Lending Club Announces Q3 Results. Originations Down from Year Prior but Beats Expectations

Scott Sanborn and DroneLending Club (NYSE:LC),the largest  marketplace lending platform in the US, is out with Q3 results.  Lending Club reported a net loss of $36.5 million for the Q3 of 2016, an improvement vs. the net loss of $81.4 million reported in Q2 of 2016. Meanwhile originations dipped from $2.24 billion in Q3 of 2015 to $1.96 billion in Q3 2016, a decline of 12%. Lending Club’s shares were up in pre-market as results came in slightly better than expected.

Lending Club has endured a challenging year following the departure of its founding CEO in May of this year that caused many institutional investors to pull back from providing the capital necessary to originate loans.  Scott Sanborn, CEO lf Lending Club, has been rebuilding the executive bench while refocusing on recruiting new capital channels. Sanborn commented on the Q3 results saying he was very pleased with the performance;

“We actively reengaged with investors of all types to deliver on our plan and enable $2 billion in loan originations. While we’ve made incredible progress, there is still work to be done. In the months ahead we are focused on increasing the diversity and resiliency of our funding mix, realigning our resources, and regaining our operating rhythm. Today’s results, along with our new executive team, and the return of banks to our platform, give me confidence as we begin our planning for 2017.”

Lending Club announced today, a $1.3 billion platform purchase program with Credigy, a subsidiary of the National Bank of Canada, to increase funding visibility and stability, aiding Lending Club’s capital diversification strategy.

During the quarter, Lending Club also announced entry into a new lending vertical: Auto Loans.

Lending Club shared that its borrower base increased to over 1.7 million individuals and the company expanded its retail investor base to over 142,000 self-managed active individual investors who collectively invested over $273 million in the third quarter.tom-casey

“We entered September without the need for investor incentives and delivered solid sequential revenue growth and margin improvement,” said Tom Casey, CFO. “While expenses remain elevated, we are heading into the fourth quarter with improving fundamentals and increasing confidence, and a plan to put the company on a path to long term growth and margin expansion.”

Lending Club provided Q4 guidance of Operating Revenue in the range of $116 million to $123 million. Net Income / (Loss) in the range of $(48) million to $(38) million and adjusted EBITDA in the range of $(15) million to $(5) million.

lending-club-auto-financeThird Quarter 2016 Financial Highlights

  • Originations – Loan originations in the third quarter of 2016 were $1.97 billion, up 1% compared to the $1.96 billion we reported in the second quarter of 2016, but down 12% compared to $2.24 billion in the same quarter last year. Lending Club has now facilitated nearly $23 billion in loans since our inception and as of the end of September 2016 manages a servicing portfolio of nearly $10.9 billion, up 42% compared to the $7.7 billion at the end of the same period last year.
  • Operating Revenue – Operating revenue in the third quarter of 2016 was $112.6 million, up 10% quarter over quarter and down 2% compared to the same period last year. Included in the third quarter revenue was approximately $11 million of cash incentives for the months of July and August recorded as contra-revenue. The company did not offer any cash incentives in September.
  • Net Loss – GAAP net loss was $(36.5) million for the third quarter of 2016, an improvement vs. the net loss of $(81.4) million reported in the second quarter of 2016, but down compared to net income of $1.0 million in the same quarter last year. The results for the third quarter of 2016 were negatively affected by approximately $11 million in incentives paid to investors, and approximately $20 million of unusual expenses from events related to our board review disclosures earlier this year, retention expenses and incremental legal, audit and other professional fees.
  • Adjusted EBITDA (3) – Adjusted EBITDA was $(11.1) million in the third quarter of 2016, compared to $(30.1) million in the second quarter of 2016, and $21.2 million in the same quarter last year. The losses were largely driven by the items listed above. As a percent of operating revenue, Adjusted EBITDA margin decreased to (9.9)% in the third quarter of 2016, down from 18.4% in the same quarter last year.
  • Earnings Per Share (EPS) – Basic and diluted EPS was $(0.09) for the third quarter of 2016, compared to basic and diluted EPS of $(0.21) in the second quarter of 2016 and $0.00 in the same quarter last year.
  • Adjusted EPS (3) – Adjusted EPS was $(0.04) for the third quarter of 2016, compared to adjusted EPS of $(0.09) in the second quarter of 2016 and $0.04 in the same quarter last year.
  • Cash, Cash Equivalents and Securities Available for Sale – As of September 30, 2016, cash, cash equivalents and securities available for sale totaled $800 million, with no outstanding debt.

 

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