LendingClub Corp (LC) Reports 2Q Results; Shares Climb


LendingClub Corp (NYSE:LC) announced financial results for the second quarter ended June 30, 2017 and provided guidance for the third quarter and full year 2017.

“It’s great to be back to growth. Our second quarter results demonstrate the power of the LendingClub platform and the capability of our team to execute,” said Scott Sanborn, LendingClub CEO. “We are excited about the momentum building in the business and the massive opportunity that lies ahead.”

 

Key accomplishments and developments in the second quarter across the LendingClub platform include:

Borrowers

  • Achieved 10% sequential growth to over $2.1 billion in originations, driven by strong borrower demand
  • Successfully launched multiple conversion initiatives, including pricing optimization and a redesigned website
  • Improved sales and marketing efficiency by over 7% sequentially
  • Credit continues to perform in line with expectations as observed in both vintage and portfolio trends

Investors

  • Successfully executed the first self-sponsored securitization thereby opening a new funding source, expanding the investor base with 20 new investors, and generating a new repeatable revenue stream
  • Record number of managed accounts and institutional investors participating on the platform in the quarter
  • Successfully launched new iOS mobile application for retail investors

Second Quarter 2017 Financial Highlights

“We closed Q2 with the second highest revenue in our company’s history and returned to Adjusted EBITDA profitability. Based on the second quarter results and how we are tracking against our initiatives, we are raising our financial outlook for the year,” said Tom Casey, LendingClub CFO.

Originations – Loan originations in the second quarter of 2017 were $2.15 billion, up 10% from both the first quarter of 2017 and compared to the same quarter last year.

Net Revenue – Net revenue in the second quarter of 2017 was $139.6 million, up 12% sequentially and up 35% compared to the same quarter last year, driven primarily by higher loan volumes. In addition, net revenue as a percent of originations, or revenue yield, was 6.50% in the second quarter, up 14 basis points sequentially, driven primarily by revenue related to the securitization program that was commenced in the second quarter.

Consolidated Net Income (Loss) – GAAP net loss was $(25.4) million for the second quarter of 2017, improving $4.4 million compared to the first quarter of 2017 and improving $55.9 million compared to the same quarter last year. The decrease in loss from the first quarter to the second quarter of 2017 was primarily due to a $15.1 million increase in revenue, offset by higher general and administrative expenses as a result of a lower insurance reimbursement of $2.4 million in the second quarter compared to a $9.6 million reimbursement in the first quarter.

Adjusted EBITDA (3)  Adjusted EBITDA was $4.5 million in the second quarter of 2017, improving $4.3 million from the first quarter of 2017 and improving $33.6 million from the same quarter last year. The increase in Adjusted EBITDA from the first quarter to the second quarter of 2017 was primarily due to a $15.1 million increase in revenue, offset by higher general and administrative expenses as a result of a lower insurance reimbursement of $2.4 million in the second quarter compared to a $9.6 million reimbursement in the first quarter.

Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $(0.06) for the second quarter of 2017, compared to basic and diluted EPS attributable to LendingClub of $(0.07) in the first quarter of 2017 and $(0.21) in the same quarter last year.

Adjusted EPS (3) – Adjusted EPS was $(0.01) for the second quarter of 2017, compared to adjusted EPS of $(0.02) in the first quarter of 2017 and $(0.09) in the same quarter last year.

Cash, Cash Equivalents and Securities Available for Sale – As of June 30, 2017, cash, cash equivalents and securities available for sale totaled $764 million, with no outstanding debt.

Outlook

Based on the information available as of August 7, 2017, LendingClub has increased its guidance for the full year and third quarter 2017:

Full Year 2017

Total Net Revenue in the range of $585 million to $600 million.
Net Income (Loss) in the range of $(69) million to $(61) million.
Adjusted EBITDA(3) in the range of $50 million to $58 million.
Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $75 million, depreciation and amortization and other net adjustments of approximately $44 million.

Third Quarter 2017

Total Net Revenue in the range of $154 million to $159 million.
Net Income (Loss) in the range of $(12) million to $(8) million.
Adjusted EBITDA(3) in the range of $18 million to $22 million.
Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $19 million, depreciation and amortization and other net adjustments of approximately $11 million.

Shares of Lendingclub are currently trading at $5.86, up $0.40 or 7.33%. LC has a 1-year high of $6.79 and a 1-year low of $4.30. The stock’s 50-day moving average is $5.37 and its 200-day moving average is $5.62.

On the ratings front, Lendingclub has been the subject of a number of recent research reports. In a report issued on August 3, Oppenheimer analyst Jed Kelly upgraded LC to Buy, with a price target of $7.00, which represents a potential upside of 34% from where the stock is currently trading. Separately, on May 5, BTIG’s Mark Palmer maintained 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, Jed Kelly and Mark Palmer have a yearly average return of 25.0% and 4.5% respectively. Kelly has a success rate of 73% and is ranked #165 out of 4628 analysts, while Palmer has a success rate of 56% and is ranked #693.

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.