LendingClub Q2 Earnings: Originations Increase 31% YoY, Net Revenue Rises 27%

LendingClub (NYSE:LC) is out with numbers for the second quarter of 2018 ending in June. According to a release, LendingClub delivered the following results:

  • Record net revenue of $177.0 million, up 27% year-over-year
  • Record originations of $2.8 billion, up 31% year-over-year
  • Improved Contribution Margin to 48.3% from 47.3% in the same quarter last year
  • Delivered Adjusted EBITDA of $25.7 million, or a 14.5% Adjusted EBITDA margin, up 11.3 percentage points year-over-year reflecting the company’s efforts to drive profitability
  • GAAP Consolidated Net Loss was $(60.8) million, or $(6.7) million excluding $35.6 million of goodwill impairment related to the Company’s patient and education finance unit, which reflects the Company’s focus on growing the direct to consumer marketplace and $18.5 million of expenses related to outstanding legacy issues disclosed by the Company in 2016
  • Basic and diluted EPS attributable to LendingClub was $(0.14) for the second quarter of 2018, compared to basic and diluted EPS attributable to LendingClub of $(0.06) in the same quarter last year and $(0.07) in the first quarter of 2018.Adjusted EPS was $0.03 for the second quarter of 2018, compared to adjusted EPS of $(0.01) in the same quarter last year and $0.01 in the first quarter of 2018.
  • LendingClub said it is using cash to accumulate loans for future transactions. Loans held for sale by the Company at the end of the second quarter of 2018 were $515.3 million, which were financed with $249.2 million of debt outstanding under the Company’s warehouse credit facilities.

Shares of LendingClub rose after hours but prior to the conference call that should shed additional light on the marketplace lending platform’s operations.

Scott Sanborn, LendingClub CEO, commented on the results;

“We are executing well against the strategy we laid out at our investor day in December 2017 and our core business is firing on all cylinders. We are laser focused on the direct to consumer opportunity as we help our members on the path to financial success.”

LendingClub CFO Tom Casey said;

“In the second quarter we delivered both strong top line growth and Adjusted EBITDA profitability as we continue to execute against our strategy.”

LendingClub provided the following forecast for Q3 earnings and full year 2018:

LendingClub provides the following outlook for the third quarter and full year 2018:

Third Quarter 2018

  • Total Net Revenue in the range of $175 million to $185 million
  • GAAP Consolidated Net Loss in the range of $(15) million to $(10) million
  • Adjusted EBITDA in the range of $18 million to $23 million
  • Reconciling Items between GAAP Consolidated Net Loss and non-GAAP Adjusted EBITDA consisting of stock-based compensation of approximately $20 million, and depreciation, impairment, amortization and other net adjustments of approximately $13 million. Outstanding legacy issues are not forecasted in GAAP Net Income (Loss) or Adjusted EBITDA.

Full Year 2018

  • Total Net Revenue in the range of $680 million to $705 million
  • GAAP Consolidated Net Loss (3) in the range of $(124) million to $(109) million
  • Adjusted EBITDA(2)(3) in the range of $75 million to $90 million
  • Reconciling Items between GAAP Consolidated Net Loss and non-GAAP Adjusted EBITDA consisting of stock-based compensation of approximately $77 million, expenses related to outstanding legacy issues of $35.5 million and goodwill impairment of $35.6 million that were recognized in the first half of 2018, and depreciation, impairment, amortization and other net adjustments of approximately $51 million.

You may download the Q2 Earnings presentation here.

Update: The earnings call was generally upbeat. LendingClub continues to drive the bulk of its loan originations from debt consolidations (70% or so) but they expect to use the information provided by borrowers to provide additional services over time – announced in coming quarters. IE the information you gather for a car loan may be the same type of information necessary to provide insurance. Today, approximately 25% of customers return to LendingClub and they believe there is opportunity here. LendingClub continues to focus on a path to profitability but its a long road back to the share price of LC when it IPOed several years ago.

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