orders and sheltering in place requirements in many states and communities. As a result, the demand for our products, in
particular in our Consumer segment, was significantly impacted. Our business operations may be disrupted if closures or lockdowns are reinstated or 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, financial condition and 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.
Some of our products are new to the market and may fail to achieve or maintain customer acceptance and profitability.
We have launched a number of new products over the last several years. We do not have as much experience with these new products as with the other
more mature products. Accordingly, new products may be subject to greater risks than our more mature products.
The success of our new products will depend on a number of factors, including:
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Implementing, at an acceptable cost, product features offered by our competitors and/or expected by consumers, lenders and lead purchasers;
• Market acceptance by consumers, lenders and lead purchasers;
• Offerings by current and future competitors;
• Our ability to attract and retain management and other skilled personnel for these businesses;
• Our ability to collect amounts owed to us from third parties;
• Our ability to develop successful and cost-effective marketing campaigns; and
• Our ability to timely adjust marketing expenditures in relation to changes in demand for the underlying products and services offered by our Network
Partners.
Our results of operations may suffer if we fail to successfully anticipate and manage these issues associated with new products.
If we are unable to continually enhance our products and services and adapt them to technological changes and consumer and lender, insurer and/or lead
purchaser needs, including the emergence of new computing devices and more sophisticated online services, we may lose market share and revenue and
our business could suffer.
We need to anticipate, develop and introduce new products, services and applications on a timely and cost-effective basis that keep pace with
technological developments and changing consumer and customer needs. For example, the number of individuals who access the internet through devices
other than a personal computer, such as tablets, mobile telephones, voice assistants, televisions and set-top box devices has increased significantly and this
trend is likely to continue. Because each manufacturer or distributor may establish unique technical standards for its devices, our websites may not be
functional or viewable on these devices. Additionally, new devices and new platforms are continually being released. Consumers access many traditional web
services on mobile devices through applications, or apps.
It is difficult to predict the problems we may encounter in improving our websites' functionality with these alternative devices or developing apps for
mobile platforms. If we fail to develop our websites or apps to respond to these or other technological developments and changing consumer and customer
needs cost effectively, or if consumers and customers respond negatively to changes, we may lose market share, which could materially and adversely affect
our business, financial condition and results of operations.
We improve our products and services in ways that forego short-term gains.
We are constantly striving to improve the user experience for our consumers who use our websites and applications and for our Network Partners. Some
of our changes may have the effect of reducing our short-term revenue or profitability if we believe that the benefits will ultimately improve our financial
performance over the long-term. Any short-term reductions in revenue or profitability could be more severe than we anticipate or these decisions may not
produce the long-term benefits that we expect, in which case our business and results of operations could be adversely affected.
The intended benefits of acquisitions may not be realized.
Our acquisitions pose risks for our ongoing operations, including, among others:
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that senior management’s attention may be diverted from the management of daily operations to the integration of the businesses acquired in the
acquisition;
• we may be unable to retain key employees of businesses acquired;
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our ability to fully integrate the businesses acquired;
costs and expenses associated with any undisclosed or potential liabilities;
that the businesses acquired in the acquisition may not perform as well as anticipated;
adverse conditions in the economy may affect the lenders or insurance carriers or other customers of the acquired businesses and their willingness to
issue new credit, write new policies or otherwise expand their businesses;
advertisers in the business verticals in which we or the acquired businesses operate may be unwilling to advertise on our websites or mobile
applications;
increased competition and its effect on our or the acquired businesses' website traffic, click-through rates, submitted consumer requests, advertising
rates, revenue, margins, and market share;
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our ability to maintain brand recognition for both us and the acquired businesses and to effectively leverage the LendingTree brand with the newly
acquired brands;
our ability to develop new products and services and enhance existing ones;
assumed liabilities associated with the historical operations of the acquired businesses, including as a result of data privacy and security laws and
regulations or security breaches.
As a result of the foregoing, our acquisitions may not be accretive to us in the near term or at all. Furthermore, if we fail to realize the intended benefits of
the business acquired in the acquisition, the market price of our common stock could decline to the extent that the market price reflects an expectation of those
benefits.
Other acquisitions or strategic investments that we pursue may not be successful and could disrupt our business and harm our financial condition.
We may consider or undertake strategic acquisitions of, or material investments in, businesses, products or technologies, such as our February 2020
acquisition of an equity interest in Stash. We may not be able to identify suitable acquisition or investment candidates, or even if we do identify suitable
candidates, they may be difficult to finance, expensive to fund and there is no guarantee that we can obtain any necessary regulatory approvals or complete
such transactions on terms that are favorable to us. To the extent we pay the purchase price of any acquisition or investment in cash or through borrowings
under our Credit Facility (as defined herein), it would reduce our cash balances and/or result in indebtedness we must service, which may have a material and
adverse effect on our business and financial condition. If the purchase price is paid with our stock, it would be dilutive to our stockholders. In addition, we
may assume liabilities associated with a business acquisition or investment, including unrecorded liabilities that are not discovered at the time of the
transaction, and the repayment of those liabilities may have a material and adverse effect on our financial condition. There may also be litigation or other
claims arising in connection with an acquisition itself.
We may not be able to successfully integrate the personnel, operations, businesses, products or technologies of an acquisition or investment. Integration
may be particularly challenging if we enter into a line of business in which we have limited experience and the business operates in a difficult legal, regulatory
or competitive environment. We may find that we do not have adequate operations or expertise to manage the new business. The integration of any acquisition
or investment may divert management's time and resources from our core business, which could impair our relationships with our current employees,
customers and strategic partners and disrupt our operations. Acquisitions and investments also may not perform to our expectations for various reasons,
including the loss of key personnel and/or customers. If we fail to integrate acquisitions or investments or realize the expected benefits, we may lose the return
on these acquisitions or investments or incur additional transaction costs and our business and financial condition may be harmed as a result.
If we fail to manage our growth effectively, our business and results of operations could be harmed.
We have experienced rapid and significant growth in our headcount and operations, including as a result of acquisitions, which places substantial demand
on management and our operational infrastructure. As we continue to grow, we must effectively integrate, develop and motivate a large number of new
employees, while maintaining the beneficial aspects of our company culture. If we do not manage the growth of our business and operations effectively, the
quality of our services and efficiency of our operations could suffer, which could harm our business and results of operations.
We rely on the performance of highly skilled personnel and if we are unable to attract, retain, develop and motivate well-qualified employees, our business
and results of operations could be harmed.
We believe our success has depended, continues to and in the future will depend, on the efforts and talents of our management team and our highly skilled
employees and workers, including our software engineers, analysts, marketing professionals and sales staff. Our future success depends on our continuing
ability to attract, develop, motivate and retain highly qualified and skilled employees. The loss of any of our senior management or key employees could
materially and adversely affect our ability to build on the efforts that they have undertaken and to execute our business plan, and we may not be able to find
adequate replacements. Despite our current efforts, we cannot ensure that we will be able to retain the services of any members of our senior management or
other key employees. If we do not succeed in attracting well-qualified employees or developing, retaining and motivating existing employees, our business
and results of operations could be harmed.
Network Partners on our marketplaces may not provide competitive levels of service to consumers, which could materially and adversely affect our brands
and businesses and their ability to attract consumers.
The ability of our businesses to provide consumers with a high-quality experience depends, in part, on consumers receiving competitive levels of
convenience, customer service, price and responsiveness from Network Partners participating on our marketplaces with whom they are matched. If these
providers do not provide consumers with competitive levels of
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convenience, customer service, price and responsiveness, the value of our various brands may be harmed, the ability of our businesses to attract consumers to
our websites may be limited and the number of consumers matched through our marketplaces may decline, which could have a material and adverse effect on
our business, financial condition and results of operations.
A significant portion of our total revenue has, in the past, derived from one Network Partner, and our results of operations could be adversely affected and
stockholder value harmed if we lose significant business from this Network Partner.
For the years ended December 31, 2020 and 2019, one Network Partner accounted for 15% and 12%, respectively, of total consolidated revenue, and this
Network Partner remains a significant contributor to our total revenue. If this significant Network Partner were to cease purchasing consumer requests and we
were unable to replace the associated demand, the loss could have a material adverse effect on our results of operations in the short term and potentially also
the longer term. Also, if this Network Partner reduces its volume of consumer requests for any reason, our business could be adversely affected.
We have incurred significant operating losses in the past and we may not be able to generate sufficient revenue to be profitable over the long term.
We have incurred operating losses from continuing operations at times in our history, and although we were profitable in 2021, we have an accumulated
deficit of $571.8 million at December 31, 2021. If we fail to maintain or grow our revenue and manage our expenses, we may incur significant losses in the
future and not be able to maintain profitability.
Our Credit Facility contains financial covenants and other restrictions on our actions, and it could therefore limit our operational flexibility or otherwise
adversely affect our financial condition. Failure to comply with the terms of any such facility could impair our rights to the assets that have been pledged
as collateral under the facility.
On September 15, 2021, we entered into a $200.0 million five-year senior secured revolving credit facility (the “Revolving Facility”) and a $250.0 million
seven-year senior secured delayed draw term loan facility (the “Term Loan Facility” and together with the Revolving Facility, the “Credit Facility”). The
Revolving Facility matures on September 15, 2026, and the Term Loan Facility matures on September 15, 2028. The delayed draw commitments under the
Term Loan Facility will be available until June 1, 2022. Borrowings under the Credit Facility can be used to finance working capital needs, capital
expenditures, and general corporate purposes, including to finance permitted acquisitions. As of February 28, 2022, we have outstanding a $0.2 million letter
of credit under the Revolving Facility. No term loans have been drawn under the Term Loan Facility as of February 28, 2022.
The Credit Facility contains a restrictive financial covenant, which limits the amount of first lien consolidated debt to an EBITDA ratio subject to a step
up following a material acquisition. In addition, the Credit Facility contains customary affirmative and negative covenants, including, subject to certain
exceptions, restrictions on our ability to, among other things:
•
•
incur additional indebtedness;
grant liens;
• make loans and investments;
•
enter into mergers or make certain fundamental changes;
• make certain restricted payments, including dividends, distributions, stock repurchases or redemptions;
•
•
•
sell assets;
enter into transactions with affiliates; and
enter into restrictive transactions.
The Credit Facility requires us to pledge as collateral, subject to certain customary exclusions, substantially all of our assets. The obligations under this
facility are unconditionally guaranteed, subject to certain customary exclusions, on a senior basis by our material domestic subsidiaries, which guaranties are
secured, subject to certain customary exclusions, by substantially all of each such guarantor's assets.
If an event of default occurs or if we otherwise fail to comply with any of the negative or affirmative covenants of the Credit Facility, the lenders may
declare all of the obligations and indebtedness under such facility due and payable. In such a scenario, the lenders could exercise their lien on the pledged
collateral, which would have a material adverse effect on our business, operations, financial condition and liquidity. For additional information on the Credit
Facility, see Note 15—Debt, in the notes to the consolidated financial statements included elsewhere in this annual report.
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Risks Related to our Industry
We participate in a highly competitive market, and pressure from existing and new competitors may materially and adversely affect our business, results of
operations and financial condition. If any of our competitors are more successful than we are at attracting and retaining customers or Network Partners,
our business, financial condition and results of operations could be materially and adversely affected.
We currently compete with a number of other online marketing companies and we expect that competition will intensify. We also face the possibility of
new competitors. Some of these existing competitors may have more capital or complementary products or services than we do, and they may leverage their
greater capital or diversification in a manner that adversely affects our competitive position, including by making strategic acquisitions. In addition, new
competitors may enter the market and may be able to innovate and bring products and services to market faster, or anticipate and meet consumer or Network
Partner demand before we do. Other newcomers, including major search engines and content aggregators, may be able to leverage their existing products and
services or access to data to our disadvantage. We may be forced to expend significant resources to remain competitive with current and potential competitors.
If any of our competitors are more successful than we are at attracting and retaining customers or Network Partners, our business, financial condition and
results of operations could be materially and adversely affected.
Risks Related to our Operations
Our success depends, in part, on the integrity of our systems and infrastructures. System interruption and the lack of integration and redundancy in these
systems and infrastructures may have a material and adverse impact on our business, financial condition and results of operations.
Our success depends, in part, on our ability to maintain the integrity of our systems and infrastructures, including websites, information and related
systems, call centers and distribution and fulfillment facilities. System interruption and the lack of integration and redundancy in our information systems and
infrastructures may materially and adversely affect our ability to operate websites, process and fulfill transactions, respond to customer inquiries and generally
maintain cost-efficient operations. We may experience occasional system interruptions that make some or all systems or data unavailable or prevent our
businesses from efficiently providing services or fulfilling orders. We also rely on affiliate and third-party computer systems, broadband and other
communications systems and service providers in connection with the provision of services generally, as well as to facilitate, process and fulfill transactions.
Any interruptions, outages or delays in our systems and infrastructures, our businesses, our affiliates and/or third parties, or deterioration in the performance of
these systems and infrastructures, could impair the ability of our businesses to provide services, fulfill orders and/or process transactions. Fire, flood, power
loss, telecommunications failure, hurricanes, tornadoes, earthquakes, acts of war or terrorism, acts of God, unauthorized intrusions or computer viruses, and
similar events or disruptions may damage or interrupt computer, broadband or other communications systems and infrastructures at any time. Any of these
events could cause system interruption, delays and loss of critical data, and could prevent our businesses from providing services, fulfilling orders and/or
processing transactions. While our businesses have backup systems and other resiliency measures in place for certain aspects of their operations, these systems
are not fully redundant and disaster recovery planning is not sufficient for all eventualities. In addition, we may not have adequate insurance coverage to
compensate for losses from a major interruption. If any of these events were to occur, it could materially and adversely affect our business, financial condition
and results of operations.
We are continuously developing, updating, and rewriting critical platforms that support our business. The risks associated with this work include, but are
not limited to, operational implementation, downtimes, and diversion of management and technical resources. If the work is more challenging or time
consuming than expected, then our business, financial condition and results of operations could be materially and adversely affected.
Breaches or failures of our systems or website security, the theft, unauthorized access, acquisition, use, disclosure, modification or misappropriation of
personal information, the occurrence of fraudulent activity, or other data security-related incidents may have a material and adverse impact on our
business, financial condition and results of operations.
In the processing of consumer transactions, our businesses collect, use, store, disclose, transfer, and otherwise process a large volume of personal
information and other confidential, proprietary and sensitive data. Breaches or failures of security involving our systems or website or those of any of our
affiliates, Network Partners or external service providers have occurred in the past and may occur in the future, and have in the past resulted in, and could in
the future result in, the theft, unauthorized access, acquisition, use, disclosure, modification or misappropriation of personal information of our consumers,
employees or third parties with whom we conduct business, or other confidential, proprietary and sensitive data, fraudulent activity, or system disruptions or
shutdowns. The occurrence of any actual or attempted breach, failure of security or fraudulent activity, the reporting of such an incident, whether accurate or
not, or our failure to make adequate or timely disclosures to the public or law enforcement agencies following any such event, whether due to delayed
discovery or a failure to follow existing protocols,
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could result in claims made against us or our affiliates, Network Partners or external service providers, which could result in state and/or federal litigation and
related financial liabilities, as well as criminal penalties or civil liabilities, regulatory actions from state and/or federal governmental authorities, and
significant fines, orders, sanctions, litigation and claims against us by consumers or third parties and related indemnification obligations. Actual or perceived
security breaches or failures also have in the past caused, and may in the future cause, financial losses, increased costs, interruptions in the operations of our
business, misappropriation of assets, significant damage to our brand and reputation with consumers and third parties with whom we do business, and result in
adverse publicity, loss of consumer confidence, distraction to our management, and reduced sales and profits, any or all of which could have a material and
adverse impact on our business, financial condition and results of operations.
Such breaches, failures and fraudulent activity may take many forms, including check fraud, fraudulent inducement, electronic fraud, wire fraud,
computer viruses, phishing, social engineering, denial or degradation of service attacks, malware, ransomware or other cyber-attacks, and other dishonest acts,
any of which could be the result of a circumvention or failure of our data security processes, procedures, tools, and controls. Our systems are also subject to
compromise from internal threats, such as theft, misuse, unauthorized access or other improper actions by employees, external service providers and other
third parties with otherwise legitimate access to our systems and website. Data security-related incidents and fraudulent activity are increasing in frequency
and evolving in nature. We rely on a framework of security, processes, procedures, tools, and controls designed to protect our information and assets but, given
the unpredictability of the timing, nature and scope of data security-related incidents and fraudulent activity, there can be no assurance that any security
procedures and controls that we or our external service providers have implemented will be sufficient to prevent data security-related incidents or other
fraudulent activity from occurring. Furthermore, because the methods of attack and deception change frequently, are increasingly complex and sophisticated,
and can originate from a wide variety of sources, including third parties such as external service providers and even nation-state actors, despite our reasonable
efforts to ensure the integrity of our systems and website, it is possible that we may not be able to anticipate, detect, appropriately react and respond to, or
implement effective preventative measures against, all security breaches and failures and fraudulent activity. As a result, our business, financial condition or
results of operations could be materially and adversely affected.
We also face risks associated with security breaches affecting third parties and their suppliers or partners (fourth parties) with whom we are affiliated or
otherwise conduct business. Due to applicable laws and regulations or contractual obligations, we may be held responsible for any breach, failure or fraudulent
activity attributed to our affiliates, Network Partners or external service providers as they relate to the information we share with them. In addition, because we
do not control our Network Partners or external service providers and our ability to monitor their data security is limited, we cannot ensure the security
measures they take will be sufficient to protect our information. We may be required to expend significant capital and other resources to protect against,
respond to, and recover from any potential, attempted, or existing security breaches or failures and their consequences. As data security-related threats
continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate
and remediate any information security vulnerabilities. In addition, our remediation efforts may not be successful. The inability to implement, maintain and
upgrade adequate safeguards could have a material and adverse impact on our business, financial condition and results of operations. Moreover, there could be
public announcements regarding any data security-related incidents and any steps we take to respond to or remediate such incidents, and if securities analysts
or investors perceive these announcements to be negative, it could, among other things, have a substantial adverse effect on the price of our common stock.
Consumers are generally concerned with security and privacy of the internet, and any publicized security problems affecting our businesses or those of third
parties with whom we are affiliated or otherwise conduct business may discourage consumers from doing business with us, which could have a material and
adverse effect on our business, financial condition and results of operations.
While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to cover us against claims related to
breaches, failures or other data security-related incidents, and we cannot be certain that cyber insurance will continue to be available to us on economically
reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us
that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large
deductible or co-insurance requirements, could have a material and adverse effect on our business, financial condition and results of operations.
Risks Related to Legal, Compliance and Regulation
Failure to comply with past, existing or new laws, rules and regulations, or to obtain and maintain required licenses, could materially and adversely affect
our business, financial condition and results of operations.
We market and provide services in heavily regulated industries through a number of different channels across the United States. As a result, our
businesses have been and remain subject to a variety of laws, rules, regulations, statutes, standards, policies and procedures in various jurisdictions in the
United States and abroad, which are subject to change at any time. The failure of our businesses to comply with past, existing or new laws, rules and
regulations, or to obtain and maintain required
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licenses, could result in administrative fines or proceedings against us or our businesses by governmental agencies and/or litigation by consumers, which could
materially and adversely affect our business, financial condition and results of operations and our brand.
Our businesses conduct marketing activities via telephone, mail and/or through online marketing channels, and these general marketing activities are
governed by numerous federal regulations, such as the TSR, the CAN-SPAM Act, the TCPA, the Federal Trade Commission Act, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, and various state telemarketing laws, federal and state data privacy and security laws and their accompanying
regulations and guidelines, among others. Additionally, increased regulation by the Bureau of Consumer Financial Protection (“CFPB”), the U.S. Federal
Trade Commission ("FTC") and Federal Communications Commission ("FCC") has resulted in restrictions on our marketing activities.
Additional federal, state and in some instances, local laws regulate secured and unsecured lending, and insurance brokerage activities, and certain
solicitation activities related to registered investment advisors, which impacts our marketplace, partners and consumers. These laws generally regulate the
manner in which lending and lending-related activities, and insurance brokerage activities, and solicitation activities related to registered investment advisors
are marketed or made available, including advertising and other consumer disclosures, payments for services and record keeping requirements; these laws
include RESPA, the Fair Credit Reporting Act, the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Housing Act and various state laws. State
laws often restrict the amount (and nature) of interest and fees that may be charged by a lender or mortgage broker, or otherwise regulate the manner in which
lenders or mortgage brokers operate or advertise.
State and federal lending laws and regulations generally require accurate disclosure of the critical components of credit costs so that consumers can
readily compare credit terms from various lenders. These laws and regulations also impose certain restrictions on the marketing and advertisement of these
credit terms. Because we are an aggregator of rate and other information regarding many financial products, including mortgages, loans, deposits and credit
cards, we may be subject to some of these laws and regulations and we may be held liable under these laws and regulations for information provided through
our online services.
Our businesses are also subject to various state, federal and/or local laws, rules and regulations that regulate the amount and nature of fees that may be
charged for transactions and incentives, such as rebates, that may be offered to consumers by our businesses, as well as the manner in which these businesses
may offer, advertise or promote transactions. For example, RESPA generally prohibits the payment or receipt of referral fees and fee shares or splits in
connection with residential mortgage loan transactions, subject to certain exceptions. The applicability of referral fee and fee sharing prohibitions to lenders
and real estate providers, including online networks, may have the effect of reducing the types and amounts of fees that may be charged or paid in connection
with real estate-secured loan offerings or activities, including mortgage brokerage, lending and real estate brokerage services, or otherwise limiting our and
our Network Partners' ability to conduct marketing and referral activities.
Various federal, state and, in some instances, local, laws also prohibit unfair, deceptive and abusive marketing and sales practices. We have adopted
appropriate policies and procedures to address these requirements (such as appropriate consumer disclosures and call scripting, call monitoring and other
quality assurance and compliance measures), but it is not possible to ensure that all employees comply with our policies and procedures at all times.
Regulatory authorities and private plaintiffs may allege that we failed to comply with applicable laws, rules and regulations where we believe we have
complied. These allegations may relate to past conduct and/or past business operations, such as our discontinued mortgage origination operation (which was
subject to various state and local laws, rules and regulations). Even allegations that our activities have not complied or do not comply with all applicable laws
and regulations may have a material and adverse effect on our business, financial condition and results of operations. The alleged violation of such laws, rules
or regulations may entitle an individual plaintiff to seek monetary damages, or may entitle an enforcing government agency to seek significant civil or
criminal penalties, costs and attorneys' fees. Regardless of its merit, an allegation typically requires legal fee expenditures to defend against. We have in the
past and may in the future decide to settle allegations of non-compliance with laws, rules and regulations when we determine that the cost of settlement is less
than the cost and risk of continuing to defend against an allegation. Settlements may require us to pay monetary fines and may require us to adopt new
procedures and practices, which may render it more difficult to operate or may raise our internal costs. The future occurrence of one or more of these events
could have a material and adverse effect on our business, financial condition and results of operations.
Compliance with these laws, rules and regulations is a significant component of our internal costs, and new laws, rules and regulations are frequently
proposed and adopted, requiring us to adopt new procedures and practices. Changes to existing laws, rules and regulations or changes to interpretation of
existing laws, rules and regulations could result in further restriction of activities incidental to our business and could have a material and adverse effect on our
business, results of operation and financial condition. Failure to comply with applicable laws and regulatory requirements may result in, among other things,
revocation of or inability to renew required licenses or registrations, loss of approval status, termination of contracts without
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compensation, administrative enforcement actions and fines, private lawsuits, including those styled as class actions, cease and desist orders and civil and
criminal liability.
Our collection, use, storage, disclosure, transfer and other processing of personal information could give rise to significant costs and liabilities, including
as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights, which may have a material and
adverse impact on our business, financial condition and results of operations.
In the course of our operations and the processing of consumer transactions, our businesses collect, use, store, disclose, transfer and otherwise process a
large volume of personal information, including from our consumers, employees and third parties with whom we conduct business, and other user data. The
collection, use, storage, disclosure, transfer and other processing of personal information is increasingly subject to a wide array of federal and state laws and
regulations regarding data privacy and security, including the GLBA, that are intended to protect the privacy of personal information that is collected, used,
stored, disclosed, transferred and otherwise processed in or from the governing jurisdiction. Some countries, including India, also are considering or have
passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of delivering our
products and services. As we seek to expand our business, we are, and may increasingly become, subject to various laws, regulations and standards, as well as
contractual obligations, relating to data use, privacy and security in the jurisdictions in which we operate. In many cases, these laws and regulations apply not
only to third-party transactions, but also to transfers of information between or among us, our affiliates and other parties with whom we conduct business.
These laws, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will
be interpreted and applied in ways that may have a material and adverse impact on our business, financial condition and results of operations. The regulatory
framework for data privacy and security worldwide is continuously evolving and developing and, as a result, interpretation and implementation standards and
enforcement practices are likely to remain uncertain for the foreseeable future.
In the United States, various federal and state regulators, including governmental agencies, like the CFPB and FTC, have adopted, or are considering
adopting, laws and regulations concerning personal information and data privacy and security. This patchwork of legislation and regulation may give rise to
conflicts or differing views of personal privacy rights. For example, certain state laws may be more stringent or broader in scope, or offer greater individual
rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which may
complicate compliance efforts. At the federal level, we are subject to the GLBA, which restricts certain collection, storage, use, disclosure and other
processing by covered companies of certain personal information, requires notice to individuals of privacy practices and provides individuals with certain
rights to prevent the use and disclosure of certain non-public or otherwise legally protected personal information. The GLBA also imposes requirements
regarding the safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines. In addition, many
states in which we operate have laws that protect the privacy and security of personal information. For example, the California Consumer Privacy Act (the
"CCPA") requires covered companies to, among other things, provide certain disclosures to California residents and provide such residents with certain data
protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as
well as a private right of action for certain data breaches that result in the loss of certain personal information. This private right of action may increase the
likelihood of, and risks associated with, data breach litigation. The passage of the California Privacy Rights Act (“CPRA”), which expands upon the CCPA,
will bring additional compliance obligations with respect to certain processing of personal information of California residents once it comes into effect in most
material respects on January 1, 2023. The CCPA and the CPRA contain several exemptions, including a provision to the effect that the CCPA and CPRA do
not apply where the personal information is collected, processed, sold or disclosed pursuant to the GLBA. It is possible that further amendments to the CCPA
and the CPRA will be enacted, but even in their current forms it remains unclear how various provisions of the CCPA and CPRA will be interpreted and
enforced. Numerous other states also have enacted or are in the process of enacting state-level data privacy and security laws and regulations and there is
discussion in Congress of a new federal data protection and privacy law to which we may become subject if it is enacted. All of these evolving compliance
and operational requirements impose significant costs that are likely to increase over time, may require us to modify our data processing practices and policies,
divert resources from other initiatives and projects, and could restrict the way products and services involving data are offered, all of which may have a
material and adverse impact on our business, financial condition and results of operations.
Many statutory requirements, both in the United States and abroad, include obligations for companies to notify individuals of data breaches involving
certain personal information, which have in the past resulted from and may in the future result from, breaches experienced by us or our external service
providers. For example, laws in all 50 U.S. states require businesses to provide notice to consumers whose personal information has been disclosed as a result
of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. Moreover, states have
been frequently amending existing laws, requiring attention to changing regulatory requirements. We also may be contractually required to notify consumers
or other third parties of a security breach. Although we may have contractual protections with our
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external service providers, actual or perceived security breaches have in the past resulted in, and may in the future result in, harm to our reputation and brand,
exposure to potential liability or a need to expend significant resources on data security and in responding to any such actual or perceived breach. Any
contractual protections we may have from our external service providers may not be sufficient to adequately protect us from any such liabilities and losses,
and we may be unable to enforce any such contractual protections.
In addition to government regulation, privacy advocates and industry groups have and may in the future propose self-regulatory standards from time to
time. These and other industry standards may legally or contractually apply to us, or we may elect to comply with such standards. We expect that there will
continue to be new proposed laws and regulations concerning data privacy and security, and we cannot yet determine the impact such future laws, regulations
and standards may have on our business. New laws, amendments to or re-interpretations of existing laws, regulations, standards and other obligations may
require us to incur additional costs and restrict our business operations. Because the interpretation and application of laws, regulations, standards and other
obligations relating to data privacy and security are still uncertain, it is possible that these laws, regulations, standards and other obligations may be interpreted
and applied in a manner that is inconsistent with our data processing practices and policies or the features of our products and services. If so, in addition to the
possibility of fines, lawsuits, regulatory investigations, public censure, other claims and penalties, and significant costs for remediation and damage to our
reputation, we could be materially and adversely affected if legislation or regulations are expanded to require changes in our data processing practices and
policies or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively impact our business, financial condition and
results of operations. We may be unable to make such changes and modifications in a commercially reasonable manner, or at all. Any inability to adequately
address data privacy or security-related concerns, even if unfounded, or to comply with applicable laws, regulations, standards and other obligations relating to
data privacy and security, could result in additional cost and liability to us, harm our reputation and brand, damage our relationships with consumers and have
a material and adverse impact on our business, financial condition and results of operations.
We make public statements about our use and disclosure of personal information through our privacy policies, information provided on our website and
press statements. Although we endeavor to comply with our public statements and documentation, we may at times fail to do so or be alleged to have failed to
do so. The publication of our privacy policies and other statements that provide promises and assurances about data privacy and security can subject us to
potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices. Moreover, from time to time,
concerns may be expressed about whether our products and services compromise the privacy of consumers and others. Any concerns about our data privacy
and security practices, even if unfounded, could damage the reputation of our businesses, discourage potential users from our products and services and have a
material and adverse impact on our business, financial condition and results of operations.
Any failure or perceived failure by us or our Network Partners or external service providers to comply with our posted privacy policies or with any
applicable federal, state or foreign laws, regulations, standards, certifications or orders relating to data privacy or security or consumer protection, or any
compromise of security that results in the theft, unauthorized access, acquisition, use, disclosure, or misappropriation of personal information or other user
data, could result in fines or proceedings or litigation by governmental agencies or consumers, including class action privacy litigation in certain jurisdictions,
which would subject us to significant awards, penalties or judgments, one or all of which could materially and adversely affect our business, financial
condition and results of operations. In addition, if our practices are not consistent, or viewed as not consistent, with legal and regulatory requirements,
including changes in laws, regulations and standards or new interpretations or applications of existing laws, regulations and standards, we may also become
subject to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, or severe criminal or civil sanctions, all of which may affect our
financial condition, operating results and our reputation.
We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business.
From time to time, in the ordinary course of business we are subjected to actual and threatened legal proceedings, claims and counterclaims, including
allegations relating to infringement of the patents, trademarks, copyrights and other intellectual property and similar proprietary rights, and misappropriation
of trade secrets, of third parties. Our success depends, in part, on our ability to develop and commercialize our products and services without infringing,
misappropriating or otherwise violating the intellectual property rights of third parties. However, we may not be aware or we may disagree that our products or
services are infringing, misappropriating or otherwise violating third-party intellectual property rights and such third parties may bring claims alleging such
infringement, misappropriation or violation. Lawsuits are often time-consuming and expensive to resolve and they may divert management’s time and
attention. Patent litigation tends to be particularly protracted and expensive. Our technologies may not be able to withstand any third-party claims against their
use.
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In addition, many companies may have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend
claims that may be brought against them. If a third party is able to obtain an injunction preventing us from accessing third-party intellectual property rights, or
if we cannot license or develop alternative technology for any infringing aspect of our business, we may be forced to limit or stop sales of our products and
services or cease business activities related to such intellectual property. Our insurance may not cover potential claims of this type or may not be adequate to
indemnify us for all liability that may be imposed. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not
have an adverse impact on our business, financial condition or results of operations. Uncertainties resulting from the initiation and continuation of intellectual
property-related litigation or proceedings could adversely affect our ability to compete in the marketplace. Any intellectual property litigation to which we
might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:
•
cease selling or using products or services that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate;
• make substantial payments for legal fees, settlement payments or other costs or damages;
•
•
obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or
redesign or rebrand the allegedly infringing products or services to avoid infringement, misappropriation or violation, which could be costly, time-
consuming or impossible.
Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of
which could materially and adversely impact our business, financial condition and results of operations. In addition, during the course of litigation there could
be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these
results to be negative, it could have a substantial adverse effect on the price of our common stock or other adverse consequences.
Failure to obtain proper business licenses or other documentation or to otherwise comply with local laws and requirements regarding marketing, sales or
services, may result in civil or criminal penalties and restrictions on our ability to conduct business in that jurisdiction.
Most states require licenses to solicit, broker or make loans secured by residential mortgages and other consumer loans to residents of those states, as well
as to operate real estate referral and brokerage services, and in many cases require the licensure or registration of individual employees engaged in aspects of
these businesses. Further, as mandated by the federal Secure and Fair Enforcement of Mortgage Licensing Act of 2008 (the "SAFE Act"), states adopted
certain minimum standards for the licensing of individuals involved in mortgage lending or loan brokering. States also require licenses to undertake certain
insurance brokerage activities, and state or federal licensure or registration is required to undertake solicitation activities involving registered investment
advisors. Compliance with these requirements may render it more difficult for us and our Network Partners to operate or may raise our internal costs or the
costs of our Network Partners, which may be passed on to us through less favorable commercial arrangements. While our businesses have endeavored to
comply with applicable requirements, the application of these requirements to persons operating online is not always clear. Moreover, any of the licenses or
rights currently held by our businesses or our employees may be revoked prior to, or may not be renewed upon, their expiration. In addition, our businesses or
our employees may not be granted new licenses or rights for which they may be required to apply from time to time in the future.
Regulations promulgated by some states may also impose compliance obligations on directors, executive officers, and any person who acquires a certain
percentage (for example, 10% or more) of the equity in a licensed entity, including requiring such persons to periodically file financial and other personal and
business information with state regulators. If any such person refuses or fails to comply with these requirements, we may be unable to obtain certain licenses
and existing licensing arrangements may be jeopardized. The inability to obtain, or the loss of, required licenses could have a material and adverse effect on
our business, financial condition and results of operations.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our
operating results and financial condition.
The impact of the changes in tax legislation on future years may be material to our consolidated financial statements. Similarly, changes in tax laws and
regulations that impact our Network Partners or the economy generally may also impact our financial condition and results of operations. In addition, tax laws
and regulations are complex and subject to varying interpretations, and any significant failure to comply with applicable tax laws and regulations in all
relevant jurisdictions could give rise to substantial penalties and liabilities. Any changes in enacted tax laws, rules or regulatory or judicial interpretations
(including any attempt to tax online services such as those offered by us); any adverse outcome in connection with tax audits in any jurisdiction; or any change
in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition
and results of operations.
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Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2021, we had pre-tax consolidated federal net operating losses (“NOLs”) of $220.1 million. The federal NOLs no longer expire under
the Tax Cuts and Jobs Act ("TCJA"). Our NOLs will be available to offset taxable income subject to the limitations found in Internal Revenue Code Sections
382 and 383. In addition, we have state NOLs of approximately $542.7 million at December 31, 2021, that will expire at various times between 2022 and
2041. The state NOLs could expire before we are able to utilize them. If we experience one or more ownership changes in the future as a result of future
transactions in our stock, our ability to utilize NOLs could be limited. Our ability to use our NOLs was limited on an annual basis by the TCJA. This
limitation was deferred for tax years 2019 and 2020 by the 2020 Coronavirus Aid, Relief, and Economic Security ("CARES") Act.
We may fail to adequately obtain, maintain, enforce and protect our intellectual property and similar proprietary rights or may be accused of infringing,
misappropriating or otherwise violating intellectual property or similar proprietary rights of third parties.
We regard our intellectual property rights, including our patents, trademarks, service marks, copyrights, domain names, trade secrets and similar
intellectual property and proprietary rights (as applicable), as critical to our success. Our businesses also rely heavily upon software, informational databases
and other components that make up their products and services.
We rely on a combination of laws, confidentiality procedures and contractual restrictions with employees, consumers, suppliers, affiliates and others to
establish and protect our intellectual property and similar proprietary rights. However, the steps we take to obtain, maintain, enforce and protect our
intellectual property and similar proprietary rights may be inadequate. We may not be able to protect our intellectual property and similar proprietary rights if
we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property or similar proprietary rights. If we fail to protect our
intellectual property and similar proprietary rights adequately, third parties, including our competitors, may gain access to our intellectual property and
proprietary technology and develop and commercialize substantially identical products, services or technologies, which would harm our business, financial
condition and results of operations. Despite the precautions we have in place, it may be possible for a third party to copy or otherwise obtain and use our
intellectual property, including our trade secrets, without authorization. In addition, third parties may independently and lawfully develop substantially similar
intellectual property.
In some cases, litigation or other actions may be necessary to protect or enforce our intellectual property and similar proprietary rights or to determine the
validity and scope of intellectual or proprietary rights claimed by others. Defending, protecting and enforcing our intellectual property and similar proprietary
rights might entail significant expense or be time-consuming or distracting to management. Further, our efforts to enforce our intellectual property rights may
be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights, and if such defenses,
counterclaims or countersuits are successful, we could lose valuable intellectual property rights. Furthermore, because of the substantial amount of discovery
required in connection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be compromised by
disclosure in the event of litigation.
We have generally registered and continue to apply to register, or secure by contract when appropriate, our principal trademarks and service marks as they
are developed and used, and reserve and register domain names when and where we deem appropriate. We generally consider the protection of our trademarks
to be important for purposes of brand maintenance and reputation. While we strive to protect our trademarks, service marks and domain names, effective
trademark protection may not be available, and contractual disputes may affect the use of marks governed by private contract. Similarly, not every variation of
a domain name may be available or be registered, even if available. Our failure to protect our intellectual property rights in a meaningful manner or challenges
to related contractual rights could result in erosion of our brand names and reputation, and limit our ability to control marketing on or through the Internet
using our various domain names or otherwise, which could materially and adversely impact our business, financial condition and results of operations. The
value of our intellectual property could diminish if others assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks
that are similar to our trademarks. We may be unable to successfully resolve these types of conflicts to our satisfaction.
We have been granted one U.S. patent and from time to time we may have patent applications pending with the United States Patent and Trademark
Office and various foreign patent authorities for various proprietary technologies and other inventions. The status of any patent involves complex legal and
factual questions, and the breadth of claims allowed is uncertain. Accordingly, any patent application filed may not result in a patent being issued, or existing
or future patents may not be adjudicated valid by a court or be afforded adequate protection against competitors with similar technology. Even if we continue
to seek patent protection in the future, we may be unable to obtain or maintain patent protection for our technology. In addition, any patents issued from
pending or future patent applications or licensed to us in the future may not provide us with competitive advantages, or may be successfully challenged by
third parties. Likewise, the issuance of a patent to us does not mean that our processes or inventions will be found not to infringe upon patents or other
intellectual property rights of third parties. There may be issued patents of which we are not aware, held by third parties that, if found to be valid and
enforceable,
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could be alleged to be infringed by our current or future processes or inventions. There also may be pending patent applications of which we are not aware that
may result in issued patents, which could be alleged to be infringed by our current or future processes or inventions. Moreover, third parties may create new
products or methods that achieve similar results without infringing upon patents that we own.
Any patents, trademarks or other intellectual property rights that we have or may obtain may be challenged or circumvented by others or invalidated or
held unenforceable through administrative process, including re-examination, inter partes review, interference and derivation proceedings and equivalent
proceedings in foreign jurisdictions (e.g., opposition proceedings) or litigation. Furthermore, legal standards relating to the validity, enforceability, and scope
of protection of intellectual property rights are often uncertain. Patent, trademark, copyright, and trade secret protection may not be available to us. In addition,
the laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of
intellectual property rights may be inadequate. As we expand our activities, our exposure to unauthorized copying and use of our intellectual property and
similar proprietary rights will likely increase. Moreover, policing unauthorized use of our intellectual property and similar proprietary rights may be difficult,
expensive, and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United
States and where mechanisms for enforcement of intellectual property rights may be weak. Accordingly, despite our efforts, we may be unable to prevent third
parties from infringing, misappropriating or otherwise violating our intellectual property or similar proprietary rights.
We cannot ensure that all persons and entities contributing to our intellectual property have validly assigned to us all applicable intellectual property rights
they may have or that we will be able to enforce our rights under any such agreements. Moreover, we cannot guarantee that we have entered into
confidentiality agreements with each party that has or may have had access to our confidential or proprietary information, know-how and trade secrets, or that
any such confidentiality agreements will be effective in controlling access to, and distribution, use, misuse, misappropriation, reverse engineering or
disclosure of, our confidential or proprietary information, know-how and trade secrets. These agreements may be breached, and we may not have adequate
remedies for any such breach.
In the ordinary course of business, we are party to litigation involving contract, intellectual property and a variety of other claims, which could adversely
affect our business and financial condition.
We are involved in various legal proceedings and claims involving taxes, contract, alleged infringement of third-party intellectual property rights,
consumer protection, securities laws, and other claims, including, but not limited to, the legal proceedings described in Part I, Item 3, Legal Proceedings.
These matters could involve claims for substantial amounts of money or for other relief that might necessitate changes to our business or operations. The
defense of these actions has been, and will likely continue to be, both time consuming and expensive, and the outcomes of these actions cannot be predicted
with certainty. Determining reserves for pending litigation is a complex, fact-intensive process that requires significant legal judgment. It is possible that
unfavorable outcomes in one or more such proceedings could result in substantial payments that could adversely affect our business, consolidated financial
position, results of operations, or cash flows in a particular period.
Our reputation, ability to do business and financial statements may be harmed by improper conduct by our business partners.
Our business partners (or businesses we acquire or partner with) may violate U.S. and/or non-U.S. laws, including the laws governing payments to
government officials, bribery, fraud, kickbacks and false claims, pricing, sales and marketing practices, conflicts of interest, competition, employment
practices and workplace behavior, export and import compliance, money laundering and data privacy and security. Our business partners typically act as
independent contractors and not as agents in their solicitations and transactions with consumers, and we cannot ensure that these entities will comply with
applicable laws and regulations at all times. Failure on the part of a lender, insurer, website operator or other third party to comply with applicable laws or
regulations could result in, among other things, claims of vicarious liability or a negative impact on our reputation and business.
If our Network Partners fail to produce required documents for examination by, or other affiliated parties fail to make certain filings with, state
regulators, we may be subject to fines, forfeitures and the revocation of required licenses.
Some of the states in which our businesses maintain licenses require us to collect various loan documents from our Network Partners and produce these
documents for examination by state regulators. While our Network Partners are contractually obligated to provide these documents upon request, these
measures may be insufficient. Failure to produce required documents for examination could result in fines, as well as the revocation of our licenses to operate
in certain states, which could have a material and adverse effect on our business, financial condition and results of operations.
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If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate
financial statements or comply with applicable regulations could be impaired.
In the event that our chief executive officer, chief financial officer, or independent registered public accounting firm determines in the future that our
internal control over financial reporting is not effective as defined under Section 404 of the Sarbanes-Oxley Act, we could be subject to one or more
investigations or enforcement actions by state or federal regulatory agencies, stockholder lawsuits or other adverse actions requiring us to incur defense costs,
pay fines, settlements or judgments, thereby causing investor perceptions to be adversely affected and potentially resulting in restatement of our financial
statements for prior periods and a decline in the market price of our stock.
In addition, our current internal controls and any new controls we implement may become inadequate because of changes in conditions in our business or
information technology systems or changes in the applicable laws, regulations and standards. We may, in the future, acquire companies that were not subject
to the Sarbanes-Oxley regulations prior to acquisition and accordingly were not required to establish and maintain an internal control infrastructure meeting
the standards promulgated under the Sarbanes-Oxley Act. Any failure to design or operate effective controls, any difficulties encountered in their
implementation or improvement, or any failure to implement adequate internal controls for our acquired companies could harm our operating results or cause
us to fail to meet our reporting obligations. Not correctly designing controls nor fully recognizing, understanding or testing the state of or changes in our
internal control environment could also adversely affect the results of management evaluations and independent registered public accounting firm audits of
our internal control over financial reporting, about which we are required to include in our periodic reports filed with the SEC. Ineffective disclosure controls
and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information,
which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we
may not be able to remain listed on the Nasdaq stock market in the future.
We may be exposed to liabilities under the Foreign Corrupt Practices Act (FCPA), which could have a material adverse effect on our business.
Our operations in India may subject us to compliance with various laws and regulations, including the FCPA and similar anti-bribery and anti-corruption
laws, which generally prohibit companies and their intermediaries from engaging in bribery or making other improper payments to private or public parties for
the purpose of obtaining or retaining business or gaining an unfair business advantage. The FCPA also requires proper record keeping and characterization of
such payments in our reports filed with the SEC. Violations of these laws could result in severe criminal or civil sanctions and financial penalties and other
consequences that may have a material adverse effect on our business, reputation, financial condition or results of operations.
Changes in the regulation of the Internet, mobile carriers and their partners could negatively affect our business.
Our business is dependent on the continued growth and maintenance of the Internet’s infrastructure, as well as our ability to market products through
channels such as e-mail and voice and text messaging. There can be no assurance that the Internet’s infrastructure will continue to be able to support the
demands placed on it by sustained growth in the number of users and amount of traffic. To the extent that the Internet’s infrastructure is unable to support the
demands placed on it, our business may be impacted. We may also be disadvantaged by the adverse effect of any delays or cancellations of private sector or
government initiatives designed to expand broadband access. The reduction in the growth of, or a decline in, broadband and Internet access poses a risk to us.
In addition, federal, state and international government bodies and agencies have in the past adopted, and may in the future adopt, laws and regulations
affecting the use of the Internet as a commercial medium. Changes in these laws or regulations could adversely affect the demand for our products and
services or require us to modify our products and services in order to comply with these changes. Laws, rules and regulations governing advertising and e-
commerce through Internet communications and mobile carriers and their partners are dynamic, and the extent of future government regulation is uncertain.
Federal and state regulations govern various aspects of our online business, including intellectual property ownership, infringement and misappropriation,
including with respect to trade secrets, the distribution of electronic communications, marketing and advertising, data privacy and security, search engines and
Internet tracking technologies. Future taxation on the use of the Internet or e-commerce transactions could also be imposed. Existing or future regulation or
taxation could hinder growth in or negatively impact the use of the Internet generally, including the viability of Internet e-commerce, which could reduce our
revenue, increase our operating expenses and expose us to significant liabilities.
The possibility of additional future regulations, changing rule interpretations and examinations by regulatory agencies may result in more stringent
compliance standards and could adversely affect the results of our operations.
In response to conditions in the U.S. financial markets and economy, as well as a heightened regulatory and Congressional focus on consumer and small
business lending and consumer investing, regulators have increased their scrutiny of the financial services industry, the result of which has included new
regulations and guidance. We are unable to predict the long-term impact
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of this enhanced scrutiny. We are also unable to predict whether any additional or similar changes to statutes or regulations, including the interpretation or
implementation thereof, will occur in the future. Likewise, states or municipalities may adopt statutes or regulations making it unattractive, impracticable or
infeasible for our businesses to continue to conduct business in such jurisdictions. The impact of additional future regulations and/or withdrawal from any
jurisdiction due to emerging legal requirements could materially and adversely affect our business, financial condition and results of operations.
Risks Related to an Investment in our Common Stock
Fluctuations in our operating results, quarter to quarter earnings and other factors may result in significant decreases in the price of our common stock.
The market price for our common stock has been volatile, as the trading volume has fluctuated and may continue to fluctuate, causing significant price
variations to occur. From when we became a publicly-traded company to as of December 31, 2021, the price per share of our common stock has fluctuated
from an intra-day low of $1.42 per share to an intra-day high of $434.94 per share. The market price of our common stock may fluctuate or decline
significantly in the future. Some of the factors that could negatively affect the price of our common stock or result in fluctuations in the price or trading
volume of our common stock include:
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our ability to attract new customers and retain existing customers;
the timing and success of introductions of new services;
rapid technological change, frequent new product introductions and evolving industry standards;
variations in our quarterly operating and financial results or our projected operating and financial results;
failure to meet analysts' earnings estimates;
publication of research reports about us, our Network Partners or our industry;
additions or departures of key management personnel;
adverse market reaction to any indebtedness we may incur or preferred or common stock we may issue in the future;
actions by stockholders, including "activist" investors;
changes in market valuations of other companies in our industry, including our Network Partners and competitors;
announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital
commitments;
increased competition from one or more large, well-established technology companies;
systems, data center, website and internet failures, breaches and service interruptions;
speculation in the press or investment community, including the short selling of our common stock;
changes or proposed changes in laws or regulations affecting our industry or enforcement of these laws and regulations, or announcements relating to
these matters;
threatened or actual ligation;
loss of key employees;
changes in estimated fair value of contingent consideration related to acquisitions; and
changes in general economic or market conditions.
The stock market is subject to frequent price and volume fluctuations. These market fluctuations could result in extreme volatility in the trading price of
our common stock, which could cause a decline in the value of your investment in our common shares. In addition, the trading price of our common stock
could decline for reasons unrelated to our business or financial results, including in reaction to events that affect other companies in our industry even if those
events do not directly affect us. You should also be aware that price volatility may be greater if the public float and trading volume of our common stock are
low. These factors may result in short-term or long-term negative pressure on the value of our common stock.
If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for internet marketplace operators and lead-generation companies depends, in part, on the research and reports that securities or
industry analysts publish about the industry and specific companies. If one or more analysts covering
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us currently or in the future fail to publish reports on us regularly, demand for our common stock could decline, which could cause our stock price and trading
volume to decline. If one or more recognized securities or industry analysts that cover our company or our industry in the future downgrades our common
stock or publishes inaccurate or unfavorable research about our business or industry, our stock price would likely decline.
One holder of our common stock owns a substantial portion of our outstanding common stock, which concentrates voting control and limits your ability to
influence corporate matters.
As of February 18, 2022, Douglas Lebda, our Chairman and Chief Executive Officer, beneficially owned approximately 16% of our outstanding common
stock. Additionally, Mr. Lebda holds options to purchase a maximum of 1,271,300 shares that are not included in beneficial ownership because Mr. Lebda
does not have the right to acquire them within 60 days. If these options were exercisable, they would represent additional beneficial ownership of
approximately 7% of our outstanding common stock.
Therefore, for the foreseeable future, Mr. Lebda will have influence over our management and affairs and all matters requiring stockholder approval,
including the election or removal (with or without cause) of directors and approval of any significant corporate transaction, such as a merger or other sale of us
or our assets. The interests of Mr. Lebda may not necessarily align with the interests of our other stockholders. Mr. Lebda could elect to sell a significant
interest in us and you may receive less than the then-current fair market value or the price you paid for your shares as a result of such transaction. This
concentrated control could delay, defer or prevent a change of control, merger, consolidation, takeover or other business combination involving us that other
stockholders may otherwise support. This concentrated control could also discourage a potential investor from acquiring our common stock and might harm
the market price of our common stock.
Future sales of common stock by our existing stockholders may cause our stock price to fall.
The market price of our common stock could decline as a result of sales by our existing stockholders in the market, or the perception that these sales could
occur. These sales might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate.
We may issue additional shares of our common stock in the future pursuant to current or future equity incentive plans, or in connection with current or
future acquisitions or financings. If we were to raise capital in the future by selling shares of our common stock, or securities that are convertible into our
common stock or issuing shares of our common stock in a business acquisition, their issuance would have a dilutive effect on the percentage ownership of our
stockholders and, depending on the prices at which such shares or convertible securities are sold or issued, on their investment in our common stock and,
therefore, could have a material adverse effect on the market prices of our common stock.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by stockholders
to replace or remove our management and affect the market price of our common stock.
Provisions in our certificate of incorporation and bylaws, as amended and restated, may have the effect of delaying or preventing a change of control or
changes in our management. Our amended and restated certificate of incorporation and/or amended and restated bylaws include provisions that:
• Authorize our board of directors to issue, without further action by our stockholders, up to five million shares of undesignated preferred stock,
sometimes referred to as "blank check preferred";
Prohibit cumulative voting in the election of directors;
Provide that vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office or by the sole
remaining director;
Provide that only our board of directors may change the size of our board of directors;
Specify that special meetings of our stockholders may be called only by or at the direction of our board of directors or by a person specifically
designated with such authority by the board; and
Prohibit stockholders from taking action by written consent.
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The provisions described above may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it
more difficult for stockholders to replace members of our board of directors, which is responsible for appointing our management. These provisions may also
have the effect of delaying or preventing a change of control of our company, even if stockholders support such a change of control.
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We do not intend to pay any cash dividends on our common stock in the foreseeable future.
We have not declared or paid a cash dividend on our common stock during the eight most recent fiscal years. We have no current intention to declare or
pay cash dividends on our common stock in the foreseeable future. In addition, the Credit Facility contains certain restrictions on our ability to pay dividends.
See Note 15—Debt, in the notes to the consolidated financial statements included elsewhere in this annual report. The declaration, payment and amount of
future cash dividends, if any, will be at the discretion of our board of directors. As a result, capital appreciation, if any, of our common stock will be the sole
source of gain for the foreseeable future for holders of our common stock.
Our financial results fluctuate as a result of seasonality, which may make it difficult to predict our future performance and may adversely affect our
common stock price.
Several of our products are subject to seasonal trends. Products in our Home segment have seasonal trends that reflect the general patterns of the
mortgage industry and housing sales, which typically peak in the spring and summer seasons and decline in the winter. Our quarterly operating results may
fluctuate as a result of these seasonal trends. In certain historical periods, broader cyclical trends in interest rates, as well as the mortgage and real estate
markets, have upset the customary seasonal trends. Our Consumer and Insurance segments also have certain products with various seasonality trends which
may create further uncertainty in our quarterly operating results. See Item 1. Business—Seasonality included elsewhere in this annual report for more
information. Any of these seasonal trends, or the combination of them, may negatively impact the price of our common stock.
The conditional conversion feature of our outstanding convertible senior notes, if triggered, may adversely affect our financial condition and operating
results.
If the conditional conversion feature of our 0.50% Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) and 0.625% Convertible Senior Notes
due June 1, 2022 (the “2022 Notes”, and, together with the 2025 Notes, the “Notes”) is triggered, holders of Notes will be entitled to convert the Notes at any
time during specified periods at their option. Convertibility for each quarter will be determined based on whether the last reported sales price of our common
stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days 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 under the Notes on each applicable trading day. If so,
then the Notes will be convertible during that calendar quarter. The Notes will also be convertible at any time during the five business day period immediately
following any five consecutive trading day period in which the trading price per $1,000 principal amount of Notes for each trading Day of such five trading
day period is less than 98% of the product of the last reported sale price of our common stock on each such trading day and the conversion ratio under the
Notes, as more fully described in the respective indentures governing the Notes, which are incorporated by reference as an exhibit to this annual report.
If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock
(other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the
payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under
applicable accounting rules to reclassify all or a portion of the outstanding principal of the respective Notes as a current rather than long-term liability, which
would result in a material reduction of our net working capital.
We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes upon a fundamental change,
and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.
Holders of the Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change at a
repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any. We may not have
enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes surrendered therefore, or pay cash with respect
to Notes being converted if we elect not to issue shares, which could harm our reputation and affect the trading price of our common stock.
Our hedge and warrant transactions may affect the value of the Notes and our common stock.
In connection with the pricing of the Notes, we entered into convertible note hedge transactions with certain counterparties. The hedge transactions are
generally expected to reduce the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the
principal amount of converted Notes, as the case may be. We also entered into warrant transactions with such counterparties. However, the warrant
transactions could separately have a dilutive effect to the extent that the market price per share of our common stock exceeds the applicable strike price of the
warrants. The
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initial strike price of the warrants is $709.52 for the warrants associated with the 2025 Notes and $266.39 for the warrants associated with the 2022 Notes.
In connection with establishing their initial hedge of the hedge and warrant transactions, the counterparties or their respective affiliates may have
purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock concurrently with or shortly after
the pricing of the Notes. In addition, the counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various
derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior
to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of Notes or following any repurchase of Notes by us
on any fundamental repurchase date or otherwise). This activity could cause or avoid an increase or a decrease in the market price of our common stock or the
Notes.
The accounting method for our convertible senior notes and warrants issued could have a material adverse effect on our reported financial results.
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06, which simplifies the
accounting for convertible instruments, amends the derivatives scope exception guidance for contracts in an entity’s own equity, and amends the related
earnings-per-share guidance. These amendments are required to be adopted in reporting periods beginning after December 15, 2021. We expect these
amendments to impact the accounting for our convertible senior notes and warrants issued. Subsequent to adoption, these amendments are expected to result
in an increase to the carrying value of the debt liability, and lower dilutive earnings per share, compared to the historical method of accounting.
We may need additional equity, debt or other financing in the future, which we may not be able to obtain on acceptable terms, or at all, and any additional
financing may result in restrictions on our operations or substantial dilution to our stockholders.
We may need to raise funds in the future, for example, to develop new technologies, expand our business, respond to competitive pressures and make
acquisitions. We may try to raise additional funds through public or private financings, strategic relationships or other arrangements. Although our existing
credit facility limits our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and may be
amended with the consent of our lenders. Accordingly, under certain circumstances, we may incur substantial additional debt.
Our ability to obtain debt or equity funding will depend on a number of factors, including market conditions, interest rates, our operating performance,
our credit rating and investor interest. Additional funding may not be available to us on acceptable terms or at all. If adequate funds are not available, we may
be required to reduce expenditures, including curtailing our growth strategies, foregoing acquisitions or reducing our business development efforts. If we
succeed in raising additional funds through the issuance of equity or equity-linked securities, then existing stockholders could experience substantial dilution.
If we raise additional funds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences and privileges senior
to those of the holders of our common stock. In addition, any such issuance could subject us to restrictive covenants relating to our capital raising activities
and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including
potential acquisitions. Further, to the extent we incur additional indebtedness or such other obligations, the risks associated with our existing debt, including
our possible inability to service our existing debt, would increase.
General Risk Factors
If our goodwill or indefinite-lived intangible assets become impaired, we may be required to record a significant charge to earnings.
Under accounting principles generally accepted in the United States of America ("GAAP"), we review the carrying value of goodwill and indefinite-lived
intangible assets on an annual basis as of October 1, or more frequently if an event occurs or circumstances change that would more likely than not reduce the
fair value of a reporting unit below its carrying value. Factors that may be considered a change in circumstances, indicating that the carrying value of our
goodwill or indefinite-lived intangible assets may not be recoverable, include a decline in stock price and market capitalization, reduced future cash flow
estimates and slower growth rates in our industry or our customers' industries. We may be required to record a significant charge in our financial statements
during a period in which any impairment of our goodwill or indefinite-lived intangible assets is determined, negatively impacting our results of operations.
If the fair value of our equity investments decrease, we will be required to record a significant charge to earnings.
Our equity investments do not have readily determinable fair values and, upon acquisition, we elected the measurement alternative to value these
securities. These equity securities are carried at cost and subsequently marked to market upon
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observable market events with any gains or losses recorded in operating income in the consolidated statement of operations. If there is an observable market
event that indicates a decrease in the fair value of our equity investments, we will be required to record a significant charge in our financial statements,
negatively impacting our results of operations.
Charges to earnings resulting from acquisitions may adversely affect our operating results.
Under GAAP, when we acquire businesses, we allocate the purchase price to tangible assets and liabilities and identifiable intangible assets acquired at
their acquisition date fair values. Any residual purchase price is recorded as goodwill. We also estimate the fair value of any contingent consideration. Our
estimates of fair value are based upon assumptions believed to be reasonable but which are uncertain and involve significant judgments by management. After
we complete an acquisition, the following factors could result in material charges and adversely affect our operating results and may adversely affect our cash
flows:
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costs incurred to combine the operations of companies we acquire, such as transitional employee expenses and employee retention or relocation
expenses;
impairment of goodwill or intangible assets;
a reduction in the useful lives of intangible assets acquired;
impairment of long-lived assets;
identification of, or changes to, assumed contingent liabilities;
changes in the fair value of any contingent consideration;
charges to our operating results due to duplicative pre-merger activities;
charges to our operating results from expenses incurred to effect the acquisition; and
charges to our operating results due to the expensing of certain stock awards assumed in an acquisition.
Substantially all of these potential charges would be accounted for as expenses that would decrease our net income and earnings per share for the periods
in which those costs are incurred. Charges to our operating results in any given period could differ substantially from other periods based on the timing and
size of our acquisitions and the extent of acquisition accounting adjustments.
For acquisitions with potential future contingent consideration payments, we assign a fair value to the contingent consideration and reassess this fair value
quarterly. Increases or decreases based on the actual performance of the acquired company against the contingent consideration targets or other factors will
cause decreases or increases, respectively, in our results of operations. These quarterly adjustments could have a material adverse effect on our results of
operations. During 2021, 2020 and 2019, we incurred $(8.2) million, $5.3 million and $28.4 million, respectively, of contingent consideration expense due to
the change in estimated fair value of the earnout payments.
ITEM 1B. Unresolved Staff Comments
Not applicable.
ITEM 2. Properties
Our principal executive offices are located on approximately 176,000 square feet of office space in Charlotte, North Carolina under a lease that expires in
2036. We have an additional Charlotte office located on approximately 27,800 square feet under a lease that expires in 2024.
Primarily as a result of our acquisitions in recent years, we also operate offices in: Charleston, South Carolina; Chicago, Illinois; Denver, Colorado;
Jacksonville, Florida; New York City, New York; Rancho Cordova, California; San Mateo, California; Seattle, Washington; Tampa, Florida; Beachwood,
Ohio; and Makarba, India.
Our Charlotte operations support all three of our segments: Home, Consumer and Insurance. Our Home segment is also supported by our San Mateo
office. The Consumer segment has personnel in the Charleston, Chicago, Jacksonville, New York City, San Mateo, and Makarba offices. The Insurance
segment has personnel in the Denver, New York City, Rancho Cordova, Tampa, Beachwood, and Seattle offices.
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ITEM 3. 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. See Note 17—Contingencies and Note 21—Discontinued Operations in the notes
to the consolidated financial statements included elsewhere in this report for a discussion of our current and recently settled litigation.
ITEM 4. Mine Safety Disclosures
Not applicable.
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PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
General Market Information, Holders and Dividends
Our common stock is quoted on the Nasdaq Global Select Market under the ticker symbol "TREE". As of February 18, 2022, there were approximately
528 holders of record of our common stock.
We have no current intention to declare or pay cash dividends on our common stock in the foreseeable future. The declaration, payment and amount of
future cash dividends, if any, will be at the discretion of our board of directors.
Performance Graph
The performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or incorporated by reference into any filings under the
Securities Act or the Exchange Act, except as otherwise expressly set forth by specific reference in such filing.
Set forth below is a line graph, for the period from December 31, 2016 through December 31, 2021, comparing the cumulative total stockholder return of
$100 invested (assuming that all dividends were reinvested) in (1) our common stock, (2) the cumulative return of all companies listed on the Nasdaq
Composite Index and (3) the cumulative total return of the Research Development Group ("RDG") Internet index. Returns over the indicated periods should
not be considered indicative of future stock prices or stockholder returns.
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Unregistered Sales of Equity Securities and Use of Proceeds
During the year ended December 31, 2021, we did not issue or sell any shares of our common stock or other equity securities in transactions that were not
registered under the Securities Act.
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. During the quarter ended December 31, 2021, 334,253 shares of common
stock were repurchased under the stock repurchase program. As of February 18, 2022, approximately $121.7 million is authorized for future share
repurchases.
Additionally, the LendingTree Seventh Amended and Restated 2008 Stock Plan approved by our stockholders on June 9, 2021 allows, and the
LendingTree 2017 Inducement Grant Plan terminated by us in April 2021 allowed, 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 December 31, 2021, 8,637 shares were purchased related to these obligations under the
LendingTree Seventh Amended and Restated 2008 Stock Plan and 1,085 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.
The following table provides information about the Company's purchases of equity securities during the quarter ended December 31, 2021.
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)
10/1/21 - 10/31/21
11/1/21 - 11/30/21
12/1/21 - 12/31/21
Total
6,472
141,399
196,104
343,975
$
$
$
$
151.73
128.22
113.55
120.30
—
141,225
193,028
334,253
$
$
$
$
179,673
161,566
139,665
139,665
(1) During October 2021, November 2021 and December 2021, 6,472 shares, 174 shares and 3,076 shares, respectively (totaling 9,722 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 Seventh Amended and Restated 2008 Stock 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 6. [Reserved]
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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our
consolidated financial statements and accompanying notes included elsewhere within this report. This discussion includes both historical information and
forward-looking information that involves risks, uncertainties and assumptions. Our actual results may differ materially from management's expectations as a
result of various factors, including but not limited to those discussed in the sections entitled "Risk Factors" and "Cautionary Statement Regarding Forward-
Looking Information."
Company Overview
LendingTree, Inc. is the parent of LT Intermediate Company, LLC, which holds all of the outstanding ownership interests of LendingTree, LLC, and
LendingTree, LLC owns several companies.
We operate what we believe to be the leading online consumer platform that connects consumers with the choices they need to be confident in their
financial decisions. Our online consumer platform provides consumers with access to product offerings from our Network Partners, including mortgage loans,
home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans,
insurance quotes, sales of insurance policies 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 Network Partners.
Our My LendingTree platform offers a personalized comparison-shopping experience by providing free credit scores and credit score analysis. This
platform enables us to monitor 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.
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.
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 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 (loss) 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
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of 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 various lockdown orders 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 was most impacted as unsecured credit and the flow of capital in certain areas of the market
have contracted. The impact to our Home and Insurance segments was much less substantial. We believe our three reporting segments have generally
recovered from the impact of the pandemic. 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 was negatively impacted during the recession, our marketing expenses generally decreased in
line with revenue.
Segment Reporting
We have three reportable segments: Home, Consumer and Insurance.
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Recent Business Acquisitions
On February 28, 2020, we acquired an equity interest in Stash for $80.0 million. On January 6, 2021 we acquired an additional equity interest for $1.2
million. Stash is a consumer investing and banking platform. Stash brings together banking, investing, and financial services 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. In the fourth quarter of 2021, we sold a portion of our investment in Stash for $46.3
million, realizing a gain on the sale of $27.9 million.
On January 10, 2019, we acquired 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. Combining ValuePenguin’s high-quality content and search engine optimization capability with proprietary
technology and insurance carrier network from QuoteWizard enables us to provide immense value to insurance carriers and agents. This strategic acquisition
positions us to achieve further scale in the insurance space as well as the broader financial services industry.
These acquisitions continue our diversification strategy.
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.
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 steadily decreased from a monthly average of 4.46% in January 2019, ending at a monthly
average of 3.72% in December 2019. The declining trend continued into 2020, largely as a result of stimulus efforts in response to the COVID-19 pandemic,
beginning at a monthly average of 3.62% in January 2020 and ending at a monthly average of 2.68% in December 2020. During 2021, 30-year mortgage
interest rates steadily increased from a monthly average of 2.74% in January 2021, ending at a monthly average of 3.10% in December.
On a full-year basis, 30-year mortgage interest rates decreased to an average 2.96% in 2021, compared to 3.11% and 3.94% in 2020 and 2019,
respectively.
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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 will move towards refinance mortgages. According to Mortgage Bankers Association ("MBA") data, total refinance origination dollars
increased from 38% of total 2019 mortgage origination dollars to 60% in 2020, then remained relatively consistent at 59% in 2021 as a result of the general
trend in average mortgage interest rates. Total refinance origination dollars increased by 109% in 2020 over 2019 and decreased by 11% in 2021 over 2020.
Industry-wide mortgage origination dollars increased by 59% in 2020 over 2019 and decreased by 3% in 2021 over 2020.
Looking forward, the MBA is projecting 30-year mortgage interest rates to increase slightly in 2022 to an average 4.0%. According to MBA projections,
the mix of mortgage origination dollars is expected to move back towards purchase mortgages with the refinance share representing just 33% for 2022.
The U.S. Real Estate Market
The health of the U.S. real estate market and interest rate levels are the primary drivers of consumer demand for new mortgages. Consumer demand, in
turn, affects lender demand for purchase mortgage leads from third-party sources. Typically, a strong real estate market will lead to reduced lender demand for
leads, as there are more consumers in the marketplace seeking financing and, accordingly, lenders receive more organic lead volume. Conversely, a weaker
real estate market will typically lead to an increase in lender demand, as there are fewer consumers in the marketplace seeking mortgages.
According to Fannie Mae data, existing-home sales in 2019 remained consistent with 2018 levels, which had decreased due to limited inventory of homes
for sale and rising interest rates. In 2020, existing home sales grew by 6% over 2019, fueled by increased competition for low inventory as well as an increase
in first-time home buyers. This trend continued into 2021 with existing home sales growing 9% over 2020. Fannie Mae expects a 5% decrease in existing
home sales in 2022.
Convertible Senior Notes and Hedge and Warrant Transactions
On July 24, 2020, we issued $575.0 million aggregate principal amount of our 0.50% Convertible Senior Notes due July 15, 2025 and, in connection
therewith, entered into Convertible Note Hedge and Warrant transactions with respect to our common stock.
On May 31, 2017, we issued $300.0 million aggregate principal amount of our 0.625% Convertible Senior Notes due June 1, 2022 and, in connection
therewith, entered into Convertible Note Hedge and Warrant transactions with respect to our common stock. On July 24, 2020, a portion of the net proceeds
from the issuance of the 2025 Notes was used to repurchase approximately $130.3 million principal amount of the 2022 Notes. A portion of the call spread
transactions associated with the 2022 Notes was also terminated on July 24, 2020 in notional amounts corresponding to the principal amount of the 2022
Notes repurchased.
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For more information, see Note 15—Debt, in the notes to the consolidated financial statements included elsewhere in this report.
North Carolina Office Properties
Our principal executive office is located on approximately 176,000 square feet of office space in Charlotte, North Carolina under an approximate 15-year
lease that commenced in the second quarter of 2021.
With our expansion in North Carolina, in December 2016, we received a grant from the state that provides an aggregate amount up to $4.9 million in
reimbursements through 2029 beginning in 2017 for investing in real estate and infrastructure in addition to increasing jobs in North Carolina at specific
targeted levels through 2021, 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 an aggregate amount up to $8.4 million in reimbursements through 2032 beginning in 2021 for
increasing jobs in North Carolina at specific targeted levels through 2024, and maintaining the jobs thereafter.
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Results of Operations for the Years ended December 31, 2021 and 2020
For information on fiscal 2019 results and similar comparisons, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations—Results of Operations for the Years ended December 31, 2020 and 2019 of our Form 10-K for the fiscal year ended December 31, 2020.
Home
Consumer
Insurance
Other
Revenue
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately
below)
Selling and marketing expense
General and administrative expense
Product development
Depreciation
Amortization of intangibles
Change in fair value of contingent consideration
Severance
Litigation settlements and contingencies
Total costs and expenses
Operating income (loss)
Other (expense) income, net:
Interest expense, net
Other income
Income (loss) before income taxes
Income tax (expense) benefit
Net income (loss) from continuing operations
Loss from discontinued operations, net of tax
Net income (loss) and comprehensive income (loss)
Revenue
Year Ended December 31,
2021 vs. 2020
2021
2020
$
Change
%
Change
(Dollars in thousands)
$
$
441,738 $
329,945
326,153
663
1,098,499
320,992 $
253,198
333,765
2,035
909,990
57,297
773,990
153,472
52,865
17,910
42,738
(8,249)
53
392
1,090,468
8,031
(46,867)
123,272
84,436
(11,298)
73,138
(4,023)
69,115 $
54,494
617,404
129,101
43,636
14,201
53,078
5,327
295
(943)
916,593
(6,603)
(36,300)
376
(42,527)
19,961
(22,566)
(25,689)
(48,255) $
120,746
76,747
(7,612)
(1,372)
188,509
2,803
156,586
24,371
9,229
3,709
(10,340)
(13,576)
(242)
1,335
173,875
14,634
10,567
122,896
126,963
(31,259)
95,704
(21,666)
117,370
38 %
30 %
(2) %
(67) %
21 %
5 %
25 %
19 %
21 %
26 %
(19) %
(255) %
(82) %
142 %
19 %
222 %
29 %
32,685 %
299 %
(157) %
424 %
(84)%
243 %
Revenue increased in 2021 compared to 2020 due to increases in our Home and Consumer segments, partially offset by decreases in our Insurance
segment.
Our Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts,
and other credit products such as credit repair and debt settlement. Many of our Consumer segment products are not individually significant to revenue.
Revenue from our Consumer segment increased $76.7 million in 2021 from 2020, or 30%, primarily due to increases in our personal loans, small business
loans products, and credit cards.
Revenue from our personal loans product increased $43.6 million to $110.1 million in 2021 from $66.5 million in 2020, or 66%, primarily due to an
increase in revenue earned per consumer, and an increase in the number of consumers completing request forms.
For the periods presented, no other products in our Consumer segment represented more than 10% of revenue; however, certain other Consumer products
experienced notable changes. Revenue from our small business loans product increased $21.5 million in 2021 compared to 2020, due to loosening
underwriting standards and improved flow of capital, as well as an
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increase in revenue earned per consumer. Revenue from our credit cards product increased $16.1 million in 2021 compared to 2020 due to an increase in the
number of approvals and an increase in revenue earned per approval.
Revenue from our Insurance segment decreased $7.6 million to $326.2 million in 2021 from $333.8 million in 2020, or 2%, due to a decrease in revenue
earned per consumer, partially offset by an increase in the number of consumers seeking insurance coverage.
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 Home segment increased $120.7 million in 2021 from 2020, or 38%, primarily due to increases in revenue from our
refinance mortgage, purchase mortgage, and home equity loans products.
Revenue from our refinance mortgage product increased $65.5 million in 2021 compared to 2020, primarily due to an increase in revenue earned per
consumer, partially offset by a decrease in the number of consumers completing request forms. Revenue from our purchase mortgage product and our home
equity loans and lines of credit product increased $24.5 million and $31.5 million, respectively, in 2021 compared to 2020. Revenue from our purchase
mortgage product and home equity loans and lines of credit product increased due to a shift in both lender and consumer focus away from refinance products
as well as an increase in revenue earned per consumer.
While we believe our three reportable segments have generally recovered from the impacts of the ongoing COVID-19 pandemic, we are continuously
monitoring the impacts of the pandemic on the economy and any potential future impacts to our segment revenue.
Our Other category primarily includes revenue from the resale of online advertising space to third parties. Revenue in the Other category decreased
$1.4 million in 2021 compared to 2020, as we ceased reselling online advertising space during the first quarter of 2020.
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 in 2021 from 2020, primarily due to increases in compensation and benefits, website network hosting and server fees, and call
center technology of $3.7 million, $1.5 million, and $1.5 million, respectively, partially offset by a $3.3 million decrease in credit card fees.
Cost of revenue as a percentage of revenue decreased to 5% in 2021 compared to 6% in 2020.
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 increase in selling and marketing expense in 2021 compared to 2020 was primarily due to the increases in advertising and promotional expense
discussed below. Additionally, compensation and benefits increased $7.7 million in 2021 compared to 2020.
Advertising and promotional expense is the largest component of selling and marketing expense, and is comprised of the following:
Online
Broadcast
Other
Total advertising expense
Year Ended December 31,
2021
2020
2021 vs. 2020
$
Change
%
Change
$
$
687,976 $
8,738
19,925
716,639 $
(Dollars in thousands)
539,910
13,415
14,423
567,748
$
$
148,066
(4,677)
5,502
148,891
27 %
(35)%
38 %
26 %
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
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to ensure sufficient consumer inquiries to profitably meet such demand. An increase in a product’s revenue is generally met by a corresponding increase in
marketing spend, and conversely a decrease in a product’s revenue is generally met by a corresponding decrease in marketing spend. This relationship exists
for our Home, Consumer and Insurance segments.
We adjusted our advertising expenditures in 2021 compared to 2020 in response to changes in Network Partner demand on our marketplace as they
recovered from the 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.
General and administrative expense increased in 2021 compared to 2020, primarily due to increases in compensation and benefits, technology expense,
and facilities expense of $18.0 million, $4.0 million, and $2.1 million, respectively. This was partially offset by decrease in professional fees of $2.3 million.
Losses on the disposal of assets also increased $2.3 million in 2021 compared to 2020.
Non-cash compensation expense within general and administrative expense increased in 2021, which resulted in reductions in net income from continuing
operations in 2021 compared to historical periods. For additional information, see Note 13—Stock-Based Compensation in the notes to the consolidated
financial statements included elsewhere in this report. Non-cash compensation expense is excluded from Adjusted Earnings Before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA"), as discussed below.
General and administrative expense as a percentage of revenue remained consistent at 14% for each of 2021 and 2020.
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 2021 compared to 2020 as we continued to invest in internal development of new and enhanced features,
functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners.
Depreciation
The increase in depreciation expense in 2021 compared to 2020 was primarily the result of higher investment in internally developed software in recent
years, to support the growth of our business.
Contingent consideration
During 2021, we recorded aggregate contingent consideration gains of $8.2 million due to adjustments in the estimated fair value of the earnout payment
related to the QuoteWizard acquisition for which the earnout period ended in 2021.
During 2020, we recorded aggregate contingent consideration expense of $5.3 million due to adjustments in the estimated fair value of the earnout
payments related to our recent acquisitions. For 2020, the net contingent consideration expense for the QuoteWizard, Ovation, and SnapCap acquisitions was
$4.0 million, $1.3 million and $0.1 million, respectively.
Interest expense
Interest expense increased in 2021 compared to 2020 primarily due to the issuance of the 0.50% Convertible Senior Notes due July 15, 2025 (the “2025
Notes”) as well as the partial repurchase of the 2022 Notes in July 2020. Interest expense was recognized on the 2025 Notes for the entire year of 2021,
compared to the partial period in 2020. This incremental interest expense was partially offset by lower interest expense on the 2022 Notes in 2021 compared
to 2020 as a result of the July 2020 partial repurchase of the notes. The overall increase was further offset by the loss on debt extinguishment of $7.8 million
recognized in July 2020, noted above. See Note 15—Debt for additional information on the issuance of the 2025 Notes and the partial repurchase of the 2022
Notes.
Other Income
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During 2021, we sold a portion of our investment in Stash and realized a gain of $27.9 million. Additionally, we recorded unrealized gains of $95.4
million as a result of an adjustment to the fair value of the Stash equity securities still held by us based on observable market events.
Income tax benefit
Income tax (expense) benefit
Effective tax rate
Year Ended December 31,
2021
2020
(in thousands, except percentages)
$
(11,298)
13.4
%
$
19,961
46.9
%
For 2021, the effective tax rate varied from the federal statutory rate of 21% in part due to the benefit derived from excess tax deductions from exercise of
stock options of $11.7 million, including state taxes and from research and experimentation ("R&D") tax credits of $3.2 million, partially offset by expense
due to nondeductible executive compensation of $3.1 million and incremental valuation allowance on state net operating losses of $0.6 million, primarily due
to state legislative changes.
For 2020, the effective tax rate varied from the federal statutory rate of 21% in part due to the benefit derived from excess tax deductions from the vesting
of restricted stock and exercise of stock options of $2.5 million, including state taxes. The effective tax rate for 2020 was also impacted by a tax benefit of
$6.1 million for the impact of the 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.
We 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 2020. These deferred tax assets have been revalued, as they have been carried back to 2016 and 2017, which are tax periods prior to the TCJA when the
federal statutory tax rate was 35% versus the 21% federal statutory tax rate in effect after the enactment of the TCJA.
Discontinued Operations
The results of discontinued operations include the results of the LendingTree Loans business formerly operated by our wholly-owned subsidiary, HLC.
The sale of substantially all of the assets of HLC, including the LendingTree Loans business, was completed on June 6, 2012. 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 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.
During the HLC bankruptcy, a bar date for claims against HLC was set, establishing a deadline for all HLC's creditors to assert any claim they may have
had against HLC. Distributions were made to holders of allowed claims deemed timely filed. After all distributions to creditors were made and HLC's Chapter
7 bankruptcy estate was fully administered, the HLC bankruptcy case was closed on July 14, 2021.
Prior to the bankruptcy filing, losses from the LendingTree Loans business were primarily due to litigation settlements and contingencies and legal fees
associated with legal proceedings.
The results of discontinued operations include litigation settlements and contingencies and legal fees associated with legal proceedings against
LendingTree, Inc. or LendingTree, LLC that arose due to the LendingTree Loans business or the HLC bankruptcy filing.
See Note 21—Discontinued Operations to the consolidated financial statements included elsewhere in this report for more information, including the
accounting effect of HLC’s bankruptcy filing on our consolidated financial statements.
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Segment Profit
Home
Consumer
Insurance
Other
Segment profit
Year Ended December 31,
2021 vs. 2020
2021
2020
$
Change
%
Change
$
$
153,352
143,497
113,464
53
410,366
$
$
(Dollars in thousands)
132,123
$
106,890
131,142
(682)
369,473
$
21,229
36,607
(17,678)
735
40,893
16
34
(13)
108
%
%
%
%
11 %
Segment profit is our primary segment operating metric. Segment profit is calculated as segment revenue less segment selling and marketing expenses
attributed to variable costs paid for advertising, direct marketing and related expenses that are directly attributable to the segments' products. See Note 22—
Segment Information in the notes to the consolidated financial statements for additional information on segments and a reconciliation of segment profit to pre-
tax income from continuing operations.
HOME
The Home segment had an increase in revenue and segment profit of 38% and 16%, respectively in 2021 compared to 2020. Our unit economics steadily
improved throughout the year, with increases in revenue per lead for refinance, purchase and home equity in 2021 compared to 2020. Mortgage rates have
risen from historic lows and refinance volumes have subsequently declined. The purchase market remains competitive as a national home inventory shortage
and lower affordability impact purchase application rates. In this type of environment our lender partners rely even more on LendingTree to help meet their
origination goals. We continue to look for opportunities to optimize towards higher converting products such as cash-out refinance and home equity loans, as
our partners are focused on these products. The average home with a mortgage has increased its available equity from a year ago. As interest rates have risen
broadly from all-time lows, loans secured with home equity represent the lowest cost source of financing for most consumers. We continue to focus on
improving the consumer experience to increase repeat users, cross-sell, and conversion rates. This will allow us to increase our reach and better align the right
borrowers to the right experiences based on their readiness to transact.
CONSUMER
The Consumer segment grew steadily throughout the year, generating revenue and segment profit growth of 30% and 34%, respectively, in 2021
compared to 2020. Personal loans and small business revenue in the fourth quarter of 2021 returned to 2019 levels and we are forecasting strong growth to
continue in 2022, while credit card is experiencing a slower rebound. As we add new lending partners to the TreeQual platform, we anticipate a significantly
improved customer experience that should drive increased conversion rates, margins, and pace of revenue growth in both credit card and personal loans.
Demand for the personal loans continues to grow as consumer savings rates decline with the end of government stimulus programs and higher consumer
spending. Our partner network has grown in 2021 compared to 2020, and we maintain a strong pipeline of new lenders looking to onboard. The addition of
TreeQual to the personal loans product and our continued investment in the down funnel experience should continue to push close rates higher and increase
monetization.
Our credit card business continues its recovery from pandemic lows. Issuers remain aggressive with the introduction of new cards and features, and we
have expanded our partner network. Margins in the credit card business continue to lag pre-pandemic levels. We are working to diversify our marketing mix,
actively pursuing more profitable marketing channels and partnerships to expand our reach and attract more consumers, which should lead to improved unit
economics over time.
Our small business product has been consistently growing, and we expect that to continue in 2022. We launched our Premium Marketplace offering in the
fourth quarter of 2021, which led to increased conversions and higher revenue per referral from enhanced customer tiering. Volume increased as our concierge
model helps small business owners find the right financing options to fit their unique business needs. We expect these positive trends to continue in 2022 as
we focus on product diversification, optimization of customer matching by segment, and cross-sell to unlock additional marketing opportunities.
INSURANCE
The claims market for our carrier partners was challenging in the last half of 2021, driving insurance revenue down 2% in 2021 from 2020 and segment
profit down 13%. Property and Casualty ("P&C") carriers reduced marketing budgets as they incurred significantly higher loss ratios, but we believe this
down cycle may be behind us. Although the dynamic remains fluid, we expect the business to return to a normalized operating environment by mid-year. In
the face of the overall industry challenge, we are committed to capturing additional share of carrier budgets by focusing on conversion rate and lead quality,
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which will benefit results when carriers look to aggressively acquire new customers. Consumer demand, as measured by traffic to our sites, remains robust
and continued to strengthen into year end. We expect this trend to continue as significant rate increases kicks-off a historic cycle of drivers shopping for new
auto policies.
We also made significant progress expanding our P&C Agency, adding P&C carriers to the platform and increasing our agent base, driving growth in
policies sold and written premium in our direct-to-consumer channel. Providing bindable insurance quotes improves the consumer experience and increases
conversion rates, and aligns well with our strategy of improving customer fulfillment across our platform.
Our Medicare Agency has scaled nicely, with growth in written policies of 111% in 2021 compared to 2020 as we invested in additional training while
managing our agent count responsibly. Exiting our second Annual Enrollment Period, we continue to evaluate our performance and look for ways to improve
unit economics through marketing effectiveness and close rates. We have observed the challenges increased customer churn and lower policy persistency have
created for competitors in the space. We will only scale this business to the extent we can do so with attractive targeted returns.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
We report Adjusted EBITDA as a supplemental measure to GAAP. This measure is the primary metric by which we evaluate the performance of our
businesses, on which our marketing expenditures and internal budgets are based and by which, in most years, management and many employees are
compensated. We believe that investors should have access to the same set of tools that we use in analyzing our results. This non-GAAP measure should be
considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. We provide and
encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures discussed below.
Definition of Adjusted EBITDA
We report Adjusted EBITDA as net income 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) gain/loss on
investments (5) restructuring and severance expenses, (6) litigation settlements and contingencies, (7) acquisitions and dispositions income or expense
(including with respect to changes in fair value of contingent consideration), and (8) 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. One-time items for the year
ended December 31, 2020 consisted of expenses incurred in connection with a secondary public offering of our common stock by our largest shareholder, for
which we did not receive any proceeds. There are no adjustments for one-time items for the year ended December 31, 2021.
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 (loss) from continuing operations to Adjusted EBITDA.
Net income (loss) from continuing operations
Adjustments to reconcile to Adjusted EBITDA:
Amortization of intangibles
Depreciation
Severance
Loss on impairments and disposal of assets
Gain on investments
Non-cash compensation expense
Costs of secondary public offering
Change in fair value of contingent consideration
Acquisition expense
Litigation settlements and contingencies
Interest expense, net
Income tax expense (benefit)
Adjusted EBITDA
Financial Position, Liquidity and Capital Resources
Year Ended December 31,
2020
2021
(in thousands)
$
73,138 $
(22,566)
42,738
17,910
53
3,465
(123,272)
68,555
—
(8,249)
1,796
392
46,867
11,298
134,691 $
53,078
14,201
295
1,160
—
53,733
863
5,327
2,217
(943)
36,300
(19,961)
123,704
$
For information on fiscal 2019 results and similar comparisons, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations—Financial Position, Liquidity and Capital Resources of our Form 10-K for the fiscal year ended December 31, 2020.
General
As of December 31, 2021, we had $251.2 million of cash and cash equivalents, compared to $169.9 million of cash and cash equivalents as of
December 31, 2020.
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 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.
Notable transactions affecting cash and cash equivalents during the reported periods are as follows:
2021
In 2021, we repurchased an aggregate of 334,253 shares of our common stock pursuant to a stock repurchase program for $40.0 million.
In the first quarter of 2021, we acquired an additional equity interest in Stash for $1.2 million. In the fourth quarter of 2021, we sold a portion of our Stash
equity securities to a third party for $46.3 million. See Note 8—Equity Investment to the consolidated financial statements included elsewhere in this report
for additional information on the equity interest in Stash.
2020
In July 2020, we made litigation settlement payments of $26.5 million to the ResCap Liquidating Trust ("ResCap") and $36.0 million to the HLC
bankruptcy Trustee for the matters noted in Note 21—Discontinued Operations. In October 2020, due to the timing of distributions from the HLC bankruptcy
estate, we were required to make a further payment of $6.4 million to ResCap. In 2021, we received an $8.6 million reimbursement from the HLC bankruptcy
estate related to the ResCap payments.
In July 2020, we issued $575.0 million of our 2025 Notes for net proceeds of approximately $559.9 million. We used approximately $63.0 million of the
net proceeds to enter into Convertible Note Hedge and Warrant transactions. Further, we used $234.0 million of the net proceeds to repurchase approximately
$130.3 million principal amount of our 2022 Notes. To the
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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 15—Debt for additional information.
In February 2020, we acquired an equity interest in Stash for $80.0 million. The investment was funded through $80.0 million drawn on our Amended
Revolving Credit Facility. See Note 8—Equity Investment to the consolidated financial statements included elsewhere in this report for more information.
During 2020, we made net repayments of $75.0 million on our Amended Revolving Credit Facility.
During 2020, we made contingent consideration payments of $6.0 million, $4.4 million and $20.2 million related to the prior acquisitions of SnapCap,
Ovation and QuoteWizard, respectively.
Credit Facility
On September 15, 2021, we entered into a credit agreement (the “Credit Agreement”), consisting of a $200.0 million revolving credit facility (the
“Revolving Facility”), which matures on September 15, 2026, and a $250.0 million delayed draw term loan facility (the “Term Loan Facility” and together
with the Revolving Facility, the “Credit Facility”), which matures on September 15, 2028 to the extent the loans thereunder will be drawn. The delayed draw
commitments under the Term Loan Facility will be available until June 1, 2022. The proceeds of the Revolving Facility can be used to finance working
capital, for general corporate purposes and any other purpose not prohibited by the Credit Agreement. The proceeds of the Term Loan Facility can be used to
settle the Company’s 2022 Notes, including related fees, costs and expenses, and up to $80.0 million may be used for general corporate purposes and any other
purposes not prohibited by the Credit Agreement. See Note 15—Debt for additional information.
As of February 28, 2022, we have outstanding a $0.2 million letter of credit under the Revolving Facility, and the remaining borrowing capacity is $199.8
million. No term loans have been drawn under the Term Loan Facility as of February 28, 2022.
For additional information on the Credit Facility, see Note 15—Debt in the notes to the consolidated financial statements included elsewhere in this
report.
Convertible Debt
Our 2022 Notes have a principal balance of $169.7 million and mature on June 1, 2022, unless earlier repurchased or converted. Our 2025 Notes have a
principal balance of $575.0 million and mature on July 15, 2025, unless earlier repurchased or converted. See Note 15—Debt to the consolidated financial
statements included elsewhere in this report for more information.
Operating Leases
We have operating lease obligations associated with office space in various cities across the country and office equipment. Our principal executive office
is located in Charlotte, North Carolina under an approximate 15-year lease that commenced in the second quarter of 2021. We anticipate cash payments under
operating lease obligations of $13.7 million in 2022. See Note 11—Leases to the consolidated financial statements included elsewhere in this report for more
information.
Cash Flows from Continuing Operations
Our cash flows attributable to continuing operations are as follows:
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash (used in) provided by financing activities
Cash Flows from Operating Activities
Year Ended December 31,
2021
2020
(in thousands)
131,256
10,067
(63,347)
$
$
$
111,299
(122,149)
193,290
$
$
$
Our largest source of cash provided by our operating activities is revenues generated by our products. Our primary uses of cash from our operating
activities include advertising and promotional payments. In addition, our uses of cash from operating
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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 2021 from 2020 primarily due to a increase in revenue,
partially offset by a corresponding increase in selling and marketing expense. Additionally, cash from changes in working capital increased primarily as a
result of changes in contingent consideration, accounts payable, accrued expenses and other current liabilities, and income taxes receivable, partially offset by
unfavorable changes in accounts receivable.
Cash Flows from Investing Activities
Net cash provided by investing activities attributable to continuing operations in 2021 of $10.1 million consisted of $46.3 million in proceeds from a
partial sale of our equity interest in Stash partially offset by $1.2 million for the purchase of an additional equity interest in Stash and capital expenditures of
$35.1 million primarily related to internally developed software.
Net cash used in investing activities attributable to continuing operations in 2020 of $122.1 million consisted of the purchase of an $80.0 million equity
interest in Stash and capital expenditures of $42.1 million primarily related to internally developed software and leasehold improvements for our new principal
corporate offices.
Cash Flows from Financing Activities
Net cash used in financing activities attributable to continuing operations in 2021 of $63.3 million consisted primarily of $40.0 million for the repurchase
of our stock, $14.4 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of
stock options, as well as $6.4 million for the payment of debt issuance costs and $2.5 million paid for the original issue discount on the undrawn Term Loan
Facility.
Net cash used in financing activities attributable to continuing operations in 2020 of $193.3 million consisted primarily of $575.0 million of gross
proceeds from the issuance of the 2025 Notes, partially offset by $233.9 million paid to repurchase a portion of the 2022 Notes, a net $47.4 million paid for
the related convertible note hedge and warrant transactions outlined above, $75.0 million of net repayments on our Amended Revolving Credit Facility, and
$16.6 million for the payment of debt issuance costs.
Critical Accounting Policies and Estimates
The following disclosure is provided to supplement the description of our accounting policies contained in Note 2—Significant Accounting Policies to the
consolidated financial statements included elsewhere in this report in regard to significant areas of judgment. This disclosure includes accounting policies
related to both continuing operations and discontinued operations. Management is required to make certain estimates and assumptions during the preparation
of the consolidated financial statements in accordance with generally accepted accounting principles. 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. Because of the size of the financial statement elements to
which they relate, some of our accounting policies and estimates have a more significant impact on our consolidated financial statements than others. A
discussion of some of our more significant accounting policies and estimates follows.
Income Taxes
Estimates of deferred income taxes and the significant items giving rise to the deferred assets and liabilities are shown in Note 14—Income Taxes to the
consolidated financial statements included elsewhere in this report, and reflect management's assessment of actual future taxes to be paid on items reflected in
the consolidated financial statements, giving consideration to both timing and the probability of realization. Actual income taxes could vary from these
estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the IRS, as well as
actual operating results that may vary significantly from anticipated results.
We also recognize liabilities for uncertain tax positions based on the two-step process prescribed by the accounting guidance for uncertainty in income
taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the
largest amount that is more than 50% likely of being realized upon ultimate settlement. This measurement step is inherently difficult and requires subjective
estimations of such amounts to determine the probability of various possible outcomes. We consider many factors when evaluating and estimating our tax
positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.
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A valuation allowance is provided on deferred tax assets if it is determined that it is "more likely than not" that the deferred tax asset will not be realized.
At December 31, 2021, 2020 and 2019, we recorded a partial valuation allowance of $6.0 million, $5.8 million and $4.1 million, respectively, primarily
related to state net operating losses, which we do not expect to be able to utilize prior to expiration.
Stock-Based Compensation
The forms of stock-based awards granted to our employees are principally restricted stock units ("RSUs"), RSUs with performance conditions, stock
options, and employee stock purchases related to the Employee Stock Purchase Plan ("Employee Stock Purchase Rights"). Further, stock options with market
conditions, restricted stock awards ("RSAs") with performance conditions and RSAs with market conditions have been granted to our Chairman and Chief
Executive Officer. The value of RSUs is measured at their grant dates as the fair value of common stock and amortized ratably as non-cash compensation
expense over the vesting term. The value of stock options issued and Employee Stock Purchase Rights are generally estimated using a Black-Scholes option
pricing model. The value of performance-based grants is measured at their grant dates and recognized as non-cash compensation expense, considering the
probability of the targets being achieved. Performance-based grants with a market condition are generally valued using a Monte Carlo simulation model. If an
award is modified, we determine if the modification requires a new calculation of fair value or change in the vesting term of the award. See Note 13—Stock-
Based Compensation to the consolidated financial statements included elsewhere in this report for additional information on assumptions and inputs to the fair
value determination of stock-based awards.
Evaluation of Goodwill Impairment
We test goodwill annually for impairment as of October 1, or more frequently upon the occurrence of certain events or substantive changes in
circumstances. As part of our annual impairment testing of goodwill, we may elect to assess qualitative factors as a basis for determining whether it is
necessary to perform the traditional quantitative impairment testing. If our assessment of these qualitative factors indicates that it is not more likely than not
that the fair value of the reporting unit or indefinite-lived intangible asset is less than its carrying value, then no further testing is required. Otherwise, the
goodwill reporting unit must be quantitatively tested for impairment.
Performing the quantitative test for goodwill impairment that compares the reporting unit fair value with its carrying value using a discounted cash flow
analysis requires the exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates and the amount and
timing of expected future cash flows. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to
that excess.
The value of goodwill subject to assessment for impairment at December 31, 2021 is $420.1 million.
Recoverability of Long-Lived Assets
We review the carrying value of all long-lived assets, primarily property and equipment, definite-lived intangible assets and operating lease right-of-use
assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may be impaired. Impairment is considered to
have occurred whenever the carrying value of a long-lived asset cannot be recovered from cash flows that are expected to result from the use and eventual
disposition of the asset. This recoverability test requires us to make assumptions and judgments related to factors used in a calculation of undiscounted cash
flows, including, but not limited to, management’s expectations for future operations and projected cash flows. The key assumptions used in this calculation
include Adjusted EBITDA, the remaining useful lives of the primary cash flow generating asset in the asset group and, to a lesser extent, the deduction of
capital expenditures and taxes paid in cash to arrive at net cash flows.
Subsequent to the adoption of ASU 2018-15 in the first quarter of 2020, capitalized implementation costs incurred in a hosting arrangement that is a
service contract are also allocated to and included within long-lived asset groups tested for recoverability.
The combined value of long-lived assets and capitalized implementation costs incurred in a hosting arrangement that is a service contract subject to
assessment for impairment is $230.2 million at December 31, 2021.
Business Acquisitions
When we acquire businesses, we allocate the purchase price to tangible assets and liabilities and identifiable intangible assets acquired at their acquisition
date fair values. Any residual purchase price is recorded as goodwill. We also estimate the fair value of any contingent consideration using Level 3
unobservable inputs. Our estimates of fair value are based upon assumptions believed to be reasonable but which are uncertain and involve significant
judgments by management.
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We reassess the fair value of contingent consideration quarterly until the contingency is resolved, and changes in the fair value are recorded in operating
income in the consolidated statements of operations and comprehensive income (loss).
Equity Investment
Our equity investment does not have a readily determinable fair value and, upon acquisition, we elected the measurement alternative to value these
securities. Accordingly, these equity securities are carried at cost and subsequently marked to market upon observable market events with any gains or losses
recorded in operating income in the consolidated statement of operations.
The carrying value of our equity investment at December 31, 2021 is $158.1 million.
New Accounting Pronouncements
See Note 2—Significant Accounting Policies to the consolidated financial statements included elsewhere in this report for a description of recent
accounting pronouncements.
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ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Other than our 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 Credit Facility, if any. As of February 28, 2022, there were no borrowings under the Credit Facility.
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.
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ITEM 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
LENDINGTREE, INC. AND SUBSIDIARIES:
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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Number
51
53
54
55
56
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of LendingTree, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of LendingTree, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020,
and the related consolidated statements of operations and comprehensive income (loss), of shareholders' equity and of cash flows for each of the three years in
the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial
Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
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Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated
or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements
and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of equity securities - Stash
As described in Note 8 to the consolidated financial statements, on February 28, 2020, the Company acquired an equity interest in Stash Financial, Inc.
(“Stash”) for $80.0 million. On January 6, 2021, the Company acquired an additional equity interest for $1.2 million. The Stash equity securities do not have a
readily determinable fair value and, upon acquisition, the Company elected the measurement alternative to value its securities. The Stash equity securities are
carried at cost and subsequently marked to market upon observable market events with any gains or losses recorded in operating income in the consolidated
statement of operations. On October 18, 2021, the Company entered into a stock transfer agreement with third parties to sell a portion of its Stash equity
securities for $46.3 million. The Company sold $35.3 million in October and closed on an additional $11.0 million in November 2021. The Company recorded
a realized gain of $27.9 million based on the sale of Stash equity securities under the stock transfer agreement. In 2021, the Company recorded a net
unrealized gain on the investment in Stash of $95.4 million as a result of an adjustment to the fair value of the Stash equity securities based on observable
market events, which is included within other income on the consolidated statement of operations and comprehensive income.
The principal considerations for our determination that performing procedures relating to the valuation of the Stash equity securities is a critical audit matter
are (i) the significant judgment by management to determine the fair value of the Stash equity securities, which included identifying the observable market
events utilized in the fair value estimate, and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating
management's fair value estimate.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included testing the effectiveness of controls relating to management’s valuation of the Stash equity securities,
including controls over the identification of the observable market events. These procedures also included, among others, (i) testing management’s process for
determining the fair value of the Stash equity securities, (ii) evaluating the appropriateness of the model and management’s identification of observable market
events, and (iii) evaluating the appropriateness of the observable market events used to estimate the fair value of the Stash equity securities. Evaluating the
observable market events involved assessing whether the inputs were reasonable considering consistency with recent company and third party executed
transactions.
/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
February 28, 2022
We have served as the Company’s auditor since 2012.
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LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Revenue
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)
Selling and marketing expense
General and administrative expense
Product development
Depreciation
Amortization of intangibles
Change in fair value of contingent consideration
Severance
Litigation settlements and contingencies
Total costs and expenses
Operating income (loss)
Other (expense) income, net:
Interest expense, net
Other income
Income (loss) before income taxes
Income tax (expense) benefit
Net income (loss) from continuing operations
Loss from discontinued operations, net of tax
Net income (loss) and comprehensive income (loss)
Weighted average shares outstanding:
Basic
Diluted
Income (loss) per share from continuing operations:
Basic
Diluted
Loss per share from discontinued operations:
Basic
Diluted
Net income (loss) per share:
Basic
Diluted
2021
Year Ended December 31,
2020
(in thousands, except per share amounts)
2019
$
1,098,499 $
909,990 $
1,106,603
57,297
773,990
153,472
52,865
17,910
42,738
(8,249)
53
392
1,090,468
8,031
54,494
617,404
129,101
43,636
14,201
53,078
5,327
295
(943)
916,593
(6,603)
(46,867)
123,272
84,436
(11,298)
73,138
(4,023)
69,115 $
(36,300)
376
(42,527)
19,961
(22,566)
(25,689)
(48,255) $
68,379
735,180
116,847
39,953
10,998
55,241
28,402
1,026
(151)
1,055,875
50,728
(20,271)
524
30,981
8,479
39,460
(21,632)
17,828
13,199
13,695
13,007
13,007
12,834
14,619
5.54 $
5.34 $
(0.30) $
(0.29) $
5.24 $
5.05 $
(1.73) $
(1.73) $
(1.98) $
(1.98) $
(3.71) $
(3.71) $
3.07
2.70
(1.69)
(1.48)
1.39
1.22
$
$
$
$
$
$
$
The accompanying notes to consolidated financial statements are an integral part of these statements.
53
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LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS:
Cash and cash equivalents
Restricted cash and cash equivalents
Accounts receivable (net of allowance of $1,456 and $1,402, respectively)
Prepaid and other current assets
Current assets of discontinued operations
Total current assets
Property and equipment (net of accumulated depreciation of $28,315 and $20,238, respectively)
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Deferred income tax assets
Equity investment (Note 8)
Other non-current assets
Non-current assets of discontinued operations
Total assets
LIABILITIES:
Current portion of long-term debt
Accounts payable, trade
Accrued expenses and other current liabilities
Current liabilities of discontinued operations
Total current liabilities
Long-term debt
Operating lease liabilities
Non-current contingent consideration
Deferred income tax liabilities
Other non-current liabilities
Total liabilities
Commitments and contingencies (Notes 16 and 17)
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; 16,070,720 and 15,766,193 shares issued, respectively,
and 13,095,149 and 13,124,875 shares outstanding, respectively
Additional paid-in capital
Accumulated deficit
Treasury stock; 2,975,571 and 2,641,318 shares, respectively
Total shareholders' equity
Total liabilities and shareholders' equity
December 31, 2021
December 31, 2020
(in thousands, except par value
and share amounts)
$
$
$
$
251,231 $
111
97,658
25,379
—
374,379
72,477
77,346
420,139
85,763
87,581
158,140
6,942
16,589
1,299,356 $
166,008 $
1,692
106,731
1
274,432
478,151
96,165
—
2,265
351
851,364
169,932
117
89,841
27,949
8,570
296,409
62,381
84,109
420,139
128,502
96,224
80,000
5,334
15,892
1,188,990
—
10,111
101,196
536
111,843
611,412
92,363
8,249
—
362
824,229
—
—
161
1,242,794
(571,794)
(223,169)
447,992
1,299,356 $
158
1,188,673
(640,909)
(183,161)
364,761
1,188,990
The accompanying notes to consolidated financial statements are an integral part of these statements.
54
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LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock
Treasury Stock
Total
Number
of Shares
Amount
Balance as of December 31, 2018
Net income and comprehensive income
Non-cash compensation
Purchase of treasury stock
Issuance of common stock for stock options,
restricted stock awards and restricted stock
units, net of withholding taxes
Other
Balance as of December 31, 2019
Net loss and comprehensive loss
Non-cash compensation
Issuance of common stock for stock options,
restricted stock awards and restricted stock
units, net of withholding taxes
Issuance of 0.50% Convertible Senior Notes, net
Repurchase of 0.625% Convertible Senior
Notes, net
Convertible note hedge transactions
Warrant transactions
Other
Balance as of December 31, 2020
Net income and comprehensive income
Non-cash compensation
Purchase of treasury stock
Issuance of common stock for stock options,
employee stock purchase plan, restricted stock
awards and restricted stock units, net of
withholding taxes
Other
Balance as of December 31, 2021
$
$
$
$
346,208
17,828
52,167
(5,470)
(8,406)
(1)
402,326
(48,255)
53,733
(3,910)
116,300
(107,882)
(14,379)
(33,171)
(1)
364,761
69,115
68,555
(40,008)
(14,423)
(8)
447,992
15,428
—
—
—
249
—
15,677
—
—
89
—
—
—
—
—
15,766
—
—
—
305
—
16,071
$
$
$
$
Additional
Paid-in
Capital
(in thousands)
1,134,227
—
52,167
—
(8,409)
(1)
1,177,984
—
53,733
(3,911)
116,300
(107,882)
(14,379)
(33,171)
(1)
1,188,673
—
68,555
—
(14,426)
(8)
1,242,794
$
$
$
$
154
—
—
—
3
—
157
—
—
1
—
—
—
—
—
158
—
—
—
3
—
161
$
$
$
$
Accumulated
Deficit
Number
of Shares
Amount
(610,482)
17,828
—
—
—
—
(592,654)
(48,255)
—
—
—
—
—
—
—
(640,909)
69,115
—
—
—
—
(571,794)
2,618
—
—
23
—
—
2,641
—
—
—
—
—
—
—
—
2,641
—
—
335
—
—
2,976
$
$
$
$
(177,691)
—
—
(5,470)
—
—
(183,161)
—
—
—
—
—
—
—
—
(183,161)
—
—
(40,008)
—
—
(223,169)
The accompanying notes to consolidated financial statements are an integral part of these statements.
55
Table of Contents
LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
2021
Year Ended December 31,
2020
(in thousands)
2019
Cash flows from operating activities attributable to continuing operations:
Net income (loss) and comprehensive income (loss)
Less: Loss from discontinued operations, net of tax
Income (loss) from continuing operations
Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing
operations:
$
69,115 $
4,023
73,138
(48,255) $
25,689
(22,566)
Loss (gain) on impairments and disposal of assets
Amortization of intangibles
Depreciation
Non-cash compensation expense
Deferred income taxes
Change in fair value of contingent consideration
Gain on investments
Bad debt expense
Amortization of debt issuance costs
Write-off of previously-capitalized debt issuance costs
Amortization of debt discount
Loss on extinguishment of debt
Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities
Changes in current assets and liabilities:
Accounts receivable
Prepaid and other current assets
Accounts payable, accrued expenses and other current liabilities
Current contingent consideration
Income taxes receivable
Other, net
Net cash provided by operating activities attributable to continuing operations
Cash flows from investing activities attributable to continuing operations:
Capital expenditures
Proceeds from the sale of fixed assets
Purchase of equity investment
Proceeds from the sale of equity investment
Acquisition of ValuePenguin, net of cash acquired
Acquisition of QuoteWizard, net of cash acquired
Net cash provided by (used in) investing activities attributable to continuing operations
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
Purchase of treasury stock
Proceeds from the issuance of 0.50% Convertible Senior Notes
Repurchase of 0.625% Convertible Senior Notes
Payment of convertible note hedge on the 0.50% Convertible Senior Notes
Termination of convertible note hedge on the 0.625% Convertible Senior Notes
Proceeds from the sale of warrants related to the 0.50% Convertible Senior Notes
Termination of warrants related to the 0.625% Convertible Senior Notes
Net repayment of revolving credit facility
Payment of debt issuance costs
Payment of original issue discount on undrawn term loan
Contingent consideration payments
Other financing activities
Net cash (used in) provided by financing activities attributable to continuing operations
Total cash provided by (used in) continuing operations
Discontinued operations:
Net cash provided by (used in) operating activities attributable to discontinued operations
Total cash provided by (used in) discontinued operations
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period
Non-cash investing activities:
(Decrease) increase in capital expenditures included in accounts payable and accrued expenses
Capital additions from tenant improvement allowance
Supplemental cash flow information:
Interest paid
Income tax payments
Income tax refunds
3,465
42,738
17,910
68,555
10,908
(8,249)
(123,272)
2,472
5,992
1,066
30,695
—
12,807
(10,289)
(4,902)
(1,537)
—
10,680
(921)
131,256
(35,065)
—
(1,180)
46,312
—
—
10,067
(14,423)
(40,008)
—
—
—
—
—
—
—
(6,385)
(2,500)
—
(31)
(63,347)
77,976
3,317
3,317
81,293
170,049
251,342 $
(4,793) $
—
8,912 $
186
10,503
1,160
53,078
14,201
53,733
(9,628)
5,327
—
1,785
3,474
—
19,570
7,768
8,888
21,861
(952)
(8,013)
(25,787)
(10,598)
(2,002)
111,299
(42,149)
—
(80,000)
—
—
—
(122,149)
(3,910)
—
575,000
(233,862)
(124,200)
109,881
61,180
(94,292)
(75,000)
(16,568)
—
(4,755)
(184)
193,290
182,440
(72,730)
(72,730)
109,710
60,339
170,049 $
4,196 $
—
4,741 $
561
60
$
$
$
17,828
21,632
39,460
(695)
55,241
10,998
52,167
(8,555)
28,402
—
1,697
1,974
333
12,016
—
213
(22,457)
(3,258)
(2,322)
(12,500)
4,548
(88)
157,174
(20,041)
24,077
—
—
(105,578)
482
(101,060)
(8,406)
(5,470)
—
—
—
—
—
—
(50,000)
(2,518)
—
(21,275)
(9)
(87,678)
(31,564)
(13,255)
(13,255)
(44,819)
105,158
60,339
(946)
1,111
7,005
25
4,743
The accompanying notes to consolidated financial statements are an integral part of these statements.
56
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—ORGANIZATION
Company Overview
LendingTree, Inc. is the parent of LT Intermediate Company, LLC, which holds all of the outstanding ownership interests of LendingTree, LLC, and
LendingTree, LLC owns several companies (collectively, "LendingTree" or the "Company").
LendingTree operates what it believes to be the leading online consumer platform that connects consumers with the choices they need to be confident in
their financial decisions. The Company offers consumers tools and resources, including free credit scores, that facilitate comparison-shopping for mortgage
loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business
loans, insurance quotes, sales of insurance policies and other related offerings. The Company primarily seeks to match in-market consumers with multiple
providers on its marketplace who can provide them with competing quotes for loans, deposit products, insurance or other related offerings they are seeking.
The Company also serves as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with
directly measurable benefits, by matching the consumer inquiries it generates with these providers.
The consolidated financial statements include the accounts of LendingTree and all its wholly-owned entities, 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
(loss) 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 21 —Discontinued Operations for additional
information.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America ("GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC").
NOTE 2—SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
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. In identifying performance obligations, judgment is required
around contracts where there was a possibility of bundled services and multiple parties. In applying judgment, the Company considers customer expectations
of performance, materiality and the core principles of Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. The
Company's services are generally transferred to the customer at a point in time.
Variable consideration is included in revenue if it is probable that a significant future reversal of cumulative revenue under the contract will not occur.
Revenue from Home products is primarily generated from upfront match fees paid by mortgage Network Partners that receive a loan request, and in some
cases upfront fees for clicks or call transfers. Match fees and upfront fees for clicks and call transfers are earned through the delivery of loan requests that
originated through the Company's websites or affiliates. The Company recognizes revenue at the time a loan request is delivered to the customer, provided that
no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance
obligation to deliver a loan request to the customer.
57
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue from Consumer products is generated by match and other upfront fees for clicks or call transfers, as well as from closing fees, approval fees and
upfront service and subscription fees. Closing fees are derived from lenders on certain auto loans, business loans, personal loans and student loans when the
lender funds a loan with the consumer. Approval fees are derived from credit card issuers when the credit card consumer receives card approval from the
credit card issuer. Upfront service fees and subscription fees are derived from consumers in the Company's credit services product. Upfront fees paid by
consumers are recognized as revenue over the estimated time the consumer will remain a customer and receive services. Subscription fees are recognized over
the period a consumer is receiving services.
Under ASC Topic 606, the timing of recognizing revenue for closing fees and approval fees is accelerated to the point when a loan request or a credit card
consumer is delivered to the customer, as opposed to when the consumer loan is closed by the lender or credit card approval is made by the issuer. 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. The time between satisfaction of the Company's performance obligation and when the Company's right to consideration becomes
unconditional varies across products but is generally less than 90 days for auto loans, personal loans, student loans and credit card approvals. The time
between satisfaction of the Company's performance obligation and when the Company's right to consideration becomes unconditional for small business loans
is generally less than 51 months.
Revenue from the Company's Insurance products is primarily generated from upfront match fees and upfront fees for website clicks or fees for calls.
Match fees and upfront fees for clicks and call transfers are earned through the delivery of consumer requests that originated through the Company's websites
or affiliates. The Company recognizes revenue at the time a consumer request is delivered to the customer, provided that no significant obligations remain.
The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a consumer
request to the customer.
Our payment terms vary by customer and services offered. The term between invoicing and when payment is due is generally 30 days or less.
Sales commissions are incremental costs of obtaining contracts with customers. The Company expenses sales commissions when incurred as the duration
of contracts with customers is less than one year, based on the right of either party to terminate the contract with less than one year's notice without
compensation to either party. These costs are recorded within selling and marketing expense on the consolidated statements of operations and comprehensive
income (loss).
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term, highly liquid money market investments with original maturities of three months or less.
Restricted Cash
Cash escrowed or contractually restricted for a specific purpose is designated as restricted cash.
Accounts Receivable
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.
58
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the beginning and ending balances of the allowance for doubtful accounts is as follows (in thousands):
Balance, beginning of the period
Charges to earnings
Write-off of uncollectible accounts receivable
Recoveries collected
Balance, end of the period
Segment Reporting
2021
Year Ended December 31,
2020
2019
$
$
1,402 $
2,472
(2,424)
6
1,456 $
1,466 $
1,785
(1,859)
10
1,402 $
1,143
1,697
(1,400)
26
1,466
The Company has three 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, or CODM, for the purpose of assessing performance and allocating resources.
Property and Equipment
Property and equipment, including internally-developed software and significant improvements, are recorded at cost less accumulated depreciation. Due
to the rapid advancements in technology and evolution of company products, all internally-developed software is written off at the end of its useful life.
Repairs and maintenance and any gains or losses on dispositions are recognized as incurred in current operations.
Depreciation is recorded on a straight-line basis to allocate the cost of depreciable assets to operations over their estimated service lives. The following
table presents the estimated useful lives for each asset category:
Asset Category
Computer equipment and capitalized software
Leasehold improvements
Furniture and other equipment
Aircraft and automobile
Hosting Arrangement that is a Service Contract
Estimated Useful Lives
1 to 5 years
Lesser of asset life or life of lease
7 years
5 to 10 years
Subsequent to the adoption of Accounting Standards Update ("ASU") 2018-15 in the first quarter of 2020, as described below, qualifying implementation
costs incurred in a hosting arrangement that is a service contract are capitalized and deferred on a straight-line basis over the term of the hosting arrangement,
which is typically one to five years. These costs are capitalized to prepaid and other current assets and other non-current assets on the balance sheet, and the
associated amortization expense is included within general and administrative expense on the statement of operations and comprehensive income (loss). The
majority of such capitalized implementation costs arise from internal and external labor associated with software development, described below.
Software Development Costs
Software development costs primarily include internal and external labor expenses incurred to develop the software that powers the Company's websites.
Certain costs incurred during the application development stage are capitalized, either as property and equipment or as a hosting arrangement that is a service
contract, based on specific activities tracked, while costs incurred during the preliminary project stage and post-implementation/operation stage are expensed
as incurred. Capitalized software development costs are amortized over an estimated useful life of one to five years.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill acquired in business combinations is assigned to the reporting units that are expected to benefit from the combination as of the acquisition date.
Goodwill and indefinite-lived intangible assets, consisting of certain trade names and
59
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
trademarks, are not amortized. Rather, these assets are tested annually for impairment as of October 1, or more frequently upon the occurrence of certain
events or substantive changes in circumstances.
As part of its annual impairment testing of goodwill and indefinite-lived intangible assets, in each instance, the Company may elect to assess qualitative
factors as a basis for determining whether it is necessary to perform the traditional quantitative impairment testing. If the Company’s assessment of these
qualitative factors indicates that it is not more likely than not that the fair value of the reporting unit or indefinite-lived intangible asset is less than its carrying
value, then no further testing is required. Otherwise, the goodwill reporting unit or long-lived intangible assets, as applicable, must be quantitatively tested for
impairment.
The quantitative impairment test for goodwill involves a comparison of the fair value of a reporting unit with its carrying amount, including goodwill. The
Company determines the fair value of its reporting units by using a market approach and a discounted cash flow ("DCF") analysis. Determining fair value
using a DCF analysis requires the exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates and the
amount and timing of expected future cash flows. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not
impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
The quantitative impairment test for indefinite-lived intangible assets involves a comparison of the estimated fair value of the intangible asset with its
carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its estimated fair value, an impairment loss is recognized in an amount
equal to that excess. The estimates of fair value of indefinite-lived intangible assets are determined using a DCF valuation analysis that employs a relief-from-
royalty methodology in estimating the fair value of trade names and trademarks. Significant judgments inherent in this analysis include the determination of
royalty rates, discount rates, perpetual growth rates and the amount and timing of future revenues.
Results of the October 1, 2021 and 2020 qualitative annual impairment tests indicated that it is not more likely than not that the fair value of the goodwill
and the indefinite-lived intangible assets were each less than their respective carrying values. Accordingly, no further testing was required.
At October 1, 2019, the Company performed the first step of the quantitative goodwill impairment test and found that the fair value of each reporting unit
exceeded its carrying amount, indicating no goodwill impairment. The Company changed its operating segments in the fourth quarter of 2019 and accordingly
changed its reporting units. At December 31, 2019, the Company performed the first step of the quantitative goodwill impairment test and found that the fair
value of each reporting unit exceeded its carrying amount, indicating no goodwill impairment. Results of the October 1, 2019 qualitative annual impairment
tests for the indefinite-lived intangible assets indicated that it is not more likely than not that the fair value of the assets were each less than their respective
carrying values. Accordingly, no further testing was required.
Long-Lived Assets and Intangible Assets with Definite Lives
Long-lived assets include property and equipment, definite-lived intangible assets and operating lease right-of-use assets. Amortization of definite-lived
intangible assets is recorded on a straight-line basis over their estimated lives.
Subsequent to the adoption of ASU 2018-15, described below, capitalized implementation costs incurred in a hosting arrangement that is a service
contract are also allocated to and included within long-lived asset groups tested for recoverability.
Long-lived asset groups are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be
recoverable. The carrying amount of a long-lived asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from
the use and eventual disposition of the asset group. If the carrying amount is deemed to not be recoverable, an impairment loss is recorded as the amount by
which the carrying amount of the long-lived asset group exceeds its fair value.
At December 31, 2021 and 2020, the Company performed its review of impairment triggering events for long-lived asset groups and determined that a
triggering event had not occurred.
Fair Value Measurements
The Company categorizes its assets and liabilities measured at fair value into a fair value hierarchy that prioritizes the assumptions used in pricing the
asset or liability into the following three levels:
•
Level 1: Observable inputs, such as quoted prices for identical assets and liabilities in active markets obtained from independent sources.
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
•
•
Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices
for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable
market data.
Level 3: Unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions, based on the
best information available under the circumstances, about the assumptions market participants would use in pricing the asset or liability.
The Company's non-financial assets, such as goodwill, intangible assets and property and equipment are recorded at fair value upon acquisition. These
assets are remeasured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized. Such
fair value measurements are based predominantly on Level 3 inputs.
Contingent consideration payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The
Company's estimates of fair value are based upon assumptions believed to be reasonable but which are uncertain and involve significant judgments by
management. Any changes in the fair value of these contingent consideration payments are included in operating income in the consolidated statements of
operations and comprehensive income (loss). At December 31, 2021, the Company had no outstanding contingent consideration arrangements.
Cost of Revenue
Cost of revenue consists primarily of expenses associated with compensation and other employee-related costs (including stock-based compensation)
related to internally-operated customer call centers, third-party customer call center fees, credit scoring fees, credit card fees, website network hosting and
server fees.
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.
Advertising
Advertising costs are expensed in the period incurred (except for production costs which are initially capitalized and then recognized as expense when the
advertisement first runs) and principally represent offline costs, including television, print and radio advertising, and online advertising costs, including fees
paid to search engines and distribution partners. Advertising expense was $716.6 million, $567.7 million and $688.2 million for the years ended December 31,
2021, 2020 and 2019, respectively, and is included in selling and marketing expense on the consolidated statements of operations and comprehensive income
(loss).
Income Taxes
Income taxes are accounted for under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In estimating future
tax consequences, all expected future events are considered. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is
more likely than not that the deferred tax asset will not be realized. Interest is recorded on potential tax contingencies as a component of income tax expense
and recorded net of any applicable related income tax benefit. For the years ended December 31, 2021, 2020 and 2019, the Company followed the incremental
or "with" and "without" approach to intraperiod tax allocation for determination of the amount of tax benefit to allocate to continuing operations as prescribed
in ASC 740-20-45-7.
In accordance with the accounting standard for uncertainty in income taxes, liabilities for uncertain tax positions are recognized based on the two-step
process prescribed by the accounting standards. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence
indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second
step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
61
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based Compensation
The forms of stock-based awards granted to LendingTree employees are principally restricted stock units ("RSUs"), RSUs with performance conditions,
stock options, and employee stock purchases related to the Employee Stock Purchase Plan ("Employee Stock Purchase Rights"). Further, stock options with
market conditions, restricted stock awards ("RSAs") with performance conditions and RSAs with market conditions have been granted to the Company's
Chairman and Chief Executive Officer. RSUs are awards in the form of units, denominated in a hypothetical equivalent number of shares of LendingTree
common stock and with the value of each award equal to the fair value of LendingTree common stock at the date of grant. RSUs may be settled in cash, stock
or both, as determined by the Company's Compensation Committee at the time of grant. The Company does not have a history of settling these awards in cash.
Each stock-based award is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. The
Compensation Committee can modify the vesting provisions of an award. Certain awards also include performance-based vesting, where certain performance
targets set at the time of grant must be achieved before an award vests.
LendingTree recognizes as expense non-cash compensation for all stock-based awards for which vesting is considered probable. Forfeitures are
recognized when they occur.
For service-based awards, non-cash compensation is measured at fair value on the grant date and expensed ratably over the vesting term. The fair value of
stock option awards without a market condition and Employee Stock Purchase Rights are typically estimated using the Black-Scholes option pricing model,
while the fair value of an RSU or RSA is measured as the closing common stock price at the time of grant. For performance-based grants, the fair value is
measured on the grant date and recognized as non-cash compensation expense, considering the probability of the targets being achieved. Performance-based
grants with a market condition are typically valued using a Monte Carlo simulation model. Non-cash compensation expense for single cliff-vesting grants with
a market condition are recognized on a straight-line basis, while graded-vesting grants with a market condition use graded vesting expense attribution.
Excess tax benefits and deficiencies that arise due to the difference in the measure of stock compensation and the amount deductible for tax purposes are
recorded in income tax expense within the consolidated statement of operations and comprehensive income (loss), and are classified as a component of
operating cash flows within the consolidated statements of cash flows.
Litigation Settlements and Contingencies
Litigation settlements and contingencies consists of expenses related to actual or anticipated litigation settlements.
The Company is involved in legal proceedings on an ongoing basis. If the Company believes that a loss arising from such matters is probable and can be
reasonably estimated, the estimated liability is accrued in the consolidated financial statements. If only a range of estimated losses can be determined, an
amount within the range is accrued that, in the Company's judgment, reflects the most likely outcome; if none of the estimates within that range is a better
estimate than any other amount, the low end of the range is accrued. For those proceedings in which an unfavorable outcome is reasonably possible but not
probable, an estimate of the reasonably possible loss or range of losses or a conclusion that an estimate of the reasonably possible loss or range of losses
arising directly from the proceeding (i.e., monetary damages or amounts paid in judgment or settlement) are not material is disclosed. Legal expenses
associated with these matters are recognized as incurred.
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: 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; assumptions related to the determination of stock-based
compensation; and the determination of right-of-use assets and lease liabilities.
The Company considered the impact of the COVID-19 pandemic on the assumptions and estimates used when preparing its financial statements
including, but not limited to, the allowance for doubtful accounts, valuation allowances, contract asset and
62
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
contingent consideration. These assumptions and estimates may change as new events occur and additional information is obtained. If economic conditions
caused by the COVID-19 pandemic worsen, such future changes may have an adverse impact on the Company's results of operations, financial position and
liquidity.
Certain Risks and Concentrations
LendingTree's business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks
associated with online commerce security and credit card fraud.
Financial instruments, which potentially subject the Company to concentration of credit risk at December 31, 2021, consist primarily of cash and cash
equivalents and accounts receivable, as disclosed in the consolidated balance sheet. Cash and cash equivalents are in excess of Federal Deposit Insurance
Corporation insurance limits, but are maintained with quality financial institutions of high credit. The Company requires certain Network Partners to maintain
security deposits with the Company, which in the event of non-payment, would be applied against any accounts receivable outstanding.
Due to the nature of the mortgage lending industry, interest rate fluctuations may negatively impact future revenue from the Company's marketplace.
For the year ended December 31, 2021, there were no network partners accounting for more than 10% of total revenue. For the years ended December 31,
2020 and 2019, one network partner accounted for 15% and 12%, respectively, of total consolidated revenue, all of which was recorded within the Insurance
segment.
Lenders and lead purchasers participating on the Company's marketplace can offer their products directly to consumers through brokers, mass marketing
campaigns or through other traditional methods of credit distribution. These lenders and lead purchasers can also offer their products online, either directly to
prospective borrowers, through one or more online competitors, or both. If a significant number of potential consumers are able to obtain loans and other
products from Network Partners without utilizing the Company's services, the Company's ability to generate revenue may be limited. Because the Company
does not have exclusive relationships with the Network Partners whose loans and other financial products are offered on its online marketplace, consumers
may obtain offers from these Network Partners without using its service.
Other than a support services office in India, the Company's operations are geographically limited to and dependent upon the economic condition of the
United States.
Recently Adopted Accounting Pronouncements
In May 2021, the FASB issued ASU 2021-04 to clarify and reduce diversity in accounting for modifications or exchanges of freestanding equity-
classified written call options that remain equity classified after modification or exchange. The amendments clarify that a modification of the terms or
conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange should be
accounted for as an exchange of the original instrument for a new instrument. This ASU is effective for annual and interim reporting periods beginning after
December 15, 2021. Early adoption is permitted, including adoption in interim periods. An entity should adopt the guidance as of the beginning of its annual
fiscal year. The amendments should be applied prospectively to modifications or exchanges occurring on or after the date of adoption. The Company adopted
ASU 2021-04 in the second quarter of 2021.
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, 2020. Early adoption is permitted, including adoption in interim periods.
Entities electing early adoption must adopt all amendments in the same period. Most amendments must be applied prospectively while others are to be applied
on a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the
beginning of the fiscal year of adoption. The Company adopted ASU 2019-12 in the first quarter of 2021. The amendments applicable to the Company
required prospective application, and do not have material impacts to its consolidated financial statements.
In August 2018, the Financial Accounting Standards Board ("FASB") issued 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. The amendments should be applied either retrospectively or prospectively to all implementation costs
incurred after the date of adoption. The Company adopted ASU 2018-15 in the first quarter of 2020 using the prospective approach. Subsequent
63
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to the adoption of this ASU, 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 amortization expense associated with these capitalized implementation
costs is included within general and administrative expense on the consolidated statement of operations and comprehensive income (loss). The adoption of
ASU 2018-15 did not have a material impact on the consolidated financial statements as of and for the year ended December 31, 2020. See Note 6—Hosting
Arrangements.
In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds certain disclosure requirements in ASC Topic 820, Fair Value
Measurement. This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. Certain amendments must be applied
prospectively while others are to be applied on a retrospective basis to all periods presented. The Company adopted ASU 2018-13 in the first quarter of 2020.
See Note 18—Fair Value Measurements.
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. The Company adopted ASU
2017-04 in the 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.
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 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 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 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.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments, amends the derivatives scope exception
guidance for contracts in an entity’s own equity, and amends the related earnings-per-share guidance. This ASU is effective for annual and interim reporting
periods beginning after December 15, 2021. Early adoption is permitted for fiscal years beginning after December 15, 2020, including adoption in interim
periods. An entity should adopt the guidance as of the beginning of its annual fiscal year. An entity may adopt the amendments through either a modified
retrospective method of transition or a fully retrospective method of transition. The Company plans to adopt the amendments through the modified
retrospective method of transition in the first quarter of 2022. As a result, the Company's convertible senior notes will be stated on its consolidated balance
sheet at their principal amounts, net of debt issuance costs. The Company will record a cumulative-effect adjustment to retained earnings related to prior
interest costs associated with the debt discount initially recorded upon issuance of the notes and will record a decrease to additional paid in capital. The
cumulative-effect adjustment is expected to increase retained earnings by approximately $61 million. Additionally, ASU 2020-06 will result in
64
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the reporting of diluted earnings per share, if the effect is dilutive, in our consolidated financial statements, regardless of our settlement intent.
NOTE 3—REVENUE
Revenue is as follows (in thousands):
Revenue:
Home
Credit cards
Personal loans
Other Consumer
Consumer
Insurance
Other
Total revenue
2021
Year Ended December 31,
2020
2019
$
$
441,738 $
93,420
110,099
126,426
329,945
326,153
663
1,098,499 $
320,992 $
77,361
66,513
109,324
253,198
333,765
2,035
909,990 $
277,935
211,294
152,729
151,014
515,037
284,792
28,839
1,106,603
The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration in the
Company's Consumer business was $9.1 million and $6.4 million on December 31, 2021 and 2020, respectively.
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 Consumer business was $0.8 million and $0.7 million at December 31, 2021 and 2020, respectively. During 2021, the Company
recognized revenue of $0.7 million that was included in the contract liability balance at December 31, 2020. During 2020, the Company recognized revenue of
$0.6 million that was included in the contract liability balance at December 31, 2019.
Revenue recognized in any reporting period includes estimated variable consideration for which the Company has satisfied the related performance
obligations but are still pending the occurrence or non-occurrence of a future event outside the Company's control (such as lenders providing loans to
consumers or credit card approvals of consumers) before the Company has a contractual right to payment. The Company recognized increases to such revenue
from prior periods of $0.7 million, $0.3 million and $4.4 million in 2021, 2020 and 2019, respectively.
NOTE 4—CASH AND RESTRICTED CASH
Total cash, cash equivalents, restricted cash and restricted cash equivalents consist of the following (in thousands):
Cash and cash equivalents
Restricted cash and cash equivalents
Total cash, cash equivalents, restricted cash and restricted cash equivalents
December 31, 2021
December 31, 2020
$
$
251,231 $
111
251,342 $
169,932
117
170,049
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5—PROPERTY AND EQUIPMENT
The balance of property and equipment, net is as follows (in thousands):
Computer equipment and capitalized software
Leasehold improvements
Furniture and other equipment
Aircraft and automobile
Projects in progress
Total gross property and equipment
Accumulated depreciation
Total property and equipment, net
December 31, 2021
December 31, 2020
$
$
46,341 $
34,485
9,942
2,621
7,403
100,792
(28,315)
72,477 $
34,777
5,012
3,290
2,621
36,919
82,619
(20,238)
62,381
Unamortized capitalized software development costs recorded in property and equipment, whether in service or under development, are $26.4 million and
$24.8 million at December 31, 2021 and 2020, respectively. Capitalized software development depreciation expense was $13.3 million, $11.1 million and
$8.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Long-lived assets located outside the United States, the Company's country of domicile, were $0.1 million at each of December 31, 2021 and 2020.
NOTE 6—HOSTING ARRANGEMENTS
The balance of capitalized implementation costs incurred in a hosting arrangement that is a service contract, which are recorded within prepaid and other
current assets and other non-current assets, is as follows (in thousands):
Capitalized implementation costs
Projects in progress
Total gross
Accumulated amortization
Total net
December 31, 2021
December 31, 2020
Current portion
1,771
367
2,138
(91)
2,047
$
$
$
$
Non-current
portion
2,960
810
3,770
(1,056)
2,714
Current portion
530
505
1,035
—
1,035
$
$
$
$
$
$
$
Non-current
portion
1,036
1,154
2,190
(185)
2,005
Amortization expense included within general and administrative expense on the consolidated statement of operations and comprehensive income (loss)
associated with these capitalized implementation costs was $1.1 million and $0.2 million for the year ended December 31, 2021 and 2020, respectively.
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7—GOODWILL AND INTANGIBLE ASSETS
The balance of goodwill, net is as follows (in thousands):
Balance at December 31, 2019
Changes in goodwill
Balance at December 31, 2020
Changes in goodwill
Balance at December 31, 2021
The balance of intangible assets, net is as follows (in thousands):
Intangible assets with indefinite lives
Intangible assets with definite lives, net
Total intangible assets, net
Goodwill and Indefinite-Lived Intangible Assets
Goodwill
Accumulated
Impairment Loss
Net Goodwill
$
$
$
903,227 $
—
903,227 $
—
903,227 $
(483,088) $
—
(483,088) $
—
(483,088) $
420,139
—
420,139
—
420,139
December 31, 2021
December 31, 2020
$
$
10,142 $
75,621
85,763 $
10,142
118,360
128,502
The Company's goodwill at each of December 31, 2021 and 2020 consists of $59.3 million associated with the Home segment, $166.1 million associated
with the Consumer segment, and $194.7 million associated with the Insurance segment. Prior to the fourth quarter of 2019, the Company's goodwill was
associated with its then one reportable segment. Results of the annual impairment test as of October 1, 2021 indicated that no impairment had occurred.
Intangible assets with indefinite lives relate to the Company's trademarks. Results of the annual impairment test as of October 1, 2021 indicated that no
impairment had occurred.
Intangible Assets with Definite Lives
Intangible assets with definite lives relate to the following (dollars in thousands):
Technology
Customer lists
Trademarks and tradenames
Website content
Balance at December 31, 2021
Technology
Customer lists
Trademarks and tradenames
Website content
Balance at December 31, 2020
Weighted
Average
Amortization Life
4.3 years
13.2 years
4.9 years
3.0 years
$
$
Cost
Accumulated
Amortization
$
$
(69,369)
(24,668)
(7,767)
(25,375)
(127,179)
$
$
Net
18,331
52,632
3,933
725
75,621
87,700
77,300
11,700
26,100
202,800
Cost
Accumulated
Amortization
Net
87,700 $
77,300
17,200
43,200
225,400 $
(48,166) $
(18,560)
(9,947)
(30,367)
(107,040) $
39,534
58,740
7,253
12,833
118,360
Weighted Average
Amortization Life
4.3 years
13.2 years
4.9 years
3.0 years
$
$
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of December 31, 2021, future
amortization is estimated to be as follows (in thousands):
Year ending December 31, 2022
Year ending December 31, 2023
Year ending December 31, 2024
Year ending December 31, 2025
Year ending December 31, 2026
Thereafter
Total intangible assets with definite lives, net
NOTE 8—EQUITY INVESTMENT
Amortization Expense
25,256
$
8,602
6,747
6,259
5,504
23,253
75,621
$
On February 28, 2020, the Company acquired an equity interest in Stash Financial, Inc. (“Stash”) for $80.0 million. On January 6, 2021, the Company
acquired an additional equity interest for $1.2 million. On October 18, 2021, the Company entered into a stock transfer agreement with third parties to sell a
portion of its Stash equity securities for $46.3 million. The Company sold $35.3 million in October and closed on an additional $11.0 million in November
2021. The Company recorded a realized gain of $27.9 million based on the sale of Stash equity securities under the stock transfer agreement, which is
included within other income on the consolidated statement of operations and comprehensive income. Stash is a consumer investing and banking platform.
Stash brings together banking, investing, and financial services 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 Stash equity securities do not have a readily determinable fair value and, upon acquisition, the Company elected the measurement alternative to value
its securities. The Stash equity securities will be carried at cost and subsequently marked to market upon observable market events with any gains or losses
recorded in operating income in the consolidated statement of operations. In 2021, the Company recorded a net unrealized gain on the investment in Stash of
$95.4 million as a result of an adjustment to the fair value of the Stash equity securities based on observable market events, which is included within other
income on the consolidated statement of operations and comprehensive income. As of December 31, 2021, there have been no impairments to the acquisition
cost of the Stash equity securities.
NOTE 9—BUSINESS ACQUISITIONS
Changes in Contingent Consideration
In 2018, the Company acquired all of the outstanding equity interests of QuoteWizard.com, LLC, which does business under the name QuoteWizard
(“QuoteWizard”). The Company made no earnout payments related to the QuoteWizard acquisition during 2021, and this earnout is complete. In 2020, the
Company paid $20.2 million related to the earnout payment for the period of November 1, 2019 through October 31, 2020, which is included within cash
flows from operating activities on the consolidated statement of cash flows. In 2019, the Company paid $23.4 million related to the earnout payment for the
period of November 1, 2018 through October 31, 2019, of which $13.9 million is included within cash flows from financing activities and $9.5 million is
included within cash flows from operating activities on the consolidated statement of cash flows.
In 2018, the Company acquired all of the outstanding equity interests of Ovation Credit Services, Inc., which does business under the name Ovation
(“Ovation”). The Company made no earnout payments related to the Ovation acquisition during 2021, as this earnout was completed in 2020. In 2020, the
Company paid $4.4 million related to the earnout payment for the period of July 1, 2019 through June 30, 2020, of which $1.4 million is included within cash
flows from financing activities and $3.0 million is included within cash flows from operating activities on the consolidated statement of cash flows. In 2019,
the Company paid $4.4 million related to the earnout payment for the period of July 1, 2018 through June 30, 2019, which is included within cash flows from
financing activities on the consolidated statement of cash flows.
In 2017, the Company acquired certain assets of Snap Capital LLC, which does business under the name SnapCap (“SnapCap”). During 2020, the
Company made the final earnout payments related to the achievement of certain defined
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
earnings targets for SnapCap. Of the total earnout payments of $6.0 million in 2020, $3.3 million is included within cash flows from financing activities and
$2.7 million is included within cash flows from operating activities on the consolidated statement of cash flows. The earnout payment of $3.0 million in 2019
is included within cash flows from financing activities on the consolidated statement of cash flows.
In 2017, the Company acquired all of the assets of Deposits Online, LLC, which does business under the name DepositAccounts.com
(“DepositAccounts”). The Company made no earnout payments related to the DepositAccounts acquisition during 2020 and 2021, and this earnout is
complete. Total earnout payments of $3.0 million in 2019 are included within cash flows from operating activities on the consolidated statement of cash flows.
Changes in the fair value of contingent consideration is summarized as follows (in thousands):
QuoteWizard
Ovation
SnapCap
DepositAccounts
Total changes in fair value of contingent consideration
2019 Acquisition
ValuePenguin
2021
Year Ended December 31,
2020
2019
$
$
(8,249) $
—
—
—
(8,249) $
3,980 $
1,270
77
—
5,327 $
27,103
26
2,220
(947)
28,402
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. In 2019, the Company completed the determination of the final allocation of purchase
price to the assets acquired and liabilities assumed as follows (in thousands):
Net working capital
Fixed assets
Intangible assets
Goodwill
Net noncurrent assets
Total purchase price
$
$
Fair Value
2,502
68
31,600
71,739
323
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.
69
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 the cost replacement method, the content was determined using the excess earnings method, and
the trademarks and tradenames were determined using the relief from royalty method. The estimated fair value of the intangible assets are based on estimates
for content lifecycles, estimates for revenue growth rates, estimates for future cash flows, the probability weighting of scenarios and discount rates, known at
the acquisition date, which management believes are reasonable. The fair value of the intangible assets with definite lives is as follows (dollars in thousands):
Technology
Content
Trademarks and tradenames
Total intangible assets
Fair Value
Weighted Average
Amortization Life
$
$
4,200
26,100
1,300
31,600
3 years
3 years
5 years
3.1 years
The Company recorded goodwill of $71.7 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 ValuePenguin as a going concern, which represents the
ability of the Company to earn a higher return on 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 to the workforce is an additional element of goodwill. The goodwill was recorded in the Company’s then one
reportable segment. For income tax purposes, the Company accounted for the acquisition as an asset purchase which would indicate the goodwill will be tax
deductible.
Subsequent to the acquisition date, the Company’s consolidated results of operations include the results of the acquired ValuePenguin business. In 2019,
the Company’s consolidated results of operations include revenue of $19.8 million attributable to the ValuePenguin business. In the first six months of 2019,
net income from continuing operations attributable to the ValuePenguin business was $3.1 million. Due to the integration of the ValuePenguin business
subsequent to the acquisition, earnings of the acquired ValuePenguin business beginning in the third quarter of 2019 is impracticable to determine with
sufficient accuracy. Acquisition-related costs were $0.1 million in 2019 and are included in general and administrative expense on the consolidated statement
of operations and comprehensive income (loss).
Pro forma Financial Results
The unaudited pro forma financial results for the year ended December 31, 2019 combine the consolidated results of the Company and ValuePenguin,
giving effect to the acquisition as if the 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 acquisition been completed as of January 1, 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. Interest expense was also adjusted to reflect incremental interest associated with debt issued to finance the
ValuePenguin acquisition.
Pro forma revenue
Pro forma net income from continuing operations
2019
(in thousands)
$
$
1,107,118
39,173
The unaudited pro forma net income from continuing operations in 2019 includes the aggregate after-tax contingent consideration expense associated with
the DepositAccounts, SnapCap, Ovation and QuoteWizard earnouts of $21.5 million. Acquisition-related costs of $0.1 million incurred by the Company that
are directly attributable to the ValuePenguin acquisition, and which will not have an ongoing impact, have been eliminated from the unaudited pro forma net
income from continuing operations for 2019.
70
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following (in thousands):
Accrued advertising expense
Accrued compensation and benefits
Accrued professional fees
Customer deposits and escrows
Contribution to LendingTree Foundation
Current lease liabilities
Other
Total accrued expenses and other current liabilities
NOTE 11—LEASES
December 31, 2021
December 31, 2020
$
$
59,150 $
16,330
1,887
7,546
3,333
8,595
9,890
106,731 $
54,045
14,081
1,869
8,153
3,333
5,375
14,340
101,196
The Company is a lessee to leases of corporate offices and certain office equipment. The majority of leases for corporate offices include one or more
options to renew, with renewal terms ranging from 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.
As of December 31, 2021, right-of-use assets totaled $77.3 million and lease liabilities, the current portion of which is included in accrued expenses and
other current liabilities in the accompanying balance sheet, totaled $104.8 million. At December 31, 2020, right-of-use assets totaled $84.1 million and lease
liabilities totaled $97.7 million.
Lease expense, which is included in general and administrative expense on the accompanying consolidated statements of operations and comprehensive
income (loss), consists of the following (in thousands):
Operating lease cost
Short-term lease cost
Total lease cost
2021
Year Ended December 31,
2020
2019
$
$
13,160 $
39
13,199 $
11,226 $
59
11,285 $
6,346
86
6,432
Weighted average remaining lease term and discount rate for operating leases are as follows:
Weighted average remaining lease term
Weighted average discount rate
December 31, 2021
December 31, 2020
December 31, 2019
12.3 years
%
5.0
13.0 years
%
5.0
5.0 years
%
4.7
Supplemental cash flow information related to leases is as follows (in thousands):
Net cash paid for amounts included in the measurement of lease
liabilities:
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new operating lease
liabilities
$
$
71
2021
Year Ended December 31,
2020
2019
329
1,250
$
$
2,359
66,881
$
$
6,779
21,969
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maturities of lease liabilities as of December 31, 2021 are as follows (in thousands):
Year ending December 31, 2022
Year ending December 31, 2023
Year ending December 31, 2024
Year ending December 31, 2025
Year ending December 31, 2026
Thereafter
Total lease payments
Less: Interest
Less: Tenant improvement allowances
Present value of lease liabilities
Operating Leases
13,716
13,278
11,504
9,473
9,682
88,167
145,820
40,807
253
104,760
$
$
The Company operated as a lessor in connection with office buildings in Charlotte, North Carolina acquired in December 2016. The properties were sold
in 2019 to an unrelated third party. Rental income of $0.3 million in 2019 is included in other income on the accompanying consolidated statements of
operations and comprehensive income (loss).
NOTE 12—SHAREHOLDERS' EQUITY
Basic and diluted income (loss) per share was determined based on the following share data (in thousands):
Weighted average basic common shares
Effect of stock options
Effect of dilutive share awards
Effect of Convertible Senior Notes and warrants
Weighted average diluted common shares
2021
Year Ended December 31,
2020
2019
13,199
407
89
—
13,695
13,007
—
—
—
13,007
12,834
747
167
871
14,619
For the year ended December 31, 2021, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income
per share, included options to purchase 0.9 million shares of common stock and 0.1 million restricted stock units.
For the year ended December 31, 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 1.1 million shares related to potentially dilutive securities were excluded from the
calculation of diluted loss per share for the year ended December 31, 2020 because their inclusion would have been anti-dilutive. For the year ended
December 31, 2020 the weighted average shares that were anti-dilutive included options to purchase 0.2 million shares of common stock.
For the year ended December 31, 2019, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income
per share, included options to purchase 0.1 million shares of common stock.
The convertible notes and the warrants issued by the Company could be converted into the Company’s common stock, subject to certain
contingencies. See Note 15—Debt for additional information. Shares of the Company's common stock associated with the 0.50% Convertible Senior Notes
due July 15, 2025 and the warrants issued by the Company in 2020 were excluded from the calculation of diluted loss per share for the years ended
December 31, 2021 and 2020 as they were anti-dilutive since the conversion price of the notes and the strike price of the warrants were greater than the
average market price of the Company’s common stock during the relevant period. Shares of the Company's common stock associated with the 0.625%
Convertible Senior Notes due June 1, 2022 and the warrants issued by the Company in 2017 were excluded from the calculation of diluted loss per share for
the year ended December 31, 2021 as they were anti-dilutive since the conversion price of the notes and the strike price of the warrants were greater than the
average market price of the Company’s common stock during the relevant period.
72
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 2021, the Company implemented an employee stock purchase plan, which did not have a material impact to the calculation of diluted shares.
See Note 13—Stock-Based Compensation for a full description of outstanding equity awards.
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 years ended December 31, 2021 and 2019, the Company purchased 334,253 and
22,731 shares, respectively, of its common stock for aggregate consideration of $40.0 million and $5.5 million, respectively. At December 31, 2021,
$139.7 million remains authorized for share repurchase.
NOTE 13—STOCK-BASED COMPENSATION
The Company currently has one active plan, the Seventh Amended and Restated LendingTree 2008 Stock Plan (the "Equity Award Plan"), under which
future awards may be granted, which currently covers outstanding stock options to acquire shares of the Company's common stock, restricted stock, restricted
stock with performance conditions, RSUs and RSUs with performance conditions, and provides for the future grants of these and other equity awards. Under
the Equity Award Plan, the Company is authorized to grant stock options, restricted stock, RSUs and other equity-based awards for up to 6.7 million shares of
LendingTree common stock to employees, and to non-employee consultants and directors.
The Equity Award Plan has a stated term of ten years and provides that the exercise price of stock options granted will not be less than the market price of
the common stock on the grant date. The Equity Award Plan does not specify grant dates or vesting schedules, as those determinations are delegated to the
Compensation Committee of the board of directors. Each grant agreement reflects the vesting schedule for that particular grant, as determined by the
Compensation Committee. The Compensation Committee has the authority to modify the vesting provisions of an award.
Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations and
comprehensive income (loss) (in thousands):
Cost of revenue
Selling and marketing expense
General and administrative expense
Product development
Total non-cash compensation
Year Ended December 31,
2020
2021
2019
$
$
1,639 $
7,480
50,989
8,447
68,555 $
1,319 $
6,240
39,650
6,524
53,733 $
755
5,785
39,177
6,450
52,167
For the years ended December 31, 2021, 2020 and 2019, the Company recognized $14.1 million, $11.4 million and $12.2 million of income tax benefit,
including state taxes, related to non-cash compensation. Additionally, for the years ended December 31, 2021, 2020 and 2019, the Company recognized $11.7
million, $2.5 million and $17.1 million, respectively, of excess tax benefit, including state taxes, in income tax expense. See Note 2—Significant Accounting
Policies, for additional information regarding excess tax benefits and deficiencies.
73
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Options
A summary of changes in outstanding stock options is as follows:
Outstanding at December 31, 2020
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2021
Options exercisable
Number of
Options
924,710
71,397
(306,113)
(13,063)
(638)
676,293
442,957
$
$
$
Weighted
Average
Exercise
Price
(per option)
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
(a)
Value
(in thousands)
111.82
241.19
7.30
261.62
304.85
169.71
113.35
5.57
3.98
$
$
25,789
25,789
(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $122.60 on the
last trading day of 2021 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 December 31, 2021. The intrinsic value changes based on the market value of
the Company's common stock.
As of December 31, 2021, there was approximately $22.2 million of unrecognized compensation cost related to stock options. These costs are expected to
be recognized over a weighted-average period of approximately 3.3 years.
Upon exercise, the intrinsic value represents the pre-tax difference between the Company's closing stock price on the exercise date and the exercise price,
multiplied by the number of stock options exercised. During the years ended December 31, 2021, 2020 and 2019, the total intrinsic value of stock options that
were exercised was $51.4 million, $6.8 million and $50.2 million, respectively. Cash received from stock option exercises and the related actual tax benefit
realized were $2.2 million and $13.1 million, respectively, for the year ended December 31, 2021.
During the years ended December 31, 2021, 2020 and 2019, the Company granted stock options with a weighted average grant date fair value per share of
$128.86, $116.08 and $167.10, respectively, of which the vesting periods include (a) immediately upon grant, (b) earlier of one year from grant date and the
Company's annual meeting of stockholders for 2022, (c) 33% over a period of three years from the grant date, (d) 25% over a period of four years from the
grant date, and (e) certain grants to executive officers that vest over periods of up to six years.
For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options, except the
December 2020 grant to the Chairman and Chief Executive Officer described below, 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:
(1)
Expected term
Expected dividend
Expected volatility
Risk-free interest rate
(2)
(3)
(4)
2021
5.00-6.00 years
—
53% - 59%
0.59% - 1.15%
Year Ended December 31,
2020
5.00 - 6.25 years
—
52%- 60%
0.33%- 0.96%
2019
5.00 - 6.25 years
—
51% - 55%
1.46% - 2.55%
(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.
(2) For all stock options granted during the years ended December 31, 2021, 2020 and 2019, no 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.
74
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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.
In December 2020, the Company granted time-based stock options to its Chairman and Chief Executive Officer at a premium exercise price of $300,
representing an approximate 25% premium over the closing market price of LendingTree's common stock on the date of grant. The net after-tax shares
acquired through exercise of these stock options are subject to a two-year post-exercise holding requirement. For purposes of determining stock-based
compensation expense, the grant date fair value per share of these time-based stock options was estimated using the Monte Carlo simulation model. The key
assumptions used in the valuation are as follows:
(1) An average expected term of 6.90 years based on the midpoint between the first day that the stock options are both vested and in-the-money and
the end of the contractual term.
(2) A zero expected dividend rate as no dividends are expected to be paid over the contractual term of the stock options.
(3) An expected volatility rate of 52% based on the historical volatility of the Company's common stock.
(4) A risk-free interest rate of 0.92% based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant
date.
(5) An 8.8% discount for the post-exercise holding requirement, calculated using the cost-of-carry method, the Chaffe protective put method, and the
Finnerty model.
During the years ended December 31, 2021, 2020 and 2019, the total fair value of options vested was $10.8 million, $5.8 million and $6.9 million,
respectively.
Stock Options with Market Conditions
A summary of changes in outstanding stock options with market conditions at target is as follows:
Outstanding at December 31, 2020
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2021
Options exercisable
Number of Options
with Market
Conditions
Weighted
Average
Exercise
Price
(per option)
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
(a)
Value
(in thousands)
700,209 $
—
—
—
—
700,209 $
— $
236.01
—
—
—
—
236.01
—
6.75 $
0 $
—
—
(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $122.60 on the
last trading day of 2021 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 December 31, 2021. The intrinsic value changes based on the market value of
the Company's common stock.
As of December 31, 2021, there was approximately $36.5 million of unrecognized compensation cost related to stock options with market conditions.
These costs are expected to be recognized over a weighted-average period of approximately 1.8 years. For single cliff-vesting stock options with market
conditions, the fair value will be recognized on a straight-line basis through each grant’s vest date, whether or not any of the total shareholder return targets are
met. For graded-vesting stock options with market conditions, the fair value will be recognized using graded vesting expense attribution, whether or not any of
the total shareholder return targets are met.
No stock options with market conditions were granted in 2021. During the years ended December 31, 2020 and 2019, the Company granted stock options
with a weighted-average grant date fair value per share of $142.54 and $230.81, respectively. The single cliff-vesting stock options granted during the years
ended December 31, 2020 and 2019 have vest dates of March 31,
75
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2024 and March 31, 2023, respectively. The graded-vesting stock options granted during the year ended December 31, 2020 have a vesting schedule with
vesting dates of December 31, 2024, December 31, 2025 and December 31, 2026.
For purposes of determining stock-based compensation expense, the weighted-average grant date fair value per share of the stock options with a market
condition was estimated using the Monte Carlo simulation model, which requires the use of various key assumptions.
The weighted-average assumptions used for single cliff-vesting stock options with a market condition are as follows:
(1)
Expected term
Expected dividend
Expected volatility
Risk-free interest rate
(2)
(3)
(4)
Year Ended December 31,
2020
2019
7.00 years
—
51 %
1.03 %
7.00 years
—
51 %
2.54 %
(1) The expected term of stock options with a market condition granted was calculated using the midpoint between the weighted average time of
vesting and the end of the contractual term.
(2) For all stock options with a market condition granted during the years ended December 31, 2020 and 2019, no 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.
In December 2020, the Company granted graded-vesting stock options with a market condition to its Chairman and Chief Executive Officer at a premium
exercise price of $300, representing an approximate 25% premium over the closing market price of LendingTree's common stock on the date of grant. The net
after-tax shares acquired through exercise of these stock options are subject to a two-year post-exercise holding requirement. The key assumptions used in the
Monte Carlo simulation model to determine the grant date fair value per share of these graded-vesting stock options with a market condition are as follows:
(1) An average expected term of 7.54 years based on the midpoint between vesting and the end of the contractual term.
(2) A zero expected dividend rate as no dividends are expected to be paid over the contractual term of the stock options.
(3) An expected volatility rate of 52% based on the historical volatility of the Company's common stock.
(4) A risk-free interest rate of 0.92% based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant
date.
(5) An 8.8% discount for the post-exercise holding requirement, calculated using the cost-of-carry method, the Chaffe protective put method, and the
Finnerty model.
The single cliff-vesting stock options with a market condition granted in 2020 have a target number of shares that vest upon achieving a targeted total
shareholder return performance of 81% stock price appreciation and a maximum of 31,940 shares for achieving superior performance. No shares will vest
unless 41% of the targeted performance is achieved. The performance measurement period ends on March 31, 2024. The graded-vesting stock options with a
market condition granted in 2020 have a target number of shares that vest upon achieving a targeted total shareholder return performance of 135% stock price
appreciation and a maximum of 363,464 shares for achieving superior performance. No shares will vest unless 81% of the targeted performance is achieved.
The performance measurement period ends on March 31, 2025.
The stock options with a market condition granted in 2019 have a target number of shares that vest upon achieving a targeted total shareholder return
performance of 81% stock price appreciation and a maximum of 27,132 shares for achieving superior performance. No shares will vest unless 41% of the
targeted performance is achieved. The performance measurement period ends on March 31, 2023.
76
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain of the stock options with a market condition granted in 2018 have a target number of shares that vest upon achieving a targeted total shareholder
return performance of 110% stock price appreciation and a maximum of 52,332 shares for achieving superior performance. No shares will vest unless 70% of
the targeted performance is achieved. The performance measurement period ends on September 30, 2022. The remaining stock options with a market
condition granted in 2018 have a target number of shares that vest upon achieving a targeted total shareholder return performance of 81% stock price
appreciation and a maximum of 21,982 shares for achieving superior performance. No shares will vest unless 41% of the targeted performance is achieved.
The performance measurement period ends on March 31, 2022.
For all stock options with market conditions, time-based service vesting conditions would also have to be satisfied in order for shares to become fully
vested and no longer subject to forfeiture.
As of December 31, 2021, 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 RSUs is as follows:
(a)
Nonvested at December 31, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2021
Number of Units
RSUs
Weighted Average Grant
Date
Fair Value
(per unit)
194,686
263,779
(91,670)
(58,727)
308,068
$
$
289.82
209.25
289.63
260.13
226.55
(a) The grant date fair value per share of the RSUs is calculated as the closing market price of LendingTree's common stock at the time of grant.
As of December 31, 2021, there was approximately $45.3 million of unrecognized compensation cost related to RSUs. These costs are expected to be
recognized over a weighted-average period of approximately 1.8 years.
The total fair value of RSUs that vested during the years ended December 31, 2021, 2020 and 2019 was $21.7 million, $22.4 million and $27.2 million,
respectively.
Restricted Stock Units with Performance Conditions
A summary of changes in outstanding nonvested RSUs with performance conditions is as follows:
Nonvested at December 31, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2021
RSUs with Performance Conditions
Number of Units
Weighted Average
Grant Date Fair Value
(per unit)
6,328 $
—
(6,328)
—
— $
223.90
—
223.90
—
—
No RSUs with performance conditions were granted in 2021, 2020, or 2019.
As of December 31, 2021, there was no unrecognized compensation cost related to RSUs with performance conditions.
The total fair value of RSUs with performance conditions that vested during the years ended December 31, 2021, 2020, and 2019 was $0.9 million, $2.6
million, and $18.8 million, respectively.
77
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Awards with Performance Conditions
A summary of changes in outstanding nonvested RSAs with performance conditions is as follows:
Nonvested at December 31, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2021
RSAs with Performance Conditions
Number of Awards
Weighted Average
Grant Date Fair Value
(per unit)
23,804 $
—
(23,804)
—
— $
340.25
—
340.25
—
—
No RSAs with performance conditions were granted in 2021, 2020, or 2019. During 2018, the Company granted time-vested RSAs with a performance
condition to its Chairman and Chief Executive Officer, which vested through December 31, 2021. The terms of this award were fixed in compensation
agreements in July 2017 with a total grant date fair value of $21.9 million. The performance condition was tied to the Company's operating results during the
first six months of 2018, and has been met.
As of December 31, 2021, there was no unrecognized compensation cost related to RSAs with performance conditions.
The total fair value of RSAs with performance conditions that vested during the years ended December 31, 2021, 2020 and 2019 was $4.1 million, $6.2
million and $8.2 million, respectively.
Restricted Stock Awards with Market Conditions
A summary of changes in outstanding nonvested RSAs with market conditions at target is as follows:
Nonvested at December 31, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2021
RSAs with Market Conditions
Number of Awards
Weighted Average
Grant Date Fair Value
(per unit)
26,674 $
—
—
—
26,674 $
340.25
—
—
—
340.25
No RSAs with market conditions were granted in 2021, 2020 or 2019. During 2018, the Company granted RSAs with market conditions to its Chairman
and Chief Executive Officer with a total grant date fair value of $1.9 million. These RSAs with a market condition have a target number of shares that vest
upon achieving a targeted total shareholder return performance of 110% stock price appreciation and a maximum of 44,545 shares for achieving superior
performance. No shares will vest unless 70% of the targeted performance is achieved. The performance measurement period ends on September 30, 2022.
Time-based service vesting conditions would also have to be satisfied in order for shares to become fully vested and no longer subject to forfeiture.
As of December 31, 2021, there was approximately $0.3 million of unrecognized compensation cost related to RSAs with market conditions. These costs
are expected to be recognized over a weighted-average period of approximately 0.8 years.
As of December 31, 2021, RSAs with a market condition of 29,601 had been earned, which have a vest date of September 30, 2022.
78
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee Stock Purchase Plan
During 2021, the Company implemented an employee stock purchase plan ("ESPP"), under which a total of 262,731 shares of the Company's common
stock were reserved for issuance. The ESPP is a tax-qualified plan under Section 423 of the Internal Revenue Code. Under the terms of the ESPP, eligible
employees are granted options to purchase shares of the Company's common stock at 85% of the lesser of (1) the fair market value at time of grant or (2) the
fair market value at time of exercise. The offering periods and purchase periods are typically 6-month periods ending on June 30 and December 31 of each
year.
During the year ended December 31, 2021, 5,543 shares were purchased under the ESPP at a weighted average purchase price of $103.62 per share,
resulting in cash proceeds of $0.6 million. As of December 31, 2021, 257,188 shares were available for issuance under the ESPP.
For the year ended December 31, 2021, the Company granted Employee Stock Purchase Rights to certain employees with a grant date fair value per share
of $42.39, calculated using the Black-Scholes option pricing model. For purposes of determining stock-based compensation expense, the grant date fair value
per share estimated using the Black-Scholes option pricing model required the use of the following key assumptions:
(1)
Expected term
Expected dividend
Expected volatility
Risk-free interest rate
(3)
(2)
(4)
0.33 years
%
%
—
46
0.05
(1) The expected term was calculated using the time period between the grant date and the purchase date.
(2) No dividends are expected to be paid, resulting in a zero expected dividend rate.
(3) The expected volatility rate is based on the historical volatility of the Company's common stock.
(4) The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable
expected terms as the Employee Stock Purchase Rights, in effect at the grant date.
79
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14—INCOME TAXES
Income Tax Provision
The components of the income tax benefit are as follows (in thousands):
Current income tax expense (benefit):
Federal
State
Current income tax expense (benefit)
Deferred income tax provision (benefit):
Federal
State
Deferred income tax provision (benefit)
Income tax expense (benefit)
2021
Year Ended December 31,
2020
2019
$
$
128
262
390
9,912
996
10,908
11,298
$
$
(10,705)
372
(10,333)
(7,495)
(2,133)
(9,628)
(19,961)
$
$
201
(125)
76
(10,857)
2,302
(8,555)
(8,479)
A reconciliation of the income tax benefit to the amounts computed by applying the statutory federal income tax rate to income (loss) from continuing
operations before income taxes is shown as follows (in thousands):
Federal statutory income tax
State income taxes, net
Excess tax deductions on non-cash compensation
Impact of the Coronavirus Aid, Relief, and Economic Security Act
Research and experimentation tax credit
Impact of certain state legislation, net
Nondeductible executive compensation
Increase (decrease) in valuation allowance
Uncertain tax positions
Nondeductible meals & entertainment
Other, net
Income tax expense (benefit)
2021
Year Ended December 31,
2020
2019
17,731 $
1,269
(9,401)
—
(3,207)
—
3,058
595
435
239
579
11,298 $
(8,931) $
(3,551)
(2,033)
(6,104)
(3,800)
—
1,778
2,100
458
99
23
(19,961) $
6,506
(1,832)
(13,971)
—
(5,794)
3,932
988
954
922
428
(612)
(8,479)
$
$
80
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Income Taxes
The tax effects of cumulative temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as
follows (in thousands):
Deferred tax assets:
(a)
Provision for accrued expenses
Leasing
Net operating loss carryforwards
Non-cash compensation expense
Intangible assets
Interest limitation
Contingent liabilities
Tax credits
Other
Total gross deferred tax assets
Less: valuation allowance
Total deferred tax assets, net of the valuation allowance
Deferred tax liabilities:
(b)
Leasing
Property and equipment
Equity investment
Other
Total gross deferred tax liabilities
Net deferred taxes
December 31,
2021
2020
5,405
27,419
66,977
26,756
15,222
8,036
—
15,848
1,079
166,742
(6,039)
160,703
(24,590)
(8,156)
(25,608)
(444)
(58,798)
101,905
$
$
4,90
24,86
56,19
20,74
12,68
4,05
4,50
13,65
3,60
145,21
(5,80
139,41
(21,63
(5,01
—
(65
(27,30
112,11
$
$
(a) At December 31, 2021, the Company had pre-tax consolidated federal net operating losses ("NOLs") of $220.1 million. The federal NOLs no longer
expire under the new TCJA. The Company's NOLs will be available to offset taxable income subject to the Internal Revenue Code Section 382
annual limitation. In addition, the Company has state NOLs of approximately $542.7 million at December 31, 2021 that will expire at various times
between 2022 and 2041.
(b) The valuation allowance is related to items for which it is "more likely than not" that the tax benefit will not be realized.
Deferred income taxes are presented in the accompanying consolidated balance sheets as follows (in thousands):
Deferred income tax assets
Non-current assets of discontinued operations
Deferred income tax liabilities
Net deferred taxes
Valuation Allowance
December 31,
2021
2020
$
$
87,581 $
16,589
(2,265)
101,905 $
96,224
15,892
—
112,116
A valuation allowance is provided on deferred tax assets if it is determined that it is "more likely than not" that the deferred tax asset will not be realized.
As of each reporting date, management considers both positive and negative evidence regarding the likelihood of future realization of the deferred tax assets.
81
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2021, 2020 and 2019, the Company recorded a partial valuation allowance of $6.0 million, $5.8 million and $4.1 million, respectively,
primarily related to state net operating losses, which the Company does not expect to be able to utilize prior to expiration.
A reconciliation of the beginning and ending balances of the deferred tax valuation allowance is as follows (in thousands):
Balance, beginning of the period
Charges to earnings
Balance, end of the period
Unrecognized Tax Benefits
2021
Year Ended December 31,
2020
2019
$
$
5,802 $
237
6,039 $
4,102 $
1,700
5,802 $
2,229
1,873
4,102
A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):
Balance, beginning of the period
Additions based on tax positions of the current period
Additions (subtractions) based on tax positions of the prior period
Balance, end of the period
Year Ended December 31,
2021
2020
$
$
2,613
435
(134)
2,914
$
$
1,996
570
47
2,613
Interest and, if applicable, penalties are recognized related to unrecognized tax benefits in income tax expense. Interest and penalties on unrecognized
tax benefits included in income tax expense for each of the years ended December 31, 2021, 2020 and 2019 is immaterial.
As of December 31, 2021 and 2020, the accrual for unrecognized tax benefits, including interest, was $2.9 million and $2.6 million, respectively, which
would benefit the effective tax rate if recognized.
Tax Audits
LendingTree is subject to audits by federal, state and local authorities in the area of income tax. These audits include questioning the timing and the
amount of deductions and the allocation of income among various tax jurisdictions. Income taxes payable include amounts considered sufficient to pay
assessments that may result from examination of prior year returns; however, any amounts paid upon resolution of issues raised may differ from the amount
provided. Differences between the reserves for tax contingencies and the amounts owed by the Company are recorded in the period they become known. As of
December 31, 2021, the Company is subject to a federal income tax examination for the tax years 2014 through 2020. In addition, the Company is subject to
state and local tax examinations for the tax years 2017 through 2021.
NOTE 15—DEBT
Convertible Senior Notes
2025 Notes
On July 24, 2020, the Company issued $575.0 million aggregate principal amount of its 0.50% Convertible Senior Notes due July 15, 2025 (the “2025
Notes”) in a private placement. The issuance included $75.0 million aggregate principal amount of 2025 Notes under a 13-day purchase option which was
exercised in full. The 2025 Notes bear interest at a rate of 0.50% per year, payable semi-annually on January 15 and July 15 of each year, beginning on
January 15, 2021. The 2025 Notes will mature on July 15, 2025, unless earlier repurchased, redeemed or converted.
The initial conversion rate of the 2025 Notes is 2.1683 shares of the Company's common stock per $1,000 principal amount of 2025 Notes (which is
equivalent to an initial conversion price of approximately $461.19 per share). 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 make-whole fundamental change prior to the
maturity of the 2025 Notes or if the Company issues a notice of redemption for the 2025 Notes, the Company will, in certain circumstances, increase the
conversion
82
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
rate by a specified number of additional shares for a holder that elects to convert the 2025 Notes in connection with such make-whole fundamental change or
to convert its 2025 Notes called for redemption, as the case may be. Upon conversion, the 2025 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 2025 Notes in cash and any conversion
premium in shares of its common stock.
The 2025 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 2025 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 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 March 13, 2025, the 2025 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, 2020 (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) 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 business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price (as
defined in the 2025 Notes) per $1,000 principal amount of 2025 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;
if the Company calls such 2025 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding
the redemption date, but only with respect to the notes called for redemption; or
upon the occurrence of specified corporate events including but not limited to a fundamental change.
Holders of the 2025 Notes were not entitled to convert the 2025 Notes during the calendar quarter ended December 31, 2021 as the last reported sale price
of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on
September 30, 2021, was not greater than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day. Holders of the 2025
Notes are not entitled to convert the 2025 Notes during the calendar quarter ended March 31, 2022 as the last reported sale price of the Company's common
stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on December 31, 2021, was not greater
than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day.
On or after March 13, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2025 Notes,
holders of the 2025 Notes may convert all or a portion of their 2025 Notes regardless of the foregoing conditions.
The Company may not redeem the 2025 Notes prior to July 20, 2023. On or after July 20, 2023 and before the 41st scheduled trading day immediately
before the maturity date, the Company may redeem for cash all or a portion of the 2025 Notes, at its option, if the last reported sale price of the common stock
for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period (and including the last trading day of such period)
ending on, and including the last trading day immediately preceding the date of notice of redemption is greater than or equal to 130% of the conversion price
on each applicable trading day. The redemption price will be equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus any accrued and
unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2025 Notes.
Upon the occurrence of a fundamental change prior to the maturity date of the 2025 Notes, holders of the 2025 Notes may require the Company to
repurchase all or a portion of the 2025 Notes for cash at a price equal to 100% of the principal amount of the 2025 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 2025 Notes, exceeds the conversion price of the 2025 Notes, the
2025 Notes could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the principal amount of the 2025 Notes and any
conversion premium in cash.
83
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The initial measurement of convertible debt instruments that may be settled in cash 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 2025 Notes were determined using an interest rate of 5.30%, 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 $455.6 million and $119.4 million, respectively. Financing costs related to the issuance
of the 2025 Notes were approximately $15.1 million, of which $12.0 million were allocated to the liability component and are being amortized to interest
expense over the term of the debt and $3.1 million were allocated to the equity component.
During 2021, the Company recorded interest expense on the 2025 Notes of $27.2 million which consisted of $2.9 million associated with the 0.50%
coupon rate, $22.1 million associated with the accretion of the debt discount, and $2.2 million associated with the amortization of the debt issuance costs.
During 2020, the Company recorded interest expense on the 2025 Notes of $11.5 million which consisted of $1.3 million associated with the 0.50% coupon
rate, $9.3 million associated with the accretion of the debt discount, and $0.9 million associated with the amortization of the debt issuance costs. The debt
discount is being amortized over the term of the debt.
As of December 31, 2021, the fair value of the 2025 Notes is estimated to be approximately $475.1 million using the Level 1 observable input of the last
quoted market price on December 31, 2021.
A summary of the gross carrying amount, unamortized debt cost, debt issuance costs and net carrying value of the liability component of the 2025 Notes,
all of which is recorded as a non-current liability in the December 31, 2021 consolidated balance sheet, are as follows (in thousands):
Gross carrying amount
Unamortized debt discount
Debt issuance costs
Net carrying amount
2022 Notes
December 31,
2021
December 31,
2020
$
$
575,000 $
87,994
8,855
478,151 $
575,000
110,110
11,056
453,834
On May 31, 2017, the Company issued $300.0 million aggregate principal amount of its 0.625% Convertible Senior Notes due June 1, 2022 (the “2022
Notes”) in a private placement. 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 the Company's 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 make-whole 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 make-whole 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 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) during the 30 consecutive trading day period ending
on, and including the last trading day of the
84
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five 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 were not entitled to convert the 2022 Notes during the calendar quarter ended December 31, 2021 as the last reported sale price
of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on
September 30, 2021, 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 are not entitled to convert the 2022 Notes during the calendar quarter ended March 31, 2022 as the last reported sale price of the Company's common
stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on December 31, 2021, 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 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.
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, including the payment of accrued and unpaid interest of approximately $0.1 million, through separate
transactions with certain holders of the 2022 Notes. Of the consideration paid, $126.0 million was allocated to the extinguishment of the liability component
of the notes, while the remaining $107.9 million was allocated to the reacquisition of the equity component and recorded as a reduction to additional paid-in
capital in the consolidated statement of shareholders’ equity. The Company recognized a loss on debt extinguishment of $7.8 million in the third quarter of
2020, which is included in interest expense, net in the consolidated statements of operations and comprehensive income (loss).
During 2021, the Company recorded interest expense on the 2022 Notes of $9.5 million which consisted of $1.1 million associated with the 0.625%
coupon rate, $7.5 million associated with the accretion of the debt discount, and $0.9 million associated with the amortization of the debt issuance costs.
During 2020, the Company recorded interest expense on the 2022 Notes of $13.0 million which consisted of $1.5 million associated with the 0.625% coupon
rate, $10.3 million associated with the accretion of the debt discount, and $1.2 million associated with the amortization of the debt issuance costs. During
2019, the Company recorded interest expense on the 2022 Notes of $15.3 million which consisted of $1.9 million associated with the 0.625% coupon rate,
$12.0 million associated with the accretion of the debt discount, and $1.4 million associated with the amortization of the debt issuance costs. The debt
discount is being amortized over the term of the debt.
As of December 31, 2021, the fair value of the 2022 Notes is estimated to be approximately $167.3 million using the Level 1 observable input of the last
quoted market price on December 31, 2021.
85
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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,
all of which is recorded as a current liability in the December 31, 2021 consolidated balance sheet, are as follows (in thousands):
Gross carrying amount
Unamortized debt discount
Debt issuance costs
Net carrying amount
Convertible Note Hedge and Warrant Transactions
2020 Hedge and Warrants
December 31,
2021
December 31,
2020
$
$
169,659 $
3,260
391
166,008 $
169,690
10,815
1,297
157,578
On July 24, 2020, in connection with the issuance of the 2025 Notes, the Company entered into Convertible Note Hedge (the “2020 Hedge”) and warrant
transactions with respect to the Company’s common stock. The Company used approximately $63.0 million of the net proceeds from the 2025 Notes to pay
for the cost of the 2020 Hedge, after such cost was partially offset by the proceeds from the warrant transactions.
On July 24, 2020, the Company paid $124.2 million to the counterparties for the 2020 Hedge transactions. The 2020 Hedge transactions cover 1.2 million
shares of the Company’s common stock, the same number of shares initially underlying the 2025 Notes, and are exercisable upon any conversion of the 2025
Notes. The 2020 Hedge transactions are expected generally to reduce the potential dilution to the Company's common stock upon conversion of the 2025
Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2025 Notes, as the case may be, in
the event that the market price per share of common stock, as measured under the terms of the 2020 Hedge transactions, is greater than the strike price of the
2020 Hedge transactions, which initially corresponds to the initial conversion price of the 2025 Notes, or approximately $461.19 per share of common stock.
The 2020 Hedge transactions will expire upon the maturity of the Notes.
On July 24, 2020, the Company sold to the counterparties, warrants (the “2020 Warrants”) to acquire 1.2 million shares of the Company's common stock
at an initial strike price of $709.52 per share, which represents a premium of 100% over the last reported sale price of the common stock of $354.76 on July
21, 2020. On July 24, 2020, the Company received aggregate proceeds of approximately $61.2 million from the sale of the 2020 Warrants. If the market price
per share of the common stock, as measured under the terms of the 2020 Warrants, exceeds the strike price of the 2020 Warrants, the 2020 Warrants could
have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the 2020 Warrants in cash.
The 2020 Hedge and 2020 Warrants transactions are indexed to, and potentially settled in, the Company's common stock and the net cost of $63.0 million
has been recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity.
2017 Hedge and Warrants
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 warrant transactions.
On May 31, 2017, the Company paid $61.5 million to the counterparties for the 2017 Hedge transactions. The 2017 Hedge transactions initially covered
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 are expected generally to reduce the potential dilution to the Company's 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 “2017 Warrants”) to acquire 1.4 million shares of the Company's common stock
at an initial strike price of $266.39 per share, which represents a premium of 70% over the last
86
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 2017 Warrants transactions are indexed to, and potentially settled in, the Company's common stock and the net cost of $18.1 million
was 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 these call spread transactions effective July 24, 2020 in notional amounts corresponding to the principal
amount of the 2022 Notes repurchased. Subsequent to such termination, the outstanding portion of the 2017 Hedge covers 0.8 million shares of the Company's
common stock and 2017 Warrants to acquire 0.8 million shares of the Company's common stock remain outstanding. The Company received $109.9 million
and paid $94.3 million as a result of terminating such portions of the 2017 Hedge and 2017 Warrants, respectively. The net $15.6 million has been recorded as
an increase to additional paid-in capital in the consolidated statement of shareholders’ equity.
Credit Facility
On September 15, 2021, the Company entered into a credit agreement (the “Credit Agreement”), consisting of a $200.0 million revolving credit facility
(the "Revolving Facility"), which matures on September 15, 2026, and a $250.0 million delayed draw term loan facility (the "Term Loan Facility" and
together with the Revolving Facility, the “Credit Facility”), which matures on September 15, 2028 to the extent the loans thereunder will be drawn. The
delayed draw commitments under the Term Loan Facility will be available until June 1, 2022. The proceeds of the Revolving Facility can be used to finance
working capital, for general corporate purposes and any other purpose not prohibited by the Credit Agreement. The proceeds of the Term Loan Facility can be
used to settle the Company’s 2022 Notes, including related fees, costs and expenses, and up to $80.0 million may be used for general corporate purposes and
any other purposes not prohibited by the Credit Agreement. The Credit Facility replaces the Company's $500.0 million five-year senior secured revolving
credit facility (the "Amended Revolving Credit Facility") which was entered into on December 10, 2019. As of December 31, 2021, the Company had no
borrowings outstanding under the Credit Facility and at December 31, 2020, the Company had no borrowings outstanding under the Amended Revolving
Credit Facility.
The full amount of the Revolving Facility will be available on a same-day basis, with respect to base rate loans and upon advance notice with respect to
LIBO rate loans, subject to customary terms and conditions. Under certain conditions, the Company will be permitted to add one or more term loans and/or
increase revolving or term loan commitments under the Credit Facility by an amount set at the greater of $116.0 million and 100% of consolidated EBITDA
(subject to adjustments for certain prepayments), plus an unlimited amount provided that the first lien net leverage ratio does not exceed 3.00 to 1.00.
Additionally, up to $20.0 million of the Revolving Facility will be available for the issuance of letters of credit. At each of December 31, 2021 and
December 31, 2020, the Company had outstanding one letter of credit issued in the amount of $0.2 million.
The Company’s borrowings under the 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 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 1.25% to
1.75% for loans under the Revolving Facility and 2.75% to 3.00% for loans under the Term Loan Facility, in each case, based on a first lien net
leverage ratio; or
a LIBO rate generally defined as the sum of (i) the rate for Eurodollar dollar deposits for the applicable interest period and (ii) an applicable
percentage of 2.25% to 2.75% for loans under the Revolving Facility and 3.75% and 4.00% for loans under the Term Loan Facility, in each case,
based on a first lien net leverage ratio.
Interest on the Company’s borrowings is 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 Credit Facility contains a restrictive financial covenant, which is set at a first lien net leverage ratio of 2.50 to 1.00, except that this may increase by
0.50:1.00 for the four fiscal quarters following a material acquisition. The financial covenant will be tested only if the loans and certain other obligations under
the Revolving Facility exceed $20.0 million as of the last date
87
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of any fiscal quarter (starting with the fiscal quarter ending on December 31, 2021). In addition, the Credit Facility contains mandatory prepayment events,
affirmative and negative covenants and events of default customary for a transaction of this type. The covenants, among other things, restrict additional
indebtedness, liens, mergers or certain fundamental changes, asset dispositions, dividends and other restricted payments, transactions with affiliates, loans and
investments and other matters customarily restricted in credit agreements of this type. The Company is required to make mandatory prepayments of the
outstanding principal amount of loans under the Term Loan Facility with the net cash proceeds from certain disposition of assets and the receipt of insurance
proceeds upon certain casualty and condemnation events, in each case, to the extent not reinvested within a specified time period, from excess cash flow
beyond stated threshold amounts, and from the incurrence of certain indebtedness. The Company has the right to prepay its term loans under the Credit
Agreement, in whole or in part, at any time without premium or penalty, subject to certain limitations and a 1.0% soft call premium applicable during the first
six months following the closing date.
The Company was in compliance with all covenants at December 31, 2021.
The Credit Facility requires the Company and certain of its subsidiaries to pledge as collateral, subject to certain customary exclusions, substantially all of
its assets, including 100% of the equity in certain domestic subsidiaries and 65% of the voting equity, and 100% of the non-voting equity, in certain foreign
subsidiaries. The obligations under the Credit Facility are unconditionally guaranteed on a senior basis by the Company's material domestic subsidiaries,
which guaranties are secured by the collateral.
With respect to the Revolving Facility, 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 Revolving Facility equal to an applicable percentage of 0.25% to 0.50% per annum based on a
first lien net leverage 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 2.25% to 2.75% based on a
first lien net leverage ratio. The letter of credit fronting fee is 0.125% per annum on the face amount of each letter of credit.
With respect to the Term Loan Facility, 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 Term Loan Facility equal to an applicable LIBO rate plus an applicable percentage of 3.75% to
4.00% per annum based on a first lien net leverage ratio.
The Company recognized $1.1 million in additional interest expense in the third quarter of 2021 due to the write-off of certain unamortized debt issuance
costs associated with the Amended Revolving Credit Facility. In addition to the remaining unamortized debt issuance costs associated with the Amended
Revolving Credit Facility, debt issuance costs of $2.8 million related to the Revolving Facility are being amortized to interest expense over the life of the
Revolving Facility. Debt issuance costs of $3.5 million related to the Term Loan Facility and the original issue discount $2.5 million paid on the undrawn term
loan facility are being amortized to interest expense over the delayed draw access period, until such time that the loans thereunder are drawn. These deferred
costs are included in prepaid and other current assets and other non-current assets in the Company's consolidated balance sheet.
During 2021, the Company recorded interest expense related to its revolving credit facilities of $3.4 million which consisted of $2.0 million in unused
commitment fees and $1.4 million associated with the amortization of the debt issuance costs. During 2021, the Company recorded interest expense related to
the Term Loan Facility of $5.9 million which consisted of $3.5 million in unused commitment fees, $1.4 million associated with the amortization of the debt
issuance costs, and $1.0 million associated with the amortization of the original issue discount.
During 2020, the Company recorded interest expense related to the Amended Revolving Credit Facility of $4.3 million which consisted of $1.3 million
associated with borrowings bearing interest at the LIBO rate, $1.7 million in unused commitment fees, and $1.3 million associated with the amortization of the
debt issuance costs. During 2019, the Company recorded interest expense related to the Amended Revolving Credit Facility of $6.1 million which consisted of
$4.9 million associated with borrowings bearing interest at the base rate and the LIBO rate, $0.6 million in unused commitment fees, and $0.6 million
associated with the amortization of the debt issuance costs.
88
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16—COMMITMENTS
Bonds
The Company has funding commitments that could potentially require performance in the event of demands by third parties or contingent events, as
follows (in thousands):
Surety bonds
(a)
$
5,177
$
5,152
$
25
$
—
$
—
Total
Less Than
1 year
1-3 years
3-5 years
More Than
5 years
Commitments Due By Period
(a) State laws and regulations generally require businesses which engage in mortgage brokering activity to maintain a mortgage broker or similar license.
Mortgage brokering activity is generally defined to include, among other things, receiving valuable consideration for offering assistance to a buyer in
obtaining a residential mortgage or soliciting financial and mortgage information from the public and providing that information to an originator of
residential mortgage loans. All states require that the Company maintain surety bonds for potential claims.
Other Commitments
The Company has certain other commitments through 2025, where the aggregate commitments for these contracts range from $0.2 million to $5.2 million
each year throughout the remaining life of the contract.
NOTE 17—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 17, 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 December 31, 2021, the Company had litigation settlement accruals of $0.1 million in continuing operations. As of December 31, 2020, the
Company had litigation settlement accruals of $0.1 million and $0.5 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 21—Discontinued Operations for additional information.
NOTE 18—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 December 31, 2021. See Note 15—Debt for additional information on the convertible notes and warrants, and see Note 8—Equity
Investment for additional information on the equity interest in Stash.
89
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 during the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands):
Contingent consideration, beginning of period
Transfers into Level 3
Transfers out of Level 3
Total net losses included in earnings (realized and unrealized)
Purchases, sales and settlements:
Additions
Payments
Contingent consideration, end of period
Year Ended December 31,
2021
2020
2019
8,249 $
—
—
(8,249)
—
—
— $
33,464 $
—
—
5,327
—
(30,542)
8,249 $
38,837
—
—
28,402
—
(33,775)
33,464
$
$
There was no contingent consideration liability at December 31, 2021 because the final earnout period for the QuoteWizard acquisition ended on October
31, 2021. The contingent consideration liability at December 31, 2020 consisted of the estimated fair value of the remaining earnout payment for the
QuoteWizard acquisition. The contingent consideration liability at December 31, 2019 consisted of the estimated fair value of the earnout payments of the
DepositAccounts, SnapCap, Ovation, and QuoteWizard acquisitions.
NOTE 19—RELATED PARTY TRANSACTIONS
In 2017, the Company's Board of Directors approved a $10.0 million contribution to fund the newly formed LendingTree Foundation. In each of 2020 and
2019, the Company paid $3.3 million of the $10.0 million contribution, and paid the final installment in 2022. Officers of the Company serve as officers of the
LendingTree Foundation.
NOTE 20—BENEFIT PLANS
The Company operates a retirement savings plan for its employees in the United States that is qualified under Section 401(k) of the Internal Revenue
Code. Employees are eligible to enroll in the plan upon date of hire. Participating employees may contribute up to 50% of their pre-tax earnings, but not more
than statutory limits ($19,500 for 2021, $19,500 for 2020, and $19,000 for 2019). The company match contribution is fifty cents for each dollar a participant
contributes to the plan, with a maximum contribution of 6% of a participant's eligible earnings. Matching contributions are invested in the same manner as
each participant's voluntary contributions in the investment options provided under the plan. LendingTree stock is not included in the available investment
options or the plan assets. Funds contributed to the plan vest according to the participant's years of service, with one year of service vesting at 33%, two years
of service vesting at 66%, and three years or more of service vesting at 100%. Matching contributions were approximately $2.9 million, $2.4 million and $2.0
million for the years ended December 31, 2021, 2020 and 2019, respectively.
NOTE 21—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, 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.
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 remained with HLC.
Litigation settlements and contingencies and legal fees associated with related bankruptcy and legal proceedings against the Company are included in
discontinued operations in the accompanying financial statements.
90
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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 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.
As a result of the voluntary petition, LendingTree, LLC was, as of the initial July 21, 2019 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 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. The derecognition of HLC’s cash of $5.9 million removed from the consolidated balance sheet on the deconsolidation date of July 21, 2019 is
included within cash flows from operating activities attributable to discontinued operations in the accompanying consolidated statement of cash flows.
During its bankruptcy, HLC indicated that it believed that it had 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. During the second quarter of 2020, LendingTree, LLC and HLC
entered into a settlement agreement 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 approved the settlement on July 16, 2020. The $36.0 million settlement payment was made in the third quarter of
2020.
During the HLC bankruptcy, a bar date for claims against HLC was set, establishing a deadline for all HLC’s creditors to assert any claim they may have
had against HLC. Distributions were made to holders of allowed claims deemed timely filed. After all distributions to creditors were made and HLC’s Chapter
7 bankruptcy estate was fully administered, the HLC bankruptcy case was closed on July 14, 2021.
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. Plaintiff then 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. It filed
substantially similar complaints against approximately 80 of the loan originators from whom RFC had purchased loans, including HLC. Judgment was entered
against HLC, see Home Loan Center, Inc. Bankruptcy Filing above.
HLC’s filing under the Bankruptcy Code discussed above in Home Loan Center, Inc. Bankruptcy Filing created an automatic stay of enforcement of the
judgment entered against HLC. 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. In June 2020, the Company entered into a settlement with
ResCap, pursuant to which, the Company agreed to, among other things, pay ResCap $58.5 million, less any amounts ResCap receives in the HLC
bankruptcy. In the third and fourth quarters of 2020, the Company made payments of $26.5 million and $6.4 million, respectively, to the ResCap Liquidating
Trust and the ResCap Liquidating Trust, in turn, assigned its allowed claims against HLC to the Company. In the second quarter of 2021, the Company
received $8.6 million related to these amounts, from the final distributions in the HLC bankruptcy on account of the allowed claims that the ResCap
Liquidating Trust had assigned to the Company.
91
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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").
HLC’s filing under the Bankruptcy Code discussed above in Home Loan Center, Inc. Bankruptcy Filing created 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. In July 2021, the Company entered into a settlement with LBHI,
which payment was made in the third quarter of 2021.
Financial Information of Discontinued Operations
The components of net loss reported as discontinued operations in the accompanying consolidated statements of operations and comprehensive income
(loss) are as follows (in thousands):
Revenue
Gain from removal of HLC's assets and liabilities
Other operating expenses
Loss before income taxes
Income tax benefit
Net loss
2021
Year Ended December 31,
2020
2019
—
$
—
$
—
—
(4,719)
(4,719)
696
(4,023)
$
—
(33,308)
(33,308)
7,619
(25,689)
$
4,51
(35,00
(30,48
8,85
(21,63
$
$
Losses from discontinued operations included all activity of HLC prior to bankruptcy, including litigation settlements, contingencies and legal fees
associated with legal proceedings, as well as a gain upon deconsolidation due to the accounting effect of HLC’s bankruptcy filing on the consolidated financial
statements.
The results of discontinued operations also include litigation settlements and contingencies and legal fees associated with legal proceedings against
LendingTree, Inc. or LendingTree, LLC that arose due to the LendingTree Loans Business or the HLC bankruptcy filing.
NOTE 22—SEGMENT INFORMATION
The Company manages its business and reports its financial results through the following three operating and reportable segments: Home, Consumer and
Insurance. Characteristics which were relied upon in making the determination of the reportable segments include the nature of the products, the organization's
internal structure, and the information that is regularly reviewed by the CODM for the purpose of assessing performance and allocating resources.
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 and
insurance policies in our agency businesses. 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.
92
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Home
Consumer
Year Ended December 31, 2021
Insurance
(in thousands)
Other
$
441,738 $
288,386
153,352
329,945 $
186,448
143,497
326,153 $
212,689
113,464
663 $
610
53
Revenue
Segment cost of revenue and marketing expense
Segment profit
Cost of revenue
Brand and other marketing expense
General and administrative expense
Product development
Depreciation
Amortization of intangibles
Change in fair value of contingent consideration
Severance
Litigation settlements and contingencies
Operating income
Interest expense, net
Other income
Income before income taxes and discontinued operations
$
Home
Consumer
Year Ended December 31, 2020
Insurance
(in thousands)
Other
Revenue
Segment cost of revenue and marketing expense
Segment profit (loss)
$
320,992 $
188,869
132,123
253,198 $
146,308
106,890
333,765 $
202,623
131,142
2,035 $
2,717
(682)
Cost of revenue (exclusive of cost of advertising re-sold to third parties included
above)
Brand and other marketing expense
General and administrative expense
Product development
Depreciation
Amortization of intangibles
Change in fair value of contingent consideration
Severance
Litigation settlements and contingencies
Operating (loss)
Interest expense, net
Other income
Loss before income taxes and discontinued operations
$
93
Total
1,098,499
688,133
410,366
57,297
85,857
153,472
52,865
17,910
42,738
(8,249)
53
392
8,031
(46,867)
123,272
84,436
Total
909,990
540,517
369,473
53,408
77,973
129,101
43,636
14,201
53,078
5,327
295
(943)
(6,603)
(36,300)
376
(42,527)
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Home
Consumer
Other
Total
Year Ended December 31, 2019
Insurance
(in thousands)
Revenue
Segment cost of revenue and marketing expense
Segment profit
$
277,935 $
174,814
103,121
515,037 $
301,852
213,185
284,792 $
170,153
114,639
28,839 $
27,466
1,373
1,106,603
674,285
432,318
Cost of revenue (exclusive of cost of advertising re-sold to third parties included
above)
Brand and other marketing expense
General and administrative expense
Product development
Depreciation
Amortization of intangibles
Change in fair value of contingent consideration
Severance
Litigation settlements and contingencies
Operating income
Interest expense, net
Other expense
Income before income taxes and discontinued operations
$
The CODM does not review information on segment assets and as such, no segment asset information is reported herein.
94
45,624
83,650
116,847
39,953
10,998
55,241
28,402
1,026
(151)
50,728
(20,271)
524
30,981
LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23—SUBSEQUENT EVENT
In January 2022, the Company acquired an equity interest in another company for $15.0 million. This company is a consumer-first payment platform
that intelligently automates loan payment scheduling and helps consumers better manage their money and improve their financial well-being.
95
Table of Contents
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), management, with the participation of our principal
executive officer (Chief Executive Officer) and our principal financial officer (Chief Financial Officer), evaluated, as of the end of the period covered by this
report, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Management necessarily applied its judgment
in assessing the costs and benefits of such controls and procedures, which by their nature can provide only reasonable assurance regarding management's
control objectives. Management does not expect that our disclosure controls and procedures will prevent or detect all errors and fraud. A control system,
irrespective of how well it is designed and operated, can only provide reasonable assurance and cannot guarantee that it will succeed in its stated objectives.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, our disclosure controls and
procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the
Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes
those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and
dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over
financial reporting as of December 31, 2021. In making this assessment, our management used the criteria for effective internal control over financial
reporting described in "Internal Control-Integrated Framework" (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO"). Based on our evaluation under the framework in the Internal Control-Integrated Framework, issued by the COSO, management has concluded that
our internal control over financial reporting was effective as of December 31, 2021. The effectiveness of our internal control over financial reporting as of
December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing
under "Item 8. Financial Statements and Supplementary Data" included elsewhere in this annual report.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in the Exchange Act, Rules 13a-15(f)) that occurred during the quarter
ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. Other Information
None.
96
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
97
Table of Contents
As set forth below, the information required by Part III (Items 10, 11, 12, 13 and 14) is incorporated herein by reference to the Company's definitive proxy
statement to be used in connection with its 2022 Annual Meeting of Stockholders and which will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the Company's fiscal year ended December 31, 2021 (the "2022 Proxy Statement"), in accordance with General
Instruction G(3) of Form 10-K.
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 will be contained in, and is hereby incorporated by reference to, the 2022 Proxy Statement.
ITEM 11. Executive Compensation
The information required by Item 11 will be contained in, and is hereby incorporated by reference to, the 2022 Proxy Statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 will be contained in, and is hereby incorporated by reference to, the 2022 Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 will be contained in, and is hereby incorporated by reference to, the 2022 Proxy Statement.
ITEM 14. Principal Accounting Fees and Services
The information required by Item 14 will be contained in, and is hereby incorporated by reference to, the 2022 Proxy Statement.
98
Table of Contents
PART IV
ITEM 15. Exhibits, Financial Statement Schedules
(a) List of documents filed as part of this report:
(1) Consolidated Financial Statements of LendingTree, Inc.
Report of Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP.
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019.
Consolidated Balance Sheets as of December 31, 2021 and 2020.
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2021, 2020 and 2019.
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019.
Notes to Consolidated Financial Statements.
(2) Consolidated Financial Statement Schedules of LendingTree, Inc.
All financial statements and schedules have been omitted since the required information is included in the consolidated financial statements or the notes
thereto, or is not applicable or required.
(3) Exhibits
The documents set forth below, numbered in accordance with Item 601 of Regulation S-K, are filed herewith or incorporated herein by reference to the
location indicated below.
Exhibit
Number
Description
2.1 Separation and Distribution Agreement among IAC/InterActiveCorp,
HSN, Inc., Interval Leisure Group, Inc., Ticketmaster and Tree.com,
Inc., dated August 20, 2008.
2.2 Tax Sharing Agreement among IAC/InterActiveCorp, HSN, Inc.,
Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc., dated
August 20, 2008.
2.3 Employee Matters Agreement among IAC/InterActiveCorp, HSN, Inc.,
Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc., dated
August 20, 2008.
2.4 Transition Services Agreement among IAC/InterActiveCorp, HSN, Inc.,
Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc., dated
August 20, 2008.
2.5 Spinco Assignment
among
IAC/InterActiveCorp, Tree.com, Inc., Liberty Media Corporation and
Liberty USA Holdings, LLC, dated August 20, 2008.
and Assumption Agreement
2.6 Asset Purchase Agreement among Home Loan Center, Inc., First
Residential Mortgage Network, Inc. dba SurePoint Lending, and the
shareholders of First Residential Mortgage Network named therein,
dated November 15, 2010.
2.7 First Amendment to Asset Purchase Agreement among HLC, SurePoint
and the shareholders party thereto, dated March 14, 2011.
2.8 Second Amendment to Asset Purchase Agreement among HLC,
SurePoint and the shareholders party thereto, dated March 15, 2011.
2.9 Asset Purchase Agreement among Tree.com, Inc., Home Loan Center,
Inc., LendingTree, LLC, HLC Escrow, Inc. and Discover Bank, dated
May 12, 2011**
99
Location
Exhibit 2.1 to the Registrant's Registration Statement on Form S-1
(No. 333-152700), filed August 1, 2008
Exhibit 10.2 to the Registrant's Current Report on Form 8-K (No.
001-34063) filed August 25, 2008
Exhibit 10.3 to the Registrant's Current Report on Form 8-K (No.
001-34063) filed August 25, 2008
Exhibit 10.4 to the Registrant's Current Report on Form 8-K (No.
001-34063) filed August 25, 2008
Exhibit 10.6 to the Registrant's Current Report on Form 8-K (No.
001-34063) filed August 25, 2008
Exhibit 2.1 to Registrant's Current Report on Form 8-K (No. 001-
34063) filed November 16, 2010
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed
March 21, 2011
Exhibit 2.2 to the Registrant's Current Report on Form 8-K filed
March 21, 2011
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed
May 16, 2011
Exhibit
Number
Description
2.10 Asset Purchase Agreement among LendingTree, LLC, RealEstate.com,
Inc. and Market Leader, Inc., dated September 15, 2011**
2.11 Amendment to Asset Purchase Agreement among Home Loan Center,
Inc., HLC Escrow, Inc., LendingTree, LLC, Tree.com, Inc., Discover
Bank and Discover Financial Services, dated February 7, 2012**
2.12 Membership Interest Purchase Agreement, dated as of November 16,
2016, by and among LendingTree, LLC, Iron Horse Holdings, LLC, all
of the members of Iron Horse Holdings, LLC and Christopher J. Mettler.
**
2.13 Assignment and Assumption Agreement, dated November 2, 2017, by
and among General Communication,
Interactive
Corporation, Liberty USA Holdings, LLC, Ventures Holdco, LLC, and
LendingTree, Inc.
Inc., Liberty
2.14 Unit Purchase Agreement dated as of October 4, 2018 by and among
LendingTree, LLC, QuoteWizard.com, LLC, all of the members of
QuoteWizard.com, LLC, and Scott Peyree as the Securityholders
Representative. **
2.15 Stock Purchase Agreement dated as of December 20, 2018 by and
among LendingTree, LLC, Value Holding Inc., all of the shareholders of
Value Holding Inc., and Jonathan Wu as the Sellers’ Representative. **
Location
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed
September 21, 2011
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed
February 8, 2012
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed
November 22, 2016
Exhibit 99.7(D) to the Registrant's Current Report on Form SC
13D/A filed November 3, 2017
Exhibit 2.1 to the Registrant’s Current Report on Form 8-K/A filed
October 12, 2018
Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed
December 27, 2018
3.1 Amended and Restated Certificate of Incorporation of LendingTree, Inc. Exhibit 3.1 to the Registrant's Current Report on Form 8-K (No.
3.2 Fourth Amended and Restated By-laws of LendingTree, Inc.
4.1 Amended and Restated Restricted Share Grant and Shareholders'
Agreement, among Forest Merger Corp., LendingTree,
Inc.,
InterActiveCorp and the Grantees named therein, dated July 7, 2003*
4.2 Registration Rights Agreement among Tree.com, Inc., Liberty Media
Corporation and Liberty USA Holdings, LLC, dated August 20, 2008.
Indenture for .0625% Convertible Senior Notes due 2022
4.3
4.4 Purchase Agreement for .0625% Convertible Senior Notes due 2022
4.5 Base Issuer Warrant Transaction
4.6 Additional Issuer Warrant Transaction
4.7 Description of the Registrant's Securities Registered Pursuant to Section
4.8
12 of the Securities Exchange Act of 1934
Indenture, dated as of July 24, 2020, between LendingTree, Inc. and
Wilmington Trust, National Association
10.1 Employment Agreement between Douglas Lebda and the Company,
dated September 20, 2017*
10.2 Employment Agreement between Douglas Lebda, the Company and
LendingTree, LLC, dated November 30, 2020*
10.3 Fifth Amended and Restated 2008 Stock and Annual Incentive Plan*
100
001-34063) filed August 25, 2008
Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed
November 15, 2017
Exhibit 10.8 to the Registrant's Registration Statement on Form S-
1 (No. 333-152700), filed August 1, 2008
Exhibit 10.5 to the Registrant's Current Report on Form 8-K (No.
001-34063) filed August 25, 2008
Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed
May 31, 2017
Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed
May 31, 2017
Exhibit 99.4 to the Registrant's Current Report on Form 8-K filed
May 31, 2017
Exhibit 99.5 to the Registrant's Current Report on Form 8-K filed
May 31, 2017
Exhibit 4.7 to the Registrant's Annual Report on Form 10-K filed
February 27, 2020
Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed
on July 24, 2020
Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q
filed October 26, 2017
Exhibit 10.2 to Registrant's Annual Report on Form 10-K filed
March 1, 2021
Exhibit 4.3(A) to the Registrant's Registration Statement on
Form S-8 (No. 333-218747), filed June 14, 2017
Exhibit
Number
Description
10.4 Form of Notice of Stock Option Award Granted Under the 2008 Stock
and Annual Incentive Plan*
10.5 Form of Notice of Restricted Stock Unit Award*
10.6 Form of Notice of Restricted Stock Award*
10.7 Form of Notice of Stock Option Award Granted Under the 2008 Stock
and Annual Incentive Plan*
10.8 LendingTree, Inc. 2017 Inducement Grant Plan*
10.9 Notice of Restricted Stock Unit Award Granted Under the LendingTree,
Inc. 2017 Inducement Plan*
10.10 Restricted Stock Award Agreement*
10.11 2011 Deferred Compensation Plan for Non-Employee Directors*
10.12 Deferred Compensation Plan for Non-Employee Directors*
10.13 Standard Terms and Conditions to Restricted Stock Award Letters of
Tree.com BU Holding Company, Inc.*
10.14 Form of Notice of Restricted Stock Unit Award*
10.15 Form of Restricted Stock Award*
10.16 Form of Notice of Stock Option Award Granted Under the Amended
and Restated 2008 Stock and Annual Incentive Plan*
10.17 Form of Notice of Stock Option Award Granted Under the Second
Amended and Restated 2008 Stock and Annual Incentive Plan*
10.18 Base Convertible Bond Hedge Transaction
10.19 Additional Convertible Bond Hedge Transaction
10.20 Credit Agreement, dated as of September 15, 2021
10.21 Agreement of Purchase and Sale, by and among LendingTree, LLC and
an affiliate of Greenstreet Real Estate Partners, L.P., dated October 17,
2016
10.22 First Amendment to Purchase and Sale, by and among LendingTree,
LLC and an affiliate of Greenstreet Real Estate Partners, L.P., dated
November 28, 2016
10.23 Employment Agreement dated December 21, 2017, among John David
Moriarty, LendingTree, Inc., and LendingTree, LLC.*
10.24 Employment Agreement, dated January 2, 2018, among Neil Salvage,
LendingTree, Inc., and LendingTree, LLC*
10.25 Sixth Amended and Restated LendingTree, Inc. 2008 Stock and Annual
Incentive Plan*
Location
Exhibit 10.6 to the Registrant's Current Report on Form 8-K (No.
001-34063) filed March 27, 2009
Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q
filed May 7, 2014
Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q
filed May 7, 2014
Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q
filed May 7, 2014
Exhibit 4.4(A) to the Registrant's Registration Statement on
Form S-8 (No. 333-218747), filed June 14, 2017
Exhibit 4.4(B) to the Registrant's Registration Statement on
Form S-8 (No. 333-218747), filed June 14, 2017
Exhibit 4.4(C) to the Registrant's Registration Statement on
Form S-8 (No. 333-218747), filed June 14, 2017
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q
filed April 30, 2015
Exhibit 10.15 to the Registrant's Registration Statement on
Form S-1 (No. 333-152700), filed August 1, 2008
Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed
February 3, 2011
Exhibit 10.86(b) to the Registrant's Post-Effective Amendment to
its Registration Statement on Form S-1 (No. 333-152700), filed
July 13, 2012
Exhibit 10.86(c) to the Registrant's Post-Effective Amendment to
its Registration Statement on Form S-1 (No. 333-152700), filed
July 13, 2012
Exhibit 10.86(d) to the Registrant's Post-Effective Amendment to
its Registration Statement on Form S-1 (No. 333-152700), filed
July 13, 2012
Exhibit 10.13 to the Registrant's Quarterly Report on Form 10-Q
(No. 001-34063) filed May 12, 2010
Exhibit 99.2 to the Registrant's Current Report on Form 8-K filed
May 31, 2017
Exhibit 99.3 to the Registrant's Current Report on Form 8-K filed
May 31, 2017
Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed
September 16, 2021
Exhibit 10.31 to the Registrant's Annual Report on Form 10-K
filed February 28, 2017
Exhibit 10.32 to the Registrant's Annual Report on Form 10-K
filed February 28, 2017
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q
filed April 27, 2018
Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q
filed April 27, 2018
Exhibit 4.3(A) to the Registrant's Registration Statement on
Form S-8 (No. 333-233035), filed August 6, 2019
101
Exhibit
Number
Description
10.26 Form of Notice of Stock Option Award Granted Under the LendingTree,
Inc. 2008 Stock and Annual Incentive Plan*
10.27 Form of Notice of Restricted Stock Unit Award Granted Under the
LendingTree, Inc. 2008 Stock and Annual Incentive Plan*
10.28 Form of Notice of Stock Option Award Granted to Non- Employee
Directors Under the LendingTree, Inc. 2008 Stock and Annual Incentive
Plan*
10.29 Form of Notice of Restricted Stock Unit Award Granted to Non-
Employee Directors Under the LendingTree, Inc. 2008 Stock and
Annual Incentive Plan*
10.30 Form of Base Convertible Note Hedge Confirmation
10.31 Form of Additional Convertible Note Hedge Confirmation
10.32 Form of Base Warrant Confirmation
10.33 Form of Additional Warrant Confirmation
10.34 LendingTree Executive Severance Pay Plan*
10.35 Memorandum on compensation changes for Trent Ziegler, dated May
12, 2021*
10.36 Seventh Amended and Restated LendingTree, Inc. 2008 Stock Plan*
10.37 LendingTree, Inc. Employee Stock Purchase Plan*
Location
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q
filed August 4, 2020
Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q
filed August 4, 2020
Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q
filed August 4, 2020
Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q
filed August 4, 2020
Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed
July 24, 2020
Exhibit 99.3 to the Registrant’s Current Report on Form 8-K filed
July 24, 2020
Exhibit 99.4 to the Registrant’s Current Report on Form 8-K filed
July 24, 2020
Exhibit 99.5 to the Registrant’s Current Report on Form 8-K filed
July 24, 2020
Exhibit 10.41 to the Registrant's Annual Report on Form 10-K
filed March 03, 2021
Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q
filed August 4, 2021
Incorporated by reference from Appendix C to the Registrant's
Definitive Proxy Statement on Schedule 14A, filed on April 29,
2021
Incorporated by reference from Appendix B to the Registrant's
Definitive Proxy Statement on Schedule 14A, filed on April 29,
2021
10.38 First Amendment to LendingTree, Inc. Employee Stock Purchase Plan* Exhibit 99.3 to the Registrant's Registration Statement on Form S-
8 (No. 333-258391), filed August 3, 2021
†
10.39 Employment Agreement between Jill Olmstead and the Company, dated
October 1, 2018*
10.40 Separation Agreement between Neil Salvage and the Company, dated
January 1, 2022*
21.1 Subsidiaries of LendingTree, Inc.
23.1 Consent of independent registered public accounting firm.
24.1 Power of Attorney (included on signature page of this Annual Report on
Form 10-K)
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
102
†
†
†
†
†
†
††
††
Exhibit
Number
Description
Location
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
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.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
101.SCH XBRL Taxonomy Extension Schema Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document contained in Exhibit 101)
†††
†††
†††
†††
†††
†††
†††
_______________________________________________________________________________________________________________________________
† Filed 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.
* Management contract or compensation plan or arrangement.
** Certain schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a
copy of all omitted schedules to the SEC upon its request.
+ Portions of this exhibit have been omitted pursuant to a request for confidential treatment and this exhibit has been submitted separately to the SEC.
ITEM 16. Form 10-K Summary
None.
103
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
SIGNATURES
behalf by the undersigned, thereunto duly authorized.
Date: February 28, 2022
LendingTree, Inc.
/s/ DOUGLAS R. LEBDA
Douglas R. Lebda
Chairman and Chief Executive Officer
By:
104
Table of Contents
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints each of Trent Ziegler and
Lisa Young as his or her true and lawful attorney and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any and all amendments to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2021,
and to file the same with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto
said attorney and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney and agent may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the dates indicated.
Signature
Title
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
February 28, 2022
/s/ DOUGLAS R. LEBDA
Douglas R. Lebda
/s/ TRENT ZIEGLER
Trent Ziegler
/s/ CARLA SHUMATE
Carla Shumate
/s/ GABRIEL DALPORTO
Gabriel Dalporto
/s/ THOMAS DAVIDSON
Thomas Davidson
/s/ ROBIN HENDERSON
Robin Henderson
/s/ STEVEN OZONIAN
Steven Ozonian
/s/ SARAS SARASVATHY
Saras Sarasvathy
Director
Director
Director
Director
Director
/s/ G. KENNEDY THOMPSON
Director
G. Kennedy Thompson
/s/ JENNIFER WITZ
Jennifer Witz
Director
105
Date
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is made and entered into this 1 day of October 2018 (the “Effective Date”)
by and between Jill Olmstead (“Executive”) and LendingTree, Inc. (the “Company”) and LendingTree, LLC (“LTLLC” which as
of the Effective Date is a wholly-owned subsidiary of the Company; LTLLC and the Company are collectively the “Company
Group”) (each a “Party” and collectively, the “Parties”).
st
1.
Employment. LTLLC shall employ Executive and Executive agrees to be employed as Chief Human Resources
Officer. Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities as are
commensurate and consistent with Executive’s position and shall render such services on the terms set forth herein. Further,
Executive shall perform such different or other duties as may be assigned to Executive by LTLLC from time to time by its Chief
Executive Officer. As a fiduciary of the Company Group, Executive will devote Executive’s full working time and best efforts to
the diligent and faithful performance of such duties as may be entrusted to Executive from time to time by Company Group, and
shall observe and abide by the corporate policies and decisions of the Company Group in all business matters. Executive’s
principal place of employment shall be the offices of the Company Group located in Charlotte, North Carolina; provided,
however, that travel to the Company Group’s other offices or places of business activity may be required. Executive
acknowledges that Company Group may, in its sole discretion from time to time, change Executive’s responsibilities or
Executive’s direct/indirect reports without any effect hereunder.
2.
Term.
(a)
Initial Term. Executive’s employment shall be governed by the terms of this Agreement for the period
beginning on the Effective Date and ending [October 1, 2022], unless earlier terminated as provided herein (the “Initial Term”).
This Agreement will expire by its terms unless renewed in the manner set forth in Section 2.b below.
(b) Renewal Terms. Upon the written request of the Executive to extend the Executive’s employment under this
Agreement beyond the Initial Term or any Renewal Term at least ninety (90) days prior to the expiration of the Agreement, the
Chief Executive Officer or the Compensation Committee of the Company’s Board of Directors (the “Compensation
Committee”), as applicable, shall consider extending the term of this Agreement. If Executive’s request for an extension is
approved by the Chief Executive Officer or Compensation Committee, as applicable, this Agreement shall be extended by one
additional year. Any such additional one- year period shall be referred to as a “Renewal Term” and, together with the Initial
Term, the “Term.” In no event, however, shall Executive’s employment under this Agreement extend beyond seven (7) years.
For purposes of clarity, if the Agreement is not renewed in accordance with this Section 2.b, the Agreement shall automatically
expire at the end of the Term. Such expiration shall not entitle Executive to any compensation or benefits except as earned by
Executive through the date of expiration of the Term. For the avoidance of doubt, following the expiration of the Term, any
continued employment of Executive by LTLLC will be on an “at will” basis.
-1-
3.
Compensation. LTLLC shall pay and Executive shall accept as full consideration for the services to be rendered
hereunder compensation consisting of the items listed below. LTLLC shall have no obligation to pay any such compensation for
any period after the termination of Executive’s employment, except as otherwise expressly provided.
(a) Base Salary. Base salary, paid pursuant to LTLLC’s normal payroll practices, at an annual rate of $350,000
or such other rate as may be established prospectively by the Compensation Committee from time to time (“Base Salary”). All
such Base Salary payments shall be subject to deduction and withholding authorized or required by applicable law. The Base
Salary shall be reviewed by the Chief Executive Officer no later than March 31, 2022.
(b) Annual Bonus Award. Beginning on January 1, 2019, the Executive shall be eligible to receive a target
annual bonus award (“Annual Bonus”) of up to 60% of Executive’s Base Salary (“Annual Bonus Percentage”) with respect to
each fiscal year of the Company (each a “Performance Year”) during the Term. The terms and conditions of the Annual Bonus,
including the applicable performance criteria for a Performance Year, and the amount of the Annual Bonus payable to the
Executive for a Performance Year, if any, shall be determined by the Compensation Committee pursuant to an annual bonus plan
for executive employees (the “Annual Bonus Plan”). If more than one Base Salary was in effect during the Performance Year,
the Annual Bonus Percentage (after it is determined pursuant to the Annual Bonus Plan), will be multiplied by each Base Salary
in effect during the Performance Year, on a pro rata basis. The Company may amend the Bonus Plan from time to time in its sole
discretion. Except as expressly provided in this Agreement, the Annual Bonus will be paid in accordance with the Annual Bonus
Plan, and is subject to discretionary adjustments based on individual performance. Executive shall not earn an Annual Bonus or
any portion thereof if Executive is not employed under this Agreement on the applicable date specified for payment in the
Annual Bonus Plan, except as set forth in the Annual Bonus Plan.
(c)
Equity Incentives.
The Compensation Committee has approved certain equity awards to be awarded to Executive under the
Company’s Fifth Amended and Restated 2008 Stock and Annual Incentive Plan, as may be amended (or replaced) by the
Company (the “2008 Plan”), including initial awards following entry into this Agreement, with a total award value of $3.825
million (the “Aggregate Award Value”) based on the valuation methodology used by the Compensation Committee. For
purposes of clarity, the Aggregate Award Value shall be comprised of a long term incentive award valued at $2.925 million and
an inducement award valued at $900,000.
During the Term, Executive shall be eligible to receive additional equity incentives, as determined in the sole
discretion of the Compensation Committee, including, but not limited to awards under the 2008 Plan. Subject to the discretion of
the Compensation Committee, equity incentives may be granted to Executive at the time the Company normally grants such
incentives generally and otherwise in accordance with applicable policies, practices, terms and conditions (including, but not
limited to, vesting requirements), and provided further that Executive is employed by LTLLC on the date such incentives are
awarded.
-2-
(d)
Additional Payments.
(i) Consulting Buy-Out Payment. LTLLC shall pay $250,000 (the “Consulting Buy-Out Payment”) to
Executive in a single installment no later than 30 days following the Effective Date. However, Executive agrees
that she will immediately repay the Buy-Out Payment to LTLLC if Executive terminates her employment other
than for Good Reason (as defined in the Additional Terms) or if Company Group terminates Executive for Cause
(as defined in the Additional Terms) prior to the 365 day following the Effective Date.
th
(ii) 2018 Bonus Payment. Provided that Executive’s Effective Date is no later than October 1, 2018,
LTLLC shall pay $52,500 (the “2018 Bonus Payment”) to Executive in a single installment on the same date in
first quarter 2019 that annual bonus payments for services rendered in calendar year 2018 are made to other
LTLLC employees (the “Bonus Payment Date”). Notwithstanding the foregoing, Executive agrees that she will
immediately repay the 2018 Bonus Payment to LTLLC if Executive terminates her employment other than for
Good Reason (as defined in the Additional Terms) or if Company Group terminates Executive for Cause (as
defined in the Additional Terms) prior to the Bonus Payment Date.
4. Additional Terms. Attached as Exhibit A hereto and deemed a part hereof is the LendingTree Additional Terms and
Conditions of Employment Agreement (the “Additional Terms”), all of the terms of which are incorporated herein by reference
and are binding on the Parties.
5.
Entire Agreement; Amendments. This Agreement, which includes the Additional Terms and the exhibits thereto,
contains the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to the subject matter hereof. This Agreement may be amended in whole or in part only by an instrument
in writing setting forth the particulars of such amendment and duly executed by all Parties.
By their signature below, the Parties acknowledge and agree that they have carefully read each and every provision of
this Agreement, including the Additional Terms and the exhibits thereto, that they understand its terms, that all understandings
and agreements between them relating to the subjects covered in this Agreement are contained in it, and that they have entered
into the Agreement voluntarily. Executive further acknowledges and agrees that Executive has been advised to and given the
opportunity to discuss this Agreement with Executive’s private legal counsel and Executive has taken advantage of that
opportunity to the extent Executive wished to do so.
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IN WITNESS WHEREOF, the Company Group has caused this Agreement to be executed and delivered by its duly
authorized officer and Executive has executed and delivered this Agreement as of the Effective Date.
LENDINGTREE, INC.
By: /s/ DOUGLAS R. LEBDA Name: Douglas R. Lebda
Title: Chief Executive Officer LENDINGTREE, LLC
By: /s/ DOUGLAS R. LEBDA Name: Douglas R. Lebda
Title: Chief Executive Officer EXECUTIVE
By: /s/ JILL OLMSTEAD Name: Jill Olmstead
Title: Chief Human Resources Officer
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EXHIBIT A
LENDINGTREE ADDITIONAL TERMS AND CONDITIONS OF EMPLOYMENT
AGREEMENT
1.
Definitions:
(a)
“Accrued Obligations” means the sum of (i) Executive’s earned but unpaid Base Salary through the date of
termination, (ii) in the case of termination for Death or Disability only, any portion of Executive’s unpaid Annual Bonus relating
to a previously completed Performance Year, (iii) any compensation previously earned but deferred by Executive (together with
any interest or earnings thereon) that has not yet been paid and that is not otherwise to be paid at a later date pursuant to the
executive deferred compensation plan of the Company, if any, (the “Deferred Compensation”, and (iv) reimbursements that
Executive is entitled to receive under Section 8 of these Additional Terms.
(b)
“Cause” shall be determined by LTLLC in its discretion and includes (i) Executive’s fraud, dishonesty, theft,
or embezzlement, (ii) misconduct by Executive injurious to the Company Group or any of its affiliates, (iii) Executive’s
conviction of, or entry of a plea of guilty or nolo contendere to, a crime that constitutes a felony or other crime involving moral
turpitude, (iv) Executive’s competition with the Company Group or any of its affiliates; (v) Executive’s unauthorized use of any
trade secrets of the Company Group or any of its affiliates or Confidential Information (as defined in the Confidentiality
Agreement), (vi) a material violation by Executive of any policy, code or standard of ethics generally applicable to employees of
the Company Group, (vii) Executive’s material breach of fiduciary duties owed to the Company Group, (viii) Executive’s
excessive and unexcused absenteeism unrelated to a disability, (ix) following written notice and a reasonable opportunity to cure,
gross neglect by Executive of the duties assigned to Executive, or (x) Executive’s failure or refusal to cooperate in any Company
investigation.
(c)
“Disability” means a medical condition, whether physical or mental, that renders, and for a consecutive six-
month period has rendered, Executive unable to perform the essential functions of Executive’s position, with or without
reasonable accommodation. A return to work of less than 14 consecutive days will not be considered an interruption in
Executive’s six consecutive months of disability. Disability will be determined by LTLLC on the basis of medical evidence
satisfactory to LTLLC.
(d)
“Good Reason” means the occurrence of any of the following without Executive’s written consent: (i)
material adverse change in the office to which Executive reports from that in effect immediately following the Effective Date,
excluding for this purpose any such change that is an isolated and inadvertent action not taken in bad faith and that is remedied
by the Company Group or that is authorized pursuant to this Agreement and further excluding a change in the office to which
Executive reports due to internal restructuring, realignment or the resignation, promotion, demotion or a reorganization of
managers within, or a sale of, the Company Group; (ii) material reduction in Executive’s annual base salary (except as part of an
enterprise wide reduction of salaries for all similarly situated executives); or (iii) relocation of Executive’s principal place of
business more than 50 miles from the location of the principal office
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from which Executive conducts Executive’s principal activities. In order to resign employment for Good Reason, Executive
must notify the Company Group in writing within fifteen (15) days of the initial existence of any event falling under (i) - (iv)
and such notice shall describe in detail the facts and circumstances explaining why Executive believes a Good Reason event has
occurred. The Company Group shall then have sixty (60) days following its receipt of such notice to cure or remedy such alleged
Good Reason event such that Good Reason will not be deemed to exist for such event. If the event remains uncured or is not
remedied by the Company Group within such sixty (60) day period and if Executive’s employment has not otherwise been
terminated, then a Qualifying Termination shall automatically occur on the first business day following the end of such sixty
(60) day cure/remedy period.
(e)
“Pro-Rated Annual Bonus” means a cash lump-sum payment in an amount equal to the pro-rated portion of
Executive’s Annual Bonus for the Company’s fiscal year in which the Qualifying Termination occurs based on actual
performance achieved for such year (as if the entire Annual Bonus was based solely on the applicable Company performance
metrics and without regard to any assessment of personal performance), with such proration based on the ratio of the number of
days employed during such year to 365.
(f)
“Qualifying Termination” means a termination of Executive’s employment with LTLLC prior to the
expiration of the Term by Executive for Good Reason or by the Company Group without Cause (other than for death or
Disability).
(g)
“Release of Claims” means a general release of all known and unknown claims against the Company Group
and their affiliates in the form attached hereto as Exhibit 1, as updated by the Company to reflect changes in the law.
2.
Resignation from Officer and Director Roles. Effective as of the termination of Executive’s employment with the
Company, regardless of the reason for or the timing of such termination, Executive agrees to and shall be deemed to have
resigned effective immediately from all roles Executive holds with the Company Group, including without limitation as an
officer or director. Such resignations shall not limit or otherwise waive any rights Executive may have to payments and benefits
under this Agreement.
3.
Termination Due to Disability or Death.
(a) Disability. If at any time during the Term of this Agreement, Executive incurs a Disability, then Executive’s
employment shall be immediately terminated as of the date of Executive’s Disability. Upon Executive’s Disability, LTLLC shall
pay Executive the Accrued Obligations; provided that Annual Bonus awards relating to a previously-completed Performance
Year shall be paid on the date that such awards are paid by LTLLC to other similarly situated executives in accordance with the
Annual Bonus Plan.
(b) Death. If Executive should die during the Term, Executive’s employment and the Company Group’s
obligations hereunder shall terminate as of Executive’s death. In such event, LTLLC shall pay Executive’s estate the Accrued
Obligations; provided that Annual Bonus awards relating to a previously completed Performance Year shall be paid on the date
that such
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awards are paid by LTLLC to other similarly situated executives in accordance with the Annual Bonus Plan.
4.
Termination by the Company Group During the Term.
(a) Cause. The Company Group may terminate the employment of Executive under this Agreement during its
Term for Cause. In such event, LTLLC shall pay Executive the Accrued Obligations. Executive shall retain only such rights to
participate in other benefits as are required by the terms of those plans, the Company Group’s policies, or applicable law.
(b) Termination by the Company Group other than for Death, Disability or Cause. Upon a Qualifying
Termination that is not upon or at any time during the 12-month period following the occurrence of a Change of Control, LTLLC
shall pay Executive the amounts described below. For the avoidance of doubt, expiration of the Term is not a Qualifying
Termination. Notwithstanding the foregoing, Executive shall receive the payments and benefits described in subsections (ii) -
(iv) below only if Executive executes and does not revoke a Release of Claims and Executive complies with the restrictive
covenants set forth in the Confidentiality Agreement attached hereto as Exhibit 1. If Executive does not execute the Release of
Claims within sixty (60) days following the Qualifying Termination, or if Executive revokes the Release of Claims (the end of
the permitted revocation period following execution without revocation being exercised, the “Release Effective Date”),
Executive shall not be entitled to the payments and benefits described in subsections (ii) - (iv) below.
(i)
Any Accrued Obligations.
(ii) An amount equal to one (1) year of Executive’s then-current Base Salary, payable in installments on
LTLLC’s regularly scheduled payroll dates over the one (1) year period following the date of such Qualifying Termination
(“Salary Continuation Payments”) beginning on the regularly scheduled payroll date immediately following the effective date of
the Release of Claims. Notwithstanding the foregoing, if the Salary Continuation Payments are determined to be “nonqualified
deferred compensation” that is subject to Section 409A (as defined below), then the first installment shall be made on the sixtieth
(60 ) day following the date of Executive’s Qualifying Termination and shall include the amount of all payments that would
have been made after the effective date of the Release of Claims but before the sixtieth (60 ) day following such Qualifying
Termination, and the remaining Salary Continuation Payments shall be payable in installments on LTLLC’s regularly scheduled
paydays following the sixtieth (60 ) day following such Qualifying Termination.
th
th
th
(iii) If Executive properly elects COBRA continuation coverage, the Company will reimburse Executive
for his COBRA premiums on the same terms and conditions, and at the same level in effect at the time of termination of
Executive’s employment, upon submission of proof of payment, until the earlier of: (1) one (1) year from the date of Executive’s
loss of coverage, or (2) the date Executive obtains replacement health care coverage through a new employer.
issued pursuant to the 2008 Plan and scheduled to vest within nine
(iv) Executive’s (a) then outstanding unvested Restricted Stock Units (“RSUs”) or Restricted Stock
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months of the Qualifying Termination, if any, shall become vested on the effective date of the Release of Claims, and (b) then
outstanding unvested Options to purchase common stock (“Options”) issued pursuant to the 2008 Plan and scheduled to vest
within nine months of the Qualifying Termination, if any, shall become vested and exercisable on the effective date of the
Release of Claims. Notwithstanding the foregoing, this subsection (iv) shall not apply to any award under the 2008 Plan to the
extent such award expressly states that its vesting acceleration terms take precedence over anything to the contrary in an
employment agreement. All RSUs that vest pursuant to this subsection (iv) shall be settled in accordance with the grant terms of
such RSUs. All Options that vest pursuant to this subsection (iv) shall remain exercisable only to the extent permitted under the
grant terms of such Options. All other unvested RSUs, Restricted Stock and Options issued to Executive pursuant to the 2008
Plan and which are not covered by the foregoing clauses (a) and (b) shall terminate without consideration as of the date of such
Qualifying Termination. Additionally, if the Release of Claims does not take effect, then the RSUs or Options that were covered
by the foregoing clauses (a) and (b) shall terminate without consideration as of the 61 day following the date of such Qualifying
Termination.
st
Notwithstanding the foregoing, if Executive obtains other employment or is otherwise compensated for services during
the period in which Executive is receiving Salary Continuation Payments (the “Severance Period”), LTLLC’s obligation to make
future payments to Executive under subsections (ii) and (iii) above shall be offset against any compensation earned by Executive
as a result of employment with or services provided to a third party; notwithstanding the above, Executive shall receive a
guaranteed minimum Salary Continuation Payment of Five Hundred Dollars ($500.00) regardless of any compensation earned
from third parties during the Severance Period (“Guaranteed Minimum Severance Payment”). Executive agrees to inform the
Company Group promptly of Executive’s employment status and any amounts so earned during the Severance Period. Further,
LTLLC’s obligation to make payments under subsections (ii) and (iii) above shall immediately cease in the event that Executive
breaches the terms of this Agreement (including these Additional Terms) or the Confidentiality Agreement, including but not
limited to Executive’s obligations set forth in Section 9 of this Agreement. Executive acknowledges and agrees that the
payments described in Section 3(b) above, or any portion thereof, including without limitation the Guaranteed Minimum
Severance Payment, constitute good and valuable consideration for the Release of Claims.
5.
Termination After the Term. If Executive’s employment continues beyond the Term, Executive’s employment shall
be at will. In other words, after the Term, the Company Group and Executive may terminate the employment relationship at any
time, for any reason, with or without cause. The Company Group retains the right to transfer, demote, or suspend Executive
without cause and without notice, at any time. If Executive’s employment is terminated after the Term, regardless of whether the
termination was with or without Cause, or by Executive for “Good Reason, Executive shall be entitled to receive only the
Accrued Obligations.
6.
Change of Control. For purposes of this Agreement, a “Change of Control” results when: (i) any person or entity,
other than Doug Lebda or persons or entities having beneficial ownership of securities of the Company also beneficially owned
by Doug Lebda, becomes a beneficial owner, directly or indirectly, of securities of the Company representing fifty percent or
more of the total voting power of all of the Company’s then outstanding voting securities, (ii) a merger or consolidation of the
Company in which the Company’s voting securities immediately
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prior to the merger or consolidation do not represent, or are not converted into securities that represent, a majority of the voting
power of all voting securities of the surviving entity immediately after the merger or consolidation, or (iii) a sale of all or
substantially all of the assets of the Company or a liquidation or dissolution of the Company. For purposes of defining Change of
Control, “Company” refers to LendingTree, Inc. as a whole and does not apply to events only affecting specific businesses or
subsidiaries of LendingTree, Inc. To the extent necessary to comply with Section 409A (as defined below), a Change of Control
must also constitute a “change in control event” within the meaning of Section 409A.
(a)
If a Change of Control occurs while Executive is employed by LTLLC then the following benefits will be
provided to Executive automatically upon the Change of Control:
(i) all then-outstanding unvested equity awards held by Executive that are scheduled to vest based solely on time will become
fully vested and immediately exercisable immediately prior to such Change of Control; and (ii) all then-outstanding unvested
Company compensatory equity awards held by Executive that are subject to performance-based vesting will vest based on the
actual level of achievement of the applicable performance goals measured as of (or within five business days before) the date of
such Change of Control; provided, that any portion of the award that does not vest as of such date will be forfeited without
consideration upon the Change of Control;
(b)
In the event that Executive experiences a Qualifying Termination upon or at any time during the 12-month
period following the occurrence of a Change of Control, then Executive will receive (x) payment of the Accrued Obligations
within thirty (30) days of such termination (or earlier, to the extent required by applicable law) and (y) the payments and benefits
described in clauses (i) through (iii) below, but (with respect to clauses (i) through (iii) below) only if Executive timely executes
and does not revoke the Release of Claims and Executive complies in all material respects with Executive’s obligations under
the Confidentiality Agreement, as defined below. If Executive does not execute the Release of Claims within sixty
(60) days following the date of such Qualifying Termination, or if Executive revokes the Release of Claims before the Release
Effective Date, Executive will not be entitled to the payments and benefits described in clauses (i) through (iii) below. For
avoidance of doubt, if Executive experiences a Qualifying Termination upon or at any time during the 12-month period
following the occurrence of a Change of Control, then Executive will not be eligible to receive any payments or benefits under
Section 3(b) herein. There is no requirement for Executive to mitigate the benefits provided in clauses (i) through (iii) below.
(i) A cash lump sum severance payment in an amount equal to the sum of (x) 200% of Executive’s
then-current Base Salary plus (y) 200% of Executive’s target annual bonus for the bonus program in effect for Executive for the
year in which Executive’s employment terminates plus (z) the Pro-Rated Annual Bonus, payable on the regularly scheduled
payroll date immediately following the Release Effective Date;
(ii) With respect to Executive’s then-outstanding vested stock options, Executive will be able to exercise
such vested stock options until the earliest of (x) their applicable expiration date, (y) the date of a change of control of the
Company in which the applicable stock option is not being assumed, continued, substituted for or otherwise replaced as of such
change of control, or (z) the second anniversary of the date of Qualifying Termination; and
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continuation of health care coverage benefit under Section 3(b)(iii).
(iii) Subject to the terms and conditions of Section 3(b)(iii), Executive will be entitled to receive the
(c) To the extent that Executive and the Company are parties to a Change of Control Letter Agreement, such
prior agreement is hereby superseded and terminated as of the Effective Date and is of no further force or effect.
7.
Confidentiality, Work Product and Restrictive Covenant Agreement. As a condition of Executive’s employment,
Executive agrees to execute the Confidentiality, Work Product and Restrictive Covenant Agreement (the “Confidentiality
Agreement”) attached hereto as Exhibit 2. Executive agrees and acknowledges that the benefits received by Executive pursuant
to this Agreement, including but not limited to those set forth in Section 3 of this Exhibit A, constitute good and valuable
consideration for Executive’s obligations under the Confidentiality Agreement.
8.
Employee Benefits.
(a) Paid Time Off. During the Term, Executive shall be entitled to take paid time off, in accordance with
applicable plans, policies, programs, practices and legal requirements applicable to similarly-situated employees generally.
(b) Other. Executive shall be entitled to such other benefits, payments, or items of compensation as are
provided under the employee benefit plans of LTLLC or as are made available from time to time under compensation policies set
by LTLLC for management employees of LTLLC having similar salary and level of responsibility. Employee acknowledges that
Employee’s eligibility for and participation in any such plan or program shall be subject to and controlled by the terms and
conditions of such plans and programs, and that LTLLC makes no representation or agreement that any particular plan currently
exists, will be maintained (in its present form, or at all), or will be established in the future.
9.
Reimbursement. The Company Group shall reimburse Executive, in accordance with applicable law and the general
policies and practices of the Company Group as in effect from time to time, for reasonable out-of-pocket expenses incurred by
Executive in the ordinary course of business, including without limitation, the Company Group’s standard mileage allowance for
business use of any personal vehicle, business related travel, customer entertainment, and professional organizations.
10. Actions After Termination. Executive agrees that for one (1) year following Executive’s termination of
employment, regardless of the reason for the termination, Executive will continue to make himself or herself available for
reasonable consultation with the Company Group and the Company Group’s agents and employees regarding Executive’s prior
work for the Company Group. In addition, Executive shall make himself or herself reasonably available for interviews by the
Company Group’s counsel, depositions, and/or appearances before courts or administrative agencies upon the Company Group’s
reasonable request. Executive agrees that if at any time following termination Executive is contacted by any government agency,
regulator or bureau, by any stock or listing exchange or any self-regulatory organization, or by any customer of the Company
Group, with reference to the Company Group’s business, or by any person
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contemplating or maintaining any claim or legal action against the Company or LTLLC, or by any agent or attorney of such
person, Executive will, to the fullest extent permitted by law, promptly notify the Company Group of the substance of
Executive’s communications with such person and shall cooperate with the Company Group in defense of such claim or legal
action. The Company Group agrees to reimburse any reasonable third party expenses incurred by Executive in connection with
this Section 9, provided that such expenses shall have been preapproved in writing by the Company Group.
11. Taxes. All payments made under this Agreement shall be subject to the Company Group’s withholding of all
required foreign, federal, state and local income and employment/payroll taxes, and all payments shall be net of such tax
withholding.
12. Recoupment. Notwithstanding anything to the contrary in this Agreement, any payments made or granted pursuant
to this Agreement shall be subject to any recoupment or clawback policy that may be adopted by the Company Group from time
to time and to any requirement of applicable law, regulation or listing standard that requires the company to recoup or claw back
compensation paid.
13. Non-Disparagement. From and after a Qualifying Termination, Executive agrees not to disparage the Company
Group or any officers, directors, employees, shareholders, parent companies, affiliates or agents of the Company Group (each an
“Employer Party”). For purposes of this Section, “disparage” means to make a negative statement in any manner that is intended
to be or is likely to be harmful to an Employer Party, its business or business reputation or personal reputation; provided that
nothing in this Agreement is intended to prohibit or shall prohibit Executive from providing truthful information or testimony in
connection with any legal or regulatory investigation or proceeding. This Agreement shall cover all forms of disparagement,
direct or indirect, through any medium or in any venue.
14. Section 280G Limitation. Notwithstanding anything in this Agreement to the contrary, in the event that any
payment or benefit received or to be received by Executive (all such payments and benefits being hereinafter referred to as the
“Total Payments”) would not be deductible (in whole or part) by the Company Group or any affiliates making such payment or
providing such benefit as a result of Section 280G of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) then, to
the extent necessary to make such portion of the Total Payments deductible (and after taking into account any reduction in the
Total Payments required by any similar reduction or elimination provision contained in such other plan, arrangement or
agreement), the portion of the Total Payments that does not constitute “nonqualified deferred compensation” under Section 409A
of the Code shall first be reduced (if necessary, to zero), and all other Total Payments shall thereafter be reduced (if necessary, to
zero) with, in each case, cash payments being reduced before non-cash payments (and, within each category, payments to be
paid last being reduced first); provided, however, that such reduction shall only be made if the amount of such Total Payments,
as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is
greater than or equal to the amount of such Total Payments without such reduction (but after subtracting the net amount of
federal, state and local income taxes on such Total Payments and the amount of the excise tax imposed under Section 4999 of the
Code on such unreduced Total Payments). Any determination required
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to be made under this Section shall be made by independent tax counsel reasonably acceptable to both Executive and the
Company, and shall be paid for by the Company (“Tax Counsel”).
It is possible that, after the determinations and selections made pursuant to the foregoing paragraph, Executive will
receive payments and/or benefits that are, in the aggregate, either more or less than the amount determined under such paragraph
(hereafter referred to as an “Excess Payment” or “Underpayment”, as applicable). If Tax Counsel determines that an Excess
Payment has been made, then Executive shall promptly repay the Excess Payment to the Company, together with interest on the
Excess Payment at the applicable federal rate (as defined in section 1274(d) of the Code) from the date of Executive’s receipt of
such Excess Payment until the date of such repayment. If Tax Counsel determines that an Underpayment has occurred, the
Company Group shall promptly (but in any event within ten (10) days of such determination) pay to Executive an amount equal
to the Underpayment, together with interest on such amount at the applicable federal rate from the date such amount would have
been paid to Executive had the provisions of the foregoing paragraph not been applied until the date of payment.
15. Section 409A. The Parties intend that any amounts payable hereunder shall comply with or be exempt from Section
409A of the Code (“Section 409A”) (including under Treasury Regulation §§ 1.409A-1(b)(4) (“short-term deferrals”) and (b)(9)
(“separation pay plans,” including the exceptions under subparagraph (iii) and subparagraph (v)(D)) and other applicable
provisions of Treasury Regulation §§ 1.409A-1 through A-6). For purposes of Section 409A, each of the payments that may be
made under this Agreement shall be deemed to be a separate payment. Executive and the Company Group agree to negotiate in
good faith to make amendments to the Agreement, as the Parties mutually agree are necessary or desirable to avoid the
imposition of taxes, penalties or interest under Section 409A. Neither Executive nor the Company Group shall have the right to
accelerate or defer the delivery of any such payments or benefits except (i) where payment may be made within a certain period
of time, the timing of payment within such period will be in the sole discretion of the Company Group, and (ii) to the extent
specifically permitted or required by Section 409A. With respect to the time of payments of any amounts under the Agreement
that are “deferred compensation” subject to Section 409A, references in the Agreement to “termination of employment” (and
substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A. Notwithstanding
anything in this Agreement to the contrary, if Executive is considered a “specified employee” under Section 409A upon
Executive’s separation from service and if payment of any amounts on account of Executive’s separation from service under this
Agreement is required to be delayed for a period of six months after separation from service in order to avoid taxation under
Section 409A, payment of such amounts shall be delayed as required by Section 409A, and the accumulated amounts shall be
paid in a lump sum payment within five business days after the end of the six-month delay period. If Executive dies during the
six-month delay period prior to the payment of benefits, the amounts withheld on account of Section 409A shall be paid to the
personal representative of Executive’s estate within 60 days after the date of Executive’s death. For the avoidance of doubt, it is
intended that any expense reimbursement made to Executive hereunder shall be exempt from Section 409A. Notwithstanding the
foregoing, if any expense reimbursement made hereunder shall be determined to be “deferred compensation” within the meaning
of Section 409A, then (i) the amount of the expense reimbursement during one taxable year shall not affect the amount of the
expense reimbursement during any other taxable year, (ii) the expense reimbursement shall be made on or before the last day of
Executive’s taxable year following the year in which the expense was
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incurred and (iii) the right to expense reimbursement hereunder shall not be subject to liquidation or exchange for another
benefit. While it is intended that all payments and benefits provided to Executive under this Agreement will be exempt from or
comply with Section 409A, the Company Group makes no representation or covenant to ensure that such payments and benefits
are exempt from or compliant with Section 409A. The Company Group will have no liability to Executive or any other party if a
payment or benefit under this Agreement or otherwise is challenged by any taxing authority or is ultimately determined not to be
exempt or compliant. Executive further understands and agrees that Executive will be entirely responsible for any and all taxes
imposed on Executive as a result of this Agreement.
16. Confidentiality. The Parties represent and agree they will keep the terms of this Agreement completely confidential,
and that none of the Parties will hereafter disclose any information concerning the terms of this Agreement to anyone, including,
but not limited to, the public, press and media representatives, investors, and any past, present or prospective employee or
applicant for employment of the Company Group; provided that:
(a) The Company Group may disclose the terms of this Agreement to the extent required by applicable
securities laws, regulations and interpretations of the Securities and Exchange Commission or the rules of any stock exchange
upon which the Company Group’s securities trade;
(b) Executive may disclose information regarding Executive’s wages solely as permitted by under California
Labor Code section 232, and information regarding this Agreement to Executive’s immediate family, financial and tax advisors,
and legal counsel, but Executive shall be responsible for any disclosure made by such persons in violation hereof;
(c) The Company Group may disclose information as is necessary for the administration of the Agreement; and
(d) Any Party may take any action authorized hereby or by law to enforce this Agreement or to recover
damages for its breach, and no disclosure incidental thereto or made as a result of legal process (such as, for example, responses
to interrogatories, subpoenas or other legal process) shall be deemed a violation hereof.
17. Agreement to Arbitrate. The Parties agree to resolve all disputes with each other as set forth the Executive Dispute
Resolution Agreement that is attached hereto as Exhibit 3 and incorporated herein by reference.
18. Assignment. This Agreement is personal in its nature and none of the Parties hereto may, without the consent of the
others, assign or transfer this Agreement or any rights or obligations hereunder; provided that, in the event of a merger,
consolidation, transfer, reorganization, or sale of all, substantially all or a substantial portion of the assets of the Company or
LTLLC with or to any other individual or entity, this Agreement will, subject to the provisions hereof, be binding upon and inure
to the benefit of such successor and such successor (including the Company upon assignment of this Agreement) must discharge
and perform all the promises, covenants, duties, and obligations of the Company Group hereunder, and all references herein to
the “Company” or “LTLLC” or “Company Group” will refer to such successor.
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19. Notices. All notices and other communications under this Agreement shall be in writing and shall be given by first-
class mail, certified or registered with return receipt requested or by hand delivery, or by overnight delivery by a national
recognized carrier, in each case to the applicable address set forth below, and any such notice is deemed effectively given which
received by recipient (or if receipt is refused by recipient, when so refused):
If to the Company
Group:
LendingTree, Inc. 11115 Rushmore Dr.
Charlotte, NC 28277 Attn: General
Counsel
If to Executive:
At the most recent address for Executive on file with the Company Group.
Any Party may change such Party’s address for notices by notice duly given pursuant hereto.
20.
Invalid Provisions. It is not the intention of any Party to violate any public policy, or any statutory or common law.
If any sentence, paragraph, clause or combination of the same in this Agreement is in violation of the law of any State where
applicable, such sentence, paragraph, clause or combination of the same shall be void in the jurisdictions where it is unlawful,
and the remainder of the Agreement shall remain binding on the Parties. However, the Parties agree, and it is their desire that a
court should substitute for each such illegal, invalid or unenforceable covenant a reasonable and judicially-enforceable limitation
in its place, and that as so modified the covenant shall be as fully enforceable as if set forth herein by the Parties themselves in
the modified form.
21. Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which will be
deemed an original, but all of which together shall constitute one and the same instrument.
22. Survival. Upon any termination of this Agreement or of Executive’s employment, the provisions of Sections 5, 7,
and 10 through 23 of this Exhibit A to the Agreement, the General Release (Exhibit 1), the Confidentiality Agreement (Exhibit
2), and the Executive Dispute Resolution Agreement (Exhibit 3) shall survive to the extent necessary to give effect to the
provisions thereof.
23. Governing Law; Jurisdiction. The validity, construction, interpretation and enforceability of this Agreement and any
dispute arising hereunder shall be determined and governed by the laws of the state in which the principal office from which
Executive conducts Executive’s principal activities is located at the time of Executive’s termination of employment or at the time
the dispute arises if prior to termination of employment (“Applicable State”). Any litigation in court permitted under this
Agreement shall be brought by any Party exclusively in the Applicable State. In addition, and to the extent permitted by the law
of the Applicable State, the Parties irrevocably waive any right to a trial by jury in any such action related to this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed and delivered these Additional Terms and Conditions of
Employment Agreement as of the date(s) written below.
LENDINGTREE, INC.
By: /s/ DOUGLAS R. LEBDA Name: Douglas R. Lebda
Title: Chief Executive Officer LENDINGTREE, LLC
By: /s/ DOUGLAS R. LEBDA Name: Douglas R. Lebda
Title: Chief Executive Officer EXECUTIVE
By: /s/ JILL OLMSTEAD Name: Jill Olmstead
Title: Chief Human Resources Officer
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Exhibit 1
General Release Agreement
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Exhibit 2
Confidentiality, Work Product and Restrictive Covenant Agreement
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Exhibit 3
Executive Dispute Resolution Agreement
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SEPARATION AGREEMENT AND GENERAL RELEASE
This Separation Agreement and General Release (the “Agreement”) is made and entered into by and between Neil Salvage
(“Executive”) and LendingTree, Inc. ( “LTI”) and LendingTree, LLC (the “Company” which is a wholly-owned subsidiary of LTI;
LTI and the Company are collectively the “Company Group”) (each a “Party” and collectively, the “Parties”), pursuant and subject
to the terms of the LendingTree Executive Severance Pay Plan (the “Plan”).
1.
The Parties agree and acknowledge that: (i) Executive’s employment with the Company, which is currently on an
“at-will” basis, was terminated due to a Qualifying Termination (as defined in the Plan) effective on January 31, 2022 (the
“Separation Date”), and such termination was not in connection with or following a Change in Control (as defined in the Plan); (ii)
Executive was previously selected by the Plan Sponsor (as defined in the Plan) to participate in the Plan, and has previously
executed a Participation Agreement (as defined in the Plan) with respect to the Plan; (iii) Executive is executing this Agreement as a
condition for eligibility to receive the separation benefits provided for under the Plan; and (iv) this Agreement contains a “Release”
as referenced in the Plan, and incorporates by reference all terms, conditions, requirements, and exclusions set forth in the Plan as if
fully set forth herein.
2.
Consideration.
Executive understands and agrees that the value and consideration provided to Executive herein is sufficient
to bind Executive to the terms of this Agreement, and that Executive will have twenty-one (21) calendar days after receiving the
Agreement during which to consider, sign, and return the Agreement.
(a)
(b)
Following the Effective Date (as defined in Section 12(c) below) of this Agreement, the Company Group
shall provide Executive with the payments and benefits set forth in Schedule A of the Plan applicable for a “Qualifying Termination
other than in connection with a Change in Control,” subject to the terms, conditions, requirements, and exclusions set forth in the
Plan. For the avoidance of doubt, those benefits include the following:
i.
Cash severance equal to 1.0x Executive’s base salary, payable in equal installments over the twelve
(12)-month period following Executive’s Qualifying Termination, in accordance with Section 3 of the Plan and
regular payroll policies;
ii.
Accelerated vesting of Executive’s outstanding equity awards that would have vested during the
twelve (12) months following Executive’s Qualifying Termination; and
iii.
dependents.
Coverage of up to twelve (12) months of COBRA premiums for Executive and Executive’s eligible
(c)
As additional consideration for Executive’s execution of the additional covenants contained in Section 5
below, following the Effective Date of this Agreement the Company Group shall additionally provide to Executive of a one-time
lump sum payment in the amount of Two Hundred Ninety-Two Thousand Five Hundred and No/100 Dollars ($292,500.00), less all
taxes and other applicable payroll deductions (the “Additional Consideration”), representing the value of sixty-five percent (65%)
of Executive’s target bonus for 2021 performance, which Additional Consideration shall be payable to Executive on the first
regularly scheduled payroll date following the Effective Date.
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(d)
No payments made pursuant to this Agreement or the Plan shall be considered as creditable “compensation”
under any pension, savings, or other benefit plan maintained by any of the Company Group, unless specifically provided for under
the applicable plan documents.
3.
General Release of Claims. Except as specified below, Executive waives and releases the Company, LTI, and their
respective former, current, and future parents, affiliates, related entities, predecessors, successors, and subsidiaries, and each of
these entities’ respective current and former officers, directors, agents, employees, attorneys, assigns, insurers, Company Group
sponsored or established benefit plans, administrators, fiduciaries, and trustees of any Company Group sponsored or established
benefit plans (collectively, the “Releasees”), to the maximum extent permitted by law, from any and all claims or causes of action,
whether or not now known, foreseen or unforeseen, with respect to any act, event, or omission occurring through and including the
date on which Executive signs this Agreement, and including but not limited to any matter arising out of or connected with
Executive’s hire or employment with the Company or the termination of such employment, including without limitation, claims for
compensation, bonuses, commissions, stock options, restricted stock, equity of any form or nature, shadow stock (excluding, in each
case, any Equity Rights, as defined below), wages, monetary damages, and including any claim based in tort, contract, statute,
regulation, constitutional provisions, or any other common law claim, any claims of wrongful discharge, defamation, slander, libel,
fraud, assault, battery, negligent or intentional infliction of emotional distress, negligent or intentional misrepresentation, negligent
or intentional interference with contract or prospective economic advantage, unfair business practices, negligence, personal injury,
invasion of privacy, false imprisonment, conversion, breach of contract (whether express, oral, written or implied from any source),
and breach of the covenant of good faith and fair dealing, promissory estoppel, fraud, any claims for alleged discrimination,
retaliation or harassment based on sex, age, race, national origin, disability, sexual orientation, medical condition, pregnancy or any
other protected basis, claims under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination
in Employment Act of 1967 (“ADEA”), the Rehabilitation Act, the Equal Pay Act, the Americans with Disabilities Act, the
Executive Retirement Income Security Act, the Fair Labor Standards Act, the Fair Credit Reporting Act, the Worker Adjustment
and Retraining Notification Act, the Family and Medical Leave Act, except as prohibited by law, the Sarbanes-Oxley Act of 2002,
the North Carolina Retaliatory Employment Discrimination Act, the North Carolina Persons With Disabilities Protection Act, the
North Carolina Wage and Hour Act, the North Carolina Equal Employment Practices Act, and any and all other constitutional,
federal, state and local laws and regulations relating to employment, all as amended, and any and all claims for attorneys’ fees and
costs, and interest and penalties (collectively, the “Claims”), with the only exceptions to such waiver and release being:
(a)
or director of the Company Group;
Any rights to defense or indemnification or insurance coverage that Executive may have as a former officer
applicable law;
(b)
Unemployment, state disability, and/or paid family leave insurance benefits pursuant to the terms of
compensation insurance policy or fund;
(c) Workers’ compensation insurance benefits pursuant to applicable state law under the terms of any worker’s
conditions of the federal law known as “COBRA” and/or any applicable state law counterpart;
(d)
Continued participation in the Company Group’s group medical benefit plans at pursuant to the terms and
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Any rights with respect to any stock options, restricted stock units, shares of stock, phantom equity, or other
grants or rights made by any member of the Company Group to Executive from time to time pursuant to written documentation
executed by any member of the Company Group (collectively, “Equity Rights”); and
(e)
(f)
Any other rights that, pursuant to applicable law, are not subject to waiver by Executive.
It is expressly agreed and acknowledged that the rights referenced in the foregoing clauses (a)-(f) are not “Claims” and are
therefore excluded from the scope of the releases set forth in this Section 3.
If and to the extent that any claims, demands, or causes of action Executive released or attempted to release in this Section 3
exist and accrued prior to the execution of this Agreement by Executive, and the approval of any court, agency, administrative body,
commission, or other entity is necessary to fully effectuate any such release, Executive agrees to participate in and cooperate fully
with the Company Group and any other Releasees in obtaining any such approval.
4.
Nothing in this Agreement restricts or prohibits Executive from initiating communications directly with, responding
to any inquiries from, providing testimony before, providing confidential information to, reporting possible violations of law or
regulation to, or from filing a claim or assisting with an investigation directly with a self-regulatory authority or a government
agency or entity, including the U.S. Equal Employment Opportunity Commission, the Department of Labor, the National Labor
Relations Board, the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector
General (collectively, the “Regulators”), or from making other disclosures that are protected under the whistleblower provisions of
state or federal law or regulation. However, to the maximum extent permitted by law, Executive is waiving Executive’s right to
receive any individual monetary relief from the Company Group or any Releasees resulting from such claims or conduct, regardless
of whether Executive or another party has filed them, and in the event Executive obtains such monetary relief the Company Group
will be entitled to an offset for the payments made pursuant to this Agreement. This Agreement does not limit Executive’s right to
receive an award from any Regulator that provides awards for providing information relating to a potential violation of law.
Executive does not need the prior authorization of the Company Group to engage in conduct protected by this Section 4, and
Executive does not need to notify the Company Group that Executive has engaged in such conduct.
5.
Executive Covenants. In consideration of the compensation provided to Executive set forth in Section 2(c) above,
and in order to protect the substantial time, money, and effort invested by the Company Group, their selling, marketing, pricing, and
servicing strategies, the development of goodwill among their customers, and other legitimate business interests, Executive agrees
as follows:
(a)
Covenant Not to Disclose Confidential Information. Executive acknowledges and agrees that by reason of
Executive’s employment with and service to the Company, Executive has had access to valuable, highly confidential, privileged,
and proprietary information relating to the business of the Company, LTI, and any subsidiaries of any of the Company Group
(collectively, the “Subsidiaries,” which currently includes QuoteWizard.com, LLC, and Ovation Credit Services, Inc.) (with the
Company Group and the Subsidiaries sometimes referred to collectively as the “Collective Group”), and/or their respective
customers (including but not limited to lenders or insurers), suppliers, vendors, and other business partners, including, without
limitation: business plans, customer files and lists; sales methods and techniques; pricing structure and data; marketing concepts,
strategies, and plans; technologies
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and processes, including without limitation technologies and systems of the Company or any of the Collective Group for matching
buyers and sellers; data, software, and formulae; information furnished to the Company or any of the Collective Group by third
parties, including without limitation consumer information, that is subject to confidentiality obligations; financial matters and all
other know how, trade secrets, or proprietary information, or any copies, elaborations, modifications and adaptations thereof, which
are in the possession, custody, or control of the Company or any of the Collective Group (hereinafter collectively referred to as
“Confidential Information”). The Confidential Information includes the items described herein whether or not developed or created
by the Company or any of the Collective Group, and may be in a draft, partial, or final status of preparation. Executive
acknowledges that the unauthorized use or disclosure by Executive of any of the Confidential Information would seriously damage
the business of the Company and (as applicable) others in the Collective Group.
i.
Unless otherwise provided herein, “Confidential Information” shall not include: (i) information that is
generally known or is available to the general public through legitimate origins (and other than as the result of unauthorized
disclosure by or through Executive), as of the date such information becomes generally known or available to the general public;
(ii) information that is rightfully acquired by Executive outside the course and scope of Executive’s employment with the Company
and from a source other than the Company or any of the Collective Group, where the disclosure of such information to Executive is
not in violation of any obligation to the Company or any of the Collective Group, as of the date such information is actually
acquired by Executive; (iii) knowledge, skills, or information which is common to the trade or profession of Executive; and (iv)
information that was known to Executive prior to any employment by the Company or any others in the Collective Group, which
knowledge Executive can establish by direct and preexisting written evidence. Notwithstanding the above, Executive shall be liable
for the unauthorized use or disclosure of any information that was Confidential Information at the time of such use or disclosure,
regardless of whether such information loses its status as Confidential Information subsequent to or as a result of such unauthorized
use or disclosure.
ii.
Executive acknowledges and agrees: (i) that the Confidential Information and all copies thereof, as
described herein, is sensitive, valuable, and proprietary information that is the sole and lawful property of the Company, or (as
applicable) of others in the Collective Group or which has been entrusted to the Company or (as applicable) others in the Collective
Group subject to certain confidentiality obligations; (ii) that the Confidential Information represents a material investment of the
time, money, and other resources of the Company or (as applicable) others in the Collective Group; (iii) that the Company or (as
applicable) others in the Collective Group have a legitimate need to protect such Confidential Information; (iv) that such
Confidential Information is the subject of reasonable efforts on behalf of the Company or (as applicable) others in the Collective
Group to keep it confidential; (v) that Confidential Information to which Executive was exposed prior to the execution of this
Agreement, if any, shall nevertheless constitute Confidential Information, and shall be subject to the terms, requirements, and
restrictions herein; (vi) that Executive has no interest in or rights with respect to any of the Confidential Information; and (vii) that
the Confidential Information constitutes proprietary, sensitive, and confidential information and, in some cases, trade secrets (as
such term is defined in both the Defend Trade Secrets Act, 18 U.S.C. § 1836, et seq., and the North Carolina Trade Secrets
Protection Act, N.C.G.S. § 66-152, et seq.) of the Company or (as applicable) others in the Collective Group.
At and for all times after the Separation Date, Executive agrees that Executive shall keep confidential
and shall not, directly or indirectly, use, divulge, publish, or otherwise reveal or allow to be revealed any aspect of the Confidential
Information to any
iii.
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individual or entity, for any reason whatsoever, except only as required by law, without the Company’s prior, express, and written
consent.
iv.
Defend Trade Secrets Act Notice: Pursuant to 18 U.S.C. § 1833(b), an individual shall not be held
criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in
confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the
purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit
or other proceeding, if such filing is made under seal. Further, an individual who files a lawsuit for retaliation by an employer for
reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret
information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not
disclose the trade secret, except pursuant to court order.
v.
Executive understands that except as set forth in Section 5(a)(iv) above, Executive may not use or
disclose (or threaten to use or disclose) any of the Collective Group’s trade secrets without the Collective Group’s consent. This
obligation means, among other things, that Executive may not use the Collective Group’s trade secrets, whether directly or
indirectly or on behalf of Executive or others, to attempt to call on, solicit, or obtain business from any actual or prospective client,
customer, or business partner of the Company or any of the Collective Group, including without limitation any Customer (as such
term is defined below), other than for authorized Collective Group business activities. This prohibition applies during and after
Executive’s employment, so long as the information remains a trade secret. Executive agrees to take all reasonable steps to maintain
the confidentiality of the Collective Group’s trade secrets and other Confidential Information.
vi.
Executive acknowledges and understands that Executive has the right under federal law to certain
protections for cooperating with or reporting legal violations to the Securities and Exchange Commission (the “SEC”) and/or its
Office of the Whistleblower, as well as certain other governmental entities and self-regulatory organizations. As such, Executive
acknowledges and understands that nothing in this Agreement or otherwise prohibits or limits Executive from disclosing this
Agreement to, or from cooperating with or reporting violations to or initiating communications with, the SEC or any other such
governmental entity or self-regulatory organization, and Executive may do so without notifying the Company or any of the
Collective Group. Executive further acknowledges and understands that (a) neither the Company nor any of its subsidiaries or
affiliates may retaliate against Executive for any of these activities, and nothing in this Agreement or otherwise requires Executive
to waive any monetary award or other payment that Executive might become entitled to from the SEC or any other governmental
entity or self-regulatory organization, and (b) nothing in this Agreement or otherwise prohibits Executive from notifying the
Company or any of the Collective Group that Executive will make a report or disclosure to law enforcement.
(b)
Covenant Not to Compete. For a period of twenty-four (24) consecutive months beginning on the Separation
Date, Executive shall not engage in the performance or attempted performance (whether for Executive’s own benefit or for, on
behalf of, as an employee of, as an independent contractor of, or at the request of any other entity or individual) of any material
activities performed in the course and scope of Executive’s duties for the Company during the Prior Period (as such term is defined
below), in a manner or role that directly competes with, or directly and materially assists others in competing with, the business of
the Company, which business includes without limitation the Services (as such term is defined below), as of the Separation Date
(the “Restricted Activity”): (i) in the Restricted Territory (as such term is defined below); or (ii) for any Competitor (as such term is
defined below), but only to the extent that such Restricted Activity is directed toward competing with the business of the
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Company inside the United States of America, or directly and materially assists others in competing with the business of the
Company inside the United States of America.
i.
Executive understands and acknowledges that the Company’s business includes, without limitation,
the provision of the Services for entities in a number of different industries, including but not limited to lenders in the residential
mortgage industry. Executive further understands and acknowledges that those entities who purchase Services from the Company,
including without limitation leads, to the extent that those entities are themselves engaged in internal electronic and internet-based
lead-generation activities to obtain prospective customers directly and not through the purchase of Services from the Company, are
direct competitors of the Company with regard to the Services. Therefore, to protect the Company’s legitimate business interests,
Executive agrees that for a period of twenty-four (24) consecutive months beginning on the Separation Date, regardless of the
reason for such cessation, Executive shall not engage in the Restricted Activity for any of the following entities:
any time during the Prior Period; or
(1)
Any entity that purchased Services from the Company, including without limitation leads, at
limitation leads, at any time during the Prior Period.
(2)
Any residential mortgage lender that purchased Services from the Company, including without
ii.
For purposes of this Agreement, “Restricted Territory” means the largest territory which is described
by one or more of the following subsections and is deemed enforceable by any court of competent jurisdiction, but only to the
extent that Executive’s Restricted Activity is directed toward competing with the business of the Company inside the United States
of America, or directly and materially assists others in competing with the business of the Company inside the United States of
America:
(1)
Any state, province, or similar political territory in any country;
(2)
Date, Executive worked in or was based during the Prior Period;
Any state, province, or similar political territory in any country in which, as of the Separation
any Customer of the Company during the Prior Period in connection with Executive’s employment with the Company; or
(3)
Any state, province, or similar political territory in any country in which Executive dealt with
(4)
North Carolina.
For purposes of this Agreement, “Competitor” shall mean any entity that is engaged in any business,
including without limitation the research, development, testing, design, publishing, marketing, promotion, licensing, application,
sale, or distribution of electronic and internet-based lead-generation services, that directly competes with the business of the
Company, as and to the extent that such business of the Company existed as of the Separation Date.
iii.
For purposes of this Agreement, “Prior Period” means the twelve (12) month period immediately
preceding the Separation Date, including the Separation Date. For the avoidance of doubt, all references in this Agreement to the
Prior Period calling for a “look back” of twelve (12) months are intended solely to identify the individuals or entities to which the
restrictions in such sections extend, and such references are not themselves intended to
iv.
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nor shall they, under any circumstances, be construed to define the length or term of the respective period of any restriction on
Executive’s activities.
For purposes of this Agreement, “Services” means the Company’s research, development, testing,
design, publishing, marketing, promotion, operation, licensing, application, and distribution of electronic and internet-based lead-
generation services, as well as the sale of leads generated therefrom.
v.
For purposes of this Agreement, “Customer” means any entity that has purchased products or services
from the Company, including without limitation any Services. For the avoidance of doubt, the purchase of Services from the
Company includes, without limitation, the purchase of any leads.
vi.
(c)
Covenants not to Solicit.
i.
For a period of twenty-four (24) consecutive months beginning on the Separation Date, Executive
shall not solicit or induce, or attempt to solicit or induce, any entity or individual that is, or was at any time during the Prior Period,
a Customer of the Company, for the purposes of performing or offering to perform, or selling or offering to sell, any products or
services which compete with any product or service offered by the Company, including without limitation any of the Services, as of
the Separation Date, whether individually, on behalf of another entity, as an employee or prospective employee, or as an
independent contractor; but only as to those Customers with whom at any time during the Prior Period: (i) Executive had material
contact or dealings regarding or concerning activities that were actually performed by Executive within the course and scope of
Executive’s employment with the Company, or for whom Executive performed such activities; (ii) regarding whom Executive
supervised, within the course and scope of Executive’s employment with the Company, any such direct material contact or dealings
by an employee, associate, or agent of the Company or Executive; or (iii) concerning whom Executive had any material knowledge
of Confidential Information regarding terms or details of such Customer’s business dealings or financial arrangements with the
Company.
the reason for such cessation), Executive shall not:
ii.
For a period of twenty-four (24) consecutive months beginning on the Separation Date (regardless of
Solicit or induce, attempt to solicit or induce, or assist any other person or entity in soliciting,
inducing, or attempting to solicit or induce any employee of the Company, LTI, or any of the Subsidiaries, or any individual who
was employed by the Company, LTI, or any of the Subsidiaries at any time during the Prior Period, to become employed by an
entity other than the Company, LTI, or any of the Subsidiaries or to cease his/her employment with the Company, LTI, or any of the
Subsidiaries; or
(1)
Hire or employ, attempt to hire or employ, or assist in hiring or employing any employee of
the Company, LTI, or any of the Subsidiaries, or any individual who was employed by the Company, LTI, or any of the Subsidiaries
at any time during the Prior Period.
(2)
For a period of twenty-four (24) consecutive months beginning on the Separation Date (regardless of
the reason for such cessation, whether such cessation was with or without cause, voluntary or involuntary, or initiated by the
Company or Executive), Executive
iii.
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shall not solicit or induce, or attempt to solicit or induce, any independent contractor of the Company, LTI, or any of the
Subsidiaries to cease its contractual relationship with the Company, LTI, or any of the Subsidiaries, to not continue or extend its
contractual relationship with the Company, LTI, or any of the Subsidiaries, or to not seek, accept or perform work for or on behalf
of the Company, LTI, or any of the Subsidiaries.
iv.
For a period of twenty-four (24) consecutive months beginning on the Separation Date (regardless of
the reason for such cessation), Executive shall not solicit or induce, or attempt to solicit or induce, any marketing partner of the
Company to cease any contractual relationship with the Company, to discontinue or limit its relationship with the Company in any
manner, to not continue supplying products or services to the Company or otherwise alter or discontinue its relationship with the
Company, or to alter in any way the terms or conditions under which such products or services are provided to the Company.
v.
For a period of twenty-four (24) consecutive months beginning on the Separation Date (regardless of
the reason for such cessation), Executive shall not solicit or induce, or attempt to solicit or induce, any supplier or vendor of the
Company to cease any contractual relationship with the Company, to discontinue or limit its relationship with the Company in any
manner, to not continue supplying products or services to the Company or otherwise alter or discontinue its relationship with the
Company, or to alter in any way the terms or conditions under which such products or services are provided to the Company.
(d)
Tolling of Covenants and Severability. For all restrictions and covenants set forth in this Section 5 containing
a twenty-four (24)-month restriction (each, a “Restriction”), the twenty-four (24) month period of each such Restriction shall be
tolled for any such Restriction, as permitted by law, and shall be increased with respect to such Restriction by and in the amount of
any time during which Executive is in breach of such Restriction. Executive agrees and acknowledges that each of the foregoing
covenants set forth in this Section 5 above constitutes a separate, severable, and independently enforceable restrictive covenant.
(e)
Acknowledgement of Reasonableness. Executive acknowledges that the restrictions and covenants contained
in this Section 5: (i) are fair and necessary to protect the Company’s legitimate business interests; (ii) are narrowly tailored to
protect such interests and so as not to offend public policy; (iii) are reasonable as to function and duration; and (iv) will not unduly
restrict Executive’s ability to obtain employment or earn a living. Executive further acknowledges that in connection with
Executive’s employment with the Company, Executive has been exposed to Confidential Information and has had material
interaction with employees and independent contractors of not only the Company, but of LTI and the Subsidiaries as well, such that
the restrictions in this Section 5, inclusive, are reasonable, fair, and necessary for the protection of the legitimate business interests
of the Company, LTI, and the Subsidiaries, all of which constitute legitimate business interests of the Company.
(f)
Each of the restrictive covenants contained in this Section 5 shall be considered to be a “restrictive covenant”
as such term is used in and applies to the Plan.
6.
Confidentiality of Agreement. Executive must keep this Agreement strictly confidential. Executive shall not disclose,
directly or indirectly (such as through anyone acting at the direction or on behalf of Executive), to any other persons or entities the
existence of this Agreement, the contents or terms of this Agreement, or the monetary consideration paid by the Company Group
pursuant to this Agreement, except that Executive may disclose such information to: (a) Executive’s spouse or registered
domestic/civil union partner, and/or (b) Executive’s attorney or accountant (solely in order for such individuals to render personal
services to Executive), and only so long as any such individual(s) agrees in advance of the disclosure to keep such information
confidential. In the event the prior agreement to be bound
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by the terms of this confidentiality provision is not obtained from such individuals, then Executive will be deemed to have breached
the confidentiality provision of this Agreement if Executive discloses such information. Nothing in this Section or elsewhere in this
Agreement is intended to prevent or prohibit Executive from: (a) providing information regarding Executive’s former employment
relationship with the Company or this Agreement, in the event required by law or lawful legal process; or (b) cooperating,
participating or assisting in any investigation or proceeding conducted by a government entity or Regulators. Should Executive be
required by law, legal process, or subpoena to provide information related to his employment with the Company, and only as
permitted by law, Executive shall, in advance of providing any response, and within three (3) calendar days of his receipt of notice
of such law, legal process or subpoena, provide written notice to the Company’s Chief Human Resources Officer via
certified/registered U.S. Mail or via email, so that the Company and/or the Releasees may seek to assert its or their rights and
interests in connection therewith.
7.
References. Executive shall direct any inquiries by potential future employers or persons/entities seeking references
to the Company’s Human Resources Department, which shall communicate only Executive’s fact of employment, last position, and
dates of employment.
8.
Acknowledgment of Receipt of Wages Due. Executive understands and agrees that Executive has been paid any and
all wages due and owing by the Company Group through the Separation Date, and that the payment of any wages concededly due
and owed is not in any way conditioned upon Executive signing this Agreement. This Agreement includes a compromise of any
potential bona fide and good faith dispute regarding claimed wages by Executive and by signing this Agreement, Executive
acknowledges and agrees that with respect to any potential claim for wages by Executive, the Company Group and other Releasees
have defenses, based in law or fact that, if successful would preclude any recovery on the part of Executive.
9.
No Voluntary Cooperation in Third Party Claims. Executive agrees that Executive will not voluntarily cooperate,
directly or indirectly (such as through anyone acting at the direction or on behalf of Executive, including without limitation
Executive’s spouse), with any third party, including without limitation any former employee of the Company Group, in any actual
or threatened lawsuit of any nature whatsoever against the Company Group, except as required by law or by any government
agency. Nothing in this provision shall be construed as preventing Executive from providing complete and truthful testimony in
connection with any formal legal proceeding (e.g., a deposition or testimony in court or arbitration).
10.
No Pending Actions. Executive represents and certifies that neither Executive nor any person, agent, or entity acting
on Executive’s behalf has filed or instituted any complaints, lawsuits, actions, claims, administrative charges, grievances, and/or
proceedings against the Company Group or any of the Releasees, in any forum, and to the extent any such claims, charges,
complaints have been filed or instituted on behalf of Executive, Executive agrees to dismiss such claims, complaints, charges with
prejudice. The dismissal with prejudice of any such pending claims, complaints, or charges shall be a condition precedent to
Company Group’s obligation to provide the severance payments and benefits to the Executive under this Agreement.
11.
Cooperation. If the Company Group so requests, then Executive will cooperate with the Company Group about any
legal matter, including matters that started after Executive leaves the Company Group. Executive agrees to provide the Company
Group with cooperation and reasonable assistance in the preparation, defense, or prosecution of any legal matters involving the
Company Group about which Executive has personal knowledge, including any matters which may be filed after the Separation
Date. Executive agrees that the consideration in Section 2 is compensation in full for such cooperation or assistance. Executive
acknowledges
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that Executive will not receive any pay for time spent testifying as a witness or in other circumstances where applicable law may
otherwise prohibit compensation.
12.
ADEA Waiver; Consideration & Revocation Periods; Effective Date. Executive acknowledges that Executive is
waiving and releasing any claims that Executive may have under the ADEA against Releasees, and Executive represents that this
waiver and release is knowing and voluntary.
(a)
Consideration Period. Executive has twenty-one (21) calendar days after the date Executive received this
Agreement (the “Consideration Period”) in order (i) to read and consider it; (ii) to consult with an attorney of Executive’s own
choosing (and cost) regarding whether Executive should sign this Agreement, which consultation the Company Group hereby
advises Executive to undertake; and (iii) to sign this Agreement if that is what Executive decides to do; provided, however, that
Executive may not sign this Agreement prior to the Separation Date. In the event Executive signs this Agreement on or after the
Separation Date, but before expiration of the Consideration Period, Executive hereby acknowledges that Executive has freely and
voluntarily chosen to waive the remainder of the Consideration Period.
(b)
Revocation Period. If Executive timely signed this Agreement during the Consideration Period, Executive
can change his mind about having signed the Agreement during the seven (7) days after the date Executive signed the Agreement
(“Revocation Period”). If Executive changes his mind in this regard, Executive must deliver notice to the Company Group of the
revocation by midnight on the seventh day to LendingTree, Inc., Attn: Chief Human Resources Officer, 1415 Vantage Park Drive,
Suite 700, Charlotte, NC 28203.
Effective Date. The “Effective Date” of the Agreement will be the eighth (8th) day after the date Executive
timely signed the Agreement, provided that Executive returned Executive’s signed Agreement to the Company Group and did not
timely revoke the Agreement during the Revocation Period.
(c)
13.
Non-Disparagement. Executive further acknowledges and agrees that following the execution of this Agreement,
Executive will not make any negative, derogatory, defamatory, slanderous, or disparaging comments, references, or
characterizations, either verbally or in writing, regarding any of the Releasees, including without limitation the services, products,
business models, personnel, officers, affiliates, management, and financial status of the Company Group, to any of the following:
former or existing employees of the Company Group, customers or business partners of the Company Group, the media, the general
public, on the Internet, or any other entity, for any purpose whatsoever, unless a legal duty to do so is imposed. Notwithstanding the
foregoing, nothing in this Agreement is intended to prohibit or shall prohibit Executive from engaging in any conduct set forth in
Section 4 above, or otherwise providing truthful information or testimony in connection with any legal or regulatory investigation
or proceeding. Executive agrees that in the event of any breach or threatened breach of this Section 13, the Company Group (in
addition to any other remedies at law or in equity it may have) shall be entitled, without the requirement of posting a bond or other
security, to equitable relief, including without limitation injunctive relief and specific performance.
14.
General Terms.
Company Group or the Releasees of any liability, or any wrongdoing, or of any violation of law.
(a)
Nothing contained in this Agreement shall constitute or be treated as an admission by Executive or by
(b)
The Company Group advises Executive to consult with an attorney of Executive’s own choosing before
signing this Agreement.
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incurred in connection with the review and signing of this Agreement.
(c)
The Executive and the Company Group shall each bear their own respective costs and fees and expenses
(d)
The Company Group reserves the right after receiving the signed Agreement from Executive to reject it and
decline to accept it in the event it is untimely or if it has been modified in any way by Executive. In the event the Agreement is
rejected and not accepted by the Company Group, it will be void and unenforceable.
(e)
Executive and the Company Group intend that this Agreement be construed to give the Releasees the full
benefit of the waiver and release provisions. Should any provision of this Agreement be determined by an arbitrator or a court of
competent jurisdiction to be wholly or partially invalid or unenforceable, such provision(s) shall be modified to comply with current
applicable law. In addition, if any one or more provisions contained in this Agreement shall be held to be excessively broad as to
duration, geographical scope, activity, subject, or otherwise, it shall be construed by limiting or reducing it, so as to be enforceable
with applicable law. If any provision(s) cannot be modified to comply with current applicable law, such provision(s) shall be
severed and the enforceability of the remaining parts, terms, or provisions shall remain in full force and effect.
(f)
Except as specified below, this Agreement and the Plan supersede any and all other agreements or
understandings, whether oral, implied, or in writing, between the Parties with respect to the subject matter hereof and contain all of
the covenants and agreements between the Parties with respect to such matters in their entirety; provided, however, Executive’s
post-employment obligations under the Employment Agreement between the Parties dated January 2, 2018 (the “Employment
Agreement,” which Employment Agreement expired on October 22, 2021), Exhibit A attached thereto, the Confidentiality, Work-
Product and Restrictive Covenant Agreement between the Parties of even date therewith, and any other written agreement(s)
between Executive and any of the Company Group relating to the protection of any of the Company Group’s confidentiality,
proprietary information, intellectual property, or trade secrets, shall remain in full force and effect. Except as set forth herein, this
Agreement shall constitute the full, complete, and exclusive agreement between Executive and the Company Group regarding all of
the subject matter covered by this Agreement, and neither the Executive nor the Company Group is relying on any representation or
promise that is not expressly stated in this Agreement.
(g)
Company Group.
This Agreement may only be amended by a written agreement signed by Executive and an Officer of the
(h)
The rights and remedies of the Company Group in this Agreement shall be deemed cumulative, and the
exercise of one of such remedies shall not operate to bar the exercise of any other rights and remedies reserved to the Company
Group or available at law or in equity. The failure of the Company Group to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver thereof, or deprive the Company Group of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing, and no waiver of any breach
of any provision of this Agreement shall constitute a continuing waiver, a waiver of any other breach of that provision, or a waiver
of any other provision hereof. Additionally, no delay or failure by the Company Group to exercise any right under this Agreement,
and no partial or single exercise of such right, shall constitute a waiver of that or any other right.
This Agreement and all rights hereunder shall be governed by and construed in accordance with the terms of
the Plan and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and, to the extent not preempted by
ERISA or
(i)
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otherwise governed by federal law, the laws of the State of North Carolina, without regard to the conflicts of laws provisions
thereof. The Parties agree that any rule of construction of contracts resolving any ambiguities against the drafting party shall be
inapplicable to this Agreement. In addition, and to the extent permitted by applicable law, the Parties irrevocably waive any right to
a trial by jury in any such action related to this Agreement.
(j)
This Agreement may be signed in counterparts. The Parties hereby expressly agree, pursuant to Article 40 of
Chapter 66 of the North Carolina General Statutes, that either or both of the Parties may execute this Agreement using an electronic
signature (as such term is defined in that statute). If and to the extent that separate signature pages are signed by the Parties, each
separate signature page shall be affixed to this Agreement and shall constitute one (1) Agreement binding on the Parties,
notwithstanding that the signatories are not signing the same page. Facsimile transmissions (including transmission by e-mail in
PDF format) of any executed original document shall be deemed the same as a delivered, executed original. Each Party agrees that
the electronic signatures, whether digital or encrypted, of the Parties included in this Agreement are intended to authenticate this
writing and to have the same force and effect as manual signatures.
(k)
Executive acknowledges that the services rendered by Executive during the course of Executive’s
employment were of a special, unique, and extraordinary character, and a breach by Executive of any provision of this Agreement
will cause irreparable injury and damage to the Company Group for which money damages alone would be an inadequate and
insufficient remedy. Therefore, the Company Group shall be entitled to any and all available remedies, including but not limited to
injunctive and equitable relief, without the requirement of posting a bond or other security, in order to prevent a breach of this
Agreement, or any part of this Agreement, or to secure its enforcement.
(l)
The Company and (as applicable) LTI may each assign their rights and obligations under this Agreement to
any successor to all or substantially all the assets of the Company and/or (as applicable) LTI by merger, sale of assets, or otherwise,
and all such rights shall inure to and be enforceable by any such assignee to the fullest extent permitted by applicable law. Executive
is not permitted to assign or encumber this Agreement, voluntarily or involuntarily, and any such purported assignment shall be
void ab initio. This Agreement shall be binding upon the heirs, executors, administrators, and other legal representatives and assigns
of Executive.
(m)
Executive, by signing this Agreement, acknowledges that Executive has had a full and fair opportunity to
review, consider and negotiate the terms of this Agreement, has been advised to seek the advice of an attorney in connection with
the decision whether to accept the benefits that have been offered under this Agreement, has had a reasonable period of time to
consider whether to enter this Agreement, has reviewed this Agreement with advisors of Executive’s choice, has read and
understands this Agreement, and has signed this Agreement freely and voluntarily, without duress, coercion or undue influence and
with full and free understanding of its terms.
I HAVE READ THIS AGREEMENT AND UNDERSTAND IT. I RECOGNIZE THAT I AM GIVING UP IMPORTANT
RIGHTS AND THAT AT NO TIME IN THE FUTURE
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MAY I PURSUE ANY OF THE RIGHTS I HAVE WAIVED AND RELEASED IN THIS AGREEMENT.
Dated: __ _February 1______, 2022
/s/ NEIL SALVAGE
Neil Salvage
Dated: ___February 28_____, 2022
LENDINGTREE, INC.
Jill Olmstead
Name
Chief Human Resources Officer
Title
/s/ JILL OLMSTEAD
Signature
Dated: ___February 28______, 2022
LENDINGTREE, LLC
Jill Olmstead
Name
Chief Human Resources Officer
Title
/s/ JILL OLMSTEAD
Signature
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SUBSIDIARIES OF LENDINGTREE, INC.
Name
LendingTree, LLC
Tree.com BU Holding Company, Inc.
DegreeTree, Inc.
Home Loan Center, Inc.
HLC Escrow, Inc.
LT India Holding Company, LLC
LendingTree Research Services LLP
Ovation Credit Services, Inc.
CM LT Holdings, LLC
QuoteWizard.com, LLC
QW Insurance Solutions, LLC
LT Intermediate Company, LLC
LTIM, LLC
Exhibit 21.1
Jurisdiction of
Formation
DE
DE
DE
CA
CA
DE
India
FL
DE
DE
WA
DE
DE
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-233034) and Form S-8 (No. 333-233035, No. 333-
218747, No. 333-197952) of LendingTree, Inc. of our report dated February 28, 2022 relating to the financial statements and the effectiveness of internal
control over financial reporting, which appears in this Form 10-K.
Exhibit 23.1
/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
February 28, 2022
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL 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
I, Douglas R. Lebda, certify that:
1. I have reviewed this annual report on Form 10-K for the period ended December 31, 2021 of LendingTree, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Dated: February 28, 2022
/s/ DOUGLAS R. LEBDA
Douglas R. Lebda
Chairman and Chief Executive Officer
(principal executive officer)
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL 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
I, Trent Ziegler, certify that:
1. I have reviewed this annual report on Form 10-K for the period ended December 31, 2021 of LendingTree, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Dated: February 28, 2022
/s/ TRENT ZIEGLER
Trent Ziegler
Chief Financial Officer
(principal financial officer)
Exhibit 32.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Douglas R. Lebda, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:
(1) the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of LendingTree, Inc. (the "Report") which this statement accompanies
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of LendingTree, Inc.
Dated: February 28, 2022
/s/ DOUGLAS R. LEBDA
Douglas R. Lebda
Chairman and Chief Executive Officer
(principal executive officer)
Exhibit 32.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Trent Ziegler, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:
(1) the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of LendingTree, Inc. (the "Report") which this statement accompanies
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of LendingTree, Inc.
Dated: February 28, 2022
/s/ TRENT ZIEGLER
Trent Ziegler
Chief Financial Officer
(principal financial officer)