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LendingClub (LC) Q2 Loss Narrows, Revenues Top Estimates

Zacks Equity Research
Updated

LendingClub Corporation LC reported second-quarter 2018 adjusted loss per share of 2 cents, which is narrower than the Zacks Consensus Estimate of a loss of 4 cents. Notably, the figure excludes expenses relating to regulatory litigation and goodwill impairment. Also, the figure reflects improvement from the prior-year quarter’s loss of 6 cents.

Shares of LendingClub jumped 3.3% after the release of its second-quarter 2018 results. The company’s results primarily benefited from higher revenues and rise in loan originations. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) displayed impressive growth. However, a decline in loan balance and a rise in operating expenses were the major headwinds.

After taking into consideration several significant items, consolidated net loss came in at $60.8 million compared with net loss of $25.4 million reported in the year-ago quarter.

Revenues Improve, Costs Flare Up

Total net revenues grew 26.8% year over year to $177 million. The upside primarily stemmed from higher volume of loan originations. Moreover, the reported figure outpaced the Zacks Consensus Estimate of $164 million.

Total operating expenses came in at $237.8 million, surging 44% from the prior-year quarter. The upswing primarily resulted from regulatory litigation expenses and goodwill impairment.

Adjusted EBITDA totaled $25.7 million, up significantly from $4.5 million recorded in the prior-year quarter.

In the reported quarter, loan originations were $2.8 billion, up 31% from the year-ago quarter.

As of Jun 30, 2018, cash and cash equivalents were $434.2 million, up nearly 8.1% from the 2017 year-end figure. Loans held for investment were down 19.6% to $2.4 billion from $2.9 billion as on Dec 31, 2017. Total stockholders' equity was $871 million, down 5.9% from the Dec 31, 2017 level.

Guidance

Concurrent with the June-end quarter results, management has provided guidance for third-quarter 2018 and full-year 2018.

Third-Quarter 2018

  • Total net revenues of $175-$185 million

  • Adjusted EBITDA of $18-$23 million

  • Stock-based compensation of nearly $20 million

  • Depreciation and amortization and other net adjustments of roughly $13 million

  • Net loss of $10-$15 million


Full-Year 2018

  • Total net revenues of $680-$705 million

  • Adjusted EBITDA of $75-$90 million

  • Stock-based compensation of around $77 million

  • Depreciation and amortization and other net adjustments of roughly $51 million

  • Net loss in the range of $109-$124 million

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Bottom Line

LendingClub’s revenue growth is commendable on the back of strong loans originations. Also, rise in adjusted EBITDA is impressive.

Nonetheless, declining loan balance remains a headwind. Also, the company’s exposure to numerous legal hassles might keep its expenses elevated in the near term.

LendingClub Corporation Price, Consensus and EPS Surprise

LendingClub Corporation Price, Consensus and EPS Surprise | LendingClub Corporation Quote

LendingClub currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Performance of Stocks in the Same Space

CIT Group CIT reported second-quarter 2018 adjusted earnings from continuing operations of $1.00 per share, surpassing the Zacks Consensus Estimate of 97 cents. Also, this was above the prior-year quarter’s figure of 68 cents.

Moody's Corporation MCO reported second-quarter 2018 adjusted earnings of $2.04 per share, which handily surpassed the Zacks Consensus Estimate of $1.88. Also, the bottom line improved 35% from the year-ago quarter.

Synchrony Financial’s SYF second-quarter 2018 earnings per share of 92 cents surpassed the Zacks Consensus Estimate of 82 cents by 12.2%, mainly driven by interchange revenues and loan receivables growth. The bottom line also improved 51% year over year.

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