Growth Strategies

OnDeck Capital Reports Larger Loss

Still, the marketplace lender said its "capacity and flexibility to fund loans has never been stronger."
Katie Kuehner-HebertMay 3, 2016

OnDeck Capital’s shares tumbled more than 35% Tuesday after the New York-based online small business lender posted a worse-than-expected loss of $12.6 million in its first quarter, or 18 cents per share.

Losses, adjusted for stock option expenses, came in at 13 cents per share, missing by four cents the average estimate of seven analysts surveyed by Zacks Investment Research, according to the Associated Press. OnDeck’s revenue of $62.6 million also missed expectations of $69.9 million.

OnDeck’s chief executive Noah Breslow said in a press release that in the first quarter the firm decided to sell fewer loans through its OnDeck Marketplace platform.

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“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,” Breslow said. “We will see greater financial benefits from our decision beginning in 2017.”

For the current quarter ending in July, OnDeck Capital said it expects revenue in the range of $67 million to $70 million. The company expects full-year revenue in the range of $278 million to $288 million.

OnDeck’s shares took a beating after Tuesday. MarketWatch cited a note by FBR analysts: “We like ONDK’s business model, particularly its ability to partner with banks to provide lending as a service, but the near-term volatility in earnings and lack of profitability are concerns.”

Sterne Agee CRT’s Henry J. Coffey downgraded the rating for the company from “neutral” to “underperform,” while establishing a price target of $3.50, according to Benzinga. The analyst commented that although credit has been improving, costs continue to outpace revenue growth.