OnDeck Reports Fourth Quarter and Full Year 2015 Financial Results

Achieves Record Origination Volume and Gross Revenue

NEW YORK, February 22, 2016 /PRNewswire/ — OnDeck® (NYSE:ONDK), the leader in online lending for small business, today announced fourth quarter 2015 financial results highlighted by record originations, record gross revenue and strong credit performance. For the full year of 2015, OnDeck loaned over $1.9 billion to small businesses in the U.S., Canada and Australia, increased gross revenue 61% year-over-year and improved its bottom-line compared to 2014.

“OnDeck delivered a strong performance during the fourth quarter of 2015, achieving several key strategic and financial milestones and wrapping up a year where we solidified our leadership in online small business lending and achieved record financial results,” said Noah Breslow, OnDeck’s chief executive officer. “In the fourth quarter total originations grew 51% year-over-year, powered by continued momentum in our Direct and Strategic Partner channels and demonstrating the appeal of OnDeck’s complete credit solution and loyalty benefits to qualified small businesses. Also during the fourth quarter, OnDeck announced a strategic relationship with JPMorgan Chase, through which the OnDeck Score and OnDeck’s integrated technology platform will help underwrite and service loans to qualified Chase small business customers. We believe these achievements validate OnDeck’s expertise in online small business lending, reinforce our market leadership and position our company well for continued high quality growth in the years to come.”

Financial Highlights

  • Gross revenue was a record $67.6 million for the quarter, up 34% from the prior year period.
  • Net revenue was $42.3 million for the quarter, up 67% from the prior year period.
  • Adjusted EBITDA* was $0.3 million for the quarter, compared to $0.6 million in the prior year period.
  • Adjusted Net Loss* was $1.1 million for the quarter, compared to $0.8 million in the prior year period.
  • GAAP net loss attributable to On Deck Capital, Inc. common stockholders was $4.6 million for the quarter, compared to a net loss of $7.3 million in the prior year period.

Key Business Highlights

  • Origination volume increased to a record $557 million for the quarter, reflecting 51% growth over the prior year period.
  • OnDeck announced a strategic relationship with JPMorgan Chase and signed an agreement establishing the parameters under which OnDeck will help Chase address the needs of its 4 million small business customers through the use of the OnDeck Score® and OnDeck’s integrated technology platform.
  • OnDeck launched operations in Australia and established a referral partnership with Commonwealth Bank of Australia, the largest of Australia’s big four banks.
  • A record $201.9 million1 of loans were sold through OnDeck Marketplace®, OnDeck’s institutional investor loan purchase platform. These loan sales were executed at a 9.0% Gain on Sale Rate and constituted 40% of term loan originations during the fourth quarter of 2015.

“OnDeck generated record originations and gross revenue during the fourth quarter of 2015,” said Howard Katzenberg, OnDeck’s chief financial officer. “Double-digit sequential growth in total originations was powered by strong production in all three of our distribution channels. The increase in gross revenue was primarily driven by further scaling of OnDeck Marketplace at strong gain on sale rates and higher servicing fee revenue. These factors, in combination with the continued improvement in the credit quality of our originations, led to solid net revenue and Adjusted EBITDA for the period. As we look towards 2016, we are confident in the many growth drivers of our business as well as the fundamental drivers of operating leverage.”

Review of Financial Results for the Fourth Quarter of 2015
Originations grew to $557 million during the fourth quarter of 2015, up 51% from the comparable prior year period and 15% sequentially. Originations growth over the prior year primarily reflected strength in the company’s Direct and Strategic Partner channels which collectively increased 69% over the prior year period and 11% sequentially.

Gross revenue increased to $67.6 million during the fourth quarter of 2015, up 34% from the comparable prior year period. The increase in gross revenue was primarily due to growth in outstanding loan balances as well as increased volume sold through OnDeck Marketplace with higher gain on sale rates and servicing fees. The Effective Interest Yield for the fourth quarter of 2015 was 35.7%, down from 38.7% in the comparable prior year period, reflecting the continued mix shift to lower cost distribution channels, an increase in average term loan length over the period, and OnDeck’s continuing efforts to lower pricing and origination fees for repeat loan customers. Reflecting these trends, as planned and executed, the average APR of loans originated in the fourth quarter was 41.4%, a decline from 51.2% in the prior year period.

Net revenue increased to $42.3 million during the fourth quarter of 2015, up 67% from the comparable prior year period. Net revenue margin increased to 62.6% during the fourth quarter of 2015 from 50.3% in the prior year period, principally due to a lower provision for loan losses.

The Cost of Funds Rate during the fourth quarter of 2015 increased to 5.8% of Average Funding Debt Outstanding, up from 5.1% in the comparable prior year period. The increase reflected an early termination fee due to the company’s voluntary closure of the Class B tranche of the company’s Deutsche Bank facility as well as unused fees relating to the company’s expanded credit facility capacity in 2015. This early termination fee resulted in a 20 basis point increase in the Cost of Funds Rate in the fourth quarter of 2015.

Provision for loan losses during the fourth quarter of 2015 decreased to $20.0 million, down from $20.4 million in the comparable prior year period. The Provision Rate in the fourth quarter of 2015 was 5.6% compared to 6.7% in the comparable prior year period. The decline in the Provision Rate was primarily due to an improvement in the quality of new originations.

Operating expenses were $47.4 million during the fourth quarter of 2015, up 73% over the comparable prior year period as OnDeck continued investing in growth, increasing its investment in customer acquisition marketing, expanding its technology and analytics teams, and incurring additional general and administrative expenses related to operating as a public company.

Adjusted EBITDA was $0.3 million for the quarter, versus $0.6 million in the comparable prior year period.

Adjusted Net Loss was $1.1 million, or $0.02 per basic and per diluted share, for the quarter versus a loss of $0.8 million, or $0.01 per basic and diluted share, in the comparable prior year period.

OnDeck had GAAP net loss attributable to On Deck Capital, Inc. common stockholders of $4.6 million, or $0.07 per basic and diluted share, for the quarter which compares to GAAP net loss attributable to On Deck Capital, Inc. common stockholders of $7.3 million, or $0.13 per basic and diluted share, in the comparable prior year period.

Guidance for First Quarter and Full Year 2016
OnDeck provided the following guidance for the three months ending March 31, 2016 and full year ending December 31, 2016.

First Quarter 2016

  • Gross revenue between $66 million and $69 million.
  • Adjusted EBITDA between negative $3 million and negative $5 million.

Full Year 2016

  • Gross revenue between $320 million and $328 million, assuming year-over-year growth in total originations of between 45% to 50% and Marketplace sales between 35% and 45% of term loan originations.
  • Adjusted EBITDA between $10 million and $14 million.

Conference Call
OnDeck will host a conference call to discuss fourth quarter 2015 financial results on February 22, 2016 at 5:00 PM 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 (877) 201-0168 for calls within the U.S., or by dialing (647) 788-4901 for international calls. The conference ID is 24991123. 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 $4 billion to more than 45,000 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 and Adjusted Net Income (Loss), which are financial measures not calculated or presented in accordance with United States generally accepted accounting principles, or 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” 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,” “expects,” “allows,” “continues,” “believes,” “anticipates,” “estimates” or similar expressions. These include statements regarding guidance on Marketplace sales for the full year 2016 and gross revenue, total originations and Adjusted EBITDA for the first quarter and full year 2016. Forward-looking statements are neither historical facts nor assurances of future performance. 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. 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; the degree to which potential customers apply for, are approved for and actually borrow from us; our future financial performance, including our expectations regarding our revenue, cost of revenue, net profit or net margin, operating expenses, ability to generate cash flow, and ability to achieve, and maintain, future profitability; anticipated trends, growth rates and challenges in our business and in the markets in which we operate; the ability of our customers to repay loans; our continuing efforts to implement certain additional compliance measures related to our funding advisor channel and their potential impact; changes in product distribution channel mix; our ability to anticipate market needs and develop new and enhanced products and services to meet those needs; interest rates and origination fees on loans; maintaining and expanding our customer base; the impact of increased competition in our industry and innovation by our competitors; our anticipated growth and growth strategies, including through the possible introduction of new products and the possible expansion in existing or new international markets, and our ability to effectively manage that growth and our expenses; our ability to sell our products and expand; our reputation and possible adverse publicity about us or our industry; the availability and cost of our funding; our failure to anticipate or adapt to future changes in our industry; our ability to hire and retain necessary qualified employees to expand our operations; the impact of any failure of our solutions; our reliance on our third-party service providers; the evolution of technology affecting our products, services and markets; our compliance with applicable local, state and federal 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; our liquidity and working capital requirements; 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; and 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 the platform or adversely impact our ability to service the loans; and other risks, including those described in our Annual Report on Form 10-K for the year ended December 31, 2014 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:
Kathryn Harmon Miller
646.558.7860
kmiller@ondeck.com

Media Contact:
Miranda Eifler
917.677.7112
meifler@ondeck.com

OnDeck, the OnDeck logo, OnDeck Score and OnDeck Marketplace are trademarks of On Deck Capital, Inc.

For full Fourth Quarter and Full Year 2015 Financial Results, visit investors.ondeck.com.