Lending Club loses CFO; posts loss

Source: Lending Club

Lending Club (LC), the world's largest online marketplace connecting borrowers and investors, today announced a series of leadership changes.

Timothy J. Mayopoulos, President and CEO of Fannie Mae, has been appointed to the Lending Club Board as an independent Director. Mr. Mayopoulos has 30 years of experience in financial services, including as General Counsel at Bank of America, and senior leadership roles at Deutsche Bank AG and Credit Suisse First Boston. Separately, Lending Club CEO Scott Sanborn has also joined the Board.

"The Board is very pleased to welcome Tim as independent Director," said Hans Morris, Chairman of the Board of Lending Club. "His well-established industry experience, track record, integrity and deep financial and legal expertise will be invaluable to Lending Club in our continuing mission to transform the banking system. We also welcome Scott to the Board of Lending Club. The Board continues to be impressed with his leadership of the company."

"Lending Club has an opportunity to change banking for the better, and I am excited to be part of it," said Timothy J. Mayopoulos. "Through its use of innovative technology, Lending Club makes affordable credit more broadly accessible to individuals, families and small businesses. I look forward to contributing my skills to help the company achieve its full potential in meeting this important market need."

Additionally, Lending Club announced that Carrie Dolan resigned from her role as CFO to pursue a new opportunity. In response, Lending Club has appointed Bradley Coleman to Principal Accounting Officer and Interim CFO. Mr. Coleman has served as Lending Club's corporate controller since 2013 and will continue in that role while fulfilling his new duties. The company has retained a global executive search firm to manage the recruitment of a new CFO and expects to name a successor in due course.

"Carrie was integral to Lending Club's maturity and growth over the past six years," said Scott Sanborn, CEO and President of Lending Club. "She approached us early this year about planning a transition, and in May the Board and I asked her to postpone her plans until we could navigate recent events. I and the Board want to thank her for her leadership, commitment and dedication particularly over the last several months, and wish her well in her next endeavor."

"I remain a passionate believer in this business model and this company, and it has been a deeply rewarding experience to help build Lending Club from 40 employees to over 1,500," said Ms. Dolan. "Now that investors are re-engaged with the platform, I am excited to begin my next chapter."

In addition, the company has successfully hired a Head of Institutional Investors, which will be formally announced soon.

Today's changes are in addition to the recent hires that Mr. Sanborn has made to strengthen the Lending Club leadership team which include former McKinsey executive Sameer Gulati as Chief Operations and Strategy Officer, and former BlackRock senior executive Patrick Dunne as Chief Capital Officer. 

Separately, Lending Club (LC), the world's largest online marketplace connecting borrowers and investors, today announced financial results for the second quarter ended June 30, 2016 and re-established guidance for the third quarter.

"Our efforts to reengage investors are working, with fifteen of our top twenty largest investors back on the platform today," said Lending Club's CEO and President, Scott Sanborn. "Despite the unusual disruption to our supply of capital in May, we facilitated nearly $2 billion of loans to nearly 170,000 borrowers. While we still have a lot of work ahead, the value that we bring to borrowers and investors is stronger than ever, and we believe we have the resources and resolve to execute on our mission."

Second Quarter 2016 Financial Highlights

Originations – Loan originations in the second quarter of 2016 were $1.96 billion, compared to $1.91 billion in the same period last year, an increase of 2% year-over-year. The Lending Club platform has now facilitated loans totaling nearly $21 billion since inception.

Operating Revenue – Operating revenue in the second quarter of 2016 was $102.4 million, compared to $96.1 million in the same period last year, an increase of 7% year-over-year. Operating revenue as a percent of originations, or revenue yield, was 5.24% in the second quarter, up from 5.03% in the same period last year.

Net Loss – GAAP net loss was $81.4 million for the second quarter of 2016, compared to a net loss of $4.1 million in the same period last year. The results for the second quarter of 2016 were negatively affected by a Goodwill impairment charge of $35.4 million related to the 2014 acquisition of Springstone, an increase in professional service fees of $14.9 million primarily due to matters identified in the board review previously announced, approximately $14.0 million in incentives paid to investors, and an increase in compensation related costs of $6.5 million associated with severance costs and a retention program.

Adjusted EBITDA(2) – Adjusted EBITDA was $(30.1) million in the second quarter of 2016, compared to $13.4 million in the same period last year. As a percent of operating revenue, Adjusted EBITDA margin decreased to (29.4)% in the second quarter of 2016, down from 13.9% in the same period last year.

Earnings Per Share (EPS) - Basic and diluted EPS was $(0.21) for the second quarter of 2016, compared to basic and diluted EPS of $(0.01) in the same period last year.

Adjusted EPS(2)– Adjusted EPS was $(0.09) for the second quarter of 2016 compared to $0.03 in the same period last year.

Cash, Cash Equivalents and Securities Available for Sale - As of June 30, 2016, cash, cash equivalents and securities available for sale totaled $832 million, with no outstanding debt.

Recent Business Developments

  • The platform's retail investor base remains a resilient source of capital and now includes over 135,000 self-managed active individual investors who collectively invested over $327 million in the second quarter, up 16% year-over-year;
  • Since inception, the borrower base has increased to over 1.5 million borrowers;
  • Servicing and Management Fee revenue associated with the servicing portfolio, excluding fair market value accounting adjustments, more than doubled to a record $19.3 million, up 128% year-over-year;
  • In light of lower loan volumes in the second quarter and recognizing that the full scale return of investors may take time, in June 2016, the company eliminated 179 positions in the organization;
  • Lending Club ended the quarter with strong liquidity including $832 million in cash, equivalents and available for sale securities, and $120 million of undrawn credit facility;
  • Jefferies successfully executed a three times oversubscribed near prime securitization in August 2016 for $134 million of unsecured Lending Club personal loans;


Outlook

Based on the information available as of August 8, 2016, Lending Club provides the following outlook for the third quarter of 2016:

Third Quarter 2016

Operating Revenue in the range of $95 million to $105 million.

Adjusted EBITDA(2) in the range of ($30) million to ($15) million.

(2) Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures. Please see the discussion below under the heading "Non-GAAP Measures" and the reconciliations at the end of this release.

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