Lendingclub Corporation · NYSE:LC
Lendingclub — Investor Day (December 2017)
123 slides from Lendingclub's investor day presentation, Dec 7, 2017
Slide 1: Investor Day Presentation December 7, 2017
Investor Day Presentation December 7, 2017 EXHIBIT 99.1
Slide 2: Legal Disclosure
Confidential Legal Disclosure Some of the statements in this presentation, including statements regarding investor demand and anticipated future product offerings and financial results are "forward-looking statements." The words "anticipate,” “appear,” "believe,“ “continue,” “could,” "estimate," "ex
Slide 3: Scott Sanborn, Chief Executive Officer
Scott Sanborn Chief Executive Officer
Slide 4: Today's agenda
Company Overview Scott Sanborn, Chief Executive Officer Our Borrowers Steve Allocca, President Credit Sid Jajodia, Chief Investment OfficerSammy Soohoo, SVP, Credit Risk Our Investors Patrick Dunne, Chief Capital Officer Investor Panel Andrew Deringer, VP, Financial Institutions Philip Bartow, Portf
Slide 5: Borrowers earn savings, investors earn returns
Borrowers earn savings and financial control Investors earn solid returns LendingClub screens borrowers, facilitates the transaction, and services the loans Founded in 2007 and headquartered in San Francisco, CA 5
Slide 6: Borrowers and investors at a glance
Investors FICO Range2 Median Income2 2M+ Mainstream Consumers1 Borrowers 600-850 $62K 70+ Institutions 60+ Managed Accounts 40+ Banks 180K+ Self-directed Individuals 1) Across all products. 2) Personal loan borrowers in Q3 2017. FICO range reflects LendingClub’spersonal loans credit policy. 6
Slide 7: Our Journey to 2016
LendingClub Originations $M, all products Brought a new asset class to investors Grew originations 126% annually1 Established ourselves as the leading player in marketplace lending Our Journey to 2016 1) Q1 2011 to Q1 2016. 46 56 69 87 110 137 207 264 353 446 567 698 791 1,006 1,165 1,415 1,63
Slide 8: We've come a long way since Q2 2016
Stabilized and transformed the Investor business Rebuilt the management team We’ve come a long way since Q2 2016 8
Slide 9: Management team
Scott Sanborn Chief Executive Officer Previous: eHealth Insurance, RedEnvelope, Home Shopping Network Tom Casey Chief Financial Officer Previous: Acelity, Clear Channel, GE Capital, Washington Mutual Richard Southwick SVP, Technology Previous: LiveOps, Contactual, Clarus Systems Sammy Soohoo SVP, Cr
Slide 10: Board of directors
John C. (Hans) Morris Chairman, LendingClub Managing Partner, Nyca Partners Former President, Visa Former CFO, Citi Markets & Banking Ken Denman Former President & CEO, Emotient Former CEO, OpenwaveSystems Mary Meeker General Partner, Kleiner Perkins Former Managing Director, Morgan Stanley Larry Su
Slide 11: Where we are today
Where we are today Improved borrower product with new features, and more in testing Launched Auto Refinance May 2016 legacy issues Tightened credit in response to changing environment Expanded technology infrastructure, including enterprise risk platform New credit model with significantly improved
Slide 12: The challenge facing many Americans
1) Federal Reserve Bank of St. Louis, “Real Median Household Income in the United States,” not seasonally adjusted, 2017. 2) US Census, “Median and Average Sales Price of Houses Sold,” adjusted from nominal to real data using CPI, 2017. 3) The Henry J. Kaiser Family Foundation, “2017 Employer Health
Slide 13: Limited savings against volatile income and expenses
0% 2% 4% 6% 8% 10% 12% 14% 1980 1985 1990 1995 2000 2005 2010 2015 U.S. personal savings rate %1 U.S. households with income change of 25% or greater (2014-15)234% 60% U.S. households reporting a major recent expense or pay cut (2015)3 Limited savings against volatile income and expenses 3.7% 2017 a
Slide 14: Credit cards often bridge the gap
of American families hold credit card debt144% $9,600 Credit cards often bridge the gap Average household credit card balance2 1) Federal Reserve, “Changes in U.S. Family Finances from 2013 to 2016: Evidence from the Survey of Consumer Finances,” 2017. 2) Federal Reserve Bank of New York, “Do We Kno
Slide 15: Borrower savings versus credit card debt
1) Based on responses from 2,862 borrowers in a survey of randomly selected borrowers conducted from 1/1/17 – 9/30/17. Borrowerswho received a loan via LendingClub to consolidate existing debt or pay off their credit card balance received an average interest rate of 15.8% and reported an average int
Slide 16: Large opportunity and track record of growing into it
$300-350B Large opportunity and a track record of growing into it 1) See page 31. 2) See page 30. Addressable Market Opportunity Track Record in Personal Loans Credit card refinance and debt consolidation1 1% 10% 2012 2017 LendingClub share of U.S. personal loan outstanding balances2 16
Slide 17: A compelling asset for vast pools of capital
A compelling asset for vast pools of capital Prime Addressable Capital2 $38T Historical Program Returns Adjusted Net Annualized Return1 6.7% 10.9%Near Prime 1) See page 55. 2) See page 58. 17
Slide 18: Our DNA: Virtuous Cycle of Scale
Our DNA Virtuous Cycle of Scale Marketplace Model Data & Analytics Technology & Product Development 18
Slide 19: Our Marketplace Model
Scalable and capital light Efficient marketing due to wide credit box Flexible and resilient in response to environment Our Marketplace Model 19
Slide 20: Our scale creates a virtuous cycle
Have served more than 180 institutions and more than 180,000 individual investors Over $31B originated to more than 2M borrowers Our scale creates a virtuous cycle Provide ~$10B annual investment assets reflecting broad risk appetite Give competitive offers to borrowers drawn from millions of applic
Slide 21: Proprietary data and analytics
Enterprise data platform supports our 150+ data analysts and scientists 10 years of credit performance, marketing, and behavioral data Two-sided marketplace produces data from both investor and borrowers Proprietary data and analytics provide a granular view of each customer 21
Slide 22: Better experience through technology
~25% of staff in product and engineering Product innovation culture Code releases every two weeks $350M+ spent on development since inception1 Better experience through technology 1) Through Q3 2017. 22
Slide 23: 2018: Focus and Invest; 2019-2020: Expand and Deepen
1. Accelerate personal loans growth while prudently managing credit 2. Invest in auto and leverage secured capabilities for personal loans 3. Strengthen our Investor franchise by expanding securitization and growing new structures 4. Address legacy issues 1. Expand lead in personal loans through fur
Slide 24: Key takeaways
1. Unsecured online lending is a large and growing market, serving a critical customer need 2. LendingClub as the leader is uniquely positioned to go after this market a) The marketplace model is the right one with broad consumer demand and investor appetite b) We have strong credit, tech and produc
Slide 25: Steve Allocca, President
Steve Allocca President LandinaCluh
Slide 26: Many Americans want to do better
Are not highly satisfied with present financial condition1 Have a current or recent financial goal2 Many Americans want to do better 1) CFSI, “Understanding and Improving Financial Health in America,” 2014. 2) CFPB “National Financial Well-Being Survey,” 2017; assuming 249M adults Americans, of whic
Slide 27: Mainstream and creditworthy borrowers
1) Refers to Personal Loan borrowers in Q3 2017. 2) FICO, “US Average FICO Score Hits 700: A Milestone for Consumers,” 2017. 3) Federal Reserve Bank of St. Louis, “Real Median Personal Income in the United States,” 2017, not seasonally adjusted.4) Estimated share of LC Personal Loan applicants; surv
Slide 28: By saving our customers money
By saving our customers money… 1) All scenarios assume $10,000 starting balance. Based on responses from 2,862 borrowers in a survey of randomly selected borrowers conducted from 1/1/17 – 9/30/17. Borrowers who received a loan via LendingClub to consolidate existing debt or pay off their credit card
Slide 29: Serving borrowers at scale
1) Bain & Company, “Customer Loyalty in Retail Banking,” 2016. 2) As of November 28, 2017. Serving borrowers at scale Leader in customer satisfaction 0 1,000 2,000 3,000 LendingClub OneMain Avant Prosper Upstart Best Egg Marcus SoFi 5-star reviews on aggregator sites2 Credit Karma LendingTree Nation
Slide 30: U.S. personal loan balances outstanding
1) “TransUnion Industry Insights Report,” TransUnion, Q3 2017. 47 53 66 83 100 112 2012 2013 2014 2015 2016 2017 U.S. Personal Loan Balances Outstanding1 $B 1% 10% >2x LendingClub Share 30
Slide 31: Market Opportunity
Interest-earning balances Transactor / low-rate / low-balance Within target credit profile Outside target credit profile Remaining opportunity Card and personal loan outstandings (2017) Interest-earning balances Immediate opportunity 3-4% LC penetration of immediate opportunity ~$960B1 $300-350B$600
Slide 32: Three areas of focus to drive growth
Q 3 2 0 1 7 P e r s o n a l L o a n A p p l i c a n t F u n n e l Demand Generation Attract more of our target customers Throughput Convert more applicants into fulfilled borrowers with a solution for their needs Lifecycle Serve a broader set of customer needs 2M+ borrowers served across all product
Slide 33: Demand generation
Q3'16 Q3'17 Personal Loan Applications +58% Leader in direct response marketing optimized for online and mobile, operating at scale and focused on: Leveraging our 10 years of experience and data New digital and social marketing channels Creating and distributing compelling content We continue
Slide 34: Enabling yes to more customers: data and modeling
Enabling “yes” to more customers – Data and modeling Throughput2 Key Strengths Credit Risk Assessment Optimized Identity & Fraud 10 Years of data Machine learning/modeling Non-traditional & proprietary data Credit risk talent 50 Custom attributes in new model Bank transaction data 34
Slide 35: Using transaction data to verify income
Throughput2 Transaction Name Transaction Amount Transaction Date APPLE, IN PAYROLL PPD ID: 1234567 $1084.62 2/18/17 Online transfer transaction #4345002086 $30 2/13/17 DEPOSIT ID NUMBER 953256 $1435.53 2/13/17 CAP TOYOTA BURLINGAME CA 02/09 $460 2/9/17 APPLE, IN PAYROLL PPD ID: 1234567 $1194.3 2/4/1
Slide 36: Pipeline of product innovation
Secured personal loans Smaller loans Shorter duration loans Various fee, pricing and payment structures Risk Reduction Borrower Savings Volume Lift ~$850 12% (realized) ~$650 5% (anticipated) Pipeline of Product Innovation 1) JointAppborrower savings based on actual JointAppapplications rece
Slide 37: Direct Payoff announcement
LendingClub pays debt directly to credit provider and offers lower price to borrower Announcing today after two years in testing 37
Slide 38: Testing and experience to remove friction
Testing and experience to remove friction Transaction Fee Interest Rate Experience and Speed Est. $75M per quarter origination volume lift1 1) Estimated by taking the originations lift observed during the product testing phase and applying the lift to our quarterly originations. Throughput2 Pricing
Slide 39: Lifecycle: serving broader customer needs
Repeat Borrowers Past borrowers come back to LendingClub for a subsequent personal loan Additional Loan Products Serve additional credit needs of current and past borrowers through other loan products Non-Lending Products Serve non-lending financial empowerment needs of current and past borrowers Li
Slide 40: Auto Refinance
$2,000 Average Savings1 66% LC Personal Loan Customers Have an Auto Loan First secured lending product Auto Refinance 1) Includes Oct 2016 –Nov 2017 Auto Refinance loans. Savings calculated by: (previous monthly payment * previous term length) – (new monthly payment * new term length). Lifecycle3 40
Slide 41: Illustrative journey of an LC customer
Feel financially out of control and motivated to take action on $15,000 in credit card debt at average 22% APR Directly payoff $5,000 of highest-rate 27% credit card debt to 17% personal loan, enabled by bank data Refi auto loan of $15,000 from 14% to 8%, saving >$1,500 in interest Pay it forward an
Slide 42: Sid Jajodia and Sammy Soohoo
Sid Jajodia SVP, Chief Investment Officer Sammy Soohoo SVP, Credit Risk
Slide 43: Credit is fundamental
Credit is fundamental BorrowerSay yes more. Better rates. Investor Credit Attractive, predictable returns. 43
Slide 44: Credit fuels our growth
Robust returns for investors Increased investor demand More funds at a lower cost available for borrowers Good credit decisions Credit fuels our growth 44
Slide 45: Strong and deep credit culture
We have a strong and deep credit culture 75 People dedicated to credit with… 15 years on average of direct experience at… Top companies, including Capital One, Wells Fargo, PayPal, Chase, and Discover 45
Slide 46: Our Credit Spectrum
Our Credit Spectrum A B C D E FG 4.1% 5.7% 6.8% 7.3% 8.4% 9.2% 10.2% E x p e c t e d R e t u r n ( % ) 1 Credit Grade Width of bars represents share of Q1-Q3 2017 issuance Prime (80% of Total Issuance) Near Prime2 NP 1) See appendix page 121 for detail. 2) Institutional investors only. 46
Slide 47: Rigorous credit approval process
Verification Approval, Pricing & Sizing Credit Bureaus Online Footprint Application Data Applicant Data Signals Investor Macroeconomic Variables Competitive Environment Returns on Other Asset Classes Rigorous credit approval process Data leveraged from both sides of the marketplaceBorrower Data Mark
Slide 48: Originations engine: data-driven decisioning and pricing
LendingClub Originations Engine Decisioning A B C D E F G Pricing B u y B o x B u y B o x B u y B o x B u y B o x B u y B o x B u y B o x B u y B o x B u y B o x B u y B o x B u y B o x B u y B o x B u y B o x Bars represent breadth of investor appetite B u y B o x Investors Loan-level purchase deci
Slide 49: Industry leading fraud detection platform
Adaptation Detection Alternative Data Sources Historical Data Linking Logic Strategy Monitoring Machine Learning Real Time Tools work to seamlessly authenticate borrowers and drive industry-leading identity fraud loss rates at <3 bps of issued loans Industry leading fraud detection platform 49
Slide 50: Historical credit evolution
Historical Credit Evolution G3 Q4 2014 3rd Generation Model G4 2015 / 2016 4th Generation Model G5 Sep. 2017 5th Generation Model Near Prime expansion to 600-619 FICO Loan amount criteria & pricing optimized Joint Application and Direct Payoff pilot Credit tightening for high velocity of leverage &
Slide 51: G5 applies machine learning
attributes reviewed per borrower 24% improvement in ability to differentiate risk relative to G4 credit model1 10K+ G5 applies sophisticated machine learning to our extensive data Machine Learning 1) As measured by the Kolmogorov–Smirnov test. The Kolmogorov–Smirnov 2 sample test measures the abilit
Slide 52: Delinquency rate by risk decile
0% 8% 16% 24% 32% 40% D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 Population Decile (by risk score) FICO G4 G5 60+ Day Delinquency, Bankruptcy, or Charge-Off Rate1 1) As of February 2017. “60+ Day Delinquency, Bankruptcy, or Charge-Off Rate” is estimated using the credit bureau data (includes information on all
Slide 53: Resiliency: prepared for a harder environment
Prepare Monitor Adjust Service Ongoing communication with dozens of banks and other investors provides insights into economic expectations Monitoring of competitive environment and debt trends Resiliency: We are prepared for the situation to become more challenging, as it eventually will Monitoring
Slide 54: Stress tests project attractive relative returns
5.5% 6.0% 7.9% 3.4% 11.5% -0.7% -2% 0% 2% 4% 6% 8% 10% 12% 14% Expected Charge-off Rate Projected IRR Stress tests project attractive relative returns even in a downturn1 Baseline Moderate Recession Protracted Slump 1) Results for Prime program stress test. See appendix page 122 for detail. 54
Slide 55: Adjusted net annualized return by vintage
0% 2% 4% 6% 8% 10% 12% 14% Prime Near Prime A d j u s t e d N e t A n n u a l i z e d R e t u r n Median 10.9% Median 6.7% Maximum Minimum Maximum Minimum 1) Data reflects the weighted average performance of each annual vintage of all Prime loans issued from Q1 2009 through Q4 2016 and all Near Prim
Slide 56: Patrick Dunne, Chief Capital Officer
Patrick Dunne Chief Capital Officer
Slide 57: Delivering innovative investor products
Continuing to deliver innovative investor products and expand our investor base All loans originated and issued by our federally regulated issuing bank partners. Borrowers Investors 57
Slide 58: The pools of capital are very large
Asset managers Banks and credit unions Insurance companies Total 27 6 4 38 Self-directed retail .25 The pools of capital are very large… Total addressable market1 by channel ($T, 2017) 1) Self-directed retail based on LendingClub internal sizing; “Assets of World’s Largest Fund Managers Passes US$80
Slide 59: Market penetration is in early stages
Currently Addressed 27 6 4 38 .25 But market penetration is in its early stages Asset managers Banks and credit unions Insurance companies TotalSelf-directed retail 1) Self-directed retail based on LendingClub internal sizing; “Assets of World’s Largest Fund Managers Passes US$80 Trillion for the Fi
Slide 60: Growing and diversified investor base
Increasing access to large pools of capital Deep and diverse investor base Large buyers with stable funding We have a growing and diversified investor base 13% 42% 29% 13% 3% Investor Channels1 % of loan originations funded by channel (Q1-Q3 2017) 1) Managed accounts include the private funds
Slide 61: Years of investor innovation
Building on 10 years of investor innovation SEC Registered Note 2008 2007 2017 LCA Funds 2010 First Institutional Investor 2009 First Whole Loan Buyer 2012 Retail RIA Access 2009 SMAs 2012 Access to 40 Act Funds 2016 Scale & Securitization Programs 2017 61
Slide 62: Investor programs: Scale, Select, Fractional
Investors purchase based on term and grade Facilitates consistent and predictable volume Enables existing and future product innovation Approved Loans Fractional Program LC Scale Program (launched July 2017) LC Select Program Random allocation based on demand Whole LoansNotes Scale Program 62
Slide 63: 2017 securitization investor mix
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Corporation REIT Bank Financial Advisor Insurance Companies Sovereign Wealth Hedge Fund Investment Management Securitization Program 2017 Securitization Investor Mix Developed 30+ new investor relationships Created new revenue streams Provided liquid
Slide 64: Increased investor breadth and depth
Investors served >40 >60 >180,000 >70 Increased investor breadth and depth A B C D E A B C D E NP A B C D EBanks Retail Managed Institutional A B C D E NP FG FG FG LendingClub continues to facilitate the issuance of F and G grade borrower loans, but they are temporarily unavailable for sale to exter
Slide 65: Investor-related revenue 2016 and 2017P
2016 2017P 85-90 46Investor-Related Revenue ($M) 65
Slide 66: Investor products over time
Whole LoansNotes Securitization CLUB Certificates Private Funds & ETP Banks Institutions Dedicated funds Large asset managers Insurance companies Banks Institutions Dedicated funds Large asset managers Insurance companies Institutions Dedicated funds Large asset managers Insurance companies Institut
Slide 67: CLUB Certificates
A pass-through security holding a basket of loans A fixed income security with a CUSIP Works within existing bond market infrastructure Eligible in existing asset manager portfolios CLUB Certificates 67
Slide 68: Exchange-Traded Partnership in development
A new, independent, U.S. public company, to be listed on a major stock exchange Listed and trades on a stock exchange Available to all investors Liquid and transparent Exchange-Traded Partnership In Development 68
Slide 69: Investor-related revenue 2016-2018P
2018P2017P2016 85-90 46 125-145 Investor-Related Revenue ($M) 69
Slide 70: An attractive investment
Marketplace Lending Treasuries US Aggregate US Corporate Investment Grade US Corporate High Yield Municipal Bond US Mortgage-Backed Securities 0% 1% 2% 3% 4% 5% 6% 0 2 4 6 8 10 12 14 3 - Y e a r T o t a l R e t u r n ( % ) Weighted Average Maturity (Years) An attractive investment Source: Bloomberg,
Slide 71: Investor Panel
Andrew Deringer LendingClub VP, Head of Financial Institutions Group Investor Panel Brian Graham Alliance Partners Chief Executive Officer Philip Bartow RiverNorth Portfolio Manager Amanda Magliaro Citi Managing Director and Head of Global Structured Finance Distribution
Slide 72: Sameer Gulati, COO
Sameer Gulati COO LandinaCluls
Slide 73: Recap: today's agenda
Company Overview Scott Sanborn, Chief Executive Officer Our Borrowers Steve Allocca, President Credit Sid Jajodia, Chief Investment OfficerSammy Soohoo, SVP, Credit Risk Our Investors Patrick Dunne, Chief Capital Officer Investor Panel Andrew Deringer, VP, Financial Institutions Philip Bartow, Portf
Slide 74: Marketplace power: four pillars
Attractive Economics Scalability Resiliency Extensibility Marketplace Power 1 2 3 4 74
Slide 75: Broad, leading credit box
LendingClub continues to facilitate the issuance of F and G grade borrower loans, but they are temporarily unavailable for sale to external investors. Broad, Leading Credit Box Attractive Economics Efficiently reaching a broad population of borrowers A B C D B C D E FG A B C D E B a n k s R e t a i
Slide 76: Unparalleled pricing flexibility
Granular signals inform pricing decisions InvestorsBorrowers Funding by grade and term Transaction fees Take rate by grade and term Interest rates Target returns Fees, premiums, discounts Attractive Economics Unparalleled pricing flexibility 1 76
Slide 77: Expanded participation in the value chain
Borrowers Investors Value Fee-Based Revenue Transaction Fees Decline Referrals Management Fees Securitization Season & Sell CLUB Certificates ETP Attractive Economics Expanded participation in the value chain 1 Servicing Fees 77
Slide 78: Scalability: capital light
Capital Light Growth is not limited by our own balance sheet Scalability Broad Credit Appetite Fulfilling not one investor credit box but many Flexible Architecture Cloud and micro- services architecture allow expansion of scale and scope 2 78
Slide 79: Resiliency
Shock Absorber Balance Sheet Resiliency Flexible Funding Mix Control Over Short-term Pricing Tools 3 79
Slide 80: Extensibility: growing with our ecosystem
Data Providers Borrower Aggregators Banks Retail Investors Secondary Market Investor Tools Ratings Agencies Leverage Providers Institutional Investors Borrowers Extensibility Growing with our ecosystem 4 80
Slide 81: Technology Foundation
Technology Foundation Technology and product development model Customer Intimacy & Data Rapid Discovery & Testing Confident Delivery at Scale 81
Slide 82: Customer intimacy and data
Customer Intimacy & Data Real-time user experience observation Cross-company customer research teams Constant feasibility, usability, NPS studies 82
Slide 83: Rapid discovery and testing
Rapid Discovery & Testing Dozens of tests running at any given time Lean startup test methodology Faster insights driven by significant customer volume Fast paths for compliance and legal review 83
Slide 84: Confident delivery at scale
Confident Delivery at Scale Two week release cycle Flexible, modularized technology architecture 84
Slide 85: Technology foundation powers our growth
Technology Foundation Technology foundation powers our growth Cloud Microservices Data Lake Cyber Security 85
Slide 86: Industry relies on tedious forms
The industry relies on tedious forms that take as long as 30 minutes to complete, which results in significant abandonment rates 86
Slide 87: Data sources shorten application time
We use various data sources to shorten application time – especially on mobile devices 87
Slide 88: Eliminating manual entry
We’re finding ways to eliminate manual entry altogether… 88
Slide 89: Making the process even faster
…to make the process even faster 89
Slide 90: Well positioned against our competitors
Well positioned against our competitors Other Fintechs Banks Specialty Finance Economics Serving full credit spectrum ✔ ✗ ✗ ✗ Real-time two-sided pricing signals ✔ Varies ✗ ✗ Scale & Scalability Hybrid, capital-efficient model ✔ Varies ✗ ✗ Millions of satisfied personal loan customers ✔ ✗ Varies Var
Slide 91: Tom Casey, Chief Financial Officer
Tom Casey Chief Financial Officer
Slide 92: Scale, growth, capital light, margins
Building Scale Significant Growth Capital Light Model Expanding Margins 92
Slide 93: Scale provides a competitive advantage
$2B+ Quarterly Originations $50M Quarterly Marketing Spend Scale provides a competitive advantage $350M+ Spent on development 2M+ Borrowers to date A-G Serving a large market (600+ FICO) 1 2 1)Amount shown through 9/30/2017. 2) FICO range reflects LendingClub’spersonal loans credit policy. ~3M Quart
Slide 94: Evolution of our funding model
$31B+ funded since 2007 2010 2014 2017 YTD1 Evolution of our funding model <30K self-directed retail investors <10 other investors Bank Institutional Retail Managed Accounts Structured Products >90K self-directed retail investors >70 other investors >180K self-directed retail investors >180 other in
Slide 95: Investment in risk management and compliance
We have invested heavily in Enterprise Risk Management, Compliance, and Internal Audit 10M+ Applications validated in 2017 alone through Enterprise Risk QC program 35 Models across underwriting, pricing, valuation, and marketing activities – all models are subject to risk governance processes Quarte
Slide 96: Scale delivers value to stakeholders
Borrower Profile 2017 Annualized Investor Return 2017 Annualized Scale allows us to deliver significant value to stakeholders… 2017 Annualized Avg. FICO 684 Avg. Loan Size $13K Avg. Savings Per Borrower 4601 bps Principal Outstanding Interest Payment Savings >$11B ~$345M- 500M2 Originations ~$8B Rev
Slide 97: Creating efficiencies in our cost base
Q2 17 $2.1B $139.6M 52.3% 40.2% Q1 17 Q3 17 $2.0B $124.5M 56.5% 42.5%Tech + G&A asa % of Revenue1 Revenue $2.4B $154.0M 50.7% 36.3% Originations Q3 vs. Q1 +$0.4B +$29.5M ..and creates efficiencies in our cost base… 1) These are non-GAAP financial measures. Please see “GAAP to non-GAAP Reconciliation
Slide 98: Driving margin expansion
…as we continue to drive margin expansion 2017 Guidance Mid 47.0% 39.4% 7.6% Mid 20161 2018 Guidance Mid Delta 44.1% 46.7% (2.6%) Tech + G&A as a % of Revenue3 47.5% 35.6% 11.9% Mid +0.5pts -3.8pts Contribution Margin2 Adjusted EBITDA Margin4 +4.3pts 1) These are non-GAAP financial measures. Please
Slide 99: Capital management strategy
Resiliency Extending the investor base Strong Liquidity Structured products provide liquidity and a targeted investment profile in multiple market environments Skin in the Game 5% minimum risk retention requirement, aligning our interest with investors Supports Growth Value added capital markets cap
Slide 100: Strong and resilient capital management framework
Available Capital Available for Investor Programs Cash & Securities $790M1 ~$300M Growth Investments, M&A, Return of Capital Remaining Capital Strong and resilient capital management framework Loans Held on Balance Sheet at Q3 ~$400M Liquidity Reserve 1) For the period ended September 30, 2017. 100
Slide 101: Growth driven by four key areas
Market Growth Consumers will continue going online for their credit needs New Revenue Streams We are creating brand new revenue streams and growing revenue Product Improvements We are well-positioned to take greater share of the market Key Investments While making key investments to support long-ter
Slide 102: Market is growing and we are taking greater share
The market is growing – and we are taking a greater share by: 47 53 66 83 100 112 2012 2013 2014 2015 2016 2017 U.S. Personal Loan Balances Outstanding1 $B 1% 10%LendingClub Share Attracting target customers Converting applicants to borrowers Serving a broader set of needs >2x 1) “TransUnion I
Slide 103: Expanding the revenue yield
We are expanding the revenue yield: Non-transaction fee revenue creating more value Increasing revenue yield from Program Fees, Gain on Sale, and Net Interest Margin expanding total revenue yield in 2018 0% 1% 2% 3% 4% 5% 6% 7% 8% 2016 2017P 2018P Revenue as % of Originations Program Fees Non-Tr
Slide 104: 2017 Guidance Update
2017 Guidance Update 2017 Net Revenue Adjusted EBITDA1 $573M-$578M $42M-$46M GAAP Net Income ($72M)-($68M) Q4 17 $155M-$160M $16M-$20M ($10M)-($6M) 1) Adjusted EBITDA is a non-GAAP financial measure. Non-GAAP reconciling items consist of stock-based compensation of approx. $15M and $70M, and approx.
Slide 105: Core business, growing market, new initiatives
Core Business Growing Market Taking Share with New Initiatives Increasing Revenue Legacy Legal Costs 105
Slide 106: Bets on future growth
$25M OPEX $10M Auto $15M Technology We continue to make bets on future growth 106
Slide 107: 2018 Guidance
2018 Guidance Guidance includes: Growth investment $10M Auto $15M Technology 1) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. Non-GAAP reconciling items consist of stock-based compensation of approx. $70M and $77M, and approx. $44M and $51M of depreciation and amo
Slide 108: Long-term Guidance
Long-term Guidance 2018 Outlook Long Term Net Revenue $680-$705M 15%-20% Adjusted EBITDA Margin %1 11.9% Mid ~20% 1) Adjusted EBITDA Margin is a non-GAAP financial measure. Non-GAAP reconciling items consist of stock-based compensation of approx. $77M, and approx. $51M of depreciation and amortizati
Slide 109: Scale, growth, capital light, margins
Building Scale Significant Growth Capital Light Model Expanding Margins 109
Slide 110: Scott Sanborn, Chief Executive Officer
Scott Sanborn Chief Executive Officer
Slide 111: Key takeaways
1. Unsecured online lending is a large and growing market, serving a critical customer need 2. LendingClub as the leader is uniquely positioned to go after this market a) The marketplace model is the right one with broad consumer demand and investor appetite b) We have strong credit, tech and produc
Slide 112: Q&A
Q&AQ&A
Slide 113: LendingClub
LendingClub
Slide 114: Appendix
Appendix
Slide 115: Financial Recons & Metrics
Financial Recons & Metrics
Slide 116: GAAP to Non-GAAP Reconciliation: Normalized Operating Expenses
GAAP to Non-GAAP Reconciliation: Normalized Operating Expenses (in thousands, except percentages) (unaudited) Three Months Ended 1Q17 2Q17 3Q17 Total GAAP net revenue $124,482 $139,573 $154,030 GAAP sales and marketing $54,583 $55,582 $59,570 Stock-based compensation expense 2,299 1,967 1,591 One-ti
Slide 117: GAAP to Non-GAAP Reconciliation: Normalized Operating Expenses (cont.)
GAAP to Non-GAAP Reconciliation: Normalized Operating Expenses (cont.) (in thousands, except percentages) (unaudited) Three Months Ended 1Q17 2Q17 3Q17 Total GAAP net revenue $124,482 $139,573 $154,030 GAAP engineering and product development $35,760 $35,718 $32,860 Stock-based compensation expense
Slide 118: GAAP to Non-GAAP Reconciliation: Operating Expenses
GAAP to Non-GAAP Reconciliation: Operating Expenses (in thousands, except percentages) (unaudited) Year Ended December 31, 2016 Total GAAP net revenue $500,812 GAAP engineering and product development $115,357 Stock-based compensation expense 19,858 Depreciation and amortization 20,906 Non-GAAP engi
Slide 119: GAAP to Non-GAAP Reconciliation: Contribution
GAAP to Non-GAAP Reconciliation: Contribution Definition and Reconciliation Contribution is a non-GAAP financial measure that we calculate as consolidated net income (loss), excluding general and administrative expense, stock-based compensation expense, income tax expense (benefit) and (income) loss
Slide 120: GAAP to Non-GAAP Reconciliation: Adjusted EBITDA
GAAP to Non-GAAP Reconciliation: Adjusted EBITDA Definition and Reconciliation Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), excluding acquisition and related expense, depreciation expense, amortization of intangible assets, stock-based compensation expense,
Slide 121: Expected Returns
Expected Returns The hypothetical loan grade and term mix used to calculate weighted average projected returns was generated by applying the fifth generation credit model to all actual loans facilitated from October 2, 2017 through October 29, 2107 (Prime) and January 2017 through May 2017 (Near Pri
Slide 122: Stress Tests
Stress Tests Sources: LendingClub and Moody’s Analytics, Inc. (“Moody’s”). As of November 2017. These projections were determined using a combination of LendingClub data and analysis by Moody’s. Moody’s calculated stress multiples which were applied to Lending Club’s expected performance. Moody’s lo
Slide 123: LendingClub
LendingClub