On Deck Capital, Inc. (NYSE: ONDK), reported earnings this week alongside P2P industry leader Lending Club. This is the first quarterly releases for OnDeck since the platform listed shares on the NYSE this past December. On Deck is a peer to peer lending platform that focuses on business loans having lent over $2 billion since its founding in 2007.
On Deck states that gross revenue was $50.5 million for the quarter and $158.1 million for all of 2014. “Adjusted” EBITDA was $0.6 million for the quarter and a loss of $0.2 for the year. Adjusted net loss was stated at $0.8 million for the quarter and a loss of $4.6 million for the full year, compared to a loss of $3.2 million in the year ago quarter and a loss of $20.2 million in the prior year.
Loan origination volume increased to $369 million in Q4 and to $1.2 billion for the year, reflecting growth of 120% and 152%, respectively, over the comparable prior year periods.
OnDeck Marketplace, OnDeck’s institutional investor loan purchase platform, grew to 18% of term loan originations during the fourth quarter of 2014, up from 8% in the third quarter of 2014. The company also stated it was creating a pilot program for loans in Canada.
“OnDeck’s considerable achievements in 2014 reflect growing acceptance by small businesses of technology-enabled lending, as well as the need small business owners have for ongoing investment capital to manage and grow their businesses,” said Noah Breslow, chief executive officer, OnDeck. “Powered by the OnDeck Score, OnDeck is providing small business owners with reliable credit solutions to address their various capital needs. We will continue to increase our marketing and brand building efforts to raise awareness of our products and further invest in technology and data innovation to expand our product set and meet more of Main Street’s credit needs.”
“OnDeck delivered strong financial performance during the fourth quarter and full year, primarily driven by the momentum of our direct channel and expansion of our Marketplace business,” said Howard Katzenberg, chief financial officer, OnDeck. “We generated triple digit top line growth during both the quarter and year, all while preserving the credit quality of our portfolio, passing along savings to our customers and achieving positive adjusted EBITDA in the fourth quarter.”
Guidance for First Quarter 2015 and Full Year 2015
OnDeck provided the following guidance for the three months ending March 31, 2015 and year ending December 31, 2015.
First Quarter 2015
- Gross revenue between $52 million and $54 million
- Adjusted EBITDA between a loss of $2 million and a loss of $3 million
Full Year 2015
- Gross revenue between $254 million and $258 million
- Adjusted EBITDA between a loss of $2 million and a loss of $4 million
On Deck Capital, Inc. Unaudited Consolidated Balance Sheets (in thousands, except share and per share data) |
|||
December 31, |
December 31, |
||
2014 |
2013 |
||
Assets |
|||
Cash and cash equivalents |
$220,433 |
$4,670 |
|
Restricted cash |
29,448 |
14,842 |
|
Loans |
504,107 |
222,521 |
|
Less: Allowance for loan losses |
(49,804) |
(19,443) |
|
Loans, net allowance for loan losses |
454,303 |
203,078 |
|
Loans held for sale |
1,523 |
1,423 |
|
Deferred debt issuance costs |
5,374 |
2,327 |
|
Property, equipment and software, net |
13,929 |
7,169 |
|
Other assets |
4,622 |
1,941 |
|
Total assets |
$ 729,632 |
$235,450 |
|
Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) |
|||
Liabilities: |
|||
Accounts payable |
$4,360 |
$1,161 |
|
Interest payable |
819 |
1,120 |
|
Funding debt |
387,928 |
188,297 |
|
Corporate debt |
12,000 |
15,000 |
|
Warrant liability |
– |
4,446 |
|
Accrued expenses and other liabilities |
13,920 |
6,563 |
|
Total liabilities |
419,027 |
216,587 |
|
Total redeemable convertible preferred stock |
– |
118,343 |
|
Stockholders’ equity (deficit): |
|||
Common stock – $0.005 par value, 69,031,719 and 4,467,614 shares issued and outstanding at December 31, 2014 and 2013, respectively |
360 |
38 |
|
Treasury stock – at cost |
(5,656) |
(5,656) |
|
Additional paid-in capital |
442,969 |
1,614 |
|
Accumulated deficit |
(127,068) |
(95,476) |
|
Total stockholders’ equity (deficit) |
310,605 |
(99,480) |
|
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) |
$ 729,632 |
$235,450 |
On Deck Capital, Inc. |
|||||||||||||||
Unaudited Consolidated Statements of Operations |
|||||||||||||||
(in thousands, except share and per share data) |
|||||||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Revenue: |
|||||||||||||||
Interest income |
$45,402 |
$21,868 |
$145,275 |
$62,941 |
|||||||||||
Gain on sales of loans |
4,254 |
788 |
8,823 |
788 |
|||||||||||
Other revenue |
835 |
516 |
3,966 |
1,520 |
|||||||||||
Gross revenue |
50,491 |
23,172 |
158,064 |
65,249 |
|||||||||||
Cost of revenue: |
|||||||||||||||
Provision for loan losses |
20,421 |
10,270 |
67,432 |
26,570 |
|||||||||||
Funding costs |
4,669 |
4,019 |
17,200 |
13,419 |
|||||||||||
Total cost of revenue |
25,090 |
14,289 |
84,632 |
39,989 |
|||||||||||
Net revenue |
25,401 |
8,883 |
73,432 |
25,260 |
|||||||||||
Operating expense: |
|||||||||||||||
Sales and marketing |
11,402 |
4,529 |
33,201 |
18,095 |
|||||||||||
Technology and analytics |
6,042 |
2,670 |
17,399 |
8,760 |
|||||||||||
Processing and servicing |
2,302 |
1,831 |
8,230 |
5,577 |
|||||||||||
General and administrative |
7,712 |
3,011 |
21,680 |
12,169 |
|||||||||||
Total operating expense |
27,458 |
12,041 |
80,510 |
44,601 |
|||||||||||
Loss from operations |
(2,057) |
(3,158) |
(7,078) |
(19,341) |
|||||||||||
Other expense: |
|||||||||||||||
Interest expense |
(124) |
(206) |
(398) |
(1,276) |
|||||||||||
Warrant liability fair value adjustment |
(2,110) |
(2,243) |
(11,232) |
(3,739) |
|||||||||||
Total other expense |
(2,234) |
(2,449) |
(11,630) |
(5,015) |
|||||||||||
Loss before provision for income taxes |
(4,291) |
(5,607) |
(18,708) |
(24,356) |
|||||||||||
Provision for income taxes |
– |
– |
– |
– |
|||||||||||
Net loss |
(4,291) |
(5,607) |
(18,708) |
(24,356) |
|||||||||||
Less: Series A and Series B preferred stock redemption |
– |
– |
– |
(5,254) |
|||||||||||
Less: Accretion of dividends on redeemable convertible preferred stock |
(3,057) |
(2,056) |
(12,884) |
(7,470) |
|||||||||||
Net loss attributable to common stockholders |
(7,348) |
(7,663) |
(31,592) |
(37,080) |
|||||||||||
Net loss per common share – basic |
($0.13) |
($1.78) |
($0.60) |
($8.64) |
|||||||||||
Weighted-average common shares outstanding |
57,417,188 |
4,316,397 |
52,556,998 |
4,292,026 |
Supplemental Information
Key Performance Metrics (in thousands, except percentage data) |
|||||||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Originations1 |
$369,445 |
$167,985 |
$1,157,751 |
$458,917 |
|||||||||||
Unpaid principal balance2 |
$490,563 |
$215,966 |
$490,563 |
$215,966 |
|||||||||||
Average loans3 |
$468,749 |
$199,404 |
$359,652 |
$147,398 |
|||||||||||
Loans under management4 |
$571,759 |
$233,324 |
$571,759 |
$233,324 |
|||||||||||
Effective interest yield5 |
38.7% |
43.9% |
40.4% |
42.7% |
|||||||||||
Average funding debt outstanding6 |
$367,566 |
$162,334 |
$279,307 |
$124,238 |
|||||||||||
Cost of funds rate7 |
5.1% |
9.9% |
6.2% |
10.8% |
|||||||||||
Provision rate8 |
6.7% |
6.9% |
6.6% |
6.0% |
|||||||||||
Reserve ratio9 |
10.2% |
9.0% |
10.2% |
9.0% |
|||||||||||
15+ day delinquency ratio10 |
7.3% |
7.6% |
7.3% |
7.6% |
|||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||||||
The Activity in Loan Balances |
2014 |
2013 |
2014 |
2013 |
|||||||||||
Unpaid principal balance beginning of period |
$422,050 |
$173,805 |
$215,966 |
$90,276 |
|||||||||||
+ Total originations |
369,445 |
167,985 |
1,157,751 |
458,917 |
|||||||||||
– Originations of loans held for sale |
(63,578) |
(18,937) |
(140,578) |
(18,937) |
|||||||||||
– Net charge-offs |
(10,373) |
(5,573) |
(37,071) |
(16,414) |
|||||||||||
– Principal paid down* |
(226,981) |
(101,314) |
(705,505) |
(297,876) |
|||||||||||
Unpaid principal balance end of period |
$490,563 |
$215,966 |
$490,563 |
$215,966 |
|||||||||||
+ Net deferred origination costs |
13,544 |
6,555 |
13,544 |
6,555 |
|||||||||||
Loans |
504,107 |
222,521 |
504,107 |
222,521 |
|||||||||||
– Allowance for loan losses |
(49,804) |
(19,443) |
(49,804) |
(19,443) |
|||||||||||
Loans, net allowance for loan losses |
$454,303 |
$203,078 |
$454,303 |
$203,078 |
|||||||||||
* Includes unpaid principal balance of term loans rolled into new originations of $52,902 and $20,808 in the three months ended December 31, 2014 and 2013, respectively, and $158,876 and $59,623 for the twelve months ended December 31, 2014 and 2013, respectively. |
|||||||||||||||
Activity in the Allowance for Loan Losses |
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Allowance for loan losses beginning of period |
$39,756 |
$14,746 |
$19,443 |
$9,288 |
|||||||||||
+ Provision for loan losses |
$20,421 |
$10,270 |
$67,432 |
$26,570 |
|||||||||||
– Net charge-offs |
(10,373) |
(5,573) |
(37,071) |
(16,415) |
|||||||||||
Allowance for loan losses end of period |
$49,804 |
$19,443 |
$49,804 |
$19,443 |
Non-GAAP Reconciliation11 (in thousands, except share and per share data) |
||||||||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||||||
Net loss |
($4,291) |
($5,607) |
($18,708) |
($24,356) |
||||||||||||
Corporate interest expense |
124 |
206 |
398 |
1,276 |
||||||||||||
Income tax expense |
– |
– |
– |
– |
||||||||||||
Depreciation and amortization |
1,223 |
881 |
4,071 |
2,645 |
||||||||||||
Stock-based compensation expense |
1,395 |
171 |
2,842 |
438 |
||||||||||||
Warrant liability fair value adjustment |
2,110 |
2,243 |
11,232 |
3,739 |
||||||||||||
Adjusted EBITDA 12 |
$561 |
($2,106) |
($165) |
($16,258) |
||||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||||||
Net loss |
($4,291) |
($5,607) |
($18,708) |
($24,356) |
||||||||||||
Stock-based compensation expense |
1,395 |
171 |
2,842 |
438 |
||||||||||||
Warrant liability fair value adjustment |
2,110 |
2,243 |
11,232 |
3,739 |
||||||||||||
Adjusted net loss13 |
($786) |
($3,193) |
($4,634) |
($20,179) |
||||||||||||
Adjusted EPS14 |
($0.01) |
($0.74) |
($0.09) |
($4.70) |
||||||||||||
Weighted-average common shares outstanding |
57,417,188 |
4,316,397 |
52,556,998 |
4,292,026 |
||||||||||||
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
Stock-based Compensation |
2014 |
2013 |
2014 |
2013 |
||||||||||||
Sales and marketing |
$361 |
$47 |
$686 |
$118 |
||||||||||||
Technology and analytics |
249 |
27 |
539 |
47 |
||||||||||||
Processing and servicing |
93 |
15 |
219 |
30 |
||||||||||||
General and administrative |
692 |
82 |
1,398 |
243 |
||||||||||||
Total stock-based compensation |
$1,395 |
$171 |
$2,842 |
$438 |
||||||||||||
Supplemental Annual Information |
|||||
Year Ended December 31, |
|||||
Annual Origination Channel Distribution |
|||||
Percentage of originations (number of loans15) |
2014 |
2013 |
|||
Direct |
55.4% |
44.1% |
|||
Strategic Partner |
14.4% |
10.3% |
|||
Funding Advisor |
30.2% |
45.6% |
|||
Percentage of originations (dollars) |
|||||
Direct |
44.7% |
34.4% |
|||
Strategic Partner |
13.9% |
9.2% |
|||
Funding Advisor |
41.4% |
56.4% |
|||
Annual Origination by Customer Type |
|||||
Percentage of originations (dollars) |
|||||
New |
49.9% |
56.5% |
|||
Repeat16 |
50.1% |
43.5% |
|||