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.) |
595 Market Street, Suite 200, 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)) |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common stock, par value $0.01 per share | LC | New York Stock Exchange |
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: | August 6, 2019 | By: | /s/ Thomas W. Casey |
Thomas W. Casey | |||
Chief Financial Officer | |||
(duly authorized officer) |
• | LendingClub’s innovation, simplification program and focus on partnerships are transforming the company and enabling it to sustain robust operational and financial momentum. |
• | Record loan originations of $3.1 billion, up 11% year-over-year. |
• | Record Net Revenue of $190.8 million, up 8% year-over-year. |
• | GAAP Consolidated Net Loss of $(10.6) million compared to $(60.9) million in the second quarter of 2018. |
• | Record Adjusted EBITDA of $33.2 million, up 29% year-over-year. |
• | Adjusted EBITDA Margin of 17.4%, up 2.9 percentage points year-over-year driven by record Contribution Margin which benefited from improving customer acquisition and origination and servicing cost efficiency. |
• | Adjusted Net Loss of $(1.2) million compared to $(6.7) million in the second quarter of 2018. |
• | Data driven improvements in demand generation helped grow applications and improve conversion in the second quarter of 2019 compared to the same quarter last year. Innovation to improve throughput resulted in 72% of customers going from application to approval within 24 hours, up from 46% in the second quarter of 2018, helping to increase conversion rates and drive business model efficiency. |
• | Structured programs innovation is enabling more investors to access our platform. 35% of loans purchased by investors in the second quarter of 2019 were through structured program channels developed by LendingClub over the last two years. Our next generation certificate program launched in July. |
• | Our recently launched Select Plus Platform, the next step in our ambitious product to platform strategy, opens up the LendingClub marketplace to sophisticated investors to identify opportunities to approve borrowers who fall outside the current criteria. |
• | Geolocation: 309 Full Time Equivalent (FTE) employees at our new site in the Salt Lake City area, with most of the 550 FTE capacity filled by year end. |
• | Business process outsourcing: 450+ operations and technology support personnel at quarter end. Lowering unit costs, swapping fixed cost for variable cost, and increasing our capacity and capabilities. |
• | Further initiatives which leverage LendingClub’s scale are benefiting Contribution Margin and Adjusted EBITDA Margin. |
• | Maintaining full year 2019 Net Revenue range of $765 million to $795 million; updating GAAP Consolidated Net Loss range to ($38) million to ($23) million reflecting $18 million year-to-date expenses related to legal, regulatory and other expense related to legacy issues; cost structure simplification expense; and other items recognized during the first half of 2019; improving Adjusted Net Loss range to ($20) million to ($5) million; and raising lower end of Adjusted EBITDA range to $120 million to $135 million. |
• | Expect third quarter 2019 Net Revenue to be in the range of $200 million to $210 million (up 8% to 14% year-over-year); GAAP Consolidated Net Income and Adjusted Net Income both in the range of $0 million to $5 million; and Adjusted EBITDA in the range of $35 million to $40 million. |
• | On track to be Adjusted Net Income profitable in the third quarter of 2019. Raising full year Adjusted EBITDA and Adjusted Net Income guidance. |
• | LendingClub provides tools that help Americans save money on their path to financial health through lower borrowing costs and a seamless user experience. We also seek to help investors efficiently generate competitive risk-adjusted returns through diversification. |
• | The company is the market leader in personal loans – a $130 billion+ industry and the fastest growing segment of consumer credit in the United States – and has an estimated potential immediate addressable market opportunity of more than $445 billion. |
• | The company's marketplace gives it unique strengths which enable it to expand its market opportunity, competitive advantage, and growth potential: |
◦ | Our marketplace model generates savings for borrowers by finding and matching the lowest available cost of capital with the right borrower and attracts investors with a low cost of capital by efficiently generating competitive returns and duration diversification; |
◦ | Our broad spectrum of investors enables us to serve more borrowers and to enhance our marketing efficiency; and |
◦ | Scale, data, and innovation enable us to generate and convert demand efficiently while managing price and credit risk effectively (3M+ customers). |
• | The company is enhancing its operating leverage and capacity to generate cash with efficiency initiatives. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Loan Originations | $ | 3,129.5 | $ | 2,818.3 | $ | 5,857.4 | $ | 5,124.3 | |||||||
Net Revenue | $ | 190.8 | $ | 177.0 | $ | 365.2 | $ | 328.6 | |||||||
GAAP Consolidated Net Loss | $ | (10.6 | ) | $ | (60.8 | ) | $ | (30.5 | ) | $ | (92.0 | ) | |||
Adjusted EBITDA | $ | 33.2 | $ | 25.7 | $ | 55.8 | $ | 41.0 | |||||||
Adjusted Net Loss | $ | (1.2 | ) | $ | (6.7 | ) | $ | (12.8 | ) | $ | (20.9 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net revenue: | |||||||||||||||
Transaction fees | $ | 152,207 | $ | 135,926 | $ | 287,604 | $ | 247,108 | |||||||
Interest income | 92,562 | 127,760 | 192,734 | 265,778 | |||||||||||
Interest expense | (66,916 | ) | (100,898 | ) | (142,276 | ) | (211,741 | ) | |||||||
Net fair value adjustments | (35,974 | ) | (26,556 | ) | (70,703 | ) | (55,269 | ) | |||||||
Net interest income and fair value adjustments | (10,328 | ) | 306 | (20,245 | ) | (1,232 | ) | ||||||||
Investor fees | 32,272 | 27,400 | 64,003 | 55,295 | |||||||||||
Gain on sales of loans | 13,886 | 11,880 | 29,038 | 24,551 | |||||||||||
Net investor revenue | 35,830 | 39,586 | 72,796 | 78,614 | |||||||||||
Other revenue | 2,770 | 1,467 | 4,825 | 2,924 | |||||||||||
Total net revenue | 190,807 | 176,979 | 365,225 | 328,646 | |||||||||||
Operating expenses: (1) | |||||||||||||||
Sales and marketing | 69,323 | 69,046 | 135,946 | 126,563 | |||||||||||
Origination and servicing | 24,931 | 25,593 | 53,204 | 48,238 | |||||||||||
Engineering and product development | 43,299 | 37,650 | 85,845 | 74,487 | |||||||||||
Other general and administrative | 64,324 | 57,583 | 121,200 | 109,892 | |||||||||||
Goodwill impairment | — | 35,633 | — | 35,633 | |||||||||||
Class action and regulatory litigation expense | — | 12,262 | — | 25,762 | |||||||||||
Total operating expenses | 201,877 | 237,767 | 396,195 | 420,575 | |||||||||||
Loss before income tax expense | (11,070 | ) | (60,788 | ) | (30,970 | ) | (91,929 | ) | |||||||
Income tax (benefit) expense | (438 | ) | 24 | (438 | ) | 63 | |||||||||
Consolidated net loss | (10,632 | ) | (60,812 | ) | (30,532 | ) | (91,992 | ) | |||||||
Less: Income attributable to noncontrolling interests | 29 | 49 | 64 | 50 | |||||||||||
LendingClub net loss | $ | (10,661 | ) | $ | (60,861 | ) | $ | (30,596 | ) | $ | (92,042 | ) | |||
Net loss per share attributable to LendingClub: | |||||||||||||||
Basic (2) | $ | (0.12 | ) | $ | (0.72 | ) | $ | (0.35 | ) | $ | (1.10 | ) | |||
Diluted (2) | $ | (0.12 | ) | $ | (0.72 | ) | $ | (0.35 | ) | $ | (1.10 | ) | |||
Weighted-average common shares - Basic (2) | 86,719,049 | 84,238,897 | 86,429,892 | 83,950,978 | |||||||||||
Weighted-average common shares - Diluted (2) | 86,719,049 | 84,238,897 | 86,429,892 | 83,950,978 |
(1) | Includes stock-based compensation expense as follows: |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Sales and marketing | $ | 1,540 | $ | 2,023 | $ | 3,111 | $ | 3,883 | |||||||
Origination and servicing | 846 | 1,102 | 1,770 | 2,174 | |||||||||||
Engineering and product development | 5,475 | 5,464 | 10,706 | 10,743 | |||||||||||
Other general and administrative | 12,690 | 11,208 | 23,216 | 20,798 | |||||||||||
Total stock-based compensation expense | $ | 20,551 | $ | 19,797 | $ | 38,803 | $ | 37,598 |
(2) | All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019. |
Three Months Ended | % Change | |||||||||||||||||||||
June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | Y/Y | |||||||||||||||||
Operating Highlights: | ||||||||||||||||||||||
Loan originations (in millions) | $ | 3,130 | $ | 2,728 | $ | 2,871 | $ | 2,886 | $ | 2,818 | 11 | % | ||||||||||
Net revenue | $ | 190,807 | $ | 174,418 | $ | 181,521 | $ | 184,645 | $ | 176,979 | 8 | % | ||||||||||
Consolidated net loss | $ | (10,632 | ) | $ | (19,900 | ) | $ | (13,412 | ) | $ | (22,749 | ) | $ | (60,812 | ) | 83 | % | |||||
Contribution (1) | $ | 99,556 | $ | 85,688 | $ | 91,023 | $ | 88,453 | $ | 85,416 | 17 | % | ||||||||||
Contribution margin (1) | 52.2 | % | 49.1 | % | 50.1 | % | 47.9 | % | 48.3 | % | 8 | % | ||||||||||
Adjusted EBITDA (1) | $ | 33,181 | $ | 22,589 | $ | 28,464 | $ | 28,052 | $ | 25,670 | 29 | % | ||||||||||
Adjusted EBITDA margin (1) | 17.4 | % | 13.0 | % | 15.7 | % | 15.2 | % | 14.5 | % | 20 | % | ||||||||||
Adjusted net loss (1) | $ | (1,232 | ) | $ | (11,518 | ) | $ | (4,110 | ) | $ | (7,330 | ) | $ | (6,727 | ) | 82 | % | |||||
EPS – diluted (2) | $ | (0.12 | ) | $ | (0.23 | ) | $ | (0.16 | ) | $ | (0.27 | ) | $ | (0.72 | ) | 83 | % | |||||
Adjusted EPS – diluted (1) (2) | $ | (0.01 | ) | $ | (0.13 | ) | $ | (0.05 | ) | $ | (0.09 | ) | $ | (0.08 | ) | 88 | % | |||||
Loan Originations by Investor Type: | ||||||||||||||||||||||
Banks | 45 | % | 49 | % | 41 | % | 38 | % | 40 | % | ||||||||||||
Other institutional investors | 21 | % | 18 | % | 19 | % | 19 | % | 16 | % | ||||||||||||
Managed accounts | 16 | % | 17 | % | 16 | % | 21 | % | 19 | % | ||||||||||||
LendingClub inventory | 13 | % | 10 | % | 18 | % | 15 | % | 18 | % | ||||||||||||
Self-directed retail investors | 5 | % | 6 | % | 6 | % | 7 | % | 7 | % | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Loan Originations by Program: | ||||||||||||||||||||||
Personal loans – standard program | 69 | % | 71 | % | 72 | % | 71 | % | 74 | % | ||||||||||||
Personal loans – custom program | 24 | % | 21 | % | 21 | % | 22 | % | 18 | % | ||||||||||||
Other – custom program (3) | 7 | % | 8 | % | 7 | % | 7 | % | 8 | % | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Personal Loan Originations by Loan Grade – Standard Loan Program (in millions): | ||||||||||||||||||||||
A | $ | 705.6 | $ | 608.3 | $ | 604.9 | $ | 607.0 | $ | 506.0 | 39 | % | ||||||||||
B | 650.8 | 574.5 | 591.6 | 563.3 | 610.2 | 7 | % | |||||||||||||||
C | 509.2 | 452.5 | 495.9 | 506.1 | 575.4 | (12 | )% | |||||||||||||||
D | 308.1 | 243.5 | 267.1 | 286.9 | 296.3 | 4 | % | |||||||||||||||
E | 0.6 | 49.4 | 83.8 | 72.7 | 70.3 | (99 | )% | |||||||||||||||
F | — | 0.2 | 6.3 | 21.7 | 18.4 | (100 | )% | |||||||||||||||
G | — | — | 1.3 | 5.4 | 3.9 | (100 | )% | |||||||||||||||
Total | $ | 2,174.3 | $ | 1,928.4 | $ | 2,050.9 | $ | 2,063.1 | $ | 2,080.5 | 5 | % |
(1) | Represents a non-GAAP measure. See “Reconciliation of GAAP to Non-GAAP Measures.” |
(2) | All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019. |
(3) | Comprised of education and patient finance loans, auto refinance loans, and small business loans. Beginning in the third quarter of 2019 this category will no longer include small business loans. |
Three Months Ended | % Change | |||||||||||||||||||||
June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | Y/Y | |||||||||||||||||
Servicing Portfolio by Method Financed (in millions, at end of period): | ||||||||||||||||||||||
Whole loans sold | $ | 12,777 | $ | 11,761 | $ | 10,890 | $ | 10,475 | $ | 9,512 | 34 | % | ||||||||||
Notes | 1,092 | 1,169 | 1,243 | 1,347 | 1,428 | (24 | )% | |||||||||||||||
Certificates | 471 | 577 | 689 | 830 | 967 | (51 | )% | |||||||||||||||
Secured borrowings | 42 | 59 | 81 | 108 | 143 | (71 | )% | |||||||||||||||
Loans invested in by the Company | 426 | 565 | 843 | 464 | 523 | (19 | )% | |||||||||||||||
Total | $ | 14,808 | $ | 14,131 | $ | 13,746 | $ | 13,224 | $ | 12,573 | 18 | % | ||||||||||
Employees and contractors (4) | 1,715 | 1,621 | 1,687 | 1,762 | 1,722 | — | % |
(4) | As of the end of each respective period. |
June 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 334,713 | $ | 372,974 | |||
Restricted cash | 166,034 | 271,084 | |||||
Securities available for sale (includes $53,007 and $53,611 pledged as collateral at fair value, respectively) | 220,449 | 170,469 | |||||
Loans held for investment at fair value | 1,512,984 | 1,883,251 | |||||
Loans held for investment by the Company at fair value | 5,027 | 2,583 | |||||
Loans held for sale by the Company at fair value | 435,083 | 840,021 | |||||
Accrued interest receivable | 17,545 | 22,255 | |||||
Property, equipment and software, net | 119,553 | 113,875 | |||||
Intangible assets, net | 16,242 | 18,048 | |||||
Other assets | 239,276 | 124,967 | |||||
Total assets | $ | 3,066,906 | $ | 3,819,527 | |||
Liabilities and Equity | |||||||
Accounts payable | $ | 8,677 | $ | 7,104 | |||
Accrued interest payable | 14,561 | 19,241 | |||||
Accrued expenses and other liabilities | 262,844 | 152,118 | |||||
Payable to investors | 64,126 | 149,052 | |||||
Notes, certificates and secured borrowings at fair value | 1,517,951 | 1,905,875 | |||||
Payable to securitization note holders | — | 256,354 | |||||
Credit facilities and securities sold under repurchase agreements | 324,426 | 458,802 | |||||
Total liabilities | 2,192,585 | 2,948,546 | |||||
Equity | |||||||
Common stock, $0.01 par value; 180,000,000 shares authorized; 87,616,553 and 86,384,667shares issued, respectively; 87,160,013 and 85,928,127 shares outstanding, respectively (1) | 876 | 864 | |||||
Additional paid-in capital (1) | 1,439,244 | 1,405,392 | |||||
Accumulated deficit | (548,323 | ) | (517,727 | ) | |||
Treasury stock, at cost; 456,540 shares (1) | (19,485 | ) | (19,485 | ) | |||
Accumulated other comprehensive income | 1,313 | 157 | |||||
Total LendingClub stockholders’ equity | 873,625 | 869,201 | |||||
Noncontrolling interests | 696 | 1,780 | |||||
Total equity | 874,321 | 870,981 | |||||
Total liabilities and equity | $ | 3,066,906 | $ | 3,819,527 |
(1) | All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | June 30, 2019 | June 30, 2018 | |||||||||||||||||||||
GAAP LendingClub net loss | $ | (10,661 | ) | $ | (19,935 | ) | $ | (13,462 | ) | $ | (22,804 | ) | $ | (60,861 | ) | $ | (30,596 | ) | $ | (92,042 | ) | ||||||
Engineering and product development expense | 43,299 | 42,546 | 39,552 | 41,216 | 37,650 | 85,845 | 74,487 | ||||||||||||||||||||
Other general and administrative expense | 64,324 | 56,876 | 61,303 | 57,446 | 57,583 | 121,200 | 109,892 | ||||||||||||||||||||
Cost structure simplification expense (1) | 646 | 3,706 | 880 | — | — | 4,352 | — | ||||||||||||||||||||
Goodwill impairment | — | — | — | — | 35,633 | — | 35,633 | ||||||||||||||||||||
Class action and regulatory litigation expense | — | — | — | 9,738 | 12,262 | — | 25,762 | ||||||||||||||||||||
Stock-based compensation expense (2) | 2,386 | 2,495 | 2,732 | 2,895 | 3,125 | 4,881 | 6,057 | ||||||||||||||||||||
Income tax (benefit) expense | (438 | ) | — | 18 | (38 | ) | 24 | (438 | ) | 63 | |||||||||||||||||
Contribution | $ | 99,556 | $ | 85,688 | $ | 91,023 | $ | 88,453 | $ | 85,416 | $ | 185,244 | $ | 159,852 | |||||||||||||
Total net revenue | $ | 190,807 | $ | 174,418 | $ | 181,521 | $ | 184,645 | $ | 176,979 | $ | 365,225 | $ | 328,646 | |||||||||||||
Contribution margin | 52.2 | % | 49.1 | % | 50.1 | % | 47.9 | % | 48.3 | % | 50.7 | % | 48.6 | % |
(1) | 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 categories. |
(2) | Contribution excludes stock-based compensation expense included in the “Sales and marketing” and “Origination and servicing” expense categories. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | June 30, 2019 | June 30, 2018 | |||||||||||||||||||||
GAAP LendingClub net loss | $ | (10,661 | ) | $ | (19,935 | ) | $ | (13,462 | ) | $ | (22,804 | ) | $ | (60,861 | ) | $ | (30,596 | ) | $ | (92,042 | ) | ||||||
Cost structure simplification expense (1) | 1,934 | 4,272 | 6,782 | — | — | 6,206 | — | ||||||||||||||||||||
Goodwill impairment | — | — | — | — | 35,633 | — | 35,633 | ||||||||||||||||||||
Legal, regulatory and other expense related to legacy issues (2) | 6,791 | 4,145 | 2,570 | 15,474 | 18,501 | 10,936 | 35,474 | ||||||||||||||||||||
Other items (3) | 704 | — | — | — | — | 704 | — | ||||||||||||||||||||
Adjusted net loss | $ | (1,232 | ) | $ | (11,518 | ) | $ | (4,110 | ) | $ | (7,330 | ) | $ | (6,727 | ) | $ | (12,750 | ) | $ | (20,935 | ) | ||||||
Depreciation and impairment expense: | |||||||||||||||||||||||||||
Engineering and product development | 11,838 | 13,373 | 12,372 | 13,221 | 10,197 | 25,211 | 19,444 | ||||||||||||||||||||
Other general and administrative | 1,596 | 1,542 | 1,525 | 1,488 | 1,420 | 3,138 | 2,839 | ||||||||||||||||||||
Amortization of intangible assets | 866 | 940 | 941 | 940 | 959 | 1,806 | 1,994 | ||||||||||||||||||||
Stock-based compensation expense | 20,551 | 18,252 | 17,718 | 19,771 | 19,797 | 38,803 | 37,598 | ||||||||||||||||||||
Income tax (benefit) expense | (438 | ) | — | 18 | (38 | ) | 24 | (438 | ) | 63 | |||||||||||||||||
Adjusted EBITDA | $ | 33,181 | $ | 22,589 | $ | 28,464 | $ | 28,052 | $ | 25,670 | $ | 55,770 | $ | 41,003 | |||||||||||||
Total net revenue | $ | 190,807 | $ | 174,418 | $ | 181,521 | $ | 184,645 | $ | 176,979 | $ | 365,225 | $ | 328,646 | |||||||||||||
Adjusted EBITDA margin | 17.4 | % | 13.0 | % | 15.7 | % | 15.2 | % | 14.5 | % | 15.3 | % | 12.5 | % | |||||||||||||
Weighted-average GAAP diluted shares (4) (5) | 86,719,049 | 86,108,871 | 85,539,436 | 84,871,828 | 84,238,897 | 86,429,892 | 83,950,978 | ||||||||||||||||||||
Weighted-average other dilutive equity awards | — | — | — | — | — | — | — | ||||||||||||||||||||
Non-GAAP diluted shares (4) (5) | 86,719,049 | 86,108,871 | 85,539,436 | 84,871,828 | 84,238,897 | 86,429,892 | 83,950,978 | ||||||||||||||||||||
Adjusted EPS - diluted (4) | $ | (0.01 | ) | $ | (0.13 | ) | $ | (0.05 | ) | $ | (0.09 | ) | $ | (0.08 | ) | $ | (0.15 | ) | $ | (0.25 | ) |
(1) | Includes personnel-related expenses associated with establishing a site in the Salt Lake City area 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 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. |
(2) | Includes class action and regulatory litigation expense and legal and other expenses related to legacy issues, which are included 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 first half of 2019, includes expense related 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 the first quarter, second quarter and first half of 2019, also 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. |
(3) | Includes expenses related to certain non-legacy litigation and regulatory matters, partially offset by a gain on the sale of our small business operating segment, which are included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations. |
(4) | All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019. |
(5) | Equivalent to the basic and diluted shares reflected in the quarterly EPS calculations. |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||||
Retail Program (1) | ConsolidatedVIEs (2) | All Other LendingClub (3) | Condensed Consolidated Balance Sheet | Retail Program (1) | ConsolidatedVIEs (2) | All Other LendingClub (3) | Condensed Consolidated Balance Sheet | ||||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 334,713 | $ | 334,713 | $ | — | $ | — | $ | 372,974 | $ | 372,974 | |||||||||
Restricted cash | — | — | 166,034 | 166,034 | 15,551 | 17,660 | 237,873 | 271,084 | |||||||||||||||||
Securities available for sale | — | — | 220,449 | 220,449 | — | — | 170,469 | 170,469 | |||||||||||||||||
Loans held for investment at fair value | 1,071,128 | 441,856 | — | 1,512,984 | 1,241,157 | 642,094 | — | 1,883,251 | |||||||||||||||||
Loans held for investment by the Company at fair value | — | — | 5,027 | 5,027 | — | — | 2,583 | 2,583 | |||||||||||||||||
Loans held for sale by the Company at fair value | — | — | 435,083 | 435,083 | — | 245,345 | 594,676 | 840,021 | |||||||||||||||||
Accrued interest receivable | 8,545 | 4,281 | 4,719 | 17,545 | 8,914 | 7,242 | 6,099 | 22,255 | |||||||||||||||||
Property, equipment and software, net | — | — | 119,553 | 119,553 | — | — | 113,875 | 113,875 | |||||||||||||||||
Intangible assets, net | — | — | 16,242 | 16,242 | — | — | 18,048 | 18,048 | |||||||||||||||||
Other assets | — | — | 239,276 | 239,276 | — | 530 | 124,437 | 124,967 | |||||||||||||||||
Total assets | $ | 1,079,673 | $ | 446,137 | $ | 1,541,096 | $ | 3,066,906 | $ | 1,265,622 | $ | 912,871 | $ | 1,641,034 | $ | 3,819,527 | |||||||||
Liabilities and Equity | |||||||||||||||||||||||||
Accounts payable | $ | — | $ | — | $ | 8,677 | $ | 8,677 | $ | — | $ | — | $ | 7,104 | $ | 7,104 | |||||||||
Accrued interest payable | 8,545 | 4,281 | 1,735 | 14,561 | 11,484 | 7,594 | 163 | 19,241 | |||||||||||||||||
Accrued expenses and other liabilities | — | — | 262,844 | 262,844 | — | 15 | 152,103 | 152,118 | |||||||||||||||||
Payable to investors | — | — | 64,126 | 64,126 | — | — | 149,052 | 149,052 | |||||||||||||||||
Notes, certificates and secured borrowings at fair value | 1,071,128 | 441,856 | 4,967 | 1,517,951 | 1,254,138 | 648,908 | 2,829 | 1,905,875 | |||||||||||||||||
Payable to securitization note holders | — | — | — | — | — | 256,354 | — | 256,354 | |||||||||||||||||
Credit facilities and securities sold under repurchase agreements | — | — | 324,426 | 324,426 | — | — | 458,802 | 458,802 | |||||||||||||||||
Total liabilities | 1,079,673 | 446,137 | 666,775 | 2,192,585 | 1,265,622 | 912,871 | 770,053 | 2,948,546 | |||||||||||||||||
Total equity | — | — | 874,321 | 874,321 | — | — | 870,981 | 870,981 | |||||||||||||||||
Total liabilities and equity | $ | 1,079,673 | $ | 446,137 | $ | 1,541,096 | $ | 3,066,906 | $ | 1,265,622 | $ | 912,871 | $ | 1,641,034 | $ | 3,819,527 |
(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 $80.8 million was equally matched and offset by interest income from the related loans of $80.8 million for the first half of 2019, 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. This includes LC Trust (which issues certificates backed by loans held by the trust) and any consolidated securitization trusts. 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” 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 retained interests, residuals and equity of those consolidated VIEs. |
June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | |||||||||||||||
Cash and loans held for investment by the Company | |||||||||||||||||||
Cash and cash equivalents | $ | 334,713 | $ | 402,311 | $ | 372,974 | $ | 348,018 | $ | 434,179 | |||||||||
Loans held for investment by the Company at fair value | 5,027 | 8,757 | 2,583 | 12,198 | 9,621 | ||||||||||||||
Total | 339,740 | 411,068 | 375,557 | 360,216 | 443,800 | ||||||||||||||
Other financial assets partially secured by credit facilities | |||||||||||||||||||
Securities available for sale | 220,449 | 197,509 | 170,469 | 165,442 | 149,804 | ||||||||||||||
Loans held for sale by the Company at fair value | 435,083 | 552,166 | 840,021 | 459,283 | 515,307 | ||||||||||||||
Payable to securitization note holders | — | (233,269 | ) | (256,354 | ) | — | — | ||||||||||||
Credit facilities and securities sold under repurchase agreements | (324,426 | ) | (263,863 | ) | (458,802 | ) | (305,336 | ) | (349,232 | ) | |||||||||
Total | $ | 331,106 | $ | 252,543 | $ | 295,334 | $ | 319,389 | $ | 315,879 | |||||||||
Net cash and other financial assets (1) | $ | 670,846 | $ | 663,611 | $ | 670,891 | $ | 679,605 | $ | 759,679 |
(1) | Comparable GAAP measure cannot be provided as not practicable. |
Three Months Ended | Year Ended | ||||
September 30, 2019 | December 31, 2019 | ||||
GAAP Consolidated net income (loss) (2) | $0 - $5 | $(38) - $(23) | |||
Cost structure simplification expense (3) | — | 6 | |||
Legal, regulatory and other expense related to legacy issues (4) | — | 11 | |||
Other items (5) | — | 1 | |||
Adjusted net income (loss) (2) | $0 - $5 | $(20) - $(5) | |||
Stock-based compensation expense | 21 | 81 | |||
Depreciation, amortization and other net adjustments | 14 | 59 | |||
Adjusted EBITDA (2) | $35 - $40 | $120 - $135 |
(1) | For the second half of 2019, reconciliation of comparable GAAP Consolidated Net Income (Loss) to Adjusted Net Income (Loss) cannot be provided as not practicable. |
(2) | Guidance excludes 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 expenses related to our cost structure simplification, legal, regulatory and other expense related to legacy issues, and other items (including certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of assets). Full year guidance now reflects such items that have been recognized during the first half of 2019. |
(3) | Includes personnel-related expenses associated with establishing a site in the Salt Lake City area 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 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. |
(4) | Includes class action and regulatory litigation expense and legal and other expenses related to legacy issues, which are included 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 first half of 2019, includes expense related 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 the first quarter, second quarter and first half of 2019, also 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. |
(5) | Includes expenses related to certain non-legacy litigation and regulatory matters, partially offset by a gain on the sale of our small business operating segment, which are included in “Other general and administrative” expense on the Company’s Condensed Consolidated Statements of Operations. |