Press Release

LendingClub Reports Fourth Quarter and Full Year 2019 Results

02/18/2020

SAN FRANCISCO, Feb. 18, 2020 /PRNewswire/ -- LendingClub Corporation (NYSE: LC), America's largest online lending marketplace connecting borrowers and investors, today announced financial results for the fourth quarter and full year ended December 31, 2019.

Lending Club, the world's largest online marketplace connecting borrowers and investors. (PRNewsFoto/Lending Club) (PRNewsFoto/Lending Club)

Profitable in the fourth quarter

  • Loan originations of $3.1 billion, up 7% year-over-year.
  • Net Revenue of $188.5 million, up 4% year-over-year.
  • GAAP Consolidated Net Income of $0.2 million ($0.00 per share), improved from a loss of $(13.4) million ($(0.16) per share) in the fourth quarter of 2018.
  • Adjusted EBITDA of $39.0 million, up 37% year-over-year.
  • Record Adjusted EBITDA Margin of 20.7%, up 5.0 percentage points year-over-year.
  • Adjusted Net Income of $7.0 million ($0.08 per share), improved from Adjusted Net Loss of $(4.1) million ($(0.05) per share) in the fourth quarter of 2018.

Record full year 2019 results

  • LendingClub's innovation, simplification program and focus on partnerships is transforming the company, and leveraging its scale to sustain robust operational and financial momentum.
  • Record loan originations of $12.3 billion, up 13% year-over-year.
  • Record Net Revenue of $758.6 million, up 9% year-over-year.
  • GAAP Consolidated Net Loss of $(30.7) million ($(0.35) per share), improved from $(128.2) million ($(1.52) per share) in 2018.
  • Record Adjusted EBITDA of $134.8 million, up 38% year-over-year.
  • Record Adjusted EBITDA Margin of 17.8%, up 3.8 percentage points year-over-year, primarily driven by a record Contribution Margin from improving cost efficiency in customer acquisition and origination and servicing.
  • Adjusted Net Income of $2.2 million ($0.02 per share), improved from Adjusted Net Loss of $(32.4) million ($(0.38) per share) in 2018.

Innovation, simplification and partnership transforming LendingClub

  • Investor product and platform innovation, such as Levered Certificates and LCX, improved balance sheet efficiency and velocity.
  • Borrower product and platform innovation drove conversion and retention higher, increased 24 hour approval rates from 67% in 2018 to 77% in 2019, and drove LendingClub's Net Promoter Score to 80.
  • Simplification program, including Business Process Outsourcing, geolocation and vendor consolidation, drove customer acquisition and servicing unit costs lower.
  • Select Plus and Small Business partnerships expand funding sources and enable LendingClub to serve more members.

LendingClub clears path to a bank charter

  • To comply with Federal banking ownership regulations, LendingClub's largest shareholder, Shanda, has agreed to exchange its 22% of voting common stock for non-voting stock. As part of the exchange, Shanda will receive a payment of $50.2 million.
  • The company is adopting a Temporary Bank Charter Protection Agreement, also known as a stockholder rights agreement, to maintain compliance with ownership thresholds under federal banking regulations by limiting accumulation of shares. This agreement will expire on the earlier of the completion of the transaction or 18 months.

Acquisition of Radius Bancorp ("Radius") provides a springboard to LendingClub's future

  • The acquisition of Radius for $185 million in cash and stock (subject to certain adjustments set forth in the definitive agreement) will enhance LendingClub's ability to serve its members, grow its market opportunity, increase and diversify earnings, and provide resilience and regulatory clarity.
  • The company believes the acquisition will take 12 to 15 months to receive regulatory approval and close.

2020 outlook focused on profitable growth, resolution of legacy issues, and preparations for a national bank charter

  • Expect full year 2020 Net Revenue to be in the range of $790 million to $820 million; GAAP Consolidated Net Income and Adjusted Net Income both in the range of $17 million to $37 million; and Adjusted EBITDA in the range of $150 million to $170 million.
  • In a seasonally slower first quarter, expect Net Revenue to be in the range of $170 million to $180 million; GAAP Consolidated Net Income (Loss) and Adjusted Net Income (Loss) both in the range of $(5) million to $0 million; and Adjusted EBITDA in the range of $25 million to $30 million.
  • GAAP Consolidated Net Income (Loss), Adjusted Net Income (Loss) and Adjusted EBITDA guidance does not include certain items, as discussed in the "Reconciliation of GAAP to Non-GAAP Guidance" table at the end of this release.

"Having achieved our key 2019 strategic and financial goals, the acquisition of Radius Bank provides a springboard to our future. It will dramatically enhance the resiliency and earnings trajectory of LendingClub, while unlocking the ability to create a category-defining experience for our members," said Scott Sanborn, CEO of LendingClub.

LendingClub remains well positioned over the long term

  • 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 $160 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 and profit potential:
    • Its 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;
    • The broad spectrum of investors enables the company to serve more borrowers and to enhance its marketing efficiency; and
    • Scale, data, and innovation enable LendingClub to generate and convert demand efficiently while managing price and credit risk effectively.
  • The Visitor-to-Member and Product-to-Platform strategies aim to leverage LendingClub's scale to deliver additional savings to our growing membership base (3M+ customers) while expanding our market opportunity and earnings potential.

Three Months Ended
December 31,


Year Ended
December 31,


($ in millions)

2019


2018


2019


2018


Loan Originations

$

3,083.1



$

2,871.0



$

12,290.1



$

10,881.8



Net Revenue

$

188.5



$

181.5



$

758.6



$

694.8



GAAP Consolidated Net Income (Loss)

$

0.2



$

(13.4)



$

(30.7)



$

(128.2)



Adjusted EBITDA

$

39.0



$

28.5



$

134.8



$

97.5



Adjusted Net Income (Loss)

$

7.0



$

(4.1)



$

2.2



$

(32.4)



Fourth Quarter 2019 Financial Highlights

Commenting on financial results, Tom Casey, CFO of LendingClub, said "Our work over the last two years to drive revenue per member up and customer acquisition costs down is powering profitable and sustainable growth. Acquiring Radius will transform the revenue, earnings and return on assets potential of LendingClub, and will enable us to make more flexible capital allocation decisions to drive shareholder returns."

Loan Originations – Loan originations in the fourth quarter of 2019 were $3.1 billion, improving 7% compared to the same quarter last year.

Net Revenue – Net Revenue in the fourth quarter of 2019 was $188.5 million, improving 4% compared to the same quarter last year driven primarily by a higher volume of loan originations.

GAAP Consolidated Net Income – GAAP Consolidated Net Income was $0.2 million for the fourth quarter of 2019, improving $13.6 million compared to the same quarter last year driven primarily by an increase in net revenue and a decrease in operating expenses.

Adjusted EBITDA  Adjusted EBITDA was $39.0 million in the fourth quarter of 2019, improving $10.5 million compared to the same quarter last year.

Adjusted Net Income Adjusted Net Income was $7.0 million in the fourth quarter of 2019, improving $11.1 million compared to the same quarter last year.

Contribution Contribution was $101.3 million in the fourth quarter of 2019, improving $10.2 million compared to the same quarter last year, with Contribution Margin improving to 53.7% from 50.1% compared to the same quarter last year.

Earnings Per Share (EPS) – Basic and diluted EPS attributable to LendingClub was $0.00 in the fourth quarter of 2019, compared to basic and diluted EPS attributable to LendingClub of $(0.16) in the same quarter last year.

Adjusted EPS – Adjusted EPS was $0.08 in the fourth quarter of 2019, compared to an Adjusted EPS of $(0.05) in the same quarter last year.

Net Cash and Other Financial Assets – As of December 31, 2019, net cash and other financial assets totaled $714.5 million compared to $670.8 million as of December 31, 2018.

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 fourth quarter 2019 webcast and teleconference is scheduled to begin at 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time) on Tuesday, February 18, 2020. A live webcast of the call will be available at http://ir.lendingclub.comunder 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 7474063, 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 February 25, 2020, by calling +1 (877) 344-7529 or outside the U.S. +1 (412) 317-0088, with Conference ID 10138523. 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 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. 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 and (5) other items (including certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of certain assets), 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 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) other items, as discussed above, (6) depreciation, impairment and amortization expense, (7) stock-based compensation expense and (8) 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) by the weighted-average diluted common 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 cost savings and other financial or other benefits of the acquisition of Radius, the ability and timing to satisfy the closing conditions for the Radius acquisition (including obtaining regulatory approval), customer preferences, future initiatives and strategy, borrower and investor demand, anticipated future financial results, 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
December 31,


Year Ended
December 31,



2019


2018


2019


2018


Net revenue:


















Transaction fees

$

149,951



$

142,053



$

598,760



$

526,942












Interest income

74,791



106,170



345,345



487,462



Interest expense

(49,251)



(83,222)



(246,587)



(385,605)



Net fair value adjustments

(42,659)



(25,865)



(144,990)



(100,688)



Net interest income and fair value adjustments

(17,119)



(2,917)



(46,232)



1,169



Investor fees

30,258



30,419



124,532



114,883



Gain on sales of loans

20,373



10,509



67,716



45,979



Net investor revenue

33,512



38,011



146,016



162,031












Other revenue

5,023



1,457



13,831



5,839












Total net revenue

188,486



181,521



758,607



694,812



Operating expenses: (1)









Sales and marketing

67,222



68,353



279,423



268,517



Origination and servicing

22,203



25,707



103,403



99,376



Engineering and product development

41,080



39,552



168,380



155,255



Other general and administrative

57,607



61,303



238,292



228,641



Goodwill impairment







35,633



Class action and regulatory litigation expense







35,500



Total operating expenses

188,112



194,915



789,498



822,922



Income (Loss) before income tax expense

374



(13,394)



(30,891)



(128,110)



Income tax expense (benefit)

140



18



(201)



43



Consolidated net income (loss)

234



(13,412)



(30,690)



(128,153)



Less: Income attributable to noncontrolling interests



50



55



155



LendingClub net income (loss)

$

234



$

(13,462)



$

(30,745)



$

(128,308)



Net income (loss) per share attributable to LendingClub:









Basic (2)

$

0.00



$

(0.16)



$

(0.35)



$

(1.52)



Diluted (2)

$

0.00



$

(0.16)



$

(0.35)



$

(1.52)



Weighted-average common shares – Basic (2)

88,371,672



85,539,436



87,278,596



84,583,461



Weighted-average common shares – Diluted (2)

88,912,677



85,539,436



87,278,596



84,583,461





(1)  Includes stock-based compensation expense as follows:





Three Months Ended
December 31,


Year Ended
December 31,



2019


2018


2019


2018


Sales and marketing

$

1,479



$

1,688



$

6,095



$

7,362



Origination and servicing

533



1,044



3,155



4,322



Engineering and product development

4,417



4,403



19,860



20,478



Other general and administrative

10,312



10,583



44,529



42,925



Total stock-based compensation expense

$

16,741



$

17,718



$

73,639



$

75,087




(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.

 

LENDINGCLUB CORPORATION


OPERATING HIGHLIGHTS


(In thousands, except percentages and number of employees, or as noted)


(Unaudited)





Three Months Ended


% Change



December 31,
2019


September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


Y/Y


Operating Highlights:


Loan originations (in millions)

$

3,083



$

3,350



$

3,130



$

2,728



$

2,871



7

%


Net revenue

$

188,486



$

204,896



$

190,807



$

174,418



$

181,521



4

%


Consolidated net income (loss)

$

234



$

(392)



$

(10,632)



$

(19,900)



$

(13,412)



102

%


Contribution (1)

$

101,261



$

105,789



$

99,556



$

85,688



$

91,023



11

%


Contribution margin (1)

53.7

%


51.6

%


52.2

%


49.1

%


50.1

%


7

%


Adjusted EBITDA (1)

$

38,981



$

40,021



$

33,181



$

22,589



$

28,464



37

%


Adjusted EBITDA margin (1)

20.7

%


19.5

%


17.4

%


13.0

%


15.7

%


32

%


Adjusted net income (loss) (1)

$

6,981



$

7,951



$

(1,232)



$

(11,518)



$

(4,110)



N/M



EPS – diluted (2)

$

0.00



$

0.00



$

(0.12)



$

(0.23)



$

(0.16)



N/M



Adjusted EPS – diluted (1) (2)

$

0.08



$

0.09



$

(0.01)



$

(0.13)



$

(0.05)



N/M



Loan Originations by Investor Type:


Banks

32

%


38

%


45

%


49

%


41

%




Other institutional investors

25

%


20

%


21

%


18

%


19

%




LendingClub inventory

23

%


23

%


13

%


10

%


18

%




Managed accounts

17

%


15

%


16

%


17

%


16

%




Self-directed retail investors

3

%


4

%


5

%


6

%


6

%




Total

100

%


100

%


100

%


100

%


100

%




Loan Originations by Program:


Personal loans – standard program

68

%


70

%


69

%


71

%


72

%




Personal loans – custom program

26

%


24

%


24

%


21

%


21

%




Other – custom program (3)

6

%


6

%


7

%


8

%


7

%




Total

100

%


100

%


100

%


100

%


100

%




Personal Loan Originations by Loan Grade – Standard Loan Program (in millions):


A

$

654.1



$

757.4



$

705.6



$

608.3



$

604.9



8

%


B

644.7



738.3



650.8



574.5



591.6



9

%


C

479.6



523.3



509.2



452.5



495.9



(3)

%


D

309.1



324.2



308.1



243.5



267.1



16

%


E





0.6



49.4



83.8



(100)

%


F







0.2



6.3



(100)

%


G









1.3



(100)

%


Total

$

2,087.5



$

2,343.2



$

2,174.3



$

1,928.4



$

2,050.9



2

%



N/M – Not meaningful


(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 no longer 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



December 31,
2019


September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


Y/Y


Servicing Portfolio by Method Financed (in millions, at end of period):


Whole loans sold

$

14,118



$

13,509



$

12,777



$

11,761



$

10,890



30

%


Notes

919



1,016



1,092



1,169



1,243



(26)

%


Certificates

211



272



471



577



689



(69)

%


Secured borrowings

19



29



42



59



81



(77)

%


Loans invested in by the Company

744



696



426



565



843



(12)

%


Total

$

16,011



$

15,522



$

14,808



$

14,131



$

13,746



16

%


Employees and contractors (4)

1,538



1,726



1,715



1,621



1,687



(9)

%




(4)

As of the end of each respective period.

 

LENDINGCLUB CORPORATION


Condensed Consolidated Balance Sheets


(In Thousands, Except Share and Per Share Amounts)


(Unaudited)





December 31,
2019


December 31,
2018


Assets





Cash and cash equivalents

$

243,779



$

372,974



Restricted cash

243,343



271,084



Securities available for sale (includes $174,849 and $53,611 pledged as collateral at fair
      value, respectively)

270,927



170,469



Loans held for investment at fair value

1,079,315



1,883,251



Loans held for investment by the Company at fair value

43,693



2,583



Loans held for sale by the Company at fair value

722,355



840,021



Accrued interest receivable

12,857



22,255



Property, equipment and software, net

114,370



113,875



Operating lease assets

93,485





Intangible assets, net

14,549



18,048



Other assets (1)

143,668



124,967



Total assets

$

2,982,341



$

3,819,527



Liabilities and Equity





Accounts payable

$

10,855



$

7,104



Accrued interest payable

9,260



19,241



Operating lease liabilities

112,344





Accrued expenses and other liabilities (1)

142,636



152,118



Payable to investors

97,530



149,052



Notes, certificates and secured borrowings at fair value

1,081,466



1,905,875



Payable to securitization note and certificate holders (includes $40,610 and $0 at fair
     value, respectively)

40,610



256,354



Credit facilities and securities sold under repurchase agreements

587,453



458,802



Total liabilities

2,082,154



2,948,546



Equity





Common stock, $0.01 par value; 180,000,000 shares authorized; 89,218,797 and
     86,384,667 shares issued, respectively; 88,757,406 and 85,928,127 shares
     outstanding, respectively (2)

892



864



Additional paid-in capital (2)

1,467,882



1,405,392



Accumulated deficit

(548,472)



(517,727)



Treasury stock, at cost; 461,391 and 456,540 shares, respectively (2)

(19,550)



(19,485)



Accumulated other comprehensive income (loss)

(565)



157



Total LendingClub stockholders' equity

900,187



869,201



Noncontrolling interests



1,780



Total equity

900,187



870,981



  Total liabilities and equity

$

2,982,341



$

3,819,527





(1)

In the fourth quarter of 2019, the Company presented operating lease assets and operating lease liabilities separately from "Other assets" and "Accrued expenses and other liabilities," respectively, on its Condensed Consolidated Balance Sheets. This change in presentation had no impact on prior period amounts presented.



(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.

 

LENDINGCLUB CORPORATION


RECONCILIATION OF GAAP TO NON-GAAP MEASURES


(In thousands, except percentages and per share data)


(Unaudited)





Three Months Ended


Year Ended



December 31,
2019


September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


December 31,
2019


December 31,
2018


GAAP LendingClub net income (loss)

$

234



$

(383)



$

(10,661)



$

(19,935)



$

(13,462)



$

(30,745)



$

(128,308)



Engineering and product development expense

41,080



41,455



43,299



42,546



39,552



168,380



155,255



Other general and administrative expense

57,607



59,485



64,324



56,876



61,303



238,292



228,641



Cost structure simplification expense (1)

188



2,778



646



3,706



880



7,318





Goodwill impairment













35,633



Class action and regulatory litigation expense













35,500



Stock-based compensation expense (2)

2,012



2,357



2,386



2,495



2,732



9,250



11,684



Income tax expense (benefit)

140



97



(438)





18



(201)



43



Contribution

$

101,261



$

105,789



$

99,556



$

85,688



$

91,023



$

392,294



$

339,328



Total net revenue

$

188,486



$

204,896



$

190,807



$

174,418



$

181,521



$

758,607



$

694,812



Contribution margin

53.7

%


51.6

%


52.2

%


49.1

%


50.1

%


51.7

%


48.8

%




(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.

 

LENDINGCLUB CORPORATION


RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)


(In thousands, except percentages and per share data)


(Unaudited)





Three Months Ended


Year Ended



December 31,
2019


September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


December 31,
2019


December 31,
2018


GAAP LendingClub net income (loss)

$

234



$

(383)



$

(10,661)



$

(19,935)



$

(13,462)



$

(30,745)



$

(128,308)



Cost structure simplification expense (1)

284



3,443



1,934



4,272



6,782



9,933



6,782



Goodwill impairment













35,633



Legal, regulatory and other expense related to legacy issues (2)

4,531



4,142



6,791



4,145



2,570



19,609



53,518



Acquisition and related expenses (3)

932











932





Other items (4)

1,000



749



704







2,453





Adjusted net income (loss)

$

6,981



$

7,951



$

(1,232)



$

(11,518)



$

(4,110)



$

2,182



$

(32,375)



Depreciation and impairment expense:















Engineering and product development

12,532



11,464



11,838



13,373



12,372



49,207



45,037



Other general and administrative

1,739



1,569



1,596



1,542



1,525



6,446



5,852



Amortization of intangible assets

848



845



866



940



941



3,499



3,875



Stock-based compensation expense

16,741



18,095



20,551



18,252



17,718



73,639



75,087



Income tax expense (benefit)

140



97



(438)





18



(201)



43



Adjusted EBITDA

$

38,981



$

40,021



$

33,181



$

22,589



$

28,464



$

134,772



$

97,519



Total net revenue

$

188,486



$

204,896



$

190,807



$

174,418



$

181,521



$

758,607



$

694,812



Adjusted EBITDA margin

20.7

%


19.5

%


17.4

%


13.0

%


15.7

%


17.8

%


14.0

%

















Weighted-average GAAP diluted shares (5)

88,912,677



87,588,495



86,719,049



86,108,871



85,539,436



87,278,596



84,583,461



Non-GAAP diluted shares (5)

88,912,677



87,588,495



86,719,049



86,108,871



85,539,436



87,794,035



84,583,461


















Adjusted EPS - diluted (5)

$

0.08



$

0.09



$

(0.01)



$

(0.13)



$

(0.05)



$

0.02



$

(0.38)





(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 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 full year 2019, 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. For each of the quarters in 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)

In 2019, represents costs related to the acquisition of Radius.



(4)

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. For the second quarter of 2019, also includes a gain on the sale of our small business operating segment.



(5)

All share information and balances have been retroactively adjusted to reflect a 1-for-5 reverse stock split effective as of July 5, 2019.

 

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.





December 31, 2019


December 31, 2018



Retail
Program (1)

Consolidated
VIEs (2) (4)

All Other
LendingClub(3)

Condensed
Consolidated
Balance Sheet


Retail
Program (1)

Consolidated
VIEs (2)

All Other
LendingClub(3)

Condensed
Consolidated
Balance Sheet


Assets











Cash and cash equivalents

$


$


$

243,779


$

243,779



$


$


$

372,974


$

372,974



Restricted cash


2,894


240,449


243,343



15,551


17,660


237,873


271,084



Securities available for sale



270,927


270,927





170,469


170,469



Loans held for investment at fair value

881,473


197,842



1,079,315



1,241,157


642,094



1,883,251



Loans held for investment by the Company at fair value (4)


37,638


6,055


43,693





2,583


2,583



Loans held for sale by the Company at fair value



722,355


722,355




245,345


594,676


840,021



Accrued interest receivable

5,930


1,815


5,112


12,857



8,914


7,242


6,099


22,255



Property, equipment and software, net



114,370


114,370





113,875


113,875



Operating lease assets



93,485


93,485








Intangible assets, net



14,549


14,549





18,048


18,048



Other assets (5)



143,668


143,668




530


124,437


124,967



Total assets

$

887,403


$

240,189


$

1,854,749


$

2,982,341



$

1,265,622


$

912,871


$

1,641,034


$

3,819,527



Liabilities and Equity











Accounts payable

$


$


$

10,855


$

10,855



$


$


$

7,104


$

7,104



Accrued interest payable

5,930


1,737


1,593


9,260



11,484


7,594


163


19,241



Operating lease liabilities



112,344


112,344








Accrued expenses and other liabilities (5)



142,636


142,636




15


152,103


152,118



Payable to investors



97,530


97,530





149,052


149,052



Notes, certificates and secured borrowings at fair value

881,473


197,842


2,151


1,081,466



1,254,138


648,908


2,829


1,905,875



Payable to securitization note and certificate holders (4)


40,610



40,610




256,354



256,354



Credit facilities and securities sold under repurchase agreements



587,453


587,453





458,802


458,802



Total liabilities

887,403


240,189


954,562


2,082,154



1,265,622


912,871


770,053


2,948,546



Total equity



900,187


900,187





870,981


870,981



  Total liabilities and equity

$

887,403


$

240,189


$

1,854,749


$

2,982,341



$

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 $148.0 million and $210.8 million was equally matched and offset by interest income from the related loans of $148.0 million and $210.8 million in 2019 and 2018, 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 $70.8 million and net fair value adjustments of $13.5 million in 2019 were equally matched and offset by interest income on the loans of $84.3 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 $154.9 million and net fair value adjustments of $15.9 million in 2018 were equally matched and offset by interest income on the loans of $170.8 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)

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 securitization note and certificate holders."



(5)

In the fourth quarter of 2019, the Company presented operating lease assets and operating lease liabilities separately from "Other assets" and "Accrued expenses and other liabilities," respectively, on its Condensed Consolidated Balance Sheets. This change in presentation had no impact on prior period amounts presented.

 

LENDINGCLUB CORPORATION


RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)


NET CASH AND OTHER FINANCIAL ASSETS


(In thousands)


(Unaudited)





December 31,
2019


September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018


Cash and cash equivalents (1)

$

243,779



$

199,950



$

334,713



$

402,311



$

372,974



Restricted cash committed for loan purchases (2)

68,001



84,536



31,945



24,632



31,118



Securities available for sale

270,927



246,559



220,449



197,509



170,469



Loans held for investment by the Company at fair value (3)

43,693



4,211



5,027



8,757



2,583



Loans held for sale by the Company at fair value

722,355



710,170



435,083



552,166



840,021



Payable to securitization note and certificate holders (3)

(40,610)







(233,269)



(256,354)



Credit facilities and securities sold under repurchase agreements

(587,453)



(509,107)



(324,426)



(263,863)



(458,802)



Other assets and liabilities (2)

(6,226)



(31,795)



(12,089)



(8,541)



(31,241)



Net cash and other financial assets (4)

$

714,466



$

704,524



$

690,702



$

679,702



$

670,768





(1)

Variations in cash and cash equivalents are primarily due to variations in the amount and timing of loan purchases invested in by the Company.



(2)

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 Condensed 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 current period presentation.



(3)

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 securitization note and certificate holders."



(4)

Comparable GAAP measure cannot be provided as not practicable.

 

LENDINGCLUB CORPORATION


RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL GUIDANCE (1)


(In millions)


(Unaudited)





Three Months Ended


Year Ended



March 31, 2020


December 31, 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




(1)

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.



(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, acquisition and related expenses, and other items (including certain non-legacy litigation and/or regulatory settlement expenses and gains on disposal of certain assets).

 

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SOURCE LendingClub Corporation