OnDeck plots expansion for 2019 after 3Q profit

After a period of cost cuts that began nearly two years ago, OnDeck Capital is shifting into investment mode, announcing plans Tuesday to spend an additional $15 million next year on growth efforts.

The New York-based company said that it plans to boost spending on its ODX subsidiary, which partners with banks to offer digital loans, as well as on international expansion initiatives.

In February 2017, OnDeck said that it would cut its annual spending by $20 million and reduce its workforce by 11%, in an effort to stem mounting losses. On Tuesday the publicly traded firm reported a profit for the third time in the last four quarters.

Net income during the third quarter was $9.8 million, versus a net loss of $4.1 million in the year-earlier period. A 19% increase in interest income helped, as loan origination volume rose 22% year over year.

“We are pleased to report excellent third quarter results highlighted by record origination volume, improved margins and stable credit quality, all of which culminated in record profitability,” OnDeck CEO Noah Breslow said in a press release.

Noah Breslow, chairman and CEO of OnDeck Capital.

The online lender has already begun ramping up spending again. During the third quarter, operating expenses totaled $42.7 million, which was up 14.4% from year-earlier period but down 18.7% from the end of 2016, when the cost-cutting plans were first announced.

OnDeck announced in October that it was creating ODX, the new subsidiary to focus on partnerships with banks. The next week, the firm announced one such deal with PNC Financial Services Group, which followed an earlier partnership with JPMorgan Chase.

During a conference call Tuesday, Breslow said that roughly $10 million of the additional spending will focus on ODX, while approximately $5 million will be spent on international expansion and general technology infrastructure. OnDeck currently offers online loans to small businesses in the U.S., Canada and Australia.

Shares in OnDeck rose by 29% in midday trading Tuesday to $8.66, though they remained far below the levels reached in the immediate aftermath of the company’s initial public offering in December 2014.

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Marketplace lending Small business lending Expense management Earnings PNC Financial Services Group JPMorgan Chase
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