Additionally, the company reiterated its commitment to making some fundamental changes to its operations to sustain growth.
Lending Club’s Q3 numbers showed strong growth over the prior quarter. Q3 loan originations hit a six-quarter high of $2.4 billion, up 14% from $2.1 billion in Q2, and 20% from $2 billion in Q3 2016.
The company attributed the rise to booming customer demand. Q3 revenue hit a record high of $154 million, up 10% from $140 million in Q2, and 34% from $115 million in last year’s quarter. This revenue boost helped consolidated net losses narrow to $6.7 million from $25.4 million in Q2, and $36.5 million in Q3 2016.
These successes seem to stem from some tough tweaks the company’s implementing. Following Lending Club’s Q2 results, when it dramatically raised its outlook, we recommended the company focus on long-term business model changes rather than front-end fixes. That’s what Lending Club now appears to be doing: It has continued to expand its securitization program to build out an additional revenue stream, even though this is costing the company money in the short term.
It has also begun implementing an updated credit model that it says better reflects today’s economy and protects investor yields. Even though this will tighten lending criteria and create a “headwind” next quarter, Lending Club maintains the approach will ensure more sustainable growth over time.
Investors should be reassured above all by Lending Club’s overall change of tone.Although Lending Club’s latest results fell below analysts’ expectations, they nevertheless demonstrated a continued upward trajectory, suggesting that, even though the company’s resurgence may be slower than previously forecast, its overall momentum is positive.
Most important is that Lending Club has now expressed a dedication to persist with some drastic changes to its business model to ensure sustainability, even if this causes some short-term blips. This attitude may be just what the long-struggling alt lender needs to secure its survival in a competitive market.
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