OnDeck Reports Second Quarter 2015 Financial Results

Achieves Record Gross Revenue of $63.3 million and Record Origination Volume of $419 million

NEW YORK, Aug. 3, 2015 /PRNewswire/ — OnDeck® (NYSE:ONDK), a leading platform for small business lending, today announced financial results for its second quarter ended June 30, 2015.

Financial Highlights

Gross revenue was a record $63.3 million for the quarter, up 78% from the prior year period.
Adjusted EBITDA* was $8.7 million for the quarter, compared to $2.5 million in the prior year period.
Adjusted Net Income* improved to $7.3 million for the quarter, compared to $1.5 million in the prior year period.
GAAP net income attributable to On Deck Capital, Inc. common stockholders was $5.0 million for the quarter, compared to a loss of $4.7 million in the prior year period.

Key Business Highlights

Origination volume increased to a record $419 million for the quarter, reflecting growth of 69% over the prior year period.
OnDeck Marketplace®, OnDeck’s institutional investor loan purchase platform, sold a record $143 million1 of loans at record gain-on-sale levels for the platform, reaching 34% of term loan originations during the second quarter of 2015, up from 24% in the first quarter of 2015.
OnDeck continued to diversify its funding sources and investor base, adding a new $100 million facility with Bank of America and a new $50 million facility with SunTrust.
OnDeck launched its first mobile app, providing small business owners with the versatility to manage their OnDeck accounts on the go.

“During the second quarter, OnDeck continued to execute on our plan to become the online small business lending platform of choice,” said Noah Breslow, OnDeck’s chief executive officer. “We generated triple digit originations volume growth, year-over-year, in our Direct and Strategic Partner channels, continued investing in brand awareness and technology innovation and established credit facilities with two of the top banks in the country. These recent achievements position OnDeck for continued high quality growth and provide institutional validation of OnDeck’s products and platform.”

“OnDeck generated record gross revenue and OnDeck Marketplace loan sales, leading to record Adjusted EBITDA in the quarter,” said Howard Katzenberg, OnDeck’s chief financial officer. “In addition, credit performance in our portfolio was consistent with our expectations. As we progress through the remainder of 2015, we will continue investing in the business while also being opportunistic in the expansion and diversification of our funding sources at attractive terms.”

Review of Financial Results for the Second Quarter of 2015

Originations grew to $419 million during the second quarter of 2015, up 69% from the comparable prior year period. Originations growth primarily reflected strength in our Direct and Strategic Partner distribution channels which grew 112% over the prior year period.

Gross revenue increased to $63.3 million during the second quarter of 2015, up 78% 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 the OnDeck Marketplace during the second quarter of 2015 compared to the prior year period. The effective interest yield for the second quarter of 2015 was 37.6%, down from 41.2% 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 customers as it achieves cost efficiencies. Reflecting these trends, the average APR of loans originated in the second quarter was 46.5%, a decline from 56.7% in the prior year period.

Net revenue increased to $43.0 million during the second quarter of 2015, up 131% from the comparable prior year period. Net revenue margin increased to 67.9% during the second quarter of 2015 from 52.5% in the prior year period, principally due to a lower Cost of Funds Rate and a lower Provision Rate.

The Cost of Funds Rate during the second quarter of 2015 declined to 5.0% of Average Funding Debt Outstanding, down from 6.4% in the comparable prior year period. The improvement was primarily the result of the company’s increasing access to lower cost funding sources.

Provision for loan losses during the second quarter of 2015 increased to $15.5 million, up from $13.1 million during the year ago period. The Provision Rate in the second quarter of 2015 was 5.3% compared to 5.8% in the comparable prior year period. The decline in the Provision Rate was primarily the result of a release of loan loss reserves, mainly reflecting the sale of loans originated prior to the second quarter that were previously designated as loans held for investment.

Operating expenses were $38.2 million during the second quarter of 2015, up 119% over the comparable prior year period as OnDeck increased investment in brand awareness and marketing, expanded its technology and analytics teams to support growth and incurred additional general and administrative expenses related to operating as a public company. Operating expense as a percent of gross revenue for the second quarter of 2015 was 60.3%, up from 49.1% during the year ago period, reflecting these investments.

Adjusted EBITDA was $8.7 million in the quarter, an improvement from $2.5 million in the comparable prior year period.

Adjusted Net Income improved to $7.3 million, or $0.11 per basic share and $0.10 per diluted share, for the quarter versus $1.5 million, or $0.29 per basic and diluted share, in the comparable prior year period.

OnDeck had GAAP net income attributable to On Deck Capital, Inc. common stockholders of $5.0 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 $4.7 million, or $0.88 per basic and diluted share, in the comparable prior year period.

Guidance for Third Quarter 2015 and Full Year 2015

OnDeck provided the following guidance for the three months ending September 30, 2015 and year ending December 31, 2015.

Third Quarter 2015

Gross revenue between $61 million and $63 million.
Adjusted EBITDA between $1 million and $2 million, reflecting the continued expansion of OnDeck Marketplace as a percentage of term loan originations.

Full Year 2015

Gross revenue between $244 million and $248 million.
Adjusted EBITDA between $7 million and $9 million, reflecting the continued expansion of OnDeck Marketplace as a percentage of term loan originations.
Conference Call

OnDeck will host a conference call to discuss second quarter 2015 financial results on August 3, 2015 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 80861672.

About OnDeck

OnDeck (NYSE: ONDK), a leading platform for small business lending, is committed to increasing Main Street’s access to capital. OnDeck uses advanced lending technology and analytics to assess creditworthiness based on actual operating performance and not solely on personal credit. The OnDeck Score®, the company’s proprietary small business credit scoring system, evaluates thousands of data points to deliver a credit decision rapidly and accurately. Small businesses can apply for a line of credit or term loan online in minutes, get a decision immediately and receive funds in as fast as the same day. OnDeck also partners with small business service providers, enabling them to connect their customers to OnDeck financing. OnDeck’s diversified loan funding strategy enables the company to fund small business loans from various credit facilities, securitization and the OnDeck Marketplace®, a platform that enables institutional investors to purchase small business loans originated by OnDeck.

Since 2007, OnDeck has deployed more than $2 billion to more than 700 different industries in all 50 U.S. states, and also makes small business loans in Canada. The company has an A+ rating with the Better Business Bureau and operates the website BusinessLoans.com which provides credit education and information about small business financing. On December 17, 2014, OnDeck started trading on the New York Stock Exchange under the ticker ONDK.

For more information, please visit www.ondeck.com and follow OnDeck on Twitter @OnDeckCapital.

*About Non-GAAP Financial Measures

This press release and its attachments include Adjusted EBITDA and Adjusted Net 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 gross revenue and Adjusted EBITDA for the second quarter and full year 2015. 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 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:
Michael McGinn
FleishmanHillard
212.453.2046
michael.mcginn@fleishman.com

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