NEW YORK, Feb. 13, 2018 /PRNewswire/ -- OnDeck®
(NYSE:ONDK), the leader in online lending for small business, today
announced fourth quarter and full year 2017 financial results,
including fourth quarter GAAP net income of $5 million and its expectation for continued
margin improvement and profit growth in 2018.
"2017 was a transformative year for OnDeck, marked by our
strategic decision to strengthen our financial profile and
accelerate our path to profitability," said Noah Breslow, OnDeck's chief executive officer.
"In the fourth quarter, we delivered on this objective, achieving
over $5 million of GAAP profit,
$41 million better than 2016's fourth
quarter results. In addition to this significant profit growth, we
grew origination volume, controlled expenses and increased our
Effective Interest Yield to its highest levels since 2015.
Credit performance continued improving in the fourth quarter while
our Provision Rate, 15+ Day Delinquency Ratio and Net Charge-Off
Rate all achieved their lowest quarterly levels of 2017."
Breslow added, "Looking ahead to 2018, we expect to drive double
digit loan growth due to our strong customer demand, disciplined
risk management and focus on scaling responsibly. With improved
credit performance and loan yields, our realigned cost structure
and a secure funding base, we are well-positioned to build on our
success and continue margin expansion."
Review of Financial Results for the Fourth Quarter of
2017
Originations were $546
million, up 3% from the prior quarter. Credit quality
of new originations, as measured by both OnDeck Score® and
personal credit scores, achieved record levels.
Gross revenue increased to $87.7
million, up 7% year-over-year driven primarily by higher
interest income. Effective Interest Yield was 35.6%, up from
33.2% in the prior year period, reflecting increases in average
loan pricing and credit improvements.
Gain on sale was $0.6
million. Loans sold or designated as held for sale
through OnDeck Marketplace® represented 3.9% of term loan
originations. Other Revenue was $3.5
million, up from $3.4 million
in the prior quarter, primarily reflecting increased revenues from
the company's OnDeck-as-a-Service (ODaaS) business, offset by a
$0.7 million reduction in the fair
value of the Company's loan servicing asset.
Net revenue was $42.1 million, up
159% versus the prior year period, driven primarily by higher gross
revenue and lower provision expense.
Provision for loan losses was $34.4
million and the Provision Rate was 6.4%. The Provision
Rate improved sequentially from 7.5% largely due to stable credit
and continued collections improvements, as well as the additional
provision in the third quarter from Hurricanes Harvey and
Irma.
The fourth quarter 15+ Day Delinquency Ratio was 6.7% and the
average term loan age in OnDeck's portfolio was 4.2 months.
The Net Charge-off rate in the fourth quarter was 12.9%, down from
16.9% in the third quarter of 2017.
The Cost of Funds Rate was 6.5%. Additionally in the fourth
quarter an investment advisor subsidiary of BlackRock joined
OnDeck's platform of financing partners.
Operating expense was $37.7
million. Operating expense as a percent of revenue
improved to 42.9% in the quarter, down from 64.1% in the prior year
period. Operating expense continued to benefit from the
company's cost rationalization plan implemented in 2017.
Subsequent to quarter-end, the company terminated a portion of its
New York headquarters lease.
This transaction, after giving effect to an associated $3.2 million charge to be recorded in the first
quarter of 2018, is expected to result in approximately
$2 million of annual savings through
2026, when the lease would have expired. The company
continues to actively explore additional opportunities to reduce
its real estate footprint.
GAAP Net income attributable to On Deck Capital, Inc. common
stockholders was $5.1 million, or
$0.07 per basic and diluted share,
for the quarter, which compares to GAAP net loss of $35.9 million, or a loss of $0.50 per basic and diluted share, in the prior
year period.
Adjusted Net income* was $8.1
million, or $0.11 per basic
and $0.10 per diluted share, for the
quarter, compared to negative $31.4
million, or a loss of $0.44
per basic and diluted share, in the prior year period.
Adjusted EBITDA* was $9.7 million
for the quarter.
Unpaid Principal Balance was $936
million at the end of the fourth quarter of 2017, 0.5% lower
than the end of the third quarter of 2017. The company expects
Unpaid Principal Balance to grow again in the first quarter of
2018.
Total Funding Debt at the end of the fourth quarter of 2017 was
$684 million, down 2.7% sequentially,
primarily reflecting the changes in Unpaid Principal Balance.
Cash and cash equivalents were $71.4
million at the end of the quarter.
The Tax Cut and Jobs Act of 2017 had no impact on fourth quarter
earnings.
Guidance for Full Year and First Quarter 2018
OnDeck
provided the following guidance for the full year ending
December 31, 2018 and three months
ending March 31, 2018.
Full Year 2018
- Gross revenue between $370
million and $382 million.
- GAAP Net income (loss) attributable to OnDeck between
$(2) million and $10 million.
- Adjusted Net income between $16
million and $28 million.
This outlook assumes unpaid principal balance growth between 10%
and 15%, a full year provision rate between 6% and 7%, noteworthy
real estate disposition and debt extinguishment costs between
$4 million and $5 million, and an additional approximately
$5 million investment compared to the
annualized Technology and Analytics operating expense of the fourth
quarter 2017.
First Quarter 2018
- Gross revenue between $86 million
and $90 million.
- GAAP Net income (loss) attributable to OnDeck between
$(5.5) million and $(1.5) million.
- Adjusted Net income between $1
million and $5 million.
This outlook assumes between 5% and 10% sequential originations
growth and approximately $43 million
of operating expense which includes the $3.2
million charge for the partial termination of our
New York office lease.
OnDeck also noted that it may be able to make additional
dispositions of portions of its office space during 2018, which
would produce multi-year savings but would likely require cash or
non-cash charges or both in the quarter the transaction(s) are
booked. OnDeck's first quarter and full year 2018 guidance
includes the $3.2 million charge
related to the partial termination of our New York office lease. Any future real
estate disposition charges are not included. Refer to the
Non-GAAP Guidance Reconciliation section below for a reconciliation
of Adjusted Net Income guidance to GAAP Net income guidance.
Conference Call
OnDeck will host a conference call to
discuss fourth quarter 2017 financial results on February 13, 2018 at 8:00
AM ET. Hosting the call will be Noah
Breslow, Chief Executive Officer, and Howard Katzenberg, Chief Financial
Officer. The conference call can be accessed toll free by
dialing (833) 227-5836 for calls within the U.S., or by dialing
(647) 689-4063 for international calls. The Conference ID is
5468078. A live webcast of the call will also be available at
https://investors.ondeck.com under the Press & Events menu.
About OnDeck
OnDeck (NYSE: ONDK) is the leader in
online small business lending. Since 2007, the company has
powered Main Street's growth through advanced lending
technology and a constant dedication to customer service. OnDeck's
proprietary credit scoring system - the OnDeck Score® -
leverages advanced analytics, enabling OnDeck to make real-time
lending decisions and deliver capital to small businesses in as
little as 24 hours. OnDeck offers business owners a complete
financing solution, including the online lending industry's widest
range of term loans and lines of credit. To date, the company has
deployed over $8 billion to more than
80,000 customers in 700 different industries across the United
States, Canada and Australia. OnDeck has an A+
rating with the Better Business Bureau and operates the
educational small business financing website BusinessLoans.com. For
more information, please visit www.ondeck.com.
*About Non-GAAP Financial Measures
This press release
and its attachments include Adjusted EBITDA, historical and
projected Adjusted Net income (loss), Pre-Provision Operating
Income and Pre-Provision Operating Yield. All of these are
financial measures not calculated or presented in accordance with
United States generally accepted
accounting principles, or GAAP, because they all exclude items
required to be included in the most directly comparable measure
calculated and presented in accordance with GAAP. We believe
these non-GAAP measures provide useful supplemental information for
period-to-period comparisons of our business and can assist
investors and others in understanding and evaluating our operating
results. However, these non-GAAP measures should not be considered
in isolation or as an alternative to any measures of financial
performance calculated and presented in accordance with GAAP. Other
companies may calculate these or similarly titled non-GAAP measures
differently than we do. See "Non-GAAP Reconciliation" and "Non-GAAP
Guidance Reconciliation" later in this press release for a
description of these non-GAAP measures and a reconciliation to the
most directly comparable financial measures prepared in accordance
with GAAP.
Safe Harbor Statement
This press release contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and other legal authority.
Forward-looking statements can be identified by words such as
"will," "targets," "expects," "intends, "may," "allows,"
"continues," "believes," "anticipates," "estimates" or similar
expressions. These include statements regarding guidance on gross
revenue, GAAP Net income (loss) and Adjusted Net income for the
first quarter and full year 2018, expected growth in Unpaid
Principal Balance and originations, increased profits in 2018, the
Provision Rate, incremental Technology and Analytics investment and
the amount and timing of possible additional real estate
dispositions and debt extinguishment costs. They are based
only on our current beliefs, expectations and assumptions regarding
the future of our business, anticipated events and trends, the
economy and other future conditions. As such, they are subject to
inherent uncertainties, risks and changes in circumstances that are
difficult to predict and in many cases outside our control.
Therefore, you should not rely on any of these forward-looking
statements. Our expected results may not be achieved, and
actual results may differ materially from our expectations.
Important factors that could cause or contribute to actual results
to differing from our forward-looking statements include risks
relating to: our ability to attract potential customers to our
platform and broaden our distribution capabilities and offerings;
the degree to which potential customers apply for loans are
approved and borrow from us; anticipated trends, growth rates, loan
originations, volume of loans sold and challenges in our business
and in the markets in which we operate; the ability of our
customers to repay loans and our ability to accurately assess
creditworthiness; our ability to adequately reserve for loan
losses; the impact of our decision to tighten our credit policies;
our liquidity and working capital requirements, including the
availability and pricing of new debt facilities, extensions and
increases to existing debt facilities, increases in our corporate
line of credit, securitizations and OnDeck Marketplace sales to
fund our existing operations and planned growth, including the
consequences of having inadequate resources to fund additional
loans or draws on lines of credit; our ability to hire and retain
necessary qualified employees, particularly following our workforce
reductions announced in February and May
2017; our reliance on our third-party service providers and
the effect on our business of originating loans without third-party
funding sources; the impact of increased utilization of cash or
incurred debt to fund originations; the effect on our business of
utilizing cash for voluntary loan purchases from third parties; the
effect on our business of the current credit environment and
increases in interest rate benchmarks; our continuing compliance
measures related to our funding advisor channel and their impact;
changes in our product distribution channel mix and/or funding mix;
our ability to anticipate market needs and develop new and enhanced
offerings to meet those needs; the impact of increases in interest
rates and origination fees we charge on loans; maintaining and
expanding our customer base; the impact of competition in our
industry and innovation by our competitors; our anticipated and
unanticipated growth and growth strategies, including the possible
introduction of new types of loans and possible expansion in
existing or new international markets, and our ability to
effectively manage that growth; our reputation and possible adverse
publicity about us or our industry; the availability and cost of
our funding, including challenges faced by the expiration of
existing debt facilities; locating funding sources for new types of
loans that are ineligible for funding under our existing credit or
securitization facilities and the possibility of reducing
originations of these loan types; our expected utilization of
OnDeck Marketplace transactions and the available OnDeck
Marketplace premiums; our failure to anticipate or adapt to future
changes in our industry; the lack of customer acceptance or failure
of our loans; the impact and effect of the Tax Cuts and Jobs Act of
2017 and any related Treasury regulations, rules or
interpretations, if and when issued; our ability to offer loans to
our small business customers that have terms that are competitive
with alternative sources of capital; our ability to issue new loans
to existing customers that seek additional capital; the evolution
of technology affecting our offerings and our markets; our
compliance with applicable local, state and federal and non-U.S.
laws, rules and regulations and their application and
interpretation, whether existing, modified or new; our ability to
adequately protect our intellectual property; the effect of
litigation or other disputes to which we are or may be a party; the
increased expenses and administrative workload associated with
being a public company; failure to maintain an effective system of
internal controls necessary to accurately report our financial
results and prevent fraud; the estimates and estimate methodologies
used in preparing our consolidated financial statements; the future
trading prices of our common stock, the impact of securities
analysts' reports and shares eligible for future sale on these
prices; our ability to prevent or discover security breaks,
disruption in service and comparable events that could compromise
the personal and confidential information held in our data systems,
reduce the attractiveness of our platform or adversely impact our
ability to service our loans; and other risks, including those
described in our Annual Report on Form 10-K for the year ended
December 31, 2016, our Quarterly
Reports on Form 10-Q for the quarters ended June 30 and September 30,
2017 and in other documents that we file with the Securities
and Exchange Commission from time to time which are or will be
available on the Commission's website at www.sec.gov. Except as
required by law, we undertake no duty to update the information in
this press release.
Investor Contact:
Scott
Reynolds
646.668.3551
sreynolds@ondeck.com
Media Contact:
Jim
Larkin
203.526.7457
jlarkin@ondeck.com
OnDeck, the OnDeck logo, OnDeck Score and OnDeck
Marketplace are trademarks of On Deck Capital, Inc.
On Deck Capital,
Inc. and Subsidiaries
|
Consolidated
Balance Sheets
|
(unaudited, $ in
thousands, except share and per share data)
|
|
|
|
|
|
December 31,
2017
|
|
December 31,
2016
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
71,362
|
|
|
$
|
79,554
|
|
Restricted
cash
|
43,462
|
|
|
44,432
|
|
Loans held for
investment
|
952,796
|
|
|
1,000,445
|
|
Less: Allowance for
loan losses
|
(109,015)
|
|
|
(110,162)
|
|
Loans held for
investment, net
|
843,781
|
|
|
890,283
|
|
Loans held for
sale
|
—
|
|
|
373
|
|
Property, equipment
and software, net
|
23,572
|
|
|
29,405
|
|
Other
assets
|
13,867
|
|
|
20,044
|
|
Total
assets
|
$
|
996,044
|
|
|
$
|
1,064,091
|
|
Liabilities and
equity
|
|
|
|
Liabilities:
|
|
|
|
Accounts
payable
|
$
|
2,674
|
|
|
$
|
5,271
|
|
Interest
payable
|
2,330
|
|
|
2,122
|
|
Funding
debt
|
684,269
|
|
|
726,639
|
|
Corporate
debt
|
7,985
|
|
|
27,966
|
|
Accrued expenses and
other liabilities
|
32,730
|
|
|
38,496
|
|
Total
liabilities
|
729,988
|
|
|
800,494
|
|
Stockholders' equity
(deficit):
|
|
|
|
Common stock—$0.005
par value, 1,000,000,000 shares authorized and 77,284,266 and
74,801,825 shares issued and 73,822,001 and 71,605,708 outstanding
at December 31, 2017 and 2016, respectively.
|
386
|
|
|
374
|
|
Treasury stock—at
cost
|
(7,965)
|
|
|
(6,697)
|
|
Additional paid-in
capital
|
492,509
|
|
|
477,526
|
|
Accumulated
deficit
|
(222,833)
|
|
|
(211,299)
|
|
Accumulated other
comprehensive loss
|
(52)
|
|
|
(379)
|
|
Total On Deck
Capital, Inc. stockholders' equity
|
262,045
|
|
|
259,525
|
|
Noncontrolling
interest
|
4,011
|
|
|
4,072
|
|
Total
equity
|
266,056
|
|
|
263,597
|
|
Total liabilities
and equity
|
$
|
996,044
|
|
|
$
|
1,064,091
|
|
|
|
|
|
Memo:
|
|
|
|
Unpaid Principal
Balance1
|
$
|
936,239
|
|
|
$
|
980,451
|
|
Interest Earning
Assets2
|
$
|
936,239
|
|
|
$
|
980,821
|
|
Loans3
|
$
|
952,796
|
|
|
$
|
1,000,818
|
|
On Deck Capital,
Inc. and Subsidiaries
|
Consolidated
Average Balance Sheets4
|
(unaudited, $ in
thousands)
|
|
|
Average Three
Months
Ended December 31,
|
|
Average Twelve
Months
Ended December 31,
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
50,692
|
|
|
$
|
73,636
|
|
|
$
|
55,725
|
|
|
$
|
85,524
|
|
Restricted
cash
|
51,312
|
|
|
49,004
|
|
|
57,053
|
|
|
41,695
|
|
Loans held for
investment
|
953,492
|
|
|
946,884
|
|
|
990,287
|
|
|
790,897
|
|
Less: Allowance for
loan losses
|
(106,199)
|
|
|
(95,059)
|
|
|
(108,829)
|
|
|
(75,432)
|
|
Loans held for
investment, net
|
847,293
|
|
|
851,825
|
|
|
881,458
|
|
|
715,465
|
|
Loans held for
sale
|
—
|
|
|
941
|
|
|
355
|
|
|
7,176
|
|
Property, equipment
and software, net
|
24,110
|
|
|
29,902
|
|
|
26,636
|
|
|
29,668
|
|
Other
assets
|
15,775
|
|
|
19,680
|
|
|
17,758
|
|
|
20,970
|
|
Total
assets
|
$
|
989,182
|
|
|
$
|
1,024,988
|
|
|
$
|
1,038,985
|
|
|
$
|
900,498
|
|
Liabilities and
equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
$
|
2,961
|
|
|
$
|
3,906
|
|
|
$
|
3,284
|
|
|
$
|
4,120
|
|
Interest
payable
|
2,226
|
|
|
1,821
|
|
|
2,301
|
|
|
1,254
|
|
Funding
debt
|
685,194
|
|
|
682,144
|
|
|
724,340
|
|
|
548,530
|
|
Corporate
debt
|
6,282
|
|
|
19,583
|
|
|
16,160
|
|
|
8,662
|
|
Accrued expenses and
other liabilities
|
31,392
|
|
|
34,401
|
|
|
33,265
|
|
|
33,095
|
|
Total
liabilities
|
728,055
|
|
|
741,855
|
|
|
779,350
|
|
|
595,661
|
|
|
|
|
|
|
|
|
|
Total On Deck
Capital, Inc. stockholders' equity
|
256,848
|
|
|
278,649
|
|
|
254,634
|
|
|
299,447
|
|
Noncontrolling
interest
|
4,279
|
|
|
4,484
|
|
|
5,001
|
|
|
5,390
|
|
Total
equity
|
261,127
|
|
|
283,133
|
|
|
259,635
|
|
|
304,837
|
|
Total liabilities
and equity
|
$
|
989,182
|
|
|
$
|
1,024,988
|
|
|
$
|
1,038,985
|
|
|
$
|
900,498
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
Unpaid Principal
Balance
|
$
|
937,021
|
|
|
$
|
929,304
|
|
|
$
|
972,269
|
|
|
$
|
776,793
|
|
Interest Earning
Assets
|
$
|
937,021
|
|
|
$
|
930,238
|
|
|
$
|
972,622
|
|
|
$
|
783,763
|
|
Loans
|
$
|
953,492
|
|
|
$
|
947,825
|
|
|
$
|
990,642
|
|
|
$
|
798,073
|
|
On Deck Capital,
Inc.
|
Consolidated
Statements of Operations
|
(unaudited, $ in
thousands, except share and per share data)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
83,621
|
|
$
|
76,118
|
|
$
|
334,575
|
|
$
|
264,844
|
|
Gain on sales of
loans
|
595
|
|
1,817
|
|
2,485
|
|
14,411
|
|
Other
revenue
|
3,525
|
|
3,894
|
|
13,890
|
|
12,062
|
|
Gross
revenue
|
87,741
|
|
81,829
|
|
350,950
|
|
291,317
|
|
Cost of
revenue:
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
34,431
|
|
55,669
|
|
152,926
|
|
149,963
|
|
Funding
costs
|
11,212
|
|
9,900
|
|
45,435
|
|
32,448
|
|
Total cost of
revenue
|
45,643
|
|
65,569
|
|
198,361
|
|
182,411
|
|
Net
revenue
|
42,098
|
|
16,260
|
|
152,589
|
|
108,906
|
|
Operating
expense:
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
10,696
|
|
16,917
|
|
52,786
|
|
67,011
|
|
Technology and
analytics
|
11,432
|
|
16,005
|
|
53,392
|
|
58,899
|
|
Processing and
servicing
|
4,555
|
|
5,458
|
|
18,076
|
|
19,719
|
|
General and
administrative
|
10,999
|
|
14,112
|
|
41,916
|
|
48,345
|
|
Total operating
expense
|
37,682
|
|
52,492
|
|
166,170
|
|
193,974
|
|
Income (loss) from
operations
|
4,416
|
|
(36,232)
|
|
(13,581)
|
|
(85,068)
|
|
Other
expense:
|
|
|
|
|
|
|
|
|
Interest
expense
|
(58)
|
|
(228)
|
|
(764)
|
|
(414)
|
|
Total other
expense
|
(58)
|
|
(228)
|
|
(764)
|
|
(414)
|
|
Loss before provision
for income taxes
|
4,358
|
|
(36,460)
|
|
(14,345)
|
|
(85,482)
|
|
Provision for income
taxes
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Net income
(loss)
|
4,358
|
|
(36,460)
|
|
(14,345)
|
|
(85,482)
|
|
Net loss attributable
to noncontrolling interest
|
738
|
|
603
|
|
2,811
|
|
2,524
|
|
Net income (loss)
attributable to On Deck Capital, Inc. common
stockholders
|
$
|
5,096
|
|
$
|
(35,857)
|
|
$
|
(11,534)
|
|
$
|
(82,958)
|
|
Net income (loss) per
share attributable to On Deck Capital, Inc. common
shareholders:
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
$
|
0.07
|
|
$
|
(0.50)
|
|
$
|
(0.16)
|
|
$
|
(1.17)
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
73,708,613
|
|
71,487,566
|
|
72,890,313
|
|
70,934,937
|
|
Diluted
|
77,153,920
|
|
71,487,566
|
|
72,890,313
|
|
70,934,937
|
|
|
|
|
|
|
|
|
|
|
On Deck Capital,
Inc.
|
Percentage of
Average Interest Earning Assets2
|
(unaudited, $ in
thousands)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Interest
income
|
35.4
|
%
|
|
32.5
|
%
|
|
34.4
|
%
|
|
33.8
|
%
|
|
Gain on sales of
loans
|
0.3
|
%
|
|
0.8
|
%
|
|
0.3
|
%
|
|
1.8
|
%
|
|
Other
revenue
|
1.5
|
%
|
|
1.7
|
%
|
|
1.4
|
%
|
|
1.5
|
%
|
|
Gross
revenue
|
37.2
|
%
|
|
34.9
|
%
|
|
36.1
|
%
|
|
37.2
|
%
|
|
Cost of
revenue:
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
14.6
|
%
|
|
23.7
|
%
|
|
15.7
|
%
|
|
19.1
|
%
|
|
Funding
costs
|
4.8
|
%
|
|
4.2
|
%
|
|
4.7
|
%
|
|
4.1
|
%
|
|
Total cost of
revenue
|
19.3
|
%
|
|
28.0
|
%
|
|
20.4
|
%
|
|
23.3
|
%
|
|
Net
revenue
|
17.8
|
%
|
|
6.9
|
%
|
|
15.7
|
%
|
|
13.9
|
%
|
|
Operating
expense:
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
4.5
|
%
|
|
7.2
|
%
|
|
5.4
|
%
|
|
8.6
|
%
|
|
Technology and
analytics
|
4.8
|
%
|
|
6.8
|
%
|
|
5.5
|
%
|
|
7.5
|
%
|
|
Processing and
servicing
|
1.9
|
%
|
|
2.3
|
%
|
|
1.9
|
%
|
|
2.5
|
%
|
|
General and
administrative
|
4.7
|
%
|
|
6.0
|
%
|
|
4.3
|
%
|
|
6.2
|
%
|
|
Total operating
expense
|
16.0
|
%
|
|
22.4
|
%
|
|
17.1
|
%
|
|
24.8
|
%
|
|
Income (loss) from
operations
|
1.9
|
%
|
|
(15.5)
|
%
|
|
(1.4)
|
%
|
|
(10.9)
|
%
|
|
Other
expense:
|
|
|
|
|
|
|
|
|
Interest
expense
|
—
|
%
|
|
(0.1)
|
%
|
|
(0.1)
|
%
|
|
(0.1)
|
%
|
|
Total other
expense
|
—
|
%
|
|
(0.1)
|
%
|
|
(0.1)
|
%
|
|
(0.1)
|
%
|
|
Net income (loss)
before provision for income taxes
|
1.9
|
%
|
|
(15.6)
|
%
|
|
(1.5)
|
%
|
|
(10.9)
|
%
|
|
Provision for income
taxes
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Net income
(loss)
|
1.9
|
%
|
|
(15.6)
|
%
|
|
(1.5)
|
%
|
|
(10.9)
|
%
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
Average Interest
Earning Assets
|
$937,021
|
|
$930,238
|
|
$972,622
|
|
$783,763
|
|
Supplemental
Information
|
|
Key Performance
Metrics
|
($ in thousands,
except percentage
data)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Originations5
|
$
|
546,360
|
|
|
$
|
631,890
|
|
|
$
|
2,114,663
|
|
|
$
|
2,403,796
|
|
Effective Interest
Yield6
|
35.6
|
%
|
|
33.2
|
%
|
|
33.9
|
%
|
|
33.3
|
%
|
Net Interest
Margin7
|
30.7
|
%
|
|
28.2
|
%
|
|
29.7
|
%
|
|
29.7
|
%
|
Marketplace
Gain on Sale Rate8
|
3.4
|
%
|
|
2.1
|
%
|
|
3.4
|
%
|
|
3.8
|
%
|
Cost of Funds
Rate9
|
6.5
|
%
|
|
5.8
|
%
|
|
6.3
|
%
|
|
5.9
|
%
|
Provision
Rate10
|
6.4
|
%
|
|
10.2
|
%
|
|
7.5
|
%
|
|
7.4
|
%
|
Reserve
Ratio11
|
11.6
|
%
|
|
11.2
|
%
|
|
11.6
|
%
|
|
11.2
|
%
|
15+ Day Delinquency
Ratio12
|
6.7
|
%
|
|
6.6
|
%
|
|
6.7
|
%
|
|
6.6
|
%
|
Net Charge-off
Rate13
|
12.9
|
%
|
|
14.2
|
%
|
|
15.8
|
%
|
|
12.0
|
%
|
Income (loss) from
operations
|
$
|
4,416
|
|
|
$
|
(36,232)
|
|
|
$
|
(13,581)
|
|
|
$
|
(85,068)
|
|
Operating Income
Yield14
|
1.9
|
%
|
|
(15.5)
|
%
|
|
(1.4)
|
%
|
|
(10.9)
|
%
|
Pre-Provision
Operating Income15
|
$
|
38,847
|
|
|
$
|
19,437
|
|
|
$
|
139,345
|
|
|
$
|
64,895
|
|
Pre-Provision
Operating Yield16
|
16.5
|
%
|
|
8.3
|
%
|
|
14.3
|
%
|
|
8.3
|
%
|
|
|
|
|
Marketplace Gain on Sale
Rate8
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Gain on sales of
loans(a)
|
$
|
595
|
|
|
$
|
1,817
|
|
|
$
|
2,485
|
|
|
$
|
14,411
|
|
Carrying value of
loans sold
|
$
|
17,493
|
|
|
$
|
85,617
|
|
|
$
|
74,176
|
|
|
$
|
378,537
|
|
Marketplace
Gain on Sale Rate(a)
|
3.4
|
%
|
|
2.1
|
%
|
|
3.4
|
%
|
|
3.8
|
%
|
(a) The
three and twelve months ended December 31, 2017 and 2016 include
amounts resulting from transfers of financial assets as shown in
the following table.
|
|
|
|
|
Activity in
Servicing Rights
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Fair value at the
beginning of period
|
$
|
629
|
|
|
$
|
1,687
|
|
|
$
|
1,131
|
|
|
$
|
3,489
|
|
Addition:
|
|
|
|
|
|
|
|
Servicing resulting
from transfers of financial assets
|
182
|
|
|
399
|
|
|
1,120
|
|
|
2,690
|
|
Changes in fair
value:
|
|
|
|
|
|
|
|
Other changes in fair
value(b)
|
(657)
|
|
|
(955)
|
|
|
(2,097)
|
|
|
(5,048)
|
|
Fair value at the end
of period
|
$
|
154
|
|
|
$
|
1,131
|
|
|
$
|
154
|
|
|
$
|
1,131
|
|
(b)
Represents changes due to collection of expected cash flows through
December 31, 2017 and 2016.
|
|
|
|
|
Marketplace Originations as Percent
of Term Loan Originations
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Marketplace
originations(c)
|
$
|
17,098
|
|
|
$
|
84,155
|
|
|
$
|
73,563
|
|
|
$
|
377,645
|
|
Origination of term
loans
|
$
|
437,285
|
|
|
$
|
531,287
|
|
|
$
|
1,696,514
|
|
|
$
|
2,051,849
|
|
Marketplace
originations as percent of term loan originations
|
3.9
|
%
|
|
15.8
|
%
|
|
3.7
|
%
|
|
18.4
|
%
|
(c)
Includes loans sold that were previously designated as held for
investment in at least one fiscal quarter prior to the quarter in
which they were sold.
|
|
|
|
|
|
|
|
|
Activity in Loan
Held for Investment Balances
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Unpaid Principal
Balance beginning of period
|
$
|
940,881
|
|
|
$
|
889,303
|
|
|
$
|
980,451
|
|
|
$
|
543,790
|
|
+ Total
originations(d)
|
546,360
|
|
|
631,890
|
|
|
2,114,663
|
|
|
2,403,796
|
|
+
Loans transferred from loans held for sale to loans held for
investment and loan purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
939
|
|
-
Marketplace originations
|
(7,100)
|
|
|
(84,155)
|
|
|
(63,065)
|
|
|
(377,097)
|
|
- Sales
of other loans(e)
|
(9,998)
|
|
|
—
|
|
|
(10,498)
|
|
|
(548)
|
|
+
Purchase of Loans
|
111
|
|
|
—
|
|
|
13,841
|
|
|
6,672
|
|
- Net
charge-offs
|
(30,288)
|
|
|
(32,875)
|
|
|
(154,073)
|
|
|
(93,112)
|
|
-
Principal paid down(d)(f)
|
(503,727)
|
|
|
(423,712)
|
|
|
(1,945,080)
|
|
|
(1,503,989)
|
|
Unpaid Principal
Balance end of period
|
936,239
|
|
|
980,451
|
|
|
936,239
|
|
|
980,451
|
|
+ Net
deferred origination costs
|
16,557
|
|
|
19,994
|
|
|
16,557
|
|
|
19,994
|
|
Loans held for
investment
|
952,796
|
|
|
1,000,445
|
|
|
952,796
|
|
|
1,000,445
|
|
-
Allowance for loan losses
|
(109,015)
|
|
|
(110,162)
|
|
|
(109,015)
|
|
|
(110,162)
|
|
Loans held for
investment, net
|
$
|
843,781
|
|
|
$
|
890,283
|
|
|
$
|
843,781
|
|
|
$
|
890,283
|
|
(d)
Includes Unpaid Principal Balance of term loans rolled into new
originations of $85.3 and $72.8 million in the three months ended
December 31, 2017 and 2016, respectively, and $306.2 million and
$273.5 million for the twelve months ended December 31, 2017 and
2016, respectively.
|
(e)
Includes loans sold that were previously designated as held for
investment in at least one fiscal quarter prior to the quarter in
which they were sold.
|
(f)
Excludes principal that was paid down related to renewed loans sold
in the period which were designated as held for investment in the
amount of $0 and $0.3 million in the three months ended December
31, 2017 and 2016, respectively, and $0.2 million and $1.6 million
for the twelve months ended December 31, 2017 and 2016,
respectively.
|
|
|
|
|
|
|
Activity in the
Allowance for Loan Losses
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Allowance for loan
losses beginning of period
|
$
|
104,872
|
|
|
$
|
87,368
|
|
|
$
|
110,162
|
|
|
$
|
53,311
|
|
+ Provision
for loan losses(g)
|
34,431
|
|
|
55,669
|
|
|
152,926
|
|
|
149,963
|
|
- Gross
charge-offs
|
(35,314)
|
|
|
(34,975)
|
|
|
(171,226)
|
|
|
(100,407)
|
|
+
Recoveries
|
5,026
|
|
|
2,100
|
|
|
17,153
|
|
|
7,295
|
|
Allowance for loan
losses end of period
|
$
|
109,015
|
|
|
$
|
110,162
|
|
|
$
|
109,015
|
|
|
$
|
110,162
|
|
(g)
Excludes a provision expense of $0.3 million and a $0.1 million for
the three months ended December 31, 2017 and 2016, respectively,
and provision expense of $0.5
million and provision release of $0.3 million for the twelve months
ended December 31, 2017 and 2016, respectively, for unfunded loan
commitments. The provision for unfunded loan commitments is
included in general and administrative expense.
|
Supplemental
Information
|
|
Non-GAAP
Reconciliation
|
(in thousands, except
share and per share data)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Net income
(loss)
|
$
|
4,358
|
|
|
$
|
(36,460)
|
|
|
$
|
(14,345)
|
|
|
$
|
(85,482)
|
|
|
Interest
expense
|
58
|
|
|
228
|
|
|
764
|
|
|
414
|
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Depreciation and
amortization
|
2,328
|
|
|
2,575
|
|
|
9,951
|
|
|
9,462
|
|
|
Stock-based
compensation
|
2,994
|
|
|
4,492
|
|
|
12,515
|
|
|
15,915
|
|
|
Adjusted
EBITDA17
|
$
|
9,738
|
|
|
$
|
(29,165)
|
|
|
$
|
8,885
|
|
|
$
|
(59,691)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Net income (loss)
attributable to On Deck Capital, Inc. common
stockholders
|
$
|
5,096
|
|
|
$
|
(35,857)
|
|
|
$
|
(11,534)
|
|
|
$
|
(82,958)
|
|
|
Stock-based
compensation
|
2,994
|
|
|
4,492
|
|
|
12,515
|
|
|
15,915
|
|
|
Adjusted Net income
(loss)18
|
$
|
8,090
|
|
|
$
|
(31,365)
|
|
|
$
|
981
|
|
|
$
|
(67,043)
|
|
|
Adjusted Net income
(loss) per share19:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.11
|
|
|
$
|
(0.44)
|
|
|
$
|
0.01
|
|
|
$
|
(0.95)
|
|
|
Diluted
|
$
|
0.10
|
|
|
$
|
(0.44)
|
|
|
$
|
0.01
|
|
|
$
|
(0.95)
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
73,708,613
|
|
|
71,487,566
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|
Diluted
|
77,153,920
|
|
|
71,487,566
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Income (loss) from
operations
|
$
|
4,416
|
|
|
$
|
(36,232)
|
|
|
$
|
(13,581)
|
|
|
$
|
(85,068)
|
|
|
Provision for loan
losses
|
34,431
|
|
|
55,669
|
|
|
152,926
|
|
|
149,963
|
|
|
Pre-Provision
Operating Income15
|
$
|
38,847
|
|
|
$
|
19,437
|
|
|
$
|
139,345
|
|
|
$
|
64,895
|
|
|
Operating Income
Yield14
|
1.9
|
%
|
|
(15.5)
|
%
|
|
(1.4)
|
%
|
|
(10.9)
|
%
|
|
Provision for loan
losses / Average Interest Earning Assets
|
14.6
|
%
|
|
23.7
|
%
|
|
15.7
|
%
|
|
19.1
|
%
|
|
Pre-Provision
Operating Yield16
|
16.5
|
%
|
|
8.3
|
%
|
|
14.3
|
%
|
|
8.3
|
%
|
|
Average Interest
Earning Assets2
|
$937,021
|
|
|
$930,238
|
|
|
$972,622
|
|
|
$783,763
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
Compensation (in thousands)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Sales and
marketing
|
$
|
599
|
|
|
$
|
1,253
|
|
|
$
|
2,429
|
|
|
$
|
4,002
|
|
Technology and
analytics
|
476
|
|
|
758
|
|
|
2,300
|
|
|
3,422
|
|
Processing and
servicing
|
54
|
|
|
315
|
|
|
483
|
|
|
869
|
|
General and
administrative
|
1,865
|
|
|
2,166
|
|
|
7,303
|
|
|
7,622
|
|
Total stock-based
compensation
|
$
|
2,994
|
|
|
$
|
4,492
|
|
|
$
|
12,515
|
|
|
$
|
15,915
|
|
Non-GAAP Guidance
Reconciliation
|
(in
millions)
|
|
|
Three Months
Ending
March 31,
|
|
Twelve Months
Ending
December 31,
|
|
|
|
|
2018
|
|
2018
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Net income (loss)
attributable to On Deck Capital, Inc. common
stockholders
|
$
|
(5.5)
|
|
|
$
|
(1.5)
|
|
|
$
|
(2)
|
|
|
$
|
10
|
|
|
Loss from early
extinguishment of debt
|
—
|
|
|
—
|
|
|
1.2
|
|
|
1.2
|
|
|
Real estate
disposition charges
|
3.2
|
|
|
3.2
|
|
|
3.2
|
|
|
3.2
|
|
|
Stock-based
compensation
|
3.3
|
|
|
3.3
|
|
|
13.6
|
|
|
13.6
|
|
|
Adjusted Net
income18
|
$
|
1.0
|
|
|
$
|
5.0
|
|
|
$
|
16.0
|
|
|
$
|
28.0
|
|
|
Supplemental
Channel Information
|
|
Quarterly
Origination Channel Distribution
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
Percentage of
originations (dollars)
|
|
|
|
|
|
|
|
Direct &
Strategic Partner
|
72.2
|
%
|
|
71.6
|
%
|
|
73.1
|
%
|
|
72.7
|
%
|
Funding
Advisor
|
27.8
|
%
|
|
28.4
|
%
|
|
26.9
|
%
|
|
27.3
|
%
|
Notes:
|
(1) Unpaid
Principal Balance represents the total amount of principal
outstanding of term loans held for investment, amounts outstanding
under lines of credit and the amortized cost of loans purchased
from other than issuing bank partners at the end of the period. It
excludes net deferred origination costs, allowance for loan losses
and any loans sold or held for sale at the end of the
period.
|
(2)
Interest Earning Assets represents the sum of Unpaid Principal
Balance plus the amount of principal outstanding of loans held for
sale in the period. It excludes net deferred origination costs and
allowance for loan losses. Average Interest Earnings Assets is
calculated as the average of Interest Earnings Assets at the
beginning of the period and the end of each month in the
period.
|
(3) Loans
represents the sum of loans held for investment and loans held for
sale during the period.
|
(4)
Average Balance Sheet Items for the period represent the average as
of the beginning of the month in the period and as of the end of
each month in the period.
|
(5)
Originations represent the total principal amount of the term loans
we made during the period, plus the total amount drawn on lines of
credit during the period. Many of our repeat term loan customers
renew their term loans before their existing term loan is fully
repaid. In accordance with industry practice, originations of such
repeat term loans are presented as the full renewal loan principal,
rather than the net funded amount, which would be the renewal term
loan's principal net of the unpaid principal balance on the
existing term loan. Loans referred to, and funded by, our issuing
bank partners and later purchased by us are included as part of our
originations.
|
(6)
Effective Interest Yield is the rate of return we achieve on loans
outstanding during a period. It is calculated as our business day
adjusted annualized interest income divided by average Loans.
Annualization is based on 252 business days per year, which is
typical weekdays per year less U.S. Federal Reserve Bank holidays.
Net deferred origination costs in loans held for investment and
loans held for sale consist of deferred origination fees and costs.
Deferred origination costs are limited to costs directly
attributable to originating loans such as commissions, vendor costs
and personnel costs directly related to the time spent by the
personnel performing activities related to loan origination and
increase the carrying value of loans, thereby decreasing the
Effective Interest Yield earned.
|
(7) Net
Interest Margin, is calculated as annualized Net Interest Income
divided by Average Interest Earning Assets. Net Interest Income
represents interest income less funding cost during the period.
Interest income is net of fees on loans held for investment and
held for sale. Net deferred origination costs in loans held for
investment and loans held for sale consist of deferred origination
costs as offset by corresponding deferred origination fees.
Deferred origination fees include fees paid up front to us by
customers when loans are funded. Deferred origination costs are
limited to costs directly attributable to originating loans such as
commissions, vendor costs and personnel costs directly related to
the time spent by the personnel performing activities related to
loan origination. Funding cost is the interest expense, fees, and
amortization of deferred debt issuance costs we incur in connection
with our lending activities across all of our debt facilities.
Annualization is based on 365 days per year and is calendar day
adjusted.
|
(8)
Marketplace Gain on Sale Rate equals our gain on sale revenue from
loans sold through OnDeck Marketplace divided by the carrying value
of loans sold, which includes both unpaid principal balance sold
and the remaining carrying value of the net deferred origination
costs. A portion of loans regularly sold through OnDeck
Marketplace are or may be loans which were initially
designated as held for investment upon origination. The portion of
such loans sold in a given period may vary materially depending
upon market conditions and other circumstances.
|
(9) Cost
of Funds Rate is our funding cost, which is the interest expense,
fees and amortization of deferred debt issuance costs we incur in
connection with our lending activities across all of our debt
facilities. For full years, it is calculated as our funding cost
divided by average funding debt outstanding and for interim periods
it is calculated as our annualized funding cost for the period
divided by average funding debt outstanding. Annualization is based
on 4 quarters per year and is not business or calendar day
adjusted.
|
(10)
Provision Rate equals the provision for loan losses divided by the
new originations volume of loans held for investment, net of
originations of sales of such loans within the period. Because we
reserve for probable credit losses inherent in the portfolio upon
origination, this rate is significantly impacted by the expectation
of credit losses for the period's originations volume. This rate
may also be impacted by changes in loss expectations for loans
originated prior to the commencement of the period. The denominator
of the Provision Rate formula includes the full amount of
originations in a period.
|
(11)
Reserve Ratio is our allowance for loan losses as of the end of the
period divided by the Unpaid Principal Balance as of the end of the
period.
|
(12) 15+
Day Delinquency Ratio equals the aggregate Unpaid Principal Balance
for our loans that are 15 or more calendar days past due as of the
end of the period as a percentage of the Unpaid Principal Balance
for such period. The Unpaid Principal Balance for our loans that
are 15 or more calendar days past due includes loans that are
paying and non-paying. Because our loans require daily and weekly
repayments, excluding weekends and holidays, they may be deemed
delinquent more quickly than loans from traditional lenders that
require only monthly payments. 15+ Day Delinquency Ratio is not
annualized, but reflects balances as of the end of the
period.
|
(13) Net
Charge-off Rate is calculated as our annualized net charge-offs for
the period divided by the average Unpaid Principal Balance
outstanding. Annualization is based on 4 quarters per year
and is not business or calendar day adjusted. Net charge-offs
are charged-off loans in the period, net of recoveries.
(14) Operating Income Yield represents Operating Income
divided by Average Interest Earning Assets, annualized.
Annualization is based on a 365 days per year and is calendar day
adjusted.
|
(15)
Pre-Provision Operating Income represents Income (Loss) from
operations plus Provision for loan losses in the period. Our
use of Pre-Provision Operating Income has limitations as an
analytical tool, and you should not consider it in isolation or as
a substitute for analysis of our results as reported under
GAAP. In particular, Pre-Provision Operating Income excludes
Provision for loan losses, and as a result does not reflect the
estimated loss of principal associated with the failure of our
customers to repay their loans in full, which is a material cost of
our business.
|
(16)
Pre-Provision Operating Yield represents Pre-Provision Operating
Income divided by Average Interest Earning Assets, annualized.
Annualization is based on a 365 days per year and is calendar day
adjusted.
Our use of Pre-Provision Operating Yield has limitations as
an analytical tool, and you should not consider it in isolation or
as a substitute for analysis of our results as reported under
GAAP. In particular, Pre-Provision Operating Yield excludes
Provision for loan losses and has the same limitations as described
above for Pre-Provision Operating Income.
|
(17)
Adjusted EBITDA represents our Net income (loss), adjusted to
exclude interest expense associated with debt used for corporate
purposes (rather than funding costs associated with lending
activities), income tax expense, depreciation and amortization and
stock-based compensation expense. Our use of Adjusted EBITDA has
limitations as an analytical tool, and you should not consider it
in isolation or as a substitute for analysis of our results as
reported under GAAP. Some of these limitations are: although
depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the
future, and Adjusted EBITDA does not reflect cash capital
expenditure requirements for such replacements or for new capital
expenditure requirements; Adjusted EBITDA does not reflect changes
in, or cash requirements for, our working capital needs; Adjusted
EBITDA does not reflect the potentially dilutive impact of
stock-based compensation; Adjusted EBITDA does not reflect interest
associated with debt used for corporate purposes or tax payments
that may represent a reduction in cash available to us.
|
(18)
Adjusted Net income (loss) represents Net income (loss)
attributable to On Deck Capital, Inc. common stockholders adjusted
to exclude stock-based compensation expense, each on the same basis
and with the same limitations as described above for Adjusted
EBITDA.
|
(19)
Adjusted Net income (loss) per share represents Net income (loss)
attributable to On Deck Capital, Inc. common stockholders adjusted
to exclude stock-based compensation expense, each on the same basis
and with the same limitations as described above for Adjusted
EBITDA, divided by the weighted average common shares outstanding
during the period.
|
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SOURCE On Deck Capital, Inc.