OnDeck On the Path to Profitability?

In their earnings announcement this morning, OnDeck predicted that GAAP profitability would be achieved in the second half of 2017. For now, the GAAP net loss in Q1 was only $11.1 million, down from $36.5 million in Q4. The company originated $573 million worth of loans for the quarter.

OnDeck has been under pressure from at least one major shareholder to make changes. “We’re talking about a stock that is down 75 percent to 80 percent from its IPO price. You’re not going to find a lot of happy campers in that situation. Shareholders are going to ask tough questions,” Mario Cibelli, Marathon Partners managing member, told deBanked last month.

OnDeck has been underperforming just about all of its peers year-to-date according to the deBanked Tracker. The company’s stock price has been flat on the year, whereas Square, which does payments in addition to business loans, is up 45%.

The Marketplace, once a defining part of the tech-based lender’s strategy, is being almost completely phased out. “Loans sold or designated as held for sale through OnDeck Marketplace represented 9.0% of term loan originations in the first quarter of 2017 compared to 25.9% of term loan originations in the comparable prior year period,” their report said. OnDeck plans to reduce the amount of loans sold through their marketplace to less than 5% for the remainder of 2017.

“The Provision Rate in the first quarter of 2017 was 8.7% compared to 5.8% in the prior year period.”

“The 15+ Day Delinquency Ratio increased to 7.8% in the first quarter of 2017 from 5.7% in the prior year period and from 6.6% in the fourth quarter of 2016 due primarily to the continued seasoning of the portfolio.”

“The Cost of Funds Rate during the first quarter of 2017 increased to 5.9% from 5.5% in the prior year period primarily due to the increase in short-term rates.”

“The Net Charge-off rate increased to 14.9% in the first quarter of 2017 from 11.2% in the prior year period and increased sequentially from 14.2%.”

“Combined with the company’s prior workforce reduction, total headcount at the end of the second quarter of 2017 is expected to be approximately 27% lower than December 31, 2016 levels, due to both involuntary terminations and actual and scheduled attrition.”