EX-99.1 2 ondkearningsrelease2019q2.htm EXHIBIT 99.1 Exhibit

OnDeck Reports Second Quarter 2019 Financial Results and Announces Share Repurchase Program

•
Loans and finance receivables of $1.2 billion, up 15% from June 30, 2018
•
Gross revenue of $110.2 million up 15% from 2Q 2018
•
Net income* of $4.3 million, $0.05 per diluted share
•
Adjusted Net Income* of $6.9 million, $0.09 per diluted share
•
Board authorized repurchase of up to $50 million of common shares
•
Actively pursuing a bank charter


NEW YORK, July 29, 2019 /PRNewswire/ -- OnDeck® (NYSE:ONDK), the leader in online lending for small business, today announced second quarter 2019 Net income of $4.3 million, Adjusted Net Income of $6.9 million and Gross revenue of $110.2 million. Second quarter 2019 results reflect the full quarter impact of the company's business combination with Evolocity Financial Group ("Evolocity") that closed on April 1, 2019.

“Our second quarter financial results reflect the continued execution of our 2019 priorities focused on growing the U.S. lending business, investing in growth adjacencies and advancing our risk, technology and funding disciplines,” said Noah Breslow, chief executive officer. “We are excited about our opportunities to create value for shareholders and our Board has authorized a significant stock repurchase program in recognition of our strong liquidity and capital positions. Further, after careful consideration and analysis, we have decided to pursue a bank charter, which will enable us to offer our small business customers a wider range of products while improving our financial profile."

Review of Financial Results for the Second Quarter of 2019

Net income was $4.3 million, or $0.05 per diluted share, compared to $5.7 million, $0.07 per diluted share, in the prior quarter and $5.6 million, or $0.07 per diluted share, in the year-ago period.

Adjusted Net Income was $6.9 million, or $0.09 per diluted share, compared to $8.1 million, or $0.10 per diluted share, in the prior quarter and $9.8 million, or $0.13 per diluted share, in the year-ago period.

Loans and finance receivables were essentially flat sequentially and increased 15% from a year ago to $1.2 billion, reflecting annual growth in all loan types and the closing of the Evolocity transaction in April 2019. Origination volume was $592 million, down from the prior quarter, as second quarter volume has historically been softer, and up 1% from the year-ago quarter. Compared to the prior quarter, term loan unit volume decreased 5%, average term loan size decreased slightly to $52 thousand and the average term loan maturity increased to 12.2 months.

Gross revenue of $110.2 million was essentially unchanged from the prior quarter and up 15% from the year-ago quarter, driven by higher Interest and finance income. Portfolio Yield of 35.0% decreased from 35.6% in the prior quarter, reflecting the addition of the Evolocity portfolio and a lower blended yield on new originations, and from 36.1% in the year-ago quarter which also reflects increased delinquencies.

Interest expense and the Cost of Funds Rate increased slightly from the prior quarter to $11.4 million and 5.5%, respectively, primarily reflecting the addition of the Evolocity debt to our balance sheet, and improved significantly from the year-ago quarter primarily due to lower borrowing spreads on debt that was refinanced.

Net Interest Margin decreased to 29.0% from 29.5% in the prior quarter and increased from 28.2% in the year-ago quarter reflecting the aforementioned drivers of Portfolio Yield and Cost of Funds Rate.

Provision for loan and finance receivable losses was $43.0 million, essentially flat sequentially, as the impacts from higher charge-offs and lower originations largely offset, and increased from $33.3 million a year ago primarily reflecting higher charge-offs and portfolio growth. The Provision Rate of 7.3% increased from 6.8% the prior quarter and 5.7% the year-ago quarter. The Net Charge-off Rate increased to 15.1% driven by the write-off of loans originated in the second half of 2018 as part of our credit expansion testing. The 15+ Day Delinquency Ratio improved 20 basis points from the prior quarter to 8.5% as the benefit from elevated charge-offs and improved performance from more recent vintages was partially offset by a continued increase in 90-plus day delinquency reflecting previously implemented changes to our collection practices. The Reserve Ratio was 12.3% at June 30, 2019, down 20 basis points from the prior quarter but remains above the prior-year figure reflecting overall portfolio quality trends and loss expectations.

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Operating expense of $52.0 million increased from the comparable periods and reflects increased spend related to our strategic growth initiatives, including the addition of Evolocity. Our Efficiency Ratio of 47.1%, increased from 43.9% the prior quarter reflecting our investments and improved from 47.5% in the year-ago quarter which included $1.4 million of expense related to debt extinguishment. Our Adjusted Efficiency Ratio* was 44.2% up from 41.1% the prior quarter and 43.1% the year-ago quarter.

Provision for income taxes was $1.8 million compared to $1.7 million the prior quarter and zero the year-ago quarter when taxable income was completely offset by operating loss carryforwards. The effective tax rate was 45% compared to 25% the prior quarter with the increase driven by a greater proportion of international losses. The year-to-date 2019 effective tax rate was 32%.

Total assets increased 2% from the prior quarter and 16% from a year ago to $1.2 billion driven by portfolio growth. Cash and cash equivalents was $59 million compared to $60 million the prior quarter and $74 million a year ago. Debt of $842 million was essentially unchanged from the prior quarter and increased 11% from $756 million a year ago, largely reflecting the funding of loan growth.

Total OnDeck stockholders’ equity of $314 million increased $7 million, or 2%, from the prior quarter and $44 million, or 16%, from a year ago. Book value per diluted common share outstanding of $3.98 increased from $3.87 the prior quarter and $3.44 a year ago.

2019 Third Quarter and Full-year Financial Guidance

OnDeck provided the following guidance for the three months ending September 30, 2019:
•
Gross revenue between $108 million and $112 million,
•
Net income between $1 million and $5 million, and
•
Adjusted Net Income between $4 million and $8 million.

OnDeck provided the following updated financial guidance for full-year 2019:
•
Gross revenue of $438 million to $448 million,
•
Net income of $12 million to $20 million and
•
Adjusted Net income of $22 million to $30 million.

The full-year 2019 financial guidance assumes the following trends relative to full-year 2018:
•
A high single-digit percentage growth rate in Loans and finance receivables,
•
A stable Net Interest Margin,
•
A slight increase in the Adjusted Efficiency Ratio,
•
A Provision Rate of approximately 7%, and
•
A effective tax rate of 30-35%.

* Net income (loss) as used in the narrative of this release is Net income (loss) attributable to On Deck Capital, Inc. common stockholders in the accompanying tables. Adjusted Net income (loss) and Adjusted Efficiency Ratio are Non-GAAP financial measures. See "About Non-GAAP Financial Measures."

Authorization to Repurchase Common Shares

The OnDeck Board has authorized the repurchase of up to $50 million of common stock with the shares to be retained in Treasury and available for possible reissuance. Any share repurchases under the program will be made from time to time in the open market, in privately negotiated transactions or otherwise. The timing and amount of any share repurchases will be subject to market conditions and other factors determined by the company. The repurchase authorization expires August 31, 2020, however, the company may suspend, modify or discontinue the program at any time in its discretion without prior notice. This press release is neither an offer to purchase nor a solicitation of an offer to buy any securities.

Revision of Prior Period Financial Statements for Immaterial Errors

During the second quarter of 2019, we identified an immaterial error in our historical financial statements relating to the accrual of commissions on a small portion of our renewal loans. As a result, we under-accrued the commissions payable on those renewal loans. The aggregate amount of the under-accrual was $2.4 million, approximately 90% of

2

which relates to 2015 and subsequent periods, and represents less than 1%, of our total stockholders’ equity at March 31, 2019. The amount of the error in each of the impacted annual and interim periods was less than 1% of total commissions paid for such period. Prior period data in this release and accompanying tables and future SEC filings will reflect this revision.

Conference Call

OnDeck will host a conference call to discuss its second quarter 2019 financial results on July 29, 2019 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 9792174. 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, lines of credit and secured equipment finance loans customized for the needs of small business owners. The company also offers bank clients a comprehensive technology and services platform that facilitates online lending to small business customers through ODX, a wholly-owned subsidiary. OnDeck has provided over $12 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” metrics including Adjusted Net income (loss), Adjusted Net income (loss) per share, Adjusted Efficiency Ratio, Adjusted Return on Assets and Adjusted Return on Equity. These financial measures are 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. Adjusted metrics exclude items management deems to be non-representative of operating results or trends (“noteworthy items”) and expenses related to stock-based compensation, which are non-cash expenses. 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 a substitute for or superior 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,” "plans," “continues,” “believes," "anticipates," "estimates" or similar expressions. These include statements regarding guidance on gross revenue, net income and Adjusted Net Income for the third quarter and full-year 2019, and the assumed loan growth rate, Net Interest Margin, Net Charge-off Ratio, Provision Rate, Loan Loss Reserve Ratio, Adjusted Efficiency Ratio, effective tax rate, and macro-economic and other external factors. 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 or contribute to such differences include risks relating to: (1) our ability to achieve consistent profitability in the future in light of our prior loss history and competition; (2) our growth strategies, including the introduction of new products or features, expanding our platform to other lenders through ODX and maintaining ODX’s current clients, expansion into international markets, business development, offering equipment financing and our ability to

3

effectively manage and fund our growth; (3) possible future acquisitions of complementary assets, businesses, technologies or products with the goal of growing our business, and the integration of any such acquisitions including Evolocity; (4) any material reduction in our interest rate spread and our ability to successfully mitigate this risk through interest rate hedging or raising interest rates or other means; (5) worsening economic conditions that may result in decreased demand for our loans or services and increase our customers’ default rates; (6) supply and demand driven changes in credit and increases in the availability of capital for our competitors that negatively impacts our loan pricing; (7) our ability to accurately assess creditworthiness and forecast and reserve for loan losses; (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) incorrect or fraudulent information provided to us by customers causing us to misjudge their qualifications to receive a loan; (10) the effectiveness of our efforts to identify, manage and mitigate our credit, market, liquidity, operational and other risks associated with our business and strategic objectives; (11) our ability to continue to innovate or respond to evolving technological changes and protect our intellectual property; (12) our reputation and possible adverse publicity about us or our industry; (13) failure of operating controls, including customer or partner experience degradation, and related legal expenses, increased regulatory cost, significant fraud losses and vendor risk; and (14) changes in federal or state laws or regulations, or judicial decisions 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; (15) risks associated with pursuing a bank charter, and risks associated with either failing to obtain or obtaining a bank charter; and other risks, including those described in Part I - Item 1A. Risk Factors in our Annual Report on From 10-K for the year ended December 31, 2018 and other documents that we file with the Securities and Exchange Commission, or SEC, from time to time which are or will be available on the SEC website at www.sec.gov.

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, OnDeck Marketplace, and ODX are trademarks of On Deck Capital, Inc.
SOURCE On Deck Capital, Inc.


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On Deck Capital, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited, $ in thousands, except share and per share data)
 
Three Months Ended,
 
Six Months Ended,
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Revenue:
 
 
 
 
 
 
 
 
 
Interest and finance income
$
105,641

 
$
105,799

 
$
92,209

 
$
211,440

 
$
178,438

Other revenue
4,605

 
4,176

 
3,247

 
8,781

 
7,158

Gross revenue
110,246

 
109,975

 
95,456

 
220,221

 
185,596

Cost of revenue:
 
 
 
 
 
 
 
 
 
Provision for loan and finance receivable losses
42,951

 
43,291

 
33,293

 
86,242

 
69,586

Interest expense
11,381

 
11,332

 
12,245

 
22,713

 
24,117

Total cost of revenue
54,332

 
54,623

 
45,538

 
108,955

 
93,703

Net revenue
55,914

 
55,352

 
49,918

 
111,266

 
91,893

Operating expense:
 
 
 
 
 
 
 
 
 
Sales and marketing
13,307

 
11,960

 
11,432

 
25,267

 
22,030

Technology and analytics
16,681

 
16,806

 
12,799

 
33,487

 
23,806

Processing and servicing
5,609

 
5,489

 
5,041

 
11,098

 
10,262

General and administrative
16,353

 
14,029

 
16,034

 
30,382

 
33,759

Total operating expense
51,950

 
48,284

 
45,306

 
100,234

 
89,857

Income (loss) from operations, before provision for income taxes
3,964

 
7,068

 
4,612

 
11,032

 
2,036

Provision for income taxes
1,796

 
1,740

 
—

 
3,536

 
—

Net income (loss)
2,168

 
5,328

 
4,612

 
7,496

 
2,036

Less: Net income (loss) attributable to noncontrolling interest
(2,127)

 
(338)

 
(1,016
)
 
(2,465)

 
(1,535
)
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
$
4,295

 
$
5,666

 
$
5,628

 
$
9,961

 
$
3,571

Net income (loss) per share attributable to On Deck Capital, Inc. common stockholders:
 
 
 
 
 
 
 
 
 
Basic
$
0.06

 
$
0.08

 
$
0.08

 
$
0.13

 
$
0.05

Diluted
$
0.05

 
$
0.07

 
$
0.07

 
$
0.13

 
$
0.05

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
76,137,751

 
75,539,535

 
74,385,446

 
75,840,604

 
74,182,929

Diluted
78,901,601

 
79,115,037

 
78,288,267

 
79,013,757

 
77,786,748

 
 
 
 
 
 
 
 
 
 

5


On Deck Capital, Inc. and Subsidiaries
Percentage of Average Interest Earning Assets
(unaudited, $ in thousands)
 
Three Months Ended,
 
Six Months Ended,
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Revenue:
 
 
 
 
 
 
 
 
 
Interest and finance income
32.5
%
 
33.0
%
 
32.6
%
 
32.8
%
 
32.4
%
Other revenue
1.4
%
 
1.3
%
 
1.2
%
 
1.4
%
 
1.3
%
Gross revenue
33.9
%
 
34.3
%
 
33.8
%
 
34.2
%
 
33.7
%
Cost of revenue:
 
 
 
 
 
 
 
 
 
Provision for loan and finance receivable losses
13.2
%
 
13.6
%
 
11.8
%
 
13.4
%
 
12.7
%
Interest expense
3.5
%
 
3.5
%
 
4.3
%
 
3.5
%
 
4.4
%
Total cost of revenue
16.7
%
 
17.1
%
 
16.1
%
 
16.9
%
 
17.1
%
Net revenue
17.2
%
 
17.2
%
 
17.7
%
 
17.3
%
 
16.6
%
Operating expense:
 
 
 
 
 
 
 
 
 
Sales and marketing
4.1
%
 
3.7
%
 
4.0
%
 
3.9
%
 
4.0
%
Technology and analytics
5.1
%
 
5.2
%
 
4.5
%
 
5.2
%
 
4.3
%
Processing and servicing
1.7
%
 
1.7
%
 
1.8
%
 
1.7
%
 
1.9
%
General and administrative
5.0
%
 
4.4
%
 
5.7
%
 
4.7
%
 
6.1
%
Total operating expense
15.9
%
 
15.0
%
 
16.0
%
 
15.5
%
 
16.3
%
Income (loss) from operations, before provision for income taxes
1.3
%
 
2.2
%
 
1.7
%
 
1.8
%
 
0.3
%
Provision for income taxes
0.6
%
 
0.5
%
 
0.0
%
 
0.6
%
 
0.0
%
Net income (loss)
0.7
%
 
1.7
%
 
1.7
%
 
1.2
%
 
0.3
%
 
 
 
 
 
 
 
 
 
 
Memo:
 
 
 
 
 
 
 
 
 
Average Interest Earning Assets
$1,303,709
 
$1,299,675
 
$1,135,713
 
$1,300,864
 
$1,109,224

6


On Deck Capital, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited, $ in thousands, except share and per share data)
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
 
 
Cash and cash equivalents
$
58,744

 
$
60,085

 
$
59,859

Restricted cash
43,336

 
44,632

 
37,779

Loans and finance receivables
1,207,609

 
1,202,771

 
1,169,407

Less: Allowance for loan and finance receivable losses
(145,739
)
 
(147,406
)
 
(140,040
)
Loans and finance receivables held for investment, net
1,061,870

 
1,055,365

 
1,029,367

Property, equipment and software, net
17,088

 
16,180

 
16,700

Other assets
67,169

 
48,636

 
18,115

Total assets
$
1,248,207

 
$
1,224,898

 
$
1,161,820

Liabilities, mezzanine equity and stockholders' equity
 
 
 
 
 
Liabilities:
 
 
 
 
 
Accounts payable
$
5,819

 
$
4,847

 
$
4,011

Interest payable
2,687

 
2,808

 
2,385

Debt
841,602

 
842,314

 
816,231

Accrued expenses and other liabilities
65,135

 
63,333

 
36,708

Total liabilities
915,243

 
913,302

 
859,335

Mezzanine equity:
 
 
 
 
 
Redeemable noncontrolling interest
15,122

 
—

 
—

Stockholders’ equity:
 
 
 
 
 
Common stock—$0.005 par value, 1,000,000,000 shares authorized and 79,338,337, 78,944,343, and 78412,291 shares issued and 76,301,387, 75,907,393, and 75,375,341 outstanding at June 30, 2019, March 31, 2019, and December 31, 2018, respectively.
401

 
399

 
396

Treasury stock—at cost
(5,842
)
 
(5,842
)
 
(5,842
)
Additional paid-in capital
508,816

 
506,345

 
502,189

Accumulated deficit
(186,997
)
 
(191,293
)
 
(196,959
)
Accumulated other comprehensive loss
(1,894
)
 
(2,234
)
 
(1,832
)
Total On Deck Capital, Inc. stockholders' equity
314,484

 
307,375

 
297,952

Noncontrolling interest
3,358

 
4,221

 
4,533

Total stockholders' equity
317,842

 
311,596

 
302,485

Total liabilities, mezzanine equity and stockholders' equity
$
1,248,207

 
$
1,224,898

 
$
1,161,820

 
 
 
 
 
 
Memo:
 
 
 
 
 
Unpaid Principal Balance1
$
1,185,122

 
$
1,177,609

 
$
1,144,954

Loans and finance receivables2
$
1,207,609

 
$
1,202,771

 
$
1,169,407

Interest Earning Assets3
$
1,309,689

 
$
1,307,488

 
$
1,267,045

Book Value Per Diluted Share
$
3.98

 
$
3.87

 
$
3.75


7

On Deck Capital, Inc. and Subsidiaries
Consolidated Average Balance Sheets4 
(unaudited, $ in thousands)
 
Average Three Months Ended,
 
Average Six Months Ended,
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
51,530

 
$
48,115

 
$
55,516

 
$
48,356

 
$
50,128

Restricted cash
45,677

 
48,182

 
54,859

 
47,258

 
55,251

Loans and finance receivables
1,206,503

 
1,203,378

 
1,025,337

 
1,205,250

 
1,003,845

Less: Allowance for loan and finance receivable losses
(146,612
)
 
(145,742
)
 
(121,899
)
 
(146,002
)
 
(118,290
)
Loans and finance receivables held for investment, net
1,059,891

 
1,057,636

 
903,438

 
1,059,248

 
885,555

Property, equipment and software, net
17,413

 
16,494

 
17,182

 
17,064

 
19,248

Other assets
58,022

 
38,843

 
15,783

 
48,404

 
14,773

Total assets
$
1,232,533

 
$
1,209,270

 
$
1,046,778

 
$
1,220,330

 
$
1,024,955

Liabilities, mezzanine equity and stockholders' equity
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
5,120

 
$
5,053

 
$
3,627

 
$
5,121

 
$
3,269

Interest payable
2,812

 
2,646

 
2,519

 
2,718

 
2,407

Debt
834,582

 
838,867

 
737,099

 
835,926

 
717,662

Accrued expenses and other liabilities
63,690

 
56,779

 
31,400

 
59,792

 
32,257

Total liabilities
906,204

 
903,345

 
774,645

 
903,557

 
755,595

Mezzanine equity:
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interest
11,634

 
—

 
—

 
6,647

 
—

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
Total On Deck Capital, Inc. stockholders' equity
310,858

 
301,469

 
266,711

 
305,990

 
264,585

Noncontrolling interest
3,837

 
4,456

 
5,422

 
4,136

 
4,775

Total stockholders' equity
314,695

 
305,925

 
272,133

 
310,126

 
269,360

Total liabilities, mezzanine equity and stockholders' equity
$
1,232,533

 
$
1,209,270

 
$
1,046,778

 
$
1,220,330

 
$
1,024,955

 
 
 
 
 
 
 
 
 
 
Memo:
 
 
 
 
 
 
 
 
 
Unpaid Principal Balance
$
1,183,056

 
$
1,177,801

 
$
1,006,133

 
$
1,180,831

 
$
985,321

Loans
$
1,206,503

 
$
1,203,378

 
$
1,025,337

 
$
1,205,250

 
$
1,003,845

Interest Earning Assets
$
1,303,709

 
$
1,299,675

 
$
1,135,713

 
$
1,300,864

 
$
1,109,224




8

Supplemental Information

Key Performance Metrics
($ in tousands, except percentage data)
 
Three Months Ended,
 
Six Months Ended,
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Originations5
$
591,848

 
$
635,506

 
$
586,728

 
$
1,227,354

 
$
1,177,313

Portfolio Yield6
35.0
%
 
35.6
%
 
36.1
%
 
35.3
%
 
35.8
%
Cost of Funds Rate7
5.5
%
 
5.4
%
 
6.6
%
 
5.4
%
 
6.7
%
Net Interest Margin8
29.0
%
 
29.5
%
 
28.2
%
 
29.3
%
 
28.1
%
Provision Rate9
7.3
%
 
6.8
%
 
5.7
%
 
7.0
%
 
5.9
%
Reserve Ratio10
12.3
%
 
12.5
%
 
12.1
%
 
12.3
%
 
12.1
%
15+ Day Delinquency Ratio11
8.5
%
 
8.7
%
 
6.8
%
 
8.5
%
 
6.8
%
Net Charge-off Rate12
15.1
%
 
12.2
%
 
11.2
%
 
13.6
%
 
11.1
%
Efficiency Ratio13
47.1
%
 
43.9
%
 
47.5
%
 
45.5
%
 
48.4
%
Adjusted Efficiency Ratio14 (a)
44.2
%
 
41.1
%
 
43.1
%
 
42.6
%
 
41.7
%
Return on Assets15
1.4
%
 
1.9
%
 
2.2
%
 
1.6
%
 
0.7
%
Adjusted Return on Assets16 (a)
2.2
%
 
2.7
%
 
3.7
%
 
2.5
%
 
3.1
%
Return on Equity17
5.5
%
 
7.5
%
 
8.4
%
 
6.5
%
 
2.7
%
Adjusted Return on Equity18 (a)
8.8
%
 
10.8
%
 
14.7
%
 
9.8
%
 
12.1
%
 
Three Months Ended,
 
Six Months Ended,
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Activity in the Allowance for Loan Losses
 
 
 
 
 
 
 
 
 
Allowance for loan losses beginning of period
$
147,406

 
$
140,040

 
$
118,921

 
$
140,040

 
$
109,015

   + Provision for loan losses
42,951

 
43,291

 
33,293

 
86,242

 
69,586

   - Gross charge-offs
(49,141
)
 
(39,839
)
 
(31,362
)
 
(88,980
)
 
(61,094
)
   + Recoveries
4,523

 
3,914

 
3,206

 
8,437

 
6,551

Allowance for loan losses end of period
$
145,739

 
$
147,406

 
$
124,058

 
$
145,739

 
$
124,058

Activity in Loans and Finance Receivables Held for Investment Balances
Three Months Ended,
 
Six Months Ended,
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Unpaid Principal Balance beginning of period
$
1,177,609

 
$
1,144,954

 
$
992,595

 
$
1,144,954

 
$
936,239

   + Total originations(b)
591,848

 
635,506

 
586,728

 
1,227,354

 
1,177,313

   + Purchase of Loans and finance receivables
37,454

 
—

 
801

 
37,454

 
801

   - Net charge-offs
(44,618
)
 
(35,924
)
 
(28,156
)
 
(80,542
)
 
(54,543
)
   - Principal paid down
(577,171
)
 
(566,927
)
 
(525,382
)
 
(1,144,098
)
 
(1,033,224
)
Unpaid Principal Balance end of period
1,185,122

 
1,177,609

 
1,026,586

 
1,185,122

 
1,026,586

   + Net deferred origination costs
22,487

 
25,162

 
20,203

 
22,487

 
20,203

Loans and finance receivables held for investment
1,207,609

 
1,202,771

 
1,046,789

 
1,207,609

 
1,046,789

   - Allowance for loan losses
(145,739
)
 
(147,406
)
 
(124,058
)
 
(145,739
)
 
(124,058
)
Loans and finance receivables held for investment, net
$
1,061,870

 
$
1,055,365

 
$
922,731

 
$
1,061,870

 
$
922,731

(a) Non-GAAP measure. See "About Non-GAAP Financial Measures," and "Non-GAAP Reconciliations" and related footnotes elsewhere in this press release.
(b) Includes Unpaid Principal Balance of term loans rolled into new originations of $95.2 million, $98.5 million, and $76.9 million, in the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively and $193.7 million, and $167.7 million, in the six months ended June 30, 2019 and June 30, 2018, respectively.

9


Supplemental Information

Non-GAAP Reconciliations
(in thousands, except share and per share data)
 
Three Months Ended,
 
Six Months Ended,
Reconciliation of Net Income to Adjusted Net Income
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
$
4,295

 
$
5,666

 
$
5,628

 
$
9,961

 
$
3,571

Adjustments (after-tax):
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
2,581

 
2,436

 
2,794

 
5,017

 
6,004

Real estate disposition charges
—

 
—

 
—

 
—

 
4,187

Severance and executive transition expenses
—

 
—

 
—

 
—

 
911

Debt Extinguishment Costs
—

 
—

 
1,384

 
—

 
1,384

Adjusted Net Income (Loss)19
$
6,876

 
$
8,102

 
$
9,806

 
$
14,978

 
$
16,057

Adjusted Net Income (Loss) per Share20:


 
 
 


 


 


Basic
$
0.09

 
$
0.11

 
$
0.13

 
$
0.20

 
$
0.22

Diluted
$
0.09

 
$
0.10

 
$
0.13

 
$
0.19

 
$
0.21

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
76,137,751

 
75,539,535

 
74,385,446

 
75,840,604

 
74,182,929

Diluted
78,901,601

 
79,115,037

 
78,288,267

 
79,013,757

 
77,786,748



 
Three Months Ended,
 
Six Months Ended,
Reconciliation of Return on Assets to Adjusted Return on Assets
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
$
4,295

 
$
5,666

 
$
5,628

 
$
9,961

 
$
3,571

Average Total Assets
1,232,533

 
1,209,270

 
1,046,778

 
1,220,330

 
1,024,955

Return on Assets
1.4
%
 
1.9
%
 
2.2
%
 
1.6
%
 
0.7
%
Adjustments (after-tax):
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
2,581

 
2,436

 
2,794

 
5,017

 
6,004

Real estate disposition charges
—

 
—

 
—

 
—

 
4,187

Severance and executive transition expenses
—

 
—

 
—

 
—

 
911

Debt Extinguishment Costs
—

 
—

 
1,384

 
—

 
1,384

Adjusted Net Income (Loss)
$
6,876

 
$
8,102

 
$
9,806

 
$
14,978

 
$
16,057

Average Total Assets
1,232,533

 
1,209,270

 
1,046,778

 
1,220,330

 
1,024,955

Adjusted Return on Assets
2.2
%
 
2.7
%
 
3.7
%
 
2.5
%
 
3.1
%




10

 
Three Months Ended,
 
Six Months Ended,
Reconciliation of Return on Equity to Adjusted Return on Equity
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
$
4,295

 
$
5,666

 
$
5,628

 
$
9,961

 
$
3,571

Average OnDeck Stockholders' Equity
310,858

 
301,469

 
266,711

 
305,990

 
264,585

Return on Equity
5.5
%
 
7.5
%
 
8.4
%
 
6.5
%
 
2.7
%
Adjustments (after-tax):
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
2,581

 
2,436

 
2,794

 
5,017

 
6,004

Real estate disposition charges
—

 
—

 
—

 
—

 
4,187

Severance and executive transition expenses
—

 
—

 
—

 
—

 
911

Debt Extinguishment Costs
—

 
—

 
1,384

 
—

 
1,384

Adjusted Net Income (Loss)
$
6,876

 
$
8,102

 
$
9,806

 
$
14,978

 
$
16,057

Average OnDeck Stockholders' Equity
310,858

 
301,469

 
266,711

 
305,990

 
264,585

Adjusted Return on Equity
8.8
%
 
10.8
%
 
14.7
%
 
9.8
%
 
12.1
%


 
Three Months Ended,
 
Six Months Ended,
Reconciliation of Efficiency Ratio to Adjusted Efficiency Ratio
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Total operating expense
$
51,950

 
$
48,284

 
$
45,306

 
$
100,234

 
$
89,857

Gross revenue
110,246

 
109,975

 
95,456

 
220,221

 
185,596

Efficiency Ratio
47.1
%
 
43.9
%
 
47.5
%
 
45.5
%
 
48.4
%
Adjustments (pre-tax):
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
3,249

 
3,083

 
2,794

 
6,331

 
6,004

Real estate disposition charges
—

 
—

 
—

 
—

 
4,187

Severance and executive transition expenses
—

 
—

 
—

 
—

 
911

Debt Extinguishment Costs
—

 
—

 
1,384

 
—

 
1,384

Operating Expenses Less Noteworthy Items
$
48,701

 
$
45,201

 
$
41,128

 
$
93,903

 
$
77,371

Gross revenue
110,246

 
109,975

 
95,456

 
220,221

 
185,596

Adjusted Efficiency Ratio
44.2
%
 
41.1
%
 
43.1
%
 
42.6
%
 
41.7
%

Adjusted Net Income is used in the calculation of Adjusted Return on Assets and Adjusted Return on Equity, all of which are Non-GAAP measures. Additionally, the same adjustment items contained in the above reconciliation of Net Income to Adjusted Net Income are used to adjust operating expense in the calculation of the Adjusted Efficiency Ratio, a Non-GAAP measure. Amounts may differ due to taxes.

Non-GAAP Guidance Reconciliation
(in millions)
 
Three Months Ending September 30,
 
Twelve Months Ending December 31,
 
 
2019
 
2019
 
Low

 
High

 
Low

 
High

Net income (loss) attributable to On Deck Capital, Inc. common stockholders
$
1

 
$
5

 
$
12

 
$
20

Stock-based compensation (after tax)
3

 
3

 
10

 
10

Adjusted Net Income
$
4

 
$
8

 
$
22

 
$
30






11

Supplemental Channel Information

Quarterly Origination Channel Distribution
 
Three Months Ended,
 
Six Months Ended,
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Percentage of originations (dollars)
 
 
 
 
 
 
 
 
 
Direct
43
%
 
42
%
 
44
%
 
43
%
 
45
%
Strategic Partner
31
%
 
31
%
 
27
%
 
30
%
 
26
%
Funding Advisor
26
%
 
27
%
 
29
%
 
27
%
 
29
%

Notes:
(1)Unpaid Principal Balance represents the total amount of principal outstanding on Loans held for investment, plus outstanding advances relating to other finance receivables 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 and finance receivable losses and any loans sold or held for sale at the end of the period.
(2)Loans and finance receivables represents the sum of term loans, lines of credit, equipment finance loans and finance receivables.
(3)Interest Earning Assets represents the sum of Loans and finance receivables plus Cash and cash equivalents plus Restricted cash.
(4)Average Balance Sheet line items for the period represent the average of the balance at the beginning of the first month of the period and the end of each month in the period.
(5)Originations represent the total principal amount of Loans made during the period plus the total amount advanced on other finance receivables. 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.
(6)Portfolio Yield is the rate of return we achieve on Loans and finance receivables outstanding during a period. It is calculated as annualized Interest and finance income on Loans and finance receivables including amortization of net deferred origination costs divided by average loans and finance receivables. Annualization is based on 365 days per year and is calendar day-adjusted.
(7)Cost of Funds Rate is calculated as interest expense divided by average debt outstanding for the period. For periods of less than one year, the metric is annualized based on four quarters per year and is not business day or calendar day-adjusted.
(8)Net Interest Margin is calculated as annualized net interest and finance income divided by average Interest Earning Assets. Net interest and finance income represents Interest and finance receivable income less Interest expense during the period. Annualization is based on 365 days per year and is calendar day-adjusted.
(9)Provision Rate equals the provision for Loan and finance receivable losses for the period divided by originations for the period.
(10)Reserve Ratio is our allowance for loan and finance receivable losses at the end of the period divided by the Unpaid Principal Balance at the end of the period.
(11)15+ Day Delinquency Ratio equals the aggregate Unpaid Principal Balance for our Loans that are 15 or more calendar days contractually passed due and for our finance receivables that are 15 or more payments behind schedule as a percentage of the Unpaid Principal Balance at the end of the period. The Unpaid Principal Balance for our loans and finance receivables that are 15 or more calendar days or payments past due includes Loans and finance receivables that are paying and non-paying.
(12)Net Charge-off Rate is calculated as our annualized net charge-offs for the period divided by the average Unpaid Principal Balance outstanding during the period. Net charge-offs are charged-off loans and finance receivables in the period, net of recoveries of prior charged-off loans and finance receivables in the period. For periods of less than one year, the metric is annualized based on four quarters per year and is not business day or calendar day-adjusted.
(13)Efficiency Ratio is a measure of operating efficiency and is calculated as Total operating expense for the period divided by Gross revenue for the period.
(14)Adjusted Efficiency Ratio is non-GAAP measure calculated as total operating expense divided by gross revenue for the period, adjusted to exclude (a) stock-based compensation expense and (b) items management deems to be non-representative of operating results or trends, all as shown in the non-GAAP reconciliation presentation of this metric. We believe Adjusted Efficiency Ratio is useful because it provides investors and others with a supplemental operating efficiency metric to present our operating efficiency across multiple periods without the effects of stock-based compensation, which is a non-cash expense based on equity grants made to participants in our equity plans at

12

specified prices and times but which does not necessarily reflect how our business is performing, and items which may only affect our operating results periodically. Our use of Adjusted Efficiency Ratio has limitations as an analytical tool and you should not consider it in isolation, as a substitute for or superior to our Efficiency Ratio, which is the most comparable GAAP metric.
(15)Return on Assets is calculated as annualized net income (loss) attributable to On Deck Capital, Inc. common stockholders for the period divided by average total assets for the period. For periods of less than one year, the metric is annualized based on four quarters per year and is not business day or calendar day-adjusted.
(16)Adjusted Return on Assets is a non-GAAP measure calculated as Adjusted Net Income (Loss) for the period divided by average total assets for the period. For periods of less than one year, the metric is annualized based on four quarters per year and is not business day or calendar day-adjusted. We believe Adjusted Return on Assets is useful because it provides investors and others with a supplemental metric to assess our performance across multiple periods without the effects of stock-based compensation, which is a non-cash expense based on equity grants made to participants in our equity plans at specified prices and times but which does not necessarily reflect how our business is performing, and items which may only affect our operating results periodically, all as shown in the non-GAAP reconciliation presentation of this metric. Our use of Adjusted Return on Assets has limitations as an analytical tool and you should not consider it in isolation, as a substitute for or superior to Return on Assets, which is the most comparable GAAP metric.
(17)Return on Equity is calculated as annualized net income (loss) attributable to On Deck Capital, Inc. common stockholders for the period divided by average total On Deck Capital, Inc. stockholders’ equity for the period. For periods of less than one year, the metric is annualized based on four quarters per year and is not business day or calendar day-adjusted.
(18)Adjusted Return on Equity is a non-GAAP measure calculated as Adjusted Net Income (Loss) attributable to On Deck Capital, Inc. common stockholders for the period divided by average total On Deck Capital, Inc. stockholders’ equity for the period. For periods of less than one year, the metric is annualized based on four quarters per year and is not business day or calendar day-adjusted. We believe Adjusted Return on Equity is useful because it provides investors with a supplemental metric to assess our performance across multiple periods without the effects of stock-based compensation, which is a non-cash expense based on equity grants made to participants in our equity plans at specified prices and times but which does not necessarily reflect how our business is performing, and items which may only affect our operating results periodically, all as shown in the non-GAAP reconciliation presentation of this metric. Our use of Adjusted Return on Equity has limitations as an analytical tool and you should not consider it in isolation, as a substitute or superior to Return on Equity, which is the most comparable GAAP metric.
(19)Adjusted Net Income (Loss) is a non-GAAP measure calculated as net income (loss) attributable to On Deck Capital, Inc. common stockholders adjusted to exclude from net income (loss) attributable to On Deck Capital, Inc. common stockholders (a) stock-based compensation expense and (b) items management deems to be non-representative of operating results or trends, all as shown in the non-GAAP reconciliation presentation of this metric. We believe Adjusted Net Income (Loss) is useful because it provides investors and others with a supplemental profitability metric to present our performance across multiple periods without the effects of stock-based compensation, which is a non-cash expense based on equity grants made to participants in our equity plans at specified prices and times but which does not necessarily reflect how our business is performing, and items which may only affect our operating results periodically. Our use of Adjusted Net Income (Loss) has limitations as an analytical tool and you should not consider it in isolation, as a substitute for or superior to net income (loss) attributable to On Deck Capital, Inc. common stockholders, which is the most comparable GAAP metric.
(20)Adjusted Net Income (Loss) per Share is a non-GAAP measure calculated as Adjusted Net Income (Loss) divided by the weighted average common shares outstanding during the period. We believe Adjusted Net Income (Loss) per Share is useful because it provides investors and others with a supplemental profitability metric to present our performance across multiple periods without the effects of stock-based compensation, which is a non-cash expense based on equity grants made to participants in our equity plans at specified prices and times but which does not necessarily reflect how our business is performing, and items which may only affect our operating results periodically. Our use of Adjusted Net Income (Loss) per Share has limitations as an analytical tool and you should not consider it in isolation, as a substitute for or superior to net income (loss) attributable to On Deck Capital, Inc. common stockholders per share, which is the most comparable GAAP metric.




13