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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2020
or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                 
Commission File No. 001-34063 
 
 
https://cdn.kscope.io/5013df37c5babd5c6b04c1574bec0c66-ltlogogradient.jpg
LendingTree, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
 
26-2414818
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 11115 Rushmore Drive, Charlotte, North Carolina 28277
(Address of principal executive offices)(Zip Code)
(704541-5351
(Registrant's telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 par value per share
 
TREE
 
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No   
As of October 30, 2020, there were 13,122,650 shares of the registrant's common stock, par value $.01 per share, outstanding, excluding treasury shares.
 





TABLE OF CONTENTS



2


PART I—FINANCIAL INFORMATION


Item 1.  Financial Statements 

LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited) 
 
Three Months Ended
September 30,

Nine Months Ended
September 30,
 
2020

2019

2020

2019
 
(in thousands, except per share amounts)
Revenue
$
220,251


$
310,605


$
687,661


$
851,416

Costs and expenses:
 


 


 


 

Cost of revenue (exclusive of depreciation and amortization shown separately below)
13,220


17,671


40,936


51,651

Selling and marketing expense
154,670


200,818


464,129


567,338

General and administrative expense
33,705


30,323


94,276


89,391

Product development
11,477


10,200


33,252


30,541

Depreciation
3,535


2,696


10,463


7,737

Amortization of intangibles
13,090


13,778


40,603


41,485

Change in fair value of contingent consideration
6,658


3,839


7,711


21,221

Severance


179


190


636

Litigation settlements and contingencies
13


(92
)

(983
)

(291
)
Total costs and expenses
236,368


279,412


690,577


809,709

Operating (loss) income
(16,117
)

31,193


(2,916
)

41,707

Other (expense) income, net:
 


 


 


 

Interest expense, net
(16,617
)

(4,845
)

(26,406
)

(15,408
)
Other income


4


7

 
143

(Loss) income before income taxes
(32,734
)

26,352


(29,315
)

26,442

Income tax benefit (expense)
7,925


(1,889
)

14,866


11,552

Net (loss) income from continuing operations
(24,809
)

24,463


(14,449
)

37,994

Income (loss) from discontinued operations, net of tax
166


(20,199
)

(25,550
)

(22,024
)
Net (loss) income and comprehensive (loss) income
$
(24,643
)

$
4,264


$
(39,999
)

$
15,970













Weighted average shares outstanding:











Basic
13,033


12,890


12,992


12,805

Diluted
13,033


14,632


12,992


14,629

(Loss) income per share from continuing operations:
 


 


 


 

Basic
$
(1.90
)

$
1.90


$
(1.11
)

$
2.97

Diluted
$
(1.90
)

$
1.67


$
(1.11
)

$
2.60

Income (loss) per share from discontinued operations:
 


 


 


 

Basic
$
0.01


$
(1.57
)

$
(1.97
)

$
(1.72
)
Diluted
$
0.01


$
(1.38
)

$
(1.97
)

$
(1.51
)
Net (loss) income per share:
 


 


 


 

Basic
$
(1.89
)

$
0.33


$
(3.08
)

$
1.25

Diluted
$
(1.89
)

$
0.29


$
(3.08
)

$
1.09

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

3


LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 (Unaudited) 
 
September 30,
2020

December 31,
2019
 
(in thousands, except par value and share amounts)
ASSETS:
 


 

Cash and cash equivalents
$
187,261


$
60,243

Restricted cash and cash equivalents
112


96

Accounts receivable (net of allowance of $1,638 and $1,466, respectively)
96,631


113,487

Prepaid and other current assets
27,585


15,516

Current assets of discontinued operations
1,172


84

Total current assets
312,761


189,426

Property and equipment (net of accumulated depreciation of $22,318 and $17,979, respectively)
48,877


31,363

Operating lease right-of-use assets
86,193

 
25,519

Goodwill
420,139


420,139

Intangible assets, net
140,977


181,580

Deferred income tax assets
92,649


87,664

Equity investment (Note 7)
80,000

 

Other non-current assets
5,262


4,330

Non-current assets of discontinued operations
16,731


7,948

Total assets
$
1,203,589


$
947,969


 
 
 
LIABILITIES:
 


 

Revolving credit facility
$

 
$
75,000

Accounts payable, trade
4,895


2,873

Accrued expenses and other current liabilities
106,333


112,755

Current contingent consideration
25,068


9,028

Current liabilities of discontinued operations
300


31,050

Total current liabilities
136,596


230,706

Long-term debt
603,520

 
264,391

Operating lease liabilities
87,597

 
21,358

Non-current contingent consideration
10,107


24,436

Other non-current liabilities
4,760

 
4,752

Total liabilities
842,580


545,643

Commitments and contingencies (Note 15)





SHAREHOLDERS' EQUITY:
 


 

Preferred stock $.01 par value; 5,000,000 shares authorized; none issued or outstanding



Common stock $.01 par value; 50,000,000 shares authorized; 15,759,235 and 15,676,819 shares issued, respectively, and 13,117,917 and 13,035,501 shares outstanding, respectively
158


157

Additional paid-in capital
1,176,664


1,177,984

Accumulated deficit
(632,652
)

(592,654
)
Treasury stock; 2,641,318 shares
(183,161
)

(183,161
)
Total shareholders' equity
361,009


402,326

Total liabilities and shareholders' equity
$
1,203,589


$
947,969

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

4


LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 (Unaudited)
 
 
 
 
Common Stock
 
 
 
 
 
Treasury Stock
 
Total
 
Number
of Shares
 
Amount
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Number
of Shares
 
Amount
 
(in thousands)
Balance as of December 31, 2019
$
402,326

 
15,677

 
$
157

 
$
1,177,984

 
$
(592,654
)
 
2,641

 
$
(183,161
)
Net income and comprehensive income
14,401

 

 

 

 
14,401

 

 

Non-cash compensation
11,917

 

 

 
11,917

 

 

 

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes
(5,087
)
 
27

 

 
(5,087
)
 

 

 

Other

 

 

 
(1
)
 
1

 

 

Balance as of March 31, 2020
$
423,557

 
15,704

 
$
157

 
$
1,184,813

 
$
(578,252
)
 
2,641

 
$
(183,161
)
Net loss and comprehensive loss
(29,757
)
 

 

 

 
(29,757
)
 

 

Non-cash compensation
13,158

 

 

 
13,158

 

 

 

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes
(981
)
 
27

 

 
(981
)
 

 

 

Balance as of June 30, 2020
$
405,977

 
15,731

 
$
157

 
$
1,196,990

 
$
(608,009
)
 
2,641

 
$
(183,161
)
Net loss and comprehensive loss
(24,643
)
 

 

 

 
(24,643
)
 

 

Non-cash compensation
14,161

 

 

 
14,161

 

 

 

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes
4,646

 
28

 
1

 
4,645

 

 

 

Issuance of 0.50% Convertible Senior Notes, net
116,300

 

 

 
116,300

 

 

 

Repurchase of 0.625% Convertible Senior Notes, net
(107,882
)
 

 

 
(107,882
)
 

 

 

Convertible note hedge transactions
(14,379
)
 

 

 
(14,379
)
 

 

 

Warrant transactions
(33,171
)
 

 

 
(33,171
)
 

 

 

Balance as of September 30, 2020
$
361,009

 
15,759

 
$
158

 
$
1,176,664

 
$
(632,652
)
 
2,641

 
$
(183,161
)


5


 
 
 
Common Stock
 
 
 
 
 
Treasury Stock
 
Total
 
Number
of Shares
 
Amount
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Number
of Shares
 
Amount
 
(in thousands)
Balance as of December 31, 2018
$
346,208

 
15,428

 
$
154

 
$
1,134,227

 
$
(610,482
)
 
2,618

 
$
(177,691
)
Net loss and comprehensive loss
(512
)
 

 

 

 
(512
)
 

 

Non-cash compensation
14,053

 

 

 
14,053

 

 

 

Purchase of treasury stock
(3,976
)
 

 

 

 

 
18

 
(3,976
)
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes
(3,585
)
 
87

 
1

 
(3,586
)
 

 

 

Balance as of March 31, 2019
$
352,188

 
15,515

 
$
155

 
$
1,144,694

 
$
(610,994
)
 
2,636

 
$
(181,667
)
Net income and comprehensive income
12,218

 

 

 

 
12,218

 

 

Non-cash compensation
15,982

 

 

 
15,982

 

 

 

Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes
(6,501
)
 
89

 
1

 
(6,502
)
 

 

 

Balance as of June 30, 2019
$
373,887

 
15,604

 
$
156

 
$
1,154,174

 
$
(598,776
)
 
2,636

 
$
(181,667
)
Net income and comprehensive income
4,264

 

 

 

 
4,264

 

 

Non-cash compensation
10,797

 

 

 
10,797

 

 

 

Purchase of treasury stock
(310
)
 

 

 

 

 
1

 
(310
)
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes
626

 
31

 

 
626

 

 

 

Balance as of September 30, 2019
$
389,264

 
15,635


$
156


$
1,165,597


$
(594,512
)

2,637


$
(181,977
)
 
The accompanying notes to consolidated financial statements are an integral part of these statements.

6


LENDINGTREE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 
Nine Months Ended
September 30,
 
2020
 
2019
 
(in thousands)
Cash flows from operating activities attributable to continuing operations:
 

 
 

Net (loss) income and comprehensive (loss) income
$
(39,999
)
 
$
15,970

Less: Loss from discontinued operations, net of tax
25,550

 
22,024

(Loss) income from continuing operations
(14,449
)
 
37,994

Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations:
 
 
 
Loss (gain) on impairments and disposal of assets
686

 
(1,119
)
Amortization of intangibles
40,603

 
41,485

Depreciation
10,463

 
7,737

Non-cash compensation expense
39,236

 
40,832

Deferred income taxes
(15,489
)
 
(11,532
)
Change in fair value of contingent consideration
7,711

 
21,221

Bad debt expense
1,314

 
1,865

Amortization of debt issuance costs
2,241

 
1,463

Amortization of convertible debt discount
12,429

 
8,959

Loss on extinguishment of debt
7,768

 

Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities
2,490

 
302

Changes in current assets and liabilities:
 
 
 
Accounts receivable
15,541

 
(50,030
)
Prepaid and other current assets
(335
)
 
(865
)
Accounts payable, accrued expenses and other current liabilities
(9,733
)
 
11,047

Current contingent consideration
(2,670
)
 
(3,000
)
Income taxes receivable
65

 
4,513

Other, net
(1,655
)
 
8

Net cash provided by operating activities attributable to continuing operations
96,216


110,880

Cash flows from investing activities attributable to continuing operations:
 
 
 
Capital expenditures
(20,386
)
 
(15,151
)
Proceeds from sale of fixed assets

 
24,060

Equity investment
(80,000
)
 

Acquisition of ValuePenguin, net of cash acquired

 
(105,578
)
Acquisition of QuoteWizard, net of cash acquired

 
482

Net cash used in investing activities attributable to continuing operations
(100,386
)

(96,187
)
Cash flows from financing activities attributable to continuing operations:
 
 
 
Payments related to net-share settlement of stock-based compensation, net of proceeds from exercise of stock options
(1,421
)
 
(9,459
)
Proceeds from the issuance of 0.50% Convertible Senior Notes
575,000

 

Repurchase of 0.625% Convertible Senior Notes
(233,862
)
 

Payment for convertible note hedge on the 0.50% Convertible Senior Notes
(124,200
)
 

Termination of convertible note hedge on the 0.625% Convertible Senior Notes
109,881

 

Proceeds from the sale of warrants related to the 0.50% Convertible Senior Notes
61,180

 

Termination of warrants related to the 0.625% Convertible Senior Notes
(94,292
)
 

Net repayment of revolving credit facility
(75,000
)
 
(40,000
)
Payment of debt issuance costs
(16,398
)
 
(31
)
Contingent consideration payments
(3,330
)
 
(3,000
)
Purchase of treasury stock

 
(4,286
)
Other financing activities
(183
)
 
(3
)
Net cash provided by (used in) financing activities attributable to continuing operations
197,375


(56,779
)
Total cash provided by (used in) continuing operations
193,205

 
(42,086
)
Discontinued operations:
 
 
 
Net cash used in operating activities attributable to discontinued operations
(66,171
)
 
(12,316
)
Total cash used in discontinued operations
(66,171
)
 
(12,316
)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents
127,034

 
(54,402
)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
60,339

 
105,158

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
$
187,373

 
$
50,756

 
 
 
 
Non-cash investing activities:
 
 
 
Capital additions from tenant improvement allowance
$

 
$
1,490

 

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

7


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)




NOTE 1ORGANIZATION
Company Overview
LendingTree, Inc. is currently the parent of LendingTree, LLC and several companies owned by LendingTree, LLC (collectively, "LendingTree" or the "Company").

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

The consolidated financial statements include the accounts of LendingTree and all its wholly-owned entities, except Home Loan Center, Inc. ("HLC") subsequent to its bankruptcy filing on July 21, 2019 which resulted in the Company's loss of a controlling interest in HLC under applicable accounting standards. Intercompany transactions and accounts have been eliminated.
Discontinued Operations
The LendingTree Loans business, which consisted of originating various consumer mortgage loans through HLC (the "LendingTree Loans Business"), is presented as discontinued operations in the accompanying consolidated balance sheets, consolidated statements of operations and comprehensive income and consolidated cash flows for all periods presented. The notes accompanying these consolidated financial statements reflect the Company's continuing operations and, unless otherwise noted, exclude information related to the discontinued operations. See Note 18Discontinued Operations for additional information.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). In the opinion of management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or any other period. The accompanying consolidated balance sheet as of December 31, 2019 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2019 (the "2019 Annual Report"). The accompanying consolidated financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in the 2019 Annual Report. 
NOTE 2SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
Management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates. 
Significant estimates underlying the accompanying consolidated financial statements, including discontinued operations, include: the recoverability of long-lived assets, goodwill and intangible assets; the determination of income taxes payable and deferred income taxes, including related valuation allowances; fair value of assets acquired in a business combination; contingent consideration related to business combinations; litigation accruals; HLC ownership related claims; contract assets; various other

8


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


allowances, reserves and accruals; assumptions related to the determination of stock-based compensation; and the determination of right-of-use assets and lease liabilities. 
The Company considered the impact of COVID-19 on the assumptions and estimates used when preparing its quarterly financial statements including, but not limited to, our allowance for doubtful accounts, valuation allowances, contract asset and contingent consideration. These assumptions and estimates may change as new events occur and additional information is obtained. If economic conditions caused by COVID-19 do not recover as currently estimated by management, such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity.
Certain Risks and Concentrations
LendingTree's business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud.
Financial instruments, which potentially subject the Company to concentration of credit risk at September 30, 2020, consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet. Cash and cash equivalents are in excess of Federal Deposit Insurance Corporation insurance limits, but are maintained with quality financial institutions of high credit. The Company requires certain Network Partners to maintain security deposits with the Company, which in the event of non-payment, would be applied against any accounts receivable outstanding.
Due to the nature of the mortgage lending industry, interest rate fluctuations may negatively impact future revenue from the Company's marketplace.
Lenders and lead purchasers participating on the Company's marketplace can offer their products directly to consumers through brokers, mass marketing campaigns or through other traditional methods of credit distribution. These lenders and lead purchasers can also offer their products online, either directly to prospective borrowers, through one or more online competitors, or both. If a significant number of potential consumers are able to obtain loans and other products from Network Partners without utilizing the Company's services, the Company's ability to generate revenue may be limited. Because the Company does not have exclusive relationships with the Network Partners whose loans and other financial products are offered on its online marketplace, consumers may obtain offers from these Network Partners without using its services.
Other than a support services office in India, the Company's operations are geographically limited to and dependent upon the economic condition of the United States.
Litigation Settlements and Contingencies
Litigation settlements and contingencies consists of expenses related to actual or anticipated litigation settlements.
Recently Adopted Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted ASU 2018-15 in the first quarter of 2020 using the prospective approach. Subsequent to the adoption of this ASU, capitalizable implementation costs incurred in a hosting arrangement that is a service contract are recorded within prepaid and other current assets and other non-current assets on the consolidated balance sheet. The expense related to these capitalized implementation costs are included within general and administrative expense on the consolidated statement of operations and comprehensive income. The adoption of ASU 2018-15 did not have a material impact on the consolidated financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020.
In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds certain disclosure requirements in Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurement. This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. Certain amendments must be applied prospectively while others are to be applied on a retrospective basis to all periods presented. The Company adopted ASU 2018-13 in the first quarter of 2020. See Note 16—Fair Value Measurements.

9


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


In January 2017, the FASB issued ASU 2017-04, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2 of the goodwill impairment test). Instead, an impairment charge will be based on the excess of the carrying amount over the fair value. This ASU is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. The Company adopted ASU 2017-04 in the first quarter of 2020.
In June 2016, the FASB issued ASU 2016-13, which requires entities to measure expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU introduces ASC Topic 326, Financial Instruments—Credit Losses, which replaces the existing incurred loss model and is applicable to financial assets measured at amortized cost, including trade receivables and certain other financial assets that have the contractual right to receive cash. ASC Topic 326 is effective for annual and interim reporting periods beginning after December 15, 2019. The guidance must be adopted using a modified retrospective transition. The Company adopted ASC Topic 326 as of January 1, 2020, which did not result in any cumulative effect adjustment to the opening balance of accumulated deficit in the period of adoption.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments, amends the derivatives scope exception guidance for contracts in an entity’s own equity, and amends the related earnings-per-share guidance. This ASU is effective for annual and interim reporting periods beginning after December 15, 2021. Early adoption is permitted for fiscal years beginning after December 15, 2020, including adoption in interim periods. An entity should adopt the guidance as of the beginning of its annual fiscal year. An entity may adopt the amendments through either a modified retrospective method of transition or a fully retrospective method of transition. The Company expects the amendments to impact its convertible senior notes and warrants issued, and is evaluating the impact this ASU will have on its consolidated financial statements and whether to early adopt.
In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes, and clarifies certain aspects of the current guidance to improve consistency among reporting entities. This ASU is effective for annual and interim reporting periods beginning after December 15, 2020. Early adoption is permitted, including adoption in interim periods. Entities electing early adoption must adopt all amendments in the same period. Most amendments must be applied prospectively while others are to be applied on a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is evaluating the impact this ASU will have on its consolidated financial statements and will adopt ASU 2019-12 in the first quarter of 2021.
NOTE 3REVENUE
Revenue is as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2020
 
2019
 
2020
 
2019
Home
$
78,859

 
$
77,265

 
$
232,156

 
$
212,458

Credit cards
6,656

 
54,822

 
65,436

 
165,373

Personal loans
12,505

 
43,873

 
52,841

 
117,513

Other Consumer
29,216

 
53,234

 
87,142

 
118,735

Total Consumer
48,377

 
151,929

 
205,419

 
401,621

Insurance
92,500

 
74,849

 
248,156

 
213,882

Other
515

 
6,562

 
1,930

 
23,455

Total revenue
$
220,251

 
$
310,605

 
$
687,661

 
$
851,416


The Company derives its revenue primarily from match fees and closing fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised services have transferred to the customer. The Company's services are generally transferred to the customer at a point in time.
Revenue from Home products is primarily generated from upfront match fees paid by mortgage Network Partners that receive a loan request, and in some cases upfront fees for clicks or call transfers. Match fees and upfront fees for clicks and call transfers

10


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


are earned through the delivery of loan requests that originated through the Company's websites or affiliates. The Company recognizes revenue at the time a loan request is delivered to the customer, provided that no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a loan request to the customer.
Revenue from Consumer products is generated by match and other upfront fees for clicks or call transfers, as well as from closing fees, approval fees and upfront service and subscription fees. Closing fees are derived from lenders on certain auto loans, business loans, personal loans and student loans when the lender funds a loan with the consumer. Approval fees are derived from credit card issuers when the credit card consumer receives card approval from the credit card issuer. Upfront service fees and subscription fees are derived from consumers in the Company's credit services product. Upfront fees paid by consumers are recognized as revenue over the estimated time the consumer will remain a customer and receive services. Subscription fees are recognized over the period a consumer is receiving services.
The Company recognizes revenue on closing fees and approval fees at the point when a loan request or a credit card consumer is delivered to the customer. The Company's contractual right to closing fees and approval fees is not contemporaneous with the satisfaction of the performance obligation to deliver a loan request or a credit card consumer to the customer. As such, the Company records a contract asset at each reporting period-end related to the estimated variable consideration on closing fees and approval fees for which the Company has satisfied the related performance obligation, but are still pending the loan closing or credit card approval before the Company has a contractual right to payment. This estimate is based on the Company's historical closing rates and historical time between when a consumer request for a loan or credit card is delivered to the lender or card issuer and when the loan is closed by the lender or approved by the card issuer.
Revenue from the Company's Insurance products is primarily generated from upfront match fees, and upfront fees for website clicks or fees for calls. Match fees and upfront fees for clicks and call transfers are earned through the delivery of consumer requests that originated through the Company's websites or affiliates. The Company recognizes revenue at the time a consumer request is delivered to the customer, provided that no significant obligations remain. The Company's contractual right to the match fee consideration is contemporaneous with the satisfaction of the performance obligation to deliver a consumer request to the customer.
The contract asset recorded within prepaid and other current assets on the consolidated balance sheets related to estimated variable consideration was $6.1 million and $6.5 million at September 30, 2020 and December 31, 2019, respectively.
The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers in the Company's Consumer business was $0.9 million and $0.6 million at September 30, 2020 and December 31, 2019, respectively. During the first nine months of 2020, the Company recognized revenue of $0.6 million that was included in the contract liability balance at December 31, 2019. During the first nine months of 2019, the Company recognized revenue of $0.4 million that was included in the contract liability balance at December 31, 2018.
Revenue recognized in any reporting period includes estimated variable consideration for which the Company has satisfied the related performance obligations, but are still pending the occurrence or non-occurrence of a future event outside the Company's control (such as lenders providing loans to consumers or credit card approvals of consumers) before the Company has a contractual right to payment. The Company recognized increases to such revenue from prior periods of $0.6 million and $0.9 million in the third quarters of 2020 and 2019, respectively.
NOTE 4CASH AND RESTRICTED CASH
Total cash, cash equivalents, restricted cash and restricted cash equivalents consist of the following (in thousands):
 
September 30,
2020
 
December 31,
2019
Cash and cash equivalents
$
187,261

 
$
60,243

Restricted cash and cash equivalents
112

 
96

Total cash, cash equivalents, restricted cash and restricted cash equivalents
$
187,373

 
$
60,339


NOTE 5ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts.

11


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, previous loss history, current and expected economic conditions and the specific customer's current and expected ability to pay its obligation. Accounts receivable are considered past due when they are outstanding longer than the contractual payment terms. Accounts receivable are written off when management deems them uncollectible.
A reconciliation of the beginning and ending balances of the allowance for doubtful accounts is as follows (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended
September 30,
 
2020
 
2019
 
2020
 
2019
Balance, beginning of the period
$
1,756

 
$
1,676

 
$
1,466

 
$
1,143

Charges to earnings
365

 
583

 
1,314

 
1,865

Write-off of uncollectible accounts receivable
(483
)
 
(441
)
 
(1,152
)
 
(1,202
)
Recoveries collected

 
5

 
10

 
17

Balance, end of the period
$
1,638

 
$
1,823

 
$
1,638

 
$
1,823


NOTE 6GOODWILL AND INTANGIBLE ASSETS
The balance of goodwill and intangible assets, net is as follows (in thousands):
 
September 30,
2020
 
December 31,
2019
Goodwill
$
903,227

 
$
903,227

Accumulated impairment losses
(483,088
)
 
(483,088
)
Net goodwill
$
420,139

 
$
420,139

 
 
 
 
Intangible assets with indefinite lives
$
10,142

 
$
10,142

Intangible assets with definite lives, net
130,835

 
171,438

Total intangible assets, net
$
140,977

 
$
181,580


Goodwill and Indefinite-Lived Intangible Assets
The Company's goodwill at each of September 30, 2020 and December 31, 2019 consists of $59.3 million associated with the Home segment, $166.1 million associated with the Consumer segment, and $194.7 million associated with the Insurance segment.
Intangible assets with indefinite lives relate to the Company's trademarks.
Intangible Assets with Definite Lives
Intangible assets with definite lives relate to the following (in thousands):
 
Cost
 
Accumulated
Amortization
 
Net
Technology
$
116,000

 
$
(70,004
)
 
$
45,996

Customer lists
77,300

 
(17,033
)
 
60,267

Trademarks and tradenames
17,200

 
(9,062
)
 
8,138

Website content
43,200

 
(26,767
)
 
16,433

Other
5

 
(4
)
 
1

Balance at September 30, 2020
$
253,705

 
$
(122,870
)
 
$
130,835


12


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 
Cost
 
Accumulated
Amortization
 
Net
Technology
$
116,200

 
$
(48,938
)
 
$
67,262

Customer lists
77,300

 
(12,452
)
 
64,848

Trademarks and tradenames
17,200

 
(6,407
)
 
10,793

Website content
51,000

 
(22,467
)
 
28,533

Other
5

 
(3
)
 
2

Balance at December 31, 2019
$
261,705

 
$
(90,267
)
 
$
171,438


Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of September 30, 2020, future amortization is estimated to be as follows (in thousands):
 
Amortization Expense
Remainder of current year
$
12,475

Year ending December 31, 2021
42,738

Year ending December 31, 2022
25,256

Year ending December 31, 2023
8,602

Year ending December 31, 2024
6,747

Thereafter
35,017

Total intangible assets with definite lives, net
$
130,835

 
NOTE 7EQUITY INVESTMENT
On February 28, 2020, the Company acquired an equity interest in Stash Financial, Inc. (“Stash”) for $80.0 million. Stash is a consumer investing and banking platform. Stash brings together banking, investing, and education into one seamless experience offering a full-suite of personal investment accounts, Traditional and Roth IRAs, custodial investment accounts, and banking services, including checking accounts and debit cards with a Stock-Back® rewards program.
The Stash equity securities do not have a readily determinable fair value and, upon acquisition, the Company elected the measurement alternative to value its securities. The Stash equity securities will be carried at cost and subsequently marked to market upon observable market events with any gains or losses recorded in operating income in the consolidated statement of operations. As of September 30, 2020, there have been no observable market events that would result in upward or downward adjustments in the fair value and there have been no impairments to the original cost of $80.0 million.
NOTE 8BUSINESS ACQUISITIONS
Changes in Contingent Consideration
In 2018, the Company acquired all of the outstanding equity interests of QuoteWizard.com, LLC (“QuoteWizard”) and Ovation Credit Services, Inc. (“Ovation”).
In 2017, the Company acquired certain assets of Snap Capital LLC, which does business under the name SnapCap (“SnapCap”) and all of the assets of Deposits Online, LLC, which does business under the name DepositAccounts.com (“DepositAccounts”).
The Company will make earnout payments ranging from zero to $46.8 million based on the achievement of certain defined performance targets for QuoteWizard. During 2020, the Company made the final earnout payments related to the achievement of certain defined earnings targets for SnapCap. The Company made no earnout payments related to the DepositAccounts acquisition during 2020, and the earnout is complete.
In October 2020, the Company made the final earnout payment related to the achievement of certain defined operating metrics for Ovation.

13


LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Changes in the fair value of contingent consideration is summarized as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2020
 
2019
 
2020
 
2019
QuoteWizard
$
6,568

 
$
4,278

 
$
6,364

 
$
21,171

Ovation
90

 
(811
)
 
1,270

 
(825
)
SnapCap

 
372

 
77

 
1,822

DepositAccounts

 

 

 
(947
)
Total changes in fair value of contingent consideration
$
6,658

 
$
3,839

 
$
7,711

 
$
21,221


As of September 30, 2020, the estimated fair value of the contingent consideration for the QuoteWizard acquisition totaled $30.8 million, of which $20.7 million is included in current contingent consideration and $10.1 million is included in non-current contingent consideration in the accompanying consolidated balance sheet. The estimated fair value of the contingent consideration payments is determined using an option pricing model. The estimated value of the contingent consideration is based upon available information and certain assumptions, known at the time of this report, which management believes are reasonable.
As of September 30, 2020, the estimated fair value of the contingent consideration for the Ovation acquisition totaled $4.4 million, which is included in current contingent consideration in the accompanying consolidated balance sheet. The estimated fair value of the contingent consideration payment is based on the $4.4 million achieved target discounted from the payment due date to September 30, 2020.
Any differences in the actual contingent consideration payments will be recorded in operating income in the consolidated statements of operations and comprehensive income.
NOTE 9ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following (in thousands):
 
September 30,
2020
 
December 31,
2019
Accrued advertising expense
$
50,752

 
$
65,836

Accrued compensation and benefits
15,480

 
10,540

Accrued professional fees
3,510

 
1,560

Customer deposits and escrows
7,547

 
6,920

Contribution to LendingTree Foundation
3,333

 
3,333

Current lease liabilities
5,826

 
6,885

Other
19,885

 
17,681

Total accrued expenses and other current liabilities
$
106,333

 
$
112,755


NOTE 10—LEASES
The Company is a lessee to leases of corporate offices and certain office equipment. The majority of leases for corporate offices include one or more options to renew, with renewal terms ranging from two to five years. These renewal options have not been included in the calculation of right-of-use assets and lease liabilities, as the Company is not reasonably certain of the exercise of these renewal options. The Company used its incremental borrowing rate to calculate the right-of-use asset and lease liability for each lease.
As of September 30, 2020, right-of-use assets totaled $86.2 million and lease liabilities, the current portion of which is included in accrued expenses and other current liabilities in the accompanying balance sheet, totaled $93.4 million. At December 31, 2019, right-of-use assets totaled $25.5 million and lease liabilities totaled