LendingClub Reports Second Quarter 2020 Results
SAN FRANCISCO, Aug. 4, 2020 /PRNewswire/ -- LendingClub Corporation (NYSE: LC), America's largest online lending marketplace connecting borrowers and investors, today announced financial results for the second quarter ended June 30, 2020.
Commenting on the quarter, CEO Scott Sanborn said, "In the current challenging environment, we have remained focused on the things we can control and are successfully executing against our strategic priorities. We are pleased with our ability to maintain strong levels of liquidity, are encouraged by the payment behavior of our members and the resilience of the loan portfolio and remain focused on the acquisition of Radius Bank." He continued, "Approximately two-thirds of members who enrolled in our hardship plans have successfully exited the deferral period and resumed full payment. This demonstrates the willingness of our members to repay their loans and is supporting the early re-engagement of loan investors back onto the platform."
We are navigating the business through this challenging environment by following five key guiding principles.
-- Keep our employees safe - Almost all of our employees have been working
remotely since March. As a digital company with a branchless structure,
we have been able to keep employees engaged and serve our members and
our investors despite this significant change to the way we operate. As
the safety of our employees is paramount, we expect employees to
continue working from home until at least the end of the year.
-- Preserve liquidity - In the second quarter, we took decisive actions to
reduce our cash expenses and preserve liquidity, successfully ending the
quarter with cash and cash equivalents of $338 million. Our focus today
is on increasing our cash position as a percentage of our total
liquidity to maximize flexibility and to prepare for a streamlined
acquisition and capitalization of Radius.
-- Protect investor returns - Despite the weak macroeconomic backdrop, we
are observing positive payment behavior and are encouraged by the
overall performance of the portfolio. The recent pre-COVID vintages,
which will be the most impacted by the weaker economy, are currently
expected to generate Internal Rates of Return (IRRs) of 3% in the
aggregate. We have tightened underwriting standards for post-COVID loans
and are targeting IRRs of 5% on new vintages. While we expect recovery
to take time, we are encouraged that five of our top 10 investors have
re-engaged and resumed purchasing.
-- Support our members - LendingClub is continuing to innovate on behalf of
our members by expanding our servicing capacity, launching multiple
self-service options online in our new member center, and expanding our
range of available hardship plans to provide reduced payment options.
-- Stay on track for the acquisition of Radius - Completing the acquisition
will help accelerate our recovery and is one of our top strategic
priorities. We remain in close contact with regulators to accomplish
this objective.
Q2 results reflected an expected decline in origination volume and an increase in prepayments, partially offset by lower fair value marks and lower expenses.
GAAP Consolidated Net Loss for the quarter of $(78.5) million primarily reflected a 90% year-over-year decrease in loan origination volumes, which was in line with our expectations. Second quarter results were also impacted by an increase in loan prepayments to pre-COVID levels compared to the levels we experienced in the first quarter of 2020. As a result of the recovering levels of prepayments, we increased our transaction fee refund reserve resulting in lower reported transaction fee revenue for the quarter. The increase in prepayments also reduced the valuation of our servicing asset, resulting in a reduction in investor fees for the quarter. Together, these items impacted net revenue by approximately $19 million.
Summary of Q2 Results
-- Loan originations of $325.8 million, down 90% year-over-year.
-- Net Revenue of $43.9 million, down 77% year-over-year.
-- GAAP Consolidated Net Loss of $(78.5) million ($(0.87) per share
attributable to common stockholders), compared to a loss of $(10.6)
million ($(0.12) per share attributable to common stockholders) in the
second quarter of 2019.
-- Adjusted EBITDA of $(27.6) million, down 183% year-over-year.
-- Adjusted EBITDA Margin of (63.0)%, down 80.4 percentage points
year-over-year.
-- Adjusted Net Loss of $(54.3) million ($(0.60) adjusted net loss per
share), compared to an Adjusted Net Loss of $(1.2) million ($(0.01)
adjusted net loss per share) in the second quarter of 2019.
Second Quarter 2020 Financial Highlights
Commenting on financial results, Tom Casey, CFO of LendingClub, said: "As anticipated, origination levels decreased in line with our expectations, reflecting the economic impact of COVID-19 on our investors, our decision to tighten underwriting and our decision to pause capital markets activities to preserve liquidity as we work towards completing the Radius acquisition. We feel good about the actions we have taken to align our operating cash expenses with revenue, maintain our liquidity, and increase our cash position in the quarter."
Three Months Ended Six Months Ended
June 30, June 30,
($ in millions) 2020 2019 2020 2019
Loan Originations $
325.8 $
3,129.5 $
2,847.3 $
5,857.4
Net Revenue $
43.9 $
190.8 $
164.1 $
365.2
GAAP Consolidated Net Loss $
(78.5) $
(10.6) $
(126.6) $
(30.5)
Adjusted EBITDA $
(27.6) $
33.2 $
(35.5) $
55.8
Adjusted Net Loss $
(54.3) $
(1.2) $
(93.4) $
(12.8)
Loan Originations - Loan originations in the second quarter of 2020 were $325.8 million, down 90% compared to the same quarter last year.
Net Revenue - Net Revenue in the second quarter of 2020 was $43.9 million, down 77% compared to the same quarter last year.
GAAP Consolidated Net Loss - GAAP Consolidated Net Loss was $(78.5) million for the second quarter of 2020, compared to $(10.6) million in the same quarter last year.
Adjusted EBITDA - Adjusted EBITDA was $(27.6) million in the second quarter of 2020, compared to $33.2 million in the same quarter last year.
Adjusted Net Loss - Adjusted Net Loss was $(54.3) million in the second quarter of 2020, compared to $(1.2) million in the same quarter last year.
Contribution - Contribution was $21.4 million in the second quarter of 2020, compared to $99.6 million in the same quarter last year, with Contribution Margin of 48.8% compared to 52.2% in the same quarter last year.
Earnings Per Share (EPS) - Basic and diluted EPS attributable to common stockholders was $(0.87) in the second quarter of 2020, compared to basic and diluted EPS attributable to common stockholders of $(0.12) in the same quarter last year.
Adjusted EPS - Adjusted EPS was $(0.60) in the second quarter of 2020, compared to Adjusted EPS of $(0.01) in the same quarter last year.
Net Cash and Other Financial Assets - As of June 30, 2020, Net Cash and Other Financial Assets totaled $564.1 million compared to $690.7 million as of June 30, 2019.
For a calculation of Adjusted EBITDA, Adjusted Net Income (Loss), 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 second quarter 2020 webcast and teleconference is scheduled to begin at 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time) on Tuesday, August 4, 2020. 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 9448496, 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 August 11, 2020, by calling +1 (877) 344-7529 or outside the U.S. +1 (412) 317-0088, with Conference ID 10146417. 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 condensed 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 overall direct product profitability because the measures illustrate the relationship between 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, restructuring costs, other items (related to one-time expenses resulting from COVID-19) 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. The adjustment for restructuring costs included severance and other personnel-related expenses, lease-related expenses and software impairment related to the impact of COVID-19 on the Company's business. 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. 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, (4) acquisition and related expenses, (5) restructuring costs and (6) other items (including certain non-legacy litigation and/or regulatory settlement expenses, gains on disposal of certain assets and expenses resulting from COVID-19), net of tax. 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. In the second quarter of 2020, we added an adjustment to Adjusted Net Income (Loss) for "Restructuring costs" to adjust for severance and other personnel-related expenses, lease-related expenses and software impairment related to the impact of COVID-19 on the Company's business. In the fourth quarter of 2019, we added an adjustment to Adjusted Net Income (Loss) for "Acquisition and related expenses" to adjust for costs related to the acquisition of Radius. 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.
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) acquisition and related expenses, (5) restructuring costs, (6) other items, as discussed above, (7) depreciation, impairment and amortization expense, (8) stock-based compensation expense and (9) income tax expense (benefit). 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. Adjusted EPS is a non-GAAP financial measure calculated by dividing Adjusted Net Income (Loss) attributable to both common and preferred stockholders by the weighted-average diluted common and preferred shares outstanding.
We believe Net Cash and Other Financial Assets is a useful measure because it illustrates the overall financial stability and operating leverage of the Company. This measure is calculated as cash and certain other assets and liabilities, including loans and securities available for sale, which are partially secured and offset by related credit facilities, and working capital.
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 the ability and timing to satisfy the closing conditions for the Radius acquisition (including obtaining regulatory approval), our ability to effectuate and the effectiveness of certain strategy initiatives, borrower behavior and platform investor demand, anticipated future financial results, the impact of the coronavirus, our ability to navigate the current economic environment, and the impact of a bank charter 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 Securities and Exchange Commission, as well as our subsequent reports on Form 10-Q and 10-K each as filed with the Securities and Exchange Commission. 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 Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Net revenue:
Transaction fees $
3,874 $
152,207 $
140,117 $
287,604
---
Interest income 60,560 92,562 129,971 192,734
Interest expense (37,766) (66,916) (82,007) (142,276)
Net fair value adjustments (6,378) (35,974) (108,116) (70,703)
Net interest income and fair value adjustments 16,416 (10,328) (60,152) (20,245)
Investor fees 19,315 32,272 61,074 64,003
Gain on sales of loans 1,724 13,886 15,985 29,038
Net investor revenue 37,455 35,830 16,907 72,796
---
Other revenue 2,540 2,770 7,051 4,825
---
Total net revenue 43,869 190,807 164,075 365,225
---
Operating expenses: (1)
Sales and marketing 8,723 69,323 58,507 135,946
Origination and servicing 17,830 24,931 38,824 53,204
Engineering and product development 39,167 43,299 77,877 85,845
Other general and administrative 56,620 64,324 115,106 121,200
Total operating expenses 122,340 201,877 290,314 396,195
---
Loss before income tax expense (78,471) (11,070) (126,239) (30,970)
Income tax expense (benefit) - (438) 319 (438)
---
Consolidated net loss (78,471) (10,632) (126,558) (30,532)
Less: Income attributable to noncontrolling interests - 29 64
LendingClub net loss $
(78,471) $
(10,661) $
(126,558) $
(30,596)
===
Net loss per share attributable to common stockholders - Basic and Diluted (2) $
(0.87) $
(0.12) $
(1.98) $
(0.35)
Weighted-average common shares - Basic and Diluted 70,304,166 86,719,049 78,406,162 86,429,892
Net income (loss) per share attributable to preferred stockholders - Basic and Diluted (2) $
(0.87) $
0.00 $
2.56 $
0.00
Weighted-average common shares, as converted - Basic and Diluted 19,562,714 11,071,212
$
---
((1) )Includes stock-based compensation expense as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Sales and marketing $
731 $
1,540 $
2,394 $
3,111
Origination and servicing 722 846 1,358 1,770
Engineering and product
development 2,668 5,475 7,283 10,706
Other general and
administrative 10,083 12,690 21,298 23,216
Total stock-based compensation
expense $
14,204 $
20,551 $
32,333 $
38,803
===
((2)) The following table details the computation of the Company's basic and diluted net loss per share of common stock and preferred stock (presented on an as-converted basis):
Three Months Ended
Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Common Preferred Common Common Preferred Common
Stock Stock Stock Stock
Stock Stock
Allocation of undistributed LendingClub net loss $
(61,389) $
(17,082) $
(10,661) $
(104,686) $
(21,872) $
(30,596)
Deemed dividend (50,204) 50,204
Net income (loss) attributable to stockholders (3) $
(61,389) $
(17,082) $
(10,661) $
(154,890) $
28,332 $
(30,596)
===
Weighted-average common shares - Basic and Diluted 70,304,166 19,562,714 86,719,049 78,406,162 11,071,212 86,429,892
Net income (loss) per share attributable to stockholders - Basic and Diluted $
(0.87) $
(0.87) $
(0.12) $
(1.98) $
2.56 $
(0.35)
---
For the first half of 2020,
reflects a deemed dividend paid
to our largest stockholder in
the first quarter of 2020 upon
the exchange of all shares of
LendingClub common stock held
by it for newly issued shares
of mandatorily convertible,
non-voting, LendingClub Series
(3) A preferred stock.
LENDINGCLUB CORPORATION
OPERATING HIGHLIGHTS
(In thousands, except percentages and number of employees, or as noted)
(Unaudited)
Three Months Ended % Change
June 30, March 31, December 31, September 30, June 30, Y/Y
2020 2020 2019 2019 2019
Operating Highlights:
Loan originations (in millions) $
326 $
2,521 $
3,083 $
3,350 $
3,130 (90)
%
Net revenue $
43,869 $
120,206 $
188,486 $
204,896 $
190,807 (77)
%
Consolidated net income (loss) $
(78,471) $
(48,087) $
234 $
(392) $
(10,632) N/M
Contribution (1) $
21,395 $
51,902 $
101,261 $
105,789 $
99,556 (79)
%
Contribution margin (1) 48.8 43.2 53.7 51.6 52.2 (7)
%
%
%
%
% %
Adjusted EBITDA (1) $
(27,619) $
(7,831) $
38,981 $
40,021 $
33,181 (183)
%
Adjusted EBITDA margin
(1) (63.0)
%
%
%
%
% (6.5) 20.7 19.5 17.4 N/M
Adjusted net income (loss) (1) $
(54,252) $
(39,151) $
6,981 $
7,951 $
(1,232) N/M
EPS (common stockholders) - diluted (2) $
(0.87) $
(1.10) $
0.00 $
0.00 $
(0.12) N/M
Adjusted EPS - diluted (1) $
(0.60) $
(0.44) $
0.08 $
0.09 $
(0.01) N/M
Loan Originations by Investor Type:
Banks 68
% 43
% 32
% 38
% 45
%
Self-directed retail investors 17
% 4
% 3
% 4
% 5
%
Managed accounts 10
% 16
% 17
% 15
% 16
%
LendingClub inventory 5
% 20
% 23
% 23
% 13
%
Other institutional investors - % 17
% 25
% 20
% 21
%
Total 100
% 100
% 100
% 100
% 100
%
===
Loan Originations by Program:
Personal loans - standard program 68
% 70
% 68
% 70
% 69
%
Personal loans - custom program 3
% 23
% 26
% 24
% 24
%
Other - custom program (3) 29
% 7
% 6
% 6
% 7
%
---
Total 100
% 100
% 100
% 100
% 100
%
===
Personal Loan Originations by Loan Grade - Standard Loan Program (in millions):
A $
105.7 $
620.0 $
654.1 $
757.4 $
705.6 (85)
%
B 74.5 544.6 644.7 738.3 650.8 (89)
%
C 38.4 357.3 479.6 523.3 509.2 (92)
%
D 3.0 249.1 309.1 324.2 308.1 (99)
%
E - 0.6 (100)
%
Total $
221.6 $
1,771.0 $
2,087.5 $
2,343.2 $
2,174.3 (90)
%
===
N/M - Not meaningful
(1) Represents a non-GAAP measure. See
"Reconciliation of GAAP to Non-GAAP
Measures."
For the first quarter of 2020,
reflects a $50.2 million deemed
dividend paid to our largest
stockholder upon the exchange of
all shares of LendingClub common
stock held by it for newly issued
shares of mandatorily convertible,
non-voting, LendingClub Series A
(2) preferred stock.
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
(3) 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
June 30, March 31, December 31, September 30, June 30, Y/Y
2020 2020 2019 2019 2019
Servicing Portfolio by Method Financed (in millions, at end of period):
Whole loans sold $
12,421 $
14,118 $
14,118 $
13,509 $
12,777 (3)
%
Notes 736 833 919 1,016 1,092 (33)
%
Certificates 109 147 211 272 471 (77)
%
Secured 6 11 19 29 42 (86)
borrowings
%
Loans invested in 690 866 744 696 426 62
by the Company %
Total $
13,962 $
15,975 $
16,011 $
15,522 $
14,808 (6)
%
===
Employees and 1,008 1,542 1,538 1,726 1,715 (41)
contractors (4)
%
(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, 2020 December 31,
2019
Assets
Cash and cash equivalents $
338,394 $
243,779
Restricted cash 134,345 243,343
Securities available for sale (includes $245,083 and $271,173 at amortized cost, $15,571 and $0 in allowance for credit losses, and $148,809 and $174,849 pledged as collateral at fair value, respectively) 221,930 270,927
Loans held for investment at fair value 785,228 1,079,315
Loans held for investment by the Company at fair value 65,557 43,693
Loans held for sale by the Company at fair value 587,093 722,355
Accrued interest receivable 11,314 12,857
Property, equipment and software, net 106,697 114,370
Operating lease assets 79,407 93,485
Intangible assets, net 12,932 14,549
Other assets 109,702 143,668
---
Total assets $
2,452,599 $
2,982,341
===
Liabilities and Equity
Accounts payable $
2,951 $
10,855
Accrued interest payable 7,780 9,260
Operating lease liabilities 100,911 112,344
Accrued expenses and other liabilities 86,369 142,636
Payable to investors 49,405 97,530
Notes, certificates and secured borrowings at fair value 785,928 1,081,466
Payable to Structured Program note and certificate holders at fair value 193,034 40,610
Credit facilities and securities sold under repurchase agreements 480,079 587,453
---
Total liabilities 1,706,457 2,082,154
---
Equity
Series A Preferred stock, $0.01 par value; 1,200,000 shares authorized; 195,627 and 0 shares issued, respectively; 195,627 and 0 shares outstanding, respectively 2
Common stock, $0.01 par value; 180,000,000 shares authorized; 70,938,835 and 89,218,797 shares issued, respectively; 70,938,835 and 88,757,406 shares outstanding, respectively 709 892
Additional paid-in capital 1,478,247 1,467,882
Accumulated deficit (725,234) (548,472)
Treasury stock, at cost; 0 and 461,391 shares, respectively - (19,550)
Accumulated other comprehensive loss (7,582) (565)
---
Total equity 746,142 900,187
---
Total liabilities and equity $
2,452,599 $
2,982,341
===
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, March 31, December 31, September 30, June 30, June 30, June 30,
2020 2020 2019 2019 2019 2020 2019
GAAP LendingClub net income (loss) $
(78,471) $
(48,087) $
234 $
(383) $
(10,661) $
(126,558) $
(30,596)
Engineering and product development expense 39,167 38,710 41,080 41,455 43,299 77,877 85,845
Other general and administrative expense 56,620 58,486 57,607 59,485 64,324 115,106 121,200
Cost structure simplification expense (1) - 175 188 2,778 646 175 4,352
Restructuring costs (2) 2,285 2,285
Other items (2) 341 341
Stock-based compensation expense (2) 1,453 2,299 2,012 2,357 2,386 3,752 4,881
Income tax expense (benefit) - 319 140 97 (438) 319 (438)
Contribution $
21,395 $
51,902 $
101,261 $
105,789 $
99,556 $
73,297 $
185,244
===
Total net revenue $
43,869 $
120,206 $
188,486 $
204,896 $
190,807 $
164,075 $
365,225
Contribution margin 48.8 43.2 53.7
% 51.6
% 52.2
% 44.7
% 50.7
% % %
---
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
(1) categories.
Contribution excludes the
portion of expenses included
in the "Sales and marketing"
and "Origination and
(2) 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, March 31, December 31, September 30, June 30, June 30, June 30,
2020 2020 2019 2019 2019 2020 2019
GAAP LendingClub net income (loss) $
(78,471) $
(48,087) $
234 $
(383) $
(10,661) $
(126,558) $
(30,596)
Cost structure simplification expense (1) - 228 284 3,443 1,934 228 6,206
Legal, regulatory and other expense related to legacy issues (2) 4,354 4,476 4,531 4,142 6,791 8,830 10,936
Acquisition and related expenses (3) 456 3,611 932 4,067
Restructuring costs (4) 17,036 17,036
Other items (5) 2,373 621 1,000 749 704 2,994 704
Adjusted net income (loss) $
(54,252) $
(39,151) $
6,981 $
7,951 $
(1,232) $
(93,403) $
(12,750)
===
Depreciation and impairment expense:
Engineering and product development 10,177 10,423 12,532 11,464 11,838 20,600 25,211
Other general and administrative 1,480 1,603 1,739 1,569 1,596 3,083 3,138
Amortization of intangible assets 772 846 848 845 866 1,618 1,806
Stock-based compensation expense 14,204 18,129 16,741 18,095 20,551 32,333 38,803
Income tax expense (benefit) - 319 140 97 (438) 319 (438)
Adjusted EBITDA $
(27,619) $
(7,831) $
38,981 $
40,021 $
33,181 $
(35,450) $
55,770
===
Total net revenue $
43,869 $
120,206 $
188,486 $
204,896 $
190,807 $
164,075 $
365,225
Adjusted EBITDA margin (63.0)
%
%
%
%
%
%
% (6.5) 20.7 19.5 17.4 (21.6) 15.3
===
(1) Includes personnel-related expenses
associated with establishing a site
in the Salt Lake City area. These
expenses 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 first half 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) Consists of legal legacy expenses
which are included in "Other
general and administrative" expense
on the Company's Condensed
Consolidated Statements of
Operations and 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. For the second
quarter of 2019, also includes
expense related to the termination
of a legacy contract, which is
included in "Other general and
administrative" expense on the
Company's Condensed Consolidated
Statements of Operations.
(3) Represents costs related to the
acquisition of Radius.
(4) Includes severance and other
personnel-related expenses, lease-
related expenses and software
impairment related to the impact of
COVID-19 on the Company's
business.
(5) In the second quarter and first half
of 2020, 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 and one-
time expenses resulting from COVID-
19 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 2019, includes
expenses related to certain non-
legacy litigation and regulatory
matters. For the second quarter of
2019, also includes a gain on the
sale of our small business
operating segment. Both of these
are included in "Other general and
administrative" expense on the
Company's Condensed Consolidated
Statements of Operations.
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, March 31, December 31, September 30, June 30, June 30, June 30,
2020 2020 2019 2019 2019 2020 2019
Common and Common and Common Common Stock Common Common and
Preferred Preferred Preferred Common
Stock (1) Stock (1) Stock Stock (1) Stock
Stock
Adjusted net income (loss) attributable to stockholders $
(54,252) $
(39,151) $
6,981 $
7,951 $
(1,232) $
(93,403) $
(12,750)
---
Weighted-average GAAP diluted shares (2) 89,866,880 89,085,270 88,912,677 87,588,495 86,719,049 89,477,374 86,429,892
Non-GAAP diluted shares (2) 89,866,880 89,085,270 88,912,677 87,588,495 86,719,049 89,477,374 86,429,892
Adjusted EPS - diluted (3) $
(0.60) $
(0.44) $
0.08 $
0.09 $
(0.01) $
(1.04) $
(0.15)
===
Presented on an as-converted
basis, as the preferred stock
is considered common shares
because it participates in
earnings similar to common
stock and does not receive
any significant preferences
(1) over the common stock.
Beginning in the first quarter
of 2020, includes the total
weighted-average shares
outstanding of both common
and preferred stock on an as-
(2) converted basis.
LENDINGCLUB CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
(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.
June 30, 2020
December 31, 2019
Retail Consolidated All Other Condensed Retail Consolidated All Other Condensed
VIEs (2) (4) LendingClub (3) Consolidated VIEs (2)(4) LendingClub (3) Consolidated
Balance Sheet Balance Sheet
Program (1) Program (1)
Assets
Cash and cash equivalents
$
$ $
338,394 $
338,394
$
$ $
243,779 $
243,779
Restricted cash - 13,676 120,669 134,345 2,894 240,449 243,343
Securities available for sale - 221,930 221,930 270,927 270,927
Loans held for investment at fair value 683,486 101,742 785,228 881,473 197,842 1,079,315
Loans held for investment by the Company at fair value (4) - 60,396 5,161 65,557 37,638 6,055 43,693
Loans held for sale by the Company at fair value - 118,292 468,801 587,093 722,355 722,355
Accrued interest receivable 5,622 2,083 3,609 11,314 5,930 1,815 5,112 12,857
Property, equipment and software, net - 106,697 106,697 114,370 114,370
Operating lease assets - 79,407 79,407 93,485 93,485
Intangible assets, net - 12,932 12,932 14,549 14,549
Other assets - 109,702 109,702 143,668 143,668
---
Total assets $
689,108 $
296,189 $
1,467,302 $
2,452,599 $
887,403 $
240,189 $
1,854,749 $
2,982,341
===
Liabilities and Equity
Accounts payable
$
$ $
2,951 $
2,951
$
$ $
10,855 $
10,855
Accrued interest payable 5,622 1,413 745 7,780 5,930 1,737 1,593 9,260
Operating lease liabilities - 100,911 100,911 112,344 112,344
Accrued expenses and other liabilities - 86,369 86,369 142,636 142,636
Payable to investors - 49,405 49,405 97,530 97,530
Notes, certificates and secured borrowings at fair value 683,486 101,742 700 785,928 881,473 197,842 2,151 1,081,466
Payable to Structured Program note and certificate holders at fair value (4) - 193,034 193,034 40,610 40,610
Credit facilities and securities sold under repurchase agreements - 480,079 480,079 587,453 587,453
Total liabilities 689,108 296,189 721,160 1,706,457 887,403 240,189 954,562 2,082,154
---
Total equity - 746,142 746,142 900,187 900,187
---
Total liabilities and equity $
689,108 $
296,189 $
1,467,302 $
2,452,599 $
887,403 $
240,189 $
1,854,749 $
2,982,341
===
(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 $53.8
million and $80.8 million was
equally matched and offset by
interest income from the related
loans of $53.8 million and $80.8
million for the first halves of
2020 and 2019, respectively,
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. Interest
expense on these liabilities
owned by third parties of $14.9
million and net fair value
adjustments of $5.7 million for
the first half of 2020 were
equally matched and offset by
interest income on the loans of
$20.6 million, resulting in no
net effect on our Net interest
income and fair value
adjustments. 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," "Loans
held for investment 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 economic
interests held by LendingClub,
including retained interests,
residuals and equity of those
consolidated VIEs.
(4) Beginning in the fourth quarter of
2019, the Company sponsored a new
Structured Program transaction
that was consolidated, resulting
in an increase to "Loans held for
investment by the Company at fair
value" and the related "Payable
to Structured Program note and
certificate holders at fair
value."
LENDINGCLUB CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)
NET CASH AND OTHER FINANCIAL ASSETS
(In thousands)
(Unaudited)
June 30, March 31, December 31, 2019 September 30,
2019 June 30,
2020 2020 2019
Cash and cash equivalents (1) $
338,394 $
294,345 $
243,779 $
199,950 $
334,713
Restricted cash committed for loan purchases (2) 290 4,572 68,001 84,536 31,945
Securities available for sale 221,930 256,554 270,927 246,559 220,449
Loans held for investment by the Company at fair value (3) 65,557 71,003 43,693 4,211 5,027
Loans held for sale by the Company at fair value 587,093 741,704 722,355 710,170 435,083
Payable to Structured Program note and certificate holders (3) (193,034) (206,092) (40,610)
Credit facilities and securities sold under repurchase agreements (480,079) (621,020) (587,453) (509,107) (324,426)
Other assets and liabilities (2) 23,916 61,107 (6,226) (31,795) (12,089)
Net cash and other financial assets (4) $
564,067 $
602,173 $
714,466 $
704,524 $
690,702
===
Variations in cash and cash
equivalents are primarily due to
variations in the amount and timing
of loan purchases invested in by
(1) the Company.
In the fourth quarter of 2019, we
added a new line item called "Other
assets and liabilities" which is a
total of "Accrued interest
receivable," "Other assets,"
"Accounts payable," "Accrued
interest payable" and "Accrued
expenses and other liabilities,"
included on our Consolidated
Balance Sheets. This line item
represents certain assets and
liabilities that impact working
capital and are affected by timing
differences between revenue and
expense recognition and related
cash activity. 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
(2) current period presentation.
Beginning in the fourth quarter of
2019, the Company sponsored a new
Structured Program transaction that
was consolidated, resulting in an
increase to "Loans held for
investment by the Company at fair
value" and the related "Payable to
Structured Program note and
(3) certificate holders at fair value."
(4) Comparable GAAP measure cannot be
provided as not practicable.
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SOURCE LendingClub Corporation
