LendingTree, Inc. (TREE)

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, auto loans, credit cards, deposit accounts, personal loans, small business loans, insurance quotes, sales of insurance policies and other related offerings. In addition, we offer 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(s) they are seeking. We also serve as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries we generate with these Network Partners.

Our Spring platform offers a personalized comparison-shopping experience, financial health advice and credit simulations by providing free credit scores and credit score analysis. This authenticated, and secure platform enables us to monitor consumers' credit profiles, identify and alert them to changes in their financial health, and to recommend loans and other offerings on our marketplace that may be more favorable than the terms they may have at a given point in time. Customers can track the progress of their financial health over time based on actions they have taken, see recommended credit score improvement actions, and loans or other products offered by LendingTree.

We are focused on developing new product offerings and enhancements to improve the experience of consumers and Network Partners as they interact with us. By expanding our portfolio of financial services offerings, we are growing and diversifying our business and sources of revenue. We intend to capitalize on our expertise in performance marketing, product development and technology by leveraging the widespread recognition of the LendingTree brand.

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

Economic Conditions

We continue to monitor the current global economic environment, specifically inflationary pressures and interest rates, and any resulting impacts on our financial position and results of operations.

During 2023, the challenging interest rate environment and inflationary pressures continued to present challenges for many of our mortgage, consumer and insurance partners. In our Home segment, mortgage rates hit multi-decade highs of nearly 8% in October, then proceeded to drop below 7% by December, ending the year at 6.6%. The continued high mortgage rates in 2023 and home affordability issues continued to cause declines in refinance volumes and purchase activity. Our Consumer segment was also negatively impacted by economic conditions, with successive Federal Reserve rate increases having their intended effect of tightening financial conditions. The availability of credit contracted and lenders were less inclined to make loans in an environment with high inflation and significantly increased cost of capital. In our Insurance segment, demand from our carrier partners remained volatile for much of the year as they continued to deal with persistent industry headwinds. In the last months of 2023, we began to see advertising budgets from our carrier partners increase.

During 2024, the challenging interest rate environment and inflationary pressures have continued to present challenges for many of our mortgage lending partners. In our Home segment, mortgage rates remained relatively consistent in 2024, with the annual average mortgage rate in 2024 of 6.7% compared to 6.8% in 2023. However, these rates are more than doubled compared to the low annual average mortgage rates seen in 2021. The increased mortgage rates continue to cause reduced refinance volumes and continue to put pressure on purchase activity. Additionally, the restrictive lending conditions continue to

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pressure our Consumer segment. In our Insurance segment, demand from our carrier partners increased significantly in 2024 and we are optimistic about maintaining the strong performance in the Insurance segment as we head into 2025.

Segment Reporting

We have three reportable segments: Home, Consumer, and Insurance.

Recent Mortgage Interest Rate Trends

Interest rate and market risks are substantial in the mortgage lead generation business. Short-term fluctuations in mortgage interest rates primarily affect consumer demand for mortgage refinancings, while long-term fluctuations in mortgage interest rates, coupled with the U.S. real estate market, affect consumer demand for new mortgages. Consumer demand, in turn, affects lender demand for mortgage leads from third-party sources, as well as our own ability to attract online consumers to our website.

Typically, when interest rates decline, we see increased consumer demand for mortgage refinancings, which in turn leads to increased traffic to our website and decreased selling and marketing efforts associated with that traffic. At the same time, lender demand for leads from third-party sources typically decreases as there are more consumers in the marketplace seeking refinancing 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 increased significantly during 2022, from a monthly average of 3.45% in January 2022, ending at a monthly average of 6.36% in December 2022. During 2023, 30-year mortgage interest rates steadily increased from a monthly average of 6.27% in January 2023 to a high of 7.62% in October 2023 prior to decreasing at the end of the year, ending at a monthly average of 6.82% in December 2023. During 2024, 30-year mortgage interest rates remained relatively consistent, starting the year at a monthly average of 6.64% in January 2024 and ending at a monthly average of 6.72% in December 2024, with monthly high of 7.06% in May and a monthly low of 6.18% in September 2024.

On a full-year basis, 30-year mortgage interest rates decreased to an average of 6.72% in 2024 compared to 6.80% in 2023, and increased from 5.33% in 2022.

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Typically, as mortgage interest rates rise, there are fewer consumers in the marketplace seeking refinancings and, accordingly, the mix of mortgage origination dollars will move toward purchase mortgages. According to Mortgage Bankers Association (“MBA”) data, total refinance origination dollars of total mortgage origination dollars decreased to 15% in 2023 from 30% of total 2022 mortgage origination dollars from refinance due to the increase in average mortgage rates. Total refinance original dollars increased to 28% of total mortgage origination dollars in 2024 due to the decrease in average mortgage interest rates. Total refinance origination dollars decreased by 68% in 2023 over 2022 and increased 124% in 2024 over 2023. Industry-wide mortgage origination dollars decreased by 37% in 2023 over 2022 and increased 22% in 2024 over 2023.

Looking forward, the MBA is projecting 30-year mortgage interest rates to decrease slightly in 2025 to an average of 6.5%. According to MBA projections, the mix of mortgage origination dollars is expected to remain primarily with purchase mortgages with the refinance share representing just 31% for 2025.

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, in 2022, existing home sales decreased by 17% compared to 2021 due to increased interest rates and limited inventory of homes. This trend continued into 2023 with existing home sales decreasing 19% compared to 2022 and decreased a further 1% in 2024 from 2023. Fannie Mae expects a 3% increase in existing home sales in 2025 compared to 2024.

LendingTree Spring

We consider certain metrics related to Spring set forth below to help us evaluate our business and growth trends and assess operational efficiencies. We believe our Spring platform drives repeat user engagement resulting in lower acquisition costs and

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increases consumer lifetime value. The calculation of the metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.

We continued to grow our user base and added 3.1 million new users in 2024, bringing cumulative active users to 31.3 million as of December 31, 2024. We calculate the number of Spring users at a period end as the number of users that had an active account at any point during the quarter that includes the period end date. Users that deactivated their accounts prior to the most recent quarter are no longer considered in the user base at the end of the most recent quarter. We attribute approximately $23.1 million of revenue, or 3% of total revenue, for the year ended December 31, 2024 to registered Spring users who initiated their transaction from the Spring platform. During 2024, approximately 0.9 million Spring users initiated a transaction from the Spring platform that contributed to revenue.

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 (the "2025 Notes") 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.

On May 31, 2022, we drew $250.0 million on the Term Loan Facility. A portion of this was used to pay the outstanding balance of $169.7 million and interest on our 0.625% Convertible Senior Notes that matured on June 1, 2022. The remaining call spread transactions associated with the 2022 Notes terminated in 2022.

In the second quarter of 2024, we repurchased approximately $161.3 million in principal amount of the 2025 Notes for $151.7 million plus accrued and unpaid interest of approximately $0.3 million. In the third quarter of 2024, we repurchased approximately $7.6 million in principal amount of the 2025 Notes for $7.2 million. In 2024, we recognized a gain on the extinguishment of debt of $10.1 million and a loss on the write-off of unamortized debt issuance costs of $1.1 million, both of which are included in interest (expense) income, net in the consolidated statements of operations and comprehensive income.

In the first quarter of 2023, we repurchased approximately $190.6 million in principal amount of our 2025 Notes, through separate transactions with certain holders of the 2025 Notes, for $156.3 million plus accrued and unpaid interest of approximately $0.1 million. In the fourth quarter of 2023, we repurchased approximately $100.2 million in principal amount of our 2025 Notes, through separate transactions with certain holders of the 2025 Notes, for $81.2 million plus accrued and unpaid interest of approximately $0.2 million. In 2023, we recognized a gain on the extinguishment of debt of $53.3 million, a loss on the write-off of unamortized debt issuance costs of $3.2 million and incurred debt repayment costs of $1.6 million, all of which are included in interest income/expense, net in the consolidated statement of operations and comprehensive income.

For more information, see Note 14—Debt, in the notes to the consolidated financial statements included elsewhere in this report.

Cost Reductions and Simplification of Business

On March 24, 2023, we committed to a workforce reduction plan (the “Reduction Plan”), to reduce operating costs, which included the elimination of approximately 13% of the Company’s workforce. As a result of the Reduction Plan, we incurred approximately $5.3 million in severance charges in connection with the workforce reduction. Part of this Reduction Plan included the shut down of our LendingTree customer call center as well as our Medicare insurance agency operations within QuoteWizard. We estimate the Reduction Plan reduced annual compensation expense by approximately $14 million, comprised of $2 million in cost of revenue, $4 million in selling and marketing expense, $3 million in general and administrative expense, and $5 million in product development.

During September 2023, we completed workforce reductions of 14 employees. We incurred $0.9 million in severance charges in connection with the workforce reductions, consisting of cash expenditures for employee separation costs of approximately $0.7 million and non-cash charges for the accelerated vesting of certain equity awards of approximately $0.2 million.

Separately, we made the decision to close our Ovation credit services business, an asset group within our Consumer segment, by mid- 2023. As a result, the Company recorded an asset impairment charge of $4.2 million in 2023 related to the write-off of certain long-term assets. Additionally, we incurred $2.1 million in severance charges in 2023 in connection with cash expenditures for employee separation costs. We acquired Ovation in 2018 to better serve those customers who come to

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LendingTree and receive suboptimal offers of credit. The business grew for a number of years before running into challenges in the wake of COVID-19, and more recently the industry has faced increased regulatory pressure. The business was capital-intensive, required elevated overhead, and future prospects were becoming uncertain.

The Ovation business accounted for approximately 3% of total revenue and 3% of total costs and expenses, with an immaterial impact to net income on the consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2022.

Regulations

Our revenue and earnings may fluctuate from time to time as a result of changes to federal, state, and industry-based laws and regulations, or changes to standards concerning the enforcement thereof. On January 26, 2024, the U.S. Federal Communications Commission (the “FCC”) published regulations which, among other things, amended the consent requirements of the Telephone Consumer Protection Act of 1991 to close what the FCC refers to as the “lead generator loophole” by requiring “one-to-one consent” for outbound telemarketing calls or texts made using an automatic telephone dialing system or pre-recorded or artificial voice messages to wireless or residential numbers. The new “one-to-one consent” rule was scheduled to take effect on January 27, 2025.

However, on January 24, 2025, in Insurance Marketing Coalition Limited. v. Federal Communications Commission, the United States Court of Appeals for the Eleventh Circuit ruled that the “one-to-one consent” requirement was improper, preventing its implementation.

Results of Operations for the Years ended December 31, 2024 and 2023

Our discussion within Revenue provides the details of consolidated revenue by segment and significant products. In this section, we describe overall changes in revenue in our segments and significant products within each segment and increases or decreases in revenue from the prior period. We also provide insight into how changes in price and volume in each significant product impacted product revenue.

Our Segment Profit is a discussion of profitability within each segment of the business. It is impacted by segment revenues as well as segment cost of revenue and marketing expenses. In Segment Profit, we provide a discussion of the business within each segment, addressing both Company and market impacts on the profitability of each segment in addition to a discussion of segment margin.

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For information on fiscal 2022 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, 2023 and 2022 of our Form 10-K for the fiscal year ended December 31, 2023.

Revenue

Revenue increased in 2024 compared to 2023 due to an increase in our Insurance segment, partially offset by decreases in our Home and Consumer segments.

Revenue from our Insurance segment increased $299.1 million, or 120%, to $548.7 million in 2024 from $249.6 million in 2023. The increase in revenue was due to a 63% increase in revenue earned per consumer, representing $156.8 million of the increase and a 35% increase in volume representing $142.3 million of the increase. We measure volume for our insurance product as the number of consumer request forms and in certain cases of re-engagement with a consumer, the number of subsequent consumer engagements through our platform.

Our 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 decreased $56.5 million in 2024 from 2023, or 20%, primarily due to decreases in our credit cards, other credit products and deposits, partially offset by an increase in small business loans. We are in the process of exiting the student loans business and plan to be substantially completed by the end of the first quarter of 2025.

Revenue from our personal loans product increased $1.3 million, or 1%, to $101.4 million in 2024 from $100.1 million in 2023. The increase in revenue was due to a 22% increase in volume, representing $18.2 million an increase, partially offset by a 17% decrease in revenue earned per consumer, representing $16.9 million of a decrease. We measure volume for our personal loans product as the number of unique consumers completing request forms.

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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 credit cards product decreased $38.2 million, or 62% in 2024 compared to 2023 primarily due to a decrease in revenue earned per click and volume. We measure volume for our credit cards product as the number of consumers clicking through to a card issuer. Revenue from our credit products decreased $12.4 million, or 40%, in 2024 compared to 2023 primarily due to the closure of our Ovation credit services business at the end of the second quarter of 2023. Revenue from our deposits product decreased $6.5 million in 2024 compared to 2023, primarily due to a decrease in volume and revenue earned per consumer. Partially offsetting these declines, revenue from our small business loans product increased $4.0 million, or 8%, in 2024 compared to 2023, due to an increase in revenue earned per consumer partially offset by a decline in the number of consumers completing request forms.

Our Home segment includes the following products: purchase mortgage, refinance mortgage, and home equity loans and lines of credit. Revenue from our Home segment decreased $14.9 million, or 10%, in 2024 from 2023 primarily due to a decrease in revenue from our mortgage products partially offset by an increase in revenue from our home equity loans product.

Revenue from our mortgage products decreased $17.3 million, or 29%, to $41.4 million in 2024 from $58.7 million in 2023. The decrease in revenue was due to a 25% decline in volume, representing $13.6 million of the decrease, and a 6% decrease in revenue earned per consumer, representing $3.7 million of the decrease. We measure volume for our mortgage products as the number of consumers completing request forms.

Revenue from our purchase mortgage product decreased $11.0 million in 2024 compared to 2023 primarily due to decreases in the number of consumers completing request forms and a decrease in revenue earned per consumer. Revenue from our refinance mortgage product decreased $6.3 million in 2024 compared to 2023, primarily due to a decrease in the number of consumers completing request forms and a decrease in revenue earned per consumer, as interest rates were generally flat compared to 2023.

Revenue from our home equity loans and lines of credit product increased $2.4 million, or 3%, to $87.5 million in 2024 from $85.1 million in 2023. The increase in revenue was due to a 23% increase in volume, representing an increase of $16.6 million, partially offset by a 17% decrease in revenue earned per consumer, representing a $14.2 million decrease. We measure volume for our home equity loans and lines of credit as the number of consumers completing request forms.

Cost of revenue

Cost of revenue consists primarily of costs associated with compensation and other employee-related costs (including stock-based compensation) relating to internally-operated customer call centers, third-party customer call center fees, credit scoring fees, credit card fees, website network hosting, and server fees.

Cost of revenue decreased in 2024 compared to 2023 primarily due to a decrease in compensation and benefits of $2.7 million. The decrease is primarily due to the Reduction Plan at the end of the first quarter of 2023, including shutting down the LendingTree customer call center, and the closure of our Ovation credit services business at the end of the second quarter of 2023.

Cost of revenue as a percentage of revenue decreased to 4% in 2024 compared to 6% in 2023.

Selling and marketing expense

Selling and marketing expense consists primarily of advertising and promotional expenditures and compensation and other employee-related costs (including stock-based compensation) for personnel engaged in sales or marketing functions. Advertising and promotional expenditures primarily include online marketing, as well as television, print, and radio spending. Advertising production costs are expensed in the period the related advertisement is first run.

Selling and marketing expense increased in 2024 compared to 2023 primarily due to the $204.4 million increase in advertising and promotional expense discussed below. Additionally, compensation and benefits decreased $2.0 million in 2024 compared to 2023.

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

In the periods presented, advertising and promotional expenses are equivalent to the non-GAAP measure variable marketing expense. See Variable Marketing Expense and Variable Marketing Margin below for additional information.

Revenue is primarily driven by Network Partner demand for our products, which is matched to corresponding consumer requests. We adjust our selling and marketing expenditures dynamically in relation to anticipated revenue opportunities in order to ensure sufficient consumer inquiries to profitably meet such demand. An increase in a product’s revenue is generally met by a corresponding increase in marketing spend, and conversely a decrease in a product’s revenue is generally met by a corresponding decrease in marketing spend. This relationship exists for our Home, Consumer, and Insurance segments.

We adjusted our advertising expenditures in 2024 compared to 2023 in response to changes in Network Partner demand on our marketplace. We will continue to adjust selling and marketing expenditures dynamically in response to anticipated revenue opportunities.

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 decreased in 2024 compared to 2023, primarily due to a decrease in compensation and benefits of $3.7 million, a decrease in loss on assets of $2.9 million, a decrease in facilities expense of $2.5 million and a decrease in bad debt expense of $1.6 million.

Non-cash compensation expense, included in total compensation and benefits noted above, within general and administrative expense decreased in 2024 compared to 2023. For additional information, see Note—12-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 decreased to 12% in 2024 from 18% in 2023.

Product development

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

Product development expense decreased in 2024 compared to 2023 primarily due to the Reduction Plan at the end of the first quarter of 2023. We continued to invest in internal development of new and enhanced features, functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners.

Amortization of Intangibles

The decrease in amortization of intangibles in 2024 compared to 2023 was due to certain intangible assets associated with our recent business acquisitions becoming fully amortized.

Goodwill Impairment

We incurred a goodwill impairment charge of $38.6 million in 2023 in our Insurance reporting unit. See Note 7 - Goodwill and Intangible Assets for additional information.

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Restructuring and severance

During September 2023, we completed workforce reductions of 14 employees. We incurred $0.9 million in severance charges in 2023 in connection with the workforce reductions, consisting of cash expenditures for employee separation costs of approximately $0.7 million and non-cash charges for the accelerated vesting of certain equity awards of approximately $0.2 million. The cash payments were completed by the third quarter of 2024.

In April 2023, we made the decision to close the Ovation credit services business ( the "Ovation Closure"). The Ovation Closure included the elimination of approximately 197 employees, or 18%, of the Company's workforce. As a result of the Ovation Closure, we incurred $2.1 million in restructuring expense in connection with cash expenditures for employee separation costs. The cash payments for the Ovation Closure were completed in the first quarter of 2024.

On March 24, 2023, we committed to the Reduction Plan to reduce operating costs. The Reduction Plan included the elimination of approximately 162 employees, or 13%, of the Company’s workforce. As a result of the Reduction Plan, we incurred approximately $5.3 million in severance charges in connection with the workforce reduction, consisting of cash expenditures for employee separation costs of approximately $4.3 million and non-cash charges for the accelerated vesting of certain equity awards of approximately $1.0 million. The Reduction Plan, including cash payments, was completed by the end of the third quarter of 2024.

Interest (expense) income, net

In March 2024, we drew $125.0 million on a first lien term loan facility and incurred $11.5 million of interest expense.

In the third quarter of 2024, we repurchased approximately $7.6 million in principal amount of our 2025 Notes for $7.2 million. In the second quarter of 2024, we repurchased approximately $161.3 million in principal amount of our 2025 Notes for $151.7 million plus accrued and unpaid interest of approximately $0.3 million. As a result of these repurchases, we recognized a gain on the extinguishment of $10.1 million and a loss on the write-off of unamortized debt issuance costs of $1.1 million.

In the first quarter of 2023, we repurchased approximately $190.6 million in principal amount of our 2025 Notes for $156.3 million plus accrued and unpaid interest of approximately $0.1 million. In the fourth quarter of 2023, we repurchased approximately $100.2 million in principal amount of our 2025 Notes, for $81.2 million in cash plus accrued and unpaid interest of approximately $0.2 million. As a result of the repurchases, we recognized a gain on the extinguishment of $53.3 million, a loss on the write-off of unamortized debt issuance costs of $3.2 million, and incurred debt repayment costs of $1.6 million.

See Note 14—Debt for additional information.

Other Income

We incurred impairment charges of $58.4 million and $114.5 million in 2024 and 2023, respectively, related to our investments in equity securities.

See Note 8—Equity Investments for additional information.

Income tax benefit (expense)

For 2024 and 2023, the effective tax rate varied from the federal statutory rate of 21% primarily due to the change in the valuation allowance, net of the current period change in tax effected net indefinite-lived intangibles.

See Note—13 Income Taxes in the notes to the consolidated financial statements included elsewhere in this report for additional information on the valuation allowance.

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Segment Profit

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 20—Segment Information in the notes to the consolidated financial statements included elsewhere in this report for additional information on segments and a reconciliation of segment profit to pre-tax income from continuing operations.

HOME

Home segment revenue decreased 10% to $128.9 million in 2024 compared to 2023 and segment profit decreased to $39.9 million in 2024, a decrease of 17% compared to 2023. Our Home segment margin, which is segment profit divided by segment revenue, decreased slightly to 31% in 2024 compared to 33% in 2023 primarily due to a decline in revenue earned per consumer, due to a decline in close rates at our lender partners.

Revenue from our home equity loan product of $87.5 million in 2024 increased 3% compared to 2023. Volume of home equity consumers completing request forms increased 23% in 2024 compared to 2023, however, a 17% decline in revenue earned per consumer partially offset this volume growth. As longer-term rates have remained stable and higher than most existing first mortgages, second lien products offer an attractively priced source of capital for homeowners. According to CoreLogic, homeowners with a mortgage in the U.S. have $17.5 trillion of equity as of September 30, 2024, a 2.5% increase from a year ago. We expect further growth in our home equity business in 2025 as home values remain at near record levels.

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Within Home, our core mortgage business generated revenue of $41.4 million in 2024, down 29% compared to 2023. Our refinance product within our mortgage business matches consumers in the market looking to refinance their existing mortgages with our network lenders. Our purchase product within our mortgage business matches consumers in the market looking to buy a new home with our network lenders. Our mortgage business is directly impacted by the mortgage market in which we participate. Our mortgage business continues to see headwinds from a lack of in-the-money refinance borrowers given the current higher level of mortgage rates, and subdued home sales have pressured the volume of consumers searching for purchase loans. According to Freddie Mac, the 30-year mortgage interest rates have remained elevated with a yearly average of 6.72% in 2024 compared to 6.80% in 2023.

The Mortgage Bankers Association expects overall mortgage originations to increase 16% in 2025, although the first quarter of 2025 is expected to remain weak and below fourth quarter of 2024 levels. The forecast calls for total loan originations of $2.1 trillion and purchase loans are expected to account for 69% of origination volume.

CONSUMER

Revenue in our Consumer segment decreased 20% to $222.5 million in 2024 from 2023, with segment profit of $110.5 million in 2024, a decrease of 20% from 2023. Our Consumer segment margin remained consistent at 50% in 2024 and 2023.

Revenue from our personal loan product of $101.4 million increased 1% in 2024 compared to 2023 as lending standards remained restrictive at our lender partners during the year. The leading reason for consumers to seek personal loans is to re-finance higher-cost credit card debt. Total revolving consumer debt remains near record levels and interest rates on that debt have increased as short-term rates have increased. We believe the outlook is positive for our personal loan product in 2025.

Small business revenue increased 8% in 2024 compared to 2023. Lenders in our network have increased new loan originations as their credit performance has improved, particularly in the second half of 2024. In response, we have invested in our concierge sales team and targeted marketing campaigns. Our concierge sales members provide single-point-of-contact for small business owners, assisting in selecting the best loan offer, collecting required documentation and troubleshooting issues during the application process. Our investment in this team has helped drive a material increase in approval rates for our customers, and allows us to capture lender volume bonuses and renewal revenue streams.

See the section titled “Revenue” above for additional discussion of declines in product revenues within the Consumer segment.

INSURANCE

Insurance revenue of $548.7 million in 2024 increased 120% from 2023, while segment profit of $159.2 million in 2024 increased 54% from 2023. Carriers increased their marketing spend with us steadily throughout the year as two years of compounded premium rate increases combined with declines in the price of used vehicles and replacement parts has created a favorable underwriting environment resulting in higher demand for new auto insurance customers. Additionally, the volume of consumers completing request forms on our platform increased 35% in 2024 compared to 2023.

Our Insurance segment margin decreased to 29% in 2024 compared to 41% in 2023. In 2023, we were able to exit from our highest cost marketing channels and continue to meet the decreased level of demand. In 2024, we re-entered those marketing channels to fill the increase in carrier demand, which has resulted in lower segment profit margin.

Variable Marketing Expense and Variable Marketing Margin

We report variable marketing expense and variable marketing margin as supplemental measures to GAAP. These related measures are the primary metrics by which we measure the effectiveness of our marketing efforts. Variable marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing, and related expenses, and excludes overhead, fixed costs, and personnel-related expenses. Variable marketing margin is a measure of the efficiency of our operating model, measuring revenue after subtracting variable marketing expense. Our operating model is highly sensitive to the amount and efficiency of variable marketing expenditures, and our proprietary systems are able to make rapidly changing decisions concerning the deployment of variable marketing expenditures (primarily but not exclusively online and mobile advertising placement) based on proprietary and sophisticated analytics. We believe that investors should have access to the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. We provide and encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures discussed below.

Variable marketing expense is defined as the expense attributable to variable costs paid for advertising, direct marketing and related expenses, and excluding overhead, fixed costs and personnel-related expenses. The majority of these variable advertising costs are expressly intended to drive traffic to our websites and these variable advertising costs are included in selling and marketing expense on our consolidated statements of operations and comprehensive income (loss). Variable marketing margin is defined as revenue less variable marketing expense.

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The following shows the calculation of variable marketing margin:

Below is a reconciliation of selling and marketing expense, the most directly comparable GAAP measure, to variable marketing expense:

The following is a reconciliation of net loss, the most directly comparable GAAP measure, to variable marketing margin:

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.

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Definition of Adjusted EBITDA

We report Adjusted EBITDA as net income adjusted to exclude interest, income tax, amortization of intangibles and depreciation, and to further exclude (1) non-cash compensation expense, (2) non-cash impairment charges, (3) gain/loss on disposal of assets, (4) gain/loss on investments (5) restructuring and severance expenses, (6) litigation settlements and contingencies, (7) acquisitions and dispositions income or expense (including with respect to changes in fair value of contingent consideration), (8) contributions to the LendingTree Foundation, (9) dividend income, and (10) one-time items. Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses, including depreciation, non-cash compensation and acquisition-related accounting. We endeavor to compensate for the limitations of the non-GAAP measures presented by also providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

One-Time Items

Adjusted EBITDA is adjusted for one-time items, if applicable. Items are considered one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. For the periods presented below, there are no adjustments for one-time items.

Non-Cash Expenses that are Excluded from Adjusted EBITDA

Non-cash compensation expense consists principally of expense associated with grants of restricted stock, restricted stock units and stock options, some of which awards have performance-based vesting conditions. These expenses are not paid in cash and we include the related shares in our calculations of fully diluted shares outstanding. Upon settlement of restricted stock units, exercise of certain stock options or vesting of restricted stock awards, the awards may be settled, on a net basis, with us remitting the required tax withholding amount from our current funds.

Amortization of intangibles are non-cash expenses relating primarily to intangible assets acquired through acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as purchase agreements, technology and customer relationships, are valued and amortized over their estimated lives.

The following table is a reconciliation of net loss, the most directly comparable GAAP measure, to Adjusted EBITDA.

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Financial Position, Liquidity and Capital Resources

For information on fiscal 2022 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, 2023.

General

As of December 31, 2024, we had $106.6 million of cash and cash equivalents, compared to $112.1 million of cash and cash equivalents as of December 31, 2023.

In the third quarter of 2024, we repurchased approximately $7.6 million in principal amount of our 2025 Notes for $7.2 million. In the second quarter of 2024, we repurchased approximately $161.3 million in principal amount of our 2025 Notes for $151.7 million plus accrued and unpaid interest of approximately $0.3 million. As a result of these repurchases, we recognized a gain on the extinguishment of $10.1 million and a loss on the write-off of unamortized debt issuance costs of $1.1 million, both of which are included in interest (expense) income, net in the consolidated statements of operations and comprehensive income.

On March 8, 2023, we repurchased approximately $190.6 million in principal amount of our 2025 Notes, through separate transactions with certain holders of the 2025 Notes, for $156.3 million plus accrued and unpaid interest of approximately $0.1 million. On December 7, 2023, we repurchased approximately $100.2 million in principal amount of our 2025 Notes, through separate transactions with certain holders of the 2025 Notes, for $81.2 million plus accrued and unpaid interest of approximately $0.2 million. In 2023, we recognized a gain on the extinguishment of debt of $53.3 million, a loss on the write-off of unamortized debt issuance costs of $3.2 million and incurred debt repayment costs of $1.6 million, both of which are included in interest income/expense, net in the consolidated statement of operations and comprehensive income.

We expect our cash and cash equivalents and cash flows from operations and available borrowings under our credit facilities to be sufficient to fund our operating needs for the next twelve months and beyond. We will continue to monitor the impact of current economic conditions, including interest rates and inflation on our liquidity and capital resources.

As of December 31, 2024, we have $115.3 million outstanding on the 2025 Notes. We intend to use cash on hand, available borrowings of $50.0 million from the 2024 Term Loan (as defined below), and future cash flows from operations for the repayment of the 2025 Notes.

For more information, see Note 14—Debt, in the notes to the consolidated financial statements included elsewhere in this report.

Equity Distribution Agreement

In July 2024, we entered into an Equity Distribution Agreement in connection with the establishment of an ATM Equity Program (as defined in the 2024 Term Loan (as defined herein) agreement) under which we may sell up to an aggregate of $50.0 million of shares of the our common stock. No sales were made under the Equity Distribution Agreement during 2024.

Credit Facilities

On September 15, 2021, we entered into a credit agreement (the “Credit Agreement”), consisting of a $200.0 million Revolving Facility (the “Revolving Facility”), which matures on September 15, 2026, and a $250.0 million delayed draw Term Loan Facility (the “2021 Term Loan” and together with the Revolving Facility, the “Credit Facility”), which matures on September 15, 2028. The proceeds of the Revolving Facility can be used to finance working capital, for general corporate purposes, and any other purpose not prohibited by the Credit Agreement. We drew $250.0 million under the Term Loan Facility on May 31, 2022 and used $170.2 million of the proceeds to settle the Company’s 2022 Notes, including interest. The remaining proceeds of $79.8 million may be used for general corporate purposes and any other purposes not prohibited by the Credit Agreement.

As of March 6, 2025, we have outstanding $243.8 million under the 2021 Term Loan and the remaining borrowing capacity is $200.0 million. As of December 31, 2024, we have $20.0 million available for borrowing under the Revolving Facility.

On March 27, 2024, we entered the 2024 Term Loan, a first lien term loan facility consisting of $175.0 million which matures on March 27, 2031. We drew $125.0 million of the 2024 Term Loan upon closing while the remaining $50.0 million will be available as a delayed draw term loan until March 27, 2025. The proceeds of the 2024 Term Loan were used to pay fees and expenses incurred in connection with the closing of the 2024 Term Loan and delayed draw term loan, and will be used for

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working capital and general corporate purposes, which may include repayment of our 2025 Notes. The funding had a $3.1 million original issue discount and associated debt issuance costs of $4.3 million.

We filed an ATM Shelf Registration (as defined in the 2024 Term Loan agreement) with the SEC in the third quarter of 2024. In the event of a default in the minimum Consolidated EBITDA (as defined in the 2024 Term Loan agreement) covenant in the 2024 Term Loan, we are required to utilize the ATM Equity Program (as defined in the 2024 Term Loan agreement) to sell common stock and use the proceeds to cure the event of default in the minimum Consolidated EBITDA covenant. Additionally, we may use the ATM Equity Program to maintain the $40.0 million minimum cash balance requirement in the 2024 Term Loan.

As of March 6, 2025, we had $115.6 million borrowings outstanding under the 2024 Term Loan.

For additional information on the Credit Facility, see Note 14—Debt in the notes to the consolidated financial statements included elsewhere in this report.

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 $9.5 million in 2025. See Note 10—Leases in the notes to the consolidated financial statements included elsewhere in this report for more information.

Cash Flows

Our cash flows are as follows:

Cash Flows from Operating Activities

Our largest source of cash provided by our operating activities is revenue generated by our products. Our primary uses of cash from our operating activities include advertising and promotional payments. In addition, our uses of cash from operating activities include compensation and other employee-related costs, other general corporate expenditures, litigation settlements and contingencies, certain contingent consideration payments, and income taxes.

Cash from changes in working capital decreased primarily as a result of unfavorable changes in accounts receivable, partially offset by favorable changes accounts payable, accrued expenses and other current liabilities.

Cash Flows from Investing Activities

Net cash used in investing activities in 2024 and 2023 consisted of capital expenditures primarily related to internally developed software of $11.2 million and $12.5 million, respectively.

Cash Flows from Financing Activities

Net cash used in financing activities in 2024 of $56.5 million consisted primarily of the repurchase of the 2025 Notes for $158.8 million, term loan repayments of $12.5 million and $2.2 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the employee stock purchase plan and the exercise of stock options offset by $117.6 million net proceeds from the 2024 Term Loan.

Net cash used in financing activities in 2023 of $242.0 million consisted primarily of the repurchase of our 2025 Notes for $237.5 million and the related payment of debt issuance costs of $1.6 million, $1.1 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the employee stock purchase plan and the exercise of stock options and $1.9 million repayment of the Term Loan Facility.

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 in the notes to the consolidated financial statements included elsewhere in this report regarding

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significant areas of judgment. 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 current and deferred income taxes and the significant items giving rise to the deferred assets and liabilities are shown in Note 13—Income Taxes in the notes 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 and/or state tax authorities, 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.

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.

During the third quarter of 2022, we established a full valuation allowance against our net deferred tax assets due to historical cumulative pre-tax losses and continued pre-tax losses in the quarter. We regularly review our deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing taxable temporary differences, and tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In determining the amount of the valuation allowance, we considered the scheduled reversal of deferred tax liabilities. We will maintain a full valuation allowance on net deferred tax assets until there is sufficient evidence to support the reversal of some or all of the allowance. Should there be a change in the valuation allowance in the future, the income tax provision would increase or decrease in the period in which the allowance is changed.

The indefinite carryforward period for certain deferred tax assets means that indefinite-lived deferred tax liabilities can be considered as support for realization of such deferred tax assets including post December 31, 2017 net operating loss carryovers, which can affect the need to record or maintain a valuation allowance for deferred tax assets.

During 2022, we incurred income tax expense of $139.4 million related to the valuation allowance. At December 31, 2024, 2023 and 2022, we maintained a valuation allowance of $167.5 million, $162.5 million and $145.4 million, respectively, against our net deferred tax assets.

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 12—Stock-Based Compensation in the notes 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.

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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 and market analysis requires the exercise of significant judgments, including judgments about appropriate discount rates, revenue growth rates, marketing spend, direct operating expenses, the amount and timing of expected future cash flows, and market multiples. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

At June 30, 2022, we assessed the qualitative factors in our impairment testing of goodwill and determined that the effects of the challenging interest rate environment, consumer price inflation, and the decline in our market capitalization required a quantitative impairment test be performed. The quantitative goodwill impairment test found that the fair value of each reporting unit exceeded its carrying amount, indicating no goodwill impairment. The property and casualty auto insurance industry experienced challenges in 2022 caused by inflation, supply chain challenges, and the rising severity and frequency of claims. Additionally, the significant increase in mortgage interest rates in 2022 had a negative impact on our Mortgage reporting unit.

During the third quarter of 2023, our market capitalization declined significantly compared to the second quarter of 2023. The closing stock price on September 29, 2023 was $15.50 reflecting a market capitalization below our book value. In addition, the effects of the challenging interest rate environment, low for-sale home inventories and the rise in home prices in the Home reporting unit and consumer price inflation negatively impacting carrier underwriting in the Insurance reporting unit continue to provide revenue headwinds. Based on these factors, we concluded that a triggering event had occurred and an interim quantitative impairment test was performed as of September 30, 2023. Upon completing the quantitative goodwill impairment test, we concluded that the carrying value of the Insurance reporting unit exceeded its fair value which resulted in a goodwill impairment charge of $38.6 million. The fair value of the Home and Consumer reporting units exceeded their carrying amounts, indicating no goodwill impairment. The fair values of each reporting unit were determined using a combination of the income approach and the market approach valuation methodologies.

We will continue to monitor each of the reporting units and the impact of business or economic changes on the fair value of the reporting unit. Changes in the timing of the recovery of the mortgage business, inflation, interest rates and other changes in current expectations could cause an impairment to the Insurance, Mortgage or Consumer reporting units.

The value of goodwill subject to assessment for impairment at December 31, 2024 is $381.5 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.

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 $134.6 million at December 31, 2024.

Equity Investments

Our equity investments do not have a readily determinable fair value and, upon acquisition, we elected the measurement alternative to value these investments. Accordingly, the equity investments will be carried at cost less impairment, if any, and subsequently measured to fair value upon observable price changes in an orderly transaction for the identical or similar investments. Additionally, if a qualitative assessment identifies impairment indicators, then the equity investments must be evaluated for impairment and written down to its fair value, if it is determined that the fair value is less than the carrying value.

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Any gains or losses are included within other (expense) income in the consolidated statement of operations and comprehensive income.

We incurred impairment charges of $58.4 million and $114.5 million on our investments in equity securities during 2024 and 2023, respectively. See Note 8—Equity Investments in the notes to the consolidated financial statements included elsewhere in this report for additional information. The carrying value of our equity investments at December 31, 2024 is $1.7 million.

New Accounting Pronouncements

See Note 2—Significant Accounting Policies in the notes to the consolidated financial statements included elsewhere in this report for a description of recent accounting pronouncements.

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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, 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(s) they are seeking. We also serve as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries we generate with these Network Partners.

Our Spring platform (previously MyLendingTree) offers a personalized comparison-shopping experience, financial health advice and credit simulations by providing free credit scores and credit score analysis. This authenticated, and secure platform enables us to monitor consumers' credit profiles, identify and alert them to changes in their financial health, and to recommend loans and other offerings on our marketplace that may be more favorable than the terms they may have at a given point in time. Customers can track the progress of their financial health over time based on actions they have taken, see recommended credit score improvement actions, and loans or other products offered by LendingTree.

We are focused on developing new product offerings and enhancements to improve the experience of consumers and Network Partners as they interact with us. By expanding our portfolio of financial services offerings, we are growing and diversifying our business and sources of revenue. We intend to capitalize on our expertise in performance marketing, product development and technology by leveraging the widespread recognition of the LendingTree brand.

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

Economic Conditions

We continue to monitor the current global economic environment, specifically inflationary pressures and interest rates, and any resulting impacts on our financial position and results of operations.

During 2022, the challenging interest rate environment and persistent inflationary pressures presented challenges for many of our mortgage lending and insurance partners. We saw the most significant impact in our Home segment as mortgage rates nearly doubled in 2022, causing a sharp decline in refinance volumes and pressure on purchase activity. Although our Insurance segment rebounded from the trough in the fourth quarter of 2021, the recovery was slower than expected as demand from our carrier partners remained volatile as they continued to attempt to implement premium increases to offset the effect of inflation on claims. In addition, the auto and home insurance industry was impacted in 2022 by persistent industry headwinds, supply chain issues, rising accident severity and frequency, and hurricane losses.

During 2023, the challenging interest rate environment and inflationary pressures have continued to present challenges for many of our mortgage lending and insurance partners. In our Home segment, mortgage rates hit multi-decade highs of nearly 8% in October, then proceeded to drop below 7% by December, ending the year at 6.6%. The continued high mortgage rates in 2023 and home affordability issues continued to cause declines in refinance volumes and purchase activity. In our Insurance segment, demand from our carrier partners remained volatile for much of the year as they continued to deal with persistent industry headwinds. In the last months of 2023, we began to see advertising budgets from our carrier partners increase and we are optimistic about the prospect for continued increases into 2024.

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Segment Reporting

We have three reportable segments: Home, Consumer, and Insurance.

Recent Mortgage Interest Rate Trends

Interest rate and market risks are substantial in the mortgage lead generation business. Short-term fluctuations in mortgage interest rates primarily affect consumer demand for mortgage refinancings, while long-term fluctuations in mortgage interest rates, coupled with the U.S. real estate market, affect consumer demand for new mortgages. Consumer demand, in turn, affects lender demand for mortgage leads from third-party sources, as well as our own ability to attract online consumers to our website.

Typically, when interest rates decline, we see increased consumer demand for mortgage refinancings, which in turn leads to increased traffic to our website and decreased selling and marketing efforts associated with that traffic. At the same time, lender demand for leads from third-party sources typically decreases as there are more consumers in the marketplace seeking refinancing 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 increased during 2021, from a monthly average of 2.74% in January 2021, ending at a monthly average of 3.10% in December 2021. During 2022, 30-year mortgage interest rates increased significantly from a monthly average of 3.45% in January 2022, ending at a monthly average of 6.36% in December 2022. During 2023, 30-year mortgage interest rates steadily increased from a monthly average of 6.27% in January 2023 to a high of 7.62% in October 2023 prior to decreasing at the end of the year, ending at a monthly average of 6.82% in December 2023.

On a full-year basis, 30-year mortgage interest rates increased to an average 6.80% in 2023, compared to 5.33% and 2.96% in 2022 and 2021, respectively.

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Typically, as mortgage interest rates rise, there are fewer consumers in the marketplace seeking refinancings and, accordingly, the mix of mortgage origination dollars will move toward purchase mortgages. According to Mortgage Bankers Association (“MBA”) data, total refinance origination dollars of total mortgage origination dollars decreased to 30% in 2022 from 59% of total 2021 mortgage origination dollars from refinance due to the increase in average mortgage rates. Total refinance original dollars decreased further to 19% of total mortgage origination dollars in 2023 due to the increase in average mortgage interest rates. Total refinance origination dollars decreased by 74% in 2022 over 2021 and 54% in 2023 over 2022. Industry-wide mortgage origination dollars decreased by 49% in 2022 over 2021 and 29% in 2023 over 2022.

Looking forward, the MBA is projecting 30-year mortgage interest rates to decrease in 2024 to an average of 6.1%. According to MBA projections, the mix of mortgage origination dollars is expected to remain primarily with purchase mortgages with the refinance share representing just 24% for 2024.

The U.S. Real Estate Market

The health of the U.S. real estate market and interest rate levels are the primary drivers of consumer demand for new mortgages. Consumer demand, in turn, affects lender demand for purchase mortgage leads from third-party sources. Typically, a strong real estate market will lead to reduced lender demand for leads, as there are more consumers in the marketplace seeking financing and, accordingly, lenders receive more organic lead volume. Conversely, a weaker real estate market will typically lead to an increase in lender demand as there are fewer consumers in the marketplace seeking mortgages.

According to Fannie Mae data, in 2021, existing home sales grew by 9% over 2020, fueled by increased competition for low inventory as well as an increase in first-time home buyers. In 2022, existing home sales decreased by 17% as compared to 2021 due to increased interest rates and limited inventory of homes. This trend continued into 2023 with existing home sales decreasing 19% over 2022. Fannie Mae expects a 4% increase in existing home sales in 2024 compared to 2023.

LendingTree Spring (previously MyLendingTree)

We consider certain metrics related to Spring set forth below to help us evaluate our business and growth trends and assess operational efficiencies. The calculation of the metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.

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We continued to grow our user base and added 3.4 million new users in 2023, bringing cumulative sign-ups to 28.2 million as of December 31, 2023.

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 (the "2025 Notes") 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.

On May 31, 2022, we drew $250.0 million on the Term Loan Facility. A portion of this was used to pay the outstanding balance of $169.7 million and interest on our 0.625% Convertible Senior Notes that matured on June 1, 2022. The remaining call spread transactions associated with the 2022 Notes terminated in 2022.

On March 8, 2023, we repurchased approximately $190.6 million in principal amount of our 2025 Notes, through separate transactions with certain holders of the 2025 Notes, for $156.3 million plus accrued and unpaid interest of approximately $0.1 million. On December 7, 2023, we repurchased approximately $100.2 million in principal amount of our 2025 Notes, through separate transactions with certain holders of the 2025 Notes, for $81.2 million plus accrued and unpaid interest of approximately $0.2 million. In 2023, we recognized a gain on the extinguishment of debt of $53.3 million, a loss on the write-off of unamortized debt issuance costs of $3.2 million and incurred debt repayment costs of $1.6 million, all of which are included in interest income/expense, net in the consolidated statement of operations and comprehensive income.

For more information, see Note 15—Debt, in the notes to the consolidated financial statements included elsewhere in this report.

Cost Reductions and Simplification of Business

On March 24, 2023, we committed to a workforce reduction plan (the “Reduction Plan”), to reduce operating costs, which included the elimination of approximately 13% of the Company’s workforce. As a result of the Reduction Plan, we incurred approximately $5.3 million in severance charges in connection with the workforce reduction. Part of this Reduction Plan included the shut down of our LendingTree customer call center as well as our Medicare insurance agency operations within QuoteWizard. We anticipate the Reduction Plan will reduce annual compensation expense by approximately $14 million, comprised of $2 million in cost of revenue, $4 million in selling and marketing expense, $3 million in general and administrative expense, and $5 million in product development.

During September 2023, we completed workforce reductions of 14 employees. We incurred $0.9 million in severance charges in connection with the workforce reductions, consisting of cash expenditures for employee separation costs of approximately $0.7 million and non-cash charges for the accelerated vesting of certain equity awards of approximately $0.2 million.

Separately, we made the decision to close our Ovation credit services business, an asset group within our Consumer segment, by mid- 2023. As a result, the Company recorded an asset impairment charge of $4.2 million in 2023 related to the write-off of certain long-term assets. Additionally, we incurred $2.1 million in severance charges in 2023 in connection with cash expenditures for employee separation costs. We acquired Ovation in 2018 to better serve those customers who come to LendingTree and receive suboptimal offers of credit. The business grew for a number of years before running into challenges in the wake of COVID-19, and more recently the industry has faced increased regulatory pressure. The business is capital-intensive, requires elevated overhead, and future prospects were becoming uncertain.

The Ovation business accounted for approximately 3% of total revenue and 3% of total costs and expenses, with an immaterial impact to net income on the consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2022.

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Results of Operations for the Years ended December 31, 2023 and 2022

For information on fiscal 2021 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, 2022 and 2021 of our Form 10-K for the fiscal year ended December 31, 2022.

Revenue

Revenue decreased in 2023 compared to 2022 due to decreases in our Home, Consumer and Insurance segments.

Our Consumer segment includes the following products: credit cards, personal loans, small business loans, student loans, auto loans, deposit accounts, and other credit products such as credit repair and debt settlement. Many of our Consumer segment products are not individually significant to revenue. Revenue from our Consumer segment decreased $117.2 million in 2023 from 2022, or 30%, primarily due to decreases in our personal loans, credit cards, small business loans products and other credit products. Several of our other products in the Consumer segment experienced decreases in revenue in 2023 from 2022.

Revenue from our personal loans product decreased $44.0 million, or 31%, to $100.1 million in 2023 from $144.1 million in 2022 primarily due to a decrease in the number of consumers completing request forms and in revenue earned per consumer.

Revenue from our credit cards product decreased $38.2 million, or 38%, to $62.0 million in 2023 from $100.2 million in 2022 primarily due to a decrease in the number of clicks and a decrease in revenue earned per click.

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 decreased $16.5 million, or 24%, in 2023 compared to 2022, due to a decrease in revenue earned per consumer and a decrease in the number of consumers completing request forms. Revenue from our credit products decreased $12.1 million, or 28%, in 2023

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compared to 2022 primarily due to the closure of our Ovation credit services business at the end of the second quarter of 2023. Student loans decreased $5.7 million in 2023 compared to 2022, due to a decrease in the number of consumers.

Revenue from our Insurance segment decreased $49.5 million, or 17%, to $249.6 million in 2023 from $299.1 million in 2022 primarily due to a decrease in the revenue earned per consumer, partially offset by an increase in the number of consumers completing request forms.

Our Home segment includes the following products: purchase mortgage, refinance mortgage, and home equity loans and lines of credit. We ceased offering reverse mortgage loans in the fourth quarter of 2022. Revenue from our Home segment decreased $145.6 million, or 50%, in 2023 from 2022 primarily due to a decrease in revenue from our mortgage products.

Revenue from our mortgage products decreased $120.8 million, or 67%, to $58.7 million in 2023 from $179.4 million in 2022. Revenue from our refinance mortgage product decreased $82.9 million in 2023 compared to 2022, primarily due to a decrease in the number of consumers completing request forms and a decrease in revenue earned per consumer as interest rates continued to increase in 2023. Revenue from our purchase mortgage product decreased $37.9 million in 2023 compared to 2022 primarily due to decreases in revenue earned per consumer and in the number of consumers completing request forms.

Revenue from our home equity loans and lines of credit product decreased $20.7 million, or 20%, to $85.1 million in 2023 from $105.8 million in 2022 primarily due to a decrease the revenue earned per consumer, slightly offset by an increase in the number of consumers completing request forms.

Cost of revenue

Cost of revenue consists primarily of costs associated with compensation and other employee-related costs (including stock-based compensation) relating to internally-operated customer call centers, third-party customer call center fees, credit scoring fees, credit card fees, website network hosting, and server fees.

Cost of revenue decreased in 2023 compared to 2022 primarily due to a decrease in compensation and benefits of $13.9 million, a decrease in website network hosting and server hosting fees of $2.4 million and a decrease in customer service fees of $1.5 million. The decreases are primarily due to the Reduction Plan at the end of the first quarter of 2023, including shutting down the LendingTree customer call center, and the closure of our Ovation credit services business at the end of the second quarter of 2023.

Cost of revenue as a percentage of revenue remained consistent at 6% in 2023 compared to 2022.

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 advertisement is first run.

Selling and marketing expense decreased in 2023 compared to 2022 primarily due to the $255.8 million decrease in advertising and promotional expense discussed below. Additionally, compensation and benefits decreased $12.9 million in 2023 compared to 2022.

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

In the periods presented, advertising and promotional expenses are equivalent to the non-GAAP measure variable marketing expense. See Variable Marketing Expense and Variable Marketing Margin below for additional information.

Revenue is primarily driven by Network Partner demand for our products, which is matched to corresponding consumer requests. We adjust our selling and marketing expenditures dynamically in relation to anticipated revenue opportunities in order to ensure sufficient consumer inquiries to profitably meet such demand. An increase in a product’s revenue is generally

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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 2023 compared to 2022 in response to changes in Network Partner demand on our marketplace. We will continue to adjust selling and marketing expenditures dynamically in response to anticipated revenue opportunities.

General and administrative expense

General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in finance, legal, tax, corporate information technology, human resources and executive management functions, as well as facilities and infrastructure costs and fees for professional services.

General and administrative expense decreased in 2023 compared to 2022, primarily due to a decrease in compensation and benefits of $18.1 million. Additionally, professional fees, technology, facilities, and bad debt expense decreased $2.8 million, $2.6 million, $2.4 million, and $2.3 million, respectively. We incurred a $4.2 million loss on the impairment of assets for our Ovation business in the first quarter of 2023.

Non-cash compensation expense, included in total compensation and benefits noted above, within general and administrative expense decreased in 2023, which resulted in an increase in net income in 2023 compared to 2022. 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 increased to 18% in 2023 from 15% in 2022.

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 decreased in 2023 compared to 2022 primarily due to the Reduction Plan at the end of the first quarter of 2023. We continued to invest in internal development of new and enhanced features, functionality and business opportunities that we believe will enable us to better and more fully serve consumers and Network Partners.

Amortization of Intangibles

The decrease in amortization of intangibles in 2023 compared to 2022 was due to certain intangible assets associated with our recent business acquisitions becoming fully amortized.

Goodwill Impairment

We incurred a goodwill impairment charge of $38.6 million in 2023 in our Insurance reporting unit. See Note 7 - Goodwill and Intangible Assets for additional information.

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Restructuring and severance

During September 2023, we initiated workforce reductions of 14 employees. We incurred $0.9 million in severance charges in 2023 in connection with the workforce reductions, consisting of cash expenditures for employee separation costs of approximately $0.7 million and non-cash charges for the accelerated vesting of certain equity awards of approximately $0.2 million. The cash payments are expected to be substantially completed by the third quarter of 2024.

On March 24, 2023, we committed to the Reduction Plan to reduce operating costs. The Reduction Plan included the elimination of approximately 162 employees, or 13%, of the Company’s current workforce. As a result of the Reduction Plan, the Company incurred approximately $5.3 million in severance charges in connection with the workforce reduction, consisting of cash expenditures for employee separation costs of approximately $4.3 million and non-cash charges for the accelerated vesting of certain equity awards of approximately $1.0 million. The Reduction Plan, including cash payments, is expected to be substantially completed by the end of the second quarter of 2024.

We made the decision to close the Ovation credit services business ( the "Ovation Closure") by mid-2023 and all operations ceased in August 2023. The Ovation Closure includes the elimination of approximately 197 employees, or 18%, of the Company's current workforce. As a result of the Ovation Closure, we incurred $2.1 million in restructuring expense in connection with cash expenditures for employee separation costs. The Ovation Closure, including cash payments, is expected to be completed by the first quarter of 2024.

During 2022, we completed workforce reductions in each of the first, second, and fourth quarters of approximately 75 employees, 25 employees, and 50 employees, respectively. We incurred total expense of $4.4 million consisting of employee separation costs of $3.3 million and non-cash compensation expense of $1.1 million due to the accelerated vesting of certain equity awards. All employee separation costs for 2022 actions were paid by the fourth quarter of 2023.

Interest expense

In the first quarter of 2023, we repurchased approximately $190.6 million in principal amount of our 2025 Notes for $156.3 million plus accrued and unpaid interest of approximately $0.1 million. In the fourth quarter of 2023, we repurchased approximately $100.2 million in principal amount of our 2025 Notes, for $81.2 million in cash plus accrued and unpaid interest of approximately $0.2 million. As a result of the repurchases, we recognized a gain on the extinguishment of $53.3 million, a loss on the write-off of unamortized debt issuance costs of $3.2 million, and incurred debt repayment costs of $1.6 million, all of which are included in interest income/expense, net in the consolidated statements of operations and comprehensive income. See Note 15—Debt for additional information.

Other Income

We incurred an impairment charge of $113.1 million in 2023 related to an investment in equity securities. See Note 8 - Equity Investments for additional information.

Other income for 2022 primarily consisted of dividend income.

Income tax benefit (expense)

For 2023, the effective tax rate varied from the federal statutory rate of 21% primarily due to the change in the valuation allowance, net of the current period change in tax effected net indefinite-lived intangibles.

For 2022, the effective tax rate varied from the federal statutory rate of 21% primarily due to expense of $139.4 million to record a full valuation allowance against our net deferred tax assets. See Note—14 Income Taxes in the notes to the consolidated financial statements included elsewhere in this report for additional information on the valuation allowance.

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Segment Profit

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 included elsewhere in this report for additional information on segments and a reconciliation of segment profit to pre-tax income from continuing operations.

HOME

Revenue in the Home segment decreased 50% to $143.8 million in 2023 from 2022, with segment profit of $47.9 million in 2023, a decrease of 54% from 2022. Our Home segment margin, which is segment profit divided by segment revenue, decreased slightly to 33% in 2023 compared to 36% in 2022.

Within Home, our core mortgage business generated revenue of $58.7 million in 2023, down 67% from 2022, as demand for refinancing transactions diminished throughout the year, with few mortgages later in the year carrying a higher rate than current loan offerings. The 30-year mortgage interest rates increased from a monthly average of 6.36% in December 2022 to a monthly average of 6.82% in December 2023, according to Freddie Mac. Purchase transactions were negatively impacted by low for sale inventory and current homeowners resisting a move in favor of retaining a significantly lower rate on their existing loan. Existing home sales decreased 19% in 2023 compared to 2022. The volume mix in our mortgage business shifted to purchase at 55% and refinance at 45% of total volume in 2023 as compared to refinance at 54% and purchase at 46% of total volume in 2022.

Revenue from our home equity loan product of $85.1 million in 2023 decreased 20% from 2022 as higher short-term interest rates broadly pressured demand from homeowners.

The Mortgage Bankers Association expects overall mortgage originations to increase in 2024, although the first quarter of 2024 is expected to remain weak and below fourth quarter of 2023 levels. The forecast calls for a 22% growth in total loan originations over 2023, with purchase loans accounting for 77% of total volume.

CONSUMER

Revenue in our Consumer segment decreased 30% to $278.9 million in 2023 from 2022, with segment profit of $138.9 million in 2023, a decrease of 20% from 2022. Our Consumer segment margin increased to 50% in 2023 compared to 44% in 2022.

Revenue from our personal loan product of $100.1 million decreased 31% in 2023 compared to 2022 as our partners broadly tightened underwriting criteria in 2023, however there are indications for increased loan originations and wider credit appetite in 2024.

Credit card revenue decreased to $62.0 million or 38% in 2023 compared to 2022. We have begun onboarding credit card issuers onto TreeQual, the prequalification/preapproval platform for our customers to more easily shop offers available to them. TreeQual sits at the core of our strategy to drive improved credit card application conversion rates which will allow us to reinvest additional marketing spend to gain back share in this large consumer marketplace.

Small business revenue declined 24% in 2023 from 2022. The highest quality customers continue to receive multiple loan offers from our partners, while lower credit quality and smaller revenue business owners receive few if any offers. We are serving partner demand for higher quality and larger revenue/loan amount effectively, as seen through a consistent increase in match rate for those customers.

INSURANCE

Insurance revenue of $249.6 million in 2023 decreased 17% from 2022, while segment profit of $103.5 million in 2023 increased 13% from 2022 as we successfully matched higher levels of organic customer search volumes against lower overall

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carrier demand for new policies. Consumer demand across all insurance products remained high, growing 8% in 2023 from 2022.

Our auto carrier partners have been asking for and receiving successive price increases across most states over the last two years, as persistent cost inflation negatively impacted underwriting results. The positive impact from premium increases on loss ratios, combined with broad declines in used car prices and other components of auto loss cost, should help our record volume of customers searching for auto insurance find an increasingly competitive partner marketplace moving into next year.

We experienced the beginning of a recovery in our auto insurance product at the end of the fourth quarter of 2023, with a number of key carrier partners unexpectedly adding budget over the holiday season and continuing to refine their product offering to target and write more profitable policies through our platforms.

Health insurance continued its strong growth trend, with revenue up 14% in 2023 compared to 2022. We have made great strides capturing a growing share of carrier budgets in these categories, and we are optimistic they will help drive incremental revenue growth in 2024.

Our Insurance segment margin increased to 42% in 2023 compared to 31% in 2022. We have maintained a focus on efficiency and adapting to changing carrier needs throughout this hard market cycle. These efforts helped us control costs and improve quality despite industry profitability challenges.

Variable Marketing Expense and Variable Marketing Margin

We report variable marketing expense and variable marketing margin as supplemental measures to GAAP. These related measures are the primary metrics by which we measure the effectiveness of our marketing efforts. Variable marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing, and related expenses, and excludes overhead, fixed costs, and personnel-related expenses. Variable marketing margin is a measure of the efficiency of our operating model, measuring revenue after subtracting variable marketing expense. Our operating model is highly sensitive to the amount and efficiency of variable marketing expenditures, and our proprietary systems are able to make rapidly changing decisions concerning the deployment of variable marketing expenditures (primarily but not exclusively online and mobile advertising placement) based on proprietary and sophisticated analytics. We believe that investors should have access to the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. We provide and encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures discussed below.

Variable marketing expense is defined as the expense attributable to variable costs paid for advertising, direct marketing and related expenses, and excluding overhead, fixed costs and personnel-related expenses. The majority of these variable advertising costs are expressly intended to drive traffic to our websites and these variable advertising costs are included in selling and marketing expense on our consolidated statements of operations and comprehensive income (loss). Variable marketing margin is defined as revenue less variable marketing expense.

The following shows the calculation of variable marketing margin:

Below is a reconciliation of selling and marketing expense, the most directly comparable GAAP measure, to variable marketing expense:

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The following is a reconciliation of net loss, the most directly comparable GAAP measure, to variable marketing margin:

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 adjusted to exclude interest, income tax, amortization of intangibles and depreciation, and to further exclude (1) non-cash compensation expense, (2) non-cash impairment charges, (3) gain/loss on disposal of assets, (4) gain/loss on investments (5) restructuring and severance expenses, (6) litigation settlements and contingencies, (7) acquisitions and dispositions income or expense (including with respect to changes in fair value of contingent consideration), (8) contributions to the LendingTree Foundation, (9) dividend income, and (10) one-time items. Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses, including depreciation, non-cash compensation and acquisition-related accounting. We endeavor to compensate for the limitations of the non-GAAP measures presented by also providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

One-Time Items

Adjusted EBITDA is adjusted for one-time items, if applicable. Items are considered one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. There are no adjustments for one-time items for the year ended December 31, 2023. One-time items for the year ended December 31, 2022 consisted of the $1.5 million franchise tax caused by the equity investment gain in Stash.

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

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and we include the related shares in our calculations of fully diluted shares outstanding. Upon settlement of restricted stock units, exercise of certain stock options or vesting of restricted stock awards, the awards may be settled, on a net basis, with us remitting the required tax withholding amount from our current funds.

Amortization of intangibles are non-cash expenses relating primarily to intangible assets acquired through acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as purchase agreements, technology and customer relationships, are valued and amortized over their estimated lives.

The following table is a reconciliation of net loss, the most directly comparable GAAP measure, to Adjusted EBITDA.

Financial Position, Liquidity and Capital Resources

For information on fiscal 2021 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, 2022.

General

As of December 31, 2023, we had $112.1 million of cash and cash equivalents, compared to $298.8 million of cash and cash equivalents as of December 31, 2022.

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 economic impacts caused by the challenging interest rate environment and high levels of inflation on our liquidity and capital resources.

Notable transactions affecting cash and cash equivalents during the reported periods are as follows:

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2023

On March 8, 2023, we repurchased approximately $190.6 million in principal amount of our 2025 Notes, through separate transactions with certain holders of the 2025 Notes, for $156.3 million plus accrued and unpaid interest of approximately $0.1 million. On December 7, 2023, we repurchased approximately $100.2 million in principal amount of our 2025 Notes, through separate transactions with certain holders of the 2025 Notes, for $81.2 million plus accrued and unpaid interest of approximately $0.2 million. In 2023, we recognized a gain on the extinguishment of debt of $53.3 million, a loss on the write-off of unamortized debt issuance costs of $3.2 million and incurred debt repayment costs of $1.6 million, all of which are included in interest income/expense, net in the consolidated statement of operations and comprehensive income.

For more information, see Note 15—Debt, in the notes to the consolidated financial statements included elsewhere in this report.

2022

In 2022, we repurchased an aggregate of 379,895 shares of our common stock pursuant to a stock repurchase program for $43.0 million.

In the first quarter of 2022, we acquired an equity interest in EarnUp for $15.0 million. See Note 8—Equity Investments in the notes to the consolidated financial statements included elsewhere in this report for additional information on the equity interest.

Credit Facility

On September 15, 2021, we entered into a credit agreement (the “Credit Agreement”), consisting of a $200.0 million Revolving Facility, which matures on September 15, 2026, and a $250.0 million delayed draw Term Loan Facility, which matures on September 15, 2028. The proceeds of the Revolving Facility can be used to finance working capital, for general corporate purposes, and any other purpose not prohibited by the Credit Agreement. We drew $250.0 million under the Term Loan Facility on May 31, 2022 and used $170.2 million of the proceeds to settle the Company’s 2022 Notes, including interest. The remaining proceeds of $79.8 million may be used for general corporate purposes and any other purposes not prohibited by the Credit Agreement.

As of February 28, 2024, we have outstanding $246.3 million under the Term Loan Facility, a $0.2 million letter of credit under the Revolving Facility, and the remaining borrowing capacity is $199.8 million. We have $79.9 million available for borrowing under the Revolving Facility as of February 28, 2024.

For additional information on the Credit Facility, see Note 15—Debt in the notes to the consolidated financial statements included elsewhere in this report.

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 $11.4 million in 2024. See Note 11—Leases in the notes to the consolidated financial statements included elsewhere in this report for more information.

Cash Flows

Our cash flows are as follows:

Cash Flows from Operating Activities

Our largest source of cash provided by our operating activities is revenue generated by our products. Our primary uses of cash from our operating activities include advertising and promotional payments. In addition, our uses of cash from operating activities include compensation and other employee-related costs, other general corporate expenditures, litigation settlements and contingencies, certain contingent consideration payments, and income taxes.

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Cash from changes in working capital increased primarily as a result of favorable changes in accounts receivable and accounts payable, accrued expenses and other current liabilities.

Cash Flows from Investing Activities

Net cash used investing activities in 2023 of $12.5 million consisted of capital expenditures primarily related to internally developed software.

Net cash used in investing activities in 2022 of $27.9 million consisted of the purchase of a $16.4 million equity investment in EarnUp and another small investment, as well as capital expenditures of $11.4 million primarily related to internally developed software.

Cash Flows from Financing Activities

Net cash used in financing activities in 2023 of $242.0 million consisted primarily of the repurchase of our 2025 Notes for $237.5 million and the related payment of debt issuance costs of $1.6 million, $1.1 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options and $1.9 million repayment of the Term Loan Facility.

Net cash provided by financing activities in 2022 of $32.5 million consisted primarily of $250.0 million in proceeds from the term loan and the repayment of $169.7 million to settle our 2022 Notes discussed in the “Credit Facility” section above, $43.0 million for the repurchase of our stock, $3.4 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options, and $1.3 million repayment of the term loan.

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 in the notes to the consolidated financial statements included elsewhere in this report regarding 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 current and deferred income taxes and the significant items giving rise to the deferred assets and liabilities are shown in Note 14—Income Taxes in the notes 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 and/or state tax authorities, 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.

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.

During the third quarter of 2022, we established a full valuation allowance against our net deferred tax assets due to historical cumulative pre-tax losses and continued pre-tax losses in the quarter. We regularly review our deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing taxable temporary differences, and tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In determining the amount of the valuation allowance, we considered the

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scheduled reversal of deferred tax liabilities. We will maintain a full valuation allowance on net deferred tax assets until there is sufficient evidence to support the reversal of some or all of the allowance. Should there be a change in the valuation allowance in the future, the income tax provision would increase or decrease in the period in which the allowance is changed.

The indefinite carryforward period for certain deferred tax assets means that indefinite-lived deferred tax liabilities can be considered as support for realization of such deferred tax assets including post December 31, 2017 net operating loss carryovers, which can affect the need to record or maintain a valuation allowance for deferred tax assets.

During 2022, we incurred income tax expense of $139.4 million related to the valuation allowance. At December 31, 2023 and 2022, we maintain a valuation allowance of $162.5 million and $145.4 million, respectively, against our net deferred tax assets.

At December 31, 2021, we recorded a partial valuation allowance of $6.0 million 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 in the notes 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 and market analysis requires the exercise of significant judgments, including judgments about appropriate discount rates, revenue growth rates, marketing spend, direct operating expenses, the amount and timing of expected future cash flows, and market multiples. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

At June 30, 2022, we assessed the qualitative factors in our impairment testing of goodwill and determined that the effects of the challenging interest rate environment, consumer price inflation, and the decline in our market capitalization required a quantitative impairment test be performed. The quantitative goodwill impairment test found that the fair value of each reporting unit exceeded its carrying amount, indicating no goodwill impairment. The property and casualty auto insurance industry experienced challenges in 2022 caused by inflation, supply chain challenges, and the rising severity and frequency of claims. Additionally, the significant increase in mortgage interest rates in 2022 had a negative impact on our Mortgage reporting unit.

During the third quarter of 2023, our market capitalization declined significantly compared to the second quarter of 2023. The closing stock price on September 29, 2023 was $15.50 reflecting a market capitalization below our book value. In addition, the effects of the challenging interest rate environment, low for-sale home inventories and the rise in home prices in the Home reporting unit and consumer price inflation negatively impacting carrier underwriting in the Insurance reporting unit continue to provide revenue headwinds. Based on these factors, we concluded that a triggering event had occurred and an interim quantitative impairment test was performed as of September 30, 2023. Upon completing the quantitative goodwill impairment test, we concluded that the carrying value of the Insurance reporting unit exceeded its fair value which resulted in a goodwill impairment charge of $38.6 million. The fair value of the Home and Consumer reporting units exceeded their carrying amounts, indicating no goodwill impairment. The fair values of each reporting unit were determined using a combination of the income approach and the market approach valuation methodologies.

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We will continue to monitor the recovery of the Insurance reporting unit and the Mortgage reporting unit. Changes in the timing of the recovery compared to current expectations could cause an impairment to the Insurance or Mortgage reporting units.

The value of goodwill subject to assessment for impairment at December 31, 2023 is $381.5 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.

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 $154.7 million at December 31, 2023.

Equity Investments

Our equity investments do not have a readily determinable fair value and, upon acquisition, we elected the measurement alternative to value these investments. Accordingly, the equity investments will be carried at cost less impairment, if any, and subsequently measured to fair value upon observable price changes in an orderly transaction for the identical or similar investments. Additionally, if a qualitative assessment identifies impairment indicators, then the equity investments must be evaluated for impairment and written down to its fair value, if it is determined that the fair value is less than the carrying value. Any gains or losses are included within other (expense) income in the consolidated statement of operations and comprehensive income.

We incurred impairment charges of $114.5 million on our investments in equity securities during 2023. See Note 8—Equity Investments in the notes to the consolidated financial statements included elsewhere in this report for additional information. The carrying value of our equity investments at December 31, 2023 is $60.1 million.

New Accounting Pronouncements

See Note 2—Significant Accounting Policies in the notes to the consolidated financial statements included elsewhere in this report for a description of recent accounting pronouncements.

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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, 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(s) they are seeking. We also serve as a valued partner to lenders and other providers seeking an efficient, scalable and flexible source of customer acquisition with directly measurable benefits, by matching the consumer inquiries we generate with these Network Partners.

Our MyLendingTree 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 by leveraging the widespread recognition of the LendingTree brand.

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 Network Partners 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

We continue to monitor the impact of the COVID-19 pandemic, government actions and measures taken to prevent its spread, and the potential to affect our operations. We are also monitoring the current global economic environment, specifically including inflationary pressures and interest rates, and any resulting impacts on our financial position and results of operations. Refer to Item 1A. “Risk Factors” for additional information.

Of our three reportable segments, the Consumer segment was impacted the most as unsecured credit and the flow of capital in certain areas of the market contracted. 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 COVID-19 pandemic and the macro-economic conditions that followed, our marketing expenses generally decreased in line with revenue.

During 2022, the challenging interest rate environment and persistent inflationary pressures have presented additional challenges for many of our mortgage lending and insurance partners. We have seen the most significant impact in our Home segment as mortgage rates have nearly doubled in 2022, causing a sharp decline in refinance volumes and more recent pressure on purchase activity. Although our Insurance segment continues to rebound from the trough in the fourth quarter of 2021, the recovery has been slower than expected as demand from our carrier partners remains volatile as they continue to attempt to

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implement premium increases to offset the effect of inflation on claims. In addition, the auto and home insurance industry was impacted in 2022 by persistent industry headwinds, supply chain issues, rising accident severity and frequency, and hurricane losses.

Segment Reporting

We have three reportable segments: Home, Consumer, and Insurance.

Recent Business Acquisitions & Investments

In January 2022, the Company acquired an equity interest in EarnUp for $15.0 million. EarnUp is a consumer-first mortgage payment platform that intelligently automates loan payment scheduling and helps consumers better manage their money and improve their financial well-being.

In February 2020, we acquired an equity interest in Stash for $80.0 million, and in January 2021, we acquired an additional equity interest in Stash 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.

See Note 8—Equity Investments in the notes to the consolidated financial statements included elsewhere in this report for additional information on the equity interest in Stash and EarnUp.

Recent Mortgage Interest Rate Trends

Interest rate and market risks are substantial in the mortgage lead generation business. Short-term fluctuations in mortgage interest rates primarily affect consumer demand for mortgage refinancings, while long-term fluctuations in mortgage interest rates, coupled with the U.S. real estate market, affect consumer demand for new mortgages. Consumer demand, in turn, affects lender demand for mortgage leads from third-party sources, as well as our own ability to attract online consumers to our website.

Typically, when interest rates decline, we see increased consumer demand for mortgage refinancings, which in turn leads to increased traffic to our website and decreased selling and marketing efforts associated with that traffic. At the same time, lender demand for leads from third-party sources typically decreases, as there are more consumers in the marketplace seeking refinancing 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 in 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 2021. During 2022, 30-year mortgage interest rates increased significantly from a monthly average of 3.45% in January 2022, ending at a monthly average of 6.36% in December 2022.

On a full-year basis, 30-year mortgage interest rates increased to an average 5.33% in 2022, compared to 2.96% and 3.11% in 2021 and 2020, respectively.

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Typically, as mortgage interest rates rise, there are fewer consumers in the marketplace seeking refinancings and, accordingly, the mix of mortgage origination dollars will move toward purchase mortgages. According to Mortgage Bankers Association (“MBA”) data, total refinance origination dollars of total mortgage origination dollars remained relatively consistent in 2020 and 2021, with 60% of total 2020 mortgage origination dollars from refinance and 59% of total 2021 mortgage origination dollars from refinance as a result of the general trend in average mortgage interest rates. Total refinance original dollars decreased to 30% of total mortgage origination dollars in 2022 due to the increase in average mortgage interest rates. Total refinance origination dollars decreased by 11% in 2021 over 2020 and 74% in 2022 over 2021. Industry-wide mortgage origination dollars decreased by 3% in 2021 over 2020 and 49% in 2022 over 2021.

Looking forward, the MBA is projecting 30-year mortgage interest rates to decrease in 2023 to an average 5.2%. According to MBA projections, the mix of mortgage origination dollars is expected to continue to move towards purchase mortgages with the refinance share representing just 24% for 2023.

The U.S. Real Estate Market

The health of the U.S. real estate market and interest rate levels are the primary drivers of consumer demand for new mortgages. Consumer demand, in turn, affects lender demand for purchase mortgage leads from third-party sources. Typically, a strong real estate market will lead to reduced lender demand for leads, as there are more consumers in the marketplace seeking financing and, accordingly, lenders receive more organic lead volume. Conversely, a weaker real estate market will typically lead to an increase in lender demand, as there are fewer consumers in the marketplace seeking mortgages.

According to Fannie Mae data, 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. In 2022, existing home sales decreased by 17% as compared to 2021 due to increased interest rates and limited inventory of homes. Fannie Mae expects a 22% decrease in existing home sales in 2023 compared to 2022.

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MyLendingTree

We consider certain metrics related to MyLendingTree set forth below to help us evaluate our business and growth trends and assess operational efficiencies. The calculation of the metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.

We continued to grow our user base and added 3.8 million new users in 2022, bringing cumulative sign-ups to 24.8 million at December 31, 2022. We attribute $123.7 million of revenue in 2022 to registered MyLendingTree members across the LendingTree platform.

Our focus on improving the MyLendingTree experience for consumers remains a top priority. Becoming an integrated digital advisor will greatly improve the consumer experience, which we expect to result in higher levels of engagement improved membership growth rates, and ultimately stronger financial results.

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.

On May 31, 2022, we drew $250.0 million on the Term Loan Facility. A portion of this was used to pay the outstanding balance of $169.7 million and interest on our 0.625% Convertible Senior Notes that matured on June 1, 2022. The remaining call spread transactions associated with the 2022 Notes terminated in 2022.

For more information, see Note 16—Debt, in the notes to the consolidated financial statements included elsewhere in this report.

North Carolina Office Properties

Our new corporate 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 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. We have received approximately $0.7 million related to the December 2016 grants. If we are unable to maintain the specified target levels, our ability to earn further reimbursements could be limited. 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. We have currently not met the specified target levels set forth in the December 2018 grant and may not realize any reimbursements from this grant.

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Results of Operations for the Years ended December 31, 2022 and 2021

For information on fiscal 2020 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, 2021 and 2020 of our Form 10-K for the fiscal year ended December 31, 2021.

Revenue

Revenue decreased in 2022 compared to 2021 due to decreases in our Home and Insurance segments, partially offset by an increase in our Consumer 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 $66.2 million in 2022 from 2021, or 20%, primarily due to increases in our personal loans, small business loans products, credit cards, and deposit accounts, partially offset by a decrease in student loans. Many of our products in the Consumer segment experienced increases in revenue in 2022 from 2021 due to the recovery from the impacts of the COVID-19 pandemic.

Revenue from our personal loans product increased $34.0 million, or 31%, to $144.1 million in 2022 from $110.1 million in 2021 primarily due to an increase in the number of consumers completing request forms.

Revenue from our credit cards product increased $6.8 million, or 7%, to $100.2 million in 2022 from $93.4 million in 2021 primarily due to an increase in revenue earned per click, partially offset by a decrease in the number of clicks.

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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 $19.9 million in 2022 compared to 2021, due to an increase in revenue earned per consumer, partially offset by a decrease in the number of consumers. Revenue from our deposit accounts product increased $6.6 million in 2022 compared to 2021 due to an increase in the number of consumers and an increase in revenue earned per consumer. Student loans decreased $6.4 million in 2022 compared to 2021, due to a decrease in the number of consumers, partially offset by an increase in revenue earned per consumer.

Revenue from our Insurance segment decreased $27.1 million, or 8%, to $299.1 million in 2022 from $326.2 million in 2021 primarily due to a decrease in carrier budgets reducing the number of consumers completing request forms. The decrease in carrier budgets was due primarily to reduced customer acquisition activity for insurance carriers as they attempted to raise premium rates in response to inflationary pressures on claims.

Our Home segment includes the following products: purchase mortgage, refinance mortgage, home equity loans and lines of credit, and real estate. We ceased offering reverse mortgage loans in the fourth quarter of 2022. Revenue from our Home segment decreased $152.4 million, or 34%, in 2022 from 2021 primarily due to a decrease in revenue from our refinance mortgage product, partially offset by increases in our home equity loans and purchase mortgage products.

Revenue from our mortgage products decreased $196.6 million, or 52%, to $179.4 million in 2022 from $376.1 million in 2021. Revenue from our refinance mortgage product decreased $203.7 million in 2022 compared to 2021, primarily due to a decrease in the number of consumers completing request forms and a decrease in revenue earned per consumer, as interest rates rose significantly in 2022. Revenue from our purchase mortgage product increased $7.1 million in 2022 compared to 2021 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 home equity loans and lines of credit product increased $43.0 million, or 67% to $105.8 million in 2022 from $62.7 million in 2021 due to an increase in both the number of consumers completing request forms and the 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.

Cost of revenue

Cost of revenue consists primarily of costs associated with compensation and other employee-related costs (including stock-based compensation) relating to internally-operated customer call centers, third-party customer call center fees, credit scoring fees, credit card fees, website network hosting, and server fees.

Cost of revenue remained relatively consistent in 2022 compared to 2021.

Cost of revenue as a percentage of revenue increased to 6% in 2022 compared to 5% in 2021.

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 $71.8 million decrease in selling and marketing expense in 2022 compared to 2021 was primarily due to the decreases in advertising and promotional expense discussed below. Additionally, compensation and benefits decreased $2.4 million in 2022 compared to 2021.

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

In the periods presented, advertising and promotional expenses are equivalent to the non-GAAP measure variable marketing expense. See Variable Marketing Expense and Variable Marketing Margin below for additional information.

Revenue is primarily driven by Network Partner demand for our products, which is matched to corresponding consumer requests. We adjust our selling and marketing expenditures dynamically in relation to anticipated revenue opportunities in order to ensure sufficient consumer inquiries to profitably meet such demand. An increase in a product’s revenue is generally met by a corresponding increase in marketing spend, and conversely a decrease in a product’s revenue is generally met by a corresponding decrease in marketing spend. This relationship exists for our Home, Consumer, and Insurance segments.

We adjusted our advertising expenditures in 2022 compared to 2021 in response to changes in Network Partner demand on our marketplace. We will continue to adjust selling and marketing expenditures dynamically in response to anticipated revenue opportunities.

General and administrative expense

General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in finance, legal, tax, corporate information technology, human resources and executive management functions, as well as facilities and infrastructure costs and fees for professional services.

General and administrative expense decreased in 2022 compared to 2021, primarily due to decreases in compensation and benefits, facilities, and professional fees expense of $13.4 million, $1.6 million, and $1.1 million, respectively. This was partially offset by increases in technology, fees and charges, travel and entertainment, and other tax expense of $5.6 million, $2.0 million, $1.5 million, and $1.5 million, respectively. Additionally, losses on the disposal of assets increased $3.1 million in 2022 compared to 2021.

Non-cash compensation expense, included in total compensation and benefits noted above, within general and administrative expense decreased in 2022, which resulted in an increase in net income from continuing operations in 2022 compared to 2021. For additional information, see Note—14-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 increased to 15% in 2022 from 14% in 2021.

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 2022 compared to 2021 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 2022 compared to 2021 was primarily the result of higher investment in internally developed software in recent years, to support the growth of our business in addition to depreciation on new assets related to our principal executive offices which we moved into in mid-2021.

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Amortization of Intangibles

The decrease in amortization of intangibles in 2022 compared to 2021 was due to certain intangible assets associated with our recent business acquisitions becoming fully amortized.

Contingent consideration

During 2022, we did not record contingent consideration expense. All earnouts were completed prior to 2022.

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.

Restructuring and severance

During 2022, we completed workforce reductions in each of the first, second, and fourth quarters of approximately 75 employees, 25 employees, and 50 employees, respectively. We incurred total expense of $4.4 million consisting of employee separation costs of $3.3 million and non-cash compensation expense of $1.1 million due to the accelerated vesting of certain equity awards. All employee separation costs are expected to be paid by the third quarter of 2023.

Interest expense

Interest expense decreased in 2022 compared to 2021 primarily due to the adoption of Accounting Standards Update (“ASU”) 2020-06 on January 1, 2022, whereby we derecognized the remaining debt discounts on the 2022 Notes and 2025 Notes and therefore no longer recognize any amortization of debt discounts as interest expense, partially offset by an increase in interest from our Term Loan Facility. See Note—2 Significant Accounting Policies in the notes to the consolidated financial statements included elsewhere in this report for additional information.

Other Income

Other income for 2022 primarily consists of dividend income. 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 expense

For 2022, the effective tax rate varied from the federal statutory rate of 21% primarily due to expense of $139.4 million to record a full valuation allowance against our net deferred tax assets. See Note—15 Income Taxes in the notes to the consolidated financial statements included elsewhere in this report for additional information on the valuation allowance.

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 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.

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.

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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.

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 22—Discontinued Operations in the notes 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.

Segment Profit

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 23—Segment Information in the notes to the consolidated financial statements included elsewhere in this report for additional information on segments and a reconciliation of segment profit to pre-tax income from continuing operations.

HOME

Revenue in the Home segment decreased 34% to $289.4 million in 2022 from 2021, with segment profit of $103.1 million in 2022, a decrease of 33% from 2021. Our Home segment margin (segment profit divided by segment revenue) remained relatively consistent, at 36% in 2022 compared to 35% in 2021.

Within Home, our core mortgage business generated revenue of $179.4 million in 2022, down 52% from 2021, as demand for refinancing transactions diminished throughout the year, with almost no outstanding mortgages later in the year carrying a higher rate than current loan offerings. The 30-year mortgage interest rates increased from a monthly average of 3.1% in December 2021 to a monthly average of 6.36% in December 2022, according to Freddie Mac Near record home prices coupled with higher mortgage rates led to a 17% decrease in existing home sales in 2022 compared to 2021. Our mortgage volume decreased 47% and revenue per lead decreased 10% in 2022 compared to 2021. The volume mix in our mortgage business was close to evenly balanced between refinance at 54% and purchase loans at 46% of total volume in 2022 as compared to refinance at 67% and purchase at 33% of total volume in 2021.

Revenue from our home equity loan product of $105.8 million in 2022 increased 69% from 2021, as homeowners in the U.S. enjoy near record levels of equity to borrow against for other debt repayments and to finance home improvements.

Home equity revenue per lead increased 13% in 2022 compared to 2021 as we were able to capture 49% more volume in 2022 compared to 2021. During the fourth quarter of 2022, we discontinued our reverse mortgage offering to better focus resources on supporting our traditional lending Network Partners going forward.

The outlook for the mortgage industry is a sustained period of lower refinance demand, with the Mortgage Bankers Association forecasting a 37% decline in refinance originations in 2023 after falling 76% in 2022. We have been actively engaged with our Network Partners in mortgage to increase purchase lead conversion rates, and are focusing on this metric internally as a key growth priority for the segment this year. We expect home equity will continue to generate the majority of our Home revenue in 2023, as our Network Partners have leaned on the favorable environment for cash-out transactions to maintain loan officer productivity.

CONSUMER

Growth in our Consumer segment continued, with revenue of $396.1 million in 2022, an increase of 20% from 2021, and segment profit of $174.6 million in 2022, an increase of 22% from 2021. Our Consumer segment margin remained consistent, at 44% in 2022 compared to 43% in 2021.

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Revenue from our personal loan product of $144.1 million increased 31% in 2022 compared to 2021 as debt consolidation was attractive with consumer credit card balances continuing to rise. Many of our partners have tightened their underwriting criteria to reduce portfolio risk given recession fears, focusing their customer acquisition activity on consumers with somewhat higher credit quality.

Credit card revenue increased to $100.2 million or 7.3% in 2022 compared to 2021. Revenue per click grew 17% in 2022 compared to 2021 while we experienced an 8% decrease in the number of clicks. Operational improvements are being implemented and improving credit card results is a core priority for the company in 2023.

Small business achieved revenue growth of 41% in 2022 from 2021. In the second half of 2022 we continue to focus on lender performance to grow originations and improve conversion rates. By optimizing our marketing mix, we have aimed to increase the quality of our leads which benefits lenders and increases profitability. Our ability to efficiently steer borrowers to the most appropriate lender on our network with our concierge model continues to positively impact results. Going forward we are implementing technology improvements to automate capture of applicant financial data to enhance the borrower experience and increase lender match rate.

INSURANCE

The auto and home insurance industry in 2022 was impacted by persistent industry headwinds, supply chain issues, rising accident severity and frequency, and hurricane losses in the back half of the year. This difficult operating environment for our carrier partners caused an 8% decrease in revenue in our Insurance segment to $299.1 million in 2022, from 2021. Segment profit of $91.8 million in 2022 decreased 19% from 2021. Our Insurance segment margin decreased to 31% in 2022 compared to 35% in 2021.

Variable Marketing Expense and Variable Marketing Margin

We report variable marketing expense and variable marketing margin as supplemental measures to GAAP. These related measures are the primary metrics by which we measure the effectiveness of our marketing efforts. Variable marketing expense represents the portion of selling and marketing expense attributable to variable costs paid for advertising, direct marketing, and related expenses, and excludes overhead, fixed costs, and personnel-related expenses. Variable marketing margin is a measure of the efficiency of our operating model, measuring revenue after subtracting variable marketing expense. Our operating model is highly sensitive to the amount and efficiency of variable marketing expenditures, and our proprietary systems are able to make rapidly changing decisions concerning the deployment of variable marketing expenditures (primarily but not exclusively online and mobile advertising placement) based on proprietary and sophisticated analytics. We believe that investors should have access to the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. We provide and encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures discussed below.

Variable marketing expense is defined as the expense attributable to variable costs paid for advertising, direct marketing and related expenses, and excluding overhead, fixed costs and personnel-related expenses. The majority of these variable advertising costs are expressly intended to drive traffic to our websites and these variable advertising costs are included in selling and marketing expense on our consolidated statements of operations and comprehensive income (loss). Variable marketing margin is defined as revenue less variable marketing expense.

The following shows the calculation of variable marketing margin:

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Below is a reconciliation of selling and marketing expense, the most directly comparable GAAP measure, to variable marketing expense:

The following is a reconciliation of net (loss) income from continuing operations, the most directly comparable GAAP measure, to variable marketing margin:

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), (8) contributions to the LendingTree Foundation, and (9) 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

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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, 2022 consisted of the $1.5 million franchise tax caused by the equity investment gain in Stash. 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.

The following table is a reconciliation of net (loss) income from continuing operations, the most directly comparable GAAP measure, to Adjusted EBITDA.

Financial Position, Liquidity and Capital Resources

For information on fiscal 2020 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, 2021.

General

As of December 31, 2022, we had $298.8 million of cash and cash equivalents, compared to $251.2 million of cash and cash equivalents as of December 31, 2021.

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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 economic impacts caused by the challenging interest rate environment, high levels of inflation, and lingering effects of the COVID-19 pandemic on our liquidity and capital resources.

Notable transactions affecting cash and cash equivalents during the reported periods are as follows:

2022

In 2022, we repurchased an aggregate of 379,895 shares of our common stock pursuant to a stock repurchase program for $43.0 million.

In the first quarter of 2022, we acquired an equity interest in EarnUp for $15.0 million. See Note 8—Equity Investments in the notes to the consolidated financial statements included elsewhere in this report for additional information on the equity interest.

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 in the notes to the consolidated financial statements included elsewhere in this report for additional information on the equity interest in Stash.

Credit Facility

On September 15, 2021, we entered into a credit agreement (the “Credit Agreement”), consisting of a $200.0 million Revolving Facility, which matures on September 15, 2026, and a $250.0 million delayed draw Term Loan Facility, which matures on September 15, 2028. The proceeds of the Revolving Facility can be used to finance working capital, for general corporate purposes, and any other purpose not prohibited by the Credit Agreement. We drew $250.0 million under the Term Loan Facility on May 31, 2022 and used $170.2 million of the proceeds to settle the Company’s 2022 Notes, including interest. The remaining proceeds of $79.8 million may be used for general corporate purposes and any other purposes not prohibited by the Credit Agreement.

As of February 27, 2023, we have outstanding $248.8 million under the Term Loan Facility, a $0.2 million letter of credit under the Revolving Facility, and the remaining borrowing capacity is $199.8 million.

For additional information on the Credit Facility, see Note 16—Debt in the notes to the consolidated financial statements included elsewhere in this report.

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 $13.1 million in 2023. See Note 12—Leases in the notes 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:

Cash Flows from Operating Activities

Our largest source of cash provided by our operating activities is revenues generated by our products. Our primary uses of cash from our operating activities include advertising and promotional payments. In addition, our uses of cash from operating

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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 decreased in 2022 from 2021 primarily due to a decrease in revenue, partially offset by a corresponding decrease in selling and marketing expense. Additionally, cash from changes in working capital decreased primarily as a result of changes in accounts payable, accrued expenses and other current liabilities, and income taxes receivable, partially offset by favorable changes in accounts receivable.

Cash Flows from Investing Activities

Net cash used in investing activities attributable to continuing operations in 2022 of $27.9 million consisted of the purchase of a $16.4 million equity investment in EarnUp and another small investment, as well as capital expenditures of $11.4 million primarily related to internally-developed software.

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.

Cash Flows from Financing Activities

Net cash provided by financing activities attributable to continuing operations in 2022 of $32.5 million consisted primarily of $250.0 million in proceeds from the term loan and the repayment of $169.7 million to settle our 2022 Notes discussed in the “Credit Facility” section above, $43.0 million for the repurchase of our stock, $3.4 million in withholding taxes paid upon surrender of shares to satisfy obligations on equity awards, net of proceeds from the exercise of stock options and $1.3 million repayment of the term loan.

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 Term Loan Facility.

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 in the notes 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 current and deferred income taxes and the significant items giving rise to the deferred assets and liabilities are shown in Note 15—Income Taxes in the notes 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 and/or state tax authorities, 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.

During the third quarter of 2022, we established a full valuation allowance against our net deferred tax assets due to historical cumulative pre-tax losses and continued pre-tax losses in the quarter. We regularly review our deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing taxable temporary differences, and tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In determining the amount of the valuation allowance, we considered the scheduled reversal of deferred tax liabilities. We will maintain a full valuation allowance on net deferred tax assets until there is sufficient evidence to support the reversal of some or all of the allowance. Should there be a change in the valuation allowance in the future, the income tax provision would increase or decrease in the period in which the allowance is changed.

The indefinite carryforward period for certain deferred tax assets means that indefinite-lived deferred tax liabilities can be considered as support for realization of such deferred tax assets including post December 31, 2017 net operating loss carryovers, which can affect the need to record or maintain a valuation allowance for deferred tax assets.

During 2022, we incurred income tax expense of $139.4 million related to the valuation allowance. At December 31, 2022, we maintain a valuation allowance of $145.4 million against our net deferred tax assets.

At December 31, 2021 and 2020, we recorded a partial valuation allowance of $6.0 million and $5.8 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 14—Stock-Based Compensation in the notes 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 and market analysis requires the exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates, including revenue, the amount and timing of expected future cash flows, and market multiples. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

At June 30, 2022, we assessed the qualitative factors in our impairment testing of goodwill and determined that the effects of the challenging interest rate environment, consumer price inflation, and the decline in our market capitalization required a quantitative impairment test be performed. The quantitative goodwill impairment test found that the fair value of each reporting unit exceeded its carrying amount, indicating no goodwill impairment. We will monitor the recovery of the Insurance reporting unit and the Mortgage reporting unit. The property and casualty auto insurance industry is experiencing challenges caused by inflation, supply chain challenges, and the rising severity and frequency of claims. Additionally, the significant increase in mortgage interest rates have had a negative impact on our Mortgage reporting unit. Changes in the timing of the recovery compared to current expectations could cause an impairment to the Insurance or Mortgage reporting units.

The value of goodwill subject to assessment for impairment at December 31, 2022 is $420.1 million.

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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 $179.4 million at December 31, 2022.

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.

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 securities do not have a readily determinable fair value and, upon acquisition, we elected the measurement alternative to value these securities. Accordingly, the equity securities will be carried at cost less impairment, if any, and subsequently measured to fair value upon observable price changes in an orderly transaction for the identical or similar investments with any gains or losses recorded to the consolidated statement of operations and comprehensive income.

The carrying value of our equity investment at December 31, 2022 is $174.6 million.

New Accounting Pronouncements

See Note 2—Significant Accounting Policies in the notes to the consolidated financial statements included elsewhere in this report for a description of recent accounting pronouncements.

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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.

Revenue

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:

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