LendingClub Logs Lower-Than-Expected Losses

Though LendingClub is still reporting losses this quarter and missed its revenue estimates, the market mostly liked what it saw out of the financial services startup when it reported its Q2 earnings. LendingClub attributes it improved earnings position to improved customer acquisition processes, better origination services and increasing cost efficiency within the organization.

“Since I took over as CEO three years ago, we have increased originations by 60% while tripling contribution dollars. We are leveraging our data, scale and marketplace model to execute with discipline and compound our competitive advantages,” LendingClub CEO Scott Sanborn told investors in the postmortem call with investors and analysts after earning were released.  Sanborn further noted that it took Lending Club five years to reach $1 billion in originations — and these days Lending Club generates $1 billion in originations per month.

By the numbers, net loss came in at $10.66 million or $0.12 per share — a lower loss than last year when Lending Club reported a loss of $60.86 million or $0.72 per share. Adjusted loss per share narrowed to $0.01 from $0.08 a year earlier.

Net revenue increased 8 percent from year-ago revenues of $176.98 million in 2018 to $190.8 million in 2019, driven by the higher volume of loan originations Sanborn mentioned.  Loan originations during the quarter were at $3.1 billion, up 11 percent year over year. While the revenue number is an improvement, it came in very, very slightly below analysts’ estimates.

“Better use of data, increased automation and new communications approaches have increased our conversion rate, reduced our unit cost of operations and accelerated time to approval. For example, in Q2, 72 percent of our personal loan customers went from application to approval within 24 hours — that is up from 46 percent only a year ago,” Sanborn told investors, also noting that 35 percent of loans purchased by investors in the second quarter of 2019 were through structured program channels developed by LendingClub over the last two years.

Sanborn also spent some time discussing what he called LendingClub’s “lifetime relationship” strategy with investors — the long-term goal isn’t merely to be a lending platform, but to build an integrated ecosystem of partners to deliver a range of products and services to LC’s 14 million applicants and 3 million members.

“The product platform will leverage our world-class demand generation and throughput capability to seamlessly deliver more ways for members to improve their financial health. We are making good progress on a product platform as well,” Sanborn said.

As for the rest of the year, LendingClub expects net revenue in the range of $765 million to $795 million. The net loss outlook is now expected to be $38 million to $23 million compared, to the previous estimate of $37 million to $17 million. For Q3, LC is forecasting net revenue in the range of $200 million to $210 million. Net income is predicted to be in the range of $0 million to $5 million and adjusted EBITDA is projected to be in the range of $35 million to $40 million.