Delaware | 001-36779 | 42-1709682 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I. R. S. Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit No. | Description | |
99.1 | Press release, dated November 3, 2016. |
Date: November 3, 2016 | On Deck Capital, Inc. | |||||||
/s/ Howard Katzenberg | ||||||||
Howard Katzenberg Chief Financial Officer |
Exhibit No. | Description | |
99.1 | Press release, dated November 3, 2016. |
• | Gross revenue was $77.4 million for the quarter, up 15% from the prior year period. |
• | Net revenue was $32.3 million for the quarter, down 30% from the prior year period. |
• | GAAP net loss attributable to OnDeck common stockholders was $16.6 million for the quarter, compared to net income of $3.7 million in the prior year period. |
• | Adjusted EBITDA* was a loss of $10.8 million for the quarter, compared to positive $9.0 million in the prior year period. |
• | Adjusted Net Loss* was $12.9 million for the quarter, compared to Adjusted Net Income* of $7.4 million in the prior year period. |
• | Origination volume increased to a record $613 million for the quarter, reflecting 27% growth over the prior year period. |
• | Loans Under Management reached $1.1 billion, up 44% from the prior year period. |
• | Unpaid Principal Balance grew to $889 million, up 76% from the prior year period. |
• | OnDeck continued to diversify its funding sources, adding a $100 million warehouse facility. |
• | Gross revenue between $280 million and $290 million. |
• | Adjusted EBITDA between a loss of $35 million and a loss of $43 million. |
September 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 85,948 | $ | 159,822 | |||
Restricted cash | 42,827 | 38,463 | |||||
Loans held for investment | 905,327 | 552,742 | |||||
Less: Allowance for loan losses | (87,368 | ) | (53,311 | ) | |||
Loans held for investment, net | 817,959 | 499,431 | |||||
Loans held for sale | 986 | 706 | |||||
Property, equipment and software, net | 30,289 | 26,187 | |||||
Other assets | 19,863 | 20,416 | |||||
Total assets | $ | 997,872 | $ | 745,025 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Accounts payable | $ | 4,087 | $ | 2,701 | |||
Interest payable | 1,583 | 757 | |||||
Funding debt | 651,753 | 375,890 | |||||
Corporate debt | 12,700 | 2,695 | |||||
Accrued expenses and other liabilities | 31,969 | 33,560 | |||||
Total liabilities | 702,092 | 415,603 | |||||
Stockholders’ equity (deficit): | |||||||
Common stock—$0.005 par value, 1,000,000,000 shares authorized and 74,512,869 and 73,107,848 shares issued and 71,374,429 and 70,060,208 outstanding at September 30, 2016 and December 31, 2015, respectively | 373 | 366 | |||||
Treasury stock—at cost | (6,418 | ) | (5,843 | ) | |||
Additional paid-in capital | 472,555 | 457,003 | |||||
Accumulated deficit | (175,447 | ) | (128,341 | ) | |||
Accumulated other comprehensive loss | (149 | ) | (372 | ) | |||
Total On Deck Capital, Inc. stockholders' equity | 290,914 | 322,813 | |||||
Noncontrolling interest | 4,866 | 6,609 | |||||
Total equity | 295,780 | 329,422 | |||||
Total liabilities and equity | $ | 997,872 | $ | 745,025 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenue: | ||||||||||||||||
Interest income | $ | 71,361 | $ | 48,624 | $ | 188,726 | $ | 147,571 | ||||||||
Gain on sales of loans | 2,670 | 16,789 | 12,594 | 35,178 | ||||||||||||
Other revenue | 3,340 | 1,985 | 8,168 | 4,418 | ||||||||||||
Gross revenue | 77,371 | 67,398 | 209,488 | 187,167 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Provision for loan losses | 36,586 | 16,239 | 94,294 | 54,865 | ||||||||||||
Funding costs | 8,452 | 5,126 | 22,548 | 14,941 | ||||||||||||
Total cost of revenue | 45,038 | 21,365 | 116,842 | 69,806 | ||||||||||||
Net revenue | 32,333 | 46,033 | 92,646 | 117,361 | ||||||||||||
Operating expense: | ||||||||||||||||
Sales and marketing | 16,789 | 15,847 | 50,094 | 43,503 | ||||||||||||
Technology and analytics | 15,050 | 11,111 | 42,894 | 29,904 | ||||||||||||
Processing and servicing | 5,181 | 3,352 | 14,261 | 9,070 | ||||||||||||
General and administrative | 12,375 | 12,146 | 34,233 | 31,722 | ||||||||||||
Total operating expense | 49,395 | 42,456 | 141,482 | 114,199 | ||||||||||||
Income (loss) from operations | (17,062) | 3,577 | (48,836) | 3,162 | ||||||||||||
Other expense: | ||||||||||||||||
Interest expense | (111) | (70) | (186) | (250) | ||||||||||||
Total other expense | (111) | (70) | (186) | (250) | ||||||||||||
Income (loss) before provision for income taxes | (17,173) | 3,507 | (49,022) | 2,912 | ||||||||||||
Provision for income taxes | — | — | — | — | ||||||||||||
Net income (loss) | (17,173) | 3,507 | (49,022) | 2,912 | ||||||||||||
Net loss attributable to noncontrolling interests | 539 | 226 | 1,920 | 458 | ||||||||||||
Net income (loss) attributable to On Deck Capital, Inc. common stockholders | $ | (16,634 | ) | $ | 3,733 | $ | (47,102 | ) | $ | 3,370 | ||||||
Net income (loss) per share attributable to On Deck Capital, Inc. common stockholders: | ||||||||||||||||
Basic | $ | (0.23 | ) | $ | 0.05 | $ | (0.67 | ) | $ | 0.05 | ||||||
Diluted | $ | (0.23 | ) | $ | 0.05 | $ | (0.67 | ) | $ | 0.04 | ||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 70,971,895 | 69,678,742 | 70,750,037 | 69,472,636 | ||||||||||||
Diluted | 70,971,895 | 75,125,740 | 70,750,037 | 75,414,348 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Originations2 | $ | 612,557 | $ | 482,653 | $ | 1,771,906 | $ | 1,317,672 | |||||||
Unpaid Principal Balance3 | $ | 889,303 | $ | 504,314 | $ | 889,303 | $ | 504,314 | |||||||
Average Loans4 | $ | 856,303 | $ | 541,151 | $ | 748,997 | $ | 541,808 | |||||||
Average Interest Earning Assets5 | $ | 841,270 | $ | 531,223 | $ | 735,825 | $ | 529,756 | |||||||
Loans Under Management6 | $ | 1,123,863 | $ | 781,357 | $ | 1,123,863 | $ | 781,357 | |||||||
Average Loans Under Management7 | $ | 1,087,641 | $ | 748,266 | $ | 1,015,768 | $ | 687,844 | |||||||
Effective Interest Yield8 | 32.8 | % | 34.8 | % | 33.4 | % | 36.1 | % | |||||||
Marketplace Gain on Sale Rate9 | 3.0 | % | 9.7 | % | 4.3 | % | 8.5 | % | |||||||
Average Funding Debt Outstanding10 | $ | 597,678 | $ | 351,675 | $ | 505,406 | $ | 364,742 | |||||||
Cost of Funds Rate11 | 5.7 | % | 5.8 | % | 5.9 | % | 5.5 | % | |||||||
Provision Rate12 | 6.9 | % | 5.1 | % | 6.4 | % | 5.9 | % | |||||||
Reserve Ratio13 | 9.8 | % | 10.4 | % | 9.8 | % | 10.4 | % | |||||||
15+ Day Delinquency Ratio14 | 6.2 | % | 7.5 | % | 6.2 | % | 7.5 | % | |||||||
Marketplace Gain on Sale Rate9 | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Gain on sales of loans(a) | $ | 2,670 | $ | 16,789 | $ | 12,594 | $ | 35,178 | |||||||
Carrying value of loans sold | $ | 89,867 | $ | 173,660 | $ | 292,920 | $ | 415,840 | |||||||
Marketplace Gain on Sale Rate(a) | 3.0 | % | 9.7 | % | 4.3 | % | 8.5 | % | |||||||
(a) Three and nine months ended September 30, 2016 include amounts resulting from transfers of financial assets as shown in the following table. | |||||||||||||||
Activity in Servicing Rights | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Fair value at the beginning of period | $ | 1,989 | $ | 78 | $ | 3,489 | $ | — | |||||||
Addition: | |||||||||||||||
Servicing resulting from transfers of financial assets | 717 | 1,466 | 2,272 | 1,544 | |||||||||||
Changes in fair value: | |||||||||||||||
Change in inputs or assumptions used in the valuation model | — | 972 | — | 972 | |||||||||||
Changes in fair value(b) | (1,019 | ) | (264 | ) | (4,074 | ) | (264 | ) | |||||||
Fair value at the end of period | $ | 1,687 | $ | 2,252 | $ | 1,687 | $ | 2,252 | |||||||
(b) Represents changes due to collection of expected cash flows through September 30, 2016 and 2015. | |||||||||||||||
Marketplace Originations as Percent of Term Loan Originations | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Marketplace originations | $ | 85,948 | $ | 167,191 | $ | 292,942 | $ | 386,268 | |||||||
Origination of term loans | $ | 518,509 | $ | 438,017 | $ | 1,520,562 | $ | 1,204,209 | |||||||
Marketplace originations as percent of term loan originations | 16.6 | % | 38.2 | % | 19.3 | % | 32.1 | % | |||||||
Activity in Loan Held for Investment Balances | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Unpaid Principal Balance beginning of period | $ | 790,421 | $ | 503,388 | $ | 543,790 | $ | 490,563 | |||||||
+ Total originations(c) | 612,557 | 482,653 | 1,771,906 | 1,317,672 | |||||||||||
+ Loans transferred from loans held for sale to loans held for investment | — | 1,348 | 939 | 1,348 | |||||||||||
- Marketplace originations | (85,948 | ) | (167,191 | ) | (292,942 | ) | (386,268 | ) | |||||||
- Sale of loans held for investment | (306 | ) | (2,892 | ) | (548 | ) | (32,783 | ) | |||||||
- Net charge-offs | (23,067 | ) | (16,704 | ) | (60,237 | ) | (52,082 | ) | |||||||
- Principal paid down(c)(d) | (404,354 | ) | (296,288 | ) | (1,080,277 | ) | (834,136 | ) | |||||||
+ Loan purchases | — | — | 6,672 | — | |||||||||||
Unpaid Principal Balance end of period | 889,303 | 504,314 | 889,303 | 504,314 | |||||||||||
+ Net deferred origination costs | 16,024 | 8,078 | 16,024 | 8,078 | |||||||||||
Loans held for investment | 905,327 | 512,392 | 905,327 | 512,392 | |||||||||||
- Allowance for loan losses | (87,368 | ) | (52,587 | ) | (87,368 | ) | (52,587 | ) | |||||||
Loans held for investment, net | $ | 817,959 | $ | 459,805 | $ | 817,959 | $ | 459,805 | |||||||
(c) Includes Unpaid Principal Balance of term loans rolled into new originations of $70.9 million and $67.0 million in the three months ended and $200.6 million and $194.2 million for the nine month period ended September 30, 2016 and 2015, respectively. | |||||||||||||||
(d) Excludes principal that was paid down related to renewed loans sold in the period which were designate as held for investment in the amount of $0.3 million in the three months ended September 30, 2016 and $1.3 million for the nine months ended September 30, 2016. | |||||||||||||||
Activity in the Allowance for Loan Losses | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Allowance for loan losses beginning of period | $ | 73,849 | $ | 53,052 | $ | 53,311 | $ | 49,804 | |||||||
+ Provision for loan losses(e) | 36,586 | 16,239 | 94,294 | 54,865 | |||||||||||
- Net charge-offs | (23,067 | ) | (16,704 | ) | (60,237 | ) | (52,082 | ) | |||||||
Allowance for loan losses end of period | $ | 87,368 | $ | 52,587 | $ | 87,368 | $ | 52,587 | |||||||
(e) Excludes provision expense of $0.2 million and $1.1 million for the three months ended and provision release of $0.4 million and provision expense of $1.9 million for the nine month period ended September 30, 2016 and 2015, respectively, for unfunded loan commitments. The provision for unfunded loan commitments is included in general and administrative expense. | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | (17,173 | ) | $ | 3,507 | $ | (49,022 | ) | $ | 2,912 | ||||||
Interest expense | 111 | 70 | 186 | 250 | ||||||||||||
Income tax expense | — | — | — | — | ||||||||||||
Depreciation and amortization | 2,452 | 1,678 | 6,887 | 4,621 | ||||||||||||
Stock-based compensation | 3,761 | 3,707 | 11,423 | 8,065 | ||||||||||||
Adjusted EBITDA16 | $ | (10,849 | ) | $ | 8,962 | $ | (30,526 | ) | $ | 15,848 | ||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | (17,173 | ) | $ | 3,507 | $ | (49,022 | ) | $ | 2,912 | ||||||
Net loss attributable to noncontrolling interest | 539 | 226 | 1,920 | 458 | ||||||||||||
Stock-based compensation | 3,761 | 3,707 | 11,423 | 8,065 | ||||||||||||
Adjusted Net Income (Loss)17 | $ | (12,873 | ) | $ | 7,440 | $ | (35,679 | ) | $ | 11,435 | ||||||
Adjusted Net Income (Loss) per share18 | ||||||||||||||||
Basic | $ | (0.18 | ) | $ | 0.11 | $ | (0.50 | ) | $ | 0.16 | ||||||
Diluted | $ | (0.18 | ) | $ | 0.10 | $ | (0.50 | ) | $ | 0.15 | ||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 70,971,895 | 69,678,742 | 70,750,037 | 69,472,636 | ||||||||||||
Diluted | 70,971,895 | 75,125,740 | 70,750,037 | 75,414,348 |
Net Interest Margin After Credit Losses (NIMAL) Reconciliation and Calculation(19) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Interest income | $ | 71,361 | $ | 48,624 | $ | 188,726 | $ | 147,571 | ||||||||
Less: Funding costs | (8,452 | ) | (5,126 | ) | (22,548 | ) | (14,941 | ) | ||||||||
Less: Net charge-offs | (23,067 | ) | (16,704 | ) | (60,237 | ) | (52,082 | ) | ||||||||
Net interest income after credit losses | 39,842 | 26,794 | 105,941 | 80,548 | ||||||||||||
Divided by: business days in period | 64 | 65 | 190 | 190 | ||||||||||||
Net interest income after credit losses per business day | 623 | 412 | 558 | 424 | ||||||||||||
Multiplied by: average business days per year | 252 | 252 | 252 | 252 | ||||||||||||
Annualized net interest income after credit losses | 156,996 | 103,824 | 140,616 | 106,848 | ||||||||||||
Divided by: Average Interest Earning Assets | $ | 841,270 | $ | 531,223 | $ | 735,825 | $ | 529,756 | ||||||||
Net Interest Margin After Credit Losses (NIMAL) | 18.7 | % | 19.5 | % | 19.1 | % | 20.2 | % | ||||||||
Adjusted Expense Ratio (AER) Reconciliation and Calculation(20) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Operating expense | $ | 49,395 | $ | 42,456 | $ | 141,482 | $ | 114,199 | ||||||||
Less: stock based compensation | (3,761 | ) | (3,707 | ) | (11,423 | ) | (8,065 | ) | ||||||||
Operating expense (Ex. SBC) | 45,634 | 38,749 | 130,059 | 106,134 | ||||||||||||
Divided by: business days in period | 64 | 65 | 190 | 190 | ||||||||||||
Operating expense (Ex. SBC) per business day | 713 | 596 | 685 | 559 | ||||||||||||
Multiplied by: average business days per year | 252 | 252 | 252 | 252 | ||||||||||||
Operating expense (Ex. SBC) | 179,676 | 150,192 | 172,620 | 140,868 | ||||||||||||
Divided by: Average Loans Under Management | $ | 1,087,641 | $ | 748,266 | $ | 1,015,768 | $ | 687,844 | ||||||||
Adjusted Expense Ratio (AER) | 16.5 | % | 20.1 | % | 17.0 | % | 20.5 | % | ||||||||
Adjusted Operating Yield (AOY) Reconciliation and Calculation(21) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net Interest Margin After Losses (NIMAL) | 18.7 | % | 19.5 | % | 19.1 | % | 20.2 | % | ||||||||
Less: Adjusted expense ratio (AER) | (16.5 | )% | (20.1 | )% | (17.0 | )% | (20.5 | )% | ||||||||
Adjusted Operating Yield (AOY) | 2.2 | % | (0.6 | )% | 2.1 | % | (0.3 | )% | ||||||||
Components of Stock-based Compensation | ||||||||||||||||
(in thousands) | ||||||||||||||||
Stock-based Compensation | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Sales and marketing | $ | 920 | $ | 1,012 | $ | 2,749 | $ | 2,180 | ||||||||
Technology and analytics | 793 | 778 | 2,437 | 1,719 | ||||||||||||
Processing and servicing | 227 | 227 | 781 | 530 | ||||||||||||
General and administrative | 1,821 | 1,690 | 5,456 | 3,636 | ||||||||||||
Total stock-based compensation | $ | 3,761 | $ | 3,707 | $ | 11,423 | $ | 8,065 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
Percentage of originations (number of loans22) | 2016 | 2015 | 2016 | 2015 | ||||||||
Direct & Strategic Partner | 79.8 | % | 81.4 | % | 80.3 | % | 79.3 | % | ||||
Funding Advisor | 20.2 | % | 18.6 | % | 19.7 | % | 20.7 | % | ||||
Percentage of originations (dollars) | ||||||||||||
Direct & Strategic Partner | 73.0 | % | 75.5 | % | 73.1 | % | 71.8 | % | ||||
Funding Advisor | 27.0 | % | 24.5 | % | 26.9 | % | 28.2 | % | ||||
(f) From time to time, management is required to make judgments to determine customers' appropriate channel attribution. |
(1) Amounts represent carrying value of loans sold, which includes both unpaid principal balance sold and the remaining carrying value of the net deferred origination costs. | |||||||
(2) 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. | |||||||
(3) 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. | |||||||
(4) Average Loans for the period is the average of the sum of loans held for investment and loans held for sale as of the beginning of the period and as of the end of each month in the period. | |||||||
(5) Average Interest Earning Assets is calculated as the average of the Unpaid Principal Balance plus the amount of principal outstanding of loans held for sale based on the beginning of the period and as of the end of each month in the period. | |||||||
(6) Loans Under Management represents the Unpaid Principal Balance plus the amount of principal outstanding of loans held for sale, excluding net deferred origination costs, plus the amount of principal outstanding of term loans we serviced for others at the end of the period. | |||||||
(7) Average Loans Under Management for the period is the average of Loans Under Management at the beginning of the period and the end of each month in the period. | |||||||
(8) 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 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 fees include fees paid up front to us by customers when loans are funded and decrease the carrying value of loans, thereby increasing the Effective Interest Yield earned. 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. | |||||||
(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 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. | |||||||
(10) Funding debt outstanding is the debt that we incur to support our lending activities and does not include our corporate debt. Average Funding Debt Outstanding for the period is the average of the funding debt outstanding as of the beginning of the period and as of the end of each month in the period. Additionally, in accordance with Financial Accounting Standards Board’s update to ASC 835-30, which was effective January 2016 and applied retrospectively, deferred debt issuance costs are presented as a direct deduction from the carrying value of the associated debt. | |||||||
(11) 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. | |||||||
(12) 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. 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. | |||||||
(13) 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. | |||||||
(14) 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. | |||||||
(15) Due to the uncertainty regarding and variability of certain items that will affect our expected U.S. GAAP net income (loss) for the fourth quarter of 2016 and full year 2016, such as stock-based compensation and other items, we are currently unable to provide a reasonable estimate of our U.S. GAAP net income (loss) for these future periods or a corresponding reconciliation to U.S. GAAP net income (loss). Our U.S. GAAP net income (loss) for these future periods will be less favorable than our Adjusted EBITDA for these periods. | |||||||
(16) 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. | |||||||
(17) Adjusted Net Income (Loss) represents our net loss adjusted to exclude net loss attributable to non-controlling interest and stock-based compensation expense, each on the same basis and with the same limitations as described above for Adjusted EBITDA. | |||||||
(18) Adjusted Net Income (Loss) per share represents our net loss adjusted to exclude net loss attributable to non-controlling interest and 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. | |||||||
(19) Net Interest Margin After Credit Losses (NIMAL), is calculated as our business day adjusted annualized Net Interest Income After Credit Losses divided by Average Interest Earning Assets. Net Interest Income After Credit Losses represents interest income less funding cost and net charge-offs during the period. Interest income is net of deferred costs and 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. Net charge-offs are charged-off loans in the period, net of recoveries. Annualization is based on 252 business days per year, which is weekdays per year less U.S. Federal Reserve Bank holidays. |
(20) Adjusted Expense Ratio (AER) represents our annualized operating expense, adjusted to exclude the impact of stock-based compensation, divided by Average Loans Under Management. Annualization is based on 252 business days per year, which is weekdays per year less U.S. Federal Reserve Bank holidays. | |||||||
(21) Adjusted Operating Yield (AOY) represents our Net Interest Margin After Credit Losses (NIMAL) less the Adjusted Expense Ratio (AER). | |||||||
(22) Number of loans, or units, equals the total number of term loans funded, plus the total number of lines of credit drawn on for the first time during the period. |