Goldman Conference. December 4, 2012

Transcription

1 Goldman Conference December 4, 2012

2 Disclaimer Some of the statements in this presentation are "forward-looking statements or are projections. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "would" and similar expressions may identify forward-looking statements, although not all forwardlooking statements contain these identifying words. The Company may not actually achieve the plans, intentions or expectations disclosed in forwardlooking statements, and you should not place undue reliance on forwardlooking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. The Company does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Past performance is no guarantee of future results. Investments may lose value over time and no return is guaranteed. Information presented is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. 2

3 Corporate Overview 3

4 Key Metrics Lending Club originates loans to prime consumers and lets investors fund the loans at the time of origination 130 employees 1 $1Bn+ loans funded to date $83M new loan origination per month 2 $48M annual run-rate revenue 3 Raised $100M+ in equity capital $58M in cash & securities 4 No debt Cash flow positive 5 1. As of 11/16/ As of October Based on annualized October 2012 management reporting (non-gaap) revenue 4. As of 9/30/12 - includes restricted cash 5. Fiscal Quarter ended 9/30/12 4

5 Lending Club Overview Loans Funded by Investors 5

6 Model Lowers Intermediation Costs Traditional Lender Operating Expense 5-7% 1 1,2 Operating Expense 2.0% Branch Infrastructure Technology Drives Cost Down Reserve Requirements Customer Acquisition Underwriting Origination Servicing Customer Acquisition Underwriting Origination Servicing 1. Operating expenses as a percentage of outstanding loan balance 2. October 2012 annualized operating expenses as a percentage of outstanding loan balances assuming no growth in origination volume 6

7 Experienced, Diverse Team Management Renaud Laplanche CEO Founded MatchPoint and sold to Oracle Fmr. securities lawyer at Cleary Gottlieb Carrie Dolan CFO Fmr. Corporate Treasurer, Schwab Corp. and CFO Schwab Bank Fmr. CFO Chevron Credit Bank Scott Sanborn CMO Fmr. Head of Mktg. Home Shopping Network Fmr. CMO & President of Red Envelope Fmr. CMO ehealth Chaomei Chen Chief Risk Officer Fmr. Chief Risk Officer at JPMorgan Chase Card Services Board of Directors Renaud Laplanche CEO Lending Club Rebecca Lynn Partner, Morgenthaler Ventures Fmr. VP Marketing, NextCard Leading Investors John MacIlwaine Chief Technology Officer Fmr. CTO Green Dot, Morgan Stanley Dean Witter and Head of Global Development at Visa John Mack Fmr. Chairman & CEO, Morgan Stanley Fmr. CEO, Credit Suisse First Boston Dan Ciporin General Partner, Canaan Partners Fmr. EVP, MasterCard Jason Altieri General Counsel Fmr. Partner at SNR-Denton Fmr. Partner at Mintz Levin Mary Meeker Investment Partner, Kleiner Perkins Fmr. Equity Research, Morgan Stanley Jeff Crowe General Partner, Norwest Venture Partners Fmr.. CEO Edify 7

8 November 5 th : $1,000,000,000 1, June-07 August-07 October-07 December-07 February-08 April-08 June-08 August-08 October-08 December-08 February-09 April-09 June-09 August-09 October-09 December-09 February-10 April-10 June-10 August-10 October-10 December-10 February-11 April-11 June-11 August-11 October-11 December-11 February-12 April-12 June-12 August-12 October-12 Cumulative Originations February 2012: $500M $ Millions 8

9 Monthly Originations $ Millions

10 Relative Size of U.S. Consumer Credit ($ in Billions) $15,953 1,2 $1 $852 1 $2,737 1 Credit Card 1. Federal Reserve G.19 report published November Mortgage Debt Outstanding report as of September 2012 Consumer Credit (Non-Housing) All Consumer Credit 10

11 Borrower 11

12 Prime Borrowers Choose Lending Club Borrower Profile FICO 32 years old $68,831 income $12,159 loan Balance Transfer Risk-Based Pricing Provides Lower Rates to Best Credit Quality Borrowers New Purchase Need Credit, not Credit Card Low Cost & Convenience Drive Adoption Low Rates Isolate Lower Risks Technology Drives Costs Down Convenience Online / Paperless 24x7 Not a Bank Customer Friendly No Hidden Fees 1. Borrower averages as of November 8,

13 Ranking Power of Our Pricing Model Retroactive analysis from Q2-Q using actual Lending Club data and inferred third party data 2. KS score measures the predictive power to rank risk where a higher score should result in better credit performance 13

14 Investor 14

15 Developing Ecosystem Supports Growth 2009 Current Target External Ecosystem External Ecosystem External Ecosystem Self Directed Retail High Net Worth / Family Offices 3rd Party Managers Credit Structure Institutional Direct 15

16 How It Works We risk rank each loan into one of 7 grades (each with 5 subgrades) Investors build portfolios by investing in tens or hundreds of fractions of loans selected based on investment objectives and risk parameters Risk / Reward A Grade B Grade C Grade D Grade E Grade F Grade G Grade 7.51% 11.62% 14.37% 17.03% 19.18% 21.48% 22.31% Average interest rates as of 11/8/

17 High Returns & Low Volatility Net Annualized Returns by Grade Since Inception 4 Net Annual Return of individual grades as of November 8, Top 50% and Bottom 50% are dollar-weighted averages of individual loan performances for each grade calculated from either the best performing half or the worst performing half, respectively, of all loans outstanding in each grade from inception to 8/08/12 (the "Period"), measured from inception through 11/08/12. In practice, if a portfolio of Notes was created from the worst performing half of the loans in a specific grade issued during the Period, the return would be roughly equivalent to the Bottom 50% of that specific grade as depicted in the chart above. Conversely, if a portfolio of Notes was created from the best performing half of the loans in a specific grade issued during the Period, the return would be roughly equivalent to the Top 50% of that specific grade as reported in the chart above. To be included in the Net Annualized Returns calculation, a Note must have been originated at least 3 months prior to the calculation date. 17

18 Preservation of Capital Return calculations based on accounts that have invested in 800 or more unique borrowers. 800 Notes can be purchased with $20,000. All data as of November 8, The availability of Notes/unique borrowers is dependent on your investment criteria. There is no guarantee that you will be able to invest in 800 or more Notes/unique borrowers promptly, if at all. The foregoing is not directed to the specific investment objectives, financial situation or investment needs of any particular person and should not be considered investment advice. You should consider reviewing the prospectus with a financial advisor prior to investing. Past performance is no guarantee of future results. 18

19 Regulatory & Financial 19

20 Regulatory Overview FDIC UT DFI SEC + State Regulators Notes $ Self Directed Investors Federal + State Regulators Servicing SEC SEC (IA) Managing Funds & SMAs 20

21 Strong Revenue Growth Annual Monthly $MM $MM Y/Y Growth 179% 117% 181% M/M 8.3% 14.9% 17.4% 14.6% 9.8% 8.9% Note: Fiscal year ends March 31 FY 13 includes actuals from April 2012 October

22 Operating Efficiency Borrower + Investor Acquisition Costs As a % of Originations Total Operating Expenses As a % of Revenue Origination & Servicing Marketing & Sales G&A Expense Note: Fiscal year ends March 31 FY 13 includes actuals from April 2012 October

23 Operating Margin & Cash Operating Margin Ending Cash % of Revenue $MM Unrestricted Restricted Note: Fiscal year ends March 31 Non-GAAP operating margin excludes share-based compensation, depreciation and amortization 23

24 Target Operating Model Non GAAP FY 2012 FY 2013 (est.) Target Model Revenue % of Originations 4.87% 4.75% 4.70% % Origination & Servicing Cost % of Originations Marketing & Sales % of Originations Contribution Margin % of Revenue Operating Margin % of Revenue 1.55% 0.97% 0.60% % 2.52% 1.63% 1.65% % -6% 34% 50% -71% -3% 35% Note: Fiscal year ends March 31 Non-GAAP operating margin excludes share-based compensation, depreciation and amortization 24

25 Summary Fast Growth More than doubling each year for the last 3 years Large Market Trillions of dollars Positive Cash Flow Cash flow positive while growing fast and investing heavily in the business Limited Competition No meaningful direct competition High Entry Barriers Regulatory approvals, technology, track record 25

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