LendingClub Reports First Quarter 2018 Results

SAN FRANCISCO, May 8, 2018 /PRNewswire/ -- LendingClub Corporation (NYSE: LC), America's largest online lending marketplace connecting borrowers and investors, today announced financial results for the first quarter ended March 31, 2018 and provided guidance for the second quarter and full year 2018.

Financial highlights for the first quarter include:

• Delivered revenue of $151.7 million, up 22% year-over-year
• Achieved 18% year-over-year growth in originations to over $2.3 billion
• Improved Contribution Margin to 49.1% from 42.7% in the same quarter last year
• Delivered Adjusted EBITDA of $15.3 million, or a 10.1% Adjusted EBITDA margin, compared to an Adjusted EBITDA of $0.2 million, or a 0.1% Adjusted EBITDA margin, in the same quarter last year
• GAAP Consolidated Net Loss was ($31.2) million, including $17 million of expenses related to outstanding legacy issues disclosed by the Company in 2016, related to ongoing legal costs from government investigations, as well indemnification costs for the previous management

Operational highlights for the first quarter include:

In the first quarter of 2018, LendingClub continued to execute on its mission to make credit more affordable and investing more rewarding, now having served over 2.4 million borrowers.

• For Borrowers: LendingClub saw strong adoption of a new feature called Direct Payoff that allows borrowers to seamlessly pay off their credit card balances in exchange for a better rate - thereby improving their financial profile and lowering their monthly payments.
• For Investors: LendingClub's recently launched innovation, CLUB Certificates, attracted over $160 million in funding from several of the top names in asset management. The new CLUB Certificates give investors easy access to consumer credit and provide a single security that offers greater flexibility and liquidity.

Scott Sanborn, LendingClub CEO said, "We feel good about how we've kicked off the year and the fundamentals of our business continue to be strong. Our strategic initiatives are working on both sides of our marketplace and we'll keep innovating to help more Americans on their journey to financial success."

First Quarter 2018 Financial Highlights

Commenting on financial results, Tom Casey, LendingClub CFO said, "In the first quarter we delivered both strong growth and Adjusted EBITDA profitability as we continue to leverage the scale of our platform and execute against our targets."

Originations – Loan originations in the first quarter of 2018 were $2.31 billion, improving 18% compared to the same quarter last year and declining 5% from the fourth quarter of 2017.

Net Revenue – Net Revenue in the first quarter of 2018 was $151.7 million, improving 22% compared to the same quarter last year and declining 3% from the fourth quarter of 2017, driven primarily by a higher volume of loan originations in the first quarter of 2018 compared to the same quarter last year and a lower volume of loan originations in the first quarter of 2018 compared to the fourth quarter of 2017.

GAAP Consolidated Net Loss – GAAP Consolidated Net Loss was $31.2 million for the first quarter of 2018, declining $1.3 million compared to the same quarter last year and improving $60.9 million from the fourth quarter of 2017, driven primarily by costs associated with outstanding legacy issues of $17.0 million and class action settlement of $77.25 million during the first quarter of 2018 and the fourth quarter of 2017, respectively.

Adjusted EBITDA (2) – Adjusted EBITDA was $15.3 million in the first quarter of 2018, improving $15.2 million compared to the same quarter last year and declining $3.7 million from the fourth quarter of 2017.

Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $(0.07) for the first quarter of 2018, compared to basic and diluted EPS attributable to LendingClub of $(0.07) in the same quarter last year and $(0.22) in the fourth quarter of 2017.

Adjusted EPS (2) – Adjusted EPS was $0.01 for the first quarter of 2018, compared to adjusted EPS of $(0.02) in the same quarter last year and $0.01 in the fourth quarter of 2017.

Cash, Cash Equivalents and Securities Available for Sale – As of March 31, 2018, cash, cash equivalents and securities available for sale totaled $469.3 million, excluding $64.2 million in securities available for sale subject to regulatory risk retention requirements.

Loans Held for Sale by the Company – As the Company continues to build its investor programs, it is using cash to accumulate loans for future transactions. Loans held for sale by the Company at the end of the first quarter of 2018 were $248.3 million, which were financed with $49.0 million of debt outstanding under the Company's warehouse credit facilities.

Outlook

Based on the information available as of May 8, 2018, LendingClub provides the following outlook for the second quarter and full year 2018:

Second Quarter 2018

Total Net Revenue in the range of $162 million to $172 million

Net Income (Loss) (3) in the range of $(20) million to $(10) million

Adjusted EBITDA(2)(3) in the range of $12 million to $22 million

Reconciling Items between GAAP Consolidated Net Loss and non-GAAP Adjusted EBITDA consisting of stock-based compensation of approximately $20 million, and depreciation, impairment, amortization and other net adjustments of approximately $12 million. Outstanding legacy issues are not forecasted in GAAP Net Income (Loss) or Adjusted EBITDA.

Full Year 2018

Total Net Revenue in the range of $680 million to $705 million

Net Income (Loss) (3) in the range of $(70) million to $(55) million

Adjusted EBITDA(2)(3) in the range of $75 million to $90 million

Reconciling Items between GAAP Consolidated Net Loss and non-GAAP Adjusted EBITDA consisting of stock-based compensation of approximately $77 million, expenses related to outstanding legacy issues of $17 million that were recognized in the first quarter of 2018, and depreciation, impairment, amortization and other net adjustments of approximately $51 million.

About LendingClub

LendingClub was founded to transform the banking system to make credit more affordable and investing more rewarding. Today, LendingClub's online credit marketplace connects borrowers and investors to deliver more efficient and affordable access to credit. Through its technology platform, LendingClub is able to create cost efficiencies and passes those savings onto borrowers in the form of lower rates and to investors in the form of solid returns. LendingClub is based in San Francisco, California. Currently, residents of the following states may invest in LendingClub notes: AL, AR, AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, ME, MD, MI, MN, MO, MS, MT, ND, NE, NH, NJ, NV, NY, OK, OR, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, or WY. All loans are made by federally regulated issuing bank partners. More information is available at https://www.lendingclub.com.

Conference Call and Webcast Information

The LendingClub first quarter 2018 webcast and teleconference is scheduled to begin at 2:00 p.m. Pacific Time on Tuesday, May 8, 2018. A live webcast of the call will be available at http://ir.lendingclub.com under the Events & Presentations menu. To access the call, please dial +1 (888) 317-6003, or outside the U.S. +1 (412) 317-6061, with conference ID 4537166, ten minutes prior to 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time). An audio archive of the call will be available at http://ir.lendingclub.com. An audio replay will also be available on May 8, 2018, until May 15, 2018, by calling +1 (877) 344-7529 or +1 (412) 317-0088, with Conference ID 10119290. LendingClub has used, and intends to use, its investor relations website, Blog (http://blog.lendingclub.com), Twitter handle (@LendingClub) and Facebook page (https://www.facebook.com/LendingClubTeam) as a means of disclosing material non-public information and to comply with its disclosure obligations under Regulation FD.

Non-GAAP Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: contribution, contribution margin, adjusted EBITDA, adjusted EBITDA margin, and adjusted EPS. Our non-GAAP measures do have limitations as analytical tools and you should not consider them in isolation or as a substitute for an analysis of our results under GAAP.

We believe these non-GAAP measures provide management and investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-GAAP financial measures.

In particular, we believe contribution and contribution margin are useful measures of direct product profitability because the measures illustrate the relationship between the costs most directly associated with revenue generating activities and the related revenue, and the effectiveness of the direct costs in obtaining revenue. Contribution is calculated as net revenue less "sales and marketing" and "origination and servicing" expenses on the Company's Statements of Operations, adjusted to exclude non-cash stock-based compensation expense within these captions and (income) loss attributable to noncontrolling interests. Contribution margin is a non-GAAP financial measure calculated by dividing contribution by total net revenue. We believe that adjusted EBITDA and adjusted EBITDA margin are important measures of operating performance because it allows for the comparison of our core operating results, including our return on capital and operating efficiencies, from period to period by removing outstanding legacy issues that will result in elevated legal costs (including ongoing regulatory and government investigations, indemnification obligations and litigation), the impact of depreciation, impairment and amortization in our asset base, share-based compensation, income tax effects, and other non-operating expenses. We believe adjusted EPS is a useful measure used by investors and analysts in our sector because non-cash items like stock-based compensation and amortization of intangibles can vary significantly due to many factors unrelated to the business, as well as certain other expenses that are unrelated to business performance, such as outstanding legacy issues discussed below.

In the fourth quarter of 2017, the company included a new adjustment for outstanding legacy issues that result in elevated legal costs (including ongoing regulatory and government investigations, indemnification obligations and litigation), to calculate adjusted EBITDA and adjusted EPS. We expect expenses in the future to include resolution of additional matters that arose from legacy management, including indemnification legal expenses paid by the Company for former employees, and settlements of regulatory investigations and examinations. Legacy legal expenses incurred in 2017 and prior were generally offset by insurance proceeds, resulting in no net material cumulative impact to earnings. As such, prior period amounts were not reclassified for the change in how we calculate adjusted EBITDA and adjusted EPS.

There are a number of limitations related to the use of these non-GAAP financial measures versus their most comparable GAAP measure. In particular, many of the adjustments to derive the non-GAAP financial measures reflect the exclusion of items, specifically stock-based compensation expense, depreciation, impairment and amortization in our asset base, outstanding legacy issues that will result in elevated legal costs (including ongoing regulatory and government investigations, indemnification obligations and litigation) and the related income tax effects of the aforementioned exclusions that are recurring and will be reflected in our financial results for the foreseeable future. Other companies, including companies in our industry, may calculate these measures differently, which may reduce their usefulness as a comparative measure.

For more information on our non-GAAP financial measures and a reconciliation of such measures to the nearest GAAP measure, please see the "Reconciliation of GAAP to Non-GAAP Measures" tables at the end of this release.

Safe Harbor Statement

Some of the statements above, including statements regarding borrower and investor demand and anticipated future financial results are "forward-looking statements." The words "anticipate," "believe," "estimate," "expect," "intend," "may," "outlook," "plan," "predict," "project," "will," "would" and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include: the outcomes of pending governmental investigations and pending or threatened litigation, which are inherently uncertain; the impact of management changes and the ability to continue to retain key personnel; our ability to achieve cost savings from restructurings; our ability to continue to attract and retain new and existing retail and institutional investors; competition; overall economic conditions; demand for the types of loans facilitated by us; default rates and those factors set forth in the section titled "Risk Factors" in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K, each as filed with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Information in this press release is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Additional information about LendingClub is available in the prospectus for LendingClub's notes, which can be obtained on LendingClub's website at https://www.lendingclub.com/info/prospectus.action.

 

 

 

 

 

 

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SOURCE LendingClub Corporation