Late last week, Prosper Marketplace filed its first-quarter report on operations and the document provides some insight into how the marketplace lender is faring during an economic landscape impacted by the Coronavirus.
Overall, Prosper has originated $17.1 billion since platform inception through March 31, 2020. For the three months ended March 31st, the marketplace lending platform originated $449 million in loans – a 25% decrease from the same period year prior. The percentage of loans funded through Prosper’s whole loan channel during Q1 was 91%.
The decline in loan originations has naturally led to a decrease in transaction fees so net revenue dropped dramatically.
Prosper notes that the decline in originations was due to “greater competition for borrowers earlier in the first quarter of 2020, followed by tighter underwriting and higher borrower rates in March 2020 to address the negative economic impact of the COVID-19 outbreak.”
Prosper adds that in the past few years it has been tightening its credit requirements and moving away from riskier loans.
Total net revenues for the three months ended March 31, 2020 decreased $26.8 million, or 89%, when compared to the three months ended March 31, 2019. This change was largely due to a “$36.9 million loss from the Change in Fair Value of Financial Instruments” as the economic impact of the COVID-19 crisis negatively affected the value of the loans.
Overall, net income increased in Q1 compared to the same quarter year prior mainly due to the change in the Fair Value of Warrants. Costs were lower too as fewer loans were serviced and the company made moves to lower operational costs as the economy shifted. The total income per share was $0.02 versus a loss of ($0.32) year prior.
Prosper said it was tracking the development of the Coronavirus while providing certain relief options to borrowers like delayed payments on loans.
Of note, Prosper received $8.4 million under the Paycheck Protection Program, part of the CARES Act, to cover payroll, rent etc. The company has also instituted temporary salary reductions and suspended certain benefits.
Prosper stated:
“We anticipate that our available funds, Warehouse Lines, and cash flow from operations will be sufficient to meet our operational cash needs for the foreseeable future. However, there remains significant uncertainty regarding the future impact of the COVID-19 outbreak on our financial condition and liquidity.”
The COVID-19 induced uncertainty is, of course, impacting many businesses – including marketplace lending platforms.
If you are interested, you can review the 10-Q here.