OnDeck Loan Originations (And Loan Loss Provisions) Soar

OnDeck Capital reported second quarter results on Monday (Aug. 8) that fared a bit better than analysts’ expectations, with key tailwinds including stronger originations, with higher loan loss provisions building up as the business model shifts.

The headline numbers showed that revenues of $69.5 million, which gained 9.8 percent year over year, beat The Street by $1.6 million. The net loss was also better than consensus, at $0.20 per share compared with projections that that net loss would come in at $0.24 a share.

The loans under management grew by 47 percent year over year to $1 billion, while originations grew by 41 percent to $590 million.

The business model is undergoing a bit of a shift, and management said that the decision has been one to take more loans onto the balance sheet.

OnDeck CEO Noah Breslow said that credit performance has been improving across the loan book and that helped the provision for loan losses grow as well, with the most recent quarter standing at $32 million, roughly double the $15.5 million seen in the prior year. This stems from the decision to take loans onto the balance sheet versus other options.

Management stated that guidance for the whole year would see revenues in the range of $280 million–$290 million, compared to the consensus of $286 million.

Breslow told analysts that expansions beyond the U.S. continue and that the partnership with JPMorgan proceeds apace. With the decision to keep more loans on the books, marketplace-focused loans should continue to have a relatively lower presence in the business.

Management seemed sanguine on the call as to overall demand, and Breslow noted that new customer originations were up 62 percent year over year in the latest quarter. Canadian business remains strong, said the CEO, and “Australia doubled … quarter over quarter, obviously a low base. It’s a very new business,” having debuted in November.