LendingClub Earnings Hammered by Costs Related to Executive Shuffle

Since early May, peer-to-peer loan maker LendingClub Corp. (NYSE: LC) has lost more than 30% of its value. The tumble began with the replacement of former CEO Renaud Laplanche that has led to a postponement of the company’s annual shareholders meeting and loss of its biggest shareholder. The company appointed a new CEO at the end of June and announced after markets closed Monday that Fannie Mae CEO Timothy Mayopoulos has joined LendingClub’s board and that CFO Carrie Dolan has resigned.

LendingClub reported a quarterly adjusted diluted per share loss of $0.09 and revenues of $102.4 million. In the same period a year ago, the company reported earnings per share (EPS) of $0.03 on revenues of $96.1 million. Second-quarter results compare to the Thomson Reuters consensus estimates for a net loss of $0.02 per share and $100.51 million in revenues.

The company’s troubled quarter included a goodwill impairment charge of $35.4 million related a 2014 acquisition; an increase in professional service fees of $14.9 million primarily related to the review of Laplanche’s actions; approximately $14 million in incentives paid to investors; and an increase in compensation related costs of $6.5 million associated with severance costs and a retention program.

On a GAAP basis the quarterly per share loss came to $0.21.

New CEO Scott Sanborn said:

Our efforts to reengage investors are working, with fifteen of our top twenty largest investors back on the platform today. Despite the unusual disruption to our supply of capital in May, we facilitated nearly $2 billion of loans to nearly 170,000 borrowers. While we still have a lot of work ahead, the value that we bring to borrowers and investors is stronger than ever, and we believe we have the resources and resolve to execute on our mission.

For the third quarter LendingClub expects operating revenues in the range of $95 to $105 million and an adjusted EBITDA loss of $15 to $30 million. The adjusted EBITDA loss per share in the second quarter was $30.1 million, so we might extrapolate a per share loss of around $0.05 to $0.09.

Analysts are looking for third-quarter revenues of $104.27 million but Thomson Reuters has no estimate for earnings/losses. For the year the current consensus estimate calls for EPS of $0.08 on revenues of $477.71 million.

Shares traded down about 3.3% in after-hours trading Monday at $4.63 after closing at $4.79. The stock’s 52-week range is $3.44 to $15.00 and the consensus price target is $7.52.

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