Lending Club reported the results for the 3rd quarter today.
Financial Highlights are:
- Originations – Loan originations in the third quarter of 2015 were $2.24 billion, compared to $1.17 billion in the same period last year, an increase of 92% year-over-year. The Lending Club platform has now facilitated loans totaling over $13.4 billion since inception.
- Operating Revenue – Operating revenue in the third quarter of 2015 was $115.1 million, compared to $56.5 million in the same period last year, an increase of 104% year-over-year. Operating revenue as a percent of originations, or revenue yield, was 5.15% in the third quarter, up from 4.85% in the prior year.
- Adjusted EBITDA – Adjusted EBITDA was $21.2 million in the third quarter of 2015, compared to $7.5 million in the same period last year. As a percent of operating revenue, Adjusted EBITDA margin increased to 18.4% in the third quarter of 2015, up from 13.3% in the prior year.
- Net Income – GAAP net income was $1.0 million for the third quarter of 2015, compared to a net loss of $7.4 million in the same period last year. GAAP net income included $13.5 million of stock-based compensation expense during the third quarter of 2015, compared to $10.5 million in the prior year.
- Earnings Per Share (EPS) – Basic and diluted earnings per share was $0.00 for the third quarter, compared to basic and diluted EPS of ($0.12) in the same period last year.
- Adjusted EPS – Adjusted EPS was $0.04 for the third quarter of 2015, compared to $0.02 in the same period last year.
- Cash, Cash Equivalents and Securities Available for Sale – As of September 30, 2015, cash, cash equivalents and securities available for sale totaled $918 million, with no outstanding debt.
“We had another spectacular quarter, with revenue growth re-accelerating from 98% to 104%, and EBITDA jumping 181% year-over-year to reach 18.4% margin ,” said Lending Club founder and CEO Renaud Laplanche. “With over 1.2 million customers, continuously high customer satisfaction, strong credit performance, increased marketing efficiency and lower customer acquisition costs, we are continuing to observe tremendous network effects and benefits of scale. Our results this quarter combined with our raised Q4 outlook lead us to forecast a near doubling of revenue again this year and look toward 2016 with high confidence.”
Lending Club opened to retail investors in nine new states, bringing investor base, which is very sticky, to over 100,000.
Small business loans grew in line with expectations.
Traditional banks do not benefit from network effects. Lending Club on the other hand does benefit strongly from network effects. All these dynamics lead to lower acquisition costs and higher margins.
From the Q&A of the earning call:
- Decrease in returns (approx 1%) is due to network effects allowing Lending Club to pass some benefits in form of lower interest rates to borrowers. This is also enabled by high investor demand.
- Custom loans are stable quarter of quarter. Lending Club has not transferred loans to the standard product.
- Customer acquisition costs have not risen as Lending Club has invested early into the product and now benefits from it, e.g. through good customer ratings driving traffic
- On the question if there is an increase on fraud attempts, Lending Club responded that there was no increase in attempts or frauds committed. Laplanche is not surprised that new platforms might experience a rise of attempts.
- Does Santander exiting consumer loans have any impact on the relationship between LC and Santander? Santander was a great partner and accounted for a single digit percentage of volume. Lending Club has replaced Santander with other institutional lenders. The very diverse investor base of Lending Club is seen by Laplanche as a competitive advantage over newer platforms.
- Madden has no direct impact on the investor base of Lending Club.
- Are whole loans growing faster than originations? The mix is a function of the mix and appetite of the investors behind it.