LendingClub Corp (NYSE:LC) announced financial results for the third quarter ended September 30, 2016 and established guidance for the fourth quarter.
“I am very pleased with our performance in the third quarter. We actively reengaged with investors of all types to deliver on our plan and enable $2 billion in loan originations,” said Lending Club’s President and CEO, Scott Sanborn. “While we’ve made incredible progress, there is still work to be done. In the months ahead we are focused on increasing the diversity and resiliency of our funding mix, realigning our resources, and regaining our operating rhythm. Today’s results, along with our new executive team, and the return of banks to our platform, give me confidence as we begin our planning for 2017.”
Third Quarter 2016 Financial Highlights
Originations – Loan originations in the third quarter of 2016 were $1.97 billion, up 1% compared to the $1.96 billion we reported in the second quarter of 2016, but down 12% compared to $2.24 billion in the same quarter last year. Lending Club has now facilitated nearly $23 billion in loans since our inception and as of the end of September 2016 manages a servicing portfolio of nearly $10.9 billion, up 42% compared to the $7.7 billion at the end of the same period last year.
Operating Revenue – Operating revenue in the third quarter of 2016 was $112.6 million, up 10% quarter over quarter and down 2% compared to the same period last year. Included in the third quarter revenue was approximately $11 million of cash incentives for the months of July and August recorded as contra-revenue. The company did not offer any cash incentives in September.
Net Loss – GAAP net loss was $(36.5) million for the third quarter of 2016, an improvement vs. the net loss of $(81.4) million reported in the second quarter of 2016, but down compared to net income of $1.0 million in the same quarter last year. The results for the third quarter of 2016 were negatively affected by approximately $11 million in incentives paid to investors, and approximately $20 million of unusual expenses from events related to our board review disclosures earlier this year, retention expenses and incremental legal, audit and other professional fees.
Adjusted EBITDA (3) – Adjusted EBITDA was $(11.1) million in the third quarter of 2016, compared to $(30.1) million in the second quarter of 2016, and $21.2 million in the same quarter last year. The losses were largely driven by the items listed above. As a percent of operating revenue, Adjusted EBITDA margin decreased to (9.9)% in the third quarter of 2016, down from 18.4% in the same quarter last year.
Earnings Per Share (EPS) – Basic and diluted EPS was $(0.09) for the third quarter of 2016, compared to basic and diluted EPS of$(0.21) in the second quarter of 2016 and $0.00 in the same quarter last year.
Adjusted EPS (3) – Adjusted EPS was $(0.04) for the third quarter of 2016, compared to adjusted EPS of $(0.09) in the second quarter of 2016 and $0.04 in the same quarter last year.
Cash, Cash Equivalents and Securities Available for Sale – As of September 30, 2016, cash, cash equivalents and securities available for sale totaled $800 million, with no outstanding debt.
Recent Business Developments
- Secured a $1.3 billion platform purchase program in October of 2016 with Credigy, a subsidiary of the National Bank of Canada, to increase funding visibility and stability; a useful addition to Lending Club’s capital diversification strategy;
- Launched Auto Refinance product in October of 2016, a new large consumer category that enables Lending Club to enter a market that targets the $283 billion of used auto loans annually; the product enables consumers to get a better rate on car loans through a fast, user-friendly online application, while providing attractive risk adjusted returns to investors;
- Lending Club’s borrower base increased to over 1.7 million individuals and the company expanded its retail investor base to over 142,000 self-managed active individual investors who collectively invested over $273 million in the third quarter;
- Lending Club signed an exclusive partnership with United Airlines’ highly-developed customer loyalty program, offering MileagePlus members airline mile rewards for personal loans, auto loans, and retail investment dollars;
- Lending Club’s servicing portfolio reached $10.9 billion at the end of September 2016, delivering $1.7 billion of principal and interest payments to investors throughout the quarter;
“We entered September without the need for investor incentives and delivered solid sequential revenue growth and margin improvement,” said Tom Casey, CFO. “While expenses remain elevated, we are heading into the fourth quarter with improving fundamentals and increasing confidence, and a plan to put the company on a path to long term growth and margin expansion.”
Based on the information available as of November 7, 2016, Lending Club provides the following outlook for the fourth quarter of 2016:
Fourth Quarter 2016
Operating Revenue in the range of $116 million to $123 million.
Net Income / (Loss) in the range of $(48) million to $(38) million.
Adjusted EBITDA(2) in the range of $(15) million to $(5) million.
Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock based compensation of approximately $25 million, depreciation and amortization of approximately $7 million, and other net adjustments of approximately $1 million. (Original Source)
Shares of Lendingclub are currently trading at $5.70, up $0.56 or 11%. LC has a 1-year high of $14.90 and a 1-year low of $3.44. The stock’s 50-day moving average is $5.88 and its 200-day moving average is $5.24.
On the ratings front, Lendingclub has been the subject of a number of recent research reports. In a report issued on November 3, Morgan Stanley analyst James Faucette upgraded LC to Buy. Separately, on October 31, BTIG’s Mark Palmer reiterated a Buy rating on the stock and has a price target of $9.00.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, James Faucette and Mark Palmer have a yearly average return of 11% and a loss of 3.2% respectively. Faucette has a success rate of 82% and is ranked #142 out of 4162 analysts, while Palmer has a success rate of 47% and is ranked #3745.
Overall, one research analyst has rated the stock with a Sell rating, 6 research analysts have assigned a Hold rating and 3 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $6.33 which is 23% above where the stock closed last Friday.
LendingClub Corp. operates as an online credit marketplace. It engages in the provision of facilitating personal loans, business loans, and financing for elective medical procedures.