Lendingclub Corporation · NYSE:LC
Lendingclub — Q1 2020 Earnings Presentation
30 slides from Lendingclub's earnings presentation, May 5, 2020
Slide 1: First Quarter 2020 Results
First Quarter 2020 Results May 5, 2020
Slide 2: Disclaimer
Disclaimer 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), our ability to effec
Slide 3: 2020 Updates & Approach
2020 Updates & Approach == LendingClub
Slide 4: Macroeconomic Backdrop
Macroeconomic Backdrop COVID-19 has had a dramatic and sudden impact on the US economy ▪ Record breaking spikes in unemployment claims with the unemployment rate forecast to peak in Q2 ▪ Macroeconomic uncertainty, dislocation of capital markets, and lower levels of liquidity for investors ▪ Unpreced
Slide 5: Taking decisive action against 5 guiding principles
Taking decisive action against 5 guiding principles 1 Keep Our Employees Safe 4 Support Our Members ▪ New originations weighted toward existing members with ▪ Rapidly and proactively implemented a work from home program, positive payment histories including crisis pay for personal and family care ▪
Slide 6: Strong liquidity position (1 of 2)
Strong liquidity position (1 of 2) Significant cash holdings with additional capital in loans held at fair value LendingClub Exposure & Liquidity as of 3/31/20 Assets & Liabilities ($MM) Cash & Cash Equivalents1 AFS – Securities2 AFS – Retained Interest2 Loans Held for Sale3 Loans Held for Investmen
Slide 7: Strong liquidity position (2 of 2)
Strong liquidity position (2 of 2) Diverse funding sources with varying maturity dates Revolving Final Maturity Debt Facilities Detail ($MM) Asset Held Against Type Rate Used Amount Unused Amount Total Maturity Date Date Revolver Cash & Cash Equivalents Committed LIBOR + PRIME + Spread $110.0 $10.0
Slide 8: Reduced quarterly expense base by $70M
Reduced quarterly expense base by $70M1 to reflect shift in operating environment $70M1 Variable Expense Savings ($50M) Restructuring Savings ($20M) ▪ Eliminated most marketing expenses ▪ Reduced staff by approximately 460 employees (preserving areas that position us for a recovery ▪ Reduced or paus
Slide 9: Cash generation can cover reduced operating expense base
Cash generation from servicing fees and loan portfolio can cover reduced operating expense base ▪ Maintaining a prudent liquidity position over the last several years enabled LendingClub to enter the crisis from a position of strength, with $550M of estimated Net Liquidity as of 3/31/20 ▪ With the a
Slide 10: Shift to higher quality credit improved borrower profile
Our shift to higher quality credit over time has improved the average borrower profile Prime Portfolio 2019 April 20, 2020 Avg. FICO 708 723 Avg. Income $93,221 $109,792 Avg. Payment-to-Income 6.1% 5.4% Joint Application % 17% 21% 10
Slide 11: Increased focus on servicing to support members
Increased focus on servicing to support our members and protect investor returns 1 Operational Readiness 2 Flexible Payment Options 3 Proactive Engagement Use robust forecasting tools to Offer a suite of payment plan Proactively engage with deliver appropriate agent options that fit borrowers’ borro
Slide 12: Payment deferrals an important tool to support members
Payment deferrals an important tool to support members and maximize investor returns 120.0 114.0 12% Cumulative Skip-A-Pay Enrollment: ▪ Approximately 11% of outstanding Prime Portfolio (Units in '000) 10.7% personal loans in the Prime portfolio 100.0 10% is enrolled as of the end of April Cumulativ
Slide 13: Near-Term Outlook
Near-Term Outlook ▪ Withdrew financial guidance until economy stabilizes ▪ We expect our near-term financial results to reflect the following trends: ▪ Loan volumes expected to be down approximately 90% reflecting current economic environment ▪ Cash flow from servicing book and loans held for sale o
Slide 14: What we are watching for
What we are watching for: 1. Stability in the unemployment rate and initial unemployment claims 2. Successful graduation rates following deferrals and hardship plans 3. Tightening of credit spreads and liquidity returning to the capital markets 14
Slide 15: 1Q 2020 Results & Financial Metrics
1Q 2020 Results & Financial Metrics
Slide 16: 1Q 2020 Results
1Q 2020 Results Results primarily reflect COVID-19-related adjustments to the fair value of loans and securities 1Q20 Results Commentary Driven by -$64M revaluation impact of loans held on the balance Net Revenue $120.2M sheet and +$500M lower volumes; partially offset by $21M benefit from lower pre
Slide 17: LendingClub Platform Investors
LendingClub Platform Investors Platform Originations by Funding Source1 ($ in millions; as a % of total platform originations) $3,350 $3,130 $3,083 Other Institutional 20% Investors $2,728 21% $2,521 25% Banks 18% 17% 38% Managed Accounts 45% 31% 49% 43% Self-directed Investors 15% 17% 16% 4% 16% Le
Slide 18: Loan Originations & Revenue
Net Investor Revenue impacted by Loan Originations & Revenue fair value adjustments for the quarter Quarterly Loan Originations1 Personal loans - standard Quarterly Total Net Revenue1 ($ in millions) ($ in millions) Net Investor Revenue Personal loans - custom 2 Other Revenue Other3 Transaction Fee
Slide 19: Contribution Margin
Contribution margin impacted revenue Contribution2 by fair value adjustments for the quarter, partially offset by lower M&S spend Quarterly expenses impacting Contribution Margin1 Quarterly Contribution Margin1,2 ($ in millions) ($ in millions) 105.8 99.1 101.3 99.6 88.7 91.2 87.2 Origination & 24.8
Slide 20: Adjusted EBITDA Margin
Adjusted EBITDA impacted by revenue Adjusted EBITDA Margin2 fair value adjustments for the quarter Quarterly Expenses impacting Adjusted EBITDA Margin1 Quarterly Adjusted EBITDA1, 2 ($ in millions) ($ in millions) 66.4 65.8 63.1 62.3 59.7 40.0 39.0 Engineering & Product 26.0 25.2 23.9 24.1 33.2 Deve
Slide 21: Adjusted Net Income (Loss)
Adjusted Net Income (Loss)2 Quarterly Expenses impacting Adjusted Net Income (Loss)1 Quarterly Adjusted Net Income (Loss)1, 2 ($ in millions) ($ in millions) 34.1 34.4 32.1 32.0 31.3 8.0 7.0 Depreciation, amortization, & 13.9 15.9 other net 14.0 15.3 13.2 (1.2) adjustments (11.5) Stock-based 20.6 18
Slide 22: $16B servicing portfolio drove +$50M in cash from investor fees
$16B servicing portfolio drove +$50M in cash from investor fees in 1Q20 Servicing Portfolio Balance1 Adjusted Investor Fee Revenue2 ($ in millions) ($ in thousands) $16,011 $15,975 $60,000 Adjusted Investor Fees % of Servicing Portfolio (Average) 0.45% $51,362 $15,522 $50,000 $47,110 $48,471 $44,315
Slide 23: Appendix: Financial Reconciliations
Appendix: Financial Reconciliations
Slide 24: GAAP to Non-GAAP Reconciliation: Operating Expenses
GAAP to Non-GAAP Reconciliation: Operating Expenses Year Ended Dec. 31, Three Months Ended (in thousands, except percentages) (unaudited) 2017 2018 2019 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Total net revenue $ 574,540 $ 694,812 $ 758,607 $ 176,979 $ 184,645 $ 181,521 $ 174,418 $ 190,807 $ 204,896
Slide 25: Contribution Reconciliation & Definition
Contribution Reconciliation & Definition Contribution is a non-GAAP financial measure that we calculate 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-b
Slide 26: Contribution as a Percent of Originations
Contribution as a Percent of Originations Year Ended Dec. 31, Three Months Ended (in thousands, except percentages or as noted) (unaudited) (1) 2017 2018 2019 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Loan originations ($ mm) $ 8,987 $ 10,882 $ 12,290 $ 2,818 $ 2,886 $ 2,871 $ 2,728 $ 3,130 $ 3,350 $
Slide 27: Adjusted Net Income, Adjusted EBITDA and Margin Reconciliation
Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted EBITDA Margin Reconciliation Adjusted Net Income (Loss) is a non-GAAP financial measure defined as net income (loss) attributable to LendingClub adjusted to exclude certain items that are either non-recurring, do not contribute directly to ma
Slide 28: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation Adjusted EPS is a non-GAAP financial measure calculated by dividing Adjusted Net Income (Loss) attributable to both common and preferred stockholders by the weighted-average diluted common and preferred shares outstanding. Year Ended Dec. 31, Three Months Ended (in thousa
Slide 29: Net Cash and Other Financial Assets
Net Cash and Other Financial Assets Net cash and other financial assets 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. Three Months Ended (in
Slide 30: LendingClub
= LendingClub