OnDeck Reports Q3 Loss as Provision Charges Rise 126% Year/Year

Small business fintech lender OnDeck announced Q3/16 financial results highlighted by continued execution of the company’s long-term plan, which has led to record levels of loans under management, originations and gross revenue. OnDeck increased loans under management by 44% year over year in Q3/16 to $1.1 billion. Originations of $612.6 million in Q3/16 were up 27% from $482.7 million a year earlier. Gross revenue of $77.4 million was up 15% year over year, from $67.4 million.

OnDeck’s net revenue was $32.3 million for Q3/16, down 30% from $46.0 million in the prior year period. The GAAP net loss was $16.6 million for the quarter, compared to net income of $3.7 million in Q3/15. The company noted its provision for loan losses was $36.6 million, up $20.3 million (126%) from $16.2 million in Q3/15.

The increase in provision expense primarily reflected the 67% increase in originations of loans designated as held for investment in connection with the strategic decision to retain a greater proportion of loans on balance sheet. The Q3/16 provision expense also included an estimated $5 million build of loss reserves for term loans originated in prior periods, generally reflecting an increase in delinquency roll rates from historically low levels. As a result, the provision rate in Q3/16 was 6.9% compared to 5.1% in the comparable prior year period, which benefited from a release of loan loss reserves in that period.

“OnDeck continued to execute on our plan to scale loans under management while also prudently managing our operating expense base,” said Noah Breslow, OnDeck’s chief executive officer. “As part of that strategy, our unpaid principal balance grew 76% year-over-year, which builds upon our solid foundation of assets that will generate future interest income. In addition, our strong leadership position and sophisticated marketing model enabled further improvement in our direct acquisition efficiency during the quarter. While we made progress on several fronts and remain well-positioned to execute on our strategy, our financial comparisons continue to be affected by our planned and previously communicated reduction in marketplace sales and its resulting accounting impact.”

Breslow continued, “As we look forward, we will continue to operate our business for the long term, focusing on our disciplined approach to scaling our loan portfolio, while further diversifying our funding model and proactively managing credit.”

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