LendingClub Reports Third Quarter 2017 Results

Delivers $154.0 Million in Revenue; Highest Quarter in its History; Serving 2 Million Borrowers and more than $30 Billion in Originations since Launch

November 7, 2017 4:01 PM EST

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SAN FRANCISCO, Nov. 7, 2017 /PRNewswire/ -- LendingClub Corporation (NYSE: LC), America's largest online marketplace connecting borrowers and investors, today announced financial results for the third quarter ended September 30, 2017 and provided guidance for the fourth quarter.

Lending Club, the world's largest online marketplace connecting borrowers and investors. (PRNewsFoto/Lending Club) (PRNewsFoto/Lending Club)

Financial highlights for the third quarter include:

  • Delivered the highest revenue in the company's history of $154.0 million, up 34 percent year-over-year
  • Achieved 24 percent annual growth in originations to over $2.44 billion, driven by strong borrower demand, which takes the total to more than $30 billion in originations facilitated since 2007
  • Narrowed GAAP net loss by almost $19 million from the second quarter of 2017 to ($6.7) million on the back of record revenue
  • Generated adjusted EBITDA of $20.9 million; almost 5 times the level of the second quarter of 2017

Operational highlights for the third quarter include:

  • Crossed 2 million borrowers on the marketplace
  • Launched fifth-generation credit model, enhancing capabilities to give borrowers fair and responsible access to credit
  • Executed the second self-sponsored securitization and contributed directly for the first time, expanding the investor base with 10 new investors

"LendingClub's strong growth and record revenue are clear indicators of our platform's appeal to both borrowers and investors," said Scott Sanborn, LendingClub CEO. "Responsibly helping more people get access to the credit they deserve is why we exist as a business and hitting new milestones on both sides of the marketplace is a testament to the power of our business model."

Three Months Ended

Nine Months Ended  September 30,

($ in millions)

September 30, 2017

June 30, 2017

September 30, 2016

2017

2016

Originations

$

2,442.9

$

2,147.3

$

1,972.0

$

6,549.0

$

6,677.5

Net Revenue

$

154.0

$

139.6

$

114.6

$

418.1

$

370.3

Consolidated Net Loss

$

(6.7)

$

(25.4)

$

(36.5)

$

(61.9)

$

(113.7)

Adjusted EBITDA (1) (2)

$

20.9

$

4.5

$

(9.2)

$

25.5

$

(12.0)

(1)

Adjusted EBITDA is a non-GAAP financial measure. Please see the discussion below under the heading "Non-GAAP Measures" and the reconciliation at the end of this release.

(2)

Prior period amounts have been reclassified to conform to the current period presentation.

Third Quarter 2017 Financial Highlights

"We are seeing operating leverage as we continue to scale and invest in reducing friction and creating efficiency in our products," said Tom Casey, LendingClub CFO. "We closed our third quarter with $20.9 million in adjusted EBITDA, expanding the margin by over 10 points."

Originations – Loan originations in the third quarter of 2017 were $2.44 billion, up 14% from the second quarter of 2017 and up 24% compared to the same quarter last year.

Net Revenue – Net revenue in the third quarter of 2017 was $154.0 million, up 10% from the second quarter of 2017 and up 34% compared to the same quarter last year, driven primarily by higher loan origination volumes. Net revenue as a percent of originations, or revenue yield, was 6.30% in the third quarter.

Consolidated Net Income (Loss) – GAAP net loss was $(6.7) million for the third quarter of 2017, improving $18.7 million compared to the second quarter of 2017 and improving $29.8 million compared to the same quarter last year. The decrease in loss from the second quarter to the third quarter of 2017 was primarily due to a $14.5 million increase in revenue and a $3.0 million decrease in stock-based compensation expense. Also impacting the quarter was $6.4 million in non-recurring expenses, partially offset by a $7.1 million insurance reimbursement covering certain legal expenses from the current and prior periods.

Adjusted EBITDA (3) Adjusted EBITDA was $20.9 million in the third quarter of 2017, improving $16.4 million from the second quarter of 2017 and improving $30.1 million compared to the same quarter last year. The increase in adjusted EBITDA from the second quarter to the third quarter of 2017 was primarily due to a $14.5 million increase in revenue. Also impacting the quarter was $6.4 million in non-recurring expenses, partially offset by a $7.1 million insurance reimbursement covering certain legal expenses from the current and prior periods.

Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $(0.02) for the third quarter of 2017, compared to basic and diluted EPS attributable to LendingClub of $(0.06) in the second quarter of 2017 and $(0.09) in the same quarter last year.

Adjusted EPS (3) – Adjusted EPS was $0.03 for the third quarter of 2017, compared to adjusted EPS of $(0.01) in the second quarter of 2017 and $(0.04) in the same quarter last year.

Cash, Cash Equivalents, Securities Available for Sale and Loans Invested in by the Company – As of September 30, 2017, cash, cash equivalents and securities available for sale totaled $603 million, with no outstanding debt. As the company continued to build its securitization program, it began using cash to accumulate loans for future securitizations. Loans invested in by the company at the end of the third quarter were $187 million, with the intent to contribute a large portion to future securitizations.

Outlook

Based on the information available as of November 7, 2017, LendingClub provides the following outlook for the fourth quarter:

Fourth Quarter 2017

Total Net Revenue in the range of $158 million to $163 million.Net Income (Loss) in the range of $(7) million to $(3) million.Adjusted EBITDA(3) in the range of $19 million to $23 million.Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $15 million, and depreciation and amortization and other net adjustments of approximately $11 million.

(3)

Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures. Adjusted EBITDA for the prior period has been reclassified to conform to the current period presentation. Please see discussion below under the heading "Non-GAAP Measures" and the reconciliations at the end of this release.

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 third quarter 2017 webcast and teleconference is scheduled to begin at 2:00 p.m. Pacific Time on Tuesday, November 7, 2017. 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 7584209, 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 November 7, 2017, until November 14, 2017, by calling +1 (877) 344-7529 or +1 (412) 317-0088, with Conference ID 10113254. 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, adjusted EPS, and investor fee revenue associated with the servicing portfolio excluding fair market value adjustments. 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. 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 the impact of depreciation and amortization in our asset base, other non-operating, and share-based compensation, tax consequences, and our capital structure (interest expense from any outstanding debt). We believe adjusted EPS is a useful measure used by investors and analysts in our sector because the exclusion of non-cash items like stock-based compensation and amortization of intangibles is a customary adjustment, and such expenses can vary significant due to many factors unrelated to the business. We believe investor fee revenue associated with the servicing portfolio excluding fair market value accounting adjustments is a useful measure because it reflects the amount of fees actually collected and represents the true economic benefit of our servicing arrangements.

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, amortization of intangible assets, 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 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; ability to achieve cost savings from recent 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 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.

 

LENDINGCLUB CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended  September 30,

2017

2016

2017

2016

Net revenue:

Transaction fees

$

121,905

$

100,813

$

327,911

$

321,926

Investor fees (1)

20,499

18,477

62,795

53,620

Other revenue (expense) (1)

(225)

(7,158)

6,219

(10,965)

Interest income

151,532

171,868

469,788

529,432

Interest expense

(139,681)

(169,444)

(448,628)

(523,723)

Net interest income

11,851

2,424

21,160

5,709

Total net revenue

154,030

114,556

418,085

370,290

Operating expenses: (2)

Sales and marketing

59,570

44,901

169,735

161,213

Origination and servicing

21,321

16,332

63,044

56,464

Engineering and product development

32,860

29,428

104,338

82,835

Other general and administrative

46,925

58,940

142,994

150,432

Goodwill impairment

1,650

37,050

Total operating expenses

160,676

151,251

480,111

487,994

Loss before income tax expense

(6,646)

(36,695)

(62,026)

(117,704)

Income tax expense (benefit)

13

(209)

(79)

(4,004)

Consolidated net loss

(6,659)

(36,486)

(61,947)

(113,700)

Less: Loss attributable to noncontrolling interests

(129)

(119)

LendingClub net loss

$

(6,530)

$

(36,486)

$

(61,828)

$

(113,700)

Net loss per share attributable to LendingClub:

Basic

$

(0.02)

$

(0.09)

$

(0.15)

$

(0.30)

Diluted

$

(0.02)

$

(0.09)

$

(0.15)

$

(0.30)

Weighted-average common shares – Basic

412,778,995

391,453,316

406,633,850

385,037,334

Weighted-average common shares – Diluted

412,778,995

391,453,316

406,633,850

385,037,334

(1)

In the first quarter of 2017, the Company aggregated the revenue previously reported as "Servicing fees" and "Management fees" into "Investor fees." Additionally, the Company aggregated "Fair value adjustments - loans, loans held for sale, notes and certificates" into "Other revenue (expense)." These changes had no impact to "Total net revenue." Prior period amounts have been reclassified to conform to the current period presentation.

(2)

Includes stock-based compensation expense as follows:

Three Months Ended  September 30,

Nine Months Ended  September 30,

2017

2016

2017

2016

Sales and marketing

$

1,591

$

1,699

$

5,857

$

5,016

Origination and servicing

1,049

1,013

3,819

2,722

Engineering and product development

4,640

4,931

17,001

13,134

Other general and administrative

8,826

10,279

28,015

25,518

Total stock-based compensation expense

$

16,106

$

17,922

$

54,692

$

46,390

 

LENDINGCLUB CORPORATION

OPERATING HIGHLIGHTS

(In thousands, except percentages and number of employees, or as noted)

(Unaudited)

September 30,  2017

Three Months Ended

% Change

September 30,  2016

December 31,  2016

March 31,  2017

June 30,  2017

September 30,  2017

Q/Q

Y/Y

Operating Highlights:

Loan originations (in millions)

$

1,972

$

1,987

$

1,959

$

2,147

$

2,443

14

%

24

%

Net revenue

$

114,556

$

130,522

$

124,482

$

139,573

$

154,030

10

%

34

%

Consolidated net loss

$

(36,486)

$

(32,269)

$

(29,844)

$

(25,444)

$

(6,659)

74

%

(82)

%

Contribution (1) (2)

$

56,035

$

60,736

$

53,165

$

66,028

$

75,908

15

%

35

%

Contribution margin (1) (2)

48.9

%

46.5

%

42.7

%

47.3

%

49.3

%

4

%

1

%

Adjusted EBITDA (1) (2)

$

(9,200)

$

(880)

$

161

$

4,483

$

20,895

N/M

N/M

Adjusted EBITDA margin (1) (2)

(8.0)

%

(0.7)

%

0.1

%

3.2

%

13.6

%

N/M

N/M

EPS - diluted

$

(0.09)

$

(0.08)

$

(0.07)

$

(0.06)

$

(0.02)

(67)

%

(78)

%

Adjusted EPS - diluted (1)

$

(0.04)

$

(0.02)

$

(0.02)

$

(0.01)

$

0.03

N/M

(175)

%

Originations by Investor Type:

Managed accounts

55

%

43

%

33

%

31

%

24

%

Self-directed

14

%

13

%

15

%

13

%

10

%

Banks

13

%

31

%

40

%

44

%

42

%

LendingClub (6)

%

%

%

%

9

%

Other institutional investors

18

%

13

%

12

%

12

%

15

%

Total

100

%

100

%

100

%

100

%

100

%

Originations by Program:

Personal loans - standard program

71

%

74

%

74

%

72

%

73

%

Personal loans - custom program

18

%

16

%

15

%

18

%

18

%

Other - custom program (3)

11

%

10

%

11

%

10

%

9

%

Total

100

%

100

%

100

%

100

%

100

%

Servicing Portfolio by Method Financed (in millions, at end of period):

Notes

$

1,818

$

1,795

$

1,779

$

1,740

$

1,683

(3)

%

(7)

%

Certificates

2,840

2,752

2,516

2,281

2,020

(11)

%

(29)

%

Whole loans sold

6,242

6,542

6,731

7,081

7,627

8

%

22

%

Other (4)

34

28

27

49

175

N/M

N/M

Total

$

10,934

$

11,117

$

11,053

$

11,151

$

11,505

3

%

5

%

Employees and contractors (5)

1,464

1,530

1,599

1,627

1,779

9

%

22

%

N/M Not meaningful.

(1)

Represents a non-GAAP measure. See "Reconciliation of GAAP to Non-GAAP Measures."

(2)

Prior to the three months ended March 30, 2017, amounts have been adjusted to conform to the current period presentation. See "Condensed Consolidated Statements of Operations" for further details. Beginning in the third quarter of 2017, contribution and adjusted EBITDA exclude income/loss attributable to noncontrolling interests. Prior period amounts have been reclassified to conform to the current period presentation.

(3)

Comprised of education and patient finance loans, small business loans, and small business lines of credit which are less than 10% of the volumes presented individually.

(4)

Includes loans invested in by the Company for which there are no associated notes or certificates.

(5)

As of the end of each respective period.

(6)

Beginning in the third quarter of 2017, the Company introduced "LendingClub" as a new line item presented to separately show the percentage of loan originations funded by the Company.

 

LENDINGCLUB CORPORATION

SELECT FINANCIAL HIGHLIGHTS

(In millions, except percentages)

(Unaudited)

September 30,  2017

Three Months Ended

% Change

September 30,  2016

December 31,  2016

March 31,  2017

June 30,  2017

September 30,  2017

Q/Q

Y/Y

Select Balance Sheet Information (at end of period):

Cash and cash equivalents

$

521

$

516

$

534

$

539

$

384

(29)

%

(26)

%

Securities available for sale

$

279

$

287

$

247

$

225

$

219

(3)

%

(22)

%

Total

$

800

$

803

$

781

$

764

$

603

(21)

%

(25)

%

Loans

$

4,412

$

4,312

$

4,027

$

3,797

$

3,414

(10)

%

(23)

%

Loans held for sale

$

15

$

9

$

9

$

36

$

266

N/M

N/M

Notes and certificates

$

4,420

$

4,321

$

4,034

$

3,806

$

3,516

(8)

%

(20)

%

Total assets

$

5,608

$

5,563

$

5,232

$

5,029

$

4,753

(5)

%

(15)

%

Total equity

$

977

$

976

$

972

$

984

$

1,000

2

%

2

%

N/M Not meaningful.

 

LENDINGCLUB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(In thousands, except percentages and per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,  2016

December 31,  2016

March 31,  2017

June 30,  2017

September 30,  2017

September 30,  2016

September 30,  2017

Contribution reconciliation:

Consolidated net loss

$

(36,486)

$

(32,269)

$

(29,844)

$

(25,444)

$

(6,659)

$

(113,700)

$

(61,947)

Engineering and product development expense

29,428

32,522

35,760

35,718

32,860

82,835

104,338

Other general and administrative expense

58,940

56,740

43,574

52,495

46,925

150,432

142,994

Goodwill impairment

1,650

37,050

Stock-based compensation expense

2,712

3,967

3,715

3,321

2,640

7,738

9,676

Income tax (benefit) expense

(209)

(224)

(40)

(52)

13

(4,004)

(79)

(Income) loss attributable to noncontrolling interest

(10)

129

119

Contribution (1)

$

56,035

$

60,736

$

53,165

$

66,028

$

75,908

$

160,351

$

195,101

Total net revenue

$

114,556

$

130,522

$

124,482

$

139,573

$

154,030

$

370,290

$

418,085

Contribution margin (1)

48.9

%

46.5

%

42.7

%

47.3

%

49.3

%

43.3

%

46.7

%

Adjusted EBITDA reconciliation:

Consolidated net loss

$

(36,486)

$

(32,269)

$

(29,844)

$

(25,444)

$

(6,659)

$

(113,700)

$

(61,947)

Acquisition and related expense (2)

294

294

293

56

880

349

Depreciation expense:

Engineering and product development

5,362

6,134

7,794

8,483

9,026

14,772

25,303

Other general and administrative

1,104

1,213

1,298

1,305

1,246

3,003

3,849

Amortization of intangible assets

1,163

1,161

1,162

1,057

1,034

3,599

3,253

Goodwill impairment

1,650

37,050

Stock-based compensation expense

17,922

22,811

19,498

19,088

16,106

46,390

54,692

Income tax (benefit) expense

(209)

(224)

(40)

(52)

13

(4,004)

(79)

(Income) loss attributable to noncontrolling interest

(10)

129

119

Adjusted EBITDA (1)

$

(9,200)

$

(880)

$

161

$

4,483

$

20,895

$

(12,010)

$

25,539

Total net revenue

$

114,556

$

130,522

$

124,482

$

139,573

$

154,030

$

370,290

$

418,085

Adjusted EBITDA margin (1)

(8.0)

%

(0.7)

%

0.1

%

3.2

%

13.6

%

(3.2)

%

6.1

%

(1)

Beginning in the first quarter of 2017, contribution and adjusted EBITDA include interest revenue to capture the full spectrum of revenue the Company expects to generate. Beginning in the third quarter of 2017, contribution and adjusted EBITDA exclude (income) loss attributable to noncontrolling interests. Prior period amounts have been reclassified to conform to the current period presentation.

(2)

Represents amounts related to costs for due diligence related to past business acquisitions including those the Company reviewed and determined not to pursue a transaction, as well as incremental compensation expense required to be paid under the purchase agreement to retain key former shareholder employees of an acquired business.

 

LENDINGCLUB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)

(In thousands, except percentages and per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,  2016

December 31,  2016

March 31,  2017

June 30,  2017

September 30,  2017

September 30,  2016

September 30,  2017

Adjusted net loss reconciliation:

LendingClub net loss

$

(36,486)

$

(32,269)

$

(29,844)

$

(25,454)

$

(6,530)

$

(113,700)

$

(61,828)

Acquisition and related expense (1)

294

294

293

56

880

349

Stock-based compensation expense

17,922

22,811

19,498

19,088

16,106

46,390

54,692

Amortization of acquired intangible assets

1,163

1,161

1,162

1,057

1,034

3,599

3,253

Goodwill impairment

1,650

37,050

Income tax (benefit) expense

(209)

(114)

(4,004)

Adjusted LendingClub net loss

$

(15,666)

$

(8,117)

$

(8,891)

(5,253)

$

10,610

$

(29,785)

$

(3,534)

Adjusted EPS - diluted

$

(0.04)

$

(0.02)

$

(0.02)

$

(0.01)

$

0.03

$

(0.08)

$

(0.01)

Non-GAAP diluted shares reconciliation:

GAAP diluted shares (2)

391,453

395,877

400,309

406,677

412,779

385,037

406,634

Other dilutive equity awards (3)

Non-GAAP diluted shares

391,453

395,877

400,309

406,677

412,779

385,037

406,634

(1)

Represents amounts related to costs for due diligence related to past business acquisitions including those the Company reviewed and determined not to pursue a transaction, as well as incremental compensation expense required to be paid under the purchase agreement to retain key former shareholder employees of an acquired business.

(2)

Equivalent to the basic and diluted shares reflected in the quarterly EPS calculations.

(3)

Other dilutive equity awards include assumed exercises of unvested stock options, net of assumed repurchases computed under the treasury method, which were excluded from GAAP net loss per share as their impact would have been anti-dilutive, but are included in adjusted net loss per share as the impact was dilutive.

 

 

View original content with multimedia:http://www.prnewswire.com/news-releases/lendingclub-reports-third-quarter-2017-results-300551283.html

SOURCE LendingClub



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