Banking, finance, and taxes

How On Deck Tripped Over Earnings and Guidance

Chris Lange

Published: May 3, 2016 10:35 am

Last Updated: January 13, 2020 9:57 am

On Deck Capital Inc. (NYSE: ONDK) took a beating on Tuesday morning after reporting less than favorable earnings after the markets closed on Monday. The company had a net loss of $0.13 per share on $62.6 million in revenue. That compared to consensus estimates that called for a net loss of $0.09 per share on $69.9 million in revenue.

For a look at what analysts are saying about On Deck after the earnings report, check out Tuesday’s top analyst upgrades and downgrades.

For this quarter, On Deck grew originations by 37% from the same period last year to $570 million and increased gross revenue and net revenue by 11% and 11% year over year, respectively. At the same time, Unpaid Principal Balance grew to $652 million, up 20%, and Loans Under Management increased to $982 million, up 45%.

On Deck sold $123.7 million of loans through the On Deck Marketplace, this constituted 26% of term loan originations.

In terms of guidance, the company expects gross revenue in the range of $67 million to $70 million in the second quarter, compared to the consensus estimate of $78.06 million. Looking at the full year, On Deck expects gross revenue in the range of $278 million to $288 million, total originations of between 30% to 35% and Marketplace sales between 15% and 25%. Consensus estimates call for revenues of $323.32 million for the full year.

Noah Breslow, CEO of On Deck, commented:

OnDeck’s first quarter 2016 operating performance was solid, highlighted by growth in all of our origination channels, and a sequential decrease in charge-offs during what is usually a seasonally higher charge-off period. In addition, we reinforced our market leadership through recent milestones including the initial launch of our program with JPMorgan Chase and pricing of our second securitization transaction.

He added:

Our hybrid funding model is designed to adapt to changing capital markets conditions and is a point of competitive differentiation. In the first quarter, we utilized this flexibility and decided to sell fewer loans through OnDeck Marketplace. This decision optimized for long-term financial performance but, over the short-term, will lead to lower Gross revenue, higher provision expense, and lower Adjusted EBITDA than we previously planned.  We will see greater financial benefits from our decision beginning in 2017.

Shares of On Deck were trading down 35% at $5.38 on last look, with a consensus analyst price target of $13.48 and a 52-week trading range of $5.36 to $18.49.