LendingClub Corporation

Good day, and welcome to the Lending Club's second quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star, then one on your touchstone phone. To withdraw your question, press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Sameer Gokhale, Investor Relations. Please go ahead.

Thank you and good afternoon. Welcome to Lending Club's second quarter 2021 earnings conference call. Joining me today to talk about our results and recent events are Scott Sanborn, CEO, and Tom Casey, CFO. You can find the presentation accompanying our earnings release on the Investor Relations section of our website. Our remarks today will include forward-looking statements that are uncertainties. These statements include, but are not limited to, the benefits of our acquisition of radius, platform volume, future products and services, and future business and financial performance. Our actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are described in today's press release and our most recent forms 10-K and 10-Q, each as filed with the SEC. as well as our subsequent filings made with the Securities and Exchange Commission, including our upcoming Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. And now I'd like to turn the call over to Scott.

All right. Thank you, Sameer. Good afternoon, everybody. Thank you for joining us. reflects our first full quarter as a digital marketplace bank, and we significantly outperformed our expectations. Across the board, the actions we took as we reentered the market drove better results on a faster timeline than we had anticipated. Notably, we achieved record profitability, which we expect to sustain and grow as our new recurring revenue stream of net interest income continues to build. In addition to the benefits received from our recently acquired digital bank, our Q2 profitability was driven in large part by revenue growth from our marketplace combined with operating efficiencies across our platform. Revenue growth in the marketplace was driven by growth in originations, which were up 84% sequentially. We've resumed marketing and returned to a more normalized credit posture with a continued focus on higher quality issuance. The outperformance of our credit relative to our competitor set is driving strong investor demand, and we added several new banks and institutional investors to our platform. Banks, including Lending Club Bank, now make up more than half of our loan funding. During the quarter, we leaned into our competitive advantages to quickly tune our efforts to current market conditions and tap into the nascent recovery in consumer demand. I'd note that as the unsecured credit market is recovering, fintech is growing faster than the market, and we are growing faster than other fintechs. According to DV01, which tracks market share data for personal loans, we have returned to market leadership. It's worth highlighting that our sequential revenue growth of 93% outpaced Origination's growth during the quarter. This primarily reflects significant growth in our new recurring net interest income revenue stream as we took advantage of our low-cost digital bank deposits and grew our loan portfolio. We expect revenue growth to continue to outpace originations growth as this income stream builds. Tom will provide details, but it's important to note that as we invested in growing our loan portfolio to build this new revenue stream, we sacrificed about $54 million in potential earnings in the quarter. We did it because we expect holding loans to eventually generate three times the earnings compared to selling them. So the near-term trade-off is more than worth it. As I mentioned, our strong revenue growth was combined with efficiency gains across the income statement. We improved our marketing efficiency by leveraging our marketplace model, which allows us to say yes to a broader range of customers, leveraging our data advantages to enhance our targeting, underwriting, and pricing models, These models are built on more than 150 billion cells of data and more than a decade of experience across over 65 billion in loans. We also optimized our application funnel and drove automated decision rates back to north of 70%. As a result, end-to-end funnel conversion was up significantly, reflecting improvements in offer rates, take rates, and issuance rates. Furthermore, we continued to focus on serving our large and loyal base of over 3.5 million members. While we are attracting new members to our platform at an accelerating pace, a large portion of our loan volume continues to go to our existing customers, reflecting the expanding lifetime value we're generating and the affinity created by offering seamless access to low-cost credit. Finally, and as I mentioned earlier, consumer demand also appears to be ticking back up, though currently remaining below pre-COVID levels. Taken together, We believe we have one of the lowest customer acquisition costs among our competitive set, which is a significant differentiator built on our unique advantages, including our large and loyal member base, our marketplace model, and our data supremacy. Along with improved marketing efficiency, we also have a substantial improvement in operating efficiency, reflecting actions we took over the last two years to streamline our expense base. Specifically, our fixed cost base now reflects the benefits of our business simplification initiatives from 2019, actions we took last year to further reduce our expenses, and efficiency gains for more recent technology investments in our services infrastructure. So where do we go from here? As I've said before, it's hard to imagine a better time to be growing a digital bank. We believe our actions over the past several years our core capabilities, and the overall accelerated trend to digital banking have set us up well to win. We believe we can deliver sustained profit while investing in our future to bring to life a next-generation digital bank that will transform the experience and reimagine banking for our customers. I want to take a moment to thank our employees for their commitment to our customers, our company, and our mission. We would not have been able to achieve these great results without their dedication and hard work. So with that, I will turn it over to Tom for a more detailed discussion of our financial performance.