LendingClub Corp (LC) 2015 Q1 法說會逐字稿

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 would 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 for the year.

I'll begin to this 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 detail 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 two 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 two (inaudible) of cost reduction.

First, there are costs that we do not incur at all. Such as the cost of building and maintaining a branch network, and the cost of collecting and guaranteeing deposits, including capital reserve requirements and FDIC insurance.

Instead of collecting deposits, we offer investments to investors, therefore, not creating the same asset liability mismatch as the traditional banking system.

Then there are costs that we do incur, but at lower amounts as we use our innovative business model and technology platform to drive costs down. Automation, continuous process and system improvements and slow optimization give us the ability to constantly drive down our operating costs.

We also use technology to deliver a better customer experience by automating tasks that our users would otherwise accomplish manually, constantly improving user flows and making our product available at the time and place that is most convenient to them.

While we have continued to more than double originations and revenue year-over-year, we have been disciplined about growing only as fast as we believe is responsible and compatible with solid risk management and a great user experience that contribute to building and maintaining our brand and our reputation.

I would like now to take the opportunity on this call to share a couple of data points about our borrowers and investors. Ready the slide to the deck of (inaudible) on our Investor Relations website this quarter that provides you with more insight into our borrower demographics.

In 2009, as you might expect, the early adopters were predominantly millennials. Over half of our borrowers were under the age of 55. Today, our borrowers are mainstream consumers looking for responsible and affordable credit, with over 75% of our borrower base being over the age of 35. We believe this expansion of our user base demonstrates the broad-based appeal of our brand and our products.

Another one-time disclosure relates to net promoter scores, or NPS, the standardized measure of the likelihood of our borrowers to recommend our product. For the past four quarters, the net promoter score of our borrowers has measured within two weeks after the loan process has been completed has remained at record high levels with a reading of 78, showing a very high level of customer satisfaction.

On the investor side, we saw a strong influx of individual investors in Q1, with self-generated retail investors representing 24% of investments, individual investors investing for a fund or managed account representing 51%, and institutional investors representing 25%.

We believe this significant influx in the individual investors capital was caused in part by the increased brand awareness and credibility coming from our public offering in December, and in part by seasonality, as we typically see capital inflows from individual investors increasing as we reach our favored portfolio around tax season.

Now let's dig into a few of the first quarter highlights. Starting with loan origination. Loan origination in the first quarter increased 107% year-over-year to $1.64 billion, compared to $791 million in the same period last year. Nearly $9.3 billion of consumer and small business loans have now been issued since we launched eight years ago, including $5.2 billion just in the last year.

Our marketplace remains neither supply nor demand constrained. We intend to stay disciplined about our growth rate with an emphasis on solid risk management and the continued improvement of the great user experience we have been delivering on both sides of the platform, as well as continuing to build on the trust and confidence we have established in the Lending Club brand.

That being said, we always look for opportunities to safely and efficiently deliver faster growth. In the first quarter, we had such an opportunity with many marketing channels outperforming our expectations, both in terms of volume and cost efficiency.

Operating revenue in the first quarter was $81 million, up 109% year-over-year. Adjusted EBITDA in the first quarter was $10.6 million or 13.1% of revenue. We are continuing to invest heavily in engineering and product development to continue to automat processes and build new products and features that continue to fuel our growth, increase our operating efficiency and deliver a great user experience. In particular, we plan to double our engineering headcount this year, which we expect to grow at twice the base of our operations headcount.

Now I'd like to discuss our progress towards our 2015 priorities and other highlights from the quarter. First, an update on our marketing channels. In our core business, we are continuing to activate our existing marketing channels at a higher level, and continue to see a tremendous amount of growth opportunities. And at the same time, we are establishing new channels that provide us with diversification and flexibility.

While there are always small competitors entering the market causing short-term inefficiency in some of the most visible channels that are most readily available to them, we have built sufficient diversification, and have enough excess borrower demand that we can afford to lower our spend, or entirely shut down any particular channel with very limited or no impact on our ability to deliver fast efficient growth.

Some of our new channels rely on partnerships to funnel borrower demand, such as the exclusive marketing agreement with Home Advisor ahead of the peak season for home improvement, an appropriate channel for our new AA grade super prime loan product.

In small business lending, we are now the exclusive non-SBA term loan provider for Sam's Club's millions of small business members. And we've signed the newest partnership agreement with Newtek, the nation's largest non-bank SBA lender.

In many instances, our dominant position in the industry puts us in a situation to secure exclusive or priority access to these channels. While any one of these partnerships might not have a material impact on our results this year, we believe that in aggregate, they will continue to provide us with diverse, exclusive, cost efficient distribution channels and with contributes to fueling our growth in the years to come.

In the same spirit, we have entered into an important partnership with Citi to provide affordable credit to moderate and low-income families across the country. While the amount of origination expected to come from this program is relatively small at $150 million, we believe this partnership is important insofar as it is the first time a top five US bank is relying on a marketplace model to originate loans.

We believe this program would set a precedent that will be followed by other large US banks and will help further our goal of transforming the banking system into an online marketplace with the banks becoming marketplace participants and benefiting from that transformation.

As we mentioned last quarter, we continued to explore new channels, including direct response video for both consumer and small business loans in four small local test markets. We're also planning to start a small TV test later this month.

In education and patient finance, we completed the rebranding of the elective medical financing part of Springstone as Lending Club Patient Solutions; released an entirely new application funnel; made progress towards building a sales team; and the issuing bank of these loans [hauled] out a new credit model.

Let me now say a few words about the competitive environment. We have launched co-branded programs with several members of the Bank Alliance Network in the last few weeks, and are seeing promising results. This relationship with Bank Alliance, the relationships with Citi, Union Bank, and various other regional and community banks, demonstrate the increasing desire by the industry to partner rather than compete with us.

Partnering provides the banks with a means to efficiently and effectively leverage market-based lending without the complexity, investments and risks of venturing on their own. We've also seen a number of small lending marketplaces emerging in the last few quarters. While there are many new platforms, most of them have deliberatively chosen to forecast some market segments Lending Club is not currently not active in, and therefore pose no immediate competitive threat.

To the small number platforms that present a competing offering, as I mentioned earlier, we have seen some short-term inefficiency in some of the most visible channels. But again, with our channel diversification and excess borrower demand, we can lower our spend or shut down any particular channel with very limited or no impact on our ability to deliver fast efficient growth.

In addition, our scale and the amount of data gathered over the last eight years have enabled us to optimize positive credit models, application funnels, and loan pricing to a degree that any new competitor would find it difficult to rationally compete against. We have continued to expand our lead and grow faster in absolute dollar amount of additional quarterly originations than any other player in the space every quarter over the last several years.

Remarkably, we are even growing faster in percentage terms when we [big and] largest platform over the last two quarters with Lending Club growing originations at 21% and 16% sequentially quarter over quarter, and the second largest marketplace growing originations at 10% quarter over quarter in the same period despite the growing of a considerably smaller base.

Now coming to a different topic entirely, our new office space. We secured a ten-year lease for an additional 112,000 square feet on Market Street next to our headquarters in San Francisco, comprising eight floors to be delivered to us progressively from June this year through June 2017 to accommodate our planned headcount growth over the period.

We made the deliberate decision to add office space in San Francisco, rather than moving our operations to a lower cost location. In contrast to a traditional call-center environment, most of our operations staff is college educated. In addition to their operational role, they essentially function as process engineers who are constantly looking for ways to use technology to make processes more efficient and deliver a better customer experience.

Their co-location and tight collaboration with product and engineering creates the best environment to efficiently and consistently create technology-enabled operations improvements and to drive automation. This leads me to operations efficiency, the last topic I'd like to discuss today.

At Lending Club, we consider banking as an engineering problem, as a set of positives that could be optimized, simplified and made more efficient with better technology. Our investments in engineering, process improvements and task automation are generating significant gains in operational efficiency.

These gains were particularly evident this quarter, with our origination and servicing expense as a percent of origination coming down significantly year-over-year and sequentially. The portion of the improvement due to efficiency gains as measured by our headcount per loan issued and serviced was close to 10% or 8 basis points of origination year-over-year.

Now let me turn the call over to Carrie to go into more detail about our financial results, our guidance for second quarter, and an update on our full-year outlook.

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 a comparison 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 two 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 recurring 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 program, 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 revenues this quarter. The impact of this shows up in several revenue lines, including gain on sales which is part of other revenue. Revenue yield, which is operating revenue as a percent of origination, was 4.96%, up 7 basis points year-over-year. Higher mix of servicing, management fees and other revenues accounted for 11 basis points of the increase, including 6 basis points coming from collection fees, which were introduced in the fourth quarter of 2014.

These increases were partially offset by a 4 basis point decline in transaction fees, due to a higher mix of small business and education and patient finance including a greater mix of the recently launched true no-interest product, which is inherently lower revenue yield.

Now turning to expenses. We divide expenses into two major buckets: Those that directly drive revenue and are part of our contribution margin, and those that support our infrastructure and long-term growth. As we review expenses in this section, please note that these amounts exclude stock-based compensation, depreciation, amortization and acquisition-related expenses.

The contribution margin expenses that directly generate revenue include sales and marketing, and origination and servicing. Sales and marketing expenses consist primarily of those related to borrower and investor acquisitions, and are generally variable and track origination volume. They vary quarter to quarter with seasonality, channel mix, channel testing, and additional marketing efforts designed to support new product launches.

In the first quarter, sales and marketing expenses were $33.4 million, up from $17.1 million a year ago. As a percent of origination, sales and marketing expenses declined from 2.16% to 2.04% year-over-year. The improvement was due in part to channel efficiency and improved conversion rates, partially offset by the impact from expanding our acquisition channels for small business and education and patient finance, which included the creation of a Patient Solutions sales force.

Also during the quarter, we reclassified our personal loan sales teams' costs from the origination and servicing line into sales and marketing. Excluding the three classifications, our sales and marketing expenses as a percent of origination would've been 1.99%.

Relative to the fourth quarter, sales and marketing expenses as a percent of origination increased 24 basis points. Excluding the reclassification, expenses increased 19 basis points. On an adjusted basis, roughly half of the sequential quarter-over- quarter increase was driven by normal seasonal trends, while the other half was from the expansion of acquisition channels for small business and education and patient finance.

Our origination and servicing expense consists primarily of personnel-related expenses for credit, collections, customer support and payment processing teams and vendor costs associated with facilitating and servicing loans such as issuing bank and credit agency fees.

In the first quarter, origination and servicing expenses were $12 million, up from $7 million last year. As a percent of originations, these expenses declined from 89 basis points to 73 basis points year-over-year. Excluding the 5 basis point reclassification, origination and servicing expenses would have been 78 basis points.

Both sales and marketing and origination and servicing expenses are netted against our operating revenue to derive contribution income and a contribution margin, which focuses on the efficiency of how we drive our revenue.

On a dollar basis, our contribution income in the first quarter was $35.7 million, up 145% year-over-year. As a percent of operating revenues, our contribution margin was 44.1% in the first quarter, up 640 basis points from the prior year. As a percent of origination, our contribution margin grew 34 basis points from 1.84% to 2.18% year-over-year. 7 basis points of the improvement was from higher revenue yield, while the remaining 28 basis points came from improving expense efficiencies.

The second set of expenses that are outside of our contribution margin but are included in our EBITDA margin are costs to support our infrastructure and long-term growth. Specifically, these are engineering and product development and other G&A costs. Engineering and product development expenses include personnel-related costs along with non-capitalized hardware and software costs. We have maintained our aggressive pace of building our engineering team to develop new products that will fuel future growth and build up scalability and security ahead of growth.

As a result, engineering and product development expense increased to $8.2 million in the first quarter, up 95% year-over-year. As a percent of operating revenues, engineering and product development expenses were 10.1% in the first quarter of 2015, down slightly from 10.8% last year. Our engineering costs in the first quarter were a bit below plan, as the bulk of our hiring occurred a little later in the quarter, due in large part to new hires waiting to join until after bonus season.

Other G&A includes personnel-related expenses for our support organizations, such as legal, finance, internal audit, accounting, risk management and human resources, along with facilities expense. Year-over-year, these expenses increased to $16.9 million in the first quarter, up 98% as we continued to invest aggressively in these support teams to further derisk future growth. As a percent of operating revenues, other G&A expenses were 20.8% in the first quarter of 2015, down from 22% last year.

To drive our adjusted EBITDA, we subtract these operating expenses from our contribution income. In this quarter, adjusted EBITDA was $10.6 million or 13.1% of revenue, compared to $1.9 million or 4.8% of revenue in the first quarter last year. Adjusted EBITDA came in ahead of our Q1 guidance range on higher revenues, which included the positive revenue benefit related to our investor mix and our marketing efficiency, both of which flow directly into our EBITDA margin.

Adjusted net income, which is GAAP net income excluding stock-based compensation, depreciation and acquisition-related expenses was $7.7 million, or $0.02 per diluted share during the first quarter, versus $875,000 or breakeven per diluted share in the year-ago period.

Finally, our GAAP net loss this quarter was $6.4 million, compared to a loss of $7.3 million a year go. The difference between GAAP and adjusted net income is largely due to stock-based compensation, which increased $4.6 million year-over-year to $11.6 million. Stock-based compensation as a percent of operating revenue declined from 18.2% last year to 14.3% this quarter.

Now turning to the balance sheet. As we have discussed, in contrast to the traditional banking system, capital to invest in loans is provided from loan sales and securities issued to investors rather than from banking deposits. A key differentiator for our marketplace model is that as a matter of business model, we do not assume credit risk or use our own balance sheet to invest in loans, and the loan sales and securities issued to investors perfectly match the term of the loan.

When reviewing our balance sheet, you'll see both the loan as an asset and the corresponding note or certificate as the offsetting liability. The changes in value of these loans, notes and certificates generally offset one another and do not impact our equity.

At the end of March, total balance sheet assets reached $4.3 billion. Of this, $3.2 billion is in loans, $874 million is in cash and cash equivalents, and the remaining $223 million in other assets. Our servicing portfolio, which includes both loans on the balance sheet and sold loans, increased to $5.6 billion in the first quarter, up from $4.7 billion in the fourth quarter of 2014, and $2.8 billion in Q1 last year.

With that, let me give you our thoughts about the second quarter and for FY15. Given the strong momentum we continue to see on many fronts, we remain encouraged that our strategy of fast yet disciplined growth is paying off and feel confident raising our full-year revenue guidance.

We expect operating revenue to be in the range of $90 million to $92 million in the second quarter. We are raising our full-year range to between $385 million and $392 million, up from the range of $370 million to $380 million provided during our fourth quarter earnings call.

Our long-run focus is to optimize our contribution and adjusted EBITDA margins, and eventually net income. However, over the short-term horizon, we intend to continue to invest in new channels, product development, engineering, process automation and the buildup of support and risk management functions.

We expect adjusted EBITDA in the range of $8.5 million to $10.5 million in the second quarter. We are also raising the full-year range to between $40 million and $46 million, up from the prior full-year guidance range of $33 million to $42 million.

Before we turn to Q&A, I would like to provide some additional color on share count and our upcoming lock-up expiration. We ended the first quarter with approximately 372 million shares, which adjusts to approximately 410 million shares on a fully-diluted basis.

While our 180 day lock-up period ends on June 9th, current employees and directors will not be free to trade on this date as our second quarter earnings blackout period will be in effect at that time.

As a result, we estimate today that approximately 150 million shares outstanding and covered by the lock-up will be eligible for sale as a lock-up expiration. And approximately 182 million shares will become eligible for sale after our second-quarter earnings release in early August in accordance with our standard blackout policy.

With that, I'd like to turn the call back to the operator, and open up the lines to take any questions.

Thank you ma'am.

(Operator Instructions)

Heath Terry of Goldman Sachs.

Great, thanks. When you look at your SMB efforts this quarter, what have you learned? Realizing that it's 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. Has that early learning made you any more or less optimistic about the opportunity in SMB?

Hello, good afternoon. It's Renaud. 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 felt there would be two 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 two. And our strategy has been to go after this market 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 a large customer base of small businesses, we believe we can acquire these small-business customers at a lower cost.

Either by benefiting from an existing brand and a trusted relationship, like is the case with the Google Partnership. Or as we have announced as part of [V3's] via 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 for acquisition cost concerns. They also help with underwriting, in the sense that there is 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 puts us in a better position through risk grant these businesses and approve more of them and generate a better yield for investors.

So we believe that that strategy is working. We have announced two more partnerships with Sam's Club and Newtek just today. And so it continued 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 teens as gross yield is what we have seen with consumers.

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

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

Okay, great. Thank you very much.

Stephen Ju of Credit Suisse.

Hey, guys, this is Nick on for Stephen. Thanks for taking the question. Congrats on the quarter.

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

These are both pretty similar. Also with Home Advisor, it really is a standard loan product. I think in addition to our standard of rates and maturity, we have 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 is 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. Other than that, the standard personal loans is also available for Home Advisor and for their clients.

As to the Citi Partnership, we are very excited about it. It's not a big dollar amount, it's $150 million in the total loan origination. But we believe it's the first-time that a really top-five US bank is relying on a marketplace like Lending Club to originate loans, and to access loans.

And in this case, it's a program that's specifically dedicated to lower and moderate income consumers. And we believe there are other banks in the same position as Citi 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. So the banks can benefit from our online of nationwide reach to really offer affordable credit to these populations.

Thank you.

Ralph Schackart of William Blair.

Good afternoon. Renaud, one of the key things coming out of LendIt this year was the increase in customer acquisition costs, and some of the inefficiencies in the channel. Due to 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 increased at a faster rate than marketing. Just curious as how you're bucking that trend, same with the industry. Was just talking about those increasing costs, as it's the brand, the scale, partnerships, just little color would be helpful. Thanks.

Yes, and thank you. So I think we have -- in general, we have seen at the LendIt conference a number of new small origination platforms starting up. Many of them already in different countries or focusing on a market segment that Lending Club is not active in. But it's interesting to see the industry developing and that you can also finance real estate or auto or student loans through a marketplace.

But obviously, where we'll notice some direct competition with us in that case. An terms of more direct competition, I think the second largest marketplace would be Prosper that's really in the same space as we are, which is mostly unsecured consumer loans.

And what we have seen is consistently over the last many years, we have grown faster in dollar amount and have extended our lead against the second-largest. In the last two quarters, we even have extended our lead. We even grow faster in percentage terms, even where we're starting off in a much higher base.

We've also historically done that in a more cost efficient way. We have seen members showing release by FD Partners, showing that Prosper specifically was spending about 300 basis points of origination outside of their marketing compared to just about 200 in our case.

So I think there is a combination of brand credibility, of efficiency of marketing channels, of operating efficiency that helps convert more of the funnel. And also the 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 we were waiting to accept a lower interest rate that gives us a pricing advantage. So I think all these factors contribute in giving us generally better marketing efficiency than other smaller platforms.

Great that is helpful. Thank you.

(Operator Instructions)

Smittipon Srethapramote of Morgan Stanley.

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

The number one 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 one-time disclosure the net promoter score on the bar side, of the borrowers who just took a loan from Lending Club and the NPS is at 78, which is a all-time high.

And a net provider score is really a good proxy for customer satisfaction. And also for our customer's willingness to talk about the experience at Lending Club, and refer their friends and colleagues. So we are very excited about that continuing to be the case.

In addition, I think we, over time we continue to build more brand awareness for many different channels. I think we talked a bit last time about starting a 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, in Q1, and in some small 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 the early acquisition channels these 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 benefits in building brand awareness and being treated in the consideration set for many different credit options.

At this point, I think that would be of less benefit. And we're certainly not planning to launch a massive brand awareness company.

Thank you.

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

Mike, can we go ahead and take it looks like one more question please?

Yes, sir. And it looks like we do have one more question, sir. Josh Beck of Pacific Crest.

Hello there. Thanks for taking the question. I was just trying to figure out how SMB healthcare 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 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 is 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. 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.

So first on the revenue yield, currently, both products are roughly equivalent to our core product. And as we have 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 are very similar at this point.

With regards to the acquisition costs 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 we have talked about in the past why we have roughly an offset between efficiency in the core product, with investment and testing in the new products.

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 costs. We would potentially break those out, but we have also committed to manage to a long-term contribution margin at 50% plus. So really, the individual line items might vary over time, but we are really focused on long-term efficiency on that contribution margin.

Just one last one for me. The core standard program 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 is 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 help us understand what type of visibility you have, and how long you think that that trend could last.

So certainly, there's a lot of runway with the current products and current channels, at similar costs and conditions. The market size, we don't think the market size will be a limiting factor anytime soon. There's roughly $900 billion in credit card receivables outstanding, we believe about $390 billion of that really meets our credit policy and our [restaurants mobile].

So it was our balances that also carried over month over month, and that will enough for a consumer to decide to go through 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 the primary way we market our offering to consumers with good credit who have a credit card balance that we're carrying over month over month. And are paying on average about 17% interest rate on this credit card balance.

Our three-year term average interest-rate for fair to normal was less than 12% in the last quarter. So we offer a significant savings to consumers, and again a great experience. So the value and the increasingly the attachment through the brand, we will continue to drive increasing adoption and origination volume.

Great, that's all for me. Thank you.

Thank you, sir. Again, we will 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 again on our second quarter.

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.