SAN FRANCISCO, May 5, 2020 /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, 2020.
"The unprecedented scale and speed at which the COVID-19 lockdown has impacted the economy has created an enormous amount of suffering for millions of Americans, disrupted business activity, and resulted in a severe contraction in market liquidity. The deteriorating environment clearly has an impact on our outlook as we significantly reduce originations to allow platform investors time to assess and address issues pertaining to their capital, their liquidity and the expected performance across their portfolios." said Scott Sanborn, CEO of LendingClub. "We have moved quickly and taken deliberate actions to keep our employees safe, protect investor returns, support our members, and preserve our liquidity. We believe that our actions, together with the steps we took to improve efficiency ahead of the downturn, have positioned LendingClub to successfully navigate the current challenges and to recover quickly when the economy stabilizes."
We are navigating the business through this challenging environment by following five key guiding principles.
- Keep our employees safe – LendingClub rapidly and proactively implemented a work from home program, including crisis pay so that employees in need were able to take paid time off to care for themselves and/or their families.
- Protect investor returns – Until unemployment stabilizes and liquidity returns, the company significantly tightened credit and underwriting standards and raised rates. The company also successfully executed its contingency plan and significantly increased its collections and servicing capacity and maintained service levels.
- Support our members – New originations are weighted towards existing members with positive payment histories. For borrowers experiencing hardship, LendingClub launched a two-month payment deferral plan (Skip-a-Pay). As of April 30, 2020, approximately 11% of LendingClub's outstanding personal loans have been enrolled in Skip-a-Pay and the company is rolling out additional graduation and hardship programs for customers.
- Preserve liquidity – At the end of the first quarter, the company had strong liquidity, including $602 million in Net Cash and Other Financial Assets. As a result of recent actions to reduce costs, the company lowered its quarterly expense run rate by approximately $70 million compared to the fourth quarter of 2019. LendingClub also performed stress testing of its cash flows in a variety of scenarios and believes that it has sufficient liquidity through the end of 2021.
- Stay on track for the acquisition of Radius – Completing the acquisition remains an important strategic priority and the company remains in close contact with regulators to accomplish this objective.
Q1 results reflected a significant fair value adjustment driven by COVID-19.
GAAP Consolidated Net Loss for the quarter of $(48.1) million primarily reflected a fair value mark of $(101.7) million, of which approximately $(64) million was attributable to a COVID-19 related revaluation of loans held for sale by the company at fair value and securities available for sale. In addition to the impact of the fair value mark, the net loss per share on a GAAP basis also reflected a previously announced, non-recurring $50.2 million deemed dividend paid to our largest stockholder upon the exchange of all shares of LendingClub common stock held by it for newly issued shares of convertible, non-voting, LendingClub Series A preferred stock.
- Loan originations of $2.5 billion, down 8% year-over-year.
- Net Revenue of $120.2 million, down 31% year-over-year.
- GAAP Consolidated Net Loss of $(48.1) million ($(1.10) per share attributable to common stockholders), compared to a loss of $(19.9) million ($(0.23) per share attributable to common stockholders) in the first quarter of 2019.
- Adjusted EBITDA of $(7.8) million, down 135% year-over-year.
- Adjusted EBITDA Margin of (6.5)%, down 19.5 percentage points year-over-year.
- Adjusted Net Loss of $(39.2) million ($(0.44) adjusted net loss per share), compared to an Adjusted Net Loss of $(11.5) million ($(0.13) adjusted net loss per share) in the first quarter of 2019.
First Quarter 2020 Financial Highlights
Commenting on financial results, Tom Casey, CFO of LendingClub, said "The operating environment was challenging in the first quarter. COVID-19's effect on the economy resulted in a decline in origination volumes in March and a significant fair value mark, both of which impacted our earnings materially. We have taken decisive action to significantly reduce our exposure to loans held for sale, reduced our expenses by a quarterly run rate of approximately $70 million, and have sufficient liquidity to manage through a variety of stress scenarios."
Three Months Ended | |||||||
($ in millions) | 2020 | 2019 | |||||
Loan Originations | $ | 2,521.5 | $ | 2,727.8 | |||
Net Revenue | $ | 120.2 | $ | 174.4 | |||
GAAP Consolidated Net Loss | $ | (48.1) | $ | (19.9) | |||
Adjusted EBITDA | $ | (7.8) | $ | 22.6 | |||
Adjusted Net Loss | $ | (39.2) | $ | (11.5) | |||
Loan Originations – Loan originations in the first quarter of 2020 were $2.5 billion, down 8% compared to the same quarter last year.
Net Revenue – Net Revenue in the first quarter of 2020 was $120.2 million, down 31% compared to the same quarter last year.
GAAP Consolidated Net Loss – GAAP Consolidated Net Loss was $(48.1) million for the first quarter of 2020, compared to $(19.9) million in the same quarter last year.
Adjusted EBITDA – Adjusted EBITDA was $(7.8) million in the first quarter of 2020, compared to $22.6 million in the same quarter last year.
Adjusted Net Loss – Adjusted Net Loss was $(39.2) million in the first quarter of 2020, compared to $(11.5) million in the same quarter last year.
Contribution – Contribution was $51.9 million in the first quarter of 2020, compared to $85.7 million in the same quarter last year, with Contribution Margin of 43.2% compared to 49.1% in same quarter last year.
Earnings Per Share (EPS) – Basic and diluted EPS attributable to common stockholders was $(1.10) in the first quarter of 2020, compared to basic and diluted EPS attributable to common stockholders of $(0.23) in the same quarter last year. In the first quarter of 2020, basic and diluted EPS reflected a $50.2 million deemed dividend paid to our largest stockholder upon the exchange of all shares of LendingClub common stock held by it for newly issued shares of mandatorily convertible, non-voting, LendingClub Series A preferred stock.
Adjusted EPS – Adjusted EPS was $(0.44) in the first quarter of 2020, compared to an Adjusted EPS of $(0.13) in the same quarter last year.
Net Cash and Other Financial Assets – As of March 31, 2020, Net Cash and Other Financial Assets totaled $602.2 million compared to $679.7 million as of March 31, 2019.
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 first quarter 2020 webcast and teleconference is scheduled to begin at 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time) on Tuesday, May 5, 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 2753920, 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 May 12, 2020, by calling +1 (877) 344-7529 or outside the U.S. +1 (412) 317-0088, with Conference ID 1014914. 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, gains on disposal of certain assets and expenses resulting from the COVID-19 pandemic), 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) attributable to both common and preferred stockholders by the weighted-average diluted common and preferred 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), our ability to effectuate and the effectiveness of certain strategy initiatives, borrower and investor demand, anticipated future financial results, the impact of the coronavirus, our ability to navigate the current economic environment, 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.
LENDINGCLUB CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited) | ||||||||
Three Months Ended | ||||||||
2020 | 2019 | |||||||
Net revenue: | ||||||||
Transaction fees | $ | 136,243 | $ | 135,397 | ||||
Interest income | 69,411 | 100,172 | ||||||
Interest expense | (44,241) | (75,360) | ||||||
Net fair value adjustments | (101,738) | (34,729) | ||||||
Net interest income and fair value adjustments | (76,568) | (9,917) | ||||||
Investor fees | 41,759 | 31,731 | ||||||
Gain on sales of loans | 14,261 | 15,152 | ||||||
Net investor revenue | (20,548) | 36,966 | ||||||
Other revenue | 4,511 | 2,055 | ||||||
Total net revenue | 120,206 | 174,418 | ||||||
Operating expenses: (1) | ||||||||
Sales and marketing | 49,784 | 66,623 | ||||||
Origination and servicing | 20,994 | 28,273 | ||||||
Engineering and product development | 38,710 | 42,546 | ||||||
Other general and administrative | 58,486 | 56,876 | ||||||
Total operating expenses | 167,974 | 194,318 | ||||||
Loss before income tax expense | (47,768) | (19,900) | ||||||
Income tax expense | 319 | — | ||||||
Consolidated net loss | (48,087) | (19,900) | ||||||
Less: Income attributable to noncontrolling interests | — | 35 | ||||||
LendingClub net loss | $ | (48,087) | $ | (19,935) | ||||
Net loss per share attributable to common stockholders:(2)(3) | ||||||||
Basic | $ | (1.10) | $ | (0.23) | ||||
Diluted | $ | (1.10) | $ | (0.23) | ||||
Weighted-average common shares – Basic | 86,505,560 | 86,108,871 | ||||||
Weighted-average common shares – Diluted | 86,505,560 | 86,108,871 | ||||||
Net income (loss) per share attributable to preferred stockholders:(2)(3) | ||||||||
Basic | $ | 18.36 | $ | 0.00 | ||||
Diluted | $ | 18.36 | $ | 0.00 | ||||
Weighted-average common shares, as converted – Basic | 2,579,710 | — | ||||||
Weighted-average common shares, as converted – Diluted | 2,579,710 | — | ||||||
(1) Includes stock-based compensation expense as follows: | ||||||||
Three Months Ended | ||||||||
2020 | 2019 | |||||||
Sales and marketing | $ | 1,663 | $ | 1,571 | ||||
Origination and servicing | 636 | 924 | ||||||
Engineering and product development | 4,615 | 5,231 | ||||||
Other general and administrative | 11,215 | 10,526 | ||||||
Total stock-based compensation expense | $ | 18,129 | $ | 18,252 | ||||
(2) | The following table details the computation of the Company's basic and diluted net income (loss) per share of common stock and preferred stock (presented on an as-converted basis): | ||||||||||
Three Months Ended March 31, | 2020 | 2019 | |||||||||
Common | Preferred | Common | |||||||||
Allocation of undistributed LendingClub net loss | $ | (45,240) | $ | (2,847) | $ | (19,935) | |||||
Deemed dividend | (50,204) | 50,204 | — | ||||||||
Net income (loss) attributable to stockholders (4) | $ | (95,444) | $ | 47,357 | $ | (19,935) | |||||
Weighted-average common shares – Basic (3) | 86,505,560 | 2,579,710 | 86,108,871 | ||||||||
Weighted-average common shares – Diluted (3) | 86,505,560 | 2,579,710 | 86,108,871 | ||||||||
Net income (loss) per share attributable to stockholders: (3) | |||||||||||
Basic | $ | (1.10) | $ | 18.36 | $ | (0.23) | |||||
Diluted | $ | (1.10) | $ | 18.36 | $ | (0.23) | |||||
(3) | Share information and balances have been retroactively adjusted, as applicable, to reflect a 1-for-5 reverse stock split effective as of July 5, 2019. | ||||||||||
(4) | Reflects a deemed dividend paid to our largest stockholder upon the exchange of all shares of LendingClub common stock held by it for newly issued shares of mandatorily convertible, non-voting, LendingClub Series A preferred stock. | ||||||||||
LENDINGCLUB CORPORATION OPERATING HIGHLIGHTS (In thousands, except percentages and number of employees, or as noted) (Unaudited) | ||||||||||||||||||||||
Three Months Ended | % Change | |||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | Y/Y | |||||||||||||||||
Operating Highlights: | ||||||||||||||||||||||
Loan originations (in millions) | $ | 2,521 | $ | 3,083 | $ | 3,350 | $ | 3,130 | $ | 2,728 | (8) | % | ||||||||||
Net revenue | $ | 120,206 | $ | 188,486 | $ | 204,896 | $ | 190,807 | $ | 174,418 | (31) | % | ||||||||||
Consolidated net income (loss) | $ | (48,087) | $ | 234 | $ | (392) | $ | (10,632) | $ | (19,900) | (142) | % | ||||||||||
Contribution (1) | $ | 51,902 | $ | 101,261 | $ | 105,789 | $ | 99,556 | $ | 85,688 | (39) | % | ||||||||||
Contribution margin (1) | 43.2 | % | 53.7 | % | 51.6 | % | 52.2 | % | 49.1 | % | (12) | % | ||||||||||
Adjusted EBITDA (1) | $ | (7,831) | $ | 38,981 | $ | 40,021 | $ | 33,181 | $ | 22,589 | (135) | % | ||||||||||
Adjusted EBITDA margin (1) | (6.5) | % | 20.7 | % | 19.5 | % | 17.4 | % | 13.0 | % | (150) | % | ||||||||||
Adjusted net income (loss) (1) | $ | (39,151) | $ | 6,981 | $ | 7,951 | $ | (1,232) | $ | (11,518) | N/M | |||||||||||
EPS (common stockholders) – diluted (2)(3) | $ | (1.10) | $ | 0.00 | $ | 0.00 | $ | (0.12) | $ | (0.23) | N/M | |||||||||||
Adjusted EPS – diluted (1)(3) | $ | (0.44) | $ | 0.08 | $ | 0.09 | $ | (0.01) | $ | (0.13) | N/M | |||||||||||
Loan Originations by Investor Type: | ||||||||||||||||||||||
Banks | 43 | % | 32 | % | 38 | % | 45 | % | 49 | % | ||||||||||||
LendingClub inventory | 20 | % | 23 | % | 23 | % | 13 | % | 10 | % | ||||||||||||
Other institutional investors | 17 | % | 25 | % | 20 | % | 21 | % | 18 | % | ||||||||||||
Managed accounts | 16 | % | 17 | % | 15 | % | 16 | % | 17 | % | ||||||||||||
Self-directed retail investors | 4 | % | 3 | % | 4 | % | 5 | % | 6 | % | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Loan Originations by Program: | ||||||||||||||||||||||
Personal loans – standard program | 70 | % | 68 | % | 70 | % | 69 | % | 71 | % | ||||||||||||
Personal loans – custom program | 23 | % | 26 | % | 24 | % | 24 | % | 21 | % | ||||||||||||
Other – custom program (4) | 7 | % | 6 | % | 6 | % | 7 | % | 8 | % | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Personal Loan Originations by Loan Grade – Standard Loan Program (in millions): | ||||||||||||||||||||||
A | $ | 620.0 | $ | 654.1 | $ | 757.4 | $ | 705.6 | $ | 608.3 | 2 | % | ||||||||||
B | 544.6 | 644.7 | 738.3 | 650.8 | 574.5 | (5) | % | |||||||||||||||
C | 357.3 | 479.6 | 523.3 | 509.2 | 452.5 | (21) | % | |||||||||||||||
D | 249.1 | 309.1 | 324.2 | 308.1 | 243.5 | 2 | % | |||||||||||||||
E | — | — | — | 0.6 | 49.4 | (100) | % | |||||||||||||||
F | — | — | — | — | 0.2 | (100) | % | |||||||||||||||
Total | $ | 1,771.0 | $ | 2,087.5 | $ | 2,343.2 | $ | 2,174.3 | $ | 1,928.4 | (8) | % | ||||||||||
N/M – Not meaningful | |||||||||||||||||||||||
(1) | Represents a non-GAAP measure. See "Reconciliation of GAAP to Non-GAAP Measures." | ||||||||||||||||||||||
(2) | Reflects a $50.2 million deemed dividend paid to our largest stockholder upon the exchange of all shares of LendingClub common stock held by it for newly issued shares of mandatorily convertible, non-voting, LendingClub Series A preferred stock. | ||||||||||||||||||||||
(3) | Share information and balances have been retroactively adjusted, as applicable, to reflect a 1-for-5 reverse stock split effective as of July 5, 2019. | ||||||||||||||||||||||
(4) | Comprised of education and patient finance loans, auto refinance loans, and small business loans. Beginning in the third quarter of 2019, this category no longer includes small business loans. | ||||||||||||||||||||||
LENDINGCLUB CORPORATION OPERATING HIGHLIGHTS (Continued) (In thousands, except percentages and number of employees, or as noted) (Unaudited) | ||||||||||||||||||||||
Three Months Ended | % Change | |||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | Y/Y | |||||||||||||||||
Servicing Portfolio by Method Financed (in millions, at end of period): | ||||||||||||||||||||||
Whole loans sold | $ | 14,118 | $ | 14,118 | $ | 13,509 | $ | 12,777 | $ | 11,761 | 20 | % | ||||||||||
Notes | 833 | 919 | 1,016 | 1,092 | 1,169 | (29) | % | |||||||||||||||
Certificates | 147 | 211 | 272 | 471 | 577 | (75) | % | |||||||||||||||
Secured borrowings | 11 | 19 | 29 | 42 | 59 | (81) | % | |||||||||||||||
Loans invested in by the Company | 866 | 744 | 696 | 426 | 565 | 53 | % | |||||||||||||||
Total | $ | 15,975 | $ | 16,011 | $ | 15,522 | $ | 14,808 | $ | 14,131 | 13 | % | ||||||||||
Employees and contractors (4) | 1,542 | 1,538 | 1,726 | 1,715 | 1,621 | (5) | % | |||||||||||||||
(4) | As of the end of each respective period. | |||||||||||||||||||||
LENDINGCLUB CORPORATION Condensed Consolidated Balance Sheets (In Thousands, Except Share and Per Share Amounts) (Unaudited) | |||||||
March 31, | December 31, | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 294,345 | $ | 243,779 | |||
Restricted cash | 139,247 | 243,343 | |||||
Securities available for sale (includes $296,316 and $271,173 at amortized cost, $18,835 and $0 in allowance for credit losses, and $130,230 and $174,849 pledged as collateral at fair value, respectively) | 256,554 | 270,927 | |||||
Loans held for investment at fair value | 885,413 | 1,079,315 | |||||
Loans held for investment by the Company at fair value | 71,003 | 43,693 | |||||
Loans held for sale by the Company at fair value | 741,704 | 722,355 | |||||
Accrued interest receivable | 11,574 | 12,857 | |||||
Property, equipment and software, net | 116,043 | 114,370 | |||||
Operating lease assets | 90,863 | 93,485 | |||||
Intangible assets, net | 13,703 | 14,549 | |||||
Other assets | 164,104 | 143,668 | |||||
Total assets | $ | 2,784,553 | $ | 2,982,341 | |||
Liabilities and Equity | |||||||
Accounts payable | $ | 5,301 | $ | 10,855 | |||
Accrued interest payable | 9,029 | 9,260 | |||||
Operating lease liabilities | 109,481 | 112,344 | |||||
Accrued expenses and other liabilities | 100,241 | 142,636 | |||||
Payable to investors | 50,003 | 97,530 | |||||
Notes, certificates and secured borrowings at fair value | 886,840 | 1,081,466 | |||||
Payable to Structured Program note and certificate holders at fair value | 206,092 | 40,610 | |||||
Credit facilities and securities sold under repurchase agreements | 621,020 | 587,453 | |||||
Total liabilities | 1,988,007 | 2,082,154 | |||||
Equity | |||||||
Series A Preferred stock, $0.01 par value; 1,200,000 shares authorized; 195,628 and 0 shares issued, respectively; 195,628 and 0 shares outstanding, respectively | 2 | — | |||||
Common stock, $0.01 par value; 180,000,000 shares authorized; 69,869,214 and 89,218,797 shares issued, respectively; 69,869,214 and 88,757,406 shares outstanding, respectively | 699 | 892 | |||||
Additional paid-in capital | 1,463,535 | 1,467,882 | |||||
Accumulated deficit | (646,763) | (548,472) | |||||
Treasury stock, at cost; 0 and 461,391 shares, respectively | — | (19,550) | |||||
Accumulated other comprehensive income (loss) | (20,927) | (565) | |||||
Total equity | 796,546 | 900,187 | |||||
Total liabilities and equity | $ | 2,784,553 | $ | 2,982,341 | |||
LENDINGCLUB CORPORATION RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In thousands, except percentages and per share data) (Unaudited) | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
GAAP LendingClub net income (loss) | $ | (48,087) | $ | 234 | $ | (383) | $ | (10,661) | $ | (19,935) | |||||||||
Engineering and product development expense | 38,710 | 41,080 | 41,455 | 43,299 | 42,546 | ||||||||||||||
Other general and administrative expense | 58,486 | 57,607 | 59,485 | 64,324 | 56,876 | ||||||||||||||
Cost structure simplification expense (1) | 175 | 188 | 2,778 | 646 | 3,706 | ||||||||||||||
Stock-based compensation expense (2) | 2,299 | 2,012 | 2,357 | 2,386 | 2,495 | ||||||||||||||
Income tax expense (benefit) | 319 | 140 | 97 | (438) | — | ||||||||||||||
Contribution | $ | 51,902 | $ | 101,261 | $ | 105,789 | $ | 99,556 | $ | 85,688 | |||||||||
Total net revenue | $ | 120,206 | $ | 188,486 | $ | 204,896 | $ | 190,807 | $ | 174,418 | |||||||||
Contribution margin | 43.2 | % | 53.7 | % | 51.6 | % | 52.2 | % | 49.1 | % | |||||||||
(1) | Contribution excludes the portion of personnel-related expenses associated with establishing a site in the Salt Lake City area that are included in the "Sales and marketing" and "Origination and servicing" expense categories. | |||||||||||||||||||
(2) | Contribution excludes stock-based compensation expense included in the "Sales and marketing" and "Origination and servicing" expense categories. | |||||||||||||||||||
LENDINGCLUB CORPORATION RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued) (In thousands, except percentages and per share data) (Unaudited) | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
GAAP LendingClub net income (loss) | $ | (48,087) | $ | 234 | $ | (383) | $ | (10,661) | $ | (19,935) | |||||||||
Cost structure simplification expense (1) | 228 | 284 | 3,443 | 1,934 | 4,272 | ||||||||||||||
Legal, regulatory and other expense related to legacy issues (2) | 4,476 | 4,531 | 4,142 | 6,791 | 4,145 | ||||||||||||||
Acquisition and related expenses (3) | 3,611 | 932 | — | — | — | ||||||||||||||
Other items (4) | 621 | 1,000 | 749 | 704 | — | ||||||||||||||
Adjusted net income (loss) | $ | (39,151) | $ | 6,981 | $ | 7,951 | $ | (1,232) | $ | (11,518) | |||||||||
Depreciation and impairment expense: | |||||||||||||||||||
Engineering and product development | 10,423 | 12,532 | 11,464 | 11,838 | 13,373 | ||||||||||||||
Other general and administrative | 1,603 | 1,739 | 1,569 | 1,596 | 1,542 | ||||||||||||||
Amortization of intangible assets | 846 | 848 | 845 | 866 | 940 | ||||||||||||||
Stock-based compensation expense | 18,129 | 16,741 | 18,095 | 20,551 | 18,252 | ||||||||||||||
Income tax expense (benefit) | 319 | 140 | 97 | (438) | — | ||||||||||||||
Adjusted EBITDA | $ | (7,831) | $ | 38,981 | $ | 40,021 | $ | 33,181 | $ | 22,589 | |||||||||
Total net revenue | $ | 120,206 | $ | 188,486 | $ | 204,896 | $ | 190,807 | $ | 174,418 | |||||||||
Adjusted EBITDA margin | (6.5) | % | 20.7 | % | 19.5 | % | 17.4 | % | 13.0 | % | |||||||||
(1) | Includes personnel-related expenses associated with establishing a site in the Salt Lake City area and external advisory fees. These expenses are included in "Sales and marketing," "Origination and servicing," "Engineering and product development" and "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. In the first quarter of 2019, also includes external advisory fees which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. | ||||||||||||||||||
(2) | Consists of legal legacy expenses which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations and expense related to the dissolution of certain private funds managed by LCAM, which is included in "Net fair value adjustments" on the Company's Condensed Consolidated Statements of Operations. For the second quarter of 2019, also includes expense related to the termination of a legacy contract, which is included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. | ||||||||||||||||||
(3) | Represents costs related to the acquisition of Radius. | ||||||||||||||||||
(4) | In the first quarter of 2020, includes one-time expenses resulting from the COVID-19 pandemic which are included in "Engineering and product development" and "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. In 2019, includes expenses related to certain non-legacy litigation and regulatory matters. For the second quarter of 2019, also includes a gain on the sale of our small business operating segment. Both of these are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. | ||||||||||||||||||
LENDINGCLUB CORPORATION RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued) (In thousands, except percentages and per share data) (Unaudited) | |||||||||||||||||||
Three Months Ended | March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||
Common and | Common | Common | Common | Common | |||||||||||||||
Adjusted net income (loss) attributable to stockholders | $ | (39,151) | $ | 6,981 | $ | 7,951 | $ | (1,232) | $ | (11,518) | |||||||||
Weighted-average GAAP diluted shares (2)(3) | 89,085,270 | 88,912,677 | 87,588,495 | 86,719,049 | 86,108,871 | ||||||||||||||
Non-GAAP diluted shares (2)(3) | 89,085,270 | 88,912,677 | 87,588,495 | 86,719,049 | 86,108,871 | ||||||||||||||
Adjusted EPS - diluted (3) | $ | (0.44) | $ | 0.08 | $ | 0.09 | $ | (0.01) | $ | (0.13) | |||||||||
(1) | Presented on an as-converted basis, as the preferred stock is considered common shares because it participates in earnings similar to common stock and does not receive any significant preferences over the common stock. | ||||||||||||||||||
(2) | In the first quarter of 2020, includes the total weighted-average shares outstanding of both common and preferred stock on an as-converted basis. | ||||||||||||||||||
(3) | Share information and balances have been retroactively adjusted, as applicable, to reflect a 1-for-5 reverse stock split effective as of July 5, 2019. | ||||||||||||||||||
LENDINGCLUB CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION (In thousands) (Unaudited) | |||||||||||||||||||||||||
The following table is provided to delineate between the assets and liabilities belonging to our member payment dependent self-directed retail program (Retail Program) note holders and certain VIEs that we are required to consolidate in accordance with GAAP. Such assets are not legally ours and the associated liabilities are payable only from the cash flows generated by those assets (i.e. Pass-throughs). As such, these debt holders do not have a secured interest in any other assets of LendingClub. We believe this is a useful measure because it illustrates the overall financial stability and operating leverage of the Company. | |||||||||||||||||||||||||
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||
Retail | Consolidated VIEs (2) (4) | All Other | Condensed | Retail | Consolidated VIEs (2)(4) | All Other | Condensed | ||||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 294,345 | $ | 294,345 | $ | — | $ | — | $ | 243,779 | $ | 243,779 | |||||||||
Restricted cash | — | 12,625 | 126,622 | 139,247 | — | 2,894 | 240,449 | 243,343 | |||||||||||||||||
Securities available for sale | — | — | 256,554 | 256,554 | — | — | 270,927 | 270,927 | |||||||||||||||||
Loans held for investment at fair value | 751,712 | 133,701 | — | 885,413 | 881,473 | 197,842 | — | 1,079,315 | |||||||||||||||||
Loans held for investment by the Company at fair value (4) | — | 65,254 | 5,749 | 71,003 | — | 37,638 | 6,055 | 43,693 | |||||||||||||||||
Loans held for sale by the Company at fair value | — | 127,718 | 613,986 | 741,704 | — | — | 722,355 | 722,355 | |||||||||||||||||
Accrued interest receivable | 5,387 | 2,119 | 4,068 | 11,574 | 5,930 | 1,815 | 5,112 | 12,857 | |||||||||||||||||
Property, equipment and software, net | — | — | 116,043 | 116,043 | — | — | 114,370 | 114,370 | |||||||||||||||||
Operating lease assets | — | — | 90,863 | 90,863 | — | — | 93,485 | 93,485 | |||||||||||||||||
Intangible assets, net | — | — | 13,703 | 13,703 | — | — | 14,549 | 14,549 | |||||||||||||||||
Other assets | — | — | 164,104 | 164,104 | — | — | 143,668 | 143,668 | |||||||||||||||||
Total assets | $ | 757,099 | $ | 341,417 | $ | 1,686,037 | $ | 2,784,553 | $ | 887,403 | $ | 240,189 | $ | 1,854,749 | $ | 2,982,341 | |||||||||
Liabilities and Equity | |||||||||||||||||||||||||
Accounts payable | $ | — | $ | — | $ | 5,301 | $ | 5,301 | $ | — | $ | — | $ | 10,855 | $ | 10,855 | |||||||||
Accrued interest payable | 5,387 | 1,624 | 2,018 | 9,029 | 5,930 | 1,737 | 1,593 | 9,260 | |||||||||||||||||
Operating lease liabilities | — | — | 109,481 | 109,481 | — | — | 112,344 | 112,344 | |||||||||||||||||
Accrued expenses and other liabilities | — | — | 100,241 | 100,241 | — | — | 142,636 | 142,636 | |||||||||||||||||
Payable to investors | — | — | 50,003 | 50,003 | — | — | 97,530 | 97,530 | |||||||||||||||||
Notes, certificates and secured borrowings at fair value | 751,712 | 133,701 | 1,427 | 886,840 | 881,473 | 197,842 | 2,151 | 1,081,466 | |||||||||||||||||
Payable to Structured Program note and certificate holders at fair value (4) | — | 206,092 | — | 206,092 | — | 40,610 | — | 40,610 | |||||||||||||||||
Credit facilities and securities sold under repurchase agreements | — | — | 621,020 | 621,020 | — | — | 587,453 | 587,453 | |||||||||||||||||
Total liabilities | 757,099 | 341,417 | 889,491 | 1,988,007 | 887,403 | 240,189 | 954,562 | 2,082,154 | |||||||||||||||||
Total equity | — | — | 796,546 | 796,546 | — | — | 900,187 | 900,187 | |||||||||||||||||
Total liabilities and equity | $ | 757,099 | $ | 341,417 | $ | 1,686,037 | $ | 2,784,553 | $ | 887,403 | $ | 240,189 | $ | 1,854,749 | $ | 2,982,341 | |||||||||
(1) | Represents loans held for investment at fair value that are funded directly by our Retail Program notes. The liabilities are only payable from the cash flows generated by the associated assets. We do not assume principal or interest rate risk on loans facilitated through our lending marketplace that are funded by our Retail Program because loan balances, interest rates and maturities are matched and offset by an equal balance of notes with the exact same interest rates and maturities. We do not retain any economic interests from our Retail Program. Interest expense on Retail Program notes of $28.9 million and $42.0 million was equally matched and offset by interest income from the related loans of $28.9 million and $42.0 million for the first quarters of 2020 and 2019, respectively, resulting in no net effect on our Net interest income and fair value adjustments. | ||||||||||||||||||||||||
(2) | Represents assets and equal and offsetting liabilities of certain VIEs that we are required to consolidate in accordance with GAAP, but which are not legally ours. The liabilities are only payable from the cash flows generated by the associated assets. The creditors of the VIEs have no recourse to the general credit of the Company. Interest expense on these liabilities owned by third parties of $7.8 million and net fair value adjustments of $2.7 million for the first quarter of 2020 were equally matched and offset by interest income on the loans of $10.5 million, resulting in no net effect on our Net interest income and fair value adjustments. Interest expense on these liabilities owned by third parties of $27.1 million and net fair value adjustments of $7.7 million for the first quarter of 2019 were equally matched and offset by interest income on the loans of $34.8 million, resulting in no net effect on our Net interest income and fair value adjustments. Economic interests held by LendingClub, including retained interests, residuals and equity of the VIEs, are reflected in "Loans held for sale by the Company at fair value," "Loans held for investment by the Company at fair value" and "Restricted cash," respectively, within the "All Other LendingClub" column. | ||||||||||||||||||||||||
(3) | Represents all other assets and liabilities of LendingClub, other than those related to our Retail Program and certain consolidated VIEs, but includes any economic interests held by LendingClub, including retained interests, residuals and equity of those consolidated VIEs. | ||||||||||||||||||||||||
(4) | Beginning in the fourth quarter of 2019, the Company sponsored a new Structured Program transaction that was consolidated, resulting in an increase to "Loans held for investment by the Company at fair value" and the related "Payable to Structured Program note and certificate holders at fair value." | ||||||||||||||||||||||||
LENDINGCLUB CORPORATION RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued) NET CASH AND OTHER FINANCIAL ASSETS (In thousands) (Unaudited) | |||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
Cash and cash equivalents (1) | $ | 294,345 | $ | 243,779 | $ | 199,950 | $ | 334,713 | $ | 402,311 | |||||||||
Restricted cash committed for loan purchases (2) | 4,572 | 68,001 | 84,536 | 31,945 | 24,632 | ||||||||||||||
Securities available for sale | 256,554 | 270,927 | 246,559 | 220,449 | 197,509 | ||||||||||||||
Loans held for investment by the Company at fair value (3) | 71,003 | 43,693 | 4,211 | 5,027 | 8,757 | ||||||||||||||
Loans held for sale by the Company at fair value | 741,704 | 722,355 | 710,170 | 435,083 | 552,166 | ||||||||||||||
Payable to Structured Program note and certificate holders (3) | (206,092) | (40,610) | — | — | (233,269) | ||||||||||||||
Credit facilities and securities sold under repurchase agreements | (621,020) | (587,453) | (509,107) | (324,426) | (263,863) | ||||||||||||||
Other assets and liabilities (2) | 61,107 | (6,226) | (31,795) | (12,089) | (8,541) | ||||||||||||||
Net cash and other financial assets (4) | $ | 602,173 | $ | 714,466 | $ | 704,524 | $ | 690,702 | $ | 679,702 | |||||||||
(1) | Variations in cash and cash equivalents are primarily due to variations in the amount and timing of loan purchases invested in by the Company. | ||||||||||||||||||
(2) | In the fourth quarter of 2019, we added a new line item called "Other assets and liabilities" which is a total of "Accrued interest receivable," "Other assets," "Accounts payable," "Accrued interest payable" and "Accrued expenses and other liabilities," included on our Consolidated Balance Sheets. This line item represents certain assets and liabilities that impact working capital and are affected by timing differences between revenue and expense recognition and related cash activity. In the third quarter of 2019, we added a new line item called "Restricted cash committed for loan purchases," which represents cash and cash equivalents that are transferred to restricted cash for loans that are pending purchase by the Company. We believe this is a more complete representation of the Company's net cash and other financial assets position as of each period presented in the table above. Prior period amounts have been reclassified to conform to the current period presentation. | ||||||||||||||||||
(3) | Beginning in the fourth quarter of 2019, the Company sponsored a new Structured Program transaction that was consolidated, resulting in an increase to "Loans held for investment by the Company at fair value" and the related "Payable to Structured Program note and certificate holders at fair value." | ||||||||||||||||||
(4) | Comparable GAAP measure cannot be provided as not practicable. | ||||||||||||||||||
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SOURCE LendingClub Corporation
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