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Table of Contents
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 March 31, 2021
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 
 
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.)
 1415 Vantage Park Dr., Suite 700, Charlotte, North Carolina 28203
(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 April 23, 2021, there were 13,310,246 shares of the registrant's common stock, par value $.01 per share, outstanding, excluding treasury shares.




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2

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements 

LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited) 
 Three Months Ended
March 31,
 20212020
 (in thousands, except per share amounts)
Revenue$272,750 $283,084 
Costs and expenses:  
Cost of revenue (exclusive of depreciation and amortization shown separately below)
13,895 14,252 
Selling and marketing expense197,462 195,538 
General and administrative expense34,989 32,082 
Product development12,468 10,963 
Depreciation3,718 3,378 
Amortization of intangibles11,312 13,757 
Change in fair value of contingent consideration797 (8,122)
Severance 158 
Litigation settlements and contingencies16 329 
Total costs and expenses274,657 262,335 
Operating (loss) income(1,907)20,749 
Other (expense) income, net:  
Interest expense, net(10,215)(4,834)
Other income40,072  
Income before income taxes27,950 15,915 
Income tax (expense) benefit(8,638)3,061 
Net income from continuing operations19,312 18,976 
Loss from discontinued operations, net of tax(263)(4,575)
Net income and comprehensive income$19,049 $14,401 
Weighted average shares outstanding:
Basic13,070 12,957 
Diluted14,119 14,158 
Income per share from continuing operations:
Basic$1.48 $1.46 
Diluted$1.37 $1.34 
Loss per share from discontinued operations:
Basic$(0.02)$(0.35)
Diluted$(0.02)$(0.32)
Net income per share:
Basic$1.46 $1.11 
Diluted$1.35 $1.02 
 
The accompanying notes to consolidated financial statements are an integral part of these statements.
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LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 (Unaudited) 
 March 31,
2021
December 31, 2020
 (in thousands, except par value and share amounts)
ASSETS:  
Cash and cash equivalents$162,091 $169,932 
Restricted cash and cash equivalents79 117 
Accounts receivable (net of allowance of $1,429 and $1,402, respectively)
123,067 89,841 
Prepaid and other current assets28,638 27,949 
Current assets of discontinued operations8,556 8,570 
Total current assets322,431 296,409 
Property and equipment (net of accumulated depreciation of $22,368 and $20,238, respectively)
71,572 62,381 
Operating lease right-of-use assets81,622 84,109 
Goodwill420,139 420,139 
Intangible assets, net117,189 128,502 
Deferred income tax assets87,586 96,224 
Equity investment121,253 80,000 
Other non-current assets5,403 5,334 
Non-current assets of discontinued operations15,982 15,892 
Total assets$1,243,177 $1,188,990 
LIABILITIES:  
Accounts payable, trade$7,230 $10,111 
Accrued expenses and other current liabilities113,442 101,196 
Current contingent consideration9,046  
Current liabilities of discontinued operations803 536 
Total current liabilities130,521 111,843 
Long-term debt619,502 611,412 
Operating lease liabilities97,352 92,363 
Non-current contingent consideration 8,249 
Other non-current liabilities359 362 
Total liabilities847,734 824,229 
Commitments and contingencies (Note 14)
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; 15,797,177 and 15,766,193 shares issued, respectively, and 13,155,859 and 13,124,875 shares outstanding, respectively
158 158 
Additional paid-in capital1,200,306 1,188,673 
Accumulated deficit(621,860)(640,909)
Treasury stock; 2,641,318 shares
(183,161)(183,161)
Total shareholders' equity395,443 364,761 
Total liabilities and shareholders' equity$1,243,177 $1,188,990 
 
The accompanying notes to consolidated financial statements are an integral part of these statements.
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LENDINGTREE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 (Unaudited)
 
  Common Stock Treasury Stock
 TotalNumber
of Shares
AmountAdditional
Paid-in
Capital
Accumulated
Deficit
Number
of Shares
Amount
 (in thousands)
Balance as of December 31, 2020$364,761 15,766 $158 $1,188,673 $(640,909)2,641 $(183,161)
Net income and comprehensive income19,049 — — — 19,049 — — 
Non-cash compensation16,436 — — 16,436 — — — 
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes(4,801)31 — (4,801)— — — 
Other(2)— — (2)— — — 
Balance as of March 31, 2021$395,443 15,797$158 $1,200,306 $(621,860)2,641$(183,161)

  Common Stock Treasury Stock
 TotalNumber
of Shares
AmountAdditional
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 income14,401 — — — 14,401 — — 
Non-cash compensation11,917 — — 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)
 
The accompanying notes to consolidated financial statements are an integral part of these statements.
5

Table of Contents
LENDINGTREE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended
March 31,
 20212020
 (in thousands)
Cash flows from operating activities attributable to continuing operations:  
Net income and comprehensive income$19,049 $14,401 
Less: Loss from discontinued operations, net of tax263 4,575 
Income from continuing operations19,312 18,976 
Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations:
Loss on disposal of assets348 530 
Amortization of intangibles11,312 13,757 
Depreciation3,718 3,378 
Non-cash compensation expense16,436 11,917 
Deferred income taxes8,638 (3,061)
Change in fair value of contingent consideration797 (8,122)
Unrealized gain on investments(40,072) 
Bad debt expense516 880 
Amortization of debt issuance costs1,275 582 
Amortization of convertible debt discount7,346 3,111 
Reduction in carrying amount of ROU asset, offset by change in operating lease liabilities7,132 (196)
Changes in current assets and liabilities:
Accounts receivable(33,743)(6,952)
Prepaid and other current assets(915)(1,430)
Accounts payable, accrued expenses and other current liabilities7,154 (3,271)
Income taxes receivable(89)65 
Other, net(240)(862)
Net cash provided by operating activities attributable to continuing operations8,925 29,302 
Cash flows from investing activities attributable to continuing operations:
Capital expenditures(10,553)(4,189)
Equity investment(1,180)(80,000)
Net cash used in investing activities attributable to continuing operations(11,733)(84,189)
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(4,801)(5,087)
Net proceeds from revolving credit facility 55,000 
Payment of debt issuance costs(168)(306)
Contingent consideration payments (3,000)
Other financing activities(31)(6)
Net cash (used in) provided by financing activities attributable to continuing operations(5,000)46,601 
Total cash used in continuing operations(7,808)(8,286)
Discontinued operations:
Net cash used in operating activities attributable to discontinued operations(71)(752)
Total cash used in discontinued operations(71)(752)
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents(7,879)(9,038)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period170,049 60,339 
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period$162,170 $51,301 
 
The accompanying notes to consolidated financial statements are an integral part of these statements.
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LENDINGTREE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



NOTE 1—ORGANIZATION
Company Overview
LendingTree, Inc. is the parent of LT Intermediate Company, LLC, which holds all of the outstanding ownership interests of LendingTree, LLC, and LendingTree, LLC owns several companies (collectively, "LendingTree" or the "Company").

LendingTree operates what it believes to be the leading online consumer platform that connects consumers with the choices they need to be confident in their financial decisions. The Company offers consumers tools and resources, including free credit scores, that facilitate comparison-shopping for mortgage loans, home equity loans and lines of credit, reverse mortgage loans, auto loans, credit cards, deposit accounts, personal loans, student loans, small business loans, insurance quotes 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 17Discontinued Operations for additional information.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020, 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 months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or any other period. The accompanying consolidated balance sheet as of December 31, 2020 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2020 (the "2020 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 2020 Annual Report. 
NOTE 2—SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
Management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates. 
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Significant estimates underlying the accompanying consolidated financial statements, including discontinued operations, include: the recoverability of long-lived assets, goodwill and intangible assets; the determination of income taxes payable and deferred income taxes, including related valuation allowances; fair value of assets acquired in a business combination; contingent consideration related to business combinations; litigation accruals; HLC ownership related claims; contract assets; various other allowances, reserves and accruals; assumptions related to the determination of stock-based compensation; and the determination of right-of-use assets and lease liabilities. 
The Company considered the impact of the COVID-19 pandemic on the assumptions and estimates used when preparing its financial statements including, but not limited to, the allowance for doubtful accounts, valuation allowances, contract asset and contingent consideration. These assumptions and estimates may change as new events occur and additional information is obtained. If economic conditions caused by the COVID-19 pandemic 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 March 31, 2021, consist primarily of cash and cash equivalents and accounts receivable, as disclosed in the consolidated balance sheet. Cash and cash equivalents are in excess of Federal Deposit Insurance Corporation insurance limits, but are maintained with quality financial institutions of high credit. The Company requires certain Network Partners to maintain security deposits with the Company, which in the event of non-payment, would be applied against any accounts receivable outstanding.
Due to the nature of the mortgage lending industry, interest rate fluctuations may negatively impact future revenue from the Company's marketplace.
Lenders and lead purchasers participating on the Company's marketplace can offer their products directly to consumers through brokers, mass marketing campaigns or through other traditional methods of credit distribution. These lenders and lead purchasers can also offer their products online, either directly to prospective borrowers, through one or more online competitors, or both. If a significant number of potential consumers are able to obtain loans and other products from Network Partners without utilizing the Company's services, the Company's ability to generate revenue may be limited. Because the Company does not have exclusive relationships with the Network Partners whose loans and other financial products are offered on its online marketplace, consumers may obtain offers from these Network Partners without using its service.
Other than a support services office in India, the Company's operations are geographically limited to and dependent upon the economic condition of the United States.
Litigation Settlements and Contingencies
Litigation settlements and contingencies consists of expenses related to actual or anticipated litigation settlements.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 was permitted, including adoption in interim periods. Entities electing early adoption were required to adopt all amendments in the same period. Most amendments require prospective application while others are to be applied on a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted ASU 2019-12 in the first quarter of 2021. The amendments applicable to the Company required prospective application, and do not have material impacts to its consolidated financial statements.
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
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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.
NOTE 3—REVENUE
Revenue is as follows (in thousands):
Three Months Ended
March 31,
20212020
Home$128,125 $79,174 
Credit cards17,637 51,586 
Personal loans14,868 31,509 
Other Consumer25,402 36,829 
Total Consumer57,907 119,924 
Insurance86,614 82,737 
Other104 1,249 
Total revenue$272,750 $283,084 
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 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
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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 in the Company's Consumer business was $7.1 million and $6.4 million at March 31, 2021 and December 31, 2020, respectively.
The contract liability recorded within accrued expenses and other current liabilities on the consolidated balance sheets related to upfront fees paid by consumers in the Company's Consumer business was $1.0 million and $0.7 million at March 31, 2021 and December 31, 2020, respectively. During the first quarter of 2021, the Company recognized revenue of $0.6 million that was included in the contract liability balance at December 31, 2020. During the first quarter of 2020, the Company recognized revenue of $0.5 million that was included in the contract liability balance at December 31, 2019.
Revenue recognized in any reporting period includes estimated variable consideration for which the Company has satisfied the related performance obligations but are still pending the occurrence or non-occurrence of a future event outside the Company's control (such as lenders providing loans to consumers or credit card approvals of consumers) before the Company has a contractual right to payment. The Company recognized increases to such revenue from prior periods of $0.3 million and $0.1 million in the first quarters of 2021 and 2020, respectively.
NOTE 4—CASH AND RESTRICTED CASH
Total cash, cash equivalents, restricted cash and restricted cash equivalents consist of the following (in thousands):
March 31,
2021
December 31, 2020
Cash and cash equivalents$162,091 $169,932 
Restricted cash and cash equivalents79 117 
Total cash, cash equivalents, restricted cash and restricted cash equivalents$162,170 $170,049 
NOTE 5—ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts.
The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, previous loss history, current and expected economic conditions and the specific customer's current and expected ability to pay its obligation. Accounts receivable are considered past due when they are outstanding longer than the contractual payment terms. Accounts receivable are written off when management deems them uncollectible.
A reconciliation of the beginning and ending balances of the allowance for doubtful accounts is as follows (in thousands):
 Three Months Ended
March 31,
 20212020
Balance, beginning of the period$1,402 $1,466 
Charges to earnings516 880 
Write-off of uncollectible accounts receivable(494)(332)
Recoveries collected5 7 
Balance, end of the period$1,429 $2,021 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6—GOODWILL AND INTANGIBLE ASSETS
The balance of goodwill, net and intangible assets, net is as follows (in thousands):
 March 31,
2021
December 31, 2020
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, net107,047 118,360 
Total intangible assets, net$117,189 $128,502 
Goodwill and Indefinite-Lived Intangible Assets
The Company's goodwill at each of March 31, 2021 and December 31, 2020 consists of $59.3 million associated with the Home segment, $166.1 million associated with the Consumer segment, and $194.7 million associated with the Insurance segment.
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):
 CostAccumulated
Amortization
Net
Technology$87,700 $(53,467)$34,233 
Customer lists77,300 (20,087)57,213 
Trademarks and tradenames17,200 (10,832)6,368 
Website content43,200 (33,967)9,233 
Balance at March 31, 2021$225,400 $(118,353)$107,047 
 CostAccumulated
Amortization
Net
Technology$87,700 $(48,166)$39,534 
Customer lists77,300 (18,560)58,740 
Trademarks and tradenames17,200 (9,947)7,253 
Website content43,200 (30,367)12,833 
Balance at December 31, 2020$225,400 $(107,040)$118,360 
Amortization of intangible assets with definite lives is computed on a straight-line basis and, based on balances as of March 31, 2021, future amortization is estimated to be as follows (in thousands):
 Amortization Expense
Remainder of current year$31,425 
Year ending December 31, 202225,256 
Year ending December 31, 20238,602 
Year ending December 31, 20246,747 
Year ending December 31, 20256,259 
Thereafter28,758 
Total intangible assets with definite lives, net$107,047 
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NOTE 7—EQUITY INVESTMENT
On February 28, 2020, the Company acquired an equity interest in Stash Financial, Inc. (“Stash”) for $80.0 million. On January 6, 2021, the Company acquired additional equity interest for $1.2 million. Stash is a consumer investing and banking platform. Stash brings together banking, investing, and financial services education into one seamless experience offering a full suite of personal investment accounts, traditional and Roth IRAs, custodial investment accounts, and banking services, including checking accounts and debit cards with a Stock-Back® rewards program.
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 to the consolidated statement of operations and comprehensive income. During the first quarter of 2021, the Company recorded a gain on the investment in Stash of $40.1 million as a result of an adjustment to the fair value of the Stash equity securities based on observable market events, which is included within other income on the consolidated statement of operations and comprehensive income. As of March 31, 2021, there have been no impairments to the acquisition cost of the Stash equity securities.
NOTE 8—BUSINESS 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”). During 2020, the Company made the final earnout payment related to the achievement of certain defined operating metrics for Ovation.
In 2017, the Company acquired certain assets of Snap Capital LLC, which does business under the name SnapCap (“SnapCap”). During 2020, the Company made the final earnout payments related to the achievement of certain defined earnings targets for SnapCap.
The Company will make an earnout payment ranging from zero to $23.4 million based on the achievement of certain defined performance targets for QuoteWizard.
Changes in the fair value of contingent consideration is summarized as follows (in thousands):
Three Months Ended
March 31,
20212020
QuoteWizard$797 $(8,262)
Ovation 141 
SnapCap (1)
Total changes in fair value of contingent consideration$797 $(8,122)
As of March 31, 2021, the estimated fair value of the contingent consideration for the QuoteWizard acquisition totaled $9.0 million, which is included in current contingent consideration in the accompanying consolidated balance sheet. The estimated fair value of the contingent consideration payments is determined using an option pricing model. The estimated value of the contingent consideration is based upon available information and certain assumptions, known at the time of this report, which management believes are reasonable.
Any differences in the actual contingent consideration payments will be recorded in operating income in the consolidated statements of operations and comprehensive income.
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NOTE 9—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following (in thousands):
 March 31,
2021
December 31, 2020
Accrued advertising expense$66,893 $54,045 
Accrued compensation and benefits11,478 14,081 
Accrued professional fees2,084 1,869 
Customer deposits and escrows7,614 8,153 
Contribution to LendingTree Foundation3,333 3,333 
Current lease liabilities5,031 5,375 
Other17,009 14,340 
Total accrued expenses and other current liabilities$113,442 $101,196 
NOTE 10—SHAREHOLDERS' EQUITY 
Basic and diluted income per share was determined based on the following share data (in thousands):
 Three Months Ended
March 31,
 20212020
Weighted average basic common shares13,070 12,957 
Effect of stock options658 628 
Effect of dilutive share awards118 104 
Effect of Convertible Senior Notes and warrants273 469 
Weighted average diluted common shares14,119 14,158 
For the first quarters of 2021 and 2020, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share, included options to purchase 0.3 million and 0.1 million shares of common stock, respectively.
The convertible notes and the warrants issued by the Company could be converted into the Company’s common stock, subject to certain contingencies. See Note 13—Debt for additional information. Shares of the Company's common stock associated with the 0.50% Convertible Senior Notes due July 15, 2025 and the warrants issued by the Company in the third quarter of 2020 were excluded from the calculation of diluted income per share for the first quarter of 2021 as they were anti-dilutive since the conversion price of the notes and the strike price of the warrants were greater than the average market price of the Company’s common stock during the relevant period.
Common Stock Repurchases
In each of February 2018 and February 2019, the board of directors authorized and the Company announced the repurchase of up to $100.0 million and $150.0 million, respectively, of LendingTree's common stock. There were no repurchases of the Company's common stock during the first quarters of 2021 and 2020. At March 31, 2021, approximately $179.7 million of the previous authorizations to repurchase common stock remain available.
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NOTE 11—STOCK-BASED COMPENSATION
Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations and comprehensive income (in thousands):
 Three Months Ended
March 31,
 20212020
Cost of revenue$397 $242 
Selling and marketing expense1,802 1,156 
General and administrative expense12,171 9,123 
Product development2,066 1,396 
Total non-cash compensation$16,436 $11,917 
Stock Options
A summary of changes in outstanding stock options is as follows:
 Number of OptionsWeighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value(a)
  (per option)(in years)(in thousands)
Options outstanding at January 1, 2021924,710 $111.82 
Granted (b)
53,173 253.75 
Exercised(635)271.96 
Forfeited(2,280)267.17 
Expired(35)371.25 
Options outstanding at March 31, 2021974,933 119.09 4.52$114,706 
Options exercisable at March 31, 2021694,184 $55.13 2.65$114,701 
(a)The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $213.00 on the last trading day of the quarter ended March 31, 2021 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on March 31, 2021. The intrinsic value changes based on the market value of the Company's common stock.
(b)During the three months ended March 31, 2021, the Company granted stock options to certain employees with a weighted average grant date fair value per share of $136.23, calculated using the Black-Scholes option pricing model, with a vesting period of three years from grant date.
For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options was estimated using the Black-Scholes option pricing model, which requires the use of various key assumptions. The weighted average assumptions used are as follows:
Expected term (1)
 6.00 years
Expected dividend (2)
 
Expected volatility (3)
58%
Risk-free interest rate (4)
0.59 - 0.94%
(1)The expected term of stock options granted was calculated using the "Simplified Method," which utilizes the midpoint between the weighted average time of vesting and the end of the contractual term. This method was utilized for the stock options due to a lack of historical exercise behavior by the Company's employees.
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(2)For all stock options granted in 2021, 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.
Stock Options with Market Conditions
A summary of changes in outstanding stock options with market conditions at target is as follows:
 Number of Options with Market ConditionsWeighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value(a)
  (per option)(in years)(in thousands)
Options outstanding at January 1, 2021700,209 $236.01 
Granted  
Exercised  
Forfeited  
Expired  
Options outstanding at March 31, 2021700,209 236.01 7.50$11,759 
Options exercisable at March 31, 2021 $ 0.00$ 
(a)The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $213.00 on the last trading day of the quarter ended March 31, 2021 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on March 31, 2021. The intrinsic value changes based on the market value of the Company's common stock.
A maximum of 1,169,349 shares may be earned for achieving superior performance up to 167% of the target number of shares. As of March 31, 2021, performance-based nonqualified stock options with a market condition of 481,669 had been earned, which have a vest date of September 30, 2022.
Restricted Stock Units
A summary of changes in outstanding nonvested restricted stock units ("RSUs") is as follows:
 RSUs
 Number of UnitsWeighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 2021194,686 $289.82 
Granted120,994 253.98 
Vested(47,330)291.07 
Forfeited(7,927)276.18 
Nonvested at March 31, 2021260,423 $273.36 
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Restricted Stock Units with Performance Conditions
A summary of changes in outstanding nonvested RSUs with performance conditions is as follows:
 RSUs with Performance Conditions
 Number of UnitsWeighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 20216,328 $223.90 
Granted  
Vested  
Forfeited  
Nonvested at March 31, 20216,328 $223.90 
Restricted Stock Awards with Performance Conditions
A summary of changes in outstanding nonvested restricted stock awards ("RSAs") with performance conditions is as follows:
 RSAs with Performance Conditions
 Number of AwardsWeighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 202123,804 $340.25 
Granted  
Vested(5,951)340.25 
Forfeited  
Nonvested at March 31, 202117,853 $340.25 
Restricted Stock Awards with Market Conditions
A summary of changes in outstanding nonvested RSAs with market conditions at target is as follows:
 RSAs with Market Conditions
 Number of AwardsWeighted Average Grant Date Fair Value
(per unit)
Nonvested at January 1, 202126,674 $340.25 
Granted  
Vested  
Forfeited  
Nonvested at March 31, 202126,674 $340.25 
 
A maximum of 44,545 shares may be earned for achieving superior performance up to 167% of the target number of shares. As of March 31, 2021, performance-based restricted stock awards with a market condition of 29,601 had been earned, which have a vest date of September 30, 2022.
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NOTE 12—INCOME TAXES
 Three Months Ended
March 31,
 20212020
(in thousands, except percentages)
Income tax (expense) benefit$(8,638)$3,061 
Effective tax rate30.9 %(19.2)%
For the first quarter of 2021, the effective tax rate varied from the federal statutory rate of 21% primarily due to the effect of state taxes.
For the first quarter of 2020, the effective tax rate varied from the federal statutory rate of 21% in part due to a tax benefit of $1.1 million recognized for excess tax benefits resulting from employee exercises of stock options and vesting of restricted stock in accordance with ASU 2016-09 and the effect of state taxes. The effective tax rate for the first quarter of 2020 was also impacted by a tax benefit of $6.1 million for the impact of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, as described below.
On March 27, 2020, President Trump signed into law the CARES Act. This legislation is an economic relief package in response to the public health and economic impacts of COVID-19 and includes various provisions that impact the Company, including, but not limited to, modifications for net operating losses, accelerated timeframe for refunds associated with prior minimum taxes and modifications of the limitation on business interest.
The Company revalued deferred tax assets related to net operating losses in light of the changes in the CARES Act and recorded a net tax benefit of $6.1 million during the first quarter of 2020. These deferred tax assets are being revalued, as they have been carried back to 2016 and 2017, which are tax periods prior to the Tax Cuts and Jobs Act ("TCJA") when the federal statutory tax rate was 35% versus the 21% federal statutory tax rate in effect after the enactment of the TCJA.
 Three Months Ended
March 31,
 20212020
(in thousands)
Income tax expense - excluding excess tax benefit on stock compensation and CARES Act$(8,670)$(4,097)
Excess tax benefit on stock compensation32 1,054 
Income tax benefit from CARES Act 6,104 
Income tax (expense) benefit$(8,638)$3,061 
NOTE 13—DEBT
Convertible Senior Notes
2025 Notes
On July 24, 2020, the Company issued $575.0 million aggregate principal amount of its 0.50% Convertible Senior Notes due July 15, 2025 (the “2025 Notes”) in a private placement. The issuance included $75.0 million aggregate principal amount of 2025 Notes under a 13-day purchase option which was exercised in full. The 2025 Notes bear interest at a rate of 0.50% per year, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2021. The 2025 Notes will mature on July 15, 2025, unless earlier repurchased, redeemed or converted.
The initial conversion rate of the 2025 Notes is 2.1683 shares of the Company's common stock per $1,000 principal amount of 2025 Notes (which is equivalent to an initial conversion price of approximately $461.19 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change prior to the maturity of the 2025 Notes or if the Company issues a notice of redemption for the 2025 Notes, the Company will, in certain circumstances, increase the conversion rate by a specified number of additional shares for a holder that elects to convert the 2025 Notes in connection with such make-whole fundamental change or to convert its 2025 Notes called for redemption, as the case may be. Upon conversion, the 2025
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Notes will settle for cash, shares of the Company’s stock, or a combination thereof, at the Company’s option. It is the intent of the Company to settle the principal amount of the 2025 Notes in cash and any conversion premium in shares of its common stock.
The 2025 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2025 Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness, including borrowings under the senior secured revolving credit facility, described below, to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.
Prior to the close of business on the business day immediately preceding March 13, 2025, the 2025 Notes will be convertible at the option of the holders thereof only under the following circumstances:
during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on, and including the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price (as defined in the 2025 Notes) per $1,000 principal amount of 2025 Notes for such trading day was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;
if the Company calls such 2025 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the notes called for redemption; or
upon the occurrence of specified corporate events including but not limited to a fundamental change.
Holders of the 2025 Notes were not entitled to convert the 2025 Notes during the calendar quarter ended March 31, 2021 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on December 31, 2020, was not greater than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day. Holders of the 2025 Notes are not entitled to convert the 2025 Notes during the calendar quarter ended June 30, 2021 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on March 31, 2021, was not greater than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day.
On or after March 13, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2025 Notes, holders of the 2025 Notes may convert all or a portion of their 2025 Notes regardless of the foregoing conditions.
The Company may not redeem the 2025 Notes prior to July 20, 2023. On or after July 20, 2023 and before the 41st scheduled trading day immediately before the maturity date, the Company may redeem for cash all or a portion of the 2025 Notes, at its option, if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period (and including the last trading day of such period) ending on, and including the last trading day immediately preceding the date of notice of redemption is greater than or equal to 130% of the conversion price on each applicable trading day. The redemption price will be equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2025 Notes.
Upon the occurrence of a fundamental change prior to the maturity date of the 2025 Notes, holders of the 2025 Notes may require the Company to repurchase all or a portion of the 2025 Notes for cash at a price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

If the market price per share of the common stock, as measured under the terms of the 2025 Notes, exceeds the conversion price of the 2025 Notes, the 2025 Notes could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the principal amount of the 2025 Notes and any conversion premium in cash.
The initial measurement of convertible debt instruments that may be settled in cash is separated into a debt and an equity component whereby the debt component is based on the fair value of a similar instrument that does not contain an equity conversion option. The separate components of debt and equity of the Company’s 2025 Notes were determined using an interest rate of 5.30%, which reflects the nonconvertible debt borrowing rate of the Company at the date of issuance. As a result, the initial components of debt and equity were $455.6 million and $119.4 million, respectively. Financing costs related to the issuance of the 2025 Notes were approximately $15.1 million, of which $12.0 million were allocated to the liability component and are being amortized to interest expense over the term of the debt and $3.1 million were allocated to the equity component.
In the first quarter of 2021, the Company recorded interest expense on the 2025 Notes of $6.8 million which consisted of $0.7 million associated with the 0.50% coupon rate, $5.5 million associated with the accretion of the debt discount, and $0.6 million associated with the amortization of the debt issuance costs. The debt discount is being amortized over the term of the debt.
As of March 31, 2021, the fair value of the 2025 Notes is estimated to be approximately $523.5 million using the Level 1 observable input of the last quoted market price on March 31, 2021.
A summary of the gross carrying amount, unamortized debt cost, debt issuance costs and net carrying value of the liability component of the 2025 Notes are as follows (in thousands):
 March 31,
2021
December 31, 2020
Gross carrying amount$575,000 $575,000 
Unamortized debt discount104,620 110,110 
Debt issuance costs10,505 11,056 
Net carrying amount$459,875 $453,834 
2022 Notes
On May 31, 2017, the Company issued $300.0 million aggregate principal amount of its 0.625% Convertible Senior Notes due June 1, 2022 (the “2022 Notes”) in a private placement. The 2022 Notes bear interest at a rate of 0.625% per year, payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2017. The 2022 Notes will mature on June 1, 2022, unless earlier repurchased or converted.
The initial conversion rate of the 2022 Notes is 4.8163 shares of the Company's common stock per $1,000 principal amount of 2022 Notes (which is equivalent to an initial conversion price of approximately $207.63 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change prior to the maturity of the 2022 Notes, the Company will, in certain circumstances, increase the conversion rate by a specified number of additional shares for a holder that elects to convert the 2022 Notes in connection with such make-whole fundamental change. Upon conversion, the 2022 Notes will settle for cash, shares of the Company’s stock, or a combination thereof, at the Company’s option. It is the intent of the Company to settle the principal amount of the 2022 Notes in cash and any conversion premium in shares of its common stock.
The 2022 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2022 Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness, including borrowings under the senior secured revolving credit facility, described below, to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.
Prior to the close of business on the business day immediately preceding February 1, 2022, the 2022 Notes will be convertible at the option of the holders thereof only under the following circumstances:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

during any calendar quarter commencing after the calendar quarter ending on September 30, 2017 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on, and including the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price (as defined in the 2022 Notes) per $1,000 principal amount of 2022 Notes for such trading day was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; or
upon the occurrence of specified corporate events including but not limited to a fundamental change.
Holders of the 2022 Notes were not entitled to convert the 2022 Notes during the calendar quarter ended March 31, 2021 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on December 31, 2020, was not greater than or equal to 130% of the conversion price of the 2022 Notes on each applicable trading day. Holders of the 2022 Notes are not entitled to convert the 2022 Notes during the calendar quarter ended June 30, 2021 as the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on March 31, 2021, was not greater than or equal to 130% of the conversion price of the 2022 Notes on each applicable trading day.
On or after February 1, 2022, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2022 Notes, holders of the 2022 Notes may convert all or a portion of their 2022 Notes regardless of the foregoing conditions.
The Company may not redeem the 2022 Notes prior to the maturity date and no sinking fund is provided for the 2022 Notes. Upon the occurrence of a fundamental change prior to the maturity date of the 2022 Notes, holders of the 2022 Notes may require the Company to repurchase all or a portion of the 2022 Notes for cash at a price equal to 100% of the principal amount of the 2022 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
If the market price per share of the common stock, as measured under the terms of the 2022 Notes, exceeds the conversion price of the 2022 Notes, the 2022 Notes could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the principal amount of the 2022 Notes and any conversion premium in cash.
The separate components of debt and equity of the Company’s 2022 Notes were determined using an interest rate of 5.36%, which reflects the nonconvertible debt borrowing rate of the Company at the date of issuance. As a result, the initial components of debt and equity were $238.4 million and $61.6 million, respectively. Financing costs related to the issuance of the 2022 Notes were approximately $9.3 million, of which $7.4 million were allocated to the liability component and are being amortized to interest expense over the term of the debt and $1.9 million were allocated to the equity component.
On July 24, 2020, the Company used approximately $234.0 million of the net proceeds from the issuance of the 2025 Notes to repurchase approximately $130.3 million principal amount of the 2022 Notes, including the payment of accrued and unpaid interest of approximately $0.1 million, through separate transactions with certain holders of the 2022 Notes. Of the consideration paid, $126.0 million was allocated to the extinguishment of the liability component of the notes, while the remaining $107.9 million was allocated to the reacquisition of the equity component and recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity. The Company recognized a loss on debt extinguishment of $7.8 million in the third quarter of 2020.
In the first quarter of 2021, the Company recorded interest expense on the 2022 Notes of $2.3 million which consisted of $0.3 million associated with the 0.625% coupon rate, $1.8 million associated with the accretion of the debt discount, and $0.2 million associated with the amortization of the debt issuance costs. In the first quarter of 2020, the Company recorded interest expense on the 2022 Notes of $4.0 million which consisted of $0.5 million associated with the 0.625% coupon rate, $3.1 million associated with the accretion of the debt discount, and $0.4 million associated with the amortization of the debt issuance costs. The debt discount is being amortized over the term of the debt.
As of March 31, 2021, the fair value of the 2022 Notes is estimated to be approximately $205.7 million using the Level 1 observable input of the last quoted market price on March 31, 2021.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the gross carrying amount, unamortized debt cost, debt issuance costs and net carrying value of the liability component of the 2022 Notes are as follows (in thousands):
 March 31,
2021
December 31, 2020
Gross carrying amount$169,659 $169,690 
Unamortized debt discount8,958 10,815 
Debt issuance costs1,074 1,297 
Net carrying amount$159,627 $157,578 
Convertible Note Hedge and Warrant Transactions
2020 Hedge and Warrants
On July 24, 2020, in connection with the issuance of the 2025 Notes, the Company entered into Convertible Note Hedge (the “2020 Hedge”) and warrant transactions with respect to the Company’s common stock. The Company used approximately $63.0 million of the net proceeds from the 2025 Notes to pay for the cost of the 2020 Hedge, after such cost was partially offset by the proceeds from the warrant transactions.
On July 24, 2020, the Company paid $124.2 million to the counterparties for the 2020 Hedge transactions. The 2020 Hedge transactions cover 1.2 million shares of the Company’s common stock, the same number of shares initially underlying the 2025 Notes, and are exercisable upon any conversion of the 2025 Notes. The 2020 Hedge transactions are expected generally to reduce the potential dilution to the Company's common stock upon conversion of the 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2025 Notes, as the case may be, in the event that the market price per share of common stock, as measured under the terms of the 2020 Hedge transactions, is greater than the strike price of the 2020 Hedge transactions, which initially corresponds to the initial conversion price of the 2025 Notes, or approximately $461.19 per share of common stock. The 2020 Hedge transactions will expire upon the maturity of the Notes.
On July 24, 2020, the Company sold to the counterparties, warrants (the “2020 Warrants”) to acquire 1.2 million shares of the Company's common stock at an initial strike price of $