Delving into Lending Club’s Latest Financial Statements

Yesterday Lending Club released their latest 10-Q filing that they are required to submit every quarter to the SEC.  This filing is for the 4th quarter of 2011, Lending Club’s fiscal 3rd quarter.

These filings contain a great deal of information, most of which is superfluous to the average investor. There are a few things I like to focus on and I am sharing these with you today in the table below. I have summarized some of the data from their Profit and Loss statement (called the Statement of Operations in the filing) and compared the December 2011 quarter to the previous quarter as well as the same quarter a year ago (note the numbers are for the quarter ending in the month displayed).

Summary of Lending Club Financials in 2010-11

Total Income Has Increased Dramatically at Lending Club

Borrower origination fees rose as expected and total revenue was up 29% over the previous quarter and up 177% over the same quarter one year ago.  I was surprised that loan servicing fees were flat but it could have been influenced by the “no fee” promotion on large loans at Lending Club started in December. Other income is a combination of many things such as fees paid by LC Advisors – you can read the full report if you want more details on that.

Expenses Also Continue to Rise

One would expect in a fast growing company like Lending Club that expenses would be rising fast. They continue to add people and this is reflected in the significant increase in administrative expenses. The official response to this increase as stated in the filing is that it was “primarily the result of higher expenses for personnel, facilities costs, licenses, permit and fees, and bank service charge.”

Marketing expenses also increased although not as much as I would have expected. Engineering costs stayed flat last quarter but no doubt that figure will rise as they add headcount there.

Lending Club Still Burning $1 Million in Cash a Month

When I chatted with CEO Renaud Laplanche several months ago he said that Lending Club could easily be at break even but they have made the strategic decision to grow rapidly. Their investors supported this and it is no secret that the growth is happening.

At their current burn rate of around $1 million a month they have enough cash on hand to see them through the end of next year but I expect we will start to see some dramatic improvements to the bottom line by the end of the year.

The biggest driver of revenue is borrower originations and the December 2012 quarter should show revenues at least double the number of the same period last year. I expect to see total revenue of around $10 million in the last quarter and while costs will also have to rise that should bring them close to break even if not in positive territory. I have no inside knowledge about these numbers this is just my hunch.

It will be interesting to see how this unfolds. One thing is for certain – this is going to be a big year at Lending Club.

  • Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.

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