LendingClub Q4 Results: Revenue & Loan Originations Increase, Shares Dip After Hours

LendingClub (NYSE: LC), the largest marketplace lending platform in the US, announced financial results for the fourth quarter and full year ended December 31, 2017. Simultaneously, LendingClub announced that it has successfully reached a preliminary settlement of class action lawsuits filed in federal and California state courts arising from legacy issues.

During Q4, LendingClub said it delivered record revenue at $156.5 million, up 20% year-over-year while just topping Q3 which registered $154 million. The online lender said it had achieved 23% annual growth in originations to over $2.4 billion but originations were relatively flat versus Q3.

Following the earnings report, shares in LendingClub dipped in after hours trading.

Scott Sanborn, LendingClub CEO commented on the results;

“2017 was a year of rebuilding and transforming our core business. We returned to growth and materially expanded and diversified our investor base. We’re continuing to invest in our people, technology and products to position us for the years ahead.”

Tom Casey, LendingClub CFO, added;

“The underlying financial performance of our business is strong and the investments we’ve made in 2017 position us for growth and expanded Adjusted EBITDA margins in 2018.”

Operational highlights for Q4 included:

  • Launched a new feature to enable borrowers to directly pay off existing credit card debt in order to improve loan performance and financial health for customers.
  • Introduced CLUB Certificates, a first-of-its-kind marketplace lending product that opens up the asset class to new investors.
  • Signed multi-year deals with a loan servicing platform and new partners to drive long-term operating cost efficiencies and increased operational flexibility.

Regarding the court settlement, LendingClub shared the following details:

  • $125.0 million agreement, subject to court approval.
  • $47.75 million will be covered by LendingClub’s insurance.
  • The remaining $77.25 million is reflected in the company’s fourth quarter net loss and will be paid from liquid assets of approximately $650 million held at December 31, 2017.

LendingClub said this preliminary settlement will have no material impact on the company’s business operations in 2018. LendingClub said it is still subject to several outstanding legacy issues that will result in elevated legal costs, including ongoing regulatory and government investigations, indemnification obligations and litigation.

 

 

Three Months Ended

Year Ended
December 31,

($ in millions)

December 31,
2017

September 30,
2017

December 31,
2016

2017

2016

Originations

$

2,438.3

$

2,442.9

$

1,987.3

$

8,987.2

$

8,664.7

Net Revenue

$

156.5

$

154.0

$

130.5

$

574.5

$

500.8

Consolidated Net Loss

$

(92.1)

$

(6.7)

$

(32.3)

$

(154.0)

$

(146.0)

Adjusted EBITDA (1)

$

19.0

$

20.9

$

(0.9)

$

44.6

$

(12.9)

(1)

Adjusted EBITDA is a non-GAAP financial measure. Beginning in the fourth quarter of 2017, adjusted EBITDA excludes legal and regulatory expense of $80.25 million related to outstanding legacy issues. Please see the discussion below under the heading “Non-GAAP Measures” and the reconciliation at the end of this release.

 

  • Consolidated Net Loss – GAAP net loss was $92.1 million for the fourth quarter of 2017, increasing $85.4 million from the third quarter of 2017 and increasing $59.8 million compared to the same quarter last year, driven primarily by the class action litigation settlement expense of $77.25 million during the fourth quarter of 2017.
  • Adjusted EBITDA (2) – Adjusted EBITDA was $19.0 million in the fourth quarter of 2017, declining $1.8 million from the third quarter of 2017 and improving $19.9 million compared to the same quarter last year.
  • Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $(0.22) for the fourth quarter of 2017, compared to basic and diluted EPS attributable to LendingClub of $(0.02) in the third quarter of 2017 and $(0.08) in the same quarter last year.
  • Adjusted EPS (2) – Adjusted EPS was $0.01 for the fourth quarter of 2017, compared to adjusted EPS of $0.03 in the third quarter of 2017 and $(0.02) in the same quarter last year.
  • Cash, Cash Equivalents, Securities Available for Sale and Loans Invested in by the Company – As of December 31, 2017, cash, cash equivalents and securities available for sale totaled $474 million, excluding $45.3 million in securities available for sale subject to regulatory risk retention requirements. As the company continued to build its investor programs, it began using cash to accumulate loans for future transactions. Loans held for sale by the company at the end of the fourth quarter were $236 million.

LendingClub provided the following outlook for Q1 of 2018:

  • Total Net Revenue in the range of $145 million to $155 million
  • Net Income (Loss) (3) in the range of $(25) million to $(20) million=
  • Adjusted EBITDA(2)(3) in the range of $5 million to $10 million

Full Year 2018

  • Total Net Revenue in the range of $680 million to $705 million
  • Net Income (Loss) (3) in the range of $(53) million to $(38) million
  • Adjusted EBITDA(2)(3) in the range of $75 million to $90 million

 

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