- Fourth Quarter and Full Year 2019 Results
February 18, 2020
Disclaimer
Some of the statements in this presentation, including statements regarding future product initiatives, borrower and investor demand, 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.
This presentation contains non-GAAP measures relating to our performance. We have included certain pro forma adjustments in our presentation of non-GAAP Operating Expenses, non-GAAP Sales and Marketing expense, non-GAAP Origination and Servicing expense, non-GAAP Engineering and Product Development expense, non-GAAP Other General and Administrative expense, non-GAAP Adjusted Net Income (Loss), non-GAAP Adjusted Earnings Per Diluted Share, non-GAAP Contribution, non-GAAP Contribution Margin, non-GAAP Adjusted EBITDA, non-GAAP Adjusted EBITDA Margin, and non-GAAP Net cash and other financial assets. 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.
These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles. You can find the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the Appendix at the end of this presentation.
Information in this presentation 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.
2
Agenda
- 4Q and Full Year 2019 Results
- 2020 Outlook and Guidance
3
4Q and Full Year 2019 Results
4Q 2019 Results
Achieves GAAP Net Income profitability
4Q19 Guidance | 4Q19 Results | YoY | |
Range | |||
Net Revenue | $190M - $200M | $188.5M | +4% |
GAAP Consolidated | $0M - $5M | $0.2M | +$13.6M |
Net Loss | |||
Adjusted EBITDA | $34M - $39M | $39.0M | +37% |
Adjusted EBITDA Margin | 17.9% -19.5% | 20.7% | +5.0pts |
Adjusted Net Income1 | $0M - $5M | $7.0M | +$11.1M |
- Excludes certain items thatareeithernon-recurring,do notcontribute directly to management's evaluationofits operating results,ornon-cash items,such as$4.5 millionoflegal,regulatory and otherexpense related to legacy issues, $0.3 million ofexpensesrelated to ourcoststructure simplification,$0.9 million ofacquisition and related expenses,and $1.0 million ofotheritems.Referto the Appendix atthe end of this presentation foradditional information.
5
Full Year 2019 Results
Record Contribution Margin and Adjusted EBITDA
Full Year Guidance | Full Year | YoY | |
Range | 2019 Results | ||
Net Revenue | $760M - $770M | $758.6M | +9% |
GAAP Consolidated | ($31M) - ($26M) | ($30.7M) | +$97.5M |
Net Income | |||
Adjusted EBITDA | $130M - $135M | $134.8M | +38% |
Adjusted EBITDA Margin | 17.1% -17.5% | 17.8% | +3.8pts |
Adjusted Net Income (Loss)1 | ($5M) - $0M | $2.2M | +$34.6M |
- Excludes certain items thatareeithernon-recurring,do notcontribute directly to management's evaluationofits operating results,ornon-cash items,such as$19.6 million oflegal,regulatory and otherexpenserelated to legacy issues, $9.9 million ofexpensesrelated to ourcoststructure simplification,$0.9 million ofacquisition and related expenses,and $2.5 million ofotheritems.Referto the Appendix atthe end of this presentation foradditional information.
6
2020 Outlook and Guidance
2020 Outlook and Guidance
Macro assumptions
- Economy continues to grow, but more slowly, and recession concerns remain elevated given the late stages of the economic cycle.
- Consumer demand remains strong but continued credit tightening across the market will slow overall personal loan market growth.
- Lower interest rates may be offset by volatile credit spreads.
- Radius acquisition expected to close in 12 to 15 months.
8
2020 Outlook and Guidance
Our priorities
- Focus on profitable growth as we prepare for bank charter.
- Investment in our infrastructure to prepare for a bank charter.
- Investment in customer engagement functionality which will enable us to serve our members across a broader spectrum of products and services.
- Investment in our distribution platforms to further increase the breadth and depth of liquidity in the marketplace.
9
2020 Outlook and Guidance
Focus on contribution margin dollars as a % of origination leverages our scale and drives profitable growth
($ in millions) | Q1 2020 | FY 2020 | Notes |
Total Net | $170 - $180 | $790 - $820 | |
Revenue | |||
GAAP | Actual results for GAAP Consolidated Net | ||
($5) - $0 | $17 - $37 | Income (Loss) and Adjusted Net Income | |
Consolidated | |||
(Loss) will differ as financial information | |||
Net Income (Loss) | related to our legacy issues, cost structure | ||
simplification, acquisition and related | |||
Adjusted | expenses, and other items become available. | ||
($5) - $0 | $17 - $37 | Such items will not impact Adjusted Net | |
Net Income (Loss) | |||
Income (Loss) but will impact GAAP | |||
Consolidated Net Income (Loss). | |||
Adjusted | $25 - $30 | $150 - $170 | |
EBITDA | |||
10
Financial Metrics
Diverse investor channels provide breadth LendingClub Platform Investorsof credit appetite and flexibility to adapt to
various market conditions.
Originations Mix by Funding Source
(as a % of total platform originations)
19% | 18% | 21% | 20% | 25% |
41% | 38% | 32% | |
49% | 45% | ||
16% | 15% | 17% | ||
17% | 16% | 4% | 3% | |
6% | ||||
6% | 5% | 23% | ||
18% | 23% | |||
10% | 13% | |||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Platform Originations by Funding Source1
($ in millions)
$3,350 | ||||
$3,130 | $3,083 | |||
$2,871 | $2,728 | $676 | ||
$630 | ||||
$765 | ||||
$538 | ||||
$489 | ||||
$1,282 | ||||
$1,183 | $1,415 | $970 | ||
$1,345 | ||||
$491 | $528 | |||
$461 | $512 | $146 | $103 | |
$458 | ||||
$162 | ||||
$155 | ||||
$169 | $755 | $718 | ||
$527 | $419 | |||
$267 | ||||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Other Institutional
Investors
Banks
Managed Accounts
Self-directed Investors
LendingClub Inventory2
- There may be differences between the sumofthe quarterly resultsdue to rounding.
- Represents the percentage ofloan originationsin the periodthatwere purchasedorpending purchase by the Company during the period,excluding loansheld by the Company through consolidated trusts,and notyetsold as ofthe period end.LendingClubinventory percentage also includesthe portion ofsecuritiesnotsold to third parties forourstructured programtransactionsduring the period.Itis the Company's expectation thatmostofthese loanswill be included in future structured program transactionsorsold in whole loan formatin subsequentperiods.
12
Originations & Revenue
Quarterly Originations1 | Personal loans - standard | ||
($ in millions) | Personal loans - custom 2 | ||
Other 3 | |||
3,350 | |||
3,130 | 3,083 | ||
2,871 | 2,728 | ||
2,174 | 2,343 | ||
2,088 | |||
2,051 | 1,928 | ||
611 | 586 | 750 | 821 | 816 |
209 | 214 | 205 | 186 | 179 |
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Grew quarterly originations by 7% and net revenue by 4% year-over-year.
Quarterly Total Net Revenue1 | Net Investor Revenue | |||
($ in millions) | Other Revenue | |||
Transaction Fee Revenue | ||||
204.9 | ||||
181.5 | 190.8 | 188.5 | ||
174.4 | 39.7 | |||
38.0 | 35.8 | 33.5 | ||
37.0 | 4.0 | |||
2.8 | 5.0 | |||
1.5 | 2.1 | |||
142.1 | 152.2 | 161.2 | 150.0 | |
135.4 | ||||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Growth (%)Growth (%)
YoY | 18% | 18% | 11% | 16% | 7% | YoY | 16% | 15% | 8% | 11% | 4% | ||
1) There may be differences between the sumofthe quarterly resultsdue to rounding. | Yield | 6.32% | 6.39% | 6.10% | 6.12% | 6.11% | |||||||
2) | Includes loansmade to near-primeandsuper-prime borrowers,as well astestingprogramoriginations. | ||||||||||||
3) | In the second quarterof2019,the Company sold certain assets related to its smallbusinessoperating segmentand announced thatitwill connectapplicants looking fora small businessloanwith strategic partnersand earn referral feesinstead | ||||||||||||
of facilitating these loanson its platform.As a result,beginning in the third quarterof2019 the "Otherloans"category presented in the chartabove no longer includessmallbusinessloans. |
13
Contribution2
Quarterly expenses impacting Contribution Margin1
($ in millions)
99.1 | ||||
90.4 | 88.7 | 91.2 | 87.2 | |
Origination & | 24.8 | |||
23.9 | 24.1 | 23.9 | 21.5 | |
Servicing (O&S) | ||||
Sales & | 66.5 | 67.3 | 74.3 | |
Marketing (M&S) | 64.6 | 65.7 | ||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Achieved record quarterly Contribution Margin of 53.7% - driven by efficiencies in marketing and operations.
Quarterly Contribution Margin1,2
($ in millions)
105.8 | |
99.6 | 101.3 |
91.0
85.7
O&S % of | 0.83% | 0.88% | 0.76% | 0.74% | 0.70% |
Originations | |||||
M&S % of | 2.32% | 2.37% | 2.15% | 2.22% | 2.13% |
Originations | |||||
Total % of | 3.15% | 3.25% | 2.91% | 2.96% | 2.83% |
Originations | |||||
Total % of | 49.8% | 50.9% | 47.8% | 48.4% | 46.3% |
Revenues | |||||
1) There may be differences between the sumofthe quarterly resultsdue to rounding.
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Margin % of | 50.1% | 49.1% | 52.2% | 51.6% | 53.7% |
Revenue | |||||
- Contribution is calculated asnetrevenue less"Salesand marketing"and "Origination and servicing"expenseson the Company'sStatementsofOperations,adjusted to exclude coststructure simplification andnon-cashstock-based compensation expenses within these captions and income orlossattributable to noncontrolling interests.Contribution Margin isa non-GAAPfinancial measure calculated by dividing Contribution by total netrevenue.See Appendix for a reconciliation ofthis non-GAAP measure.
14
Adjusted EBITDA Margin2
Quarterly Expenses impacting Adjusted EBITDA Margin1
($ in millions) | 66.4 | 65.8 | ||
62.6 | 63.1 | |||
62.3 | ||||
Engineering & | 26.0 | 25.2 | ||
Product | 22.8 | 23.9 | ||
24.1 |
Development
Other G&A | 39.8 | 39.2 | 40.4 | 40.5 | 38.1 |
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Adjusted EBITDA up 37% year-over-year, with 5pts of margin improvement delivered through operating leverage.
Quarterly Adjusted EBITDA1, 2
($ in millions)
40.039.0
33.2
28.5
22.6
Eng. & PD | 12.5% | 13.7% | 13.6% | 12.3% | 12.8% | ||||||||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | |||||||||
(% of Rev .) | |||||||||||||
Other G&A | 21.9% | 22.5% | 21.2% | 19.8% | 20.2% | ||||||||
(% of Rev .) | |||||||||||||
Margin % | |||||||||||||
Total % of | 34.5% | 36.2% | 34.8% | 32.1% | 33.0% | 15.7% | 13.0% | 17.4% | 19.5% | 20.7% | |||
Rev enue | of Revenue | ||||||||||||
- There may be differences between the sumofthe quarterly resultsdue to rounding.
-
Adjusted EBITDA is anon-GAAP financial measuredefined asnetincome(loss)attributable to LendingClubadjusted to exclude (1)coststructure simplification expense,(2)goodwill impairment,(3)legal,regulatory and otherexpense related to legacy issues,
(4)acquisition and related expenses,(5)otheritems,(6)depreciation,impairmentand amortization expense,(7)stock-based compensation expense,and (8)income tax expense (benefit).Adjusted EBITDA Margin is a non-GAAP financial measure calculated by dividing Adjusted EBITDA by total netrevenue.
15
Adjusted Net Income (Loss)2
Quarterly Expenses impacting Adjusted Net Income (Loss)1
($ in millions)
34.134.4
32.6 | 32.1 | 32.0 |
Depreciation, | ||||
amortization, & | 14.9 | 15.9 | 13.9 | |
other net | 14.0 | 15.3 | ||
adjustments
Delivered Adjusted Net Income of $7M for the quarter, and $2.2M for the full year.
Quarterly Adjusted Net Income (Loss)1, 2
($ in millions)
8.0
7.0
(1.2)
Stock-based | 17.7 | 18.3 | 20.6 | 18.1 | 16.7 | (4.1) | ||||||
compensation | ||||||||||||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | (11.5) | |||||||
D&A + other | 8.2% | 9.1% | 7.3% | 6.8% | 8.0% | |||||||
(% of Rev .) | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | |||||||
SBC | 9.8% | 10.5% | 10.8% | 8.8% | 8.9% | |||||||
(% of Rev .) | ||||||||||||
Margin % | ||||||||||||
Total % of | 17.9% | 19.6% | 18.0% | 15.7% | 17.0% | (2.3%) | (6.6%) | (0.6%) | 3.9% | 3.7% | ||
Rev enue | of Revenue | |||||||||||
- There may be differences between the sumofthe quarterly resultsdue to rounding.
- Adjusted NetIncome (Loss)isanon-GAAPfinancial measure defined asnetincome (loss)attributable to LendingClub adjusted to exclude certain items thatare either non-recurring,do notcontribute directly to management's evaluation ofits operating results, ornon-cash items,such as(1)expensesrelated to ourcoststructure simplification,(2)goodwill impairment,(3)legal,regulatory and otherexpense related to legacy issues,and (4)acquisition and related expenses,and (5)otheritems,netoftax.
16
Servicing Portfolio Recurring Revenue
Total portfolio grew 16% YoY to a record $16B.
Servicing Portfolio Balance1
($ in millions)
$16,011
$15,522
$14,808
$14,131
$13,746
Growth (%) | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | |
YoY | 15% | 18% | 18% | 17% | 16% | |
- Servicing Portfolio Balance represents outstanding principal balanceofloansthatwe serviced atthe end ofthe periods indicated,and financedwith notes,certificates &secured borrowings,and whole loans sold (including loansinvested in by the Company).
17
Appendix:
Financial Reconciliations
GAAP to Non-GAAP Reconciliation: Operating Expenses
Year Ended Dec. 31, | Three Months Ended | ||||||||||||||||||||||
(in thousands, except percentages) (unaudited) | 2017 | 2018 | 2019 | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | ||||||||||||
Total net rev enue | $ | 574,540 | $ | 694,812 | $ | 758,607 | $ | 151,667 | $ | 176,979 | $ | 184,645 | $ | 181,521 | $ | 174,418 | $ | 190,807 | $ | 204,896 | $ | 188,486 | |
GAAP sales and marketing | |||||||||||||||||||||||
$ | 229,865 | $ | 268,517 | $ | 279,423 | $ | 57,517 | $ | 69,046 | $ | 73,601 | $ | 68,353 | $ | 66,623 | $ | 69,323 | $ | 76,255 | $ | 67,222 | ||
Stock-based compensation expense | 7,654 | 7,362 | 6,095 | 1,860 | 2,023 | 1,791 | 1,688 | 1,571 | 1,540 | 1,505 | 1,479 | ||||||||||||
Cost structure simplification expense (1) | - | 131 | 1,410 | - | - | - | 131 | 468 | 445 | 454 | 43 | ||||||||||||
Non-GAAP sales and marketing | $ | 222,211 | $ | 261,024 | $ | 271,918 | $ | 55,657 | $ | 67,023 | $ | 71,810 | $ | 66,534 | $ | 64,584 | $ | 67,338 | $ | 74,296 | $ | 65,700 | |
% Total net revenue | 38.7% | 37.6% | 35.8% | 36.7% | 37.9% | 38.9% | 36.7% | 37.0% | 35.3% | 36.3% | 34.9% | ||||||||||||
GAAP origination and servicing | $ | 86,891 | $ | 99,376 | $ | 103,403 | $ | 22,645 | $ | 25,593 | $ | 25,431 | $ | 25,707 | $ | 28,273 | $ | 24,931 | $ | 27,996 | $ | 22,203 | |
Stock-based compensation expense | 4,804 | 4,322 | 3,155 | 1,072 | 1,102 | 1,104 | 1,044 | 924 | 846 | 852 | 533 | ||||||||||||
Cost structure simplification expense (1) | - | 749 | 5,908 | - | - | - | 749 | 3,238 | 201 | 2,324 | 145 | ||||||||||||
Non-GAAP origination and serv icing | $ | 82,087 | $ | 94,305 | $ | 94,340 | $ | 21,573 | $ | 24,491 | $ | 24,327 | $ | 23,914 | $ | 24,111 | $ | 23,884 | $ | 24,820 | $ | 21,525 | |
% Total net revenue | 14.3% | 13.6% | 12.4% | 14.2% | 13.8% | 13.2% | 13.2% | 13.8% | 12.5% | 12.1% | 11.4% | ||||||||||||
GAAP engineering and product development | $ | 142,264 | $ | 155,255 | $ | 168,380 | $ | 36,837 | $ | 37,650 | $ | 41,216 | $ | 39,552 | $ | 42,546 | $ | 43,299 | $ | 41,455 | $ | 41,080 | |
Stock-based compensation expense | 22,047 | 20,478 | 19,860 | 5,279 | 5,464 | 5,332 | 4,403 | 5,231 | 5,475 | 4,737 | 4,417 | ||||||||||||
Depreciation and amortization | 36,790 | 45,037 | 49,207 | 9,247 | 10,197 | 13,221 | 12,372 | 13,373 | 11,838 | 11,464 | 12,532 | ||||||||||||
Cost structure simplification expense (1) | - | - | 15 | - | - | - | - | 7 | 8 | 10 | (10) | ||||||||||||
Non-GAAP engineering and product dev elopment | $ | 83,427 | $ | 89,740 | $ | 99,298 | $ | 22,311 | $ | 21,989 | $ | 22,663 | $ | 22,777 | $ | 23,935 | $ | 25,978 | $ | 25,244 | $ | 24,141 | |
% Total net revenue | 14.5% | 12.9% | 13.1% | 14.7% | 12.4% | 12.3% | 12.5% | 13.7% | 13.6% | 12.3% | 12.8% | ||||||||||||
GAAP other general and administrative, legal, regulatory and other expense related to | $ | 268,933 | $ | 299,774 | $ | 238,292 | $ | 65,809 | $ | 105,478 | $ | 67,184 | $ | 61,303 | $ | 56,876 | $ | 64,324 | $ | 59,485 | $ | 57,607 | |
legacy issues and goodwill impairment | |||||||||||||||||||||||
Stock-based compensation expense | 36,478 | 42,925 | 44,529 | 9,590 | 11,208 | 11,544 | 10,583 | 10,526 | 12,690 | 11,001 | 10,312 | ||||||||||||
Depreciation | 5,130 | 5,852 | 6,446 | 1,419 | 1,420 | 1,488 | 1,525 | 1,542 | 1,596 | 1,569 | 1,739 | ||||||||||||
Acquisition and related expenses (2) | 349 | - | 932 | - | - | - | - | - | - | - | 932 | ||||||||||||
Amortization of intangibles | 4,288 | 3,875 | 3,499 | 1,035 | 959 | 940 | 941 | 940 | 866 | 845 | 848 | ||||||||||||
Cost structure simplification expense (1) | - | 5,902 | 2,600 | - | - | - | 5,902 | 559 | 1,280 | 655 | 106 | ||||||||||||
Goodwill impairment | - | 35,633 | - | - | 35,633 | - | - | - | - | - | - | ||||||||||||
Legal, regulatory and other expense related to legacy issues (3) | 80,250 | 53,518 | 19,609 | 16,973 | 18,501 | 15,474 | 2,570 | 4,145 | 6,791 | 4,142 | 4,531 | ||||||||||||
Other items (4) | - | - | 2,453 | - | - | - | - | - | 704 | 749 | 1,000 | ||||||||||||
Non-GAAP other general and administrativ e | $ | 142,438 | $ | 152,069 | $ | 158,224 | $ | 36,792 | $ | 37,757 | $ | 37,738 | $ | 39,782 | $ | 39,164 | $ | 40,397 | $ | 40,524 | $ | 38,139 | |
% Total net revenue | 24.8% | 21.9% | 20.9% | 24.3% | 21.3% | 20.4% | 21.9% | 22.5% | 21.2% | 19.8% | 20.2% |
-
Includes personnel-related expenses associated with establishing a site in the Salt Lake City area, which are included in "Sale s 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. - In 2019, includes costs related to the acquisition of Radius. In 2017, represents incremental compensation expense required t o be paid under the purchase agreement to retain key former shareholder employees of an acquired business.
-
Includes class action and regulatory litigation expense and legal and other expenses related to legacy issues, which are incl uded 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 full year 2019, includes expense relate d 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. For the each of the quarters in 2019, also includes expense related to the d issolution of certain private funds managed by LCAM, which is included in "Net fair value adjustments" on the Company's Condensed Consolidated Statements of Operations. - Includes expenses related to certainnon-legacy litigation and regulatory matters which are included in "Other general and administrative" expense on the Company's Consolidated Statements of Operations. For the second quarter of 2019, also includes a g ain
on the sale of our small business operating segment. | 19 |
Contribution Reconciliation & Definition
Contribution is a non-GAAP financial measure that we calculate 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-cashstock-based compensation expenses within these captions and income or loss attributable to noncontrolling interests. Contribution Margin is a non-GAAP financial measure calculated by dividing contribution by total net revenue.
Year Ended Dec. 31, | Three Months Ended | ||||||||||||||||||||||||
(in thousands, except percentages) (unaudited) | 2017 | 2018 | 2019 | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | ||||||||||||||
GAAP LendingClub net income (loss) | $ | (153,835) | $ | (128,308) | $ | (30,745) | $ | (31,181) | $ | (60,861) | $ | (22,804 | ) | $ | (13,462 | ) | $ | (19,935) | $ | (10,661) | $ | (383) | $ | 234 | |
GAAP general and administrative expense: | |||||||||||||||||||||||||
Engineering and product development | 142,264 | 155,255 | 168,380 | 36,837 | 37,650 | 41,216 | 39,552 | 42,546 | 43,299 | 41,455 | 41,080 | ||||||||||||||
Other general and administrative | 191,683 | 228,641 | 238,292 | 52,309 | 57,583 | 57,446 | 61,303 | 56,876 | 64,324 | 59,485 | 57,607 | ||||||||||||||
Cost structure simplification expense (1) | - | 880 | 7,318 | - | - | - | 880 | 3,706 | 646 | 2,778 | 188 | ||||||||||||||
Goodw ill impairment | - | 35,633 | - | - | 35,633 | - | - | - | - | - | - | ||||||||||||||
Class action and regulatory litigation expense | 77,250 | 35,500 | - | 13,500 | 12,262 | 9,738 | - | - | - | - | - | ||||||||||||||
Stock-based compensation expense: (2) | |||||||||||||||||||||||||
Sales and marketing | 7,654 | 7,362 | 6,095 | 1,860 | 2,023 | 1,791 | 1,688 | 1,571 | 1,540 | 1,505 | 1,479 | ||||||||||||||
Origination and servicing | 4,804 | 4,322 | 3,155 | 1,072 | 1,102 | 1,104 | 1,044 | 924 | 846 | 852 | 533 | ||||||||||||||
Income tax expense (benefit) | 632 | 43 | (201) | 39 | 24 | (38) | 18 | - | (438) | 97 | 140 | ||||||||||||||
Contribution | $ | 270,452 | $ | 339,328 | $ | 392,294 | $ | 74,436 | $ | 85,416 | $ | 88,453 | $ | 91,023 | $ | 85,688 | $ | 99,556 | $ | 105,789 | $ | 101,261 | |||
Total net revenue | $ | 574,540 | $ | 694,812 | $ | 758,607 | $ | 151,667 | $ | 176,979 | $ | 184,645 | $ | 181,521 | $ | 174,418 | $ | 190,807 | $ | 204,896 | $ | 188,486 | |||
Contribution margin | 47.1% | 48.8% | 51.7% | 49.1% | 48.3% | 47.9% | 50.1% | 49.1% | 52.2% | 51.6% | 53.7% |
- Excludes the portion ofpersonnel-related expense associated with establishing a site in the Salt Lake City area that are inclu ded in the "Sales and marketing" and "Origination and servicing" expense categories.
- Excludesstock-based compensation expense included in the "Sales and marketing" and "Origination and servicing" expense categori es.
20
Contribution as a Percent of Originations
Year Ended Dec. 31, | ||||||
(in thousands, except percentages or as noted) (unaudited) (1) | 2017 | 2018 | 2019 | |||
Loan originations ($ mm) | $ | 8,987 | $ | 10,882 | $ | 12,290 |
Total net revenue | $ | 574,540 | $ | 694,812 | $ | 758,607 |
% of loan originations | 6.39% | 6.38% | 6.17% | |||
Non-GAAP sales and marketing | $ | 222,211 | $ | 261,024 | $ | 271,918 |
Non-GAAP origination and servicing | $ | 82,087 | $ | 94,305 | $ | 94,340 |
Total non-GAAP sales and marketing & origination and servicing (1) | $ | 304,298 | $ | 355,329 | $ | 366,258 |
% of loan originations | 3.39% | 3.27% | 2.98% | |||
(Income) Loss attributable to noncontrolling interests | $ | 210 | $ | (155) | $ | (55) |
Three Months Ended
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | ||||||||
$ | 2,306 | $ | 2,818 | $ | 2,886 | $ | 2,871 | $ | 2,728 | $ | 3,130 | $ | 3,350 | $ | 3,083 |
$ | 151,667 | $ | 176,979 | $ | 184,645 | $ | 181,521 | $ | 174,418 | $ | 190,807 | $ | 204,896 | $ | 188,486 |
6.58% | 6.28% | 6.40% | 6.32% | 6.39% | 6.10% | 6.12% | 6.11% | ||||||||
$ | 55,657 | $ | 67,023 | $ | 71,810 | $ | 66,534 | $ | 64,584 | $ | 67,338 | $ | 74,296 | $ | 65,700 |
$ | 21,573 | $ | 24,491 | $ | 24,327 | $ | 23,914 | $ | 24,111 | $ | 23,884 | $ | 24,820 | $ | 21,525 |
$ | 77,230 | $ | 91,514 | $ | 96,137 | $ | 90,448 | $ | 88,695 | $ | 91,222 | $ | 99,116 | $ | 87,225 |
3.35% | 3.25% | 3.33% | 3.15% | 3.25% | 2.91% | 2.96% | 2.83% | ||||||||
$ | (1) | $ | (49) | $ | (55) | $ | (50) | $ | (35) | $ | (29) | $ | 9 | $ | - |
Contribution | $ 270,452 | $ 339,328 | $ 392,294 | $ 74,436 | $ 85,416 | $ 88,453 | $ 91,023 | $ 85,688 | $ 99,556 | $ 105,789 | $ 101,261 |
% of loan originations | 3.01% | 3.12% | 3.19% | 3.23% | 3.03% | 3.06% | 3.17% | 3.14% | 3.18% | 3.16% | 3.28% |
(1)There maybe differences between the sum of the quarterlyresults and the total annual results due to rounding.
21
Adjusted Net Income (Loss), Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS Reconciliation
Adjusted Net Income (Loss) is a non-GAAP financial measure defined as net income (loss) attributable to LendingClub adjusted to exclude 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, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, (4) acquisition and related expenses and (5) other items, net of tax. Adjusted EBITDA is a non-GAAP financial measure defined as net income (loss) attributable to LendingClub adjusted to exclude (1) cost structure simplification expense, (2) goodwill impairment, (3) legal, regulatory and other expense related to legacy issues, (4) acquisition and related expenses, (5) other items, (6) depreciation, impairment and amortization expense, (7) stock-based compensation expense and (8) income tax expense (benefit). Adjusted EBITDA Margin is a non -GAAP financial measure calculated by dividing Adjusted EBITDA by total net revenue. Adjusted EPS is a non -GAAP financial measure calculated by dividing Adjusted Net Income (Loss) by the weighted -average diluted common shares outstanding.
Year Ended Dec. 31, | Three Months Ended | |||||||||||||||||||||||||
(in thousands, except per share data) (unaudited) | 2017 | 2018 | 2019 | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | |||||||||||||||
GAAP LendingClub net income (loss) | $ | (153,835 | ) | $ | (128,308 | ) | $ | (30,745) | $ | (31,181) | $ | (60,861) | $ | (22,804) | $ | (13,462) | $ | (19,935) | $ | (10,661) | $ | (383) | $ | 234 | ||
Cost structure simplification expense (1) | - | 6,782 | 9,933 | - | - | - | 6,782 | 4,272 | 1,934 | 3,443 | 284 | |||||||||||||||
Goodwill impairment | - | 35,633 | - | - | 35,633 | - | - | - | - | - | - | |||||||||||||||
Legal, regulatory and other expense related to legacy issues (2) | 80,250 | 53,518 | 19,609 | 16,973 | 18,501 | 15,474 | 2,570 | 4,145 | 6,791 | 4,142 | 4,531 | |||||||||||||||
Acquisition and related expense (3) | 349 | - | 932 | - | - | - | - | - | - | - | 932 | |||||||||||||||
Other items (4) | - | - | 2,453 | - | - | - | - | - | 704 | 749 | 1,000 | |||||||||||||||
Adj usted net income (loss) | $ | (73,236) | $ | (32,375) | $ | 2,182 | $ | (14,208) | $ | (6,727) | $ | (7,330) | $ | (4,110) | $ | (11,518) | $ | (1,232) | $ | 7,951 | $ | 6,981 | ||||
Depreciation and impairment expense: | ||||||||||||||||||||||||||
Engineering and product development | 36,790 | 45,037 | 49,207 | 9,247 | 10,197 | 13,221 | 12,372 | 13,373 | 11,838 | 11,464 | 12,532 | |||||||||||||||
Other general and administrative | 5,130 | 5,852 | 6,446 | 1,419 | 1,420 | 1,488 | 1,525 | 1,542 | 1,596 | 1,569 | 1,739 | |||||||||||||||
Amortization of intangible assets | 4,288 | 3,875 | 3,499 | 1,035 | 959 | 940 | 941 | 940 | 866 | 845 | 848 | |||||||||||||||
Stock-based compensation expense | 70,983 | 75,087 | 73,639 | 17,801 | 19,797 | 19,771 | 17,718 | 18,252 | 20,551 | 18,095 | 16,741 | |||||||||||||||
Income tax expense (benefit) | 632 | 43 | (201) | 39 | 24 | (38) | 18 | - | (438) | 97 | 140 | |||||||||||||||
Adj usted EBITDA | $ | 44,587 | $ | 97,519 | $ | 134,772 | $ | 15,333 | $ | 25,670 | $ | 28,052 | $ | 28,464 | $ | 22,589 | $ | 33,181 | $ | 40,021 | $ | 38,981 | ||||
Total net revenue | $ | 574,540 | $ | 694,812 | $ | 758,607 | $ | 151,667 | $ | 176,979 | $ | 184,645 | $ | 181,521 | $ | 174,418 | $ | 190,807 | $ | 204,896 | $ | 188,486 | ||||
Adj usted EBITDA Margin | 7.8% | 14.0% | 17.8% | 10.1% | 14.5% | 15.2% | 15.7% | 13.0% | 17.4% | 19.5% | 20.7 | % | ||||||||||||||
Weighted-average GAAP diluted shares (5) | 81,799,189 | 84,583,461 | 87,278,596 | 83,659,860 | 84,238,897 | 84,871,828 | 85,539,436 | 86,108,871 | 86,719,049 | 87,588,495 | 88,912,677 | |||||||||||||||
Non-GAAP diluted shares (5) | 81,799,189 | 84,583,461 | 87,794,035 | 83,659,860 | 84,238,897 | 84,871,828 | 85,539,436 | 86,108,871 | 86,719,049 | 87,588,495 | 88,912,677 | |||||||||||||||
Adj usted EPS - diluted (5) | $ | (0.90) | $ | (0.38) | $ | 0.02 | $ | (0.17) | $ | (0.08) | $ | (0.09) | $ | (0.05) | $ | (0.13) | $ | (0.01) | $ | 0.09 | $ | 0.00 |
- Includes personnel-related expenses associated with establishing a site in the Salt Lake City area, which are included in "Sale s 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.
- Includes class action and regulatory litigation expense and legal and other expenses related to legacy issues, which are incl uded 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 year ended 2019, includes expense relat ed 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 each of the quarters in 2019, a lso 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.
- In 2019, includes costs related to the acquisition of Radius. In 2017, represents incremental compensation expense required t o be paid under the purchase agreement to retain key former shareholder employees of an acquired business.
- Includes expenses related to certainnon-legacy litigation and regulatory matters which are included in "Other general and administrative" expense on the Company's Consolidated Statements of Operations. For the second quarter of 2019, also includes a gain on the sale of our small business operating segment.
- All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.
22
Net Cash and Other Financial Assets
Net cash and other financial assets 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.
Three Months Ended | ||||||||||||||||
(in thousands) (unaudited) | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | ||||||||
Cash and cash equivalents (1) | $ | 405,078 | $ | 434,179 | $ | 348,018 | $ | 372,974 | $ | 402,311 | $ | 334,713 | $ | 199,950 | $ | 243,779 |
Restricted cash committed for loan purchases (2) | 25,687 | 26,820 | 27,778 | 31,118 | 24,632 | 31,945 | 84,536 | 68,001 | ||||||||
Securities available for sale | 128,424 | 149,804 | 165,442 | 170,469 | 197,509 | 220,449 | 246,559 | 270,927 | ||||||||
Loans held for investment by the Company at fair value (3) | 317,458 | 9,621 | 12,198 | 2,583 | 8,757 | 5,027 | 4,211 | 43,693 | ||||||||
Loans held for sale by the Company at fair value | 248,344 | 515,307 | 459,283 | 840,021 | 552,166 | 435,083 | 710,170 | 722,355 | ||||||||
Payable to securitization note and certificate holders (3) | (280,915) | - | - | (256,354) | (233,269) | - | - | (40,610) | ||||||||
Credit facilities and securities sold under repurchase agreements | (74,000) | (349,232) | (305,336) | (458,802) | (263,863) | (324,426) | (509,107) | (587,453) | ||||||||
Other assets and liabilities (2) | (91,534) | (108,517) | (29,015) | (31,241) | (8,541) | (12,089) | (31,795) | (6,226) | ||||||||
Net cash and other financial assets (4) | $ | 678,542 | $ | 677,982 | $ | 678,368 | $ | 670,768 | $ | 679,702 | $ | 690,702 | $ | 704,524 | $ | 714,466 |
- Variations in cash and cash equivalents are primarilydue to variations in the amount and timing of loan purchases invested i n bythe Company.
- In the fourth quarter of 2019, we added a new line item called "Other assets and liabilities" which is a total of "Accrued in terest receivable," "Other assets," "Accounts payable," "Accrued interest payable" and "Accrued expenses and other liabilities," included on our Condensed Consolidated Balance Sheets. This line item represents ce rtain assets and liabilities that impact working capital and are affected bytiming differences between revenue and expense recognition and related cash activity. In the third quarter of 2019, we added a new l ine 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 bythe Company. We beli eve 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.
- In the fourth quarter of 2019, the Companysponsored a new Structured Program transaction that was consolidated, resulting in an increase to "Loans held for investment bythe Companyat fair value" and the related "Payable to securitization note and certificate holders."
- Comparable GAAP measure cannot be provided as not practicable.
23
Reconciliation of GAAP to Non-GAAP Financial Guidance (1)
Three Months Ended | Year Ended | ||
(in millions) (unaudited) | 1Q 2020 | 2020 | |
GAAP Consolidated net income (loss) (2) | $(5) - $0 | $17 - $37 | |
Adjusted net income (loss) (2) | $(5) - $0 | $17 - $37 | |
Stock-based compensation expense | 19 | 79 | |
Depreciation, amortization and other net adjustments | 11 | 54 | |
Adjusted EBITDA (2) | $25 - $30 | $150 - $170 |
- For the second half of 2020, reconciliation of comparable GAAP Consolidated Net Income (Loss) to Adjusted Net Income (Loss) cannot be provided as not practicable.
- Guidance excludes certain items that are eithernon-recurring, do not contribute directlyto management's evaluation of its operating results, or non-cash items, such as expenses related to our cost structure simplification, legal, regulatoryand other expense related to legacyissues, acquisition and related expenses, and other ite ms (including certain non-legacylitigation and/or regulatorysettlement expenses and gains on disposal of certain assets).
24
Attachments
- Original document
- Permalink
Disclaimer
Lending Club Corp. published this content on 18 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 February 2020 09:02:27 UTC