LendingClub Reports First Quarter 2019 Results

SAN FRANCISCO, May 7, 2019 /PRNewswire/ -- LendingClub Corporation LC, America's largest online lending marketplace connecting borrowers and investors, today announced financial results for the first quarter ended March 31, 2019.

First quarter 2019 results exceeded expectations

• LendingClub's innovation, simplification program and focus on partnerships are transforming the company and enabling it to sustain strong operational and financial momentum.
• Loan originations of $2.7 billion, up 18% year-over-year with application growth of 31%.
• Net Revenue of $174.4 million, up 15% year-over-year.
• GAAP Consolidated Net Loss of $(19.9) million compared to $(31.2) million in the first quarter of 2018.
• Adjusted EBITDA of $22.6 million, up 47% year-over-year.
• Adjusted EBITDA Margin of 13.0%, up 2.9 percentage points year-over-year due to our ongoing initiatives to grow G&A and technology costs slower than revenue.
• Adjusted Net Loss of $(11.5) million compared to $(14.2) million in the first quarter of 2018.

Innovation driving adoption on both the borrower and investor sides of the platform

• Data driven improvements in demand generation helped grow applications 31% in the first quarter of 2019 compared to the same quarter last year. 73% of customers went from application to approval within 24 hours, up from 57% in the first quarter of 2018, helping to increase conversion rates.
• Almost 40% of loans purchased by investors in the first quarter of 2019 were through structured program channels developed by LendingClub over the last 18 months.

Simplification program is on track and transforming our ability to serve customers and improve margins

• Geolocation: 76 Full Time Equivalent (FTE) employees at our new site in the Salt Lake City area, with most of the 550 capacity filled by year end.
• Business process outsourcing: 400+ operations support personnel at quarter end. Swapping fixed cost for variable cost and increasing our capacity and capabilities.
• Better serving small businesses through partnership with Opportunity Fund and Funding Circle, which leverages LendingClub's world class demand generation and conversion capabilities.
• Further initiatives underway to leverage LendingClub's scale will benefit Adjusted EBITDA Margins in the second half of 2019.

Strong momentum towards full year goals

• Expect full year 2019 Net Revenue to be in the range of $765 million to $795 million; GAAP Consolidated Net Loss in the range of ($37) million to ($17) million (which now reflects $8 million of expenses related to legacy issues and our cost structure simplification program recognized during the first quarter of 2019); Adjusted Net Loss in the range of ($29) million to ($9) million; and Adjusted EBITDA in the range of $115 million to $135 million.
• Expect second quarter 2019 Net Revenue to be in the range of $185 million to $195 million; GAAP Consolidated Net Loss and Adjusted Net Loss both in the range of $(11) million to $(6) million; and Adjusted EBITDA in the range of $25 million to $30 million.
• Targeting Adjusted Net Income profitability over the second half of 2019, supported by our cost structure simplification program.

"With 3 million borrowers served and our simplification efforts well underway, we are driving both revenue growth and margin expansion," said Scott Sanborn, CEO of LendingClub. "We will continue to deliver on our strategy and focus on the bottom line as we push towards profitability."

LendingClub remains well positioned over the long term

• LendingClub provides tools that help Americans on their path to financial health through lower borrowing costs and a seamless user experience.
• The company is the market leader in personal loans, a $130 billion+ industry and the fastest growing segment of consumer credit in the United States, and has an estimated addressable revolving debt market opportunity of more than $1 trillion.
• The company's marketplace gives it unique strengths which enable it to expand its market opportunity, competitive advantage, and growth potential:
• Our marketplace model generates savings for borrowers by finding and matching the lowest cost of capital with the right borrower and attracts investors with the lowest cost of capital by efficiently generating targeted returns and duration diversification;
• Our broad spectrum of borrowers and investors enables us to serve more customers and to enhance our marketing efficiency; and
• Scale, data and innovation enable us to generate and convert demand efficiently while managing price and credit risk effectively (3 million customers).
• The company is enhancing its operating leverage and capacity to generate cash with efficiency initiatives.

First Quarter 2019 Financial Highlights

Commenting on financial results, Tom Casey, CFO of LendingClub said, "Our simplification program is transforming LendingClub, enabling us to grow responsibly and increase our operating leverage. The actions we are taking to simplify our cost structure underpin our goal to be Adjusted Net Income profitable over the second half of 2019 with full year benefits realized in 2020."

Loan Originations – Loan originations in the first quarter of 2019 were $2.7 billion improving 18% compared to the same quarter last year.

Net Revenue – Net Revenue in the first quarter of 2019 was $174.4 million improving 15% compared to the same quarter last year driven primarily by a higher volume of loan originations.

GAAP Consolidated Net Loss – GAAP Consolidated Net Loss was $(19.9) million for the first quarter of 2019 improving $11.3 million compared to the same quarter last year driven primarily by a decline in expenses related to the resolution of certain legacy issues.

Adjusted EBITDA – Adjusted EBITDA was $22.6 million in the first quarter of 2019 improving $7.3 million compared to the same quarter last year.

Adjusted Net Loss – Adjusted Net Loss was $(11.5) million in the first quarter of 2019 improving $2.7 million compared to the same quarter last year.

Contribution – Contribution was $85.7 million in the first quarter of 2019, improving $11.3 million compared to the same quarter last year.

Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $(0.05) for the first quarter of 2019, compared to basic and diluted EPS attributable to LendingClub of $(0.07) in the same quarter last year.

Adjusted EPS – Adjusted EPS was $(0.03) for both the first quarters of 2019 and 2018.

Net Cash and Other Financial Assets – As of March 31, 2019, net cash and other financial assets totaled $663.6 million. For a calculation of net cash and other financial assets, refer to the "Reconciliation of GAAP to Non-GAAP Measures" tables 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 risk-adjusted 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 2019 webcast and teleconference is scheduled to begin at 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time) on Tuesday, May 7, 2019. 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 9666465, 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 7, 2019, until May 14, 2019, by calling +1 (877) 344-7529 or +1 (412) 317-0088, with Conference ID 10130681. 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.

Contacts

For Investors:

IR@lendingclub.com

Media Contact:

Press@lendingclub.com

Non-GAAP Financial Measures and Supplemental Financial Statement Information

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 Net Income (Loss), Adjusted EPS and Net Cash and Other Financial Assets. 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 cost structure simplification and non-cash stock-based compensation expenses within these captions and income or 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 they allow for the comparison of our core operating results, including our return on capital and operating efficiencies, from period to period by removing legacy issues that have resulted in elevated legal costs (including ongoing regulatory and government investigations, indemnification obligations and litigation), expenses related to our cost structure simplification, the impact of depreciation, impairment and amortization in our asset base, stock-based compensation, income tax effects, and other non-operating expenses.

In the fourth quarter of 2018, we revised the calculation of Adjusted Net Income (Loss) and Adjusted EPS to adjust for certain expenses that are either non-recurring or unusual in nature, such as expenses related to our cost structure simplification, goodwill impairment and legacy issues that have resulted in elevated legal costs (including ongoing regulatory and government investigations, indemnification obligations and litigation), net of tax. We believe that Adjusted Net Income (Loss) and Adjusted EPS are important measures because they directly reflect the financial performance of our business operations. Prior period amounts have been reclassified to conform to the current period presentation.

Additionally, in the fourth quarter of 2018, we included a new adjustment for cost structure simplification expense to calculate certain of our non-GAAP financial measures. This expense relates to a review of our cost structure and a number of expense initiatives underway, including the establishment of a site in the Salt Lake City area. The expense includes incremental and excess personnel-related expenses associated with establishing our Salt Lake City area site and external advisory fees.

Beginning in the first quarter of 2019, we included supplemental financial information to the existing financial statements. We believe this supplemental financial information is useful because it indicates the effect of pass-through items (Pass-throughs) related to our member payment dependent retail program (Retail Program) notes as well as certain VIEs that we are required to consolidate in accordance with GAAP. We are delineating between assets which are legally ours and those which are not, as well as liabilities which are only payable from the cash flows of those assets. In addition, in the first quarter of 2019, the Company introduced "Net Cash and Other Financial Assets" as a new non-GAAP measure that is calculated as cash and certain other financial assets, including loans and securities available for sale which are partially secured and offset by the related credit facilities. We believe this is a useful measure because it illustrates the overall financial stability and operating leverage of the Company. Refer to the tables at the end of this section for additional detail.

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 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 Annual Report on Form 10-K, 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