OnDeck (ONDK 8.46, +1.74, +25.89%) is trading higher after the company beat
estimates on the top and bottom line for the fourth consecutive quarter this
The online lender for small businesses reported a third quarter adjusted net profit of $0.17/share versus a $0.01/share adjusted net loss last year. Origination volume was an all-time high of $648 mln, up 22% yr/yr and 10% sequentially, with growth in term loans and lines of credit.
Originations increased across all segments and all geographies, driven by increased volume -- the average term loan size of $56K was largely unchanged.
Gross revenue increased 23% to $103.0 mln, beating estimates by 5%, driven by higher Interest income due to portfolio growth and higher yields.
The Effective Interest Yield was up 40 basis points sequentially and 340 basis points yr/yr to 36.5%, reflecting improved pricing and portfolio performance. As a result, the net interest margin expanded 400 basis points yr/yr and 90 basis points sequentially to 32.9%.
Meanwhile, credit quality was stable. The provision for loan losses was flat yr/yr while the delinquency rate improved.
OnDeck also raised its 2018 outlook. The company increased fiscal 2018 gross revenue to $392-396 mln from $380-386 mln and adjusted net income to $40-44 mln from $30-36 mln.
OnDeck provided a positive outlook for next year as well. Assuming the macroeconomic environment remains favorable, “OnDeck expects current operating trends to extend into 2019 with ongoing strength in originations resulting in low double-digit loan growth, a stable net interest margin as higher market interest rates mitigate lower borrowing spreads, and a stable annual efficiency ratio as positive operating leverage in the U.S. lending business offsets ~$15 mln of incremental investment in strategic growth initiatives including ODX( a cloud lending platform for bank clients.)”
"We are pleased to report excellent third quarter results highlighted by record origination volume, improved margins and stable credit quality, all of which culminated in record profitability," said Noah Breslow, chief executive officer, OnDeck. "We continued to improve our funding profile and advanced our strategic initiatives including our recent launch of ODX, our platform-as-a-service business, and announcement of PNC as ODX's second major bank client. We surpassed $10 bln of cumulative originations, we are on track to announce our next lending product before year-end, we are investing in the future and business momentum is strong."
At $7/share, the online lender has a ~$550 mln market capitalization and trades at ~13x EPS, or ~2x book value.
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