LendingClub Reports Fourth Quarter and Full Year 2019 Results

SAN FRANCISCO, Feb. 18, 2020 /PRNewswire/ -- LendingClub Corporation LC, America's largest online lending marketplace connecting borrowers and investors, today announced financial results for the fourth quarter and full year ended December 31, 2019.

Profitable in the fourth quarter

• Loan originations of $3.1 billion, up 7% year-over-year.
• Net Revenue of $188.5 million, up 4% year-over-year.
• GAAP Consolidated Net Income of $0.2 million ($0.00 per share), improved from a loss of $(13.4) million ($(0.16) per share) in the fourth quarter of 2018.
• Adjusted EBITDA of $39.0 million, up 37% year-over-year.
• Record Adjusted EBITDA Margin of 20.7%, up 5.0 percentage points year-over-year.
• Adjusted Net Income of $7.0 million ($0.08 per share), improved from Adjusted Net Loss of $(4.1) million ($(0.05) per share) in the fourth quarter of 2018.

Record full year 2019 results

• LendingClub's innovation, simplification program and focus on partnerships is transforming the company, and leveraging its scale to sustain robust operational and financial momentum.
• Record loan originations of $12.3 billion, up 13% year-over-year.
• Record Net Revenue of $758.6 million, up 9% year-over-year.
• GAAP Consolidated Net Loss of $(30.7) million ($(0.35) per share), improved from $(128.2) million ($(1.52) per share) in 2018.
• Record Adjusted EBITDA of $134.8 million, up 38% year-over-year.
• Record Adjusted EBITDA Margin of 17.8%, up 3.8 percentage points year-over-year, primarily driven by a record Contribution Margin from improving cost efficiency in customer acquisition and origination and servicing.
• Adjusted Net Income of $2.2 million ($0.02 per share), improved from Adjusted Net Loss of $(32.4) million ($(0.38) per share) in 2018.

Innovation, simplification and partnership transforming LendingClub

• Investor product and platform innovation, such as Levered Certificates and LCX, improved balance sheet efficiency and velocity.
• Borrower product and platform innovation drove conversion and retention higher, increased 24 hour approval rates from 67% in 2018 to 77% in 2019, and drove LendingClub's Net Promoter Score to 80.
• Simplification program, including Business Process Outsourcing, geolocation and vendor consolidation, drove customer acquisition and servicing unit costs lower.
• Select Plus and Small Business partnerships expand funding sources and enable LendingClub to serve more members.

LendingClub clears path to a bank charter

• To comply with Federal banking ownership regulations, LendingClub's largest shareholder, Shanda, has agreed to exchange its 22% of voting common stock for non-voting stock. As part of the exchange, Shanda will receive a payment of $50.2 million.
• The company is adopting a Temporary Bank Charter Protection Agreement, also known as a stockholder rights agreement, to maintain compliance with ownership thresholds under federal banking regulations by limiting accumulation of shares. This agreement will expire on the earlier of the completion of the transaction or 18 months.

Acquisition of Radius Bancorp ("Radius") provides a springboard to LendingClub's future

• The acquisition of Radius for $185 million in cash and stock (subject to certain adjustments set forth in the definitive agreement) will enhance LendingClub's ability to serve its members, grow its market opportunity, increase and diversify earnings, and provide resilience and regulatory clarity.
• The company believes the acquisition will take 12 to 15 months to receive regulatory approval and close.

2020 outlook focused on profitable growth, resolution of legacy issues, and preparations for a national bank charter

• Expect full year 2020 Net Revenue to be in the range of $790 million to $820 million; GAAP Consolidated Net Income and Adjusted Net Income both in the range of $17 million to $37 million; and Adjusted EBITDA in the range of $150 million to $170 million.
• In a seasonally slower first quarter, expect Net Revenue to be in the range of $170 million to $180 million; GAAP Consolidated Net Income (Loss) and Adjusted Net Income (Loss) both in the range of $(5) million to $0 million; and Adjusted EBITDA in the range of $25 million to $30 million.
• GAAP Consolidated Net Income (Loss), Adjusted Net Income (Loss) and Adjusted EBITDA guidance does not include certain items, as discussed in the "Reconciliation of GAAP to Non-GAAP Guidance" table at the end of this release.

"Having achieved our key 2019 strategic and financial goals, the acquisition of Radius Bank provides a springboard to our future. It will dramatically enhance the resiliency and earnings trajectory of LendingClub, while unlocking the ability to create a category-defining experience for our members," said Scott Sanborn, CEO of LendingClub.

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 $160 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.

Fourth Quarter 2019 Financial Highlights

Commenting on financial results, Tom Casey, CFO of LendingClub, said "Our work over the last two years to drive revenue per member up and customer acquisition costs down is powering profitable and sustainable growth. Acquiring Radius will transform the revenue, earnings and return on assets potential of LendingClub, and will enable us to make more flexible capital allocation decisions to drive shareholder returns."

Loan Originations – Loan originations in the fourth quarter of 2019 were $3.1 billion, improving 7% compared to the same quarter last year.

Net Revenue – Net Revenue in the fourth quarter of 2019 was $188.5 million, improving 4% compared to the same quarter last year driven primarily by a higher volume of loan originations.

GAAP Consolidated Net Income – GAAP Consolidated Net Income was $0.2 million for the fourth quarter of 2019, improving $13.6 million compared to the same quarter last year driven primarily by an increase in net revenue and a decrease in operating expenses.

Adjusted EBITDA – Adjusted EBITDA was $39.0 million in the fourth quarter of 2019, improving $10.5 million compared to the same quarter last year.

Adjusted Net Income – Adjusted Net Income was $7.0 million in the fourth quarter of 2019, improving $11.1 million compared to the same quarter last year.

Contribution – Contribution was $101.3 million in the fourth quarter of 2019, improving $10.2 million compared to the same quarter last year, with Contribution Margin improving to 53.7% from 50.1% compared to the same quarter last year.

Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $0.00 in the fourth quarter of 2019, compared to basic and diluted EPS attributable to LendingClub of $(0.16) in the same quarter last year.

Adjusted EPS – Adjusted EPS was $0.08 in the fourth quarter of 2019, compared to an Adjusted EPS of $(0.05) in the same quarter last year.

Net Cash and Other Financial Assets – As of December 31, 2019, net cash and other financial assets totaled $714.5 million compared to $670.8 million as of December 31, 2018.

For a calculation of Adjusted EBITDA, Adjusted Net Income (Loss), 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 fourth 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, February 18, 2020. 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 7474063, 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 February 25, 2020, by calling +1 (877) 344-7529 or outside the U.S. +1 (412) 317-0088, with Conference ID 10138523. 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 condensed 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 overall direct product profitability because the measures illustrate the relationship between 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. 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, (4) acquisition and related expenses and (5) other items (including certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of certain assets), net of tax. 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. In the fourth quarter of 2019, we added an adjustment to Adjusted Net Income (Loss) for "Acquisition and related expenses" to adjust for costs related to the acquisition of Radius. 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.

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) acquisition and related expenses, (5) other items, as discussed above, (6) depreciation, impairment and amortization expense, (7) stock-based compensation expense and (8) income tax expense (benefit). 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. Adjusted EPS is a non-GAAP financial measure calculated by dividing Adjusted Net Income (Loss) by the weighted-average diluted common shares outstanding.

We believe Net Cash and Other Financial Assets is a useful measure because it illustrates the overall financial stability and operating leverage of the Company. This measure is calculated as cash and certain other assets and liabilities, including loans and securities available for sale, which are partially secured and offset by related credit facilities, and working capital.

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 cost savings and other financial or other benefits of the acquisition of Radius, the ability and timing to satisfy the closing conditions for the Radius acquisition (including obtaining regulatory approval), customer preferences, future initiatives and strategy, borrower and investor demand, anticipated future financial results, and the impact of a bank charter 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 Securities and Exchange Commission, as well as our subsequent reports on Form 10-Q and 10-K each as filed with the Securities and Exchange Commission. 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.