Good day, and welcome to today's conference call and webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference call over to Mr. James Samford. Mr. Samford, the floor is yours, sir.

Thank you, and good afternoon, and welcome to Lending Club's First Quarter of 2015 Earnings Conference Call. Joining me today to talk about our results are Renaud Laplanche, Founder and CEO; and Carrie Dolan, CFO. Before we get started, I'd like to remind everyone that our remarks today will include forward-looking statements, and 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, the related slide presentation on our Investor Relations website and our Form 10-K filed with the SEC on February 27, 2015. 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. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The press release and an accompanying investor presentation are available on our website at ir.lendingclub.com. And now I'd like to turn the call over to Renaud.

Thank you, James. I'd like to welcome everyone to our first quarter conference call. This was another great quarter with 109% operating revenue growth year-over-year to $81 million, and the momentum we are seeing gives us the confidence to raise both our revenue and EBITDA outlook for the year. I'll begin today's call with a brief introduction of Lending Club, then I'll dig into our first quarter results and our progress towards our 2015 goals. I will then turn the call over to Carrie, who will go into more details about our financial results, provide guidance for Q2 and update our full year outlook. At that point, we'll turn the call over to the operator for your questions. Let's get started. Last quarter, we provided a detailed overview of the business, as it was our first quarter as a public company. Today, we do not plan to go as deep on how the business model works. However, I would like to touch on a few key areas before talking about the quarter. Lending Club is an online marketplace serving 2 constituents: borrowers and investors. Investors invest capital and assume credit risk, borrowers make monthly payments of principal and interest and our marketplace underwrites, prices and services the loans. Our marketplace operates at a lower cost than the traditional banking system, and we pass on the cost savings to borrowers in the form of lower interest rates and investors in the form of attractive risk-adjusted returns. Traditional banks have an operating expense ratio of 5% to 7%. The same measure at Lending Club, assuming no growth in originations, is roughly 2%. There are 2 sources of cost reduction. Firstly, our costs that we do not incur at all, such as the cost of building and maintaining a branch network and the…

Thanks, Renaud. I'd also like to reiterate how pleased we are with the company's results this quarter. I will first review our financial results, and then review our second quarter and annual guidance before taking your questions. All year-over-year comments are comparisons to the first quarter in the prior year. As Renaud shared, total originations in the first quarter grew to a record $1.64 billion, an increase of 107% compared to the same period last year. This origination growth drove equally strong revenue growth. Operating revenue in the first quarter was $81 million, up 109% year-over-year. As a quick reminder, the majority of our revenue is earned in 2 ways: First, transaction fees are earned upfront when a loan is originated. These fees totaled $72.5 million, up 105% year-over-year and represented roughly 89% of operating revenues in the first quarter. Second, servicing and management fees from investors are reoccurring in nature and are earned over the life of the investment. During the first quarter, these fees totaled $7.6 million, up 165% from last year. First quarter revenue performance came in ahead of our expectations as a result of several drivers: First, momentum picked up during the quarter with high borrower conversion rates, particularly in our standard programs, with broad-based benefit from the interest rate reductions that were made possible by the diversity and fast growth of our investor base. Given these favorable acquisition trends that somewhat offset expected seasonal headwinds, we decided to take advantage of the positive momentum and activate more than we had communicated to you on our last call. In addition, our investor mix provided upside as we had a higher proportion of retail investors and a higher proportion of demand from investors paying marginally higher servicing fees. This investor mix change added approximately $1.2 million to…

[Operator Instructions] The first question we have comes from Heath Terry of Goldman Sachs.

Great. When you look at your SMB efforts this quarter, what have you learned, realizing that it's sort of early stage in terms of demand for credit among that audience, the profile of your borrower and what you expect the APR and spread to look like for that customer? And then, the cost of origination compared to your personal loan business. And has that early learning made you any more or less optimistic about the opportunity in SMB?

Yes, it's Renaud. Yes, so we are continuing to learn a lot. We launched the small business lending platform about a year ago now. And as we said at the time, we thought there would be 2 things that would be different from consumer and that are typically hard with small businesses: one, is customer acquisition and, two, is underwriting. And nobody has really cracked the code on these 2. And our strategy has been to go after these markets for a series of partnerships that, we believe, can solve both issues or can be helpful in both respects by partnering with large companies that have large customer base of small businesses. We believe we can sort of acquire these small business customers at a lower cost, either by so benefiting from an existing brand and trusted relationship like in the case with -- sort of the -- so Google partnership or, as we've announced as part of this release, the Sam's Club partnership or Newtek. Or in another case, we can insert ourselves in the transaction flow and really provide purchase financing for small businesses as is the case with the Alibaba partnership. So we believe partnerships help solve acquisition cost concerns. They also help with underwriting in the sense that there's typically thin credit files available for small businesses, and the credit data isn't always as predictive as it is for consumers. But when we enhance that credit data with financial data, transactional data and transaction history coming from our partners, we believe that gives us -- puts us in a better position to risk-rank the businesses and approve more of them and generate a better yield for investors. So we believe that, that strategy is working. We've announced, again, 2 more partnerships with Sam's Club and Newtek just today. And so we'll continue to move forward on the same -- along the same lines. I think, part of your question was what yield we expect. I think we expect similar yield in the teams as gross yield, as what we've seen with consumers.

And is there a level that you can sort of quantify what SMB contributed in the quarter?

No, we're not breaking it out at this point.

Next we have Stephen Ju of Crédit Suisse.

This is Nick on for Stephen. Just a few questions with respect to some of the new partnerships this quarter. For Home Advisor, is this still the standard product for kind of home improvement and not a new product that you're offering? And for the Citi partnership, how kind of -- does this function similar to kind of some of the other distribution deals you've signed in the past?

Yes. No, these are both pretty similar. Also, with Home Advisor, it's really the standard loan product. I think, in addition to our standard sort of rates and maturity, we've launched late last year a AA grade super prime product, with loans going all the way up to $50,000 and a starting interest rate of 3.99% interest rate, 4.97% APR. And so that's a competitive rate even compared to a home equity line of credit. And obviously, the process is considerably simpler and faster. So we think that's a great product for that particular channel, but other than that, I mean the standard personal loans are also available for Home Advisor and for their clients. As to the Citi partnership, we're very excited about it. It's not a big dollar amount, it's $150 million in total origination. But we believe it's the first time that a, really, top 5 U.S. bank is relying on a marketplace like Lending Club to originate loans and -- or to access loans. And in this case, it's a program that's specifically dedicated to low- and moderate-income consumers. And we believe there are others of banks in the same position as Citi who could benefit from that program. I think the idea here is we can reach consumers in -- using our national origination platform, online origination platform in areas where the banks don't necessarily have a branch footprint. And so the banks can benefit from our online sort of nationwide reach to really offer affordable credit to these populations.

Next, we have Ralph Schackart of William Blair.

Renaud, one of the key things coming out of LendIt this year was sort of the increase in customer acquisition costs and some of the inefficiencies in the channel due to sort of growing competition, which you'd talked a little bit about on the call. But just curious, given your results here, where you saw contribution margin improve year-over-year and operating revenue increase at a faster rate than marketing, just curious sort of how you're bucking that trend. It seemed that the industry was just talking about those increasing costs. Is it sort of the brand? The scale? Partnerships? Just a little color there would be helpful.

Yes, thank you. So I think we've -- I mean, in general, we've seen at the LendIt conference sort of a number of new sort of small origination platforms starting up. Many of them are really in sort of different countries or focusing on a market segment that Lending Club is not active in. But it's interesting to see the industry sort of developing, and that you can now -- so finance, real estate or auto or student loans through a marketplace. But obviously, there's no sort of direct competition with us in that case. In terms of a more direct competition, I think the second largest marketplace would be Prosper. That's really sort of in the same space as we are, which is mostly unsecured consumer loans. And what we've seen is, consistently over the last sort of many years, we've grown faster in dollar amount and have extended our lead against this second largest. In the last 2 quarters, we even have extended our lead. We even grew faster in percentage terms, even though we're starting off a much higher base. We've also historically done that in a more cost-efficient way. We've seen sort of numbers showing -- released by FT Partners, showing that sort of Prosper, specifically, was spending about 300 basis points of origination on sales and marketing compared to just about 200 in our case. So I think there's a combination of brand credibility, of efficiency of marketing channels, of operating efficiency that helps convert more of the funnel. And also, interest rate advantage as we have a broader, deeper investor base. We have investors now who have built in us, confidence in our origination and servicing track record that they are willing to accept a lower interest rate, and that gives us a pricing advantage. So I think all these factors contribute in giving us generally better marketing efficiency than other smaller platforms.

[Operator Instructions] Next, we have Smitti Srethapramote of Morgan Stanley.

Renaud and Carrie, I just wanted to follow up on one of the things that you talked about at the time of the IPO, which was sort of your initiatives to sort of build the brand and to acquire customers more efficiently. Can you just give us an update what you've done over the past 5, 6 months to -- towards that goal?

So I think the -- I mean, the #1 way we build the brand is by delivering a great service and a great product. And that's continued to be the case. I think we released this quarter, as a onetime disclosure, the Net Promoter Score on the borrower side of -- so borrowers who just took a loan from Lending Club, and the NPS is at 78%, which is really sort of all-time high. And Net Promoter Score is really sort of a good proxy for customer satisfaction and also for a customer's willingness to talk about their experience at Lending Club and refer their friends and colleagues. So we're very excited about that continuing to be the case. In addition, I think we, over time, would continue to build more brand awareness through many different channels. I think we talked a bit last time about starting a sort of radio and TV test, which is mostly direct response radio and direct response TV. But that has, obviously, a brand impact of raising awareness. We launched the radio test this quarter -- well, in Q1, on sort of 4 test markets. It's very early, so we don't really have a read on that test. And we're planning on launching the TV test in the next few weeks. So we believe, in addition to being sort of the early acquisition channels, this can have a brand benefit as well. I think, in general, as we continue to launch new products and be more useful to more people and cover more use cases, I think there will be more benefit in building brand awareness and being included in the consideration set for many different credit options. At this point, I think there will be sort of less benefits, and we're certainly not planning to launch a massive brand awareness campaign.

At this time, we're showing no further questions. We'll go ahead and conclude today's question-and-answer session. At this time, I would like to hand the conference back over to Mr. Samford for any closing remarks. Sir?

Hey, Mike, can we go ahead and take -- it looks like one more question, please.

All right. Yes, sir. And it looks like we do have one more question, sir, and it will come from Josh Beck of Pacific Crest.

I was just trying to figure out how SMB, health care and education are going to really impact the model on a sustainable basis. So as we think about transaction fees as a percentage of origination, should we be thinking steady kind of levels there on a sustainable basis? And then, similarly, thinking about their impact on sales and marketing efficiency, could we see a time where, over the next couple of quarters, maybe it's a detriment, and then, as we get through that investment period, it actually starts to become a tailwind as you start to reap the benefits? So just, I guess, maybe longer term, help us think through the puts and takes and how those are going to impact the model on a sustainable basis.

Yes. So first, on the revenue yield. Currently, both products are roughly equivalent to our core product, and as we've shared in the past, one of the reasons why we aren't necessarily breaking it out and giving you specific details on how that might impact the model, because they're very similar at this point. With regards to the acquisition cost, both on small business and with the investments we're doing with educational and Patient Finance, those are, on a relative basis, as we develop those, have a bit higher cost. And it's one of the things that we've talked about in the past why we have roughly kind of an offset between efficiency in the core product with investment and testing in the new products. Kind of longer term, what we would guide here is that as those start to change, or we do see material differences because, let's say, top line revenue is adjusting based on what we see different in the acquisition cost, we would potentially break those out. But we have also committed to manage to a long-term contribution margin at 50-plus percent. And so really, our -- the individual line items might vary over time, but we're really focused on long-term efficiency on that contribution margin.

And just one last one for me. Just in the core standard program, I think, for origination perspective seems to be doing really well. It seems like from an efficiency perspective, marketing also doing really well. Is that a market where you think there's enough greenfield to see those trends continue, where there's enough, it sounds like, flexibility in terms of your go-to-market through different channels that, even though you've had a lot of success to date, I think, in terms of improving that core standard program marketing efficiency, that it seems like you have a lot of runway. So just, I guess, help us just understand what type of visibility you have and kind of how long you think that trend could last.

Yes. So certainly, there's a lot of runway on the -- with the current products and current channels at similar sort of cost and conditions. The market size, we don't think the market size will be a limiting factor any time soon. There's roughly sort of $900 billion in credit card receivables outstanding. We believe about $390 billion of that really meets our credit policy and our response model. So those balances that are sort of carried over month-over-month and that are big enough for a consumer to sort of decide to go for the process of paying off that credit card balance and refinancing with a Lending Club loan, which is, really, the dominant use case for our loans. And that's a primary way we market our offering to consumers with good credit who have a credit card balance that they're carrying over month-over-month and are paying, on average, about 17% interest rate on this credit card balance. Our 3-year term average interest rates for fair [ph] term loan was less than 12% in the last quarter. So we offer significant savings to consumers and, again, a great experience. So we think these -- so the value and, increasingly, the attachment to the brand will continue to drive increasing sort of adoption and origination volume.

And again, we'll hand the conference back over to Mr. Samford. Sir?

Thank you. That concludes our comments on the first quarter of 2015. We look forward to speaking to you again on our second quarter.

And we thank you, sir, and to the rest of the management team for your time today. Again, the conference call has ended. At this time, you may disconnect your lines. Thank you, and take care, everyone.