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Lending Club 2Q 2016 Results

Started by Peter, August 07, 2016, 11:00:00 PM

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bdonovan

August 07, 2016, 11:00:00 PM
http://ir.lendingclub.com/Cache/1001212877.PDF?Y=&O=PDF&D=&fid=1001212877&T=&iid=4213397" class="bbc_link" target="_blank">http://ir.lendingclub.com/Cache/1001212877.PDF?Y=&O=PDF&D=&fid=1001212877&T=&iid=4213397

Lending Club Reports Second Quarter 2016 Results
Investors Re-engage in June
Total Originations Reach $2 Billion in the Second Quarter

SAN FRANCISCO – August 8, 2016 – Lending Club (NYSE:LC), the world's largest online marketplace
connecting borrowers and investors, today announced financial results for the second quarter ended
June 30, 2016 and re-established guidance for the third quarter.

Quarter Ended June 30, Six Months Ended June 30,
($ in millions) 2016 2015 % Change 2016 2015 % Change
Originations $ 1,955.4 $ 1,911.8 2% $ 4,705.4 $ 3,546.8 33%
Operating Revenue $ 102.4 $ 96.1 7% $ 253.7 $ 177.2 43%
Net Loss(1 ) $ (81.4) $ (4.1) N/M $ (77.3) $ (10.5) N/M
Adjusted EBITDA(2) $ (30.1) $ 13.4 N/M $ (4.9) $ 24.0 N/M
N/M Not Meaningful

(1)
Includes $35.4 million of goodwill impairment in the quarter ended June 30, 2016
(2) Adjusted EBITDA is a non-GAAP financial measure. Please see the discussion below under the heading "Non-GAAP
Measures" and the reconciliation at the end of this release.
"Our efforts to reengage investors are working, with fifteen of our top twenty largest investors back
on the platform today," said Lending Club's CEO and President, Scott Sanborn. "Despite the unusual
disruption to our supply of capital in May, we facilitated nearly $2 billion of loans to nearly 170,000
borrowers. While we still have a lot of work ahead, the value that we bring to borrowers and
investors is stronger than ever, and we believe we have the resources and resolve to execute on our
mission."

Second Quarter 2016 Financial Highlights

Originations – Loan originations in the second quarter of 2016 were $1.96 billion, compared to
$1.91 billion in the same period last year, an increase of 2% year-over-year. The Lending Club
platform has now facilitated loans totaling nearly $21 billion since inception.
Operating Revenue – Operating revenue in the second quarter of 2016 was $102.4 million,
compared to $96.1 million in the same period last year, an increase of 7% year-over-year. Operating
revenue as a percent of originations, or revenue yield, was 5.24% in the second quarter, up from
5.03% in the same period last year.

Net Loss – GAAP net loss was $81.4 million for the second quarter of 2016, compared to a net loss
of $4.1 million in the same period last year. The results for the second quarter of 2016 were
negatively affected by a Goodwill impairment charge of $35.4 million related to the 2014 acquisition
of Springstone, an increase in professional service fees of $14.9 million primarily due to matters
identified in the board review previously announced, approximately $14.0 million in incentives paid
to investors, and an increase in compensation related costs of $6.5 million associated with severance
costs and a retention program.

Adjusted EBITDA(2)

 – Adjusted EBITDA was $(30.1) million in the second quarter of 2016,
compared to $13.4 million in the same period last year. As a percent of operating revenue, Adjusted
EBITDA margin decreased to (29.4)% in the second quarter of 2016, down from 13.9% in the same
period last year.

Earnings Per Share (EPS) - Basic and diluted EPS was $(0.21) for the second quarter of 2016,
compared to basic and diluted EPS of $(0.01) in the same period last year.

Adjusted EPS(2)– Adjusted EPS was $(0.09) for the second quarter of 2016 compared to $0.03 in
the same period last year.

Cash, Cash Equivalents and Securities Available for Sale - As of June 30, 2016, cash, cash
equivalents and securities available for sale totaled $832 million, with no outstanding debt.

TravelingPennies

#1
August 07, 2016, 11:00:00 PM
It appears to be a big miss by Lending Club.  EPS expectations were negative 5 cents.
"The report will be for the fiscal Quarter ending Jun 2016. According to Zacks Investment Research, based on 5 analysts' forecasts, the consensus EPS forecast for the quarter is $-0.05."

LC however lost 21 cents per share.

TravelingPennies

#2
August 07, 2016, 11:00:00 PM
The PPT for the results are; some very interesting slides -
http://s000.tinyupload.com/index.php?file_id=46175123044862330388" class="bbc_link" target="_blank">http://s000.tinyupload.com/index.php?file_id=46175123044862330388

Slide 4- Origination of loans took a hit; LC had grown loan originations every quarter since Q1'11; Q2 2016 was the first quarter->quarter drop (although year over year numbers are up).  2.75B in originations in Q1 2016 to 1.95B originations in Q2 2016.

See slide 10- Post-Scandal, Banks have largely dropped off the platform as far as buying.  Other Institutional is down too.  Managed Accounts (which I presume include are primarily financial advisers but not certain) is way up as a fraction of overall new loans bought.  Individual investors is steady.  Banks and Other Institutional combined made up 55% of loans in Q1 2016; post scandal Q2 they made up only 28%. 

TravelingPennies

#4
August 07, 2016, 11:00:00 PM
Ended the quarter with $832M cash + equivalents still on their balance sheet.  This means even thru all of the difficulties of this quarter, they didn't burn much cash.  That's excellent.

Remember all those naysayers who were saying that LC might use up all their cash doing stupid things?  Well, they didn't.

TravelingPennies

#5
August 07, 2016, 11:00:00 PM
Slide 15: Expenses up to 66% of Revenue from 50-55% range of Revenue in prior quarters.
Slide 18: Adjusted EBITDA margin for 2q 2016 = -30.1 ; compared to 25.2 last quarter

Rob L

#6
August 07, 2016, 11:00:00 PM
Waiting for the Q&A ...

TravelingPennies

#8
August 07, 2016, 11:00:00 PM
Q&A notes
---

Q: Will 'unusual expenses' continue.
A: Unusual one-time expenses are said to be reduced by 80% by end of the year.  (These refer to: incentives, control/reporting professional services fees.  To my point earlier, these expenses on controls, reporting etc. will go beyond this quarter.)

Q: Of Large Investors back on the platform, how much reduced are their investments.
A: 15 of 20 largest investors- back on platform.  They are lower.  (Sanborn does not answer question; does not say how much their investments have reduced).

Q: Expenses in 2H
A: Legal, Due Dilligence costs will continue. 

TravelingPennies

#11
August 07, 2016, 11:00:00 PM
Think they said 50% of originations were done pre 5/9.
Got bad ears. Did I hear that correctly?

rawraw

#14
August 07, 2016, 11:00:00 PM
Very pleased to see the stability of cash on the balance sheet.  It'll be interesting to see how LC trades tomorrow.  Not sure how a miss due largely to goodwill will be perceived.
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