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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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42-1709682
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.005 per share
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New York Stock Exchange
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Large accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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x
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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x
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 1.
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Business
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•
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Tailored Solutions
. We offer small businesses a suite of financing choices with our term loans and lines of credit that we believe can be tailored to effectively address small businesses' particular funding needs. We believe that small businesses prefer to work with providers with whom they can build long-term relationships and that the range of our offerings makes us an ideal lending partner. Our term loans are available from $5,000 up to $500,000 with maturities of three to 36 months and our lines of credit range from $6,000 to $100,000 and are repayable within six or twelve months of the date of most recent draw. We believe this provides a wider range of term lengths, pricing alternatives and repayment options than any other online small business lender. We also report customer performance to several business credit bureaus, which can help small businesses build their business credit.
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•
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Simple
. Small businesses can submit an application on our website in as little as minutes. We are able to provide many loan applicants with an immediate decision and, if approved, fund as fast as 24 hours. Because we require no in-person meetings, collect comprehensive information electronically and have an intuitive online application form, we have been able to significantly increase the convenience and efficiency of the application process without burdensome documentation requirements.
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•
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Human
. Being “human” is about understanding our customers and treating them with respect. We employ a hybrid approach to deliver a "human" experience, where people and technology complement one another. Our internal sales force and customer service representatives provide assistance throughout the application process and the life of the loan. Our U.S-based representatives support customers in the U.S., and currently also Canada, and our separate Sydney-based representatives support customers in Australia. Our representatives are available Monday through Saturday before, during and after regular business hours to accommodate the busy schedules of small business owners. Our website enables our customers to complete the loan application process online, but they may also elect to mail, fax or securely email us their application and related documentation. We believe that our inclusion of the human element differentiates us from many digital lenders that attempt to complete transactions with no human interaction as well as from banks that, we believe, have a poor history of customer service and satisfaction.
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•
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Through our direct marketing channel, we make contact with prospective customers utilizing direct mail, outbound calling, social media and other online marketing.
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•
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In our strategic partner channel we enter into agreements with third parties that serve or otherwise have access to the small business community, who then introduce us to prospective customers. Strategic partners include, among others, small business-focused service providers, other financial institutions, financial and accounting solution providers, payment processors, independent sales organizations and other websites. Strategic partners conduct their own marketing activities which may include email marketing, leveraging existing business relationships and direct mail. Our business development team is dedicated to expanding our network of strategic partners and leveraging their relationships with small businesses to acquire new customers. In general, if a strategic partner refers a customer that takes a loan from us, we pay that strategic partner a referral fee based on the amount of the originated loan. Strategic partners differ from funding advisors (described below) in that strategic partners generally provide a referral to our direct sales team and our
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•
|
Through our funding advisor program, we make contact with prospective customers by entering into relationships with third party independent advisors, known as funding advisor program partners, or FAPs, that typically offer a variety of financial services to small businesses. FAPs conduct their own marketing activities, which may include direct mail, online marketing, paid leads, television and radio advertising or leveraging existing business relationships. FAPs include independent sales organizations, commercial loan brokers and equipment leasing firms. FAPs act as intermediaries between potential customers and lenders by brokering business loans on behalf of potential customers. As part of our FAP strategy, we require a detailed certification process, including background checks, to approve a FAP, and annual recertifications in order to remain a FAP. We also employ a senior compliance officer whose responsibilities include overseeing compliance matters involving our funding advisor program channel. Our relationships with FAPs provide for the payment of a commission at the time the term loan is originated or line of credit account is opened. We generally do not recover these commissions upon default of a loan. As of
December 31, 2018
, we had active relationships with more than 400 FAPs, and in 2018, 2017 and 2016, no single FAP was associated with more than
2.0%
,
1.7%
, and
2.1%
of our total originations, respectively.
|
•
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Singular Focus and Visibility.
We are passionate about small businesses. Since we began lending in 2007, we have focused exclusively on assessing and delivering credit to small businesses. We believe this passion, focus and small business credit expertise provides us with significant competitive advantages, including deep insight into small businesses and their financing needs. Our partnerships with well-known companies such as JPMorgan Chase Bank, National Association, or JPM, PNC Bank, National Association, or PNC, Intuit Inc., and others also help increase our visibility and validate our brand.
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•
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Significant Scale
. We have originated over
$10 billion
in loans across more than 700 industries since we made our first loan in 2007. We believe our extensive experience and significant scale allow us to obtain and analyze large and growing amounts of data, which provides us with greater insight to identify, understand and meet the needs of our customers and prospective customers as well as better manage our business. For business reasons and because of our scale we were able to become an NYSE listed company, which requires us to meet high standards of transparency, governance, financial reporting and other legal requirements. We believe this differentiates us from non-listed small business lenders.
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•
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Diversified Distribution Channels
. We have established distribution capabilities through diversified channels, including direct marketing, strategic partnerships and funding advisors. Having multiple distribution channels enables us to optimize our targeting efforts and resource allocation in response to fluctuations in customer demand and marketing costs and the overall competitive landscape by channel. Moreover, each channel provides its own set of complimentary benefits. Our direct marketing includes direct mail, outbound calling, social media and other online marketing, enhances brand awareness and fosters customer retention and loyalty. Our strategic partners, including small business-focused service providers, payment processors, and other financial institutions, offer us access to their base of small business customers and data that can be used to enhance our targeting capabilities. Our relationships with a large network of funding advisors, including businesses that provide loan brokerage services, expand our reach in identifying and serving more customers and aid brand awareness.
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•
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Proprietary Small Business Credit Evaluation
. We use data, analytics and technology to optimize our business operations and the customer experience. Our loan decision process, including our proprietary OnDeck
Score,
provide us with significant visibility and predictability to assess the creditworthiness of small businesses and allow us to better serve more customers across more industries. With each loan application, each originated loan and each payment received, our dataset expands and our loan decision process improves. We are able to lend to more small businesses than if we relied on personal credit scores alone. We are also able to use our proprietary data and analytics engine to pre-qualify customers and market to those customers we believe are predisposed to take a loan and have a higher likelihood of approval. When we believe it is warranted, we may also utilize our hybrid approach which utilizes our online platform together with our judgmental underwriting to help tailor the right financial solution for our customers. We believe that our technology and decisioning process allow us to more quickly and dynamically make credit adjustments in changing environments compared to certain smaller or less experienced lenders.
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•
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End-to-End Integrated Technology Platform
. We built our integrated platform specifically to meet the financing needs of small businesses. Our platform touches every aspect of the customer life cycle, including customer acquisition, sales, scoring and underwriting, funding, and servicing and collections. This purpose-built infrastructure is enhanced by robust fraud protection, multiple layers of security and proprietary application programming interfaces. It enables us to deliver a superior customer experience and facilitates agile decision making.
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•
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High Customer Satisfaction and Repeat Customer Base
. Our strong value proposition has been validated by our customers. We achieved an overall Net Promoter Score of
81
for the year ended December 31,
2018
based on our internal survey of U.S. customers in all three of our distribution channels. The Net Promoter Score is a widely used index ranging from negative 100 to positive 100 that measures customer loyalty. Our score places us at the upper end of customer satisfaction ratings and compares favorably to the average Net Promoter Score of
35
for the financial services industry. We have also consistently achieved an A+ rating from the Better Business Bureau. We believe that high customer satisfaction has played an important role in repeat borrowing by our customers. In
2018
,
2017
, and
2016
,
52%
,
52%
and
53%
, respectively, of loan originations were by repeat term loan customers, who either replaced their existing term loan with a new, usually larger, term loan or took out a new term loan after paying off their existing OnDeck term loan in full. Repeat customers generally demonstrate improvements in key metrics such as revenue and bank balance when they return for an additional loan. Approximately
29%
percent of our origination volume from repeat customers in
2018
was due to unpaid principal balances rolled from existing loans directly into new loans. Generally each repeat customer seeking another term loan must meet the following standards:
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•
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the business must be approximately 50% paid down on its existing loan;
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the business must be current on its outstanding OnDeck loan with no material delinquency history; and
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•
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the business must be fully re-underwritten and determined to be of adequate credit quality.
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•
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Differentiated Funding Platform
. We source funding principally through debt facilities and securitizations with a diverse group of banks, insurance companies and other institutional lenders. This diversity provides us with a mix of scalable funding sources, significant capital commitments and access to flexible funding for growth. In addition, because we contribute a portion of the capital for each loan we fund via our debt facilities and securitizations, we are able to align interests with our lenders.
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•
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Durable Business Model
. Since we began lending in 2007, we have successfully operated our business through both strong and weak economic environments. The diversity of our portfolio including loans to over
97,000
small businesses in over
700
industries results in minimal portfolio concentrations and reduces sensitivity to industry specific downturns or events. Our real-time data, short duration loans, automated daily and weekly collections, risk management capabilities and unit economics enable us to react rapidly to changing market conditions.
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•
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Expand in Each of our Distribution Channels and Optimize our Funnel.
We plan continued efficient investment in direct marketing to increase our brand awareness and add new customers. As our dataset expands, we will continue to pre-qualify and market to those customers we believe are predisposed to take a loan and have a higher likelihood of approval. We have seen success from this strategy as the direct marketing channel continued to originate more dollar volume than any other channel in 2018. We also intend to grow originations by broadening our indirect distribution capabilities through expanding our strategic partner and funding advisor networks. Our strategic partner channel offers our lowest customer acquisition cost while enhancements to our funding advisor network has led to increased application volume and conversion rates. We regularly seek to improve our efficiency in attracting new and repeat customers to apply for loans from us, to increase the number of completed loan applications and improve the conversion rate of completed applications into funded loans for qualified small businesses. This includes many aspects of our business from marketing, sales and customer support, underwriting, funding and servicing. By optimizing our sales funnel, we seek to reduce customer acquisition costs, responsibly increase loan originations and improve profitability.
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•
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Continue to Optimize Decisioning Models.
W
e continually update our decisioning models based on additional data and use that information to refine and optimize our marketing and lending decisions. For example, during 2018 as in prior years, in the ordinary course of business, we conducted numerous underwriting tests of discreet pools of loans with defined characteristics to assess the profitability of the sample. Testing included specific sectors, credit profiles and loan terms. We incorporate the learnings from these tests, both positive and negative, into our underwriting which we believe will lead to increased originations and profitability.
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•
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Expand Loan Offerings and Features
. We will continue to develop financing solutions and enhancements for underserved small businesses throughout their life cycle. We offer lines of credit with limits up to $100,000 and term loans up to $500,000 with terms up to 36-months. In 2018, we launched a line of credit instant funding option to small businesses via their debit cards through our agreements with Ingo Money and Visa and announced our intention to enter into the equipment finance market. We regularly evaluate and explore new ideas including variations of existing loans through test pilot programs before new loans or loan enhancements are fully introduced. We believe expanded offerings and features will help retain existing customers, attract new customers and ultimately increase customer lifetime value.
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•
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Grow International Businesses
. We continue to grow our business in both Canada and Australia where we believe the markets for online small business loans are still relatively new and underserved. This growth includes our recently announced intention to combine our Canadian business with Evolocity Financial Group, or Evolocity, a private, Montréal-based online small business lender. As we grow our international business, we will closely monitor and adjust our pricing and costs, including the costs of integrating businesses with Evolocity. We believe there are other promising international markets, although our near-term plans do not include expansion of OnDeck lending into additional countries.
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•
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Grow ODX
. We believe the opportunity exists to further expand ODX, which offers bank clients a comprehensive technology and services platform to facilitate online lending to their small business customers. We have existing agreements with JPM and PNC, each of which uses ODX services to support the origination and underwriting processes for a portion of their small business customers. We intend to work with our existing bank clients to increase the volume and scope of our business together and are actively seeking to expand the ODX customer base to include other banks and small business lenders. ODX was previously known as OnDeck-as-a-Service.
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•
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Extend Customer Lifetime Value
. We believe we have an opportunity to increase revenue and loyalty from new and existing customers, thereby extending customer lifetime value. We continue to add benefits to our customer offerings to increase engagement and usage of our platform. For example, in 2018, we introduced line of credit instant funding, which allows our customers to more quickly access funds, and we continuously explore ways to enhance our loan offerings and features. Our publicly announced plans to enter the equipment finance market are driven by our goal of offering both new and existing customers another lending solution to match their needs.
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•
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Liquidity and Market Risks. Liquidity risk is the risk that we will not maintain adequate financial resources to meet our financial obligations. We mitigate liquidity risk by using a funding strategy that allows us to access debt facilities and the securitization markets through a diverse set of banks, insurance companies and other institutional lenders, which reduces our dependence on any one source of capital. Market risks relate to potential implications of fluctuating interest rate or currency exchange rates on our operations or financial results. Liquidity and market risks are monitored by an asset liability committee.
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•
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Operational Risks including: (1) ensuring our IT systems, security protocols and business continuity plans are maintained, reviewed and tested; (2) establishing and testing internal controls with respect to financial reporting; (3) recruiting and retaining talent and (4) other risks associated with developing and executing business strategies.
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•
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Regulatory Risks. Regulatory risk involves regularly reviewing the legal and regulatory environment to ensure compliance with existing laws and anticipate future legal or regulatory changes that may impact us.
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•
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Competitive Risks including threat of new and existing market entrants.
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One Team
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We know that the best outcomes happen when we work together.
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Switched On
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We are passionate about small businesses, our company, and each other.
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Driven to Win
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Every decision counts in our journey to lend responsibly and win with integrity.
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Focused Innovation
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We invent where it differentiates us and leverage existing solutions where it doesn't.
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Strike the Right Balance
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Our entrepreneurial culture keeps us nimble and standards and processes keep us well-managed.
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•
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ease of process to apply for a loan;
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•
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brand recognition and trust;
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•
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loan features, including amount, rate, term and repayment method;
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•
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loan product fit for business purpose;
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•
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transparent description of key terms;
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•
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effectiveness of underwriting;
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speed of funding;
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•
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effectiveness of operational processes;
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effectiveness of customer acquisition; and
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customer experience.
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FDIC,
Loans to Small Businesses and Farms, FDIC-Insured Institutions 1995-2018
, Q2 2018.
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Item 1A.
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Risk Factors
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marketing, including expenses relating to increased direct marketing efforts;
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expanding product offerings;
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product development, including the continued development of our platform and OnDeck
Score
;
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technology and analytics, including through ODX;
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diversification of funding sources;
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broadening distribution capabilities through strategic partnerships and funding advisors;
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general administration, including legal, accounting and other compliance expenses related to being a public company and the loss of emerging growth company status at the end of 2019; and
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expansion in Canada and Australia, and possibly into new international geographies.
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increase the number and total volume of term loans and lines of credit we extend to our customers;
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improve the terms on which we lend to our customers as our business becomes more efficient;
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increase the effectiveness of our direct marketing, as well as our strategic partner and funding advisor program customer acquisition channels;
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maintain or increase repeat borrowing by existing customers;
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successfully develop and deploy new types of loans and new loan features including equipment finance loans;
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successfully expand ODX, our comprehensive technology and services platform that facilitates online lending to small business customers, to additional banks and other small business lenders;
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successfully maintain our diversified funding strategy, including through debt warehouse facilities and possible future securitization transactions;
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favorably compete with other companies that are currently in, or may in the future enter, the business of lending to small businesses including traditional lenders and so-called "closed-loop lenders;"
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successfully navigate economic conditions and fluctuations in the credit market;
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effectively manage the growth of our business;
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obtain debt or equity capital on attractive terms;
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successfully expand internationally; and
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anticipate and react to changes in an evolving regulatory environment.
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lack of acceptance of our platform through ODX by other lenders;
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reluctance of other lenders to share their customer data with us, or impacts of data and security breaches if they do;
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unwillingness of other lenders to use our platform through ODX because we are doing business with their competitors, or for other reasons;
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the possible preference of other lenders to build and use their own platforms, or platforms offered by existing or new competitors of ours, for online small business lending;
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our ability to charge fees for services commensurate with the total cost of providing those services;
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the amount of time it may take us to integrate new lenders;
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our ability to fund investment to expand and customize our platform in advance of earning fee revenue related to that investment;
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our ability to provide customized solutions that meet the needs of lenders;
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our ability to meet the performance criteria that customers or prospective customers require;
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the inability to retain one or more customers and the impact of that customer loss on other existing or prospective customers;
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our ability to scale our platform through ODX to make it economically viable; and
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our ability to compete effectively with third parties seeking to provide similar services.
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adjusting our proprietary loan platform, and our loan decisioning process, to account for the country-specific differences in information available on potential small business borrowers;
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conformity with applicable business customs, including translation into foreign languages and associated expenses;
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changes to the way we do business as compared with our current operations;
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the need to support and integrate with local third-party service providers;
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competition with service providers that have greater experience in the local markets than we do or that have pre-existing relationships with potential borrowers and investors in those markets;
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difficulties in staffing and managing foreign operations in an environment of diverse culture, laws and customs, and the increased travel, infrastructure and legal and compliance costs associated with international operations;
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difficulties in securing financing in international markets in local currencies;
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compliance with multiple, potentially conflicting and changing governmental laws and regulations, including banking, securities, employment, tax, privacy and data protection laws and regulations;
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compliance with U.S. and foreign anti-bribery laws, such as the Foreign Corrupt Practices Act and comparable laws in Canada, Australia and other non-U.S. markets into which we might expand in the future;
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difficulties in collecting payments in foreign currencies and associated foreign currency exposure;
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restrictions on repatriation of earnings;
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compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and applicable U.S. tax laws as they relate to international operations, the complexity and adverse consequences of such tax laws and potentially adverse tax consequences due to changes in such tax laws; and
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regional economic and political conditions.
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diversion of management time and focus from operating our business to addressing acquisition integration challenges;
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coordination of technology, product development and sales and marketing functions;
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transition of the acquired company’s customers to our platform;
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retention of employees from the acquired company;
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cultural challenges associated with integrating employees from the acquired company into our organization;
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integration of the acquired company’s accounting, management information, human resources and other administrative systems;
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the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies;
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potential write-offs of loans or intangibles or other assets acquired in such transactions that may have an adverse effect our operating results in a given period;
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liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and
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litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties.
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our inability to launch and scale our equipment finance offering beyond our limited pilot program in offering equipment finance loans;
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our inability to effectively underwrite and price equipment finance transactions, and evaluate the initial and residual value of the loan collateral;
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our failure to develop or acquire the technology needed to support the offering of equipment finance loans;
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inadequately training sales and customer service personnel to handle the offering of equipment finance loans;
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•
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possible delays in our ability to launch the offering of equipment finance loans;
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customer acceptance;
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intense competition from other equipment finance providers, many of whom have much more experience and greater financial resources than we do, and risks of innovation by our competitors;
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•
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actual losses exceeding expected losses for the offering of equipment finance loans;
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worsening economic conditions that may result in decreased demand and increase our customers' default rates;
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the effectiveness of our risk management efforts; and
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repossessing equipment collateral and liquidating it, including possible reputational and publicity risks associated with our collection efforts.
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announcements of new types of loans, services or technologies, relationships with strategic partners, acquisitions or other events by us or our competitors;
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changes in economic conditions;
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changes in prevailing interest rates;
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price and volume fluctuations in the overall stock market from time to time;
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significant volatility in the market price and trading volume of technology companies in general and of companies in our industry;
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fluctuations in the trading volume of our shares or the size of our public float;
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•
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the impact of securities analysts’ reports or other publicity regarding our business or industry;
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actual or anticipated changes in our operating results or fluctuations in our operating results;
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quarterly fluctuations in demand for our loans;
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whether our operating results meet the expectations of securities analysts or investors;
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actual or anticipated changes in the expectations of investors or securities analysts;
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regulatory developments in the United States, foreign countries or both;
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major catastrophic events;
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sales of large blocks of our stock; or
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departures of key personnel.
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a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;
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the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;
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the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
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•
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the requirement that a special meeting of stockholders may be called only by the chairman of our board of directors, our president, our secretary or a majority vote of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;
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•
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the requirement for the affirmative vote of holders of at least 66
2
/
3
% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our amended and restated bylaws, which may inhibit the ability of an acquiror to effect such amendments to facilitate an unsolicited takeover attempt;
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•
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the ability of our board of directors, by majority vote, to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquiror to amend the bylaws to facilitate an unsolicited takeover attempt; and
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•
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advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
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Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
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Location
|
|
Purpose
|
|
Approximate
Square Feet
|
|
Lease
Expiration Date
|
New York, NY
|
|
Corporate Headquarters, technology and direct sales
|
|
80,700
|
|
2026
|
Denver, CO
|
|
Direct sales and operations
|
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44,400
|
|
2026
|
Arlington, VA
|
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Underwriting, loan origination and technology
|
|
18,600
|
|
2022
|
Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
|
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
Item 6.
|
Selected Consolidated Financial Data
|
|
Year Ended December 31,
|
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2018
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2017
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2016
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2015
|
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2014
|
||||||||||
Consolidated Statements of Operations Data
|
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|
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income
|
$
|
383,579
|
|
|
$
|
334,575
|
|
|
$
|
264,844
|
|
|
$
|
195,048
|
|
|
$
|
145,275
|
|
Gross revenue
|
398,376
|
|
|
350,950
|
|
|
291,317
|
|
|
254,767
|
|
|
158,064
|
|
|||||
Total cost of revenue
|
195,616
|
|
|
199,125
|
|
|
182,825
|
|
|
95,413
|
|
|
85,030
|
|
|||||
Net revenue
|
202,760
|
|
|
151,825
|
|
|
108,492
|
|
|
159,354
|
|
|
73,034
|
|
|||||
Net income (loss)
|
25,270
|
|
|
(14,345
|
)
|
|
(85,482
|
)
|
|
(2,231
|
)
|
|
(18,708
|
)
|
|||||
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
|
$
|
27,681
|
|
|
$
|
(11,534
|
)
|
|
$
|
(82,958
|
)
|
|
$
|
(1,273
|
)
|
|
$
|
(31,592
|
)
|
Net income (loss) per share attributable to On Deck Capital, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
0.37
|
|
|
$
|
(0.16
|
)
|
|
$
|
(1.17
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.60
|
)
|
Diluted
|
$
|
0.35
|
|
|
$
|
(0.16
|
)
|
|
$
|
(1.17
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.60
|
)
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
74,561,019
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|
69,545,238
|
|
|
52,556,998
|
|
|||||
Diluted
|
78,549,940
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|
69,545,238
|
|
|
52,556,998
|
|
|||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
59,859
|
|
|
$
|
71,362
|
|
|
$
|
79,554
|
|
|
$
|
159,822
|
|
|
$
|
220,433
|
|
Loans held for investment
|
1,169,157
|
|
|
952,796
|
|
|
1,000,445
|
|
|
552,742
|
|
|
504,107
|
|
|||||
Total assets
|
1,161,570
|
|
|
996,044
|
|
|
1,064,091
|
|
|
745,025
|
|
|
724,265
|
|
|||||
Debt
|
816,231
|
|
|
692,254
|
|
|
754,605
|
|
|
378,585
|
|
|
394,554
|
|
|||||
Total liabilities
|
857,281
|
|
|
729,988
|
|
|
800,494
|
|
|
415,603
|
|
|
413,660
|
|
|||||
Total On Deck Capital, Inc. stockholders' equity (deficit)
|
$
|
299,756
|
|
|
$
|
262,045
|
|
|
$
|
259,525
|
|
|
$
|
322,813
|
|
|
$
|
310,605
|
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
As of or for the Year Ended
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in thousands)
|
||||||||||
Originations
|
$
|
2,483,596
|
|
|
$
|
2,114,663
|
|
|
$
|
2,403,796
|
|
Loan Yield
|
36.2
|
%
|
|
33.8
|
%
|
|
33.2
|
%
|
|||
Cost of Funds Rate
|
6.3
|
%
|
|
6.2
|
%
|
|
5.9
|
%
|
|||
Net Interest Margin
|
29.0
|
%
|
|
26.1
|
%
|
|
25.4
|
%
|
|||
Provision Rate
|
6.0
|
%
|
|
7.5
|
%
|
|
7.4
|
%
|
|||
Reserve Ratio
|
12.2
|
%
|
|
11.6
|
%
|
|
11.2
|
%
|
|||
15+ Day Delinquency Ratio
|
7.5
|
%
|
|
6.7
|
%
|
|
6.6
|
%
|
|||
Net Charge-off Rate
|
11.3
|
%
|
|
15.8
|
%
|
|
12.0
|
%
|
|||
Efficiency Ratio
|
44.6
|
%
|
|
47.3
|
%
|
|
66.6
|
%
|
|||
Adjusted Efficiency Ratio*
|
40.1
|
%
|
|
42.9
|
%
|
|
61.1
|
%
|
|||
Return on Assets
|
2.6
|
%
|
|
(1.1
|
)%
|
|
(9.2
|
)%
|
|||
Adjusted Return On Assets*
|
4.3
|
%
|
|
0.4
|
%
|
|
(7.4
|
)%
|
|||
Return on Equity
|
10.0
|
%
|
|
(4.5
|
)%
|
|
(27.7
|
)%
|
|||
Adjusted Return On Equity*
|
16.5
|
%
|
|
1.6
|
%
|
|
(22.4
|
)%
|
|
As of or for the Year Ended December 31,
|
||||||||||||||||||||||
|
Prior
|
|
New
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
Interest Earning Assets
|
$
|
1,144,954
|
|
|
$
|
936,239
|
|
|
$
|
980,821
|
|
|
$
|
1,266,795
|
|
|
$
|
1,067,619
|
|
|
$
|
1,124,431
|
|
Loan Yield (replaces EIY)
|
36.3
|
%
|
|
33.8
|
%
|
|
33.2
|
%
|
|
36.2
|
%
|
|
33.8
|
%
|
|
33.2
|
%
|
||||||
Net Interest Margin
|
32.5
|
%
|
|
29.7
|
%
|
|
29.7
|
%
|
|
29.0
|
%
|
|
26.1
|
%
|
|
25.4
|
%
|
||||||
Cost of Funds
|
6.3
|
%
|
|
6.3
|
%
|
|
5.9
|
%
|
|
6.3
|
%
|
|
6.2
|
%
|
|
5.9
|
%
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
48,833
|
|
|
$
|
55,725
|
|
Restricted cash
|
54,944
|
|
|
57,053
|
|
||
Loans held for investment
|
1,057,831
|
|
|
990,285
|
|
||
Less: Allowance for loan losses
|
(126,260
|
)
|
|
(108,821
|
)
|
||
Loans held for investment, net
|
931,571
|
|
|
881,464
|
|
||
Loans held for sale
|
—
|
|
|
355
|
|
||
Property, equipment and software, net
|
17,949
|
|
|
26,636
|
|
||
Other assets
|
15,651
|
|
|
17,759
|
|
||
Total assets
|
$
|
1,068,948
|
|
|
$
|
1,038,992
|
|
Liabilities and equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
3,717
|
|
|
$
|
3,284
|
|
Interest payable
|
2,392
|
|
|
2,301
|
|
||
Debt
|
751,040
|
|
|
740,500
|
|
||
Accrued expenses and other liabilities
|
31,355
|
|
|
33,265
|
|
||
Total liabilities
|
788,504
|
|
|
779,350
|
|
||
|
|
|
|
||||
Total On Deck Capital, Inc. stockholders' equity
|
275,525
|
|
|
254,641
|
|
||
Noncontrolling interest
|
4,919
|
|
|
5,001
|
|
||
Total equity
|
280,444
|
|
|
259,642
|
|
||
Total liabilities and equity
|
$
|
1,068,948
|
|
|
$
|
1,038,992
|
|
|
|
|
|
||||
Memo:
|
|
|
|
||||
Unpaid Principal Balance
|
$
|
1,037,563
|
|
|
$
|
972,269
|
|
Interest Earning Assets
|
$
|
1,161,608
|
|
|
$
|
1,103,063
|
|
Loans
|
$
|
1,057,831
|
|
|
$
|
990,642
|
|
•
|
Adjusted Net income does not reflect the potentially dilutive impact of stock-based compensation; and
|
•
|
Adjusted Net income excludes charges we are required to incur in connection with real estate dispositions, severance obligations, debt extinguishment costs and sales tax refunds.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands, except shares and per share data)
|
||||||||||
Reconciliation of Net Income (Loss) Attributable to OnDeck to Adjusted Net Income (Loss)
|
|
|
|
|
|
||||||
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
|
$
|
27,681
|
|
|
$
|
(11,534
|
)
|
|
$
|
(82,958
|
)
|
Add / (Subtract):
|
|
|
|
|
—
|
|
|||||
Stock-based compensation expense
|
11,819
|
|
|
12,515
|
|
|
15,915
|
|
|||
Real estate disposition charges
|
4,187
|
|
|
—
|
|
|
—
|
|
|||
Severance and executive transition expenses
|
911
|
|
|
3,183
|
|
|
—
|
|
|||
Debt extinguishment costs
|
1,935
|
|
|
—
|
|
|
—
|
|
|||
Sales tax refund
|
(1,097
|
)
|
|
—
|
|
|
—
|
|
|||
Adjusted Net income (loss)
|
$
|
45,436
|
|
|
$
|
4,164
|
|
|
$
|
(67,043
|
)
|
|
|
|
|
|
|
||||||
Adjusted Net income (loss) per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.61
|
|
|
$
|
0.06
|
|
|
$
|
(0.95
|
)
|
Diluted
|
$
|
0.58
|
|
|
$
|
0.06
|
|
|
$
|
(0.95
|
)
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
74,561,019
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|||
Diluted
|
78,549,940
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|
Year Ended December 31,
|
||||||||||
Reconciliation of Net Income (Loss) per Basic Share to Adjusted Net Income (Loss) per Basic Share
|
2018
|
|
2017
|
|
2016
|
||||||
|
(per share)
|
||||||||||
Net income (loss) per basic share attributable to On Deck Capital, Inc. common stockholders
|
$
|
0.37
|
|
|
$
|
(0.16
|
)
|
|
$
|
(1.17
|
)
|
Add / (Subtract):
|
|
|
|
|
|
||||||
Stock-based compensation expense
|
0.16
|
|
|
0.17
|
|
|
0.22
|
|
|||
Real estate disposition charges
|
0.06
|
|
|
—
|
|
|
—
|
|
|||
Severance and executive transition expenses
|
0.01
|
|
|
0.05
|
|
|
—
|
|
|||
Debt extinguishment costs
|
0.02
|
|
|
—
|
|
|
—
|
|
|||
Sales tax refund
|
(0.01
|
)
|
|
—
|
|
|
—
|
|
|||
Adjusted Net income (loss) per basic share
|
$
|
0.61
|
|
|
$
|
0.06
|
|
|
$
|
(0.95
|
)
|
|
Year Ended December 31,
|
||||||||||
Reconciliation of Net Income (Loss) per Diluted Share to Adjusted Net Income (Loss) per Diluted Share
|
2018
|
|
2017
|
|
2016
|
||||||
|
(per share)
|
||||||||||
Net income (loss) per diluted share attributable to On Deck Capital, Inc. common stockholders
|
$
|
0.35
|
|
|
$
|
(0.16
|
)
|
|
$
|
(1.17
|
)
|
Add/ (Subtract):
|
|
|
|
|
|
||||||
Stock-based compensation expense
|
0.15
|
|
|
0.18
|
|
|
0.22
|
|
|||
Real estate disposition charges
|
0.06
|
|
|
—
|
|
|
—
|
|
|||
Severance and executive transition expenses
|
0.01
|
|
|
0.04
|
|
|
—
|
|
|||
Debt extinguishment costs
|
0.02
|
|
|
—
|
|
|
—
|
|
|||
Sales tax refund
|
(0.01
|
)
|
|
—
|
|
|
—
|
|
|||
Adjusted Net income (loss) per diluted share
|
$
|
0.58
|
|
|
$
|
0.06
|
|
|
$
|
(0.95
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Reconciliation of Return on Assets to Adjusted Return on Assets
|
|
|
|
|
|
||||||
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
|
$
|
27,681
|
|
|
$
|
(11,534
|
)
|
|
$
|
(82,958
|
)
|
Average total assets
|
$
|
1,068,948
|
|
|
$
|
1,038,992
|
|
|
$
|
900,502
|
|
Return on Assets
|
2.6
|
%
|
|
(1.1
|
)%
|
|
(9.2
|
)%
|
|||
Adjustments:
|
|
|
|
|
|
||||||
Stock-based compensation expense
|
$
|
11,819
|
|
|
$
|
12,515
|
|
|
$
|
15,915
|
|
Real estate disposition charges
|
4,187
|
|
|
—
|
|
|
—
|
|
|||
Severance and executive transition expenses
|
911
|
|
|
3,183
|
|
|
—
|
|
|||
Debt extinguishment costs
|
1,935
|
|
|
—
|
|
|
—
|
|
|||
Sales tax refund
|
(1,097
|
)
|
|
—
|
|
|
—
|
|
|||
Adjusted Net income (loss)
|
$
|
45,436
|
|
|
$
|
4,164
|
|
|
$
|
(67,043
|
)
|
Average total assets
|
$
|
1,068,948
|
|
|
$
|
1,038,992
|
|
|
$
|
900,502
|
|
Adjusted Return on Assets
|
4.3
|
%
|
|
0.4
|
%
|
|
(7.4
|
)%
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Reconciliation of Return on Equity to Adjusted Return on Equity
|
|
|
|
|
|
||||||
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
|
$
|
27,681
|
|
|
$
|
(11,534
|
)
|
|
$
|
(82,958
|
)
|
Average OnDeck stockholders' equity
|
$
|
275,525
|
|
|
$
|
254,641
|
|
|
$
|
299,447
|
|
Return on equity
|
10.0
|
%
|
|
(4.5
|
)%
|
|
(27.7
|
)%
|
|||
Adjustments:
|
|
|
|
|
—
|
|
|||||
Stock-based compensation expense
|
$
|
11,819
|
|
|
$
|
12,515
|
|
|
$
|
15,915
|
|
Real estate disposition charges
|
4,187
|
|
|
—
|
|
|
—
|
|
|||
Severance and executive transition expenses
|
911
|
|
|
3,183
|
|
|
—
|
|
|||
Debt extinguishment costs
|
1,935
|
|
|
—
|
|
|
—
|
|
|||
Sales tax refund
|
(1,097
|
)
|
|
—
|
|
|
—
|
|
|||
Adjusted Net income (loss)
|
$
|
45,436
|
|
|
$
|
4,164
|
|
|
$
|
(67,043
|
)
|
Average total On Deck Capital, Inc. stockholders' equity
|
$
|
275,525
|
|
|
$
|
254,641
|
|
|
$
|
299,447
|
|
Adjusted return on equity
|
16.5
|
%
|
|
1.6
|
%
|
|
(22.4
|
)%
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Reconciliation of Efficiency Ratio to Adjusted Efficiency Ratio
|
|
|
|
|
|
||||||
Total operating expense
|
$
|
177,490
|
|
|
$
|
166,170
|
|
|
$
|
193,974
|
|
Gross revenue
|
$
|
398,376
|
|
|
$
|
350,950
|
|
|
$
|
291,317
|
|
Efficiency Ratio
|
44.6
|
%
|
|
47.3
|
%
|
|
66.6
|
%
|
|||
Adjustments:
|
|
|
|
|
—
|
|
|||||
Stock-based compensation expense
|
$
|
11,819
|
|
|
$
|
12,515
|
|
|
$
|
15,915
|
|
Real estate disposition charges
|
4,187
|
|
|
—
|
|
|
—
|
|
|||
Severance and executive transition expenses
|
911
|
|
|
3,183
|
|
|
—
|
|
|||
Debt extinguishment costs
|
1,935
|
|
|
—
|
|
|
—
|
|
|||
Sales tax refund
|
(1,097
|
)
|
|
—
|
|
|
—
|
|
|||
Operating expenses less noteworthy items
|
$
|
159,735
|
|
|
$
|
150,472
|
|
|
$
|
178,059
|
|
Gross revenue
|
$
|
398,376
|
|
|
$
|
350,950
|
|
|
$
|
291,317
|
|
Adjusted Efficiency Ratio
|
40.1
|
%
|
|
42.9
|
%
|
|
61.1
|
%
|
|
Year Ended December 31,
|
|||||||
Percentage of Originations (Dollars)
|
2018
|
|
2017
|
|
2016
|
|||
Direct
|
45.5
|
%
|
|
52.1
|
%
|
|
52.7
|
%
|
Strategic Partner
|
25.1
|
%
|
|
21.0
|
%
|
|
20.0
|
%
|
Funding Advisor
|
29.4
|
%
|
|
26.9
|
%
|
|
27.3
|
%
|
•
|
the business must be approximately 50% paid down on its existing loan;
|
•
|
the business must be current on its outstanding OnDeck loan with no material delinquency history; and
|
•
|
the business must be fully re-underwritten and determined to be of adequate credit quality.
|
|
Year Ended December 31,
|
|||||||
Percentage of Originations (Dollars)
|
2018
|
|
2017
|
|
2016
|
|||
New
|
48.5
|
%
|
|
47.6
|
%
|
|
47.0
|
%
|
Repeat
|
51.5
|
%
|
|
52.4
|
%
|
|
53.0
|
%
|
|
For the Year
|
|
For the Quarter
|
|||||||
|
2014
|
2015
|
2016
|
2017
|
2018
|
|
Q1 2018
|
Q1 2018
|
Q3
2018
|
Q4
2018 |
Weighted Average Term Loan "Cents on Dollar" Borrowed, per Month
|
2.32¢
|
1.95¢
|
1.82¢
|
1.95¢
|
2.14¢
|
|
2.08¢
|
2.15¢
|
2.17¢
|
2.17¢
|
Weighted Average APR - Term Loans and Lines of Credit
|
54.4%
|
44.5%
|
41.4%
|
43.7%
|
46.9%
|
|
46.0%
|
47.2%
|
47.5%
|
47.0%
|
Loan Yield
|
|||||||||||||||||
For the Year
|
|
For the Quarter
|
|||||||||||||||
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
Q1 2018
|
|
Q2 2018
|
|
Q3 2018
|
|
Q4 2018
|
|
40.4%
|
|
36.9%
|
|
33.2%
|
|
33.8%
|
|
36.2
|
%
|
|
35.6%
|
|
36.1%
|
|
36.5%
|
|
36.6%
|
•
|
Channel Mix
- In general, loans originated from the strategic partner channel have lower Loan Yields than loans from the direct and funding advisor channel. This is primarily due to the strategic partner channel's higher commissions as compared to the direct channel, and lower pricing as compared to the funding advisor channel.
|
•
|
Term Mix
- In general, term loans with longer durations have lower annualized interest rates. Despite lower Loan Yields, total revenues from customers with longer loan durations are typically higher than the revenue of customers with shorter-term, higher Loan Yield loans because total payback is typically higher compared to a shorter length term for the same principal loan amount. Following the introduction of our 24-month and 36-month term loans, the average length of new term loan originations had increased from
10.8
months for the year ended December 31, 2014 to
13.3
months for the year ended December 31, 2016. As part of our 2017 credit tightening, when appropriate, the offered duration of term loans to certain customers was shortened to control duration risk. For the year ended
December 31, 2018
, the average length of new term loan originations had decreased to
11.3
months.
|
•
|
Customer Type Mix
- In general, loans originated from repeat customers historically have had lower Loan Yields than loans from new customers. This is primarily because repeat customers typically have a higher OnDeck
Score
and are therefore deemed to be lower risk. In addition, repeat customers are more likely to be approved for longer terms than new customers given their established payment history and lower risk profiles. Finally, origination fees can be reduced or waived for repeat customers, contributing to lower Loan Yields.
|
•
|
Loan Mix
- In general, lines of credit have lower Loan Yields than term loans. For the year ended
2018
, the weighted average line of credit APR was
32.6%
, compared to
49.2%
for term loans. Draws by line of credit customers increased to
20.6%
of total originations for the year ended
2018
from
19.8%
in
2017
.
|
|
For the Year
|
|
For the Quarter
|
|||||||||
|
2014
|
2015
|
2016
|
2017
|
|
Q1 2018
|
|
Q2 2018
|
|
Q3 2018
|
|
Q4 2018
|
Principal Outstanding as of December 31, 2018 by Period of Origination
|
—%
|
—%
|
0.2%
|
1.5%
|
|
8.7%
|
|
25.2%
|
|
57.8%
|
|
86.0%
|
|
For the Year
|
|
For the Quarter
|
||||||||||||||||||||||
Originations
|
2014
|
2015
|
2016
|
2017
|
|
Q1 2018
|
Q2 2018
|
Q3 2018
|
Q4 2018
|
||||||||||||||||
All term loans
(in thousands)
|
$
|
1,100,957
|
|
$
|
1,703,617
|
|
$
|
2,051,849
|
|
$
|
1,696,514
|
|
|
$
|
469,393
|
|
$
|
465,430
|
|
$
|
519,808
|
|
$
|
517,000
|
|
Weighted average term (months)
|
11.2
|
|
12.4
|
|
13.2
|
|
12.1
|
|
|
11.8
|
|
11.8
|
|
11.9
|
|
11.8
|
|
|
For the Year
|
|
For the Quarter
|
||||||||||||||||||||||
Originations
|
2014
|
2015
|
2016
|
2017
|
|
Q1 2018
|
Q2 2018
|
Q3 2018
|
Q4 2018
|
||||||||||||||||
New term loans
(in thousands)
|
$
|
521,355
|
|
$
|
627,494
|
|
$
|
777,129
|
|
$
|
589,487
|
|
|
$
|
161,494
|
|
$
|
174,199
|
|
$
|
184,437
|
|
$
|
172,058
|
|
Weighted average term (months)
|
10.8
|
|
11.8
|
|
13.3
|
|
11.9
|
|
|
11.4
|
|
11.3
|
|
11.3
|
|
11.3
|
|
|
For the Year
|
|
For the Quarter
|
||||||||||||||||||||||
Originations
|
2014
|
2015
|
2016
|
2017
|
|
Q1 2018
|
Q2 2018
|
Q3 2018
|
Q4 2018
|
||||||||||||||||
Repeat term loans
(in thousands)
|
$
|
579,602
|
|
$
|
1,076,122
|
|
$
|
1,274,721
|
|
$
|
1,107,027
|
|
|
$
|
307,899
|
|
$
|
291,231
|
|
$
|
335,372
|
|
$
|
344,943
|
|
Weighted average term (months)
|
11.6
|
|
12.7
|
|
13.1
|
|
12.2
|
|
|
12.0
|
|
12.1
|
|
12.2
|
|
12.0
|
|
•
|
New loans which are designated at origination to be sold, referred to as “Originations of loans held for sale;” and
|
•
|
Loans which were originally designated as held for investment that are subsequently designated to be sold at the time of their renewal and which are considered modified loans, referred to as “Originations of loans held for investment, modified."
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Originations of loans held for sale
|
$
|
—
|
|
|
$
|
49,813
|
|
|
$
|
304,258
|
|
Originations of loans held for investment, modified
|
—
|
|
|
13,252
|
|
|
72,839
|
|
|||
Marketplace
originations
|
$
|
—
|
|
|
$
|
63,065
|
|
|
$
|
377,097
|
|
•
|
Demand for Our Loans
. Generally, we believe a strong economic climate tends to increase demand for our loans as consumer spending increases and small businesses seek to expand and more potential customers may meet our underwriting requirements, although some small businesses may generate enough additional cash flow that they no longer require a loan. In that climate, traditional lenders may also approve loans for a higher percentage of our potential customers.
|
•
|
Credit Performance
. In a strong economic climate, our customers may experience improved cash flow and liquidity, which may result in lower loan losses. In a weakening economic climate or recession, the opposite may occur. We factor economic conditions into our loan underwriting analysis and reserves for loan losses, but changes in economic conditions, particularly sudden changes, may affect our actual loan losses. These effects may be partially mitigated by the short-term nature and repayment structure of our loans, which should allow us to react more quickly than if the terms of our loans were longer.
|
•
|
Loan Losses
. Our underwriting process is designed to limit our loan losses to levels consistent with our risk tolerance and financial model. Our aggregate loan loss rates in 2014 and 2015 were consistent with our financial targets while 2016 was higher than our financial target as we incurred higher than estimated loss rates on certain larger and longer-term loans. Our 2017 loan loss levels were also higher than our financial targets largely because we were taking corrective action throughout the first half of the year to address the higher 2016 loan losses. Our 2018 loan loss levels are consistent with our financial targets. Our overall loan losses are affected by a variety of factors, including external factors such as prevailing economic conditions, general small business sentiment and unusual events such as natural disasters, as well as internal factors such as the accuracy of our loan decisioning, the effectiveness of our underwriting process and the introduction of new loan types or features with which we have less experience to draw upon when forecasting their loss rates. Our loan loss rates may vary in the future.
|
•
|
Interest Expense.
Changes in monetary and fiscal policy may affect generally prevailing interest rates. Interest rates may also change for reasons unrelated to economic conditions. To the extent that interest rates rise, our interest expense will increase and the spread between our Loan Yield and our Cost of Funds Rate may narrow to the extent we cannot correspondingly increase the interest rates we charge our customers or reduce the credit spreads in our borrowing facilities.
|
•
|
Average number of loans per customer during the measurement period:
1.8
|
•
|
Average initial loan size:
$38,660
|
•
|
Average amount borrowed per customer:
$82,734
|
•
|
Total borrowings:
$1.65 billion
|
•
|
Average number of loans per customer during the measurement period:
1.7
|
•
|
Average initial loan size:
$43,465
|
•
|
Average amount borrowed per customer:
$81,550
|
•
|
Total borrowings:
$1.08 billion
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in thousands)
|
||||||||||
Revenue:
|
|
|
|
|
|
||||||
Interest income
|
$
|
383,579
|
|
|
$
|
334,575
|
|
|
$
|
264,844
|
|
Gain on sales of loans
|
—
|
|
|
2,485
|
|
|
14,411
|
|
|||
Other revenue
|
14,797
|
|
|
13,890
|
|
|
12,062
|
|
|||
Gross revenue
|
398,376
|
|
|
350,950
|
|
|
291,317
|
|
|||
Cost of revenue:
|
|
|
|
|
|
||||||
Provision for loan losses
|
148,541
|
|
|
152,926
|
|
|
149,963
|
|
|||
Interest expense
|
47,075
|
|
|
46,199
|
|
|
32,862
|
|
|||
Total cost of revenue
|
195,616
|
|
|
199,125
|
|
|
182,825
|
|
|||
Net revenue
|
202,760
|
|
|
151,825
|
|
|
108,492
|
|
|||
Operating expense:
|
|
|
|
|
|
||||||
Sales and marketing
|
44,082
|
|
|
52,786
|
|
|
67,011
|
|
|||
Technology and analytics
|
50,866
|
|
|
53,392
|
|
|
58,899
|
|
|||
Processing and servicing
|
21,209
|
|
|
18,076
|
|
|
19,719
|
|
|||
General and administrative
|
61,333
|
|
|
41,916
|
|
|
48,345
|
|
|||
Total operating expense
|
177,490
|
|
|
166,170
|
|
|
193,974
|
|
|||
Income (loss) from operations, before provision for income taxes
|
25,270
|
|
|
(14,345
|
)
|
|
(85,482
|
)
|
|||
Provision for income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net income (loss)
|
$
|
25,270
|
|
|
$
|
(14,345
|
)
|
|
$
|
(85,482
|
)
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2018
|
|
2017
|
|
2018 vs 2017
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Revenue:
|
|
|||||||||||||||||||
Interest income
|
$
|
383,579
|
|
|
96.3
|
%
|
|
$
|
334,575
|
|
|
95.3
|
%
|
|
$
|
49,004
|
|
|
14.6
|
%
|
Gain on sales of loans
|
—
|
|
|
—
|
|
|
2,485
|
|
|
0.7
|
|
|
(2,485
|
)
|
|
(100.0
|
)
|
|||
Other revenue
|
14,797
|
|
|
3.7
|
|
|
13,890
|
|
|
4.0
|
|
|
907
|
|
|
6.5
|
|
|||
Gross revenue
|
$
|
398,376
|
|
|
100.0
|
%
|
|
$
|
350,950
|
|
|
100.0
|
%
|
|
$
|
47,426
|
|
|
13.5
|
%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2018
|
|
2017
|
|
2018 vs 2017
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Provision for loan losses
|
$
|
148,541
|
|
|
37.3
|
%
|
|
$
|
152,926
|
|
|
43.6
|
%
|
|
$
|
(4,385
|
)
|
|
(2.9
|
)%
|
Interest expense
|
47,075
|
|
|
11.8
|
|
|
46,199
|
|
|
13.2
|
|
|
876
|
|
|
1.9
|
|
|||
Total cost of revenue
|
$
|
195,616
|
|
|
49.1
|
%
|
|
$
|
199,125
|
|
|
56.8
|
%
|
|
$
|
(3,509
|
)
|
|
(1.8
|
)%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2018
|
|
2017
|
|
2018 vs 2017
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Sales and marketing
|
$
|
44,082
|
|
|
11.1
|
%
|
|
$
|
52,786
|
|
|
15.0
|
%
|
|
$
|
(8,704
|
)
|
|
(16.5
|
)%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|||||||||||||||
|
2018
|
|
2017
|
|
2018 vs 2017
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Technology and analytics
|
$
|
50,866
|
|
|
12.8
|
%
|
|
$
|
53,392
|
|
|
15.2
|
%
|
|
$
|
(2,526
|
)
|
|
(4.7
|
)%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|||||||||||||||
|
2018
|
|
2017
|
|
2018 vs 2017
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Processing and servicing
|
$
|
21,209
|
|
|
5.3
|
%
|
|
$
|
18,076
|
|
|
5.2
|
%
|
|
$
|
3,133
|
|
|
17.3
|
%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|||||||||||||||
|
2018
|
|
2017
|
|
2018 vs 2017
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
General and administrative
|
$
|
61,333
|
|
|
15.4
|
%
|
|
$
|
41,916
|
|
|
11.9
|
%
|
|
$
|
19,417
|
|
|
46.3
|
%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2017
|
|
2016
|
|
2017 vs 2016
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest income
|
$
|
334,575
|
|
|
95.3
|
%
|
|
$
|
264,844
|
|
|
90.9
|
%
|
|
$
|
69,731
|
|
|
26.3
|
%
|
Gain on sales of loans
|
2,485
|
|
|
0.7
|
|
|
14,411
|
|
|
5.0
|
|
|
(11,926
|
)
|
|
(82.8
|
)
|
|||
Other revenue
|
13,890
|
|
|
4.0
|
|
|
12,062
|
|
|
4.1
|
|
|
1,828
|
|
|
15.2
|
|
|||
Gross revenue
|
350,950
|
|
|
100.0
|
|
|
291,317
|
|
|
100.0
|
|
|
59,633
|
|
|
20.5
|
|
|||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Provision for loan losses
|
152,926
|
|
|
43.6
|
|
|
149,963
|
|
|
51.5
|
|
|
2,963
|
|
|
2.0
|
|
|||
Interest expense
|
46,199
|
|
|
13.2
|
|
|
32,862
|
|
|
11.3
|
|
|
13,337
|
|
|
40.6
|
|
|||
Total cost of revenue
|
199,125
|
|
|
56.8
|
|
|
182,825
|
|
|
62.8
|
|
|
16,300
|
|
|
8.9
|
|
|||
Net revenue
|
151,825
|
|
|
43.2
|
|
|
108,492
|
|
|
37.2
|
|
|
43,333
|
|
|
39.9
|
|
|||
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Sales and marketing
|
52,786
|
|
|
15.0
|
|
|
67,011
|
|
|
23.0
|
|
|
(14,225
|
)
|
|
(21.2
|
)
|
|||
Technology and analytics
|
53,392
|
|
|
15.2
|
|
|
58,899
|
|
|
20.2
|
|
|
(5,507
|
)
|
|
(9.3
|
)
|
|||
Processing and servicing
|
18,076
|
|
|
5.2
|
|
|
19,719
|
|
|
6.8
|
|
|
(1,643
|
)
|
|
(8.3
|
)
|
|||
General and administrative
|
41,916
|
|
|
11.9
|
|
|
48,345
|
|
|
16.6
|
|
|
(6,429
|
)
|
|
(13.3
|
)
|
|||
Total operating expense
|
166,170
|
|
|
47.3
|
|
|
193,974
|
|
|
66.6
|
|
|
(27,804
|
)
|
|
(14.3
|
)
|
|||
Income (loss) from operations, before provision for income taxes
|
(14,345
|
)
|
|
(4.1
|
)
|
|
(85,482
|
)
|
|
(29.3
|
)
|
|
71,137
|
|
|
(83.2
|
)
|
|||
Provision for income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|||
Net income (loss)
|
$
|
(14,345
|
)
|
|
(4.1
|
)%
|
|
$
|
(85,482
|
)
|
|
(29.3
|
)%
|
|
$
|
71,137
|
|
|
(83.2
|
)%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2017
|
|
2016
|
|
2017 vs 2016
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|
|
|||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest income
|
$
|
334,575
|
|
|
95.3
|
%
|
|
$
|
264,844
|
|
|
90.9
|
%
|
|
$
|
69,731
|
|
|
26.3
|
%
|
Gain on sales of loans
|
2,485
|
|
|
0.7
|
|
|
14,411
|
|
|
5.0
|
|
|
(11,926
|
)
|
|
(82.8
|
)
|
|||
Other revenue
|
13,890
|
|
|
4.0
|
|
|
12,062
|
|
|
4.1
|
|
|
1,828
|
|
|
15.2
|
|
|||
Gross revenue
|
$
|
350,950
|
|
|
100.0
|
%
|
|
$
|
291,317
|
|
|
100.0
|
%
|
|
$
|
59,633
|
|
|
20.5
|
%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2017
|
|
2016
|
|
2017 vs 2016
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Provision for loan losses
|
$
|
152,926
|
|
|
43.6
|
%
|
|
$
|
149,963
|
|
|
51.5
|
%
|
|
$
|
2,963
|
|
|
2.0
|
%
|
Interest expense
|
46,199
|
|
|
13.2
|
|
|
32,862
|
|
|
11.3
|
|
|
13,337
|
|
|
40.6
|
|
|||
Total cost of revenue
|
$
|
199,125
|
|
|
56.8
|
%
|
|
$
|
182,825
|
|
|
62.8
|
%
|
|
$
|
16,300
|
|
|
8.9
|
%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2017
|
|
2016
|
|
2017 vs 2016
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Sales and marketing
|
$
|
52,786
|
|
|
15.0
|
%
|
|
$
|
67,011
|
|
|
23.0
|
%
|
|
$
|
(14,225
|
)
|
|
(21.2
|
)%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2017
|
|
2016
|
|
2017 vs 2016
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Technology and analytics
|
$
|
53,392
|
|
|
15.2
|
%
|
|
$
|
58,899
|
|
|
20.2
|
%
|
|
$
|
(5,507
|
)
|
|
(9.3
|
)%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2017
|
|
2016
|
|
2017 vs 2016
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
|
|
(dollars in thousands)
|
|
|
|||||||||||||||
Processing and servicing
|
$
|
18,076
|
|
|
5.2
|
%
|
|
$
|
19,719
|
|
|
6.8
|
%
|
|
$
|
(1,643
|
)
|
|
(8.3
|
)%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2017
|
|
2016
|
|
2017 vs 2016
|
|||||||||||||||
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage of
Gross Revenue |
|
Amount
|
|
Percentage
|
|||||||||
|
|
|
(dollars in thousands)
|
|
|
|||||||||||||||
General and administrative
|
$
|
41,916
|
|
|
11.9
|
%
|
|
$
|
48,345
|
|
|
16.6
|
%
|
|
$
|
(6,429
|
)
|
|
(13.3
|
)%
|
|
Maturity
Date |
|
Weighted
Average Interest Rate |
|
Borrowing
Capacity |
|
Principal
Outstanding |
||||
|
|
|
|
|
(in millions)
|
||||||
Debt:
|
|
|
|
|
|
||||||
OnDeck Asset Securitization Trust II LLC
|
April 2022
|
(1)
|
3.8%
|
|
$
|
225.0
|
|
|
$
|
225.0
|
|
OnDeck Account Receivables Trust 2013-1 LLC
|
March 2019
|
|
5.1%
|
|
214.1
|
|
|
117.7
|
|
||
Receivable Assets of OnDeck, LLC
|
September 2021
|
(2)
|
4.7%
|
|
119.7
|
|
|
113.6
|
|
||
OnDeck Asset Funding II LLC
|
August 2022
|
(3)
|
5.3%
|
|
175.0
|
|
|
109.6
|
|
||
Prime OnDeck Receivable Trust II, LLC
|
March 2019
|
|
5.0%
|
|
125.0
|
|
|
108.8
|
|
||
Loan Assets of OnDeck, LLC
|
October 2022
|
(4)
|
4.3%
|
|
100.0
|
|
|
100.0
|
|
||
Corporate Debt
|
January 2019
|
(5)
|
6.8%
|
|
30.0
|
|
|
—
|
|
||
Other Agreements
|
Various
|
(6)
|
6.0%
|
|
79.3
|
|
|
47.3
|
|
||
Total Debt
|
|
|
4.7%
|
|
$
|
1,068.1
|
|
|
$
|
822.0
|
|
(1)
|
The period during which new borrowings may be made under this debt facility expires in
March 2020
.
|
(2)
|
The period during which new borrowings of Class A revolving loans may be made under this debt facility expires in
December 2020
. The
$19.7 million
of Class B borrowing capacity matures in
December 2019
.
|
(3)
|
The period during which new borrowings may be made under this debt facility expires in
August 2021
.
|
(4)
|
The period during which new borrowings may be made under this debt facility expires in
April 2022
. On February 8, 2019, we entered into an amendment which increased the revolving commitment amount by $50 million and reduced the interest rate margin over 1-month LIBOR by 0.25%, as well as made various technical, definitional, conforming and other changes, see Note 15, "Subsequent Events" of Notes to Consolidated Financial Statements for additional information.
|
(5)
|
In January 2019, we voluntarily prepaid in full and terminated the Square 1 Agreement which had a
$30 million
borrowing capacity. In January 2019 we established a new revolving debt facility with a commitment amount of $85 million and an interest rate of 1-month LIBOR plus 3.0% and a final maturity date of January 2021, see Note 15, "Subsequent Events" of Notes to Consolidated Financial Statements for additional information.
|
(6)
|
Maturity dates range from
January 2020
through
June 2021
|
|
As of and for the Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Cash and cash equivalents
|
$
|
59,859
|
|
|
$
|
71,362
|
|
|
$
|
79,554
|
|
Restricted cash
|
$
|
37,779
|
|
|
$
|
43,462
|
|
|
$
|
44,432
|
|
Loans held for investment, net
|
$
|
1,029,117
|
|
|
$
|
843,781
|
|
|
$
|
890,283
|
|
Cash provided by (used in):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
263,781
|
|
|
$
|
210,198
|
|
|
$
|
134,251
|
|
Investing activities
|
$
|
(399,641
|
)
|
|
$
|
(157,534
|
)
|
|
$
|
(583,265
|
)
|
Financing activities
|
$
|
121,724
|
|
|
$
|
(62,496
|
)
|
|
$
|
374,728
|
|
|
Payment Due by Period
|
||||||||||||||||||
|
Total
|
|
2019
|
|
2020-2021
|
|
2022-2023
|
|
Thereafter
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|
||||||||||
Debt
|
$
|
821,997
|
|
|
$
|
243,730
|
|
|
$
|
330,019
|
|
|
$
|
248,248
|
|
|
$
|
—
|
|
Interest payments
(1)
|
77,602
|
|
|
29,247
|
|
|
41,016
|
|
|
7,339
|
|
|
—
|
|
|||||
Operating leases
|
48,518
|
|
|
6,416
|
|
|
13,096
|
|
|
11,495
|
|
|
17,511
|
|
|||||
Purchase obligations
|
16,840
|
|
|
7,704
|
|
|
6,486
|
|
|
2,650
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
964,957
|
|
|
$
|
287,097
|
|
|
$
|
390,617
|
|
|
$
|
269,732
|
|
|
$
|
17,511
|
|
(1)
|
Interest payments on our debt facilities with variable interest rates are calculated using the interest rate as of
December 31, 2018
.
|
•
|
Effective tax rate of approximately 20% as the company utilizes its remaining US Federal net operating loss carryforwards.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Consolidated Financial Statements and Supplementary Data
|
|
Page
|
Index to Consolidated Financial Statements:
|
|
|
December 31,
|
|
December 31,
|
||||
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
59,859
|
|
|
$
|
71,362
|
|
Restricted cash
|
37,779
|
|
|
43,462
|
|
||
Loans held for investment
|
1,169,157
|
|
|
952,796
|
|
||
Less: Allowance for loan losses
|
(140,040
|
)
|
|
(109,015
|
)
|
||
Loans held for investment, net
|
1,029,117
|
|
|
843,781
|
|
||
Property, equipment and software, net
|
16,700
|
|
|
23,572
|
|
||
Other assets
|
18,115
|
|
|
13,867
|
|
||
Total assets
|
$
|
1,161,570
|
|
|
$
|
996,044
|
|
Liabilities and equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
4,011
|
|
|
$
|
2,674
|
|
Interest payable
|
2,385
|
|
|
2,330
|
|
||
Debt
|
816,231
|
|
|
692,254
|
|
||
Accrued expenses and other liabilities
|
34,654
|
|
|
32,730
|
|
||
Total liabilities
|
857,281
|
|
|
729,988
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
||||
Stockholders’ equity (deficit):
|
|
|
|
||||
Common stock—$0.005 par value, 1,000,000,000 shares authorized and 79,135,510 and 77,284,266 shares issued and 75,375,341 and 73,822,001 outstanding at December 31, 2018 and 2017, respectively.
|
396
|
|
|
386
|
|
||
Treasury stock—at cost
|
(9,822
|
)
|
|
(7,965
|
)
|
||
Additional paid-in capital
|
506,169
|
|
|
492,509
|
|
||
Accumulated deficit
|
(195,155
|
)
|
|
(222,833
|
)
|
||
Accumulated other comprehensive loss
|
(1,832
|
)
|
|
(52
|
)
|
||
Total On Deck Capital, Inc. stockholders' equity
|
299,756
|
|
|
262,045
|
|
||
Noncontrolling interest
|
4,533
|
|
|
4,011
|
|
||
Total equity
|
304,289
|
|
|
266,056
|
|
||
Total liabilities and equity
|
$
|
1,161,570
|
|
|
$
|
996,044
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Interest income
|
$
|
383,579
|
|
|
$
|
334,575
|
|
|
$
|
264,844
|
|
Gain on sales of loans
|
—
|
|
|
2,485
|
|
|
14,411
|
|
|||
Other revenue
|
14,797
|
|
|
13,890
|
|
|
12,062
|
|
|||
Gross revenue
|
398,376
|
|
|
350,950
|
|
|
291,317
|
|
|||
Cost of revenue:
|
|
|
|
|
|
||||||
Provision for loan losses
|
148,541
|
|
|
152,926
|
|
|
149,963
|
|
|||
Interest expense
|
47,075
|
|
|
46,199
|
|
|
32,862
|
|
|||
Total cost of revenue
|
195,616
|
|
|
199,125
|
|
|
182,825
|
|
|||
Net revenue
|
202,760
|
|
|
151,825
|
|
|
108,492
|
|
|||
Operating expense:
|
|
|
|
|
|
||||||
Sales and marketing
|
44,082
|
|
|
52,786
|
|
|
67,011
|
|
|||
Technology and analytics
|
50,866
|
|
|
53,392
|
|
|
58,899
|
|
|||
Processing and servicing
|
21,209
|
|
|
18,076
|
|
|
19,719
|
|
|||
General and administrative
|
61,333
|
|
|
41,916
|
|
|
48,345
|
|
|||
Total operating expense
|
177,490
|
|
|
166,170
|
|
|
193,974
|
|
|||
Income (loss) from operations, before provision for income taxes
|
25,270
|
|
|
(14,345
|
)
|
|
(85,482
|
)
|
|||
Provision for income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net income (loss)
|
25,270
|
|
|
(14,345
|
)
|
|
(85,482
|
)
|
|||
Less: Net income (loss) attributable to noncontrolling interest
|
(2,411
|
)
|
|
(2,811
|
)
|
|
(2,524
|
)
|
|||
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
|
$
|
27,681
|
|
|
$
|
(11,534
|
)
|
|
$
|
(82,958
|
)
|
Net income (loss) per share attributable to On Deck Capital, Inc. common stockholders:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.37
|
|
|
$
|
(0.16
|
)
|
|
$
|
(1.17
|
)
|
Diluted
|
$
|
0.35
|
|
|
$
|
(0.16
|
)
|
|
$
|
(1.17
|
)
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
74,561,019
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|||
Diluted
|
78,549,940
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|||
Comprehensive income (loss):
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
25,270
|
|
|
$
|
(14,345
|
)
|
|
$
|
(85,482
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|||||
Unrealized (loss) on derivative instrument
|
(456
|
)
|
|
—
|
|
|
—
|
|
|||
Foreign currency translation adjustment
|
(1,791
|
)
|
|
594
|
|
|
(20
|
)
|
|||
Comprehensive income (loss)
|
23,023
|
|
|
(13,751
|
)
|
|
(85,502
|
)
|
|||
Less: Comprehensive income (loss) attributable to noncontrolling interests
|
(467
|
)
|
|
267
|
|
|
(13
|
)
|
|||
Less: Net income (loss) attributable to noncontrolling interest
|
(2,411
|
)
|
|
(2,811
|
)
|
|
(2,524
|
)
|
|||
Comprehensive income (loss) attributable to On Deck Capital, Inc. common stockholders
|
$
|
25,901
|
|
|
$
|
(11,207
|
)
|
|
$
|
(82,965
|
)
|
|
On Deck Capital, Inc.'s stockholders' equity
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Treasury
Stock
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total Stockholders' Equity
|
|
Noncontrolling interest
|
|
Total
Equity
(Deficit)
|
|||||||||||||||||||
|
Shares
|
|
Amount
|
|
||||||||||||||||||||||||||||||
Balance—December 31, 2015
|
70,060,208
|
|
|
$
|
366
|
|
|
$
|
457,003
|
|
|
$
|
(128,341
|
)
|
|
$
|
(5,843
|
)
|
|
$
|
(372
|
)
|
|
$
|
322,813
|
|
|
$
|
6,609
|
|
|
$
|
329,422
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
17,385
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,385
|
|
|
—
|
|
|
17,385
|
|
||||||||
Issuance of common stock through vesting of restricted stock units and option exercises
|
1,237,969
|
|
|
6
|
|
|
197
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
203
|
|
|
—
|
|
|
203
|
|
||||||||
Employee stock purchase plan
|
456,008
|
|
|
2
|
|
|
2,941
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,943
|
|
|
—
|
|
|
2,943
|
|
||||||||
Repurchases of common stock
|
(148,477
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(854
|
)
|
|
—
|
|
|
(854
|
)
|
|
—
|
|
|
(854
|
)
|
||||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
(7
|
)
|
|
(13
|
)
|
|
(20
|
)
|
||||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(82,958
|
)
|
|
—
|
|
|
—
|
|
|
(82,958
|
)
|
|
(2,524
|
)
|
|
(85,482
|
)
|
||||||||
Balance—December 31, 2016
|
71,605,708
|
|
|
$
|
374
|
|
|
$
|
477,526
|
|
|
$
|
(211,299
|
)
|
|
$
|
(6,697
|
)
|
|
$
|
(379
|
)
|
|
$
|
259,525
|
|
|
$
|
4,072
|
|
|
$
|
263,597
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
12,690
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,690
|
|
|
—
|
|
|
12,690
|
|
||||||||
Issuance of common stock through vesting of restricted stock units and option exercises
|
2,014,497
|
|
|
10
|
|
|
454
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
464
|
|
|
—
|
|
|
464
|
|
||||||||
Employee stock purchase plan
|
467,944
|
|
|
2
|
|
|
1,839
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,841
|
|
|
—
|
|
|
1,841
|
|
||||||||
Repurchases of common stock
|
(266,148
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,268
|
)
|
|
—
|
|
|
(1,268
|
)
|
|
—
|
|
|
(1,268
|
)
|
||||||||
Investments by noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,440
|
|
|
3,440
|
|
||||||||
Return of equity to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(957
|
)
|
|
(957
|
)
|
||||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
327
|
|
|
327
|
|
|
267
|
|
|
594
|
|
||||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,534
|
)
|
|
—
|
|
|
—
|
|
|
(11,534
|
)
|
|
(2,811
|
)
|
|
(14,345
|
)
|
||||||||
Balance—December 31, 2017
|
73,822,001
|
|
|
386
|
|
|
492,509
|
|
|
(222,833
|
)
|
|
(7,965
|
)
|
|
(52
|
)
|
|
262,045
|
|
|
4,011
|
|
|
266,056
|
|
||||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
11,301
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,301
|
|
|
—
|
|
|
11,301
|
|
||||||||
Issuance of common stock through vesting of restricted stock units and option exercises
|
1,482,546
|
|
|
8
|
|
|
72
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
80
|
|
||||||||
Employee stock purchase plan
|
368,698
|
|
|
2
|
|
|
2,287
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,289
|
|
|
—
|
|
|
2,289
|
|
||||||||
Repurchases of common stock
|
(297,904
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,857
|
)
|
|
—
|
|
|
(1,857
|
)
|
|
—
|
|
|
(1,857
|
)
|
||||||||
Investment by noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,400
|
|
|
3,400
|
|
||||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,780
|
)
|
|
(1,780
|
)
|
|
(467
|
)
|
|
(2,247
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
27,681
|
|
|
—
|
|
|
—
|
|
|
27,681
|
|
|
(2,411
|
)
|
|
25,270
|
|
||||||||
Balance—December 31, 2018
|
75,375,341
|
|
|
$
|
396
|
|
|
$
|
506,169
|
|
|
$
|
(195,155
|
)
|
|
$
|
(9,822
|
)
|
|
$
|
(1,832
|
)
|
|
$
|
299,756
|
|
|
$
|
4,533
|
|
|
$
|
304,289
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
25,270
|
|
|
$
|
(14,345
|
)
|
|
$
|
(85,482
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Provision for loan losses
|
148,541
|
|
|
152,926
|
|
|
149,963
|
|
|||
Depreciation and amortization
|
7,802
|
|
|
9,951
|
|
|
9,462
|
|
|||
Amortization of debt issuance costs
|
6,656
|
|
|
3,806
|
|
|
4,538
|
|
|||
Stock-based compensation
|
11,819
|
|
|
12,515
|
|
|
15,915
|
|
|||
Amortization of net deferred origination costs
|
57,486
|
|
|
48,219
|
|
|
36,040
|
|
|||
Changes in servicing rights, at fair value
|
290
|
|
|
2,097
|
|
|
4,997
|
|
|||
Gain on sales of loans
|
—
|
|
|
(2,485
|
)
|
|
(14,411
|
)
|
|||
Unfunded loan commitment reserve
|
1,438
|
|
|
535
|
|
|
(307
|
)
|
|||
Gain on extinguishment of debt
|
—
|
|
|
(312
|
)
|
|
(1,372
|
)
|
|||
Gain on lease termination
|
(1,481
|
)
|
|
—
|
|
|
—
|
|
|||
Loss on disposal of fixed assets
|
5,737
|
|
|
—
|
|
|
—
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Other assets
|
(4,972
|
)
|
|
4,768
|
|
|
(1,942
|
)
|
|||
Accounts payable
|
1,535
|
|
|
(2,597
|
)
|
|
2,570
|
|
|||
Interest payable
|
119
|
|
|
208
|
|
|
1,365
|
|
|||
Accrued expenses and other liabilities
|
3,541
|
|
|
(6,206
|
)
|
|
5,580
|
|
|||
Originations of loans held for sale
|
—
|
|
|
(49,813
|
)
|
|
(304,258
|
)
|
|||
Capitalized net deferred origination costs of loans held for sale
|
—
|
|
|
(1,667
|
)
|
|
(10,269
|
)
|
|||
Proceeds from sale of loans held for sale
|
—
|
|
|
51,463
|
|
|
314,627
|
|
|||
Principal repayments of loans held for sale
|
—
|
|
|
1,135
|
|
|
7,235
|
|
|||
Net cash provided by operating activities
|
263,781
|
|
|
210,198
|
|
|
134,251
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Purchases of property, equipment and software
|
(1,058
|
)
|
|
(1,340
|
)
|
|
(6,640
|
)
|
|||
Capitalized internal-use software
|
(5,385
|
)
|
|
(2,919
|
)
|
|
(4,645
|
)
|
|||
Originations of term loans and lines of credit, excluding rollovers into new originations
|
(2,115,800
|
)
|
|
(1,758,600
|
)
|
|
(1,826,085
|
)
|
|||
Proceeds from sale of loans held for investment
|
—
|
|
|
24,826
|
|
|
75,787
|
|
|||
Payments of net deferred origination costs
|
(64,628
|
)
|
|
(44,778
|
)
|
|
(47,082
|
)
|
|||
Principal repayments of term loans and lines of credit
|
1,788,031
|
|
|
1,639,117
|
|
|
1,232,272
|
|
|||
Purchase of loans
|
(801
|
)
|
|
(13,840
|
)
|
|
(6,671
|
)
|
|||
Other
|
—
|
|
|
—
|
|
|
(201
|
)
|
|||
Net cash used in investing activities
|
(399,641
|
)
|
|
(157,534
|
)
|
|
(583,265
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Investments by noncontrolling interests
|
3,400
|
|
|
3,443
|
|
|
—
|
|
|||
Purchase of treasury shares
|
(1,857
|
)
|
|
(1,268
|
)
|
|
(855
|
)
|
|||
Proceeds from exercise of stock options and warrants
|
78
|
|
|
454
|
|
|
197
|
|
|||
Purchase of interest rate cap
|
(1,725
|
)
|
|
—
|
|
|
—
|
|
|||
Issuance of common stock under employee stock purchase plan
|
1,435
|
|
|
1,838
|
|
|
2,606
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Proceeds from the issuance of debt
|
759,171
|
|
|
211,781
|
|
|
777,743
|
|
|||
Payments of debt issuance costs
|
(6,034
|
)
|
|
(4,108
|
)
|
|
(6,281
|
)
|
|||
Repayments of debt principal
|
(632,744
|
)
|
|
(273,679
|
)
|
|
(398,682
|
)
|
|||
Distribution to noncontrolling interest
|
—
|
|
|
(957
|
)
|
|
—
|
|
|||
Net cash provided by (used in) financing activities
|
121,724
|
|
|
(62,496
|
)
|
|
374,728
|
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(3,050
|
)
|
|
670
|
|
|
(13
|
)
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
(17,186
|
)
|
|
(9,162
|
)
|
|
(74,299
|
)
|
|||
Cash, cash equivalents, and restricted cash at beginning of year
|
114,824
|
|
|
123,986
|
|
|
198,285
|
|
|||
Cash, cash equivalents, and restricted cash at end of year
|
$
|
97,638
|
|
|
$
|
114,824
|
|
|
$
|
123,986
|
|
|
|
|
|
|
|
||||||
Reconciliation to amounts on consolidated balance sheets
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
59,859
|
|
|
$
|
71,362
|
|
|
$
|
79,554
|
|
Restricted cash
|
37,779
|
|
|
43,462
|
|
|
44,432
|
|
|||
Total cash, cash equivalents and restricted cash
|
$
|
97,638
|
|
|
$
|
114,824
|
|
|
$
|
123,986
|
|
|
|
|
|
|
|
||||||
Supplemental disclosure of other cash flow information
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
42,208
|
|
|
$
|
41,918
|
|
|
$
|
24,778
|
|
Supplemental disclosures of non-cash investing and financing activities
|
|
|
|
|
|
||||||
Loans transferred from loans held for sale to loans held for investment
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
884
|
|
Stock-based compensation included in capitalized internal-use software
|
$
|
243
|
|
|
$
|
175
|
|
|
$
|
1,470
|
|
Unpaid principal balance of term loans rolled into new originations
|
$
|
368,385
|
|
|
$
|
306,250
|
|
|
$
|
273,453
|
|
•
|
Adequate compensation: We estimate adequate compensation as the rate a willing market participant would require to service loans with similar characteristics as those in the serviced portfolio. In the event of a lack of transparency and quantity of transactions related to trades of servicing rights of comparable loans (i.e., loans with comparable terms, unpaid principal balances, renewal rates and default rates) we may consider the actual cost incurred as a basis for determining what a market participant would require to service the loans.
|
•
|
Discount rate: For servicing rights on loans, the discount rate reflects the time value of money and a risk premium intended to reflect the amount of compensation market participants would require.
|
•
|
Renewal rate: We estimate the timing and probability that a borrower may renew their loan in advance of scheduled repayment, thus reducing the projected unpaid principal balance and expected term of the loan, which are used to project future servicing revenues.
|
•
|
Default rate: We estimate the timing and probability of loan defaults and write-offs, thus reducing the projected unpaid principal balance and expected term of the loan, which are used to project future servicing revenues.
|
1.
|
The financial assets are isolated from the transferor and its consolidated affiliates as well as its creditors.
|
2.
|
The transferee or beneficial interest holders have the right to pledge or exchange the transferred financial assets.
|
3.
|
The transferor does not maintain effective control of the transferred assets.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net Income (loss)
|
$
|
25,270
|
|
|
$
|
(14,345
|
)
|
|
$
|
(85,482
|
)
|
Less: Net income (loss) attributable to noncontrolling interest
|
(2,411
|
)
|
|
(2,811
|
)
|
|
(2,524
|
)
|
|||
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
|
$
|
27,681
|
|
|
$
|
(11,534
|
)
|
|
$
|
(82,958
|
)
|
Denominator:
|
|
|
|
|
|
||||||
Weighted-average common shares outstanding, basic
|
74,561,019
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|||
Net income (loss) per common share, basic
|
$
|
0.37
|
|
|
$
|
(0.16
|
)
|
|
$
|
(1.17
|
)
|
Effect of dilutive securities
|
3,988,921
|
|
|
—
|
|
|
—
|
|
|||
Weighted-average common shares outstanding, diluted
|
78,549,940
|
|
|
72,890,313
|
|
|
70,934,937
|
|
|||
Net income (loss) per common share, diluted
|
$
|
0.35
|
|
|
$
|
(0.16
|
)
|
|
$
|
(1.17
|
)
|
Anti-dilutive securities excluded
|
5,423,547
|
|
|
11,410,980
|
|
|
15,580,272
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Interest on unpaid principal balance
|
$
|
440,753
|
|
|
$
|
382,983
|
|
|
$
|
300,713
|
|
Amortization of net deferred origination costs
|
(57,414
|
)
|
|
(48,540
|
)
|
|
(36,040
|
)
|
|||
Interest income on loans, net
|
383,339
|
|
|
334,443
|
|
|
264,673
|
|
|||
Interest on deposits
|
240
|
|
|
132
|
|
|
171
|
|
|||
Total interest income
|
$
|
383,579
|
|
|
$
|
334,575
|
|
|
$
|
264,844
|
|
|
2018
|
|
2017
|
||||
Term loans
|
$
|
956,755
|
|
|
$
|
804,227
|
|
Lines of credit
|
188,199
|
|
|
132,012
|
|
||
Total unpaid principal balance
|
1,144,954
|
|
|
936,239
|
|
||
Net deferred origination costs
|
24,203
|
|
|
16,557
|
|
||
Total loans held for investment
|
$
|
1,169,157
|
|
|
$
|
952,796
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Balance at January 1
|
$
|
109,015
|
|
|
$
|
110,162
|
|
|
$
|
53,311
|
|
Recoveries of loans previously charged off
|
13,179
|
|
|
17,199
|
|
|
7,270
|
|
|||
Loans charged off
|
(130,695
|
)
|
|
(171,272
|
)
|
|
(100,382
|
)
|
|||
Provision for loan losses
|
148,541
|
|
|
152,926
|
|
|
149,963
|
|
|||
Allowance for loan losses at December 31
|
$
|
140,040
|
|
|
$
|
109,015
|
|
|
$
|
110,162
|
|
|
2018
|
|
2017
|
||||
Current loans
|
$
|
1,031,449
|
|
|
$
|
850,060
|
|
Delinquent: paying (accrual status)
|
54,427
|
|
|
49,252
|
|
||
Delinquent: non-paying (non-accrual status)
|
59,078
|
|
|
36,927
|
|
||
Total
|
$
|
1,144,954
|
|
|
$
|
936,239
|
|
|
2018
|
|
2017
|
||||
By delinquency status:
|
|
|
|
||||
Current loans
|
$
|
1,031,449
|
|
|
$
|
850,060
|
|
1-14 calendar days past due
|
27,655
|
|
|
23,611
|
|
||
15-29 calendar days past due
|
14,665
|
|
|
12,528
|
|
||
30-59 calendar days past due
|
21,470
|
|
|
22,059
|
|
||
60-89 calendar days past due
|
19,031
|
|
|
12,809
|
|
||
90 + calendar days past due
|
30,684
|
|
|
15,172
|
|
||
Total unpaid principal balance
|
$
|
1,144,954
|
|
|
$
|
936,239
|
|
|
2018
|
|
2017
|
||||
Fair value at the beginning of period
|
$
|
154
|
|
|
$
|
1,131
|
|
Addition:
|
|
|
|
||||
Servicing resulting from transfers of financial assets
|
140
|
|
|
1,120
|
|
||
Changes in fair value:
|
|
|
|
||||
Other changes in fair value
(1)
|
(290
|
)
|
|
(2,097
|
)
|
||
Fair value at the end of period (Level 3)
|
$
|
4
|
|
|
$
|
154
|
|
|
Estimated
Useful Life
|
|
2018
|
|
2017
|
||||
Computer/office equipment
|
36 months
|
|
$
|
15,107
|
|
|
$
|
15,419
|
|
Capitalized internal-use software
|
36 months
|
|
30,412
|
|
|
24,784
|
|
||
Leasehold improvements
|
Life of lease
|
|
11,761
|
|
|
18,336
|
|
||
Total property, equipment and software, at cost
|
|
|
57,280
|
|
|
58,539
|
|
||
Less accumulated depreciation and amortization
|
|
|
(40,580
|
)
|
|
(34,967
|
)
|
||
Property, equipment and software, net
|
|
|
$
|
16,700
|
|
|
$
|
23,572
|
|
|
|
|
|
|
Outstanding
|
||||||||
|
Type
|
|
Maturity Date
|
|
Weighted Average Interest
Rate at December 31, 2018 |
|
December 31, 2018
|
|
December 31, 2017
|
||||
Debt:
|
|
|
|
|
|
|
|
||||||
ODAST II Series 2018-1
|
Securitization
|
|
April 2022
|
(1)
|
3.8%
|
|
$
|
225,000
|
|
|
$
|
—
|
|
ODAST II Series 2016-1
|
Securitization
|
|
May 2020
|
(2)
|
N/A
|
|
—
|
|
|
250,000
|
|
||
ODART
|
Revolving
|
|
March 2019
|
|
5.1%
|
|
117,664
|
|
|
102,058
|
|
||
RAOD
|
Revolving
|
|
September 2021
|
(3)
|
4.7%
|
|
113,631
|
|
|
86,478
|
|
||
ODAC
|
Revolving
|
|
May 2019
|
(4)
|
N/A
|
|
—
|
|
|
62,350
|
|
||
ODAF
|
Revolving
|
|
February 2020
|
(4)
|
N/A
|
|
—
|
|
|
75,000
|
|
||
ODAF II
|
Revolving
|
|
August 2022
|
(5)
|
5.3%
|
|
109,568
|
|
|
—
|
|
||
PORT II
|
Revolving
|
|
March 2019
|
|
5.0%
|
|
108,816
|
|
|
63,851
|
|
||
LAOD
|
Revolving
|
|
October 2022
|
(6)
|
4.3%
|
|
100,000
|
|
|
—
|
|
||
Corporate Debt
|
Revolving
|
|
January 2019
|
(7)
|
6.8%
|
|
—
|
|
|
8,000
|
|
||
Other Agreements
|
Various
|
|
Various
|
(8)
|
6.0%
|
|
47,318
|
|
|
50,706
|
|
||
|
|
|
|
|
4.7%
|
|
821,997
|
|
|
698,443
|
|
||
Deferred debt issuance cost
|
|
|
|
|
|
|
(5,766
|
)
|
|
(6,189
|
)
|
||
Total Debt
|
|
|
|
|
|
|
$
|
816,231
|
|
|
$
|
692,254
|
|
(1)
|
The period during which new borrowings may be made under this debt facility expires in
March 2020
.
|
(2)
|
In April 2018, we issued
$225 million
of debt in a new ODAST II securitization transaction (Series 2018-1) and the net proceeds were used, together with other available funds, to voluntarily prepay in full all
$250 million
of the prior Series 2016-1 Notes.
|
(3)
|
The period during which new borrowings of Class A revolving loans may be made under this debt facility expires in
December 2020
.
|
(4)
|
This debt facility was voluntarily repaid in full and terminated in August 2018.
|
(5)
|
The period during which new borrowings may be made under this debt facility expires in
August 2021
.
|
(6)
|
The period during which new borrowings may be made under this debt facility expires in
April 2022
.
|
(7)
|
In January 2019, we voluntarily prepaid in full and terminated the Square 1 Agreement which had a
$30 million
borrowing capacity. In January 2019 we established a new revolving debt facility with a commitment amount of
$85 million
and an interest rate of 1-month LIBOR plus
3.0%
and a final maturity date of January 2021, see Note 15, "Subsequent Events" of Notes to Consolidated Financial Statements for additional information.
|
(8)
|
Maturity dates range from
January 2020
through
June 2021
.
|
2019
|
$
|
243,730
|
|
2020
|
108,760
|
|
|
2021
|
221,259
|
|
|
2022
|
248,248
|
|
|
Thereafter
|
—
|
|
|
Total
|
$
|
821,997
|
|
|
2018
|
|
2017
|
||||
Deferred tax assets relating to:
|
|
|
|
||||
Net operating loss carryforwards
|
$
|
4,104
|
|
|
$
|
20,476
|
|
Loan loss reserve
|
33,691
|
|
|
27,186
|
|
||
Deferred compensation
|
5,839
|
|
|
—
|
|
||
Imputed interest income
|
415
|
|
|
424
|
|
||
Deferred rent
|
1,207
|
|
|
1,892
|
|
||
Unrealized loss
|
545
|
|
|
—
|
|
||
Miscellaneous items
|
613
|
|
|
45
|
|
||
Total gross deferred tax assets
|
46,414
|
|
|
50,023
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property, equipment and software
|
3,151
|
|
|
8,154
|
|
||
Origination costs
|
5,685
|
|
|
4,078
|
|
||
Miscellaneous items
|
—
|
|
|
40
|
|
||
Total gross deferred tax liabilities
|
8,836
|
|
|
12,272
|
|
||
Net deferred tax asset
|
37,578
|
|
|
37,751
|
|
||
Less: valuation allowance
|
(37,578
|
)
|
|
(37,751
|
)
|
||
Net deferred tax asset less valuation allowance
|
$
|
—
|
|
|
$
|
—
|
|
|
2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
:
|
|
|
|
|
|
|
|
||||||||
Servicing assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Interest rate cap
|
—
|
|
|
1,253
|
|
|
—
|
|
|
1,253
|
|
||||
Total assets
|
$
|
—
|
|
|
$
|
1,253
|
|
|
$
|
4
|
|
|
$
|
1,257
|
|
|
2017
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
:
|
|
|
|
|
|
|
|
||||||||
Servicing assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
154
|
|
|
$
|
154
|
|
Total assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
154
|
|
|
$
|
154
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
|
Servicing Assets
|
||||||
Default rate assumption:
|
|
|
|
||||
Default rate increase of 25%
|
$
|
(1
|
)
|
|
$
|
(40
|
)
|
Default rate increase of 50%
|
$
|
(2
|
)
|
|
$
|
(76
|
)
|
Cost to service assumption:
|
|
|
|
||||
Cost to service increase by 25%
|
$
|
(2
|
)
|
|
$
|
(63
|
)
|
Cost to service increase by 50%
|
$
|
(4
|
)
|
|
$
|
(126
|
)
|
|
December 31, 2018
|
||||||||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
Assets
:
|
|
|
|
|
|
|
|
|
|
||||||||||
Loans held for investment, net
|
$
|
1,029,117
|
|
|
$
|
1,155,464
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,155,464
|
|
Total assets
|
$
|
1,029,117
|
|
|
$
|
1,155,464
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,155,464
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed-rate debt
|
$
|
232,972
|
|
|
$
|
226,965
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226,965
|
|
Total fixed-rate debt
|
$
|
232,972
|
|
|
$
|
226,965
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226,965
|
|
|
December 31, 2017
|
||||||||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
Assets
:
|
|
|
|
|
|
|
|
|
|
||||||||||
Loans held for investment, net
|
$
|
843,781
|
|
|
$
|
932,343
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
932,343
|
|
Total assets
|
$
|
843,781
|
|
|
$
|
932,343
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
932,343
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed-rate debt
|
$
|
300,706
|
|
|
$
|
293,512
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
293,512
|
|
Total fixed-rate debt
|
$
|
300,706
|
|
|
$
|
293,512
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
293,512
|
|
|
2018
|
|
2017
|
|
2016
|
Risk-free interest rate
|
2.82% - 3.13 %
|
|
2.32% - 2.42 %
|
|
1.40% - 2.54 %
|
Expected term (years)
|
5.3
|
|
5
|
|
5.0 - 6.0
|
Expected volatility
|
35% - 37%
|
|
42% - 44%
|
|
46% - 54%
|
Dividend yield
|
—%
|
|
—%
|
|
—%
|
Weighted-average grant date fair value per share
|
$2.12
|
|
$1.66
|
|
$2.65
|
|
Number of
Options |
|
Weighted-
Average Exercise Price |
|
Weighted-
Average Remaining Contractual Term (in years) |
|
Aggregate
Intrinsic Value (in thousands) |
||||||
Outstanding at January 1, 2018
|
7,918,853
|
|
|
$
|
5.75
|
|
|
—
|
|
|
—
|
|
|
Granted
|
1,171,180
|
|
|
$
|
5.69
|
|
|
—
|
|
|
—
|
|
|
Exercised
|
(559,664
|
)
|
|
$
|
0.96
|
|
|
—
|
|
|
—
|
|
|
Forfeited
|
(375,187
|
)
|
|
$
|
7.37
|
|
|
—
|
|
|
—
|
|
|
Expired
|
(222,400
|
)
|
|
$
|
10.80
|
|
|
—
|
|
|
—
|
|
|
Outstanding at December 31, 2018
|
7,932,782
|
|
|
$
|
5.86
|
|
|
5.4
|
|
|
$
|
16,097
|
|
Exercisable at December 31, 2018
|
6,418,213
|
|
|
$
|
5.82
|
|
|
4.7
|
|
|
$
|
15,467
|
|
Vested or expected to vest as of December 31, 2018
|
7,847,599
|
|
|
$
|
5.86
|
|
|
5.4
|
|
|
$
|
16,057
|
|
|
Number of RSUs
|
|
Weighted-Average Grant Date Fair Value
|
|||
Unvested at January 1, 2018
|
3,342,640
|
|
|
$
|
6.18
|
|
RSUs and PRSUs granted
|
1,671,806
|
|
|
$
|
6.02
|
|
RSUs and PRSUs vested
|
(1,012,569
|
)
|
|
$
|
6.58
|
|
RSUs and PRSUs forfeited/expired
|
(694,316
|
)
|
|
$
|
6.06
|
|
Unvested at December 31, 2018
|
3,307,561
|
|
|
$
|
6.00
|
|
Expected to vest after December 31, 2018
|
2,666,471
|
|
|
$
|
6.03
|
|
|
2018
|
|
2017
|
|
2016
|
|||
Risk-free interest rate
|
2.10
|
%
|
|
1.17
|
%
|
|
0.39
|
%
|
Expected term (years)
|
0.50
|
|
|
0.50
|
|
|
0.50
|
|
Expected volatility
|
47
|
%
|
|
37
|
%
|
|
52
|
%
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
2018
|
|
2017
|
|
2016
|
||||||
Sales and marketing
|
$
|
2,012
|
|
|
$
|
2,429
|
|
|
$
|
4,002
|
|
Technology and analytics
|
2,647
|
|
|
2,300
|
|
|
3,422
|
|
|||
Processing and servicing
|
385
|
|
|
483
|
|
|
869
|
|
|||
General and administrative
|
6,775
|
|
|
7,303
|
|
|
7,622
|
|
|||
Total
|
$
|
11,819
|
|
|
$
|
12,515
|
|
|
$
|
15,915
|
|
Derivative Type
|
|
Classification
|
|
December 31, 2018
|
||
Assets:
|
|
|
|
|
||
Interest rate cap agreement
|
|
Other Assets
|
|
$
|
1,253
|
|
|
|
2018
|
||
Amount Recognized in OCI on Derivative:
|
|
|
||
Interest rate cap agreement
|
|
$
|
456
|
|
|
|
Location and Amount of Gain or (Loss) Recognized in Income on Cash Flow Hedging Relationships
|
||
|
|
2018
|
||
|
|
Interest Income (Expense)
|
||
|
|
|
||
Total amounts of expense line items presented in the statement of financial performance in which the effects of cash flow hedges are recorded
|
|
$
|
(16
|
)
|
For the years ending December 31,
|
|
||
2019
|
$
|
6,416
|
|
2020
|
6,615
|
|
|
2021
|
6,481
|
|
|
2022
|
6,153
|
|
|
2023
|
5,342
|
|
|
Thereafter
|
17,511
|
|
|
Total
|
$
|
48,518
|
|
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||
Gross revenue
|
109,480
|
|
|
102,999
|
|
|
95,618
|
|
|
90,280
|
|
|
87,741
|
|
|
83,666
|
|
|
86,651
|
|
|
92,892
|
|
Net revenue
|
58,396
|
|
|
52,169
|
|
|
50,080
|
|
|
42,114
|
|
|
42,040
|
|
|
32,719
|
|
|
41,984
|
|
|
35,082
|
|
Net income (loss)
|
13,436
|
|
|
9,497
|
|
|
4,774
|
|
|
(2,436
|
)
|
|
4,358
|
|
|
(4,532
|
)
|
|
(2,569
|
)
|
|
(11,602
|
)
|
Net income (loss) attributable to On Deck Capital, Inc. common stockholders
|
14,040
|
|
|
9,770
|
|
|
5,790
|
|
|
(1,918
|
)
|
|
5,096
|
|
|
(4,074
|
)
|
|
(1,498
|
)
|
|
(11,058
|
)
|
Net income (loss) per share attributable to On Deck Capital, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
0.19
|
|
|
0.13
|
|
|
0.08
|
|
|
(0.03
|
)
|
|
0.07
|
|
|
(0.06
|
)
|
|
(0.02
|
)
|
|
(0.15
|
)
|
Diluted
|
0.18
|
|
|
0.12
|
|
|
0.07
|
|
|
(0.03
|
)
|
|
0.07
|
|
|
(0.06
|
)
|
|
(0.02
|
)
|
|
(0.15
|
)
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
•
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accounting Fees and Services
|
|
On Deck Capital, Inc.
|
|
|
|
/s/ Kenneth A. Brause
|
|
Kenneth A. Brause
Chief Financial Officer
(Principal Financial Officer)
|
Date: March 1, 2019
|
|
|
|
|
/s/ Nicholas Sinigaglia
|
|
Nicholas Sinigaglia
Chief Accounting Officer ( Principal Accounting Officer ) |
Date: March 1, 2019
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Noah Breslow
|
|
Chief Executive Officer and
Director (Principal Executive
Officer)
|
|
March 1, 2019
|
Noah Breslow
|
|
|
|
|
|
|
|
|
|
/s/ Kenneth A. Brause
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
March 1, 2019
|
Kenneth A. Brause
|
|
|
|
|
|
|
|
|
|
/s/ Nicholas Sinigaglia
|
|
Chief Accounting Officer
(Principal Accounting Officer)
|
|
March 1, 2019
|
Nicholas Sinigaglia
|
|
|
|
|
|
|
|
|
|
/s/ Chandra Dhandapani
|
|
Director
|
|
March 1, 2019
|
Chandra Dhandapani
|
|
|
|
|
|
|
|
|
|
/s/ Daniel Henson
|
|
Director
|
|
March 1, 2019
|
Daniel Henson
|
|
|
|
|
|
|
|
|
|
/s/ Bruce P. Nolop
|
|
Director
|
|
March 1, 2019
|
Bruce P. Nolop
|
|
|
|
|
|
|
|
|
|
/s/ Manolo Sánchez
|
|
Director
|
|
March 1, 2019
|
Manolo Sánchez
|
|
|
|
|
|
|
|
|
|
/s/ Jane J. Thompson
|
|
Director
|
|
March 1, 2019
|
Jane J. Thompson
|
|
|
|
|
|
|
|
|
|
/s/ Ronald F. Verni
|
|
Director
|
|
March 1, 2019
|
Ronald F. Verni
|
|
|
|
|
|
|
|
|
|
/s/ Neil E. Wolfson
|
|
Director
|
|
March 1, 2019
|
Neil E. Wolfson
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
Filed /
Incorporated by
Reference from
Form *
|
|
Incorporated
by Reference
from Exhibit
Number
|
|
Date Filed
|
|
|
8-K
|
|
3.1
|
|
12/22/2014
|
||
|
|
10-Q
|
|
3.2
|
|
11/6/2018
|
||
|
|
S-1
|
|
4.1
|
|
11/10/2014
|
||
|
|
S-1
|
|
4.6
|
|
11/10/2014
|
||
|
|
S-1
|
|
10.1
|
|
11/10/2014
|
||
|
|
S-1
|
|
10.2
|
|
11/10/2014
|
||
|
|
S-1/A
|
|
10.3
|
|
12/4/2014
|
||
|
|
Filed herewith (1)
|
|
|
|
|
||
|
|
S-1
|
|
10.5
|
|
11/10/2014
|
||
|
|
Filed herewith.
|
|
|
|
|
||
|
|
S-1
|
|
10.7
|
|
11/10/2014
|
||
|
|
10-Q
|
|
10.1
|
|
11/7/2017
|
||
|
|
10-Q
|
|
10.2
|
|
11/7/2017
|
||
|
|
8-K
|
|
10.1
|
|
9/21/2016
|
||
|
|
S-1
|
|
10.12
|
|
11/10/2014
|
||
|
|
10-K
|
|
10.21
|
|
3/10/2015
|
||
|
|
10-Q
|
|
10.1
|
|
5/8/2018
|
||
|
|
10-Q
|
|
10.2
|
|
5/9/2017
|
||
|
|
S-1
|
|
10.15
|
|
11/10/2014
|
||
|
|
|
10-Q
|
|
10.2
|
|
8/9/2016
|
|
|
|
|
|
|
|
|
|
|
|
10-K
|
|
10.19
|
|
3/3/2016
|
||
|
|
S-1
|
|
10.20
|
|
11/10/2014
|
||
|
|
Filed herewith.
|
|
|
|
|
||
|
|
10-K
|
|
10.23
|
|
3/2/2017
|
||
|
|
10-K
|
|
10.24
|
|
3/2/2017
|
||
|
|
10-K
|
|
10.25
|
|
3/2/2017
|
||
|
|
Filed herewith.
|
|
|
|
|
||
|
|
10-K
|
|
10.26
|
|
3/2/2017
|
||
|
|
Filed herewith.
|
|
|
|
|
||
|
|
10-Q
|
|
10.2
|
|
5/8/2018
|
||
|
|
10-Q
|
|
10.3
|
|
5/8/2018
|
||
|
|
10-Q
|
|
10.4
|
|
5/8/2018
|
|
|
10-Q
|
|
10.1
|
|
8/7/2018
|
||
|
|
10-Q
|
|
10.2
|
|
8/7/2018
|
||
|
|
10-Q
|
|
10.3
|
|
8/7/2018
|
||
|
|
10-Q
|
|
10.1
|
|
11/6/2018
|
||
|
|
Filed herewith.
|
|
|
|
|
||
|
|
Filed herewith.
|
|
|
|
|
||
|
|
Filed herewith.
|
|
|
|
|
||
|
|
Filed herewith.
|
|
|
|
|
||
|
|
Filed herewith.
|
|
|
|
|
||
|
|
Filed herewith.
|
|
|
|
|
||
101.INS
|
|
XBRL Instance Document
|
|
Filed herewith.
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
Filed herewith.
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
Filed herewith.
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
Filed herewith.
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
|
Filed herewith.
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
Filed herewith.
|
|
|
|
|
*
|
All exhibits incorporated by reference to the Registrant's Form S-1 or S-1/A registration statements relate to Registration No. 333-200043
|
+
|
Indicates a management contract or compensatory plan.
|
(1)
|
The 2014 Employee Stock Purchase Plan is filed herewith solely to correct certain administrative errors and replaces the version filed with the Registrant's Form S-1/A registration statement filed on December 4, 2014.
|
18.
|
Adjustments, Dissolution, Liquidation, Merger or Change in Control
.
|
1.
|
CASH RETAINERS
|
Chairperson of Audit Committee:
|
$18,750
|
Chairperson of Compensation Committee:
|
$15,000
|
Chairperson of Risk Management Committee:
|
$15,000
|
Chairperson of Corporate Governance and Nominating Committee:
|
$10,000
|
Member of Audit Committee:
|
$10,000
|
Member of Compensation Committee:
|
$7,500
|
Member of Risk Management Committee:
|
$7,500
|
Member of Corporate Governance and Nominating Committee:
|
$5,000
|
2.
|
EQUITY COMPENSATION
|
3.
|
TRAVEL EXPENSES
|
4.
|
ADDITIONAL PROVISIONS
|
5.
|
REVISIONS
|
|
|
Page
|
|
Section 1.
|
DEFINITIONS AND INTERPRETATION
|
1
|
|
1.1
|
|
Definitions..............................................................................................
|
1
|
1.2
|
|
Accounting Terms.................................................................................
|
38
|
1.3
|
|
Interpretation, etc.................................................................................
|
39
|
1.4
|
|
Amendment and Restatement.............................................................
|
39
|
Section 2.
|
LOANS
|
39
|
|
2.1
|
|
Revolving Loans...................................................................................
|
39
|
2.2
|
|
Pro Rata Shares....................................................................................
|
42
|
2.3
|
|
Use of Proceeds.....................................................................................
|
42
|
2.4
|
|
Evidence of Debt; Register; Lenders' Books and Records; Notes...
|
42
|
2.5
|
|
Interest on Loans..................................................................................
|
44
|
2.6
|
|
Reserved.................................................................................................
|
44
|
2.7
|
|
Fees.........................................................................................................
|
44
|
2.8
|
|
Repayment on or Before Applicable Maturity Date.........................
|
45
|
2.9
|
|
Voluntary Commitment Reductions...................................................
|
45
|
2.10
|
|
Borrowing Base Deficiency..................................................................
|
46
|
2.11
|
|
Controlled Accounts.............................................................................
|
46
|
2.12
|
|
Application of Proceeds.......................................................................
|
50
|
2.13
|
|
General Provisions Regarding Payments...........................................
|
53
|
2.14
|
|
Ratable Sharing....................................................................................
|
53
|
2.15
|
|
Increased Costs; Capital Adequacy....................................................
|
54
|
2.16
|
|
Taxes; Withholding, etc........................................................................
|
56
|
2.17
|
|
Obligation to Mitigate..........................................................................
|
58
|
2.18
|
|
Defaulting Lenders...............................................................................
|
59
|
2.19
|
|
Removal or Replacement of a Lender................................................
|
60
|
2.20
|
|
The Paying Agent.................................................................................
|
60
|
2.21
|
|
Duties of Paying Agent.........................................................................
|
65
|
2.22
|
|
Collateral Agent....................................................................................
|
68
|
2.23
|
|
Intention of Parties...............................................................................
|
69
|
Section 3.
|
CONDITIONS PRECEDENT
|
69
|
|
3.1
|
|
Conditions Precedent to Effectiveness of the Existing Credit
|
69
|
|
Agreement.............................................................................................
|
|
|
3.2
|
|
Conditions Precedent to Effectiveness of the Amended and
|
69
|
|
Restated Credit Agreement.................................................................
|
|
|
3.3
|
|
Conditions to Each Credit Extension.................................................
|
70
|
Section 4.
|
REPRESENTATIONS AND WARRANTIES
|
72
|
|
4.1
|
|
Organization; Requisite Power and Authority; Qualification;
|
72
|
|
Other Names.........................................................................................
|
|
|
4.2
|
|
Capital Stock and Ownership.............................................................
|
72
|
4.3
|
|
Due Authorization................................................................................
|
72
|
4.4
|
|
No Conflict............................................................................................
|
72
|
4.5
|
|
Governmental Consents......................................................................
|
73
|
4.6
|
|
Binding Obligation.............................................................................
|
73
|
4.7
|
|
Eligible Receivables.............................................................................
|
73
|
4.8
|
|
Historical Financial Statements..........................................................
|
73
|
4.9
|
|
No Material Adverse Effect.................................................................
|
73
|
4.10
|
|
Adverse Proceedings, etc.....................................................................
|
73
|
4.11
|
|
Payment of Taxes..................................................................................
|
74
|
4.12
|
|
Title to Assets........................................................................................
|
74
|
4.13
|
|
No Indebtedness....................................................................................
|
74
|
4.14
|
|
No Defaults............................................................................................
|
74
|
4.15
|
|
Material Contracts...............................................................................
|
74
|
4.16
|
|
Government Contracts........................................................................
|
74
|
4.17
|
|
Governmental Regulation....................................................................
|
74
|
4.18
|
|
Margin Stock........................................................................................
|
74
|
4.19
|
|
Employee Benefit Plans.......................................................................
|
75
|
4.20
|
|
Solvency; Fraudulent Conveyance.....................................................
|
75
|
4.21
|
|
Compliance with Statutes, etc.............................................................
|
75
|
4.22
|
|
Matters Pertaining to Related Agreements........................................
|
75
|
4.23
|
|
Disclosure..............................................................................................
|
75
|
4.24
|
|
Patriot Act.............................................................................................
|
76
|
4.25
|
|
Remittance of Collections....................................................................
|
76
|
4.26
|
|
Tax Status..............................................................................................
|
76
|
4.27
|
|
Beneficial Ownership...........................................................................
|
76
|
SECTION 5.
|
AFFIRMATIVE COVENANTS.........................................................
|
76
|
|
5.1
|
|
Financial Statements and Other Reports...........................................
|
77
|
5.2
|
|
Existence................................................................................................
|
79
|
5.3
|
|
Payment of Taxes and Claims.............................................................
|
80
|
5.4
|
|
Insurance...............................................................................................
|
80
|
5.5
|
|
Inspections; Compliance Audits..........................................................
|
80
|
5.6
|
|
Compliance with Laws.........................................................................
|
81
|
5.7
|
|
Separateness..........................................................................................
|
81
|
5.8
|
|
Further Assurances..............................................................................
|
81
|
5.9
|
|
Communication with Accountants......................................................
|
81
|
5.10
|
|
Acquisition of Receivables from Holdings.........................................
|
82
|
5.11
|
|
Class B Revolving Lenders Information Rights................................
|
82
|
5.12
|
|
Level 2 Performance Covenant...........................................................
|
82
|
SECTION 6.
|
NEGATIVE COVENANTS.................................................................
|
82
|
|
6.1
|
|
Indebtedness.........................................................................................
|
82
|
6.2
|
|
Liens......................................................................................................
|
83
|
6.3
|
|
Reserved................................................................................................
|
83
|
6.4
|
|
No Further Negative Pledges..............................................................
|
83
|
6.5
|
|
Restricted Junior Payments................................................................
|
83
|
6.6
|
|
Subsidiaries...........................................................................................
|
83
|
6.7
|
|
Investments...........................................................................................
|
83
|
6.8
|
|
Fundamental Changes; Disposition of Assets; Acquisitions.............
|
83
|
6.9
|
|
Sales and Lease-Backs.........................................................................
|
84
|
6.10
|
|
Transactions with Shareholders and Affiliates..................................
|
84
|
6.11
|
|
Conduct of Business.............................................................................
|
84
|
6.12
|
|
Fiscal Year.............................................................................................
|
84
|
6.13
|
|
Servicer; Backup Servicer; Custodian..............................................
|
84
|
6.14
|
|
Acquisitions of Receivables.................................................................
|
84
|
6.15
|
|
Independent Manager..........................................................................
|
84
|
6.16
|
|
Organizational Agreements.................................................................
|
86
|
6.17
|
|
Changes in Underwriting or Other Policies.......................................
|
86
|
6.18
|
|
Receivable Program Agreements........................................................
|
87
|
SECTION 7.
|
EVENTS OF DEFAULT......................................................................
|
87
|
|
7.1
|
|
Events of Default..................................................................................
|
87
|
SECTION 8
|
AGENTS...............................................................................................
|
91
|
|
8.1
|
|
Appointment of Agents........................................................................
|
91
|
8.2
|
|
Powers and Duties................................................................................
|
91
|
8.3
|
|
General Immunity................................................................................
|
92
|
8.4
|
|
Agents Entitled to Act as Lender........................................................
|
93
|
8.5
|
|
Lenders' Representations, Warranties and Acknowledgment.........
|
93
|
8.6
|
|
Right to Indemnity...............................................................................
|
93
|
8.7
|
|
Successor Administrative Agent and Collateral Agent.....................
|
94
|
8.8
|
|
Collateral Documents...........................................................................
|
96
|
SECTION 9.
|
MISCELLANEOUS.............................................................................
|
97
|
|
9.1
|
|
Notices...................................................................................................
|
97
|
9.2
|
|
Expenses................................................................................................
|
97
|
9.3
|
|
Indemnity..............................................................................................
|
98
|
9.4
|
|
Reserved................................................................................................
|
99
|
9.5
|
|
Amendments and Waivers...................................................................
|
99
|
9.6
|
|
Successors and Assigns; Participations..............................................
|
101
|
9.7
|
|
Independence of Covenants.................................................................
|
104
|
9.8
|
|
Survival of Representations, Warranties and Agreements...............
|
105
|
9.9
|
|
No Waiver; Remedies Cumulative......................................................
|
105
|
9.10
|
|
Marshalling; Payments Set Aside.......................................................
|
105
|
9.11
|
|
Severability............................................................................................
|
105
|
9.12
|
|
Obligations Several; Actions in Concert............................................
|
105
|
9.13
|
|
Headings................................................................................................
|
106
|
9.14
|
|
APPLICABLE LAW............................................................................
|
106
|
9.15
|
|
CONSENT TO JURISDICTION........................................................
|
106
|
9.16
|
|
WAIVER OF JURY TRIAL................................................................
|
107
|
9.17
|
|
Confidentiality......................................................................................
|
107
|
9.18
|
|
Usury Savings Clause...........................................................................
|
108
|
9.19
|
|
Counterparts.........................................................................................
|
109
|
9.20
|
|
Effectiveness..........................................................................................
|
109
|
9.21
|
|
Patriot Act.............................................................................................
|
109
|
By:
|
/s/ Kenneth A. Brause
|
By:
|
/s/ Kyle Shenton
|
By:
|
/s/ Kyle Shenton
|
By:
|
/s/ Katie Jordan
|
By:
|
/s/ Ronald G. Romano, Jr.
|
Borrower:
|
On Deck Capital, Inc.
|
Address:
|
1400 Broadway, 25th Floor
|
|
New York, New York 10018
|
|
|
Guarantor:
|
ODWS, LLC
|
Address:
|
1400 Broadway, 25th Floor
|
|
New York, New York 10018
|
|
|
Guarantor:
|
ODX, LLC
|
Address:
|
1400 Broadway, 25th Floor
|
|
New York, New York 10018
|
(Section 6.1):
|
January 26, 2019.
|
Borrower:
ON DECK CAPITAL, INC.
By
/s/ Kenneth A. Brause
Title
Chief Financial Officer
|
Lender:
PACIFIC WESTERN BANK
By
/s/ John Wroton
Title
Senior Vice President
|
Guarantor:
ODWS, LLC
By
/s/ Kenneth A. Brause
Title
Officer
|
|
Guarantor:
ODX, LLC
By
/s/ Cory Kampfer
Title
Officer
|
|
Name
|
|
Jurisdiction
|
On Deck Asset Company, LLC
|
|
Delaware
|
On Deck Capital Australia PTY LTD
(1)
|
|
Australia
|
OnDeck Account Receivables Trust 2013-1 LLC
|
|
Delaware
|
Prime OnDeck Receivable Trust II, LLC
|
|
Delaware
|
Receivable Assets of OnDeck, LLC
|
|
Delaware
|
OnDeck Asset Securitization Trust II LLC
|
|
Delaware
|
OnDeck Asset Funding I LLC
|
|
Delaware
|
OnDeck Asset Funding II LLC
|
|
Delaware
|
Small Business Asset Fund II LLC
|
|
Delaware
|
Loan Assets of OnDeck, LLC
|
|
Delaware
|
OnDeck Funding Trust No. 1
|
|
Australia
|
OnDeck Funding Trust No. 2
|
|
Australia
|
1.
|
Registration Statement (Form S-8 No. 333-200998) of On Deck Capital, Inc.
|
2.
|
Registration Statement (Form S-8 No. 333-209938) of On Deck Capital, Inc.
|
3.
|
Registration Statement (Form S-8 No. 333-216801) of On Deck Capital, Inc.
|
1.
|
I have reviewed this Annual Report on Form 10-K of On Deck Capital, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/s/ Noah Breslow
|
|
Noah Breslow
Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of On Deck Capital, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/s/ Kenneth A. Brause
|
|
Kenneth A. Brause
Chief Financial Officer
|
|
/s/ Noah Breslow
|
|
Noah Breslow
Chief Executive Officer
|
|
/s/ Kenneth A. Brause
|
|
Kenneth A. Brause
Chief Financial Officer
|