Categories: Earnings

Embattled OnDeck Reports $59 Million Net Loss

Already facing harsh criticism from an activist investor, FinTech OnDeck reported a $59 million first-quarter net loss and $57.6 million adjusted net loss due to an increased allowance set aside to cover credit losses from the COVID-19 pandemic.

"In the span of several weeks, the spread of COVID-19 led to government-mandated lockdowns for small businesses both in the U.S. and globally, placing our customers under unprecedented economic stress," CEO Noah Breslow said in announcing the red ink. "After a successful and rapid transition to remote work, we effected immediate changes to our business to preserve liquidity, support our customer base, manage our loan portfolio and reduce costs."

The news sent OnDeck's stock tumbling 24.8 percent to $1.21 on the New York Stock Exchange. Shares have lost some 96 percent of their value since December 2014.

That prompted activist investor Voce Capital Management LLC to recently urge stockholders to vote against three OnDeck board members who are running for re-election at a May shareholders' meeting. In a letter earlier this month to investors, Voce founder and CIO J. Daniel Plants complained that “OnDeck’s lack of strategic focus, runaway costs and weak corporate governance have contributed to chronic underperformance."

Voce, whose 1.3 million shares make it one of OnDeck’s largest stockholders, asked stockholders to vote Breslow off the board, along with Jane Thompson, chairman of corporate governance and nominating committee; and Ronald Verni, chairman of the compensation committee.

“All three of these individuals … share a common track record of terrible returns for stockholders,” Plants wrote in his letter. When the missive became public on April 17, OnDeck shares rose as much 11.2 percent intraday.

OnDeck bills itself as a small-business lender that can help companies get cash quick. The FinTech offers three products: short-term loans of up to $500,000, lines of credit of up to $100,000 and low-interest loans under the U.S. Paycheck Protection Program (PPP) through the Small Business Administration (SBA).

Although the company didn't announce any management changes with its first-quarter earnings report, it did note earlier this week that two proxy-advisory firms have recommended shareholders reject Voce's call and re-elect the three current board members. The company said Wednesday that Glass, Lewis & Co. recommended voting for the three directors, mirroring an earlier announcement from Institutional Shareholder Services.

"We are pleased that Glass Lewis and ISS share our belief that voting for the three directors up for election at this year's annual meeting is in the best interest of the company and our shareholders," said Daniel Henson, OnDeck's lead independent director.

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