What's happening?

Shares of LendingClub Corp. (NYSE:LC) are trading higher by about 11% as of 11:30 a.m. EDT after the company reported a better-than-expected outlook for the remainder of the year.

So what

LendingClub saw its total originations grow in the second quarter by 10% year over year, as LendingClub begins to lap periods of reduced originations that followed its 2016 scandals.

LendingClub logo

Image source: LendingClub.

In prepared remarks on the conference call, Thomas Casey, LendingClub's CFO, noted that the company sees a path to GAAP profitability as the company rounds the turn into 2018. "With the significant operating leverage our business model produces, we believe we can obtain our 15% to 20% EBITDA margin target in 4Q and approach GAAP profitability as we exit the year," he said.

In the table below, I've summarized the company's guidance for the full year 2017, and what it implies for the second half of the year based on its first-half results.


Full-year 2017

Implied 2nd Half 2017

Total net revenue

$585 to $600 million

$320.9 to $335.9 million

GAAP net loss

($69) to ($61 million)

($13.7) to ($5.7 million)

Adjusted EBITDA

$50 to $58 million

$45.3 to $53.3 million

Source: LendingClub presentation.

Now what

Perhaps the best indication that LendingClub is regaining the confidence of institutional investors is the fact it acted as a sponsor for a securitization deal backed by loans on its platform. Securitization is a process in which a pile of loans are used as collateral to back bonds that are sold to investors. Many financial companies package everything from auto loans to credit card receivables into securitization deals for cheap leverage that can magnify returns. 

The securitization hardly moved the needle this quarter, generating less than 3% of the company's net revenue. However, it provides at least some indication that LendingClub is regaining credibility with institutional investors, who dumped the platform amid the scandals of 2016. Large institutional investors are the primary buyers of debt issued in the securitization process.

LendingClub executives pointed out that, in the future, such deals may enable LendingClub to originate loans that can be pushed into a securitization, allowing the company to tap into what could be a perennial source demand for LendingClub loans.

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