Q1 Archives - Lend Academy

LendingClub, GreenSky and OnDeck Q1 2019 Earnings Results

We share the results of the public online lenders

May 7, 2019 By Ryan Lichtenwald 2 Comments

Every quarter we check in on the public online lenders. This includes LendingClub, OnDeck and GreenSky. LendingClub and Greensky reported today and we’ll review some general highlights from OnDeck who reported last week.

LendingClub rounded out 2018 originating the most loans in the company’s history at $10.9 billion. With their Q1 2019 results, the company is off to a great start in 2019. Originations were $2.7 billion, up 18% year over year. The company reported that application growth was 31% over the same period.

Net revenues came in above high end guidance of $172 million at $174.4 million for the quarter, up 15% year over year. GAAP Consolidated Net Loss was $(19.9) million, compared to $(31.2) million in Q1 2018. Finally, the company delivered adjusted EBITDA of $22.6, up 47% year over year and well above their projections of $13-$18 million. LendingClub is on track to become adjusted net income profitable over the second half of 2019.

As always, it’s always interesting to look at the investor mix over time.

There were a few interesting news items from the quarter as well as some comments from CEO Scott Sanborn on the earnings call. The most significant news was that the company announced a shift to the way they serve small businesses. LendingClub is no longer originating small business loans themselves and is instead opting for a partnership approach. The co-branded offering is made possible by Funding Circle and Opportunity Fund. In addition, small business loans will no longer be funded by LendingClub investors.

Beyond the small business operation, Sanborn discussed that the company is working towards their vision of not just being a “lending club” but a financial health club. To date we’ve seen little progress in realizing this vision, but clearly they want to do more. They envision moving from simply a product focus to a platform focus in areas where it makes sense. The decision to make the change in their small business operation is the first example of this.

In the personal loan space LendingClub is also looking to offer a unique opportunity for their investors. The reality today is that the company receives 40,000 applications a day but only a small fraction of these borrowers get approved and subsequently take a loan. LendingClub realizes that there is a lot of expertise in their broad investor base and they may give investors the opportunity to provide their custom models to underwrite a subset of these applicants. This would also result in higher satisfaction on the borrower side as more borrowers would be approved. In my opinion this gets back to LendingClub’s original promise of being a true marketplace, offering a wide range of loans to every type of borrower.

Interestingly, Sanborn commented on the opportunity of a bank charter, something that would be hugely beneficial for a company seeking to offer a wider range of products. Other potential benefits include margin improvement, more resilient funding and giving the company more regulatory clarity. While this would certainly change many dynamics in the business, Sanborn noted that this is a massive undertaking that will come with significant time and costs and they will update investors as their thinking evolves.

LendingClub is also very much focused on cutting costs as part of their simplification program. Last week Bloomberg published a piece on LendingClub’s plans to move employees to Utah from their expensive San Francisco office. The cost savings are significant as they decrease their footprint by around 41% in the city as leases expire and they sublease their open space. Below is LendingClub’s Q2 2019 and full year guidance.

GreenSky Q1 2019 Earnings

In Q1 2019 GreenSky increased transaction volume on the platform 20% to $1.2 billion. They also grew revenue 22% to $103.7 million form the prior year period. GAAP Net Income in Q1 2019 was $7.4 million. The company had aggregate commitments of $11.8 billion from nine bank partners of which $4.5 billion remain unused. The company ended the quarter with $268 million in cash.

Last year we reported on the potential of the company’s partnership with American Express. GreenSky shared that since the alliance launched 3,600 merchants have been referred to GreenSky for enrollment evaluation. In February 2019, the program was extended to include elective healthcare.

Below is a look at how their merchant network has grown over time and the verticals they currently serve.

GreenSky also noted new relationships with a field services software company, a dental practice management software company and an HVAC home services software enterprise. In all of these relationships, the GreenSky financing platform is integrated into the software. These types of relationships and the market GreenSky focuses on is what makes them different from many of the fintech companies around today.

In Q1 2019 GreenSky also repurchased 4.3 million shares at a cost of $50.9 million which is part of their $150 million share repurchase program. Since then the company has purchased more shares and in total has repurchased 9.1 million shares.

OnDeck Q1 2019 Earnings

OnDeck reported Q1 2019 earnings last week. Originations fell for the quarter to $636 million compared to $658 million for the previous quarter. This was attributed to OnDeck tightening their credit box during the quarter. The company shared that their line of credit product reached an all time high of $150 million for the quarter. Further information on their quarter is available in their press release.

LendingClub Q1 2018 Earnings Results Review

Banks make up nearly 50% of LendingClub's platform as originations grow 18% year over year

May 8, 2018 By Ryan Lichtenwald 5 Comments

During the first quarter, LendingClub is typically affected by the seasonality of the lending business so it’s beneficial to look both at the last quarter as well as the prior year period. In the first quarter of 2018, LendingClub posted originations of $2.3 billion. This represents a 5% decrease from the previous quarter, but an increase of 18% from the prior year period.

Revenue came in at $151.7 million, down 3% from the previous quarter but up 22% from the prior year period. They incurred a GAAP net loss of $31.2 million which included legal expenses related to legacy issues of $17 million.

One of the most interesting things to look at every quarter is LendingClub’s platform mix. Below I’ve included data which includes platform mix all of the way back to Q1 2015. Together, these charts tell the story of LendingClub’s evolution over time. In Q1 2018 banks funded 48% of loans on the platform. Over time we’ve also seen loans funded by retail investors, marked “self-directed” below continue to fall to its lowest point in the data included below. Individual investors funded $222 million of loans in Q1 2018 or about 10% of originations. [Read more…]

Review of OnDeck Q1 2018 Earnings Results

OnDeck has been working towards executing on their five strategic initiatives for 2018.

May 8, 2018 By Ryan Lichtenwald 1 Comment

This morning OnDeck released their Q1 2018 earnings. Last quarter we highlighted that the company had reached GAAP profitability which was a significant milestone. While the company posted a net loss of $1.9 million for the quarter, this was within guidance. Gross revenues were $90 million, coming in at the top end of projections for the quarter. The increase in revenue was attributable to higher interest income or the company’s effective interest yield, or EIY which came in at 35.6%, compared to 34.8% in the previous quarter. OnDeck also beat on adjusted income which came in at $6.4 million (Q1 2018 guidance was between $1 and $5 million).

The below chart outlines OnDeck’s revenue sources. It’s interesting to note that OnDeck reported zero for gain on sale revenue. While this hasn’t made up a significant amount of the business for quite some time, there has been a small amount of revenue coming from this source in previous quarters. It seems they have officially shut the marketplace down for the time being. It is also worth noting that other revenue remained consistent. This is a number to keep an eye on as it includes income from OnDeck-as-a-Service, with OnDeck’s longstanding partnership with JPMorgan Chase as the central piece here. While the company may continue to grow originations this is the area with the most potential of upside for the company. Noah Breslow noted that another significant bank partnership would be announced this year, along with a new lending product which could boost originations.

Originations were up 8% from the previous quarter at $591 million. At the same time the company was able to control sales in marketing costs which came in slightly lower than the previous quarter. This is a significant decrease from the prior year period. [Read more…]