LendingClub Reports Third Quarter 2019 Results

SAN FRANCISCO, Nov. 5, 2019 /PRNewswire/ -- LendingClub Corporation LC, America's largest online lending marketplace connecting borrowers and investors, today announced financial results for the third quarter ended September 30, 2019.

Record results

• LendingClub's innovation, simplification program and focus on partnerships are transforming the company and leveraging its scale to sustain robust operational and financial momentum.
• Record loan originations of $3.3 billion, up 16% year-over-year.
• Record Net Revenue of $204.9 million, up 11% year-over-year.
• GAAP Consolidated Net Loss of $(0.4) million ($0.00 per share) compared to $(22.7) million ($(0.27) per share) in the third quarter of 2018.
• Record Adjusted EBITDA of $40.0 million, up 43% year-over-year.
• Record Adjusted EBITDA Margin of 19.5%, up 4.3 percentage points year-over-year primarily driven by improving cost efficiency in customer acquisition, and origination and servicing.
• Adjusted Net Income of $8.0 million ($0.09 per share) compared to a loss of $(7.3) million ($(0.09) per share) in the third quarter of 2018.

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

• Launched LCX, LendingClub's fifth distribution platform (in addition to Scale, Select, Select Plus and Retail platforms), to enable competitive price discovery, same day settlement, improved liquidity and capital efficiency.
• Structured programs that did not exist two years ago continue to allow LendingClub to access new and larger pools of investor capital. In the quarter, investors who initially came to LendingClub through the structured programs accounted for over $1 billion of funding across the marketplace.
• Data driven innovation in demand generation helped grow applications, improve conversion and retention, and drive business model efficiency. 71% of customers went from application to approval within 24 hours, up from 60% in the third quarter of 2018, helping increase LendingClub's Net Promoter Score to 80.
• In support of its vision to be America's Financial Health Club, LendingClub is actively assessing options to obtain a national bank charter. This should enhance LendingClub's ability to serve its members, grow its market opportunity, increase and diversify earnings, and provide both resilience and regulatory clarity.

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

• Business process outsourcing: now represents 19% of total direct and indirect workforce, lowering unit costs, swapping fixed cost for variable cost, and increasing our capacity and capabilities.
• Geolocation: 528 Full Time Equivalent (FTE) employees at the new site in the Salt Lake City area with 48% of direct and indirect workforce now located outside San Francisco.

Continued momentum towards full year goals

• Narrowing full year 2019 Net Revenue range to $760 million to $770 million.
• Updating full year GAAP Consolidated Net Loss range to ($31) million to ($26) million reflecting $26 million year-to-date expenses related to legal, regulatory and other expense related to legacy issues, cost structure simplification expense, and other items recognized during the first nine months of 2019.
• Improving full year Adjusted Net Income (Loss) range to ($5) million to $0 million, and raising Adjusted EBITDA range to $130 million to $135 million.
• Expect fourth quarter 2019 Net Revenue to be in the range of $190 million to $200 million; GAAP Consolidated Net Income and Adjusted Net Income both in the range of $0 million to $5 million; and Adjusted EBITDA in the range of $34 million to $39 million.
• On track to be Adjusted Net Income profitable over the second half of 2019.

"Returning to Adjusted Net Income profitability is an important milestone for LendingClub," said Scott Sanborn, CEO of LendingClub. "Our strategy is working and we are executing with discipline on our mission to help more borrowers improve their financial health, while growing our market opportunity, generating competitive returns for our platform investors, building our resiliency and compounding our competitive advantages."

LendingClub remains well positioned over the long term

• LendingClub provides tools that help Americans save money on their path to financial health through lower borrowing costs and a seamless user experience. We also seek to help investors efficiently generate competitive risk-adjusted returns through diversification.
• The company is the market leader in personal loans – a $140 billion+ industry and the fastest growing segment of consumer credit in the United States – and has an estimated potential immediate addressable market opportunity of more than $445 billion.
• The company's marketplace gives it unique strengths, which enable it to expand its market opportunity, competitive advantage, and growth and profit potential:
• Its marketplace model generates savings for borrowers by finding and matching the lowest available cost of capital with the right borrower and attracts investors with a low cost of capital by efficiently generating competitive returns and duration diversification;
• The broad spectrum of investors enables the company to serve more borrowers and to enhance its marketing efficiency; and
• Scale, data, and innovation enable LendingClub to generate and convert demand efficiently while managing price and credit risk effectively.
• The Visitor-to-Member and Product-to-Platform strategies aim to leverage LendingClub's scale to deliver additional savings to our growing membership base (3M+ customers) while expanding our market opportunity and earnings potential.

Third Quarter 2019 Financial Highlights

Commenting on financial results, Tom Casey, CFO of LendingClub said, "We are again raising our Adjusted EBITDA and Adjusted Net Income guidance. Our simplification program is transforming LendingClub with 19% of our workforce through variable cost business process outsourcing and 49% located outside San Francisco. This transformation of our cost structure enables us to grow responsibly and increase our operating leverage in 2019 and beyond."

Loan Originations – Loan originations in the third quarter of 2019 were $3.3 billion, improving 16% compared to the same quarter last year.

Net Revenue – Net Revenue in the third quarter of 2019 was $204.9 million, improving 11% 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 $(0.4) million for the third quarter of 2019, improving $22.4 million compared to the same quarter last year driven primarily by an increase in net revenue and a decrease in class action and regulatory litigation expense.

Adjusted EBITDA – Adjusted EBITDA was $40.0 million in the third quarter of 2019, improving $12.0 million compared to the same quarter last year.

Adjusted Net Income – Adjusted Net Income was $8.0 million in the third quarter of 2019, improving $15.3 million compared to the same quarter last year.

Contribution – Contribution was $105.8 million in the third quarter of 2019, improving $17.3 million compared to the same quarter last year.

Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $0.00 in the third quarter of 2019, compared to basic and diluted EPS attributable to LendingClub of $(0.27) in the same quarter last year.

Adjusted EPS – Adjusted EPS was $0.09 in the third quarter of 2019, compared to Adjusted EPS of $(0.09) in the same quarter last year.

Net Cash and Other Financial Assets – As of September 30, 2019, net cash and other financial assets totaled $736.3 million.

For a calculation of Adjusted EBITDA, Adjusted Net Income, Contribution, Adjusted EPS and 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. 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 2019 webcast and teleconference is scheduled to begin at 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time) on Tuesday, November 5, 2019. A live webcast of the call will be available at http://ir.lendingclub.com under the Filings & Financials menu in Quarterly Results. To access the call, please dial +1 (888) 317-6003, or outside the U.S. +1 (412) 317-6061, with conference ID 2537483, 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 1 hour after the end of the call until November 12, 2019, by calling +1 (877) 344-7529 or outside the U.S. +1 (412) 317-0088, with Conference ID 10135994. 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 Net Income (Loss), Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Earnings (Loss) Per Share (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. The adjustment for cost structure simplification 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. Contribution Margin is a non-GAAP financial measure calculated by dividing Contribution by total net revenue.

We believe Adjusted Net Income (Loss) is an important measure because it directly reflects the financial performance of our business operations. Adjusted Net Income (Loss) adjusts for certain items that are either non-recurring, do not contribute directly to management's evaluation of its operating results, or non-cash items, such as (1) expenses related to our cost structure simplification as discussed above, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, and (4) other items (including certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of assets), net of tax. In the second quarter of 2019, we added an adjustment to Adjusted Net Income (Loss) and Adjusted EBITDA for other items to adjust for expenses or gains that are not part of our core operating results. Other items include certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of assets.

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. Adjusted EBITDA adjusts for certain items that are either non-recurring, do not contribute directly to management's evaluation of its operating results, or non-cash items, such as (1) cost structure simplification expense, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, (4) other items, (5) depreciation, impairment and amortization expense, (6) stock-based compensation expense, (7) income tax expense (benefit), and (8) acquisition related expenses. Legacy items are generally those expenses that arose from the decisions of legacy management prior to the board review initiated in 2016 and resulted in the resignation of our former CEO, including legal and other costs associated with ongoing regulatory and government investigations, indemnification obligations, litigation, and termination of certain legacy contracts. Additionally, we utilize Adjusted EBITDA as an input into the Company's calculation of the annual bonus plan. Adjusted EBITDA Margin is a non-GAAP financial measure calculated by dividing Adjusted EBITDA by total net revenue.

We believe Adjusted EPS is an important measure because it directly reflects the financial performance of our business operations. Adjusted EPS is a non-GAAP financial measure calculated by dividing Adjusted Net Income (Loss) by the weighted-average diluted common shares outstanding.

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 future initiatives, borrower and investor demand, and anticipated future financial results, and our ability to obtain a bank charter and the impact it would have on our business 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 borrowers and investors; our ability to obtain or add bank functionality and a bank charter; 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.