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LendingClub Reports Third Quarter 2019 Results

Break-Even GAAP Earnings Per Share and Adjusted Earnings Per Share of $0.09

SAN FRANCISCO, Nov. 5, 2019 /PRNewswire/ -- LendingClub Corporation (LC), America's largest online lending marketplace connecting borrowers and investors, today announced financial results for the third quarter ended September 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 leveraging its scale to sustain robust operational and financial momentum.
  • Record loan originations of $3.3 billion, up 16% year-over-year.
  • Record Net Revenue of $204.9 million, up 11% year-over-year.
  • GAAP Consolidated Net Loss of $(0.4) million ($0.00 per share) compared to $(22.7) million ($(0.27) per share) in the third quarter of 2018.
  • Record Adjusted EBITDA of $40.0 million, up 43% year-over-year.
  • Record Adjusted EBITDA Margin of 19.5%, up 4.3 percentage points year-over-year primarily driven by improving cost efficiency in customer acquisition, and origination and servicing.
  • Adjusted Net Income of $8.0 million ($0.09 per share) compared to a loss of $(7.3) million ($(0.09) per share) in the third quarter of 2018.

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

  • Launched LCX, LendingClub's fifth distribution platform (in addition to Scale, Select, Select Plus and Retail platforms), to enable competitive price discovery, same day settlement, improved liquidity and capital efficiency.
  • Structured programs that did not exist two years ago continue to allow LendingClub to access new and larger pools of investor capital. In the quarter, investors who initially came to LendingClub through the structured programs accounted for over $1 billion of funding across the marketplace.
  • Data driven innovation in demand generation helped grow applications, improve conversion and retention, and drive business model efficiency. 71% of customers went from application to approval within 24 hours, up from 60% in the third quarter of 2018, helping increase LendingClub's Net Promoter Score to 80.
  • In support of its vision to be America's Financial Health Club, LendingClub is actively assessing options to obtain a national bank charter. This should enhance LendingClub's ability to serve its members, grow its market opportunity, increase and diversify earnings, and provide both resilience and regulatory clarity.

Simplification program is transforming our ability to serve customers and improve margins

  • Business process outsourcing: now represents 19% of total direct and indirect workforce, lowering unit costs, swapping fixed cost for variable cost, and increasing our capacity and capabilities.
  • Geolocation: 528 Full Time Equivalent (FTE) employees at the new site in the Salt Lake City area with 48% of direct and indirect workforce now located outside San Francisco.

Continued momentum towards full year goals

  • Narrowing full year 2019 Net Revenue range to $760 million to $770 million.
  • Updating full year GAAP Consolidated Net Loss range to ($31) million to ($26) million reflecting $26 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 nine months of 2019.
  • Improving full year Adjusted Net Income (Loss) range to ($5) million to $0 million, and raising Adjusted EBITDA range to $130 million to $135 million.
  • Expect fourth quarter 2019 Net Revenue to be in the range of $190 million to $200 million; 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 $34 million to $39 million.
  • On track to be Adjusted Net Income profitable over the second half of 2019.

"Returning to Adjusted Net Income profitability is an important milestone for LendingClub," said Scott Sanborn, CEO of LendingClub. "Our strategy is working and we are executing with discipline on our mission to help more borrowers improve their financial health, while growing our market opportunity, generating competitive returns for our platform investors, building our resiliency and compounding our competitive advantages."

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 $140 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 and profit potential:
  • The Visitor-to-Member and Product-to-Platform strategies aim to leverage LendingClub's scale to deliver additional savings to our growing membership base (3M+ customers) while expanding our market opportunity and earnings potential.

Three Months Ended
September 30,


Nine Months Ended
September 30,


($ in millions)

2019


2018


2019


2018


Loan Originations

$

3,349.6



$

2,886.5



$

9,207.0



$

8,010.8



Net Revenue

$

204.9



$

184.6



$

570.1



$

513.3



GAAP Consolidated Net Loss

$

(0.4)



$

(22.7)



$

(30.9)



$

(114.7)



Adjusted EBITDA

$

40.0



$

28.1



$

95.8



$

69.1



Adjusted Net Income (Loss)

$

8.0



$

(7.3)



$

(4.8)



$

(28.3)



Third Quarter 2019 Financial Highlights

Commenting on financial results, Tom Casey, CFO of LendingClub said, "We are again raising our Adjusted EBITDA and Adjusted Net Income guidance. Our simplification program is transforming LendingClub with 19% of our workforce through variable cost business process outsourcing and 49% located outside San Francisco. 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 third quarter of 2019 were $3.3 billion, improving 16% compared to the same quarter last year.

Net Revenue – Net Revenue in the third quarter of 2019 was $204.9 million, improving 11% 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 $(0.4) million for the third quarter of 2019, improving $22.4 million compared to the same quarter last year driven primarily by an increase in net revenue and a decrease in class action and regulatory litigation expense.

Adjusted EBITDA  Adjusted EBITDA was $40.0 million in the third quarter of 2019, improving $12.0 million compared to the same quarter last year.

Adjusted Net Income Adjusted Net Income was $8.0 million in the third quarter of 2019, improving $15.3 million compared to the same quarter last year.

Contribution Contribution was $105.8 million in the third quarter of 2019, improving $17.3 million compared to the same quarter last year.

Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $0.00 in the third quarter of 2019, compared to basic and diluted EPS attributable to LendingClub of $(0.27) in the same quarter last year.

Adjusted EPS – Adjusted EPS was $0.09 in the third quarter of 2019, compared to Adjusted EPS of $(0.09) in the same quarter last year.

Net Cash and Other Financial Assets – As of September 30, 2019, net cash and other financial assets totaled $736.3 million.

For a calculation of Adjusted EBITDA, Adjusted Net Income, Contribution, Adjusted EPS and 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. 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 third 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, November 5, 2019. A live webcast of the call will be available at http://ir.lendingclub.com under the Filings & Financials menu in Quarterly Results. To access the call, please dial +1 (888) 317-6003, or outside the U.S. +1 (412) 317-6061, with conference ID 2537483, 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 1 hour after the end of the call until November 12, 2019, by calling +1 (877) 344-7529 or outside the U.S. +1 (412) 317-0088, with Conference ID 10135994. 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 it 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 initiatives, borrower and investor demand, and anticipated future financial results, and our ability to obtain a bank charter and the impact it would have on our business 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 and a bank charter; 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.

 

LENDINGCLUB CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)





Three Months Ended
September 30,


Nine Months Ended
September 30,



2019


2018


2019


2018


Net revenue:


















Transaction fees

$

161,205



$

137,781



$

448,809



$

384,889












Interest income

77,820



115,514



270,554



381,292



Interest expense

(55,060)



(90,642)



(197,336)



(302,383)



Net fair value adjustments

(31,628)



(19,554)



(102,331)



(74,823)



Net interest income and fair value adjustments

(8,868)



5,318



(29,113)



4,086



Investor fees

30,271



29,169



94,274



84,464



Gain on sales of loans

18,305



10,919



47,343



35,470



Net investor revenue

39,708



45,406



112,504



124,020












Other revenue

3,983



1,458



8,808



4,382












Total net revenue

204,896



184,645



570,121



513,291



Operating expenses: (1)









Sales and marketing

76,255



73,601



212,201



200,164



Origination and servicing

27,996



25,431



81,200



73,669



Engineering and product development

41,455



41,216



127,300



115,703



Other general and administrative

59,485



57,446



180,685



167,338



Goodwill impairment







35,633



Class action and regulatory litigation expense



9,738





35,500



Total operating expenses

205,191



207,432



601,386



628,007



Loss before income tax expense

(295)



(22,787)



(31,265)



(114,716)



Income tax expense (benefit)

97



(38)



(341)



25



Consolidated net loss

(392)



(22,749)



(30,924)



(114,741)



Less: (Loss) Income attributable to noncontrolling interests

(9)



55



55



105



LendingClub net loss

$

(383)



$

(22,804)



$

(30,979)



$

(114,846)



Net loss per share attributable to LendingClub:









Basic (2)

$

0.00



$

(0.27)



$

(0.36)



$

(1.36)



Diluted (2)

$

0.00



$

(0.27)



$

(0.36)



$

(1.36)



Weighted-average common shares - Basic (2)

87,588,495



84,871,828



86,849,388



84,261,301



Weighted-average common shares - Diluted (2)

87,588,495



84,871,828



86,849,388



84,261,301



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



Three Months Ended
September 30,


Nine Months Ended
September 30,



2019


2018


2019


2018


Sales and marketing

$

1,505



$

1,791



$

4,616



$

5,674



Origination and servicing

852



1,104



2,622



3,278



Engineering and product development

4,737



5,332



15,443



16,075



Other general and administrative

11,001



11,544



34,217



32,342



Total stock-based compensation expense

$

18,095



$

19,771



$

56,898



$

57,369






(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



September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


Y/Y


Operating Highlights:


Loan originations (in millions)

$

3,350



$

3,130



$

2,728



$

2,871



$

2,886



16

%


Net revenue

$

204,896



$

190,807



$

174,418



$

181,521



$

184,645



11

%


Consolidated net loss

$

(392)



$

(10,632)



$

(19,900)



$

(13,412)



$

(22,749)



98

%


Contribution (1)

$

105,789



$

99,556



$

85,688



$

91,023



$

88,453



20

%


Contribution margin (1)

51.6

%


52.2

%


49.1

%


50.1

%


47.9

%


8

%


Adjusted EBITDA (1)

$

40,021



$

33,181



$

22,589



$

28,464



$

28,052



43

%


Adjusted EBITDA margin (1)

19.5

%


17.4

%


13.0

%


15.7

%


15.2

%


28

%


Adjusted net income (loss) (1)

$

7,951



$

(1,232)



$

(11,518)



$

(4,110)



$

(7,330)



N/M



EPS – diluted (2)

$

0.00



$

(0.12)



$

(0.23)



$

(0.16)



$

(0.27)



100

%


Adjusted EPS – diluted (1) (2)

$

0.09



$

(0.01)



$

(0.13)



$

(0.05)



$

(0.09)



200

%


Loan Originations by Investor Type:


Banks

38

%


45

%


49

%


41

%


38

%




LendingClub inventory

23

%


13

%


10

%


18

%


15

%




Other institutional investors

20

%


21

%


18

%


19

%


19

%




Managed accounts

15

%


16

%


17

%


16

%


21

%




Self-directed retail investors

4

%


5

%


6

%


6

%


7

%




Total

100

%


100

%


100

%


100

%


100

%




Loan Originations by Program:


Personal loans – standard program

70

%


69

%


71

%


72

%


71

%




Personal loans – custom program

24

%


24

%


21

%


21

%


22

%




Other – custom program (3)

6

%


7

%


8

%


7

%


7

%




Total

100

%


100

%


100

%


100

%


100

%




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


A

$

757.4



$

705.6



$

608.3



$

604.9



$

607.0



25

%


B

738.3



650.8



574.5



591.6



563.3



31

%


C

523.3



509.2



452.5



495.9



506.1



3

%


D

324.2



308.1



243.5



267.1



286.9



13

%


E



0.6



49.4



83.8



72.7



(100)

%


F





0.2



6.3



21.7



(100)

%


G







1.3



5.4



(100)

%


Total

$

2,343.2



$

2,174.3



$

1,928.4



$

2,050.9



$

2,063.1



14

%



(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 no longer includes small business loans.

 

LENDINGCLUB CORPORATION

OPERATING HIGHLIGHTS (Continued)

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

(Unaudited)





Three Months Ended


% Change



September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


Y/Y


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


Whole loans sold

$

13,509



$

12,777



$

11,761



$

10,890



$

10,475



29

%


Notes

1,016



1,092



1,169



1,243



1,347



(25)

%


Certificates

272



471



577



689



830



(67)

%


Secured borrowings

29



42



59



81



108



(73)

%


Loans invested in by the Company

696



426



565



843



464



50

%


Total

$

15,522



$

14,808



$

14,131



$

13,746



$

13,224



17

%


Employees and contractors (4)

1,726



1,715



1,621



1,687



1,762



(2)

%



(4)     As of the end of each respective period.

 

LENDINGCLUB CORPORATION

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)





September 30,
2019


December 31,
2018


Assets





Cash and cash equivalents

$

199,950



$

372,974



Restricted cash

275,136



271,084



Securities available for sale (includes $51,342 and $53,611 pledged as collateral at fair
     value, respectively)

246,559



170,469



Loans held for investment at fair value

1,237,479



1,883,251



Loans held for investment by the Company at fair value

4,211



2,583



Loans held for sale by the Company at fair value

710,170



840,021



Accrued interest receivable

14,171



22,255



Property, equipment and software, net

117,242



113,875



Intangible assets, net

15,396



18,048



Other assets

229,346



124,967



Total assets

$

3,049,660



$

3,819,527



Liabilities and Equity





Accounts payable

$

15,490



$

7,104



Accrued interest payable

10,449



19,241



Accrued expenses and other liabilities

268,071



152,118



Payable to investors

117,698



149,052



Notes, certificates and secured borrowings at fair value

1,240,958



1,905,875



Payable to securitization note holders



256,354



Credit facilities and securities sold under repurchase agreements

509,107



458,802



Total liabilities

2,161,773



2,948,546



Equity





Common stock, $0.01 par value; 180,000,000 shares authorized; 88,593,023 and
   86,384,667 shares issued, respectively; 88,132,589 and 85,928,127 shares
   outstanding, respectively (1)

886



864



Additional paid-in capital (1)

1,454,586



1,405,392



Accumulated deficit

(548,706)



(517,727)



Treasury stock, at cost; 460,434 shares (1)

(19,538)



(19,485)



Accumulated other comprehensive income

659



157



Total LendingClub stockholders' equity

887,887



869,201



Noncontrolling interests



1,780



Total equity

887,887



870,981



Total liabilities and equity

$

3,049,660



$

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


Nine Months Ended



September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


September 30,
2019


September 30,
2018


GAAP LendingClub net loss

$

(383)



$

(10,661)



$

(19,935)



$

(13,462)



$

(22,804)



$

(30,979)



$

(114,846)



Engineering and product development expense

41,455



43,299



42,546



39,552



41,216



127,300



115,703



Other general and administrative expense

59,485



64,324



56,876



61,303



57,446



180,685



167,338



Cost structure simplification expense (1)

2,778



646



3,706



880





7,130





Goodwill impairment













35,633



Class action and regulatory litigation expense









9,738





35,500



Stock-based compensation expense (2)

2,357



2,386



2,495



2,732



2,895



7,238



8,952



Income tax expense (benefit)

97



(438)





18



(38)



(341)



25



Contribution

$

105,789



$

99,556



$

85,688



$

91,023



$

88,453



$

291,033



$

248,305



Total net revenue

$

204,896



$

190,807



$

174,418



$

181,521



$

184,645



$

570,121



$

513,291



Contribution margin

51.6

%


52.2

%


49.1

%


50.1

%


47.9

%


51.0

%


48.4

%




(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


Nine Months Ended



September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


September 30,
2019


September 30,
2018


GAAP LendingClub net loss

$

(383)



$

(10,661)



$

(19,935)



$

(13,462)



$

(22,804)



$

(30,979)



$

(114,846)



Cost structure simplification expense (1)

3,443



1,934



4,272



6,782





9,649





Goodwill impairment













35,633



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

4,142



6,791



4,145



2,570



15,474



15,078



50,948



Other items (3)

749



704









1,453





Adjusted net income (loss)

$

7,951



$

(1,232)



$

(11,518)



$

(4,110)



$

(7,330)



$

(4,799)



$

(28,265)



Depreciation and impairment expense:















Engineering and product development

11,464



11,838



13,373



12,372



13,221



36,675



32,665



Other general and administrative

1,569



1,596



1,542



1,525



1,488



4,707



4,327



Amortization of intangible assets

845



866



940



941



940



2,651



2,934



Stock-based compensation expense

18,095



20,551



18,252



17,718



19,771



56,898



57,369



Income tax expense (benefit)

97



(438)





18



(38)



(341)



25



Adjusted EBITDA

$

40,021



$

33,181



$

22,589



$

28,464



$

28,052



$

95,791



$

69,055



Total net revenue

$

204,896



$

190,807



$

174,418



$

181,521



$

184,645



$

570,121



$

513,291



Adjusted EBITDA margin

19.5

%


17.4

%


13.0

%


15.7

%


15.2

%


16.8

%


13.5

%

















Weighted-average GAAP diluted

 shares (4) (5)

87,588,495



86,719,049



86,108,871



85,539,436



84,871,828



86,849,388



84,261,301



Non-GAAP diluted shares (4) (5)

87,588,495



86,719,049



86,108,871



85,539,436



84,871,828



86,849,388



84,261,301


















Adjusted EPS - diluted (4)

$

0.09



$

(0.01)



$

(0.13)



$

(0.05)



$

(0.09)



$

(0.06)



$

(0.34)





(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 nine months 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 each of the quarters in the first nine months 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 which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. For the second quarter of 2019, also includes a gain on the sale of our small business operating segment.



(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 [OPEN]

(In thousands)

(Unaudited)


The following table is provided to delineate between the assets and liabilities belonging to our member payment dependent self-directed retail program (Retail Program) note holders and certain VIEs that we are required to consolidate in accordance with GAAP. Such assets are not legally ours and the associated liabilities are payable only from the cash flows generated by those assets (i.e. Pass-throughs). As such, these debt holders do not have a secured interest in any other assets of LendingClub. We believe this is a useful measure because it illustrates the overall financial stability and operating leverage of the Company.



September 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

$


$


$

199,950


$

199,950



$


$


$

372,974


$

372,974


Restricted cash



275,136


275,136



15,551


17,660


237,873


271,084


Securities available for sale



246,559


246,559





170,469


170,469


Loans held for investment at fair value

984,084


253,395



1,237,479



1,241,157


642,094



1,883,251


Loans held for investment by the Company at fair value



4,211


4,211





2,583


2,583


Loans held for sale by the Company at fair value



710,170


710,170




245,345


594,676


840,021


Accrued interest receivable

6,725


2,197


5,249


14,171



8,914


7,242


6,099


22,255


Property, equipment and software, net



117,242


117,242





113,875


113,875


Intangible assets, net



15,396


15,396





18,048


18,048


Other assets



229,346


229,346




530


124,437


124,967


Total assets

$

990,809


$

255,592


$

1,803,259


$

3,049,660



$

1,265,622


$

912,871


$

1,641,034


$

3,819,527


Liabilities and Equity










Accounts payable

$


$


$

15,490


$

15,490



$


$


$

7,104


$

7,104


Accrued interest payable

6,725


2,197


1,527


10,449



11,484


7,594


163


19,241


Accrued expenses and other liabilities



268,071


268,071




15


152,103


152,118


Payable to investors



117,698


117,698





149,052


149,052


Notes, certificates and secured borrowings at fair value

984,084


253,395


3,479


1,240,958



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



509,107


509,107





458,802


458,802


Total liabilities

990,809


255,592


915,372


2,161,773



1,265,622


912,871


770,053


2,948,546


Total equity



887,887


887,887





870,981


870,981


Total liabilities and equity

$

990,809


$

255,592


$

1,803,259


$

3,049,660



$

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 $116.2 million was equally matched and offset by interest income from the related loans of $116.2 million for the first nine months 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 $61.5 million and net fair value adjustments of $12.7 million for the first nine months of 2019 were equally matched and offset by interest income on the loans of $74.2 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)





September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


Cash and loans held for investment by the Company


Cash and cash equivalents (1)

$

199,950



$

334,713



$

402,311



$

372,974



$

348,018



Loans held for investment by the Company at fair value

4,211



5,027



8,757



2,583



12,198



Total

204,161



339,740



411,068



375,557



360,216














Other financial assets partially secured by credit facilities


Securities available for sale

246,559



220,449



197,509



170,469



165,442



Loans held for sale by the Company at fair value

710,170



435,083



552,166



840,021



459,283



Restricted cash committed for loan purchases (2)

84,536



31,945



24,632



31,118



27,778



Payable to securitization note holders





(233,269)



(256,354)





Credit facilities and securities sold under repurchase agreements

(509,107)



(324,426)



(263,863)



(458,802)



(305,336)



Total

$

532,158



$

363,051



$

277,175



$

326,452



$

347,167














Net cash and other financial assets (3)

$

736,319



$

702,791



$

688,243



$

702,009



$

707,383





(1)

The decrease in cash and cash equivalents on a sequential basis was primarily due to increases in loan purchases invested in by the Company.



(2)

In the third quarter of 2019, we added a new line item called "Restricted cash committed for loan purchases," which represents cash and cash equivalents that are transferred to restricted cash for loans that are pending purchase by the Company. We believe this is a more complete representation of the Company's net cash and other financial assets position as of each period presented in the table above. Prior period amounts have been reclassified to conform to the current period presentation.



(3)

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



December 31, 2019


December 31, 2019


GAAP Consolidated net income (loss) (2)

$0 – $5


$(31) – $(26)


Cost structure simplification expense (3)


10


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


15


Other items (5)


1


Adjusted net income (loss) (2)

$0 – $5


$(5) – $0


Stock-based compensation expense

19


76


Depreciation, amortization and other net adjustments

15


59


Adjusted EBITDA (2)

$34 – $39


$130 – $135




(1)

For the fourth quarter 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 nine months 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 nine months 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 each of the quarters in the first nine months 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 which are included in "Other general and administrative" expense on the Company's Condensed Consolidated Statements of Operations. For the second quarter of 2019, also includes a gain on the sale of our small business operating segment.

 

Cision

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