OnDeck Beats Expectations, Plans To Expand ODX Service

OnDeck beat expectations with its Q4 earnings report, with a surge in loan originations and larger than expected revenue gains.

“2018 was a pivotal year for OnDeck and we finished strong,” Chief Executive Officer Noah Breslow said on a conference call with analysts. “We began the year with an ambitious agenda and we accomplished the objective we laid out.”

Earnings came in at $15.9 million, or 20 cents per share, well above analyst estimates of 16 cents. Loan originations saw a big pop – up 21 percent to a company record of $658.5 million, while net interest income was up 26 percent to $105.4 million.

For Q1, OnDeck forecast an adjusted net income of $5 million to $9 million, on the high side of analysts’ forecasts of $8.5 million. Gross revenue in the current quarter is expected to be between $108 million and $112 million, higher than analysts’ expectations of $106.09 million. For 2019, OnDeck forecast net income between $30 million and $40 million, below the analyst consensus of  $44.4 million.

The last year has been an active one for OnDeck, a lending platform that underwrites small businesses online and then resells the loans to institutional investors. Like many marketplace lenders, OnDeck has faced concerns from investors and industry watchers that it would struggle to grow and to adequately control loan quality, particularly in an environment where interest rates are on the rise. OnDeck has responded by cutting costs, decreasing its staff count and tightening its credit requirements.

The online lender has also sought to diversify its business, launching its ODX subsidiary last fall to provide lending technology and services to white-labeled for banks. They further announced that PNC Bank will use ODX to provide lines of credit of up to $100,000 to small business through its website.

Breslow noted in his earnings call with investors that OnDeck has a strong pipeline of potential large and small bank partners. “Most large banks now realize they must digitize their lending processes to remain competitive,” he said. “Some will build and some may buy and others will partner in that transformation process, and we want to be the partner of choice for those banks.”

OnDeck also announced in December of last year that it will be introducing equipment finance loans to certain U.S. small businesses this year. Breslow noted that he believes OnDeck will be able to introduce its existing experience in the online small business lending space to disrupt what has historically been a “slow-moving, opaque and complicated process.”

Investors, by and large, liked what they heard from OnDeck, sending the stock price up 3.1 percent before the market opened.