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LendingClub Reports Second Quarter 2019 Results

Record results with simplification program ahead of plan

SAN FRANCISCO, Aug. 6, 2019 /PRNewswire/ -- LendingClub Corporation (LC), America's largest online lending marketplace connecting borrowers and investors, today announced financial results for the second quarter ended June 30, 2019.

Lending Club, the world's largest online marketplace connecting borrowers and investors. (PRNewsFoto/Lending Club) (PRNewsFoto/Lending Club)

Record results

  • LendingClub's innovation, simplification program and focus on partnerships are transforming the company and enabling it to sustain robust operational and financial momentum.
  • Record loan originations of $3.1 billion, up 11% year-over-year.
  • Record Net Revenue of $190.8 million, up 8% year-over-year.
  • GAAP Consolidated Net Loss of $(10.6) million compared to $(60.9) million in the second quarter of 2018.
  • Record Adjusted EBITDA of $33.2 million, up 29% year-over-year.
  • Adjusted EBITDA Margin of 17.4%, up 2.9 percentage points year-over-year driven by record Contribution Margin which benefited from improving customer acquisition and origination and servicing cost efficiency.
  • Adjusted Net Loss of $(1.2) million compared to $(6.7) million in the second quarter of 2018.

Innovation driving adoption on both the borrower and investor sides of the platform

  • Data driven improvements in demand generation helped grow applications and improve conversion in the second quarter of 2019 compared to the same quarter last year. Innovation to improve throughput resulted in 72% of customers going from application to approval within 24 hours, up from 46% in the second quarter of 2018, helping to increase conversion rates and drive business model efficiency.
  • Structured programs innovation is enabling more investors to access our platform. 35% of loans purchased by investors in the second quarter of 2019 were through structured program channels developed by LendingClub over the last two years. Our next generation certificate program launched in July.
  • Our recently launched Select Plus Platform, the next step in our ambitious product to platform strategy, opens up the LendingClub marketplace to sophisticated investors to identify opportunities to approve borrowers who fall outside the current criteria.

Simplification program ahead of plan and transforming our ability to serve customers and improve margins

  • Geolocation: 309 Full Time Equivalent (FTE) employees at our new site in the Salt Lake City area, with most of the 550 FTE capacity filled by year end.
  • Business process outsourcing: 450+ operations and technology support personnel at quarter end. Lowering unit costs, swapping fixed cost for variable cost, and increasing our capacity and capabilities.
  • Further initiatives which leverage LendingClub's scale are benefiting Contribution Margin and Adjusted EBITDA Margin.

Strong momentum towards full year goals

  • Maintaining full year 2019 Net Revenue range of $765 million to $795 million; updating GAAP Consolidated Net Loss range to ($38) million to ($23) million reflecting $18 million year-to-date expenses related to legal, regulatory and other expense related to legacy issues; cost structure simplification expense; and other items recognized during the first half of 2019; improving Adjusted Net Loss range to ($20) million to ($5) million; and raising lower end of Adjusted EBITDA range to $120 million to $135 million.
  • Expect third quarter 2019 Net Revenue to be in the range of $200 million to $210 million (up 8% to 14% year-over-year); GAAP Consolidated Net Income and Adjusted Net Income both in the range of $0 million to $5 million; and Adjusted EBITDA in the range of $35 million to $40 million.
  • On track to be Adjusted Net Income profitable in the third quarter of 2019. Raising full year Adjusted EBITDA and Adjusted Net Income guidance.

"LendingClub is adding more customers and capital to its marketplace, compounding its competitive advantages," said Scott Sanborn, CEO of LendingClub. "This is enabling more borrowers to improve their financial health, more investors to generate competitive risk-adjusted returns, and LendingClub to serve both more efficiently."

LendingClub remains well positioned over the long term

  • LendingClub provides tools that help Americans save money on their path to financial health through lower borrowing costs and a seamless user experience. We also seek to help investors efficiently generate competitive risk-adjusted returns through diversification.
  • The company is the market leader in personal loans a $130 billion+ industry and the fastest growing segment of consumer credit in the United States and has an estimated potential immediate addressable market opportunity of more than $445 billion.
  • The company's marketplace gives it unique strengths which enable it to expand its market opportunity, competitive advantage, and growth potential:
  • The company is enhancing its operating leverage and capacity to generate cash with efficiency initiatives.

Three Months Ended 
June 30,


Six Months Ended
June 30,

($ in millions)

2019


2018


2019


2018

Loan Originations

$

3,129.5



$

2,818.3



$

5,857.4



$

5,124.3


Net Revenue

$

190.8



$

177.0



$

365.2



$

328.6


GAAP Consolidated Net Loss

$

(10.6)



$

(60.8)



$

(30.5)



$

(92.0)


Adjusted EBITDA

$

33.2



$

25.7



$

55.8



$

41.0


Adjusted Net Loss

$

(1.2)



$

(6.7)



$

(12.8)



$

(20.9)


Second Quarter 2019 Financial Highlights

Commenting on financial results, Tom Casey, CFO of LendingClub said, "We are executing our simplification program ahead of plan which contributed to our strong second quarter results. This transformation of our cost structure enables us to grow responsibly and increase our operating leverage in 2019 and beyond."

Loan Originations – Loan originations in the second quarter of 2019 were $3.1 billion improving 11% compared to the same quarter last year.

Net Revenue – Net Revenue in the second quarter of 2019 was $190.8 million improving 8% compared to the same quarter last year driven primarily by a higher volume of loan originations.

GAAP Consolidated Net Loss – GAAP Consolidated Net Loss was $(10.6) million for the second quarter of 2019 improving $50.2 million compared to the same quarter last year driven primarily by a goodwill impairment expense recognized during the second quarter of 2018, a decline in expenses related to the resolution of certain legacy issues and an increase in net revenue.

Adjusted EBITDA  Adjusted EBITDA was $33.2 million in the second quarter of 2019 improving $7.5 million compared to the same quarter last year.

Adjusted Net Loss Adjusted Net Loss was $(1.2) million in the second quarter of 2019 improving $5.5 million compared to the same quarter last year.

Contribution Contribution was $99.6 million in the second quarter of 2019, improving $14.1 million compared to the same quarter last year.

Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $(0.12) in the second quarter of 2019, compared to basic and diluted EPS attributable to LendingClub of $(0.72) in the same quarter last year. All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.

Adjusted EPS – Adjusted EPS was $(0.01) in the second quarter of 2019, compared to Adjusted EPS of $(0.08) in the same quarter last year. All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.

Net Cash and Other Financial Assets – As of June 30, 2019, net cash and other financial assets totaled $670.8 million. For a calculation of net cash and other financial assets, refer to the "Reconciliation of GAAP to Non-GAAP Measures" tables at the end of this release.

About LendingClub

LendingClub was founded to transform the banking system to make credit more affordable and investing more rewarding. Today, LendingClub's online credit marketplace connects borrowers and investors to deliver more efficient and affordable access to credit. Through its technology platform, LendingClub is able to create cost efficiencies and passes those savings onto borrowers in the form of lower rates and to investors in the form of risk-adjusted returns. LendingClub is based in San Francisco, California. Currently, residents of the following states may invest in LendingClub notes: AL, AR, AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, ME, MD, MI, MN, MO, MS, MT, ND, NE, NH, NJ, NV, NY, OK, OR, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, or WY. All loans are made by federally regulated issuing bank partners. More information is available at https://www.lendingclub.com.

Conference Call and Webcast Information

The LendingClub second quarter 2019 webcast and teleconference is scheduled to begin at 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time) on Tuesday, August 6, 2019. A live webcast of the call will be 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 3076474, ten minutes prior to 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time). An audio archive of the call will be available at http://ir.lendingclub.com. An audio replay will also be available on August 6, 2019, until August 13, 2019, by calling +1 (877) 344-7529 or outside the U.S. +1 (412) 317-0088, with Conference ID 10133466. LendingClub has used, and intends to use, its investor relations website, blog (http://blog.lendingclub.com), Twitter handle (@LendingClub) and Facebook page (https://www.facebook.com/LendingClubTeam) as a means of disclosing material non-public information and to comply with its disclosure obligations under Regulation FD.

Contacts

For Investors:
IR@lendingclub.com

Media Contact:
Press@lendingclub.com

Non-GAAP Financial Measures and Supplemental Financial Statement Information

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Contribution, Contribution Margin, Adjusted Net Income (Loss), Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Earnings (Loss) Per Share (Adjusted EPS) and Net Cash and Other Financial Assets. Our non-GAAP measures do have limitations as analytical tools and you should not consider them in isolation or as a substitute for an analysis of our results under GAAP.

We believe these non-GAAP measures provide management and investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-GAAP financial measures.

In particular, we believe Contribution and Contribution Margin are useful measures of direct product profitability because the measures illustrate the relationship between the costs most directly associated with revenue generating activities and the related revenue, and the effectiveness of the direct costs in obtaining revenue. Contribution is calculated as net revenue less "Sales and marketing" and "Origination and servicing" expenses on the Company's Statements of Operations, adjusted to exclude cost structure simplification and non-cash stock-based compensation expenses within these captions and income or loss attributable to noncontrolling interests. The adjustment for cost structure simplification expense relates to a review of our cost structure and a number of expense initiatives underway, including the establishment of a site in the Salt Lake City area. The expense includes incremental and excess personnel-related expenses associated with establishing our Salt Lake City area site and external advisory fees. Contribution Margin is a non-GAAP financial measure calculated by dividing Contribution by total net revenue.

We believe Adjusted Net Income (Loss) is an important measure because it directly reflects the financial performance of our business operations. Adjusted Net Income (Loss) adjusts for certain items that are either non-recurring, do not contribute directly to management's evaluation of its operating results, or non-cash items, such as (1) expenses related to our cost structure simplification as discussed above, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, and (4) other items (including certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of assets), net of tax. In the second quarter of 2019, we added an adjustment to Adjusted Net Income (Loss) and Adjusted EBITDA for other items to adjust for expenses or gains that are not part of our core operating results. Other items include certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of assets.

We believe that Adjusted EBITDA and Adjusted EBITDA Margin are important measures of operating performance because they allow for the comparison of our core operating results, including our return on capital and operating efficiencies, from period to period. Adjusted EBITDA adjusts for certain items that are either non-recurring, do not contribute directly to management's evaluation of its operating results, or non-cash items, such as (1) cost structure simplification expense, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, (4) other items, (5) depreciation, impairment and amortization expense, (6) stock-based compensation expense, (7) income tax expense (benefit), and (8) acquisition related expenses. Legacy items are generally those expenses that arose from the decisions of legacy management prior to the board review initiated in 2016 and resulted in the resignation of our former CEO, including legal and other costs associated with ongoing regulatory and government investigations, indemnification obligations, litigation, and termination of certain legacy contracts. Additionally, we utilize Adjusted EBITDA as an input into the Company's calculation of the annual bonus plan. Adjusted EBITDA Margin is a non-GAAP financial measure calculated by dividing Adjusted EBITDA by total net revenue.

We believe Adjusted EPS is an important measure because is directly reflects the financial performance of our business operations. Adjusted EPS is a non-GAAP financial measure calculated by dividing Adjusted Net Income (Loss) by the weighted-average diluted common shares outstanding.

There are a number of limitations related to the use of these non-GAAP financial measures versus their most comparable GAAP measure. In particular, many of the adjustments to derive the non-GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future. Other companies, including companies in our industry, may calculate these measures differently, which may reduce their usefulness as a comparative measure.

For more information on our non-GAAP financial measures and a reconciliation of such measures to the nearest GAAP measure, please see the "Reconciliation of GAAP to Non-GAAP Measures" tables at the end of this release.

Safe Harbor Statement

Some of the statements above, including statements regarding future product initiatives, borrower and investor demand and anticipated future financial results are "forward-looking statements." The words "anticipate," "believe," "estimate," "expect," "intend," "may," "outlook," "plan," "predict," "project," "will," "would" and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include: the outcomes of pending governmental investigations and pending or threatened litigation, which are inherently uncertain; the impact of management changes and the ability to continue to retain key personnel; our ability to achieve cost savings from restructurings; our ability to continue to attract and retain new and existing borrowers and investors; our ability to obtain or add bank functionality; competition; overall economic conditions; demand for the types of loans facilitated by us; default rates and those factors set forth in the section titled "Risk Factors" in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K, each as filed with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Information in this press release is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Additional information about LendingClub is available in the prospectus for LendingClub's notes, which can be obtained on LendingClub's website at https://www.lendingclub.com/info/prospectus.action.

LENDINGCLUB CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)



Three Months Ended
June 30,


Six Months Ended
June 30,


2019


2018


2019


2018

Net revenue:
















Transaction fees

$

152,207



$

135,926



$

287,604



$

247,108










Interest income

92,562



127,760



192,734



265,778


Interest expense

(66,916)



(100,898)



(142,276)



(211,741)


Net fair value adjustments

(35,974)



(26,556)



(70,703)



(55,269)


Net interest income and fair value adjustments

(10,328)



306



(20,245)



(1,232)


Investor fees

32,272



27,400



64,003



55,295


Gain on sales of loans

13,886



11,880



29,038



24,551


Net investor revenue

35,830



39,586



72,796



78,614










Other revenue

2,770



1,467



4,825



2,924










Total net revenue

190,807



176,979



365,225



328,646


Operating expenses: (1)








Sales and marketing

69,323



69,046



135,946



126,563


Origination and servicing

24,931



25,593



53,204



48,238


Engineering and product development

43,299



37,650



85,845



74,487


Other general and administrative

64,324



57,583



121,200



109,892


Goodwill impairment



35,633





35,633


Class action and regulatory litigation expense



12,262





25,762


Total operating expenses

201,877



237,767



396,195



420,575


Loss before income tax expense

(11,070)



(60,788)



(30,970)



(91,929)


Income tax (benefit) expense

(438)



24



(438)



63


Consolidated net loss

(10,632)



(60,812)



(30,532)



(91,992)


Less: Income attributable to noncontrolling interests

29



49



64



50


LendingClub net loss

$

(10,661)



$

(60,861)



$

(30,596)



$

(92,042)


Net loss per share attributable to LendingClub:








Basic (2)

$

(0.12)



$

(0.72)



$

(0.35)



$

(1.10)


Diluted (2)

$

(0.12)



$

(0.72)



$

(0.35)



$

(1.10)


Weighted-average common shares - Basic (2)

86,719,049



84,238,897



86,429,892



83,950,978


Weighted-average common shares - Diluted (2)

86,719,049



84,238,897



86,429,892



83,950,978



(1) Includes stock-based compensation expense as follows:



Three Months Ended
June 30,


Six Months Ended
June 30,


2019


2018


2019


2018

Sales and marketing

$

1,540



$

2,023



$

3,111



$

3,883


Origination and servicing

846



1,102



1,770



2,174


Engineering and product development

5,475



5,464



10,706



10,743


Other general and administrative

12,690



11,208



23,216



20,798


Total stock-based compensation expense

$

20,551



$

19,797



$

38,803



$

37,598




(2)

All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.

 

LENDINGCLUB CORPORATION

OPERATING HIGHLIGHTS

(In thousands, except percentages and number of employees, or as noted)

(Unaudited)



Three Months Ended


% Change


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


Y/Y

Operating Highlights:

Loan originations (in millions)

$

3,130



$

2,728



$

2,871



$

2,886



$

2,818



11

%

Net revenue

$

190,807



$

174,418



$

181,521



$

184,645



$

176,979



8

%

Consolidated net loss

$

(10,632)



$

(19,900)



$

(13,412)



$

(22,749)



$

(60,812)



83

%

Contribution (1)

$

99,556



$

85,688



$

91,023



$

88,453



$

85,416



17

%

Contribution margin (1)

52.2

%


49.1

%


50.1

%


47.9

%


48.3

%


8

%

Adjusted EBITDA (1)

$

33,181



$

22,589



$

28,464



$

28,052



$

25,670



29

%

Adjusted EBITDA margin (1)

17.4

%


13.0

%


15.7

%


15.2

%


14.5

%


20

%

Adjusted net loss (1)

$

(1,232)



$

(11,518)



$

(4,110)



$

(7,330)



$

(6,727)



82

%

EPS – diluted (2)

$

(0.12)



$

(0.23)



$

(0.16)



$

(0.27)



$

(0.72)



83

%

Adjusted EPS – diluted (1) (2)

$

(0.01)



$

(0.13)



$

(0.05)



$

(0.09)



$

(0.08)



88

%

Loan Originations by Investor Type:

Banks

45

%


49

%


41

%


38

%


40

%



Other institutional investors

21

%


18

%


19

%


19

%


16

%



Managed accounts

16

%


17

%


16

%


21

%


19

%



LendingClub inventory

13

%


10

%


18

%


15

%


18

%



Self-directed retail investors

5

%


6

%


6

%


7

%


7

%



Total

100

%


100

%


100

%


100

%


100

%



Loan Originations by Program:

Personal loans – standard program

69

%


71

%


72

%


71

%


74

%



Personal loans – custom program

24

%


21

%


21

%


22

%


18

%



Other – custom program (3)

7

%


8

%


7

%


7

%


8

%



Total

100

%


100

%


100

%


100

%


100

%



Personal Loan Originations by Loan Grade – Standard Loan Program (in millions):

A

$

705.6



$

608.3



$

604.9



$

607.0



$

506.0



39

%

B

650.8



574.5



591.6



563.3



610.2



7

%

C

509.2



452.5



495.9



506.1



575.4



(12)

%

D

308.1



243.5



267.1



286.9



296.3



4

%

E

0.6



49.4



83.8



72.7



70.3



(99)

%

F



0.2



6.3



21.7



18.4



(100)

%

G





1.3



5.4



3.9



(100)

%

Total

$

2,174.3



$

1,928.4



$

2,050.9



$

2,063.1



$

2,080.5



5

%



(1)

Represents a non-GAAP measure. See "Reconciliation of GAAP to Non-GAAP Measures."

(2)

All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.

(3)

Comprised of education and patient finance loans, auto refinance loans, and small business loans. Beginning in the third quarter of 2019 this category will no longer include small business loans.

 

LENDINGCLUB CORPORATION

OPERATING HIGHLIGHTS (Continued)

(In thousands, except percentages and number of employees, or as noted)

(Unaudited)



Three Months Ended


% Change


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


Y/Y

Servicing Portfolio by Method Financed (in millions, at end of period):

Whole loans sold

$

12,777



$

11,761



$

10,890



$

10,475



$

9,512



34

%

Notes

1,092



1,169



1,243



1,347



1,428



(24)

%

Certificates

471



577



689



830



967



(51)

%

Secured borrowings

42



59



81



108



143



(71)

%

Loans invested in by the Company

426



565



843



464



523



(19)

%

Total

$

14,808



$

14,131



$

13,746



$

13,224



$

12,573



18

%

Employees and contractors (4)

1,715



1,621



1,687



1,762



1,722



%



(4)

As of the end of each respective period.

 

LENDINGCLUB CORPORATION

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)



June 30,
2019


December 31,
2018

Assets




Cash and cash equivalents

$

334,713



$

372,974


Restricted cash

166,034



271,084


Securities available for sale (includes $53,007 and $53,611 pledged as collateral at fair value, respectively)

220,449



170,469


Loans held for investment at fair value

1,512,984



1,883,251


Loans held for investment by the Company at fair value

5,027



2,583


Loans held for sale by the Company at fair value

435,083



840,021


Accrued interest receivable

17,545



22,255


Property, equipment and software, net

119,553



113,875


Intangible assets, net

16,242



18,048


Other assets

239,276



124,967


Total assets

$

3,066,906



$

3,819,527


Liabilities and Equity




Accounts payable

$

8,677



$

7,104


Accrued interest payable

14,561



19,241


Accrued expenses and other liabilities

262,844



152,118


Payable to investors

64,126



149,052


Notes, certificates and secured borrowings at fair value

1,517,951



1,905,875


Payable to securitization note holders



256,354


Credit facilities and securities sold under repurchase agreements

324,426



458,802


Total liabilities

2,192,585



2,948,546


Equity




Common stock, $0.01 par value; 180,000,000 shares authorized; 87,616,553 and 86,384,667shares issued, respectively; 87,160,013 and 85,928,127 shares outstanding, respectively (1)

876



864


Additional paid-in capital (1)

1,439,244



1,405,392


Accumulated deficit

(548,323)



(517,727)


Treasury stock, at cost; 456,540 shares (1)

(19,485)



(19,485)


Accumulated other comprehensive income

1,313



157


Total LendingClub stockholders' equity

873,625



869,201


Noncontrolling interests

696



1,780


Total equity

874,321



870,981


Total liabilities and equity

$

3,066,906



$

3,819,527




(1)

All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.

 

LENDINGCLUB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(In thousands, except percentages and per share data)

(Unaudited)



Three Months Ended


Six Months Ended


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


June 30,
2019


June 30,
2018

GAAP LendingClub net loss

$

(10,661)



$

(19,935)



$

(13,462)



$

(22,804)



$

(60,861)



$

(30,596)



$

(92,042)


Engineering and product development expense

43,299



42,546



39,552



41,216



37,650



85,845



74,487


Other general and administrative expense

64,324



56,876



61,303



57,446



57,583



121,200



109,892


Cost structure simplification expense (1)

646



3,706



880







4,352




Goodwill impairment









35,633





35,633


Class action and regulatory litigation expense







9,738



12,262





25,762


Stock-based compensation expense (2)

2,386



2,495



2,732



2,895



3,125



4,881



6,057


Income tax (benefit) expense

(438)





18



(38)



24



(438)



63


Contribution

$

99,556



$

85,688



$

91,023



$

88,453



$

85,416



$

185,244



$

159,852


Total net revenue

$

190,807



$

174,418



$

181,521



$

184,645



$

176,979



$

365,225



$

328,646


Contribution margin

52.2

%


49.1

%


50.1

%


47.9

%


48.3

%


50.7

%


48.6

%



(1)

Contribution excludes the portion of personnel-related expenses associated with establishing a site in the Salt Lake City area that are included in the "Sales and marketing" and "Origination and servicing" expense categories.

(2)

Contribution excludes stock-based compensation expense included in the "Sales and marketing" and "Origination and servicing" expense categories.

 

LENDINGCLUB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)

(In thousands, except percentages and per share data)

(Unaudited)



Three Months Ended


Six Months Ended


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


June 30,
2019


June 30,
2018

GAAP LendingClub net loss

$

(10,661)



$

(19,935)



$

(13,462)



$

(22,804)



$

(60,861)



$

(30,596)



$

(92,042)


Cost structure simplification expense (1)

1,934



4,272



6,782







6,206




Goodwill impairment









35,633





35,633


Legal, regulatory and other expense related to legacy issues (2)

6,791



4,145



2,570



15,474



18,501



10,936



35,474


Other items (3)

704











704




Adjusted net loss

$

(1,232)



$

(11,518)



$

(4,110)



$

(7,330)



$

(6,727)



$

(12,750)



$

(20,935)


Depreciation and impairment expense:














Engineering and product development

11,838



13,373



12,372



13,221



10,197



25,211



19,444


Other general and administrative

1,596



1,542



1,525



1,488



1,420



3,138



2,839


Amortization of intangible assets

866



940



941



940



959



1,806



1,994


Stock-based compensation expense

20,551



18,252



17,718



19,771



19,797



38,803



37,598


Income tax (benefit) expense

(438)





18



(38)



24



(438)



63


Adjusted EBITDA

$

33,181



$

22,589



$

28,464



$

28,052



$

25,670



$

55,770



$

41,003


Total net revenue

$

190,807



$

174,418



$

181,521



$

184,645



$

176,979



$

365,225



$

328,646


Adjusted EBITDA margin

17.4

%


13.0

%


15.7

%


15.2

%


14.5

%


15.3

%


12.5

%















Weighted-average GAAP diluted shares (4) (5)

86,719,049



86,108,871



85,539,436



84,871,828



84,238,897



86,429,892



83,950,978


Weighted-average other dilutive equity awards














Non-GAAP diluted shares (4) (5)

86,719,049



86,108,871



85,539,436



84,871,828



84,238,897



86,429,892



83,950,978
















Adjusted EPS - diluted (4)

$

(0.01)



$

(0.13)



$

(0.05)



$

(0.09)



$

(0.08)



$

(0.15)



$

(0.25)




(1)

Includes personnel-related expenses associated with establishing a site in the Salt Lake City area which are included in "Sales and marketing," "Origination and servicing," "Engineering and product development" and "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. In the fourth quarter of 2018 and first quarter of 2019, also includes external advisory fees which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations.

(2)

Includes class action and regulatory litigation expense and legal and other expenses related to legacy issues, which are included in "Class action and regulatory litigation expense" and "Other general and administrative" expense, respectively, on the Company's Condensed Consolidated Statements of Operations. For the second quarter and first half of 2019, includes expense related to the termination of a legacy contract and legacy legal expenses, which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. For the first quarter, second quarter and first half of 2019, also includes expense related to the dissolution of certain private funds managed by LCAM, which is included in "Net fair value adjustments" on the Company's Condensed Consolidated Statements of Operations.

(3)

Includes expenses related to certain non-legacy litigation and regulatory matters, partially offset by a gain on the sale of our small business operating segment, which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations.

(4)

All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.

(5)

Equivalent to the basic and diluted shares reflected in the quarterly EPS calculations.

 

LENDINGCLUB CORPORATION

SUPPLEMENTAL FINANCIAL INFORMATION

(In thousands)

(Unaudited)



June 30, 2019


December 31, 2018


Retail
Program (1)

Consolidated
VIEs (2)

All Other
LendingClub (3)

Condensed
Consolidated
Balance Sheet


Retail
Program (1)

Consolidated
VIEs (2)

All Other
LendingClub (3)

Condensed
Consolidated
Balance Sheet

Assets










Cash and cash equivalents

$


$


$

334,713


$

334,713



$


$


$

372,974


$

372,974


Restricted cash



166,034


166,034



15,551


17,660


237,873


271,084


Securities available for sale



220,449


220,449





170,469


170,469


Loans held for investment at fair value

1,071,128


441,856



1,512,984



1,241,157


642,094



1,883,251


Loans held for investment by the Company at fair value



5,027


5,027





2,583


2,583


Loans held for sale by the Company at fair value



435,083


435,083




245,345


594,676


840,021


Accrued interest receivable

8,545


4,281


4,719


17,545



8,914


7,242


6,099


22,255


Property, equipment and software, net



119,553


119,553





113,875


113,875


Intangible assets, net



16,242


16,242





18,048


18,048


Other assets



239,276


239,276




530


124,437


124,967


Total assets

$

1,079,673


$

446,137


$

1,541,096


$

3,066,906



$

1,265,622


$

912,871


$

1,641,034


$

3,819,527


Liabilities and Equity










Accounts payable

$


$


$

8,677


$

8,677



$


$


$

7,104


$

7,104


Accrued interest payable

8,545


4,281


1,735


14,561



11,484


7,594


163


19,241


Accrued expenses and other liabilities



262,844


262,844




15


152,103


152,118


Payable to investors



64,126


64,126





149,052


149,052


Notes, certificates and secured borrowings at fair value

1,071,128


441,856


4,967


1,517,951



1,254,138


648,908


2,829


1,905,875


Payable to securitization note holders







256,354



256,354


Credit facilities and securities sold under repurchase agreements



324,426


324,426





458,802


458,802


Total liabilities

1,079,673


446,137


666,775


2,192,585



1,265,622


912,871


770,053


2,948,546


Total equity



874,321


874,321





870,981


870,981


Total liabilities and equity

$

1,079,673


$

446,137


$

1,541,096


$

3,066,906



$

1,265,622


$

912,871


$

1,641,034


$

3,819,527




(1)

Represents loans held for investment at fair value that are funded directly by our Retail Program notes. The liabilities are only payable from the cash flows generated by the associated assets. We do not assume principal or interest rate risk on loans facilitated through our lending marketplace that are funded by our Retail Program because loan balances, interest rates and maturities are matched and offset by an equal balance of notes with the exact same interest rates and maturities. We do not retain any economic interests from our Retail Program. Interest expense on Retail Program notes of $80.8 million was equally matched and offset by interest income from the related loans of $80.8 million for the first half of 2019, resulting in no net effect on our Net interest income and fair value adjustments.

(2)

Represents assets and equal and offsetting liabilities of certain VIEs that we are required to consolidate in accordance with GAAP, but which are not legally ours. The liabilities are only payable from the cash flows generated by the associated assets. The creditors of the VIEs have no recourse to the general credit of the Company. This includes LC Trust (which issues certificates backed by loans held by the trust) and any consolidated securitization trusts. Interest expense on these liabilities owned by third-parties of $47.5 million and net fair value adjustments of $7.7 million for the first half of 2019 were equally matched and offset by interest income on the loans of $55.2 million, resulting in no net effect on our Net interest income and fair value adjustments. Economic interests held by LendingClub, including retained interests, residuals and equity of the VIEs, are reflected in "Loans held for sale by the Company at fair value" and "Restricted cash," respectively, within the "All Other LendingClub" column.

(3)

Represents all other assets and liabilities of LendingClub, other than those related to our Retail Program and certain consolidated VIEs, but includes any retained interests, residuals and equity of those consolidated VIEs.

 

LENDINGCLUB CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)

NET CASH AND OTHER FINANCIAL ASSETS

(In thousands)

(Unaudited)



June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018

Cash and loans held for investment by the Company

Cash and cash equivalents

$

334,713



$

402,311



$

372,974



$

348,018



$

434,179


Loans held for investment by the Company at fair value

5,027



8,757



2,583



12,198



9,621


Total

339,740



411,068



375,557



360,216



443,800












Other financial assets partially secured by credit facilities

Securities available for sale

220,449



197,509



170,469



165,442



149,804


Loans held for sale by the Company at fair value

435,083



552,166



840,021



459,283



515,307


Payable to securitization note holders



(233,269)



(256,354)






Credit facilities and securities sold under repurchase agreements

(324,426)



(263,863)



(458,802)



(305,336)



(349,232)


Total

$

331,106



$

252,543



$

295,334



$

319,389



$

315,879












Net cash and other financial assets (1)

$

670,846



$

663,611



$

670,891



$

679,605



$

759,679




(1)

Comparable GAAP measure cannot be provided as not practicable.

 

LENDINGCLUB CORPORATION


RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL GUIDANCE (1)


(In millions)


(Unaudited)





Three Months Ended


Year Ended



September 30, 2019


December 31, 2019


GAAP Consolidated net income (loss) (2)

$0 - $5


$(38) - $(23)


Cost structure simplification expense (3)


6


Legal, regulatory and other expense related to legacy issues (4)


11


Other items (5)


1


Adjusted net income (loss) (2)

$0 - $5


$(20) - $(5)


Stock-based compensation expense

21


81


Depreciation, amortization and other net adjustments

14


59


Adjusted EBITDA (2)

$35 - $40


$120 - $135




(1)

For the second half of 2019, reconciliation of comparable GAAP Consolidated Net Income (Loss) to Adjusted Net Income (Loss) cannot be provided as not practicable.

(2)

Guidance excludes certain items that are either non-recurring, do not contribute directly to management's evaluation of its operating results, or non-cash items, such as expenses related to our cost structure simplification, legal, regulatory and other expense related to legacy issues, and other items (including certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of assets). Full year guidance now reflects such items that have been recognized during the first half of 2019.

(3)

Includes personnel-related expenses associated with establishing a site in the Salt Lake City area which are included in "Sales and marketing," "Origination and servicing," "Engineering and product development" and "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. In the fourth quarter of 2018 and first quarter of 2019, also includes external advisory fees which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations.

(4)

Includes class action and regulatory litigation expense and legal and other expenses related to legacy issues, which are included in "Class action and regulatory litigation expense" and "Other general and administrative" expense, respectively, on the Company's Condensed Consolidated Statements of Operations. For the second quarter and first half of 2019, includes expense related to the termination of a legacy contract and legacy legal expenses, which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. For the first quarter, second quarter and first half of 2019, also includes expense related to the dissolution of certain private funds managed by LCAM, which is included in "Net fair value adjustments" on the Company's Condensed Consolidated Statements of Operations.

(5)

Includes expenses related to certain non-legacy litigation and regulatory matters, partially offset by a gain on the sale of our small business operating segment, which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations.

 

Cision

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