Lending Club Reports Q4 & Full Year Results as Originations Dip: “We Are Entering 2017 in a Stronger Position”

Lending Club (NYSE:LC), the largest marketplace lending platform in the US, has reported Q4 results alongside full year numbers. Loan originations in Q4 of 2016 were $1.99 billion, up 1% compared to the $1.97 billion reported in Q3 of 2016 and down 23% compared to $2.58 billion in the same quarter last year. Shares in the online lender dipped following the report.

Net operating revenue in Q4 of 2016 was $129.2 million, up 15% quarter over quarter and down 4% compared to the same period last year. Net operating revenue as a percent of originations, or revenue yield, was 6.50% in the fourth quarter, up 79 basis points sequentially, driven primarily by a $4.3 million favorable adjustment to the servicing asset valuation and the elimination of $10.7 million in incentives recognized in Q3 of 2016.

Net operating revenue as a percent of originations, or revenue yield, was 6.50% in Q4, up 79 basis points sequentially, driven primarily by a $4.3 million favorable adjustment to the servicing asset valuation and the elimination of $10.7 million in incentives recognized in Q3 of 2016.

GAAP net loss was $(32.3) million for the fourth quarter of 2016, improving by $4.2 million compared to third quarter of 2016 and down compared to net income of $4.6 million in the same quarter last year. The fourth quarter net loss benefited sequentially from higher revenue but was offset by higher marketing expenses and the quarterly impact of the previously disclosed acceleration of the first quarter of 2017 stock grant.

The results for the fourth quarter include approximately $16 million of expenses from events related to our board review disclosure earlier in 2016, including employee retention, legal, audit, and other professional service fees.

Lending Club CEO Scott Sanborn commented on the results;

“Last quarter we accomplished the foundational work required to prepare Lending Club for the growth to come. With a diverse, stable and scalable mix of investors, and an enhanced control environment, we are entering 2017 in a stronger position than ever to serve the needs of our customers.”

Tom Casey, Lending Club CFO, stated;

“2016 was a year of investment in the company. We developed better internal processes, stronger controls, and a diversified investor base that will help us compete in the future. Going forward, we are beginning to redeploy resources into areas of the business that will drive long-term growth and value creation.”

Key accomplishments for Lending Club in Q4 include:

Investors

  • Banks returned to purchasing at scale, funding 31% of total originations for the quarter, up from 13% in the third quarter – a clear testament to the strength of Lending Club’s control environment, and the attractiveness of the asset in helping banks efficiently deploy their capital and gain access to consumer credit
  • Lending Club supported the first rated securitization of Lending Club loans

Borrowers

  • Achieved targeted originations of nearly $2 billion, up 1% compared to third quarter 2016
  • Continued the company’s lead as the largest personal loan provider in the U.S. with a borrower base of over 1.8 million individuals
  • Lending Club has now facilitated nearly $25 billion in loans since inception

Other developments

  • Ended the year with a servicing portfolio of $11.1 billion, up 24% from the same period last year and delivering $1.8 billion of principal and interest payments to investors throughout the quarter
  • Completed planned remediation steps related to historical material weakness
  • Ended 2016 with cash, cash equivalents and securities available for sale totaling $803 million, with no outstanding debt

Lending Club provided the folllowing outlook for Q1 of 2017 and full year 2017 results as follows:

Full Year 2017

Total Net Revenue in the range of $565 million to $595 million.

Net Income / (Loss) in the range of $(84) million to $(69) million.

Adjusted EBITDA(3)(4) in the range of $40 million to $55 million.

Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock based compensation of approximately $91 million, depreciation and amortization and other net adjustments of approximately $33 million.

First Quarter 2017

Total Net Revenue in the range of $117 million to $122 million.

Net Income / (Loss) in the range of $(43) million to $(38) million.

Adjusted EBITDA(3)(4) in the range of $(10) million to $(5) million.

Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $25 million, depreciation and amortization and other net adjustments of approximately $8 million.

Lending Club is hosting a live webcast on the earnings report 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 2560900, ten minutes prior to 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time).

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