FORM 8-K |
CURRENT REPORT |
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
LendingClub Corporation (Exact name of registrant as specified in its charter) |
Commission File Number: 001-36771 | |
Delaware | 51-0605731 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
71 Stevenson St., Suite 1000, San Francisco, CA 94105 | |
(Address of principal executive offices and zip code) | |
(415) 632-5600 (Registrant's telephone number, including area code) | |
N/A (Former name or former address, if changed since last report) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits | |
(d) | Exhibits |
Exhibit Number | Exhibit Title or Description | |
LendingClub Corporation | |||
Date: | May 8, 2018 | By: | /s/ Thomas W. Casey |
Thomas W. Casey | |||
Chief Financial Officer | |||
(duly authorized officer) |
• | Delivered revenue of $151.7 million, up 22% year-over-year |
• | Achieved 18% year-over-year growth in originations to over $2.3 billion |
• | Improved Contribution Margin to 49.1% from 42.7% in the same quarter last year |
• | Delivered Adjusted EBITDA of $15.3 million, or a 10.1% Adjusted EBITDA margin, compared to an Adjusted EBITDA of $0.2 million, or a 0.1% Adjusted EBITDA margin, in the same quarter last year |
• | GAAP Consolidated Net Loss was ($31.2) million, including $17 million of expenses related to outstanding legacy issues disclosed by the Company in 2016, related to ongoing legal costs from government investigations, as well indemnification costs for the previous management |
• | For Borrowers: LendingClub saw strong adoption of a new feature called Direct Payoff that allows borrowers to seamlessly pay off their credit card balances in exchange for a better rate - thereby improving their financial profile and lowering their monthly payments. |
• | For Investors: LendingClub’s recently launched innovation, CLUB Certificates, attracted over $160 million in funding from several of the top names in asset management. The new CLUB Certificates give investors easy access to consumer credit and provide a single security that offers greater flexibility and liquidity. |
Three Months Ended | |||||||||||
($ in millions) | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||
Originations | $ | 2,306.0 | $ | 2,438.3 | $ | 1,958.7 | |||||
Net Revenue | $ | 151.7 | $ | 156.5 | $ | 124.5 | |||||
GAAP Consolidated Net Loss | $ | (31.2 | ) | $ | (92.1 | ) | $ | (29.8 | ) | ||
Adjusted EBITDA (1) | $ | 15.3 | $ | 19.0 | $ | 0.2 |
(1) | Adjusted EBITDA is a non-GAAP financial measure. Beginning in the fourth quarter of 2017, Adjusted EBITDA excludes legal and regulatory expense related to outstanding legacy issues. Please see the discussion below under the heading “Non-GAAP Measures” and the reconciliation at the end of this release. |
(2) | Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures. Please see discussion below under the heading “Non-GAAP Measures” and the reconciliations at the end of this release. |
(3) | Forecasted GAAP Consolidated Net Loss excludes expenses associated with outstanding legacy issues, as those expenses are neither probable nor estimable as of the time of this earnings release. Adjusted EBITDA and Adjusted EPS will also exclude expenses associated with outstanding legacy issues as more fully described in the discussion below under “Non-GAAP Measures.” We will update forecasted GAAP Consolidated Net Loss as expenses associated with outstanding legacy issues become available for the remainder of the year. For the first quarter, we recognized $17 million of expenses related to outstanding legacy issues, which are now reflected in our full year 2018 GAAP Consolidated Net Loss. |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net revenue: | |||||||
Transaction fees | $ | 111,182 | $ | 98,692 | |||
Investor fees | 27,895 | 21,180 | |||||
Gain on sales of loans (1) | 12,671 | 1,892 | |||||
Other revenue (1) | 1,457 | 1,746 | |||||
Net interest income and fair value adjustments: | |||||||
Interest income | 138,018 | 160,996 | |||||
Interest expense | (110,843 | ) | (158,607 | ) | |||
Net fair value adjustments (1) | (28,713 | ) | (1,417 | ) | |||
Net interest income and fair value adjustments (1) | (1,538 | ) | 972 | ||||
Total net revenue | 151,667 | 124,482 | |||||
Operating expenses: (2) | |||||||
Sales and marketing | 57,517 | 54,583 | |||||
Origination and servicing | 22,645 | 20,449 | |||||
Engineering and product development | 36,837 | 35,760 | |||||
Other general and administrative | 52,309 | 43,574 | |||||
Regulatory litigation expense | 13,500 | — | |||||
Total operating expenses | 182,808 | 154,366 | |||||
Loss before income tax expense | (31,141 | ) | (29,884 | ) | |||
Income tax expense (benefit) | 39 | (40 | ) | ||||
Consolidated net loss | (31,180 | ) | (29,844 | ) | |||
Less: Income attributable to noncontrolling interests | 1 | — | |||||
LendingClub net loss | $ | (31,181 | ) | $ | (29,844 | ) | |
Net loss per share attributable to LendingClub: | |||||||
Basic | $ | (0.07 | ) | $ | (0.07 | ) | |
Diluted | $ | (0.07 | ) | $ | (0.07 | ) | |
Weighted-average common shares - Basic | 418,299,301 | 400,308,521 | |||||
Weighted-average common shares - Diluted | 418,299,301 | 400,308,521 |
(1) | In the fourth quarter of 2017, the Company separately reported “Gain (Loss) on sales of loans” and “Net fair value adjustments” from “Other revenue (expense).” These changes had no impact on “Total net revenue.” Prior period amounts have been reclassified to conform to the current period presentation. |
(2) | Includes stock-based compensation expense as follows: |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Sales and marketing | $ | 1,860 | $ | 2,299 | |||
Origination and servicing | 1,072 | 1,416 | |||||
Engineering and product development | 5,279 | 6,588 | |||||
Other general and administrative | 9,590 | 9,195 | |||||
Total stock-based compensation expense | $ | 17,801 | $ | 19,498 |
March 31, 2018 | |||||||||||||||||||||||||
Three Months Ended | % Change | ||||||||||||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | Q/Q | Y/Y | |||||||||||||||||||
Operating Highlights: | |||||||||||||||||||||||||
Loan originations (in millions) | $ | 2,306 | $ | 2,438 | $ | 2,443 | $ | 2,147 | $ | 1,959 | (5 | )% | 18 | % | |||||||||||
Net revenue | $ | 151,667 | $ | 156,455 | $ | 154,030 | $ | 139,573 | $ | 124,482 | (3 | )% | 22 | % | |||||||||||
Consolidated net loss | $ | (31,180 | ) | $ | (92,098 | ) | $ | (6,659 | ) | $ | (25,444 | ) | $ | (29,844 | ) | (66 | )% | 4 | % | ||||||
Contribution (1) (2) | $ | 74,436 | $ | 75,351 | $ | 75,908 | $ | 66,028 | $ | 53,165 | (1 | )% | 40 | % | |||||||||||
Contribution margin (1) (2) | 49.1 | % | 48.2 | % | 49.3 | % | 47.3 | % | 42.7 | % | 2 | % | 15 | % | |||||||||||
Adjusted EBITDA (1) (2) | $ | 15,333 | $ | 19,048 | $ | 20,895 | $ | 4,483 | $ | 161 | (20 | )% | N/M | ||||||||||||
Adjusted EBITDA margin (1) (2) | 10.1 | % | 12.2 | % | 13.6 | % | 3.2 | % | 0.1 | % | (17 | )% | N/M | ||||||||||||
EPS - diluted | $ | (0.07 | ) | $ | (0.22 | ) | $ | (0.02 | ) | $ | (0.06 | ) | $ | (0.07 | ) | (68 | )% | — | % | ||||||
Adjusted EPS - diluted (1) | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | (0.01 | ) | $ | (0.02 | ) | — | % | N/M | ||||||||||
Originations by Investor Type: | |||||||||||||||||||||||||
Managed accounts | 20 | % | 26 | % | 24 | % | 31 | % | 33 | % | |||||||||||||||
Self-directed | 10 | % | 10 | % | 10 | % | 13 | % | 15 | % | |||||||||||||||
Banks | 48 | % | 36 | % | 42 | % | 44 | % | 40 | % | |||||||||||||||
LendingClub inventory (3) | 9 | % | 11 | % | 9 | % | — | % | — | % | |||||||||||||||
Other institutional investors | 13 | % | 17 | % | 15 | % | 12 | % | 12 | % | |||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
Originations by Program: | |||||||||||||||||||||||||
Personal loans - standard program | 76 | % | 74 | % | 73 | % | 72 | % | 74 | % | |||||||||||||||
Personal loans - custom program | 15 | % | 17 | % | 18 | % | 18 | % | 15 | % | |||||||||||||||
Other - custom program (4) | 9 | % | 9 | % | 9 | % | 10 | % | 11 | % | |||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
Personal Loan Originations by Loan Grade – Standard Loan Program (in millions): | |||||||||||||||||||||||||
A | $ | 414.6 | $ | 364.7 | $ | 279.7 | $ | 242.1 | $ | 210.3 | 14 | % | 97 | % | |||||||||||
B | 524.5 | 555.3 | 487.4 | 416.7 | 380.3 | (6 | )% | 38 | % | ||||||||||||||||
C | 474.8 | 504.4 | 639.8 | 558.2 | 522.5 | (6 | )% | (9 | )% | ||||||||||||||||
D | 248.0 | 278.3 | 229.4 | 190.0 | 194.2 | (11 | )% | 28 | % | ||||||||||||||||
E | 63.3 | 79.6 | 90.8 | 82.7 | 87.6 | (20 | )% | (28 | )% | ||||||||||||||||
F | 14.0 | 24.6 | 28.6 | 32.8 | 32.6 | (43 | )% | (57 | )% | ||||||||||||||||
G | 2.6 | 10.5 | 35.5 | 15.9 | 10.5 | (75 | )% | (75 | )% | ||||||||||||||||
Total | $ | 1,741.8 | $ | 1,817.4 | $ | 1,791.2 | $ | 1,538.4 | $ | 1,438.0 | (4 | )% | 21 | % |
(1) | Represents a non-GAAP measure. See ”Reconciliation of GAAP to Non-GAAP Measures.” |
(2) | Beginning in the third quarter of 2017, contribution and adjusted EBITDA exclude (income) loss attributable to noncontrolling interests. Prior period amounts have been reclassified to conform to the current period presentation. Additionally, beginning in the fourth quarter of 2017, adjusted EBITDA excludes legal and regulatory expense related to outstanding legacy issues. |
(3) | Beginning in the third quarter of 2017, the Company introduced “LendingClub inventory” as a new line item presented to separately show the percentage of loan originations in the period that were owned by the Company as of the period end. |
(4) | Comprised of education and patient finance loans, auto refinance loans, and small business loans. |
March 31, 2018 | ||||||||||||||||||||
Three Months Ended | % Change | |||||||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | Q/Q | Y/Y | ||||||||||||||
Servicing Portfolio by Method Financed (in millions, at end of period): | ||||||||||||||||||||
Notes | 1,518 | 1,608 | 1,683 | 1,740 | 1,779 | (6 | )% | (15 | )% | |||||||||||
Certificates | 1,125 | 1,291 | 2,020 | 2,281 | 2,516 | (13 | )% | (55 | )% | |||||||||||
Secured borrowings | 187 | 243 | — | — | — | (23 | )% | N/M | ||||||||||||
Whole loans sold | 8,571 | 8,178 | 7,627 | 7,081 | 6,731 | 5 | % | 27 | % | |||||||||||
Loans invested in by the Company | 581 | 593 | 175 | 49 | 27 | (2 | )% | N/M | ||||||||||||
Total | 11,982 | 11,913 | 11,505 | 11,151 | 11,053 | 1 | % | 8 | % | |||||||||||
Employees and contractors (5) | 1,812 | 1,837 | 1,779 | 1,627 | 1,599 | (1 | )% | 13 | % |
March 31, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 405,078 | $ | 401,719 | |||
Restricted cash | 226,818 | 242,570 | |||||
Securities available for sale | 128,424 | 117,573 | |||||
Loans held for investment at fair value | 2,635,413 | 2,932,325 | |||||
Loans held for investment by the Company at fair value | 317,458 | 361,230 | |||||
Loans held for sale by the Company at fair value | 248,344 | 235,825 | |||||
Accrued interest receivable | 27,012 | 33,822 | |||||
Property, equipment and software, net | 107,177 | 101,933 | |||||
Intangible assets, net | 20,888 | 21,923 | |||||
Goodwill | 35,633 | 35,633 | |||||
Other assets | 106,870 | 156,278 | |||||
Total assets | $ | 4,259,115 | $ | 4,640,831 | |||
Liabilities and Equity | |||||||
Accounts payable | $ | 3,389 | $ | 9,401 | |||
Accrued interest payable | 25,510 | 32,992 | |||||
Accrued expenses and other liabilities | 196,517 | 228,380 | |||||
Payable to investors | 108,247 | 143,310 | |||||
Notes, certificates and secured borrowings at fair value | 2,655,417 | 2,954,768 | |||||
Payable to securitization note and residual certificate holders (includes $1,354 and $1,479 at fair value, respectively) | 280,915 | 312,123 | |||||
Payable to revolving credit facilities | 74,000 | 32,100 | |||||
Total liabilities | 3,343,995 | 3,713,074 | |||||
Equity | |||||||
Common stock, $0.01 par value; 900,000,000 shares authorized; 421,890,329 and 419,756,546 shares issued, respectively; 419,607,629 and 417,473,846 shares outstanding, respectively | 4,219 | 4,198 | |||||
Additional paid-in capital | 1,346,770 | 1,327,206 | |||||
Accumulated deficit | (420,600 | ) | (389,419 | ) | |||
Treasury stock, at cost; 2,282,700 shares | (19,485 | ) | (19,485 | ) | |||
Accumulated other comprehensive loss | 45 | (5 | ) | ||||
Total LendingClub stockholders’ equity | 910,949 | 922,495 | |||||
Noncontrolling interests | 4,171 | 5,262 | |||||
Total equity | 915,120 | 927,757 | |||||
Total liabilities and equity | $ | 4,259,115 | $ | 4,640,831 |
Three Months Ended | |||||||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | |||||||||||||||
Contribution reconciliation: | |||||||||||||||||||
Consolidated net loss | $ | (31,180 | ) | $ | (92,098 | ) | $ | (6,659 | ) | $ | (25,444 | ) | $ | (29,844 | ) | ||||
Engineering and product development expense | 36,837 | 37,926 | 32,860 | 35,718 | 35,760 | ||||||||||||||
Other general and administrative expense | 52,309 | 48,689 | 46,925 | 52,495 | 43,574 | ||||||||||||||
Class action settlement and regulatory litigation expense | 13,500 | 77,250 | — | — | — | ||||||||||||||
Stock-based compensation expense | 2,932 | 2,782 | 2,640 | 3,321 | 3,715 | ||||||||||||||
Income tax expense (benefit) | 39 | 711 | 13 | (52 | ) | (40 | ) | ||||||||||||
(Income) Loss attributable to noncontrolling interests | (1 | ) | 91 | 129 | (10 | ) | — | ||||||||||||
Contribution (1) | $ | 74,436 | $ | 75,351 | $ | 75,908 | $ | 66,028 | $ | 53,165 | |||||||||
Total net revenue | $ | 151,667 | $ | 156,455 | $ | 154,030 | $ | 139,573 | $ | 124,482 | |||||||||
Contribution margin (1) | 49.1 | % | 48.2 | % | 49.3 | % | 47.3 | % | 42.7 | % | |||||||||
Adjusted EBITDA reconciliation: | |||||||||||||||||||
Consolidated net loss | $ | (31,180 | ) | $ | (92,098 | ) | $ | (6,659 | ) | $ | (25,444 | ) | $ | (29,844 | ) | ||||
Acquisition and related expense (2) | — | — | — | 56 | 293 | ||||||||||||||
Depreciation and impairment expense: | |||||||||||||||||||
Engineering and product development | 9,247 | 11,487 | 9,026 | 8,483 | 7,794 | ||||||||||||||
Other general and administrative | 1,419 | 1,281 | 1,246 | 1,305 | 1,298 | ||||||||||||||
Amortization of intangible assets | 1,035 | 1,035 | 1,034 | 1,057 | 1,162 | ||||||||||||||
Legal and regulatory expense related to legacy issues (3) | 16,973 | 80,250 | — | — | — | ||||||||||||||
Stock-based compensation expense | 17,801 | 16,291 | 16,106 | 19,088 | 19,498 | ||||||||||||||
Income tax expense (benefit) | 39 | 711 | 13 | (52 | ) | (40 | ) | ||||||||||||
(Income) Loss attributable to noncontrolling interests | (1 | ) | 91 | 129 | (10 | ) | — | ||||||||||||
Adjusted EBITDA (1) | $ | 15,333 | $ | 19,048 | $ | 20,895 | $ | 4,483 | $ | 161 | |||||||||
Total net revenue | $ | 151,667 | $ | 156,455 | $ | 154,030 | $ | 139,573 | $ | 124,482 | |||||||||
Adjusted EBITDA margin (1) | 10.1 | % | 12.2 | % | 13.6 | % | 3.2 | % | 0.1 | % |
(1) | Beginning in the third quarter of 2017, contribution and adjusted EBITDA exclude (income) loss attributable to noncontrolling interests. Prior period amounts have been reclassified to conform to the current period presentation. |
(2) | Represents amounts related to costs for due diligence related to past business acquisitions, including those the Company reviewed and determined not to pursue a transaction, as well as incremental compensation expense required to be paid under the purchase agreement to retain key former shareholder employees of an acquired business. |
(3) | Includes expense related to outstanding legacy issues. In the first quarter of 2018 and fourth quarter of 2017, also includes regulatory litigation expense and class action settlement expense, respectively. Amounts prior to the fourth quarter of 2017 have not been reclassified because legacy legal expenses incurred in 2017 and prior were generally offset by insurance proceeds, resulting in no net material cumulative impact to earnings. |
Three Months Ended | |||||||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | |||||||||||||||
Adjusted net loss reconciliation: | |||||||||||||||||||
LendingClub net loss | $ | (31,181 | ) | $ | (92,007 | ) | $ | (6,530 | ) | $ | (25,454 | ) | $ | (29,844 | ) | ||||
Acquisition and related expense (1) | — | — | — | 56 | 293 | ||||||||||||||
Stock-based compensation expense | 17,801 | 16,291 | 16,106 | 19,088 | 19,498 | ||||||||||||||
Amortization of acquired intangible assets | 1,035 | 1,035 | 1,034 | 1,057 | 1,162 | ||||||||||||||
Legal and regulatory expense related to legacy issues (2) | 16,973 | 80,250 | — | — | — | ||||||||||||||
Adjusted LendingClub net income (loss) | $ | 4,628 | $ | 5,569 | $ | 10,610 | $ | (5,253 | ) | $ | (8,891 | ) | |||||||
Adjusted EPS - diluted | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | (0.01 | ) | $ | (0.02 | ) | |||||||
Non-GAAP diluted shares reconciliation: | |||||||||||||||||||
GAAP diluted shares (3) | 418,299 | 416,005 | 412,779 | 406,677 | 400,309 | ||||||||||||||
Other dilutive equity awards (4) | — | — | — | — | — | ||||||||||||||
Non-GAAP diluted shares | 418,299 | 416,005 | 412,779 | 406,677 | 400,309 |
(1) | Represents amounts related to costs for due diligence related to past business acquisitions, including those the Company reviewed and determined not to pursue a transaction, as well as incremental compensation expense required to be paid under the purchase agreement to retain key former shareholder employees of an acquired business. |
(2) | Includes expense related to outstanding legacy issues. In the first quarter of 2018 and fourth quarter of 2017, also includes regulatory litigation expense and class action settlement expense, respectively. Amounts prior to the fourth quarter of 2017 have not been reclassified because legacy legal expenses incurred in 2017 and prior were generally offset by insurance proceeds, resulting in no net material cumulative impact to earnings. |
(3) | Equivalent to the basic and diluted shares reflected in the quarterly EPS calculations. |
(4) | Other dilutive equity awards include assumed exercises of unvested stock options, net of assumed repurchases computed under the treasury method, which were excluded from GAAP net loss per share as their impact would have been anti-dilutive. |