OnDeck Capital reported a quarterly loss of $12.6 million as revenues fell short of expectations. At the same time, the New York firm sharply reduced its earnings projection for the rest of the year.
The disappointing results led to a rapid sell-off of OnDeck's shares. The firm's stock price fell by 29% to $5.90 in after-hours trading Monday.
OnDeck, a digital lender, attributed the worse-than-expected quarterly results to its decision to hold more of its small-business loans on its own balance sheet. That decision came at a time when online lenders are having a harder time selling their loans to investors at favorable prices.
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The partnership with OnDeck will allow the megabank to approve and fund loans in as little as a day, according to CEO Jamie Dimon. Meanwhile, OnDeck is eyeing similar partnerships with other banks.
April 12 -
Delinquencies are rising among the sector's less creditworthy borrowers, which is contributing to smaller returns for investors. This sets up the first major test for an industry that blossomed during a period of unusually low defaults.
February 25 -
Shares in the online small-business lender plunged Tuesday after the firm's 2016 revenue guidance fell short of expectations. New details about the firm's plans to provide its technology to big banks did nothing to stanch the bleeding.
February 23
"We will see greater financial benefits from our decision beginning in 2017," OnDeck Chief Executive Noah Breslow said in a press release.
OnDeck reported gross revenue of $62.6 million during the first quarter. While gross revenue was up 11% from the same period a year earlier, it fell short of the $66 million to $69 million that the firm projected three months ago.
The quarterly loss of $12.6 million compared with a $5.3 million loss in the first quarter of 2015.
OnDeck reduced its gross revenue guidance for the full year to between $278 million and $288 million, down from $320 million to $328 million three months earlier.
The firm also sharply reduced its full-year projection for one measure of earnings — adjusted earnings before interest, depreciation, taxes and amortization. The firm now projects a full-year loss of between $41 million and $49 million, down from projected full-year earnings of $10 million to $14 million.
OnDeck originated $569 million in loans during the first quarter, up 37% from a year earlier. The effective interest yield on the company's loans fell to 34.5%, down from 37.6% in the same period of 2015. The percentage of loans that were at least 15 days delinquent fell from 8.4% to 5.7%.
OnDeck said that it had $44.6 million in operating expenses, up 33% from the same period in 2015. The firm attributed some of that increase to efforts to license its technology to banks such as JPMorgan Chase.
