Lending Club’s 2nd Quarter Earnings

After yesterday's close, Lending Club (symbol: LC) announced its 2nd quarter earnings.

If you want to read the entire transcript from the earnings call yesterday, here is a copy at Seeking Alpha. (a free email signup required to read it all) You can also find the numbers and presentation on the LC site.

Let's check out out some of the info in the earnings report and see what's happening.

Highlights

  • Net Revenues up 35% from the same quarter last year to $139.6 beating the estimate of $136.4 million by ~3%.
  • Loan origination, one of the most important metrics for LC, is up 10% over last quarter to $2.15 billion
  • LC completed their first securitization during this quarter
  • Launched their iPhone Mobile app for retail investors
  • A record number of institutional investors are using the platform
  • The 6c per share loss of $25.5 million is a big improvement from last year's 2Q loss of 21c.
  • Total Revenue for the year on pace to hit $585-600 million

What You Should Know

Check out this chart from the earnings report

Banks are Back

CEO Scott Sanborn said in the call that he's happy that 'Lending Club is back on its front foot.' What he means is banks and institutional investors back on the platform and in greater numbers than before the Spring 2016 fraudulent loan sale mess.

Look at the Origination by Investor Type part of the chart. In June 2016, banks and other institutional investors (the bottom 2 rows) represented 28% and 20% or 48% of the total funded. These groups have come back to LC at a slow clip until this quarter. Q2 saw a big jump up to 44% and 12% or 56% funded.

For better or worse, retail investors need healthy institutional investors so we can still have as much choice as possible for loans for our investments.

Growth is Back

As a bellwether for the industry, seeing Lending Club growing again is good news for all investors, big and small. Growth in loans originated, amounts funded, Revenues and Net Income means that LC is starting to grow after going through this rocky period in 2016.

Still Losing Money

LC is still losing money and expects to for the full year 2017. Should that matter to you? It might if you own the stock. It matters less if you only invest in loans although it's still something to watch. Cash flow is more important than profitability for a growing industry like Fintech but LC will need both if they want to stay in business.

About the author

Stu Stu Lustman, the author of this post, is a Credit Analyst by trade trying to bring Commercial Credit Analysis techniques to the world of Peer to Peer Lending. Check me out on Twitter, LinkedIn and Google+

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