Prosper Reports $35M Loss as Revenue Plummets

Prosper Marketplace in San Francisco reported a $35 million loss in the second quarter, adding to the struggles of the entire marketplace lending sector.

The firm, which specializes in consumer installment loans, said in a securities filing Monday that its operating revenues plunged to $27.1 million during the second quarter — more than 50% lower than they were during the first quarter, and 44% lower than during the second quarter of 2015.

Loan originations at Prosper totaled $445 million, down 56% from the first quarter and down 51% from the same period a year earlier.

The company's net loss of $35 million compared with a loss of $17.5 million in the first quarter and a $6 million loss in the second quarter of 2015.

Prosper, similar to its rival Lending Club, runs an online marketplace where consumers looking to borrow between $2,000 and $35,000 get matched with loan buyers.

Both firms enjoyed rapid growth during the first half of the decade, as hedge funds and other institutional investors were eager to buy their high-yielding loans. But those sentiments reversed earlier this year, as buyers began to have doubts about the credit quality of loans being originated and saw more attractive opportunities in other investment markets.

In May, Prosper announced 170 layoffs, which amounted to 28% of the company's staff — part of an effort to adjust to the industry's new reality.

During the second quarter, Prosper recorded $14.1 million in one-time restructuring charges. Those charges contributed to expenses totaling $63.7 million, down by 14% from the first quarter but up by 12% from the second quarter of 2015.

Prosper also reported Monday that its pile of cash and other liquid assets is dwindling.

The company had $28.8 million in cash and cash equivalents as of June 30, down from $40.1 million at the end of the first quarter. The firm also had an additional $55.7 million in investments available for sale at the end of the second quarter, which were down from $68 million three months earlier.

Prosper said in the securities filing that it is taking numerous actions to increase the amount of capital committed to buy its loans.

"These actions include increasing the interest rates on loans offered through its marketplace, launching a new line of asset management products and improving the retail investor experience," the company said. "We also may enter into strategic agreements with large institutional investors in order to increase the amount of capital available to purchase loans on the marketplace."

The Wall Street Journal reported in early August that Prosper is in talks with a group of investment firms to sell them about $5 billion in new loans over the next two years. A source familiar with the matter said Tuesday that those talks are still ongoing.

Prosper's recent troubles resemble those at other large marketplace lenders.

Lending Club, which is also based in San Francisco, posted an $81.4 million loss during the second quarter. And OnDeck Capital, a New York-based small-business lender, reported a $17.9 million loss between April and June.