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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
(State or other jurisdiction of
incorporation or organization)
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26-2414818
(I.R.S. Employer
Identification No.)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Emerging growth company
o
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Page
Number
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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||
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Three Months Ended
March 31, |
||||||
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2018
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2017
|
||||
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(in thousands, except per share amounts)
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||||||
Revenue
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$
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181,035
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$
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132,515
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Costs and expenses:
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|
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Cost of revenue
(exclusive of depreciation and amortization shown separately below)
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5,696
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3,591
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Selling and marketing expense
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126,044
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93,251
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General and administrative expense
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22,814
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11,547
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Product development
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6,260
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3,623
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Depreciation
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1,671
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1,703
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Amortization of intangibles
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3,963
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2,609
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Change in fair value of contingent consideration
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(741
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)
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8,746
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Severance
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—
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157
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Litigation settlements and contingencies
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(22
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)
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404
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Total costs and expenses
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165,685
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125,631
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Operating income
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15,350
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6,884
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Other (expense) income, net:
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Interest expense, net
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(2,988
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)
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(165
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)
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Other income
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34
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|
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—
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Income before income taxes
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12,396
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|
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6,719
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|
||
Income tax benefit
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23,461
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|
1,079
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|
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Net income from continuing operations
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35,857
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|
7,798
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|
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Loss from discontinued operations, net of tax
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(4,333
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)
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|
(932
|
)
|
||
Net income and comprehensive income
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$
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31,524
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$
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6,866
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Weighted average shares outstanding:
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Basic
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12,090
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11,827
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Diluted
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14,848
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13,477
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Income per share from continuing operations:
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|
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Basic
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$
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2.97
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$
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0.66
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Diluted
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$
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2.41
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$
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0.58
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Loss per share from discontinued operations:
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Basic
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$
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(0.36
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)
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$
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(0.08
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)
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Diluted
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$
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(0.29
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)
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$
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(0.07
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)
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Net income per share:
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Basic
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$
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2.61
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$
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0.58
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Diluted
|
$
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2.12
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$
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0.51
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March 31,
2018 |
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December 31,
2017 |
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(in thousands, except par value and share amounts)
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ASSETS:
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Cash and cash equivalents
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$
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346,470
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$
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368,550
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Restricted cash and cash equivalents
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4,084
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4,091
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|
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Accounts receivable (net of allowance of $714 and $675, respectively)
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64,769
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53,444
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Prepaid and other current assets
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13,551
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11,881
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Current assets of discontinued operations
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175
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75
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Total current assets
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429,049
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438,041
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Property and equipment (net of accumulated depreciation of $12,901 and $13,043, respectively)
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37,560
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36,431
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Goodwill
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113,368
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113,368
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Intangible assets, net
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77,035
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81,125
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Deferred income tax assets
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45,406
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20,156
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|
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Other non-current assets
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1,933
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1,910
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Non-current assets of discontinued operations
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2,428
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2,428
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Total assets
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$
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706,779
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$
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693,459
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LIABILITIES:
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Accounts payable, trade
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$
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4,726
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$
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9,250
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Accrued expenses and other current liabilities
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78,150
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77,183
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Current contingent consideration
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28,357
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46,576
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Current liabilities of discontinued operations (Note 15)
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17,449
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14,507
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Total current liabilities
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128,682
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147,516
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Long-term debt
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241,332
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238,199
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Non-current contingent consideration
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5,251
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11,273
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|
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Other non-current liabilities
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1,611
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1,597
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Total liabilities
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376,876
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398,585
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Commitments and contingencies (Note 12)
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|
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SHAREHOLDERS' EQUITY:
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Preferred stock $.01 par value; 5,000,000 shares authorized; none issued or outstanding
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—
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—
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Common stock $.01 par value; 50,000,000 shares authorized; 14,691,595 and 14,218,572 shares issued, respectively, and 12,422,041 and 11,979,434 shares outstanding, respectively
|
147
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|
|
142
|
|
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Additional paid-in capital
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1,100,743
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1,087,582
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|
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Accumulated deficit
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(675,457
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)
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|
(708,354
|
)
|
||
Treasury stock; 2,269,554 and 2,239,138 shares, respectively
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(96,085
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)
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(85,085
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)
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Noncontrolling interest
|
555
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|
589
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Total shareholders' equity
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329,903
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294,874
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Total liabilities and shareholders' equity
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$
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706,779
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$
|
693,459
|
|
|
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Common Stock
|
|
|
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|
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Treasury Stock
|
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||||||||||||||||||
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Total
|
|
Number
of Shares
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Number
of Shares
|
|
Amount
|
Noncontrolling Interest
|
||||||||||||||
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(in thousands)
|
|
||||||||||||||||||||||||||
Balance as of December 31, 2017
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$
|
294,874
|
|
|
14,218
|
|
|
$
|
142
|
|
|
$
|
1,087,582
|
|
|
$
|
(708,354
|
)
|
|
2,239
|
|
|
$
|
(85,085
|
)
|
$
|
589
|
|
Net income and comprehensive income
|
31,524
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31,524
|
|
|
—
|
|
|
—
|
|
—
|
|
||||||
Non-cash compensation
|
11,109
|
|
|
—
|
|
|
—
|
|
|
11,109
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
||||||
Purchase of treasury stock
|
(11,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
(11,000
|
)
|
—
|
|
||||||
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes
|
2,057
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|
473
|
|
|
5
|
|
|
2,052
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
||||||
Cumulative effect adjustment due to ASU 2014-09
|
1,373
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,373
|
|
|
—
|
|
|
—
|
|
—
|
|
||||||
Noncontrolling interest
|
(34
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(34
|
)
|
||||||
Balance as of March 31, 2018
|
$
|
329,903
|
|
|
14,691
|
|
|
$
|
147
|
|
|
$
|
1,100,743
|
|
|
$
|
(675,457
|
)
|
|
2,269
|
|
|
$
|
(96,085
|
)
|
$
|
555
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Cash flows from operating activities attributable to continuing operations:
|
|
|
|
|
|
||
Net income and comprehensive income
|
$
|
31,524
|
|
|
$
|
6,866
|
|
Less: Loss from discontinued operations, net of tax
|
4,333
|
|
|
932
|
|
||
Income from continuing operations
|
35,857
|
|
|
7,798
|
|
||
Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations:
|
|
|
|
|
|
||
Loss on disposal of fixed assets
|
92
|
|
|
273
|
|
||
Amortization of intangibles
|
3,963
|
|
|
2,609
|
|
||
Depreciation
|
1,671
|
|
|
1,703
|
|
||
Rental amortization of intangibles and depreciation
|
202
|
|
|
262
|
|
||
Non-cash compensation expense
|
11,109
|
|
|
2,230
|
|
||
Deferred income taxes
|
(25,781
|
)
|
|
(3,307
|
)
|
||
Change in fair value of contingent consideration
|
(741
|
)
|
|
8,746
|
|
||
Bad debt expense
|
56
|
|
|
157
|
|
||
Amortization of debt issuance costs
|
434
|
|
|
61
|
|
||
Amortization of convertible debt discount
|
2,799
|
|
|
—
|
|
||
Changes in current assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(11,381
|
)
|
|
(11,132
|
)
|
||
Prepaid and other current assets
|
(515
|
)
|
|
(269
|
)
|
||
Accounts payable, accrued expenses and other current liabilities
|
(2,024
|
)
|
|
6,086
|
|
||
Income taxes receivable
|
2,092
|
|
|
2,143
|
|
||
Other, net
|
(158
|
)
|
|
(176
|
)
|
||
Net cash provided by operating activities attributable to continuing operations
|
17,675
|
|
|
17,184
|
|
||
Cash flows from investing activities attributable to continuing operations:
|
|
|
|
|
|
||
Capital expenditures
|
(3,456
|
)
|
|
(1,896
|
)
|
||
Acquisition of SnapCap
|
(10
|
)
|
|
—
|
|
||
Other investing activities
|
(34
|
)
|
|
—
|
|
||
Net cash used in investing activities attributable to continuing operations
|
(3,500
|
)
|
|
(1,896
|
)
|
||
Cash flows from financing activities attributable to continuing operations:
|
|
|
|
|
|
||
Proceeds from exercise of stock options, net of payments related to net-share settlement of stock-based compensation
|
2,057
|
|
|
(95
|
)
|
||
Contingent consideration payments
|
(23,500
|
)
|
|
—
|
|
||
Payment of debt issuance costs
|
(76
|
)
|
|
—
|
|
||
Purchase of treasury stock
|
(12,099
|
)
|
|
—
|
|
||
Net cash used in financing activities attributable to continuing operations
|
(33,618
|
)
|
|
(95
|
)
|
||
Total cash (used in) provided by continuing operations
|
(19,443
|
)
|
|
15,193
|
|
||
Discontinued operations:
|
|
|
|
||||
Net cash used in operating activities attributable to discontinued operations
|
(2,644
|
)
|
|
(891
|
)
|
||
Total cash used in discontinued operations
|
(2,644
|
)
|
|
(891
|
)
|
||
Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents
|
(22,087
|
)
|
|
14,302
|
|
||
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
|
372,641
|
|
|
95,220
|
|
||
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
|
$
|
350,554
|
|
|
$
|
109,522
|
|
|
December 31,
2017 |
|
Adjustments
due to
ASC Topic 606
|
|
January 1,
2018 |
||||||
Assets:
|
|
|
|
|
|
||||||
Prepaid and other current assets
|
$
|
11,881
|
|
|
$
|
1,903
|
|
|
$
|
13,784
|
|
Deferred income tax assets
|
20,156
|
|
|
(530
|
)
|
|
19,626
|
|
|||
|
|
|
|
|
|
||||||
Shareholders' equity:
|
|
|
|
|
|
||||||
Accumulated deficit
|
$
|
(708,354
|
)
|
|
$
|
1,373
|
|
|
$
|
(706,981
|
)
|
|
Three Months Ended March 31, 2018
|
||||||||||
|
As Reported
|
|
Balances without
adoption of
ASC Topic 606
|
|
Effect of Change
|
||||||
Revenue
|
$
|
181,035
|
|
|
$
|
180,844
|
|
|
$
|
191
|
|
|
|
|
|
|
|
||||||
Costs and expenses:
|
|
|
|
|
|
||||||
Income tax benefit
|
23,461
|
|
|
23,513
|
|
|
(52
|
)
|
|||
|
|
|
|
|
|
||||||
Net income from continuing operations
|
$
|
35,857
|
|
|
$
|
35,718
|
|
|
$
|
139
|
|
|
March 31, 2018
|
||||||||||
|
As Reported
|
|
Balances without
adoption of
ASC Topic 606
|
|
Effect of Change
|
||||||
Assets:
|
|
|
|
|
|
||||||
Prepaid and other current assets
|
$
|
13,551
|
|
|
$
|
11,456
|
|
|
$
|
2,095
|
|
Deferred income tax assets
|
45,406
|
|
|
45,936
|
|
|
(530
|
)
|
|||
|
|
|
|
|
|
||||||
Shareholders' equity:
|
|
|
|
|
|
||||||
Accumulated deficit
|
$
|
(675,457
|
)
|
|
$
|
(677,022
|
)
|
|
$
|
1,565
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
(As Reported)
|
|
2017
|
||||
Revenue:
|
|
|
|
||||
Mortgage products
|
$
|
73,462
|
|
|
$
|
62,938
|
|
Non-mortgage products
|
|
|
|
||||
Credit cards
|
46,132
|
|
|
33,773
|
|
||
Personal loans
|
25,965
|
|
|
17,014
|
|
||
Other
|
35,476
|
|
|
18,790
|
|
||
Total non-mortgage products
|
107,573
|
|
|
69,577
|
|
||
Total revenue
|
$
|
181,035
|
|
|
$
|
132,515
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Cash and cash equivalents
|
$
|
346,470
|
|
|
$
|
368,550
|
|
Restricted cash and cash equivalents
|
4,084
|
|
|
4,091
|
|
||
Total cash, cash equivalents, restricted cash and restricted cash equivalents
|
$
|
350,554
|
|
|
$
|
372,641
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Cash in escrow from sale of LendingTree Loans
(a)
|
$
|
4,036
|
|
|
$
|
4,034
|
|
Other
|
48
|
|
|
57
|
|
||
Total restricted cash and cash equivalents
|
$
|
4,084
|
|
|
$
|
4,091
|
|
(a)
|
Home Loan Center, Inc. ("HLC"), a subsidiary of the Company, continues to be liable for certain indemnification obligations, repurchase obligations and premium repayment obligations following the sale of substantially all of the operating assets of its LendingTree Loans business in the second quarter of 2012.
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Goodwill
|
$
|
596,456
|
|
|
$
|
596,456
|
|
Accumulated impairment losses
|
(483,088
|
)
|
|
(483,088
|
)
|
||
Net goodwill
|
$
|
113,368
|
|
|
$
|
113,368
|
|
|
|
|
|
||||
Intangible assets with indefinite lives
|
$
|
10,142
|
|
|
$
|
10,142
|
|
Intangible assets with definite lives, net
|
66,893
|
|
|
70,983
|
|
||
Total intangible assets, net
|
$
|
77,035
|
|
|
$
|
81,125
|
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
||||||
Technology
|
$
|
37,500
|
|
|
$
|
(10,951
|
)
|
|
$
|
26,549
|
|
Customer lists
|
33,100
|
|
|
(3,977
|
)
|
|
29,123
|
|
|||
Trademarks and tradenames
|
6,942
|
|
|
(2,310
|
)
|
|
4,632
|
|
|||
Tenant leases
|
1,362
|
|
|
(630
|
)
|
|
732
|
|
|||
Website content
|
7,800
|
|
|
(1,950
|
)
|
|
5,850
|
|
|||
Other
|
256
|
|
|
(249
|
)
|
|
7
|
|
|||
Balance at March 31, 2018
|
$
|
86,960
|
|
|
$
|
(20,067
|
)
|
|
$
|
66,893
|
|
|
Amortization Expense
|
||
Remainder of current year
|
$
|
12,160
|
|
Year ending December 31, 2019
|
15,995
|
|
|
Year ending December 31, 2020
|
13,970
|
|
|
Year ending December 31, 2021
|
5,763
|
|
|
Year ending December 31, 2022
|
3,902
|
|
|
Thereafter
|
15,103
|
|
|
Total intangible assets with definite lives, net
|
$
|
66,893
|
|
|
Three Months Ended
March 31, 2017 |
||
|
(in thousands)
|
||
Pro forma revenue
|
$
|
136,578
|
|
Pro forma net income from continuing operations
|
$
|
7,800
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Accrued litigation liabilities
|
$
|
32
|
|
|
$
|
346
|
|
Accrued advertising expense
|
43,728
|
|
|
40,727
|
|
||
Accrued compensation and benefits
|
5,432
|
|
|
7,679
|
|
||
Accrued professional fees
|
917
|
|
|
2,072
|
|
||
Customer deposits and escrows
|
5,555
|
|
|
5,564
|
|
||
Contribution to LendingTree Foundation
|
10,000
|
|
|
10,000
|
|
||
Other
|
12,486
|
|
|
10,795
|
|
||
Total accrued expenses and other current liabilities
|
$
|
78,150
|
|
|
$
|
77,183
|
|
|
Three Months Ended March 31,
|
||||
|
2018
|
|
2017
|
||
Weighted average basic common shares
|
12,090
|
|
|
11,827
|
|
Effect of stock options
|
1,559
|
|
|
1,553
|
|
Effect of dilutive share awards
|
213
|
|
|
97
|
|
Effect of Convertible Senior Notes and warrants
|
986
|
|
|
—
|
|
Weighted average diluted common shares
|
14,848
|
|
|
13,477
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Cost of revenue
|
$
|
58
|
|
|
$
|
43
|
|
Selling and marketing expense
|
1,501
|
|
|
485
|
|
||
General and administrative expense
|
8,739
|
|
|
1,219
|
|
||
Product development
|
811
|
|
|
483
|
|
||
Total non-cash compensation
|
$
|
11,109
|
|
|
$
|
2,230
|
|
|
Number of Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
(a)
|
|||||
|
|
|
(per option)
|
|
(in years)
|
|
(in thousands)
|
|||||
Options outstanding at January 1, 2018
|
1,863,739
|
|
|
$
|
30.70
|
|
|
|
|
|
|
|
Granted
(b)
|
34,641
|
|
|
359.89
|
|
|
|
|
|
|
||
Exercised
|
(279,508
|
)
|
|
27.40
|
|
|
|
|
|
|
||
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Options outstanding at March 31, 2018
|
1,618,872
|
|
|
38.31
|
|
|
3.98
|
|
$
|
470,309
|
|
|
Options exercisable at March 31, 2018
|
1,439,582
|
|
|
$
|
16.29
|
|
|
3.32
|
|
$
|
448,951
|
|
(a)
|
The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of
$328.15
on the last trading day of the quarter ended
March 31, 2018
and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on
March 31, 2018
. The intrinsic value changes based on the market value of the Company's common stock.
|
(b)
|
During the
three
months ended
March 31, 2018
, the Company granted stock options to certain employees and a new member of the board of directors with a weighted average grant date fair value per share of
$183.26
, calculated using the Black-Scholes option pricing model, which vesting periods include (a)
two years
from the grant date, (b)
three years
from the grant date and (c)
four years
from the grant date.
|
Expected term
(1)
|
5.75 - 6.25 years
|
|
Expected dividend
(2)
|
—
|
|
Expected volatility
(3)
|
50% - 51%
|
|
Risk-free interest rate
(4)
|
2.33% - 2.78%
|
|
(1)
|
The expected term of stock options granted was calculated using the "Simplified Method," which utilizes the midpoint between the weighted average time of vesting and the end of the contractual term. This method was utilized for the stock options due to a lack of historical exercise behavior by the Company's employees.
|
(2)
|
For all stock options granted in
2018
,
no
dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.
|
(3)
|
The expected volatility rate is based on the historical volatility of the Company's common stock.
|
(4)
|
The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.
|
|
Number of Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
(a)
|
|||||
|
|
|
(per option)
|
|
(in years)
|
|
(in thousands)
|
|||||
Options outstanding at January 1, 2018
|
37,877
|
|
|
$
|
308.90
|
|
|
|
|
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Options outstanding at March 31, 2018
|
37,877
|
|
|
$
|
308.90
|
|
|
9.70
|
|
$
|
729
|
|
Options exercisable at March 31, 2018
|
—
|
|
|
$
|
—
|
|
|
0
|
|
$
|
—
|
|
(a)
|
The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of
$328.15
on the last trading day of the quarter ended
March 31, 2018
and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on
March 31, 2018
. The intrinsic value changes based on the market value of the Company's common stock.
|
|
RSUs
|
|||||
|
Number of Units
|
|
Weighted Average Grant Date Fair Value
|
|||
|
|
|
(per unit)
|
|||
Nonvested at January 1, 2018
|
152,829
|
|
|
$
|
121.68
|
|
Granted
|
36,948
|
|
|
364.34
|
|
|
Vested
|
(41,493
|
)
|
|
79.01
|
|
|
Forfeited
|
(840
|
)
|
|
151.35
|
|
|
Nonvested at March 31, 2018
|
147,444
|
|
|
$
|
194.33
|
|
|
RSUs with Performance Conditions
|
|||||
|
Number of Units
|
|
Weighted Average Grant Date Fair Value
|
|||
|
|
|
(per unit)
|
|||
Nonvested at January 1, 2018
|
111,205
|
|
|
$
|
160.34
|
|
Granted
|
—
|
|
|
—
|
|
|
Vested
|
(4,104
|
)
|
|
96.66
|
|
|
Forfeited
|
(2,055
|
)
|
|
109.57
|
|
|
Nonvested at March 31, 2018
|
105,046
|
|
|
$
|
163.83
|
|
|
Number of Options with Market Conditions
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
(a)
|
|||||
|
|
|
(per option)
|
|
(in years)
|
|
(in thousands)
|
|||||
Options outstanding at January 1, 2018
|
402,694
|
|
|
$
|
183.80
|
|
|
|
|
|
|
|
Granted (b)
|
44,499
|
|
|
351.70
|
|
|
|
|
|
|
||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Options outstanding at March 31, 2018
|
447,193
|
|
|
200.51
|
|
|
9.37
|
|
$
|
58,129
|
|
|
Options exercisable at March 31, 2018
|
—
|
|
|
$
|
—
|
|
|
0
|
|
$
|
—
|
|
(a)
|
The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of
$328.15
on the last trading day of the quarter ended March 31, 2018 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on March 31, 2018. The intrinsic value changes based on the market value of the Company's common stock.
|
(b)
|
During the three months ended March 31, 2018, the Company granted stock options with a weighted average grant date fair value per share of
$296.80
, calculated using the Monte Carlo simulation model, which have vesting dates of March 31, 2022 and September 30, 2022.
|
Expected term
(1)
|
7.00 - 7.15 years
|
|
Expected dividend
(2)
|
—
|
|
Expected volatility
(3)
|
50%
|
|
Risk-free interest rate
(4)
|
2.38% - 2.81%
|
|
(1)
|
The expected term of stock options with a market condition granted was calculated using the midpoint between the weighted average time of vesting and the end of the contractual term.
|
(2)
|
For all stock options with a market condition granted in 2018,
no
dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.
|
(3)
|
The expected volatility rate is based on the historical volatility of the Company's common stock.
|
(4)
|
The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(in thousands, except percentages)
|
||||||
Income tax benefit
|
$
|
23,461
|
|
|
$
|
1,079
|
|
Effective tax rate
|
189.3
|
%
|
|
16.1
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Income tax expense - excluding excess tax benefit on stock compensation
|
$
|
(3,742
|
)
|
|
$
|
(2,683
|
)
|
Excess tax benefit on stock compensation
|
27,203
|
|
|
3,762
|
|
||
Income tax benefit
|
$
|
23,461
|
|
|
$
|
1,079
|
|
•
|
during any calendar quarter commencing after the calendar quarter ending on September 30, 2017 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive)
|
•
|
during the
five
business day period after any
five
consecutive trading day period in which, for each trading day of that period, the trading price (as defined in the Notes) per
$1,000
principal amount of Notes for such trading day was less than
98%
of the product of the last reported sale price of the Common Stock and the conversion rate on each such trading day; or
|
•
|
upon the occurrence of specified corporate events including but not limited to a fundamental change.
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Gross carrying amount
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Unamortized debt discount
|
52,403
|
|
|
55,202
|
|
||
Debt issuance costs
|
6,265
|
|
|
6,599
|
|
||
Net carrying amount
|
$
|
241,332
|
|
|
$
|
238,199
|
|
•
|
a base rate generally defined as the sum of (i) the greater of (a) the
prime rate of SunTrust Bank
, (b) the
federal funds effective rate
plus
0.5%
and (c) the
LIBO rate
(defined below) on a daily basis applicable for an interest period of one month plus
1.0%
and (ii) an applicable percentage of
0.25%
to
1.0%
based on a total consolidated debt to EBITDA ratio; or
|
•
|
a LIBO rate generally defined as the sum of (i) the
rate for Eurodollar deposits
in the applicable currency and (ii) an applicable percentage of
1.25%
to
2.0%
based on a total consolidated debt to EBITDA ratio.
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Contingent consideration, beginning of period
|
$
|
57,349
|
|
|
$
|
23,100
|
|
Transfers into Level 3
|
—
|
|
|
—
|
|
||
Transfers out of Level 3
|
—
|
|
|
—
|
|
||
Total net (gains) losses included in earnings (realized and unrealized)
|
(741
|
)
|
|
8,746
|
|
||
Purchases, sales and settlements:
|
|
|
|
||||
Additions
|
—
|
|
|
—
|
|
||
Payments
|
(23,500
|
)
|
|
—
|
|
||
Contingent consideration, end of period
|
$
|
33,108
|
|
|
$
|
31,846
|
|
|
Three Months Ended
March 31, |
|||||
|
2018
|
2017
|
||||
Mortgage products
|
$
|
73,462
|
|
$
|
62,938
|
|
Non-mortgage products
|
107,573
|
|
69,577
|
|
||
Total revenue
|
$
|
181,035
|
|
$
|
132,515
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Revenue
|
$
|
—
|
|
|
$
|
(750
|
)
|
|
|
|
|
||||
Loss before income taxes
|
$
|
(5,485
|
)
|
|
$
|
(1,435
|
)
|
Income tax benefit
|
1,152
|
|
|
503
|
|
||
Net loss
|
$
|
(4,333
|
)
|
|
$
|
(932
|
)
|
|
Number of Loans
|
|
Original Issue Balance
|
|||
|
(in thousands)
|
|
(in billions)
|
|||
Loans sold by HLC
|
234
|
|
|
$
|
38.9
|
|
Subsequent settlements
|
(172
|
)
|
|
(28.8
|
)
|
|
Remaining unsettled balance as of March 31, 2018
|
62
|
|
|
$
|
10.1
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Loan loss reserve, beginning of period
|
$
|
7,554
|
|
|
$
|
6,804
|
|
Provisions
|
—
|
|
|
750
|
|
||
Charge-offs to reserves
|
—
|
|
|
—
|
|
||
Loan loss reserve, end of period
|
$
|
7,554
|
|
|
$
|
7,554
|
|
|
Three Months Ended March 31,
|
||||||||||
|
2018
|
2017
|
$
Change
|
%
Change
|
|||||||
|
(Dollars in thousands)
|
||||||||||
Mortgage products
|
$
|
73,462
|
|
$
|
62,938
|
|
$
|
10,524
|
|
17
|
%
|
Non-mortgage products
|
107,573
|
|
69,577
|
|
37,996
|
|
55
|
%
|
|||
Revenue
|
181,035
|
|
132,515
|
|
48,520
|
|
37
|
%
|
|||
Costs and expenses:
|
|
|
|
|
|||||||
Cost of revenue
(exclusive of depreciation and amortization shown separately below)
|
5,696
|
|
3,591
|
|
2,105
|
|
59
|
%
|
|||
Selling and marketing expense
|
126,044
|
|
93,251
|
|
32,793
|
|
35
|
%
|
|||
General and administrative expense
|
22,814
|
|
11,547
|
|
11,267
|
|
98
|
%
|
|||
Product development
|
6,260
|
|
3,623
|
|
2,637
|
|
73
|
%
|
|||
Depreciation
|
1,671
|
|
1,703
|
|
(32
|
)
|
(2
|
)%
|
|||
Amortization of intangibles
|
3,963
|
|
2,609
|
|
1,354
|
|
52
|
%
|
|||
Change in fair value of contingent consideration
|
(741
|
)
|
8,746
|
|
(9,487
|
)
|
(108
|
)%
|
|||
Severance
|
—
|
|
157
|
|
(157
|
)
|
(100
|
)%
|
|||
Litigation settlements and contingencies
|
(22
|
)
|
404
|
|
(426
|
)
|
(105
|
)%
|
|||
Total costs and expenses
|
165,685
|
|
125,631
|
|
40,054
|
|
32
|
%
|
|||
Operating income
|
15,350
|
|
6,884
|
|
8,466
|
|
123
|
%
|
|||
Other (expense) income, net:
|
|
|
|
|
|||||||
Interest expense, net
|
(2,988
|
)
|
(165
|
)
|
2,823
|
|
1,711
|
%
|
|||
Other income
|
34
|
|
—
|
|
34
|
|
N/A
|
|
|||
Income before income taxes
|
12,396
|
|
6,719
|
|
5,677
|
|
84
|
%
|
|||
Income tax benefit
|
23,461
|
|
1,079
|
|
22,382
|
|
2,074
|
%
|
|||
Net income from continuing operations
|
35,857
|
|
7,798
|
|
28,059
|
|
360
|
%
|
|||
Loss from discontinued operations, net of tax
|
(4,333
|
)
|
(932
|
)
|
3,401
|
|
365
|
%
|
|||
Net income and comprehensive income
|
$
|
31,524
|
|
$
|
6,866
|
|
$
|
24,658
|
|
359
|
%
|
|
Three Months Ended March 31,
|
|||||||||||||
|
2018
|
|
2017
|
|
$
Change
|
|
%
Change
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Online
|
$
|
111,420
|
|
|
$
|
80,660
|
|
|
$
|
30,760
|
|
|
38
|
%
|
Broadcast
|
3,240
|
|
|
7,232
|
|
|
(3,992
|
)
|
|
(55
|
)%
|
|||
Other
|
3,368
|
|
|
1,110
|
|
|
2,258
|
|
|
203
|
%
|
|||
Total advertising expense
|
$
|
118,028
|
|
|
$
|
89,002
|
|
|
$
|
29,026
|
|
|
33
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
|
|
|
||||
Net income from continuing operations
|
$
|
35,857
|
|
|
$
|
7,798
|
|
Adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
||||
Amortization of intangibles
|
3,963
|
|
|
2,609
|
|
||
Depreciation
|
1,671
|
|
|
1,703
|
|
||
Severance
|
—
|
|
|
157
|
|
||
Loss on disposal of assets
|
92
|
|
|
273
|
|
||
Non-cash compensation
|
11,109
|
|
|
2,230
|
|
||
Change in fair value of contingent consideration
|
(741
|
)
|
|
8,746
|
|
||
Acquisition expense
|
62
|
|
|
549
|
|
||
Litigation settlements and contingencies
|
(22
|
)
|
|
404
|
|
||
Interest expense, net
|
2,988
|
|
|
165
|
|
||
Rental depreciation and amortization of intangibles
|
202
|
|
|
262
|
|
||
Income tax benefit
|
(23,461
|
)
|
|
(1,079
|
)
|
||
Adjusted EBITDA
|
$
|
31,720
|
|
|
$
|
23,817
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Net cash provided by operating activities
|
$
|
17,675
|
|
|
$
|
17,184
|
|
Net cash used in investing activities
|
(3,500
|
)
|
|
(1,896
|
)
|
||
Net cash used in financing activities
|
(33,618
|
)
|
|
(95
|
)
|
Period
|
|
Total Number of
Shares Purchased
(1)
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
(2)
|
|
Approximate
Dollar Value of Shares
that May Yet be
Purchased Under the
Plans or Programs
|
||||||
|
|
|
|
|
|
|
|
(in thousands)
|
||||||
1/1/18 - 1/31/18
|
|
31,359
|
|
|
$
|
361.56
|
|
|
30,416
|
|
|
$
|
16,748
|
|
2/1/18 - 2/28/18
|
|
14,340
|
|
|
$
|
356.57
|
|
|
—
|
|
|
$
|
116,748
|
|
3/1/18 - 3/31/18
|
|
411
|
|
|
$
|
365.42
|
|
|
—
|
|
|
$
|
116,748
|
|
Total
|
|
46,110
|
|
|
$
|
360.05
|
|
|
30,416
|
|
|
$
|
116,748
|
|
(1)
|
During
January 2018
,
February 2018
and
March 2018
,
943
shares,
14,340
shares and
411
shares, respectively (totaling
15,694
shares), were purchased to satisfy federal and state withholding obligations of our employees upon the settlement of restricted stock unit awards, all in accordance with our Fifth Amended and Restated 2008 Stock and Award Incentive Plan, as described above.
|
(2)
|
See the narrative disclosure above the table for further description of our publicly announced stock repurchase program.
|
Exhibit
|
|
Description
|
|
Location
|
|
|
|
|
|
|
|
3.1
|
|
|
|
Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed August 25, 2008
|
|
3.2
|
|
|
|
Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed November 15, 2017
|
|
10.1
|
|
|
|
†
|
|
10.2
|
|
|
|
†
|
|
10.3
|
|
|
|
†
|
|
31.1
|
|
|
|
†
|
|
31.2
|
|
|
|
†
|
|
32.1
|
|
|
|
††
|
|
32.2
|
|
|
|
††
|
|
101.INS
|
|
|
XBRL Instance Document
|
|
†††
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema Document
|
|
†††
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
†††
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
†††
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
†††
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
†††
|
|
LENDINGTREE, INC.
|
|
|
|
|
|
By:
|
/s/ J.D. MORIARTY
|
|
|
J.D. Moriarty
|
|
|
Chief Financial Officer
|
|
|
(principal financial officer and duly authorized officer)
|
|
LENDINGTREE, INC.
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
LENDINGTREE, LLC
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
EXECUTIVE
|
|
|
|
|
|
By:
|
/s/ J.D. Moriarty
|
|
Name:
|
J.D. Moriarty
|
|
Title:
|
Chief Financial Officer
|
If to the Company Group:
|
LendingTree, Inc.
11115 Rushmore Dr.
Charlotte, NC 28277
Attn: Chief Human Resources Officer
|
|
|
If to Executive:
|
At the most recent address for Executive on file with the Company Group.
|
|
LENDINGTREE, INC.
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
LENDINGTREE, LLC
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
EXECUTIVE
|
|
|
|
|
|
By:
|
/s/ J.D. Moriarty
|
|
Name:
|
J.D. Moriarty
|
|
Title:
|
Chief Financial Officer
|
|
LENDINGTREE, INC.
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
LENDINGTREE, LLC
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
EXECUTIVE
|
|
|
|
|
|
By:
|
/s/ Neil Salvage
|
|
Name:
|
Neil Salvage
|
|
Title:
|
President
|
If to the Company Group:
|
LendingTree, Inc.
11115 Rushmore Dr.
Charlotte, NC 28277
Attn: Chief Human Resources Officer
|
|
|
If to Executive:
|
At the most recent address for Executive on file with the Company Group.
|
|
LENDINGTREE, INC.
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
LENDINGTREE, LLC
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
EXECUTIVE
|
|
|
|
|
|
By:
|
/s/ Neil Salvage
|
|
Name:
|
Neil Salvage
|
|
Title:
|
President
|
|
LENDINGTREE, INC.
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
LENDINGTREE, LLC
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
EXECUTIVE
|
|
|
|
|
|
By:
|
/s/ Nikul Patel
|
|
Name:
|
Nikul Patel
|
|
Title:
|
Chief Strategy Officer
|
If to the Company Group:
|
LendingTree, Inc.
11115 Rushmore Dr.
Charlotte, NC 28277
Attn: Chief Human Resources and Administrative Officer
|
|
|
If to Executive:
|
At the most recent address for Executive on file with the Company Group.
|
|
LENDINGTREE, INC.
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
LENDINGTREE, LLC
|
|
|
|
|
|
By:
|
/s/ Claudette Parham
|
|
Name:
|
Claudette Parham
|
|
Title:
|
Chief Human Resources and Administrative Officer
|
|
EXECUTIVE
|
|
|
|
|
|
By:
|
/s/ Nikul Patel
|
|
Name:
|
Nikul Patel
|
|
Title:
|
Chief Strategy Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the period ended
March 31, 2018
of LendingTree, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Douglas R. Lebda
|
|
Douglas R. Lebda
|
|
Chairman and Chief Executive Officer
|
|
(principal executive officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the period ended
March 31, 2018
of LendingTree, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ J.D. Moriarty
|
|
J.D. Moriarty
|
|
Chief Financial Officer
|
|
(principal financial officer)
|
(1)
|
the Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2018
of LendingTree, Inc. (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of LendingTree, Inc.
|
|
/s/ Douglas R. Lebda
|
|
Douglas R. Lebda
|
|
Chairman and Chief Executive Officer
|
|
(principal executive officer)
|
(1)
|
the Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2018
of LendingTree, Inc. (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of LendingTree, Inc.
|
|
/s/ J.D. Moriarty
|
|
J.D. Moriarty
|
|
Chief Financial Officer
|
|
(principal financial officer)
|