NEW YORK, Aug. 7, 2018 /PRNewswire/ -- OnDeck®
(NYSE:ONDK), the leader in online lending for small business, today
announced second quarter 2018 Net income of $5.8 million, Adjusted Net income of $10.0 million and Gross revenue of $95.6 million.
"We are pleased with our second quarter results that reflect
continued execution of our strategy," said Noah Breslow, chief executive officer, OnDeck.
"We delivered record net income driven by asset growth and margin
expansion, and our investments in risk management continue to pay
off as credit metrics remained strong. We also achieved key
milestones on our second On-Deck-as-a-Service bank partnership,
grew our international business, strengthened our funding profile
by closing four significant financing facilities, and advanced the
development of our next major lending product - all which position
us well for the second half of the year and beyond."
Review of Financial Results for the Second Quarter of
2018
Net income was $5.8 million, or
$0.07 per diluted share, improved
from the Net loss of $1.5 million, or
$0.02 per diluted share, in the
year-ago period.
Adjusted Net income was $10.0
million, or $0.13 per diluted
share, compared to Adjusted Net income of $4.7 million, or $0.06 per diluted share, in the year-ago
period.
Unpaid Principal Balance grew 3% sequentially and 8% from a year
ago to $1,027 million. Originations
of $587 million were consistent with
the prior quarter reflecting an increase in the number of loans
funded and decrease in the average loan size. Originations
increased 26% from a year ago with growth in both term loans and
lines of credit.
Gross revenue increased to $95.6
million, up 6% from the prior quarter and 10% from the
year-ago quarter, driven by higher Interest income. The Effective
Interest Yield was 36.1%, up from 35.6% in the prior quarter and
33.5% in the year-ago quarter, primarily reflecting increases in
average loan pricing.
Funding costs of $12.2 million
increased from the prior quarter due to higher debt balances, and
from the year-ago quarter due to higher market interest rates. The
Cost of Funds Rate was 6.6%, down from 6.8% the prior quarter
reflecting favorable refinancing rates on the $225 million securitization and new $100 million revolving credit facility that
closed in April. The Cost of Funds Rate increased from a year
ago reflecting the higher interest rate environment.
Net Interest Margin increased to 32.0% from 31.3% in the prior
quarter and 29.3% in the year-ago quarter reflecting the
improvements in portfolio yield and sequential decrease in the Cost
of Funds Rate.
Credit quality remained strong reflecting our enhancements in
underwriting and collections, and the favorable small business
lending environment. Provision for loan losses was
$33.3 million down $3.0 million sequentially and up slightly from a
year ago while the Provision Rate of 5.7% decreased from both
periods. The 15+ Day Delinquency Ratio of 6.8% and Net
Charge-off Rate of 11.2% were essentially flat sequentially and
improved from a year ago. The Reserve Ratio of 12.1% was also
essentially flat sequentially.
Operating expense was $45.3
million and included $1.4
million of debt extinguishment charges related to the
voluntary prepayment in full of our securitization.
Total assets increased 3% sequentially and from a year ago to
$1,072 million driven by loan growth.
Cash and cash equivalents of $74
million was comparable with balances of $70 million the prior quarter and $78 million a year ago. Funding debt of
$756 million increased at a rate
commensurate with the growth in loans over both periods.
Total OnDeck stockholders' equity of $272
million increased 3% from the prior quarter and 7% from a
year ago and book value per diluted common share outstanding of
$3.46 increased from $3.40 the prior quarter and $3.33 a year ago.
Guidance for Third Quarter 2018
OnDeck provided the following guidance for the three months
ending September 30, 2018:
- Gross revenue between $95 million
and $100 million,
- Net income between $2 million and
$6 million, and
- Adjusted Net income between $6
million and $10 million.
This outlook assumes $44 million
to $46 million of operating
expense.
Guidance for Full Year 2018
OnDeck increased its guidance for the full year ending
December 31, 2018:
- Gross revenue between $380
million and $386 million, up
from between $372 million and
$382 million,
- Net income between $10 million
and $16 million, up from between
$0 and $10
million, and
- Adjusted Net income between $30
million and $36 million, up
from between $18 million and
$28 million.
This outlook assumes Unpaid Principal Balance growth between 10%
and 15% and a full year Provision Rate near the low end of our 2018
guidance of between 6% and 7%, and includes approximately
$7 million of real estate
disposition, severance and debt extinguishment costs.
OnDeck also may terminate additional portions of its office
leases, which would likely result in charges in the quarter in
which the transaction(s) occur. Any future real estate
disposition charges are not included in third quarter or full year
guidance. Refer to the Non-GAAP Guidance Reconciliation section
below for a reconciliation of Net income attributable to OnDeck
guidance to Adjusted Net income guidance.
* Net income (loss) as used in the narrative of this
release is Net income (loss) attributable to On Deck Capital, Inc.
common shareholders in the accompanying tables. Adjusted Net
income (loss) is a Non-GAAP financial measure based on Net income
(loss) attributable to On Deck Capital, Inc. common
shareholders. See "About Non-GAAP Financial Measures."
Conference Call
OnDeck will host a conference call to
discuss second quarter 2018 financial results on August 7, 2018 at 8:00 AM
ET. Hosting the call will be Noah
Breslow, Chief Executive Officer, and Ken Brause, Chief Financial Officer. The
conference call can be accessed toll free by dialing (866) 393-4306
for calls within the U.S., or by dialing (734) 385-2616 for
international calls. The Conference ID is 7156659. 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 proven
leader in transparent and responsible online lending to small
business. Founded in 2006, the company pioneered the use of
data analytics and technology to make real-time lending decisions
and deliver capital rapidly to small businesses. Today,
OnDeck offers a wide range of online term loans and lines of credit
customized for the needs of small business owners. The
company also offers a comprehensive technology and services
platform to the world's leading banks that facilitates online
lending to small business customers. OnDeck has provided over
$9 billion in loans to customers in
700 different industries across the
United States, Canada and
Australia. The company has an A+
rating with the Better Business Bureau and is rated 5 stars by
Trustpilot. For more information, visit www.ondeck.com.
About Non-GAAP Financial Measures
This press release
and its attachments include historical and projected Adjusted Net
income (loss), Adjusted Net income (loss) per share, and Net
Interest Margin. 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," "enables," "targets," "expects," "intends, "may," "allows,"
"plan," "continues," "believes," "anticipates," "estimates" or
similar expressions. These include statements regarding guidance on
gross revenue, GAAP Net income (loss) attributable to OnDeck and
Adjusted Net income for the third quarter and full year 2018,
expected growth in Unpaid Principal Balance and originations,
expected levels of operating expense, the assumed full year
Provision Rate and the amount and timing of possible additional
real estate disposition, severance 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 actual results to differ from our forward-looking
statements include risks relating to: (1) our ability to achieve
consistent profitability in the future in light of our prior loss
history; (2) worsening economic conditions that may result in
decreased demand for our loans and increase our customers' default
rates; (3) the effectiveness of our risk management efforts; (4)
our ability to accurately assess creditworthiness and forecast and
reserve for losses; (5) disruptions in credit markets and the
availability and cost of our key funding sources; (6) our growth
strategies, including the introduction of new products or features,
expanding our OnDeck-as-a-Service platform to other lenders,
expansion into international markets, and our ability to
effectively manage that growth; (7) changes in federal or state
laws or regulations, or judicial decisions, if and when issued or
enacted, involving licensing or supervision of commercial lenders,
interest rate limitations, the enforceability of choice of law
provisions in loan agreements, the validity of bank sponsor
partnerships, the use of brokers or other significant changes; (8)
our ability to prevent or discover security breaches, disruption in
service and comparable events that could compromise confidential
information held in our data systems or adversely impact our
ability to service our loans; (9) our ability to hire and retain
necessary qualified employees in a competitive labor market; and
(10) the impact of competition in our industry and innovation by
our competitors; and other risks, including those described in our
Annual Report on Form 10-K for the year ended December 31, 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:
Steve
Klimas
646.668.3582
sklimas@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.
|
|
Consolidated
Statements of Operations
|
|
(unaudited, $ in
thousands, except share and per share data)
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
92,371
|
|
$
|
83,721
|
|
$
|
178,740
|
|
$
|
170,832
|
|
Gain on sales of
loans
|
—
|
|
260
|
|
—
|
|
1,744
|
|
Other
revenue
|
3,247
|
|
2,670
|
|
7,158
|
|
6,967
|
|
Gross
revenue
|
95,618
|
|
86,651
|
|
185,898
|
|
179,543
|
|
Cost of
revenue:
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
33,293
|
|
32,733
|
|
69,586
|
|
78,913
|
|
Funding
costs
|
12,202
|
|
11,616
|
|
24,023
|
|
22,893
|
|
Total cost of
revenue
|
45,495
|
|
44,349
|
|
93,609
|
|
101,806
|
|
Net
revenue
|
50,123
|
|
42,302
|
|
92,289
|
|
77,737
|
|
Operating
expense:
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
11,432
|
|
15,368
|
|
22,030
|
|
30,187
|
|
Technology and
analytics
|
12,799
|
|
14,769
|
|
23,806
|
|
30,212
|
|
Processing and
servicing
|
5,041
|
|
4,826
|
|
10,262
|
|
9,361
|
|
General and
administrative
|
16,034
|
|
9,590
|
|
33,759
|
|
21,477
|
|
Total operating
expense
|
45,306
|
|
44,553
|
|
89,857
|
|
91,237
|
|
Income (loss) from
operations
|
4,817
|
|
(2,251)
|
|
2,432
|
|
(13,500)
|
|
Other
expense:
|
|
|
|
|
|
|
|
|
Interest
expense
|
43
|
|
318
|
|
94
|
|
671
|
|
Total other
expense
|
43
|
|
318
|
|
94
|
|
671
|
|
Income (loss) before
provision for income taxes
|
4,774
|
|
(2,569)
|
|
2,338
|
|
(14,171)
|
|
Provision for income
taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
Net income
(loss)
|
4,774
|
|
(2,569)
|
|
2,338
|
|
(14,171)
|
|
Net income (loss)
attributable to noncontrolling interest
|
(1,016)
|
|
(1,071)
|
|
(1,535)
|
|
(1,615)
|
|
Net income (loss)
attributable to On Deck Capital, Inc. common
stockholders
|
$
|
5,790
|
|
$
|
(1,498)
|
|
$
|
3,873
|
|
$
|
(12,556)
|
|
Net income (loss) per
share attributable to On Deck Capital, Inc. common
shareholders:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.08
|
|
$
|
(0.02)
|
|
$
|
0.05
|
|
$
|
(0.17)
|
|
Diluted
|
$
|
0.07
|
|
$
|
(0.02)
|
|
$
|
0.05
|
|
$
|
(0.17)
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
74,385,446
|
|
72,688,815
|
|
74,182,929
|
|
72,276,734
|
|
Diluted
|
78,288,267
|
|
72,688,815
|
|
77,786,748
|
|
72,276,734
|
|
On Deck Capital,
Inc.
|
|
Percentage of
Average Interest Earning Assets1
|
|
(unaudited, $ in
thousands)
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Interest
income
|
36.8
|
%
|
|
34.1
|
%
|
|
36.6
|
%
|
|
34.4
|
%
|
|
Gain on sales of
loans
|
—
|
%
|
|
0.1
|
%
|
|
—
|
%
|
|
0.4
|
%
|
|
Other
revenue
|
1.3
|
%
|
|
1.1
|
%
|
|
1.5
|
%
|
|
1.4
|
%
|
|
Gross
revenue
|
38.1
|
%
|
|
35.3
|
%
|
|
38.1
|
%
|
|
36.1
|
%
|
|
Cost of
revenue:
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
13.3
|
%
|
|
13.3
|
%
|
|
14.2
|
%
|
|
15.9
|
%
|
|
Funding
costs
|
4.9
|
%
|
|
4.7
|
%
|
|
4.9
|
%
|
|
4.6
|
%
|
|
Total cost of
revenue
|
18.1
|
%
|
|
18.1
|
%
|
|
19.2
|
%
|
|
20.5
|
%
|
|
Net
revenue
|
20.0
|
%
|
|
17.2
|
%
|
|
18.9
|
%
|
|
15.7
|
%
|
|
Operating
expense:
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
4.6
|
%
|
|
6.3
|
%
|
|
4.5
|
%
|
|
6.1
|
%
|
|
Technology and
analytics
|
5.1
|
%
|
|
6.0
|
%
|
|
4.9
|
%
|
|
6.1
|
%
|
|
Processing and
servicing
|
2.0
|
%
|
|
2.0
|
%
|
|
2.1
|
%
|
|
1.9
|
%
|
|
General and
administrative
|
6.4
|
%
|
|
3.9
|
%
|
|
6.9
|
%
|
|
4.3
|
%
|
|
Total operating
expense
|
18.1
|
%
|
|
18.1
|
%
|
|
18.4
|
%
|
|
18.4
|
%
|
|
Income (loss) from
operations
|
1.9
|
%
|
|
(0.9)
|
%
|
|
0.5
|
%
|
|
(2.7)
|
%
|
|
Other
expense:
|
|
|
|
|
|
|
|
|
Interest
expense
|
—
|
%
|
|
0.1
|
%
|
|
—
|
%
|
|
0.1
|
%
|
|
Total other
expense
|
—
|
%
|
|
0.1
|
%
|
|
—
|
%
|
|
0.1
|
%
|
|
Net income (loss)
before provision for income taxes
|
1.9
|
%
|
|
(1.1)
|
%
|
|
0.5
|
%
|
|
(2.9)
|
%
|
|
Provision for income
taxes
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Net income
(loss)
|
1.9
|
%
|
|
(1.1)
|
%
|
|
0.5
|
%
|
|
(2.9)
|
%
|
|
Net income (loss)
attributable to noncontrolling interest
|
(0.4)
|
%
|
|
(0.4)
|
%
|
|
(0.3)
|
%
|
|
(0.3)
|
%
|
|
Net income (loss)
attributable to On Deck Capital, Inc. common
stockholders
|
2.3
|
%
|
|
(0.6)
|
%
|
|
0.8
|
%
|
|
(2.5)
|
%
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
Average Interest
Earning Assets
|
$1,006,133
|
|
|
$985,370
|
|
|
$985,321
|
|
|
$1,001,887
|
|
|
On Deck Capital,
Inc. and Subsidiaries
|
|
Consolidated
Balance Sheets
|
|
(unaudited, $ in
thousands, except share and per share data)
|
|
|
June 30,
2018
|
|
December 31,
2017
|
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
74,262
|
|
|
$
|
71,362
|
|
|
Restricted
cash
|
44,189
|
|
|
43,462
|
|
|
Loans held for
investment
|
1,046,588
|
|
|
952,796
|
|
|
Less: Allowance for
loan losses
|
(124,058)
|
|
|
(109,015)
|
|
|
Loans held for
investment, net
|
922,530
|
|
|
843,781
|
|
|
Property, equipment
and software, net
|
16,939
|
|
|
23,572
|
|
|
Other
assets
|
14,264
|
|
|
13,867
|
|
|
Total
assets
|
$
|
1,072,184
|
|
|
$
|
996,044
|
|
|
Liabilities and
equity
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accounts
payable
|
$
|
4,087
|
|
|
$
|
2,674
|
|
|
Interest
payable
|
2,574
|
|
|
2,330
|
|
|
Funding
debt
|
755,720
|
|
|
684,269
|
|
|
Corporate
debt
|
—
|
|
|
7,985
|
|
|
Accrued expenses and
other liabilities
|
32,115
|
|
|
32,730
|
|
|
Total
liabilities
|
794,496
|
|
|
729,988
|
|
|
Stockholders' equity
(deficit):
|
|
|
|
|
Common stock—$0.005
par value, 1,000,000,000 shares authorized and 78,189,980 and
77,284,266 shares issued and 74,641,004 and 73,822,001 outstanding
at June 30, 2018 and December 31, 2017,
respectively.
|
391
|
|
|
386
|
|
|
Treasury stock—at
cost
|
(8,406)
|
|
|
(7,965)
|
|
|
Additional paid-in
capital
|
499,347
|
|
|
492,509
|
|
|
Accumulated
deficit
|
(218,960)
|
|
|
(222,833)
|
|
|
Accumulated other
comprehensive loss
|
(334)
|
|
|
(52)
|
|
|
Total On Deck
Capital, Inc. stockholders' equity
|
272,038
|
|
|
262,045
|
|
|
Noncontrolling
interest
|
5,650
|
|
|
4,011
|
|
|
Total
equity
|
277,688
|
|
|
266,056
|
|
|
Total liabilities
and equity
|
$
|
1,072,184
|
|
|
$
|
996,044
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
Unpaid Principal
Balance2
|
$
|
1,026,586
|
|
|
$
|
936,239
|
|
|
Interest Earning
Assets1
|
$
|
1,026,586
|
|
|
$
|
936,239
|
|
|
Loans3
|
$
|
1,046,588
|
|
|
$
|
952,796
|
|
|
Book Value Per
Diluted Share
|
$
|
3.46
|
|
|
$
|
3.39
|
|
|
On Deck Capital,
Inc. and Subsidiaries
|
|
Consolidated
Average Balance Sheets4
|
|
(unaudited, $ in
thousands)
|
|
|
Average
|
|
Average
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
55,516
|
|
|
$
|
61,104
|
|
|
$
|
50,128
|
|
|
$
|
60,824
|
|
|
Restricted
cash
|
54,859
|
|
|
68,530
|
|
|
55,251
|
|
|
58,956
|
|
|
Loans held for
investment
|
1,025,143
|
|
|
1,003,103
|
|
|
1,003,655
|
|
|
1,020,727
|
|
|
Less: Allowance for
loan losses
|
(121,899)
|
|
|
(110,542)
|
|
|
(118,290)
|
|
|
(112,355)
|
|
|
Loans held for
investment, net
|
903,244
|
|
|
892,561
|
|
|
885,365
|
|
|
908,372
|
|
|
Loans held for
sale
|
—
|
|
|
561
|
|
|
—
|
|
|
660
|
|
|
Property, equipment
and software, net
|
17,182
|
|
|
27,776
|
|
|
19,248
|
|
|
28,298
|
|
|
Other
assets
|
15,782
|
|
|
18,030
|
|
|
14,773
|
|
|
18,940
|
|
|
Total
assets
|
$
|
1,046,583
|
|
|
$
|
1,068,562
|
|
|
$
|
1,024,765
|
|
|
$
|
1,076,050
|
|
|
Liabilities and
equity
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
$
|
3,627
|
|
|
$
|
3,412
|
|
|
$
|
3,269
|
|
|
$
|
3,862
|
|
|
Interest
payable
|
2,519
|
|
|
2,461
|
|
|
2,407
|
|
|
2,347
|
|
|
Funding
debt
|
735,123
|
|
|
747,009
|
|
|
715,110
|
|
|
750,761
|
|
|
Corporate
debt
|
1,976
|
|
|
24,723
|
|
|
2,552
|
|
|
26,114
|
|
|
Accrued expenses and
other liabilities
|
29,856
|
|
|
31,347
|
|
|
30,795
|
|
|
34,336
|
|
|
Total
liabilities
|
773,101
|
|
|
808,952
|
|
|
754,133
|
|
|
817,420
|
|
|
|
|
|
|
|
|
|
|
Total On Deck
Capital, Inc. stockholders' equity
|
268,060
|
|
|
253,260
|
|
|
265,857
|
|
|
253,271
|
|
|
Noncontrolling
interest
|
5,422
|
|
|
6,350
|
|
|
4,775
|
|
|
5,359
|
|
|
Total
equity
|
273,482
|
|
|
259,610
|
|
|
270,632
|
|
|
258,630
|
|
|
Total liabilities
and equity
|
$
|
1,046,583
|
|
|
$
|
1,068,562
|
|
|
$
|
1,024,765
|
|
|
$
|
1,076,050
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
Unpaid Principal
Balance
|
$
|
1,006,133
|
|
|
$
|
984,812
|
|
|
$
|
985,321
|
|
|
$
|
1,001,231
|
|
|
Interest Earning
Assets
|
$
|
1,006,133
|
|
|
$
|
985,370
|
|
|
$
|
985,321
|
|
|
$
|
1,001,887
|
|
|
Loans
|
$
|
1,025,143
|
|
|
$
|
1,003,664
|
|
|
$
|
1,003,654
|
|
|
$
|
1,021,387
|
|
|
Supplemental
Information
|
|
|
Key Performance
Metrics
|
|
($ in thousands,
except percentage data)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Originations5
|
$
|
586,728
|
|
|
$
|
464,362
|
|
|
$
|
1,177,313
|
|
|
$
|
1,037,377
|
|
|
Effective Interest
Yield6
|
36.1
|
%
|
|
33.5
|
%
|
|
35.9
|
%
|
|
33.7
|
%
|
|
Cost of Funds
Rate7
|
6.6
|
%
|
|
6.2
|
%
|
|
6.7
|
%
|
|
6.1
|
%
|
|
Net Interest
Margin8
|
32.0
|
%
|
|
29.3
|
%
|
|
31.7
|
%
|
|
29.8
|
%
|
|
Marketplace
Gain on Sale Rate9
|
N/A
|
|
|
2.8
|
%
|
|
N/A
|
|
|
3.4
|
%
|
|
Provision
Rate10
|
5.7
|
%
|
|
7.2
|
%
|
|
5.9
|
%
|
|
8.0
|
%
|
|
Reserve
Ratio11
|
12.1
|
%
|
|
11.0
|
%
|
|
12.1
|
%
|
|
11.0
|
%
|
|
15+ Day Delinquency
Ratio12
|
6.8
|
%
|
|
7.2
|
%
|
|
6.8
|
%
|
|
7.2
|
%
|
|
Net Charge-off
Rate13
|
11.2
|
%
|
|
18.5
|
%
|
|
11.1
|
%
|
|
16.8
|
%
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
Activity in Loan
Held for Investment Balances
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Unpaid Principal
Balance beginning of period
|
$
|
992,595
|
|
|
$
|
1,026,158
|
|
|
$
|
936,239
|
|
|
$
|
980,451
|
|
|
+ Total
originations(c)
|
586,728
|
|
|
464,362
|
|
|
1,177,313
|
|
|
1,037,377
|
|
|
-
Marketplace originations
|
—
|
|
|
(8,379)
|
|
|
—
|
|
|
(50,625)
|
|
|
- Sales
of other loans(d)
|
—
|
|
|
—
|
|
|
—
|
|
|
(500)
|
|
|
+
Purchase of Loans
|
801
|
|
|
212
|
|
|
801
|
|
|
13,730
|
|
|
- Net
charge-offs
|
(28,156)
|
|
|
(45,591)
|
|
|
(54,543)
|
|
|
(83,858)
|
|
|
-
Principal paid down(c)(e)
|
(525,382)
|
|
|
(482,953)
|
|
|
(1,033,224)
|
|
|
(942,766)
|
|
|
Unpaid Principal
Balance end of period
|
1,026,586
|
|
|
953,809
|
|
|
1,026,586
|
|
|
953,809
|
|
|
+ Net
deferred origination costs
|
20,002
|
|
|
16,663
|
|
|
20,002
|
|
|
16,663
|
|
|
Loans held for
investment
|
1,046,588
|
|
|
970,472
|
|
|
1,046,588
|
|
|
970,472
|
|
|
-
Allowance for loan losses
|
(124,058)
|
|
|
(105,217)
|
|
|
(124,058)
|
|
|
(105,217)
|
|
|
Loans held for
investment, net
|
$
|
922,530
|
|
|
$
|
865,255
|
|
|
$
|
922,530
|
|
|
$
|
865,255
|
|
|
(c)
Includes Unpaid Principal Balance of term loans rolled into new
originations of $76.9 million and $68.1 million in the three months
ended and $167.7 million and $138.1 million June 30, 2018 and 2017,
respectively.
|
|
(d)
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.
|
|
(e)
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 $0.0 in the three months ended June 30, 2018 and 2017 and
$0.0 and $0.2 million in the six months ended June 30, 2018 and
2017, respectively.
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
Activity in the
Allowance for Loan Losses
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Allowance for loan
losses beginning of period
|
$
|
118,921
|
|
|
$
|
118,075
|
|
|
$
|
109,015
|
|
|
$
|
110,162
|
|
|
+ Provision
for loan losses(f)
|
33,293
|
|
|
32,733
|
|
|
69,586
|
|
|
78,913
|
|
|
- Gross
charge-offs
|
(31,362)
|
|
|
(49,817)
|
|
|
(61,094)
|
|
|
(90,701)
|
|
|
+
Recoveries
|
3,206
|
|
|
4,226
|
|
|
6,551
|
|
|
6,843
|
|
|
Allowance for loan
losses end of period
|
$
|
124,058
|
|
|
$
|
105,217
|
|
|
$
|
124,058
|
|
|
$
|
105,217
|
|
|
(f)
Excludes a provision expense of $0.5 million and $0.2 million for
the three months ended June 30, 2018 and 2017, 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
June 30,
|
|
Six Months Ended
June 30,
|
|
Reconciliation of
Net Income Attributable to OnDeck to Adjusted Net Income
(Loss)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net income (loss)
attributable to On Deck Capital, Inc. common
stockholders
|
$
|
5,790
|
|
|
$
|
(1,498)
|
|
|
$
|
3,873
|
|
|
$
|
(12,556)
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
2,794
|
|
|
2,974
|
|
|
6,004
|
|
|
6,465
|
|
|
Real estate
disposition charges
|
—
|
|
|
—
|
|
|
4,187
|
|
|
—
|
|
|
Severance and
executive transition expenses
|
—
|
|
|
3,183
|
|
|
911
|
|
|
3,183
|
|
|
Debt Extinguishment
Costs
|
1,384
|
|
|
—
|
|
|
1,384
|
|
|
—
|
|
|
Adjusted Net income
(loss)14
|
$
|
9,968
|
|
|
$
|
4,659
|
|
|
$
|
16,359
|
|
|
$
|
(2,908)
|
|
|
Adjusted Net income
(loss) per share15:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.13
|
|
|
$
|
0.06
|
|
|
$
|
0.22
|
|
|
$
|
(0.04)
|
|
|
Diluted
|
$
|
0.13
|
|
|
$
|
0.06
|
|
|
$
|
0.21
|
|
|
$
|
(0.04)
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
74,385,446
|
|
|
72,688,815
|
|
|
74,182,929
|
|
|
72,276,734
|
|
|
Diluted
|
78,288,267
|
|
|
72,688,815
|
|
|
77,786,748
|
|
|
72,276,734
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Reconciliation of
Interest Income to Net Interest Margin
(NIM)8
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
92,371
|
|
|
$
|
83,721
|
|
|
$
|
178,740
|
|
|
$
|
170,832
|
|
|
Less: Funding
costs
|
(12,202)
|
|
|
(11,616)
|
|
|
(24,023)
|
|
|
(22,893)
|
|
|
Net interest
income
|
80,169
|
|
|
72,105
|
|
|
154,717
|
|
|
147,939
|
|
|
Divided by: calendar
days in period
|
91
|
|
|
91
|
|
|
181
|
|
|
181
|
|
|
Net interest income
per calendar day
|
881
|
|
|
792
|
|
|
855
|
|
|
817
|
|
|
Multiplied by:
calendar days per year
|
365
|
|
|
365
|
|
|
365
|
|
|
365
|
|
|
Annualized net
interest income
|
321,565
|
|
|
289,080
|
|
|
312,075
|
|
|
298,205
|
|
|
Divided by: Average
Interest Earning Assets
|
$
|
1,006,133
|
|
|
$
|
985,370
|
|
|
$
|
985,321
|
|
|
$
|
1,001,887
|
|
|
Net Interest Margin
(NIM)
|
32.0
|
%
|
|
29.3
|
%
|
|
31.7
|
%
|
|
29.8
|
%
|
|
Non-GAAP Guidance
Reconciliation
|
|
(in
millions)
|
|
|
Three Months
Ending
September 30,
|
|
Twelve Months
Ending
December 31,
|
|
Reconciliation of
Net Income Attributable to OnDeck Guidance
|
2018
|
|
2018
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Net income (loss)
attributable to On Deck Capital, Inc. common
stockholders
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
10
|
|
|
$
|
16
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Debt Extinguishment
Costs
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
|
Real estate
disposition charges
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
Severance and
executive transition expenses
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Stock-based
compensation expense
|
3
|
|
|
3
|
|
|
13
|
|
|
13
|
|
|
Adjusted Net
income16 (g)
|
$
|
6
|
|
|
$
|
10
|
|
|
$
|
30
|
|
|
$
|
36
|
|
|
|
(g) May
not sum due to rounding.
|
|
Supplemental
Channel Information
|
|
|
Quarterly
Origination Channel Distribution
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Percentage of
originations (dollars)
|
|
|
|
|
|
|
|
|
Direct &
Strategic Partner
|
71
|
%
|
|
76
|
%
|
|
71
|
%
|
|
73
|
%
|
|
Funding
Advisor
|
29
|
%
|
|
24
|
%
|
|
29
|
%
|
|
27
|
%
|
|
|
Notes:
|
|
(1)
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 Earning Assets is
calculated as the average of Interest Earning Assets at the
beginning of the period and the end of each month in the
period.
|
|
(2) 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.
|
|
(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 monthly averages based
on the beginning and the ending period balances.
|
|
(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.
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(6)
Effective Interest Yield is the rate of interest we achieve on
loans outstanding during a period. It is calculated as our calendar
day-adjusted annualized interest income divided by average
Loans. Prior to the first quarter of 2018, annualization was
based on 252 business days per year. Beginning with the three
months ended March 31, 2018, annualization is based on 365 days per
year and is calendar day-adjusted. All revisions have been
applied retrospectively. 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.
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(7) Cost
of Funds Rate 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 four quarters
per year and is not business or calendar day-adjusted.
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(8) Net
Interest Margin, a non-GAAP measure, 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 costs
are 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. Our use of Net Interest
Margin 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: Net
Interest Margin is the rate of net return we achieve on our Average
Interest Earning Assets outstanding during a period. It does not
reflect the return from loans sold through OnDeck Marketplace,
specifically our gain on sale revenue. Similarly, Average Interest
Earning Assets does not include the unpaid principal balance of
loans sold through OnDeck Marketplace. Further, Net Interest Margin
does not include servicing revenue related to loans previously
sold, fair value adjustments to servicing rights, monthly fees
charged to customers for our line of credit, and marketing fees
earned from our issuing bank partners, which are recognized as the
related services are provided. Funding costs do not reflect
interest associated with debt used for corporate
purposes.
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(9)
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 any loans sold through OnDeck
Marketplace may be loans which were initially designated as
held for investment upon origination. The portion of such loans
sold, if any, in a given period may vary materially depending upon
market conditions and other circumstances.
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(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.
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(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.
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(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 weekly and daily
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.
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(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 four quarters per year
and is not business or calendar day-adjusted. Net charge-offs
are charged-off loans in the period, net of
recoveries.
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(14)
Adjusted Net income (loss), a non-GAAP measure, represents Net
income (loss) attributable to On Deck Capital, Inc. common
stockholders adjusted to exclude loss from early extinguishment of
debt, stock-based compensation expense, real estate
disposition charges, severance and executive transition expenses.
Stock-based compensation includes employee compensation as well as
compensation to third-party service providers. Our use of Adjusted
Net income (loss) 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 that Adjusted Net income (loss) does not reflect the
potentially dilutive impact of stock-based compensation and does
not reflect expenses incurred in connection with real estate
dispositions and severance.
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(15)
Adjusted Net income (loss) per share represents Net income (loss)
attributable to On Deck Capital, Inc. common stockholders adjusted
to exclude loss from early extinguishment of debt, stock-based
compensation expense, real estate disposition charges, severance
and executive transition expenses, each on the same basis and with
the same limitations as described above for Adjusted Net income
(loss), divided by the weighted average common shares outstanding
during the period.
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(16)
Forward looking Adjusted Net income guidance is a non-GAAP measure
and represents our Net income (loss) attributable On Deck Capital,
Inc. common stockholders adjusted to exclude loss from early
extinguishment of debt, real estate disposition charges and
stock-based compensation expense, each on the same basis and with
the same limitations as described above for Adjusted Net income
(loss), and in addition that it does not reflect the cost of the
early extinguishment of debt. As a result, our GAAP Net income
(loss) for these future periods will be less favorable than our
Adjusted Net income for the corresponding periods. In
addition, forward looking Adjusted Net income (loss) guidance is
neither historical fact nor an assurance of future performance. It
is 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, it is
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 this
guidance.
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SOURCE On Deck Capital, Inc.