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LendingClub (LC) Falls on Wider-than-Expected Q2 Loss
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Shares of LendingClub Corporation (LC - Free Report) decreased over 2% following the release of its second-quarter 2016 results, after the market closed. Also, announcement of leadership changes played a part in the decline in share price.
Carrie Dolan resigned from her position as CFO to pursue a new opportunity. In her place, LendingClub announced the appointment of Bradley Coleman as Principal Accounting Officer and Interim CFO. Additionally, there were some other important management changes.
LendingClub’s loss per share of 12 cents was wider than the Zacks Consensus Estimate loss of 5 cents. Moreover, the figure shows deterioration from breakeven recorded in the year-ago quarter.
Results in the reported quarter included a goodwill impairment charge related to the 2014 acquisition of Springstone, a rise in professional service fees mainly due to matters identified in the board review, incentives paid to investors and an increase in compensation related expenses pertaining to severance costs and a retention program. Net income, on a GAAP basis, came in at $81.4 billion as against a loss of $4.1 million in the year-ago quarter.
Revenue Rise Fail to Support Bottom Line
Total net revenue rose 6.7% year over year to $103.4 million. The rise was attributable to an increase in all revenue components, except other revenue which was negative. However, the figure lagged the Zacks Consensus Estimate of $110.8 million.
Total operating expenses were $188.7 million, a significant jump of 87.5% from the prior-year quarter. The increase was triggered by drastic rise in all expense components.
Adjusted loss before interest, taxes, depreciation, and amortization totaled $30.1 million, as against adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $13.4 million in the prior-year quarter.
In the reported quarter, loan originations were $1.96 billion, up 2.3% from the prior-year quarter.
As of Jun 30, 2016, cash and cash equivalents were $573 million. Further, loans grew 21.1% year over year to $4.4 billion. Total stockholders' equity summed $988 million, down 1% from Jun 30, 2015 level.
Guidance
Based on the information available as of Aug 8, 2016, LendingClub provided the following outlook for the third quarter of 2016:
Operating revenue in the range of $95–$105 million.
Adjusted EBITDA in the range of ($30)–($15) million
Our Viewpoint
Results reflect the turmoil faced by the company since May 2016. The internal review had revealed lapses on business practices, leading to resignation of the then CEO. This had even led to a regulatory probe.
Additionally, given the reduced volumes of loan in the reported quarter and “recognizing that the full scale return of investors may take time”, the company slashed 179 jobs in June. These along with above-mentioned concerns had an adverse impact on the company’s financials.
Currently, LendingClub carries a Zacks Rank #4 (Sell). Better-ranked finance stocks include ORIX Corporation (IX - Free Report) , Euronet Worldwide, Inc. (EEFT - Free Report) and Access National Corporation . All these stocks hold a Zacks Rank #2 (Buy).
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LendingClub (LC) Falls on Wider-than-Expected Q2 Loss
Shares of LendingClub Corporation (LC - Free Report) decreased over 2% following the release of its second-quarter 2016 results, after the market closed. Also, announcement of leadership changes played a part in the decline in share price.
Carrie Dolan resigned from her position as CFO to pursue a new opportunity. In her place, LendingClub announced the appointment of Bradley Coleman as Principal Accounting Officer and Interim CFO. Additionally, there were some other important management changes.
LendingClub’s loss per share of 12 cents was wider than the Zacks Consensus Estimate loss of 5 cents. Moreover, the figure shows deterioration from breakeven recorded in the year-ago quarter.
Results in the reported quarter included a goodwill impairment charge related to the 2014 acquisition of Springstone, a rise in professional service fees mainly due to matters identified in the board review, incentives paid to investors and an increase in compensation related expenses pertaining to severance costs and a retention program. Net income, on a GAAP basis, came in at $81.4 billion as against a loss of $4.1 million in the year-ago quarter.
Revenue Rise Fail to Support Bottom Line
Total net revenue rose 6.7% year over year to $103.4 million. The rise was attributable to an increase in all revenue components, except other revenue which was negative. However, the figure lagged the Zacks Consensus Estimate of $110.8 million.
Total operating expenses were $188.7 million, a significant jump of 87.5% from the prior-year quarter. The increase was triggered by drastic rise in all expense components.
Adjusted loss before interest, taxes, depreciation, and amortization totaled $30.1 million, as against adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $13.4 million in the prior-year quarter.
In the reported quarter, loan originations were $1.96 billion, up 2.3% from the prior-year quarter.
As of Jun 30, 2016, cash and cash equivalents were $573 million. Further, loans grew 21.1% year over year to $4.4 billion. Total stockholders' equity summed $988 million, down 1% from Jun 30, 2015 level.
Guidance
Based on the information available as of Aug 8, 2016, LendingClub provided the following outlook for the third quarter of 2016:
Our Viewpoint
Results reflect the turmoil faced by the company since May 2016. The internal review had revealed lapses on business practices, leading to resignation of the then CEO. This had even led to a regulatory probe.
Additionally, given the reduced volumes of loan in the reported quarter and “recognizing that the full scale return of investors may take time”, the company slashed 179 jobs in June. These along with above-mentioned concerns had an adverse impact on the company’s financials.
LENDINGCLUB CP Price, Consensus and EPS Surprise
LENDINGCLUB CP Price, Consensus and EPS Surprise | LENDINGCLUB CP Quote
Currently, LendingClub carries a Zacks Rank #4 (Sell). Better-ranked finance stocks include ORIX Corporation (IX - Free Report) , Euronet Worldwide, Inc. (EEFT - Free Report) and Access National Corporation . All these stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>