Sie sind auf Seite 1von 26

One Year Price Chart

January 12, 2015

On Deck Capital, Inc.


ONDK NYSE
Buy
Financial Technology

Initiation of Coverage
Initiating Coverage of On Deck Capital, Inc. (ONDK) with a Buy Rating
We believe OnDeck represents an attractive growth opportunity as its revolutionary online lending platform transforms SMB
lending. Relative to traditional bank competitors, OnDeck offers an "Uber-like" experience that SMBs value more than price. With
growing brand recognition and key strategic partnerships driving accelerating origination growth, we believe OnDeck can enjoy
years of substantial profit growth before competitors start to catch up. While skeptics point to the rich valuation and significant
macro risk, we discount the probability of a near-term recession, and in the meantime we think OnDeck should materially exceed
today's high expectations. Accordingly, we rate the shares Buy with a $28 target price based on 20x our 2017 EBITDA estimate.
Changes

We believe OnDeck has revolutionized SMB lending and despite significant balance
sheet risk and a rich valuation, we are bullish due to the unique growth opportunity.
Admittedly, to seasoned, specialty finance analysts, OnDeck appears to be an
all-too-familiar story that has rarely had a happy ending. From Advanta to Countrywide,
we have covered many high-flying lenders that were quickly reduced to bankruptcy after
stretching for growth and underestimating credit problems that led to a deadly liquidity
squeeze.
However, we firmly believe OnDeck is truly different because unlike many in the Spec Fin
graveyard, OnDeck brings Uber-like innovation to a grossly overlooked sector. For SMBs,
bank loans are not only hard to get (~50% approval rate), but incredibly time consuming
(average 26 hours), inconvenient (limited branch hours), and slow (average 4-6 weeks).
With OnDeck, the busy entrepreneur can privately apply online anytime, get a decision in
15 minutes, and even receive funding same day.
This transformational experience is powered by true innovation: successfully automating
SMB underwriting down to just a 7% loss rate. OnDecks fifth generation credit model
includes 10,000+ raw inputs from 100 data sources. The model is continuously improving
and with new strategic partnerships now including valuable underwriting data (Intuit,
merchant acquirers), we believe OnDeck's credit models should only get better post-IPO.

Rating
Target Price
FY14E EPS (Cash)
FY15E EPS (Cash)
FY14E Revenue
FY15E Revenue

Current

Buy
$28.00
$(0.16)
$(0.22)
$155.4
$246.5

Price (01/09/15):
$22.69
52-Week Range:
$29 $21
Market Cap.(mm):
1,731.2
Shr.O/S-Diluted (mm):
76.3
Avg Daily Vol (3 Mo):
NA
Dividend($ / %)
$0.00 / 0.0%
S&P Index
2,044.81
Note: 52-week range since shares began
trading 12/17/14.
EPS (Cash)

2013A

2014E

2015E

Q1

$(0.13) $(0.12)A

$(0.08)

Q2

(0.11)

0.03A

(0.06)

Q3

(0.06)

0.02A

(0.04)

Q4

(0.06)

(0.09)

(0.04)

$(0.36)A

$(0.16)

$(0.22)

Revenue

2013A

2014E

2015E

FY Dec

$65.2A

$155.4

$246.5

FY Dec

With such low losses and 40+% effective yields, OnDeck has considerable risk-adjusted
margins that drive impressive returns as the business scales. OnDeck's loans are also
short (4-5 month duration) which sharply reduces credit risk and with early detection,
OnDeck remains profitable even in our recession scenario.

Previous

Still, investing in SMB loans is higher risk, but we share management's confidence as
OnDeck has built an entire culture around leveraging data to underwrite credit and we
believe it has just scratched the surface of its lending opportunity. With our current EPS
estimates relatively conservative, we see significant upside potential to both earnings and
the stock (see bull scenario). Accordingly, we rate the shares Buy.

Christopher C. Brendler, CFA


John Davis
Stifel Equity Trading Desk

ccbrendler@stifel.com
davisj@stifel.com

(443) 224-1303
(443) 224-1265
(800) 424-8870

Stifel does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision.

All relevant disclosures and certifications appear on pages 25 - 26 of this report.

On Deck Capital, Inc. (ONDK)

January 12, 2015

Company Overview
OnDeck is a leading online platform for small business lending. Small and
medium-size businesses (SMBs) apply online, get approved in minutes, and get
funding as fast as same day. OnDeck launched in 2007 and has now originated
more than $1.7 billion in loans and collected more than 4.4 million payments.
OnDecks approach is unique with SMB loans that are shorter term (10-11
months) than most banks and lower cost than traditional short-term SMB
alternatives like merchant cash advances (MCAs). The company recently
launched a second major product (line of credit) that provides more flexibility for
the companys higher quality borrowers.

Investment Rationale
Despite a somewhat speculative valuation (stock closed 13.5%% above IPO
price vs. 1.6% gain in the S&P), we believe OnDeck has a unique growth
opportunity within the fin tech sector. In our view, the companys easy-to-use
online platform coupled with next-gen underwriting models position the company
to take the previously underserved SMB lending market by storm. Although
banks have major competitive advantages in scale, funding, and distribution,
ingenuity and innovation have been regulated away post-crisis, leaving SMBs
with even fewer options. While the success of OnDeck and the leading P2P
lender is attracting attract competing tech-enabled competitors, we believe
OnDecks first mover advantage and relentless reinvestment in its data-driven
underwriting models will help OnDeck maintain its wide lead over the medium
term. Indeed, we see significant growth ahead and with OnDeck keeping most
loans (75%) on balance sheet, it should generate rapid earnings growth as the
company scales. While the downside is significant credit and funding risk, we
believe the tremendous growth opportunity outweighs credit/funding concerns at
least in the current benign credit environment. As such, we are initiating
coverage of OnDeck with a Buy rating and a $28 target price based on 20x our
2017 EBITDA estimate.

Positives
Next-gen underwriting key competitive advantage. OnDeck uses traditional
data like daily bank account transaction history and credit reports as well as nontraditional data sources like Yelp reviews to predict credit quality and ferret out
fraud. Unlike many traditional SMB lenders, OnDeck focuses heavily on
borrowers business and its relative financial health rather than personal credit.
OnDecks fifth generation credit model and proprietary OnDeck Score now
includes more than 10,000 raw inputs from over 100 data sources and can score
99% of applicants. With each successive improvement, OnDeck can now slice
credit 2x better than FICO and has yielded stable, predictable losses (6%-8%) in
every quarterly vintage since the recession..

Page 2

On Deck Capital, Inc. (ONDK)

January 12, 2015

Figure 1: OnDeck Score

Source: Company reports

Substantial growth opportunity. Despite supposed political and regulatory


support, SMB lending is still a significantly underserved market. For banks,
SMBs are often not worth the effort due to the smaller loan sizes and expensive
manual underwriting and with rising regulatory requirements, small loans are a
shrinking part of banks balance sheets. For the borrower, bank loans are
incredibly time consuming and inefficient, taking an average of 26 hours of the
SMBs precious time despite only a 50% approval rate and 4-6 weeks to close.
Nonbank alternatives are often exceedingly expensive with short-term options
such as MCAs often carrying effective APRs well above 100%.
For many of the 28mm small businesses in the U.S., this is simply not worth it
and SMBs too often fall back on personal credit (cards, home equity) or chose
not to even try to get the capital they need to grow their businesses. OnDeck
believes there is $80B-$120B of unmet demand for SMB loans/lines of credit on
top of the $178B currently outstanding. With less than $0.5B on balance sheet
today, we see massive potential for OnDecks revolutionary solution and note
than even in our bull case scenario, OnDecks loan portfolio grows to $3.4B by
2020, just 1% market share.

Figure 2: SMB Market Opportunity

Source: Company reports

Page 3

On Deck Capital, Inc. (ONDK)

January 12, 2015

OnDecks Uber-like experience. Small business owners are busy running their
respective businesses, and spending time going back and forth with the bank is
antiquated and incredibly inconvenient. OnDecks easy-to-use online platform
allows the business owner to privately apply for a loan online, 24 hours a day,
and get a decision in a little as 15 minutes.
For the roughly two-thirds of
applicants that are auto-scored with no manual underwriting, many qualify for
same day funding a transformational improvement relative to legacy
competitors.
Willing to pay for this convenience. Importantly, unlike many Internet
disruptors from Amazon and Xoom, OnDeck is about convenience, not price.
Indeed, for the vast majority of customers, they only apply to OnDeck since its
so convenient. This accessibility comes at a price, however, with effective APRs
that make OnDecks interest rates look egregious and predatory (often over
50%). However, APR is not the right calculation as rates are exaggerated by the
short duration of the loans (4-5 months). Rather, short-term SMB lending
products are typically priced on a cents on dollar basis. While OnDecks rates
are still very expensive relative to banks (4%-15% APRs), its customers are
clearly willing to pay for the convenience as evidenced by the companys rising
repeat business (loans/customer now over 2.0) and impressive Net Promoter
Score (71). We also note that this is not because borrowers are unaware of the
high APRs since OnDecks disclosure is clear and upfront about its pricing.

Figure 3: Clear Disclosure Right on Its Homepage

Source: Company website

Short duration, daily collection reduces risk through cycle. With such high
effective APRs, OnDeck appears to be taking excessive risk especially since,
unlike many alt-lending peers, the company keeps most loans (and credit risk) on
balance sheet. Credit risk is also magnified by sourcing loans online, which
tends to be a riskier channel (easy to loan shop, fraud).
OnDeck mitigates these risks not only through sophisticated, data-driven
underwriting, but also with product design and collections. On the product side,
OnDeck reduces SMB lending risk by only offering short-term loans (3-24
months) with an average term of 10-11 months. Combined with daily ACH

Page 4

On Deck Capital, Inc. (ONDK)

January 12, 2015

collection on its loans (straight from the borrowers business checking account
that was used to underwrite the loan), OnDeck gets timely early warnings on
repayment issues and can respond quicker than traditional competitors. This
served the company well during the 2008-2009 recession as losses remained
below 10% despite unprecedented economic conditions.
Unparalleled resilience. When specialty finance companies fail, it is almost
always because unforeseen credit problems choke off funding due to shrinking
excess spread in the warehouse lines and securitizations. While OnDeck is
relying on the same wholesale funding, we believe its model is structurally
superior. With massive 40+% excess spreads (50+% yields, sub-10% losses)
and short loan durations, we expect OnDeck to retain access to funding in all but
the harshest loss scenarios (~25%). We note that in our more modest recession
scenario, OnDeck remains profitable and well capitalized even as losses spike to
nearly 20%.

Figure 4: OnDeck Remains Profitable Even In Recession Scenario


Net Charge-offs
20.0%

17.5%

Adjusted EPS
$0.80

Base
Bull
Recession

$0.60

15.0%

Base
Bull
Recession

$0.40

12.5%
10.0%

$0.20
7.5%
$0.00

5.0%

-$0.20

Note: Excludes $0.62 tax benefit from DTA reversal expected in 2Q17

Source: Company reports and Stifel estimates

OnDeck is not a bank. Given the significant regulatory headaches that come
with a bank charter, we view the companys non-bank status as a significant
positive and competitive advantage. Although bank deposits are clearly a more
secure source of funding, we expect OnDeck to SMB focused non-bank lenders
have long escaped regulatory scrutiny and we do not expect this to change
anytime soon (the C in CFPB stands for consumer). More importantly, regulators
have become increasingly involved with bank underwriting processes under
Dodd-Frank and we think it is increasingly difficult for banks to follow OnDecks
lead in nontraditional, data-driven underwriting.
Growing, sustainable lead. Although banks should at some point catch up and
there are already a host of start-ups targeting SMBs, we believe OnDeck has a
substantial lead with over 7 years of SMB lending experience and continuous
reinvestment in its underwriting models. While a major P2P player recently
started offering SMB loans, it only has 9 months of data so it will be starting slow
and targeting much higher quality borrowers. The SMB market is not only highly
fragmented with plenty of room for more competition (just 1% market share in our
2020 bull case), these borrowers are also hard to reach and we believe
OnDecks growth could accelerate with key partnerships and growing brand
recognition. Combined, we are quite bullish on origination growth and see new
loan generation topping $10B in our 2020 bull case scenario.

Page 5

On Deck Capital, Inc. (ONDK)

January 12, 2015

Concerns
OnDeck is a wholesale-funded, balance-sheet lender in a high risk
segment. History has not been kind to fast-growing lending start-ups as too
many lost sight of credit quality in a quest for maintaining rapid growth. Just in
our career, we have numerous examples including Providian, Countrywide, and
New Century of lenders that were different only to watch a spectacular collapse.
Unlike traditional Internet/fin tech companies, securitization-funded lenders cant
afford to get it wrong because credit mistakes can quickly turn into liquidity
problems as funding tightens up. This often starts a downward spiral as funding
issues force slower origination growth and without fresh loans, credit problems
accelerate. We truly believe OnDeck is different with an entire culture built
around credit and a structurally superior product strategy, but it is a riskier
funding model that may be better off as part of a bank long term.
Growth can obscure true credit performance. With originations growing
almost 100% year over year, traditional credit metrics like delinquencies and
charge-offs are understated as rapidly growing originations of new loans dilute
portfolio metrics. While this is less of a concern for OnDeck given the shorter
duration, SMB loans are lumpier and more sensitive to macro shocks than
consumer products and the asset class is very much unproven (OnDeck did first
securitization). Fortunately, we have found securitization data more reliable in
providing accurate and timely credit metrics and management has indicated it
expects to be making this data public at least quarterly. While it would certainly
be better to have full monthly details around key metrics like delinquencies,
payment rates, and excess spreads, at some point the master trust will grow
enough to warrant public registration (currently 144A).
Funding sources could dry up if credit turns. OnDeck currently has three
different funding sources including warehouse lines (30%), securitizations (57%),
and marketplace (13%). While all are widely available now with credit losses near
historical lows, OnDecks funding is not guaranteed and could be reduced or
even pulled if the economic and/or credit environment were to significantly
worsen. Marketplace is the least reliable source of funding as investors can pull
out at any time and for any reason and will likely be the first funding source to dry
up if credit were to turn. While marketplace only makes up 13% of funding today,
management hopes to increase this channel to 25% by the end of 2015.
Additionally, while bank warehouse lines are committed facilities, covenants and
financial triggers are tight so banks can generally reduce or terminate them if
certain credit covenants/metrics are not met or if the bank decides to reduce its
overall credit exposure. Finally, the companys recently executed securitization
provides the most secure source of funding but still relies on investor appetite,
which could fall sharply if credit turned.
Business model unproven through credit cycle. Although OnDeck has the
often-rare benefit of surviving a tough macro cycle and even produced fairly
impressive credit results during the Great Recession, the company was in its
infancy and has yet to be truly tested through a credit cycle. The behavior of
SMB credit can be volatile and somewhat unpredictable during times of
economic stress. OnDeck has had the good fortune of growing up the past few
years when credit losses have been near historical lows, but the true metal of the
platform and business model will be how it performs when times get tough and to
date that really remains to be seen.
Rich valuation for a lender. OnDeck currently trades at nearly 18x our 2017
EBITDA estimate, not cheap especially for a finance company with balance sheet
risk. In our view, the current valuation reflects not only the current growth rate but
also the tremendous market opportunity that lies ahead. That said, any misstep
along the way could result in a sharp correction/revaluation, and the risk of
owning a stock with such lofty expectations and in turn valuation should not be
overlooked or minimized.

Page 6

On Deck Capital, Inc. (ONDK)

January 12, 2015

Given the rapid, tech-driven growth, we also looked at valuation relative to


internet and similar fin tech peers and compared revenue growth to current
EV/EBITDA multiples. Although we had to use OnDecks 2017 estimate, the
companys current 16.2x EBITDA multiple does not look too far out of line
compared to other fast growing Internet peers. Admittedly, while none of these
companies take credit risk and there should be an inherent discount, we note that
ADS continues to enjoy a rich valuation despite significant consumer credit and
funding risk.

Figure 5: Revenue Growth vs. EV/EBITDA

Revenue Growth vs EV/EBITDA


% Revenue Growth (2016)

60

ONDK 2017

50

TWTR

40

YELP

FB

30

LNKD

SSTK
XOOM

20

TRUE

GRUB

EBAY
10

FLT

ADS

10

15

20

25

30

EV/EBITDA (2016)
Source: FactSet

Scenario Analysis
With the combination of compelling growth potential and significant macro risk, a
key part of our Buy rating is our constructive view of both the upside potential
and perhaps more importantly, OnDecks ability to withstand a significant
recession. In addition to our base earnings forecast, we have built full Bull Case
and Recession scenarios to get a more complete picture of OnDecks potential.
For the Bull Case, we use the following key assumptions:
1.

Stronger origination growth, reaching $5.5B in 2017, up from $4.5B

2.

Higher top line yields less assumed pricing pressure, 39.7% vs. 37.7%

3.

Limited operating leverage despite faster revenue growth, opex 44.5%


vs. .44.6% as faster growth requires significant opex investments

4.

No change to credit provisioning, constant at 6% of originations

Despite relatively conservative assumptions (3&4), our optimistic model produces


much stronger profit growth with 2020 EPS of $2.92 vs. $1.89 base and $407M
in adjusted EBITDA (vs. $264M). Importantly, due to short duration, the loan
book only reaches $3.4B (1% market share) and our model suggests OnDeck
would not need to raise additional capital to fund this growth.

Page 7

On Deck Capital, Inc. (ONDK)

January 12, 2015

Figure 6: Significant Upside Potential in Bull Case Scenario


Quarterly Originations

Gross Revenue
400,000

4,000

Base
Bull

3,000

Recession

Thousands

300,000

Base Case
Bull Case

Recession

2,000

200,000

100,000

1,000

Source: Company reports and Stifel estimates

Perhaps even more importantly, OnDeck performs admirably in our recession


scenario. Although 2017 EPS drops to just $0.03 (vs. $0.61), earnings growth
rebounds quickly as we would expect higher margins on higher quality growth
post-recession. Again, thanks to the short duration, we would expect the portfolio
to turn over in just a year and by 2020 EPS power should back to base case
estimates.
For the Recession Case, we use the following key assumptions:
1.

Starting in 1Q17, the economy starts to deteriorate rapidly driving


OnDeck credit losses up to nearly 20% by 4Q17.

2.

OnDeck responds by pulling back on origination growth down to just 5%


by 4Q17 vs. 45% in the base case

3.

Reduced origination and tighter credit raise top line yields, up to 41.9%
from 37.1% base case

4.

OnDeck pulls back on expenses especially marketing but lower


revenues drive opex higher 41% vs. 40% base.

5.

OnDeck recovers quickly since it can quickly adjust underwriting and


portfolio turns in just 6 months so very profitable post-recession amid
lack of competition.

Page 8

On Deck Capital, Inc. (ONDK)

January 12, 2015

Key Investment Themes


Recession-Resistant Business Model
OnDeck has a higher risk strategy, but we see many reasons to be optimistic this
company is built to survive. It of course starts with revolutionary data-driven
underwriting but models can break down and often at the worst time recession.
We do admit there is a risk OnDeck gets it wrong, but we also see a business
model that is structurally better protected against credit disasters for several
reasons. First and foremost these are short term loans averaging 10 months
with 5 month durations so in less than two quarters, OnDeck already has half its
principal back. More importantly, with such short loans, OnDeck can quickly
learn from its mistakes and make model corrections.
Second, OnDeck has an unparalleled early-warning system to spot problem
loans before credit issues spiral out of control. OnDeck the only lender we have
ever known in almost 17 years covering this sector that requires daily ACH
payments and collections effort start after just three missed payments.
Moreover, OnDeck underwriting models continue to monitor the portfolio
companies after origination and can spot credit stress even before the first
missed payment. Combined with constant model improvement, OnDeck should
always be well ahead of the credit curve especially relative to its competitors.
Third and most importantly, OnDecks loans are priced to more than account for
the high risk. With massive 40+% excess spreads (50+% yields, sub-10%
losses) and short loan durations, we expect OnDeck to retain access to funding
in all but the harshest loss scenarios. We note that losses would have to over
20% for a sustainable period before OnDeck would default on its warehouse
lines and the securitization has even higher thresholds. As such, although a
recession or other credit event would be nasty for the stock, we would expect
OnDeck to survive and then thrive in the post-recession carnage.
Strong Consistent Credit Performance
In our view, OnDecks biggest accomplishment has been its impressive track
record underwriting SMB loans. Unlike many of its newly formed competitors,
OnDeck started providing loans before the 2008-09 recession with impressive
results. Indeed, despite mostly third party originations (broker) in the formative
years, the 2008 vintage had cumulative losses under 10% and losses have been
lower in every cohort since. OnDecks impressive track record and sophisticated
underwriting helped the company complete the first securitization in this new
sector.

Page 9

On Deck Capital, Inc. (ONDK)

January 12, 2015

Figure 7: Net Charge-offs by Cohort


10.0%

8.0%

6.0%

4.0%

2.0%

0.0%
2007

2008

2009

2010

2011

2012

2013

2014

Source: Company reports

Continuous Improvement Adds To Differentiation


More importantly, we expect OnDecks underwriting models to only get better.
The company is highly committed to leveraging new sources of data to improve
its ability to predict losses and recently launched its fifth generation model. V5.0
can automatically score almost every app received (99%, up from 65% just two
years ago) and now uses over 100 data sources and up to 10,000 raw attributes,
up from 300-400 in 2012. With another year of rapid growth and innovation
(originations + 171% YTD), OnDeck has now processed over 4.4M customer
payments only adding to its ability to model credit. Moreover, although OnDeck
has only just started to leverage social data (mostly fraud detection), it is building
a massive database of indicators just as reviews, check-ins, and +1s. We
expect OnDecks sixth generation model next year to represent another
substantial leap forward, not only improving its ability to score and predict credit,
but also further expand its ability to approve and price a wider range of
borrowers.

True Innovation and Virtuous Circle Drive Long-Term Potential


With continuously improving models on an ever-growing database, we think
OnDeck has a sustainable competitive advantage. Although OnDecks success
has spawned a host of alt-lender competitors, we think they will struggle to match
OnDecks scale and data advantage. Longer term, we expect consolidation as
banks are clearly the better platform given not only their stable deposit funding
and SMB relationships, but also data advantage. We note that some of
OnDecks most predictive data are the daily inflows and outflows of the SMBs
business checking accounts. One SMB lending start up told us that 80% of its
customers had business checking account with a top 10 bank.
Additionally, iterative, data-driven underwriting should only get better as OnDeck
adds new data sources like merchant acquiring data. As the model improves,
we expect OnDeck to grow its credit spectrum, especially in longer-term, lower
yielding but also lower loss term loans to higher quality borrowers. As OnDeck
takes advantage of its substantial head start, we believe its underwriting
advantage should prove sustainable.

Page 10

On Deck Capital, Inc. (ONDK)

January 12, 2015

Figure 8: OnDeck Scores Proven Results

Source: Company reports

Improving Channel Mix; Deemphasizing Brokers


SMBs are notoriously hard to reach so historically OnDeck relied heavily on
expensive broker channels to help source loans. However, while brokers can
provide easy access to these SMBs, not only is distribution through brokers
expensive, but the lack of control over the customer experience adds to renewal,
credit, and reputation risk.
Fortunately, OnDeck has been increasingly
diversifying away from brokers as increased scale and brand recognition have
led to successful strategic partnerships with traditional SMB service providers.
These newer partnerships with merchant acquirers as well as banks are ideal as
both have not only SMB access, but also often include valuable underwriting
data.
While funding advisors (brokers) and strategic partnerships remain important
channels for OnDeck, its fastest growing channel today is Direct. Importantly,
OnDeck leverages technology not just for underwriting but for marketing as it is
currently tracking over 10mm SMBs for preapprovals. This SMB database allows
OnDeck to directly target SMBs through mail offers and, coupled with national
radio and television campaigns, connect OnDeck directly with business owners.
With higher repeat business, stronger credit performance, and most importantly
no profit sharing with brokers/partners, Direct is OnDecks most profitable
channel and it will be even more so as the business scales.

Figure 9: OnDeck Acquisition Channels Shifting

Source: Company reports

Page 11

On Deck Capital, Inc. (ONDK)

January 12, 2015

Pricing Attractive Even at 50% APR


SMB loans have traditionally been quoted on a cents per dollar basis where
borrower pays a fixed amount per dollar borrowed. Given the often short-term
nature of the loans, this can make APRs look extraordinarily high (over 50%)
when annualized. Despite these high rates, SMBs still benefit as loans pay for
themselves quickly by driving revenue growth. Typical uses include hiring, buying
inventory, marketing, and expansion. Although we expect pricing and yield to
trend lower over time due to a higher percentage of cheaper direct loans (no
broker mark-up) coupled with the ramp of the newer credit line product, we do
not expect competition or regulation to put pressure on top-line yields.
Repeat Business Key Profit Driver
OnDeck customer retention is a key indicator of success as the majority of
borrowers borrow again with an average of more than two loans per customer.
Repeat loans are available at 50% pay down and are significantly more profitable
as the company has already paid to acquire the customer. Despite obvious risks,
repeat loans have lower losses as well as higher profits. In our view, the
companys ability to continue to drive loans per acquired customer higher will not
only increase top-line growth but also boosts operating leverage imbedded in
OnDecks business model, allowing it to scale faster.

Figure 10: Estimated Customer Lifetime Value

1. Based on upfront commissions and direct marketing expenses


2. Contribution is interest and fees less acquisition, 3rd third party processing, servicing, funding, and credit costs.
Source: Company reports

Traditional Specialty Finance Funding Sources


OnDeck uses traditional funding sources including warehouse lines and
securitization. OnDecks first securitization transaction in 2Q14 created a new
ABS category, and a competitor has now followed OnDecks lead. While it still
early and the asset class needs a lot more history before ratings can increase
(currently BBB), we expect better execution on its next securitization, likely mid2015. OnDeck is also starting to sell more loan production to broaden liquidity,
from 13% in 3Q14 growing to an estimated 25% by the end of 2015. Still, we
expect OnDeck to become a major securitization issuer and attract at least one
additional rating agency to DBRS on its next deal. With a master trust structure
to help control duration and reduce issuance costs and a growing track record of
strong excess spread, we expect securitization to power improving funding costs
over time.

Page 12

On Deck Capital, Inc. (ONDK)

January 12, 2015

Figure 11: Securitization Lowers Funding Costs, Maintains High NIM

NIM
15.0%

40%

12.0%

30%

9.0%

20%

6.0%

10%

3.0%

0%

0.0%
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14E
1Q15E
2Q15E
3Q15E
4Q15E
1Q16E
2Q16E
3Q16E
4Q16E
1Q17E
2Q17E
3Q17E
4Q17E

50%

NIM

Yield

Cost of Funds

Source: Company data and Stifel estimates

More Risk = More Return


While balance sheet risk will undoubtedly weigh on valuation relative to its P2P
competitor, holding loans is significantly more profitable than selling. We estimate
unit economics of holding the risk (managed model) vs. selling (serviced model)
is more than twice as profitable. In addition, although OnDecks rapid growth and
balance sheet strategy normally would require a capital raise to fund growth, we
estimate that OnDeck would not need additional capital in either or bull or
recession scenarios because its loans are so short (limiting balance sheet
growth) and profitable (equity builds fast).

Figure 12: On Balance Sheet Loans More Than Twice As Profitable

Origination costs
Origination fee
Purchase proceeds
Interest income
Funding costs
Principal losses
Servicing fee
Unit contribution

Managed
($7)
$2

Serviced
($7)
$2
$8

$24
($3)
($7)
$9

Source: Stifel estimates

Page 13

$1
$4

On Deck Capital, Inc. (ONDK)

January 12, 2015

Estimates and Valuation


Given OnDecks current origination growth (150%+), modeling future earnings
estimates is challenging as there is considerable uncertainty about its ability to
sustain this pace and other key earnings drivers including yield, funding cost,
provisions, and operating leverage . Additionally, GAAP accounting requires the
company to provide for expected losses at the time the loan is originated, making
it very difficult to for the company to earn a GAAP profit until origination growth
slows to a more reasonable level. As such, we do not currently expect OnDeck to
become profitable on a GAAP basis until sometime in 2016 (likely 2Q16 based
on current projections). That said, we expect rapid origination growth to drive
50%+ revenue growth through at least 2017.
Our 2015, 2016, and 2017 EPS estimates are -$0.22, $0.86, and $0.61,
respectively. Importantly, 2016 estimates are boosted by a one-time $0.62
benefit from the DTA reversal. Our revenue estimates of $247mm, $389mm, and
$581mm imply growth of 59%, 58%, and 49%, respectively. Despite earnings
growth muted by high upfront provision expense, top-line growth can accelerate
rapidly especially in our bull case where portfolio growth and scale offsets credit
costs.

Figure 13: Valuation by Scenario, 2017 vs. 2020


Base
Current Market Cap (M)
$1,735

Bull
$1,735

Recession
$1,735

2017E
Originations (000s)
Revenue (M)
Revenue/Origination
Adj EBTDA Margin
Adj EBITDA (M)
EV/EBITDA

$4,541
$581
$0.128
16.8%
$98
17.8x

$5,509
$735
$0.133
19.7%
$145
12.0x

$4,202
$611
$0.145
1.6%
$10
177.9x

2020E
Originations (000s)
Revenue (M)
Adj EBTDA Margin
Adj EBITDA
EV/EBITDA

$7,909
$1,028
25.7%
$264
6.6

$10,680
$1,477
27.6%
$407
4.3

$7,230
$975
27.2%
$265
6.3

Source: Stifel estimates

As a result, we think the valuation looks much more attractive, especially on 2020
bull case estimates. Granted OnDecks extremely rapid growth makes valuation
more art than science and we admit OnDecks current valuation looks expensive
on traditional metrics. However, we believe the growth potential here is so
powerful that OnDeck can easily grow into this valuation noting that OnDeck
currently trades at just 4.1x our bull case 2020 EBITDA estimate. If we were to
use a more growth appropriate 15x multiple and discount it back, it implies ONDK
is worth over $40 per share today even at a steep 15% discount rate. Finally,
although we note that our bull case origination growth is somewhat aggressive,
we have taken a conservative approach to other key drivers such as provision
expense and operating leverage, implying even greater upside potential.

Page 14

On Deck Capital, Inc. (ONDK)

January 12, 2015

Business Model
OnDecks business model is rather simple as the company primarily generates
revenue from interest income, which is derived from the spread between what
OnDeck can charge SMBs it lends to and the cost to borrow those funds from
either a bank (warehouse line) or investors (securitizations). Additionally, the
company generates origination fees as well as gains on sale from loans it
decides not to hold on balance sheet.
The companys major expenses are provision expense and eventually losses
from loans that default as well as cost to acquire the customer (marketing),
investments into the platform and underwriting capabilities (technology), and
processing and servicing the loans.
OnDeck offers two productsa term loan and a line of credit. Term loans make
up over 90% of revenue today as the line of credit product has been rolled out
recently but over time management expects line of credit to contribute more
meaningfully. The differences in the products are highlighted in the table below.

Figure 14: Two Key Products

Source: Company reports

An important distinction of OnDecks business model that differentiates it from


other lenders is its daily or weekly ACH draft collection process. This not only
allows OnDeck to know very early on if a customer is having trouble paying back
the loan or line of credit but also gives the customer an Uber-like experience.

Industry Overview
Although regulators have been pushing to increase banks willingness to lend,
loans to SMBs are still shrinking as a percentage of loans. Banks use an
antiquated underwriting process that is time-consuming and inefficient. On
average, business owners have to apply to three banks, require approximately
26 hours of time, and are approved less than 50% of the time.

Page 15

On Deck Capital, Inc. (ONDK)

January 12, 2015

Figure 15: SMBs Underserved

Source: Company reports

Despite banks failure to serve SMBs, there arent many alternatives. Merchant
cash advances (MCA) take a cut of credit card receipts but are very expensive
with effective APRs over 100%. SMBs often are forced to use personal lending
products such as credit cards/home equity.
OnDeck fills the gap with reasonably priced short-term loans that undercut MCAs
but are much easier to obtain than a bank loan. OnDecks proprietary credit
engine aggregates and analyzes thousands of data points from unique, disparate
data sources to assess the creditworthiness of small businesses rapidly and
more accurately than traditional underwriting. An entire application can be done
online in minutes and funded as soon as next day. This quick simple process is
a huge competitive advantage over banks that SMBs are willing to pay for.
Additionally, powered by the Internet, we believe OnDeck has just scratched the
surface of the huge SMB lending opportunity. With 28mm SMBs, it is hard to
estimate unmet loan demand, but we conservatively estimate OnDeck can grow
originations at least 50% per year through 2017 and likely longer.

Page 16

On Deck Capital, Inc. (ONDK)

January 12, 2015

Figure 16: Company Management

OnDeck Capital, Inc.


Officers
Noah Breslow
Chief Executive Officer

Howard Katzenberg
Chief Financial Officer

James Hobson
Chief Operating Officer

Noah Breslow is the chief executive officer at OnDeck. As OnDecks first employee, Mr. Breslow has held a variety
of leadership roles since the companys 2006 inception and became CEO in June of 2012. During his tenure as CEO,
OnDeck has been named to the Inc. 500 | 5000 List of the Fastest Growing Companies in America three years in a
row. To date, OnDeck has delivered over $1.5 billion to small businesses nationwide. Previously, Mr. Breslow was
VP of Marketing & Product Management for Tacit Networks, guiding the company from initial launch to its
successful sale to a public company. He holds a bachelors degree in computer science from MIT and an MBA with
distinction from Harvard Business School.

Howard Katzenberg is the chief financial officer at OnDeck. Under his financial leadership since 2008, OnDeck has
grown originations five-fold and increased annual revenues by over 1,000%. During his tenure, Mr. Katzenberg has
also negotiated several equity transactions and structured numerous credit facilities, providing OnDeck with ample
capital to scale its business. Prior to joining OnDeck, Mr. Katzenberg spent several years as a consultant specializing
in strategy, operational ramp, and fundraising for early- to mid-stage companies, including roles within American
Express OPEN, American Express venture capital group, and Swift Financial. Mr. Katzenberg graduated summa cum
laude from Cornell University and holds an MBA from the Wharton School of the University of Pennsylvania.

James Hobson is the chief operating officer at OnDeck, where he manages the day-to-day operations of the
business and provides leadership to OnDecks operations, analytics, credit, risk management, platform solutions,
and business development teams. His career spans a wide array of leadership experience in building and leading
technology-enabled businesses. Most recently, Mr. Hobson served as SVP, Technology Operations for iQor, Inc., a
leading private equity-backed global business process outsourcing company. At iQor he helped build a platform for
commercializing iQors proprietary suite of business applications and managed a global technology team. Prior to
iQor, Mr. Hobson co-founded BuyYourFriendADrink.com, which was sold to LivingSocial in 2009. Earlier in his career,
he was a consultant at McKinsey & Company and worked in the M&A group at AT&T. Mr. Hobson holds a bachelors
degree in economics from Hamilton College and an MBA with high distinction from Harvard Business School, where
he was chosen as a Baker Scholar.

Source: Company website

Investment Risks
OnDecks funding is not guaranteed. The companys funding is provided by
banks and the capital markets, which can be can be fickle especially when times
are tough. If the company is unable to get funding, OnDecks financial results and
health could be significantly adversely impacted.
SMB credit is volatile and losses could exceed estimates. While it is
significantly more profitable to hold the loans on balance sheet and take credit
risk, if the economic environment were to worsen, losses could exceed estimates
and negatively impact the companys results or in extreme cases the ability to
stay in business.
Although OnDeck is not a bank, regulation of SMB lending could change.
While it is significantly more attractive to be a non-bank lender today, if the
regulatory landscape were to change, OnDeck could be forced to become a bank
holding company or at the very least change its practices, which could negatively
impact the company.
Although reliance on brokers has been declining, disreputable behavior
may impact the companys reputation. In using the broker channel, OnDeck
loses the majority of control over the customer experience, and if brokers are

Page 17

On Deck Capital, Inc. (ONDK)

January 12, 2015

disreputable it could hurt the companys reputation and ultimately impact the top
and bottom line.
Competition is increasing and may lead to pricing pressure. Although we do
not see price competition in the market today, over time competition could
intensify and ultimately lead to pricing pressure. Furthermore, if irrational players
enter the market, the companys ability to effectively price risk could be impacted
and adversely impact both OnDecks growth and profitability.

Page 18

On Deck Capital, Inc. (ONDK)

January 12, 2015

Target Price Methodology/Risks


Target Price Methodology
Our $28 target price is based on 20x our 2017 adjusted EBITDA estimate.
Risks
OnDecks funding is not guaranteed. The companys funding is provided by
banks and the capital markets, which can be can be fickle especially when times
are tough. If the company is unable to get funding, OnDecks financial results and
health could be significantly adversely impacted.
SMB credit is volatile and losses could exceed estimates. While it is
significantly more profitable to hold the loans on balance sheet and take credit risk,
if the economic environment were to worsen, losses could exceed estimates and
negatively impact the companys results or in extreme cases the ability to stay in
business.
Although OnDeck is not a bank, regulation of SMB lending could change.
While it is significantly more attractive to be a non-bank lender today, if the
regulatory landscape were to change, OnDeck could be forced to become a bank
holding company or at the very least change its practices, which could negatively
impact the company.
Company Description
On Deck Capital, Inc. (OnDeck) is a leading online platform for small business
lending. OnDeck is seeking to transform small business lending by making it
efficient and convenient for small businesses to access capital. Enabled by the
companys proprietary technology and analytics, OnDeck aggregates and analyzes
thousands of data points from dynamic, disparate data sources to assess the
creditworthiness of small businesses rapidly and accurately. Small businesses can
apply for a term loan or line of credit on OnDecks website in minutes and, using the
companys proprietary OnDeck Score, a funding decision can be made immediately
and funds transferred as fast as the same day. OnDeck has originated more than
$1.7 billion in loans and collected more than 4.4 million customer payments since
the companys first loan in 2007.

Page 19

On Deck Capital, Inc. (ONDK)

January 12, 2015

OnDeck Comps
Market Data
YTD Price
Short
Chg %
Interest %

2016 Rev
Growth

5.9
5.1
2.5
18.0
NM
3.1
0.9
10.3
6.5

26.8
23.6
10.0
14.0
58.6
11.6
56.5
23.0
28.0

9.2
20.5
12.4
17.9
57.8
10.0
10.5
19.2
19.7

16.9
34.2
27.2
30.0
26.4
15.6
19.3
24.1
24.2

3.8
3.5
7.9
4.2
4.1
4.5
6.8
2.2
4.6

12.8
17.5
13.5
12.9
50.3
10.1
11.6
13.5
17.8

-0.4
-1.1
-8.5
12.0
2.4
-3.0
0.2

1.6
7.9
12.9
5.3
15.9
35.4
13.2

37.8
34.3
31.9
65.7
43.3
37.5
41.7

32.2
29.3
28.3
49.3
36.5
29.9
34.3

30.1
55.5
18.4
52.8
62.1
63.5
47.1

8.5
6.8
2.0
6.6
5.4
6.5
6.0

14.3
22.7
12.4
22.7
20.1
26.1
19.7

-0.9
NM
-8.9
-9.4
NM
-4.3
-4.8

1.4
5.3
8.8
8.2
6.0
1.7
20.5

12.1
29.5
19.4
32.2
36.2
18.4
47.5

12.7
19.5
19.3
23.5
32.6
17.8
39.0

15.3
57.1
29.5
32.8
48.5
102.6
29.2

3.0
7.4
3.4
3.7
4.1
1.1
1.0

9.6
22.7
12.5
15.3
27.6
13.2
13.2

-6.0

6.2

27.9

23.5

39.5

4.4

16.2

Price

Fin Tech
Alliance Data Systems Corporation
Envestnet, Inc.
MarketAxess Holdings Inc.
Financial Engines, Inc.
On Deck Capital, Inc.
WEX Inc.
FleetCor Technologies, Inc.
Xoom Corporation
Average

ADS
ENV
MKTX
FNGN
ONDK
WEX
FLT
XOOM

290.75
50.61
71.51
35.45
22.69
98.81
143.55
15.97

18,614
1,738
2,673
1,842
1,501
3,831
12,034
614

1.6
3.0
-0.3
-3.0
1.2
-0.1
-3.5
-8.8
-1.2

High Growth Internet


Facebook, Inc. Class A
LinkedIn Corporation Class A
Pandora Media, Inc.
Twitter, Inc.
Yelp Inc. Class A
Zillow, Inc. Class A
Average

FB
LNKD
P
TWTR
YELP
Z

77.74
227.13
16.31
40.17
56.07
102.72

216,727
28,204
3,394
25,488
4,066
4,177

EBAY
GRUB
AWAY
SSTK
TRUE
AMZN
ZU

55.63
38.25
27.14
62.63
21.25
296.93
22.27

69,113
3,118
2,560
2,219
1,639
137,480
2,791

Average

Valuation

2015 Rev
Growth

Ticker

Marketplaces/E-Commerce
eBay Inc.
GrubHub, Inc.
Homeaway, Inc.
Shutterstock, Inc.
TrueCar, Inc.
Amazon.com, Inc.
Zulily, Inc. Class A

Mkt Cap

Revenue

Covered companies in BOLD


Source: FactSet and Stifel estimates

Page 20

PE
2016
2016
2016E EV/REV EV/EBITDA

On Deck Capital, Inc. (ONDK)


On Deck Capital, Inc. (NYSE: ONDK)

January 12, 2015

$ (0.29)

$ (0.36)

($0.12)

2012

2013

1Q14

$0.03

$0.02

($0.09)

$ (0.16)

($0.08)

($0.06)

($0.04)

($0.04)

$ (0.22)

($0.02)

$0.66

$0.11

$0.11

$ 0.86

$ 0.61

$ 1.26

$ 1.63

$ 1.89

4Q14E

2014E

1Q15E

2Q15E

3Q15E

4Q15E

2015E

1Q16E

2Q16E

3Q16E

4Q16E

2016E

2017E

2018E

2019E

2020E

Figures in 000's unless otherwise noted


Hardcoded
Calculation
Forecast/Assumption
2Q14

3Q14

INCOME STATEMENT
Revenue
Interest Income
Gain on Sales of Loans
Other Revenue
Total Gross Revenue

25,273
370
25,643

62,941
788
1,520
65,249

26,348
1,343
871
28,562

32,864
1,584
1,054
35,502

40,661
1,642
1,206
43,509

43,202
3,498
1,168
47,868

143,075
8,067
4,299
155,441

44,762
5,245
1,500
51,507

48,900
6,489
1,662
57,051

55,577
8,221
1,914
65,713

59,990
10,135
2,104
72,229

209,229
30,091
7,180
246,500

66,593
11,789
2,351
80,734

74,950
14,138
2,673
91,761

84,957
16,240
3,036
104,232

90,234
18,667
3,267
112,168

316,734
60,835
11,327
388,896

468,492
95,282
16,913
580,687

636,016
119,828
22,675
778,519

761,761
143,794
27,167
932,722

839,474
158,173
29,929
1,027,576

Cost of revenue
Provision For Loan Losses
Funding Costs
Cost of Revenue

12,469
8,294
20,763

26,570
13,419
39,989

16,579
4,640
21,219

13,073
3,801
16,874

17,359
4,090
21,449

18,912
5,514
24,426

65,923
18,045
83,968

20,390
5,940
26,331

22,721
6,097
28,817

26,137
6,177
32,314

29,342
7,166
36,509

98,590
25,381
123,971

31,068
7,728
38,796

34,412
8,373
42,785

38,179
8,879
47,058

42,472
10,227
52,699

146,131
35,207
181,338

207,334
50,996
258,330

269,613
68,623
338,236

323,535
83,893
407,428

355,889
94,409
450,298

4,880

25,260

7,343

18,628

22,060

23,442

71,473

25,176

28,234

33,399

35,721

122,530

41,938

48,976

57,174

59,470

207,558

322,357

440,283

525,293

577,278

6,633
5,001
2,919
6,935
21,488

18,095
8,760
5,577
12,169
44,601

6,361
2,909
1,609
3,392
14,271

7,113
3,799
2,084
4,434
17,430

8,325
4,649
2,235
6,142
21,351

12,016
8,114
2,694
7,190
30,013

33,815
19,471
8,622
21,158
83,065

12,121
9,561
2,823
7,604
32,110

13,127
9,933
2,991
8,054
34,105

15,026
11,359
3,284
8,784
38,453

16,096
12,189
3,401
8,972
40,658

56,370
43,043
12,499
33,414
145,326

17,627
13,370
3,586
9,378
43,961

19,662
14,902
3,825
9,947
48,337

21,896
16,649
4,087
10,726
53,358

22,984
17,470
4,130
10,855
55,439

82,169
62,391
15,628
40,907
201,095

111,410
82,862
17,591
47,105
258,968

138,951
100,677
19,463
51,657
310,747

160,757
114,902
20,986
56,172
352,818

173,015
122,497
20,552
57,795
373,858

(16,608)

(19,341)

(6,928)

1,198

709

(6,571)

(11,592)

(6,934)

(5,871)

(5,054)

(4,937)

(22,796)

(2,024)

640

3,816

4,031

6,462

63,389

129,537

172,476

203,421

(89)
(147)
(236)

(1,276)
(3,739)
(5,015)

(157)
(6,632)
(6,789)

(62)
(2,190)
(2,252)

(55)
(300)
(355)

(85)

(359)
(9,122)
(9,481)

(137)

(176)

(206)

(225)

(744)

(216)

(206)

(197)

(188)

(806)

(750)

(969)

(1,219)

(1,469)

(85)

(137)

(176)

(206)

(225)

(744)

(216)

(206)

(197)

(188)

(806)

(750)

(969)

(1,219)

(1,469)

(16,844)
(16,844)

(24,356)
(24,356)

(13,717)
(13,717)

(1,054)
(1,054)

354
354

(6,657)
(6,657)

(21,074)
(21,074)

(7,070)
(7,070)

(6,047)
(6,047)

(5,260)
(5,260)

(5,162)
(5,162)

(23,540)
(23,540)

(2,239)
2,500
(4,739)

434
(47,300)
47,734

3,619
(1,100)
4,719

3,843
(1,500)
5,343

5,656
(47,400)
53,056

62,639
32,572
30,067

128,568
53,998
74,569

171,257
71,928
99,329

201,952
84,820
117,132

Fully Diluted GAAP EPS


Fully Diluted Adjusted EPS

($0.30)
($0.29)

($0.43)
($0.36)

($0.24)
($0.12)

($0.02)
$0.03

$0.01
$0.02

($0.12)
($0.09)

($0.37)
($0.16)

($0.11)
($0.08)

($0.09)
($0.06)

($0.08)
($0.04)

($0.08)
($0.04)

($0.35)
($0.22)

($0.07)
($0.02)

$0.62
$0.66

$0.06
$0.11

$0.07
$0.11

$0.68
$0.86

$0.39
$0.61

$0.96
$1.26

$1.27
$1.63

$1.49
$1.89

Basic Share Count


Fully Diluted Share Count

56,161
66,258

56,161
66,258

56,161
66,258

56,161
66,258

56,161
66,258

57,827
67,925

56,494
66,592

66,258
76,258

66,358
76,358

66,458
76,458

66,558
76,558

64,692
74,712

66,658
76,658

66,758
76,758

66,858
76,858

66,958
76,958

66,758
76,758

67,158
77,158

67,558
77,558

67,958
77,958

68,358
78,358

38.5%
1.5%
7.2%
12.5%
25.9%
19.5%
11.4%
27.0%
83.8%
4.4%
6.0%
1.0%

42.7%
4.2%
2.4%
6.0%
10.8%
27.7%
13.4%
8.5%
18.7%
68.4%
16.8%
4.1%
0.7%

41.2%
4.4%
3.1%
8.4%
9.3%
22.3%
10.2%
5.6%
11.9%
50.0%
7.0%
3.1%
0.8%

41.2%
7.1%
3.1%
5.8%
6.4%
20.0%
10.7%
5.9%
12.5%
49.1%
8.3%
2.5%
1.1%

41.6%
7.1%
2.9%
6.0%
5.4%
19.1%
10.7%
5.1%
14.1%
49.1%
7.3%
2.5%
1.9%

39.3%
6.0%
2.5%
7.0%
6.1%
25.1%
17.0%
5.6%
15.0%
62.7%
6.5%
3.0%
2.7%

41.1%
6.0%
2.8%
6.7%
6.5%
21.8%
12.5%
5.5%
13.6%
53.4%
5.7%
2.7%
1.8%

39.2%
6.3%
3.0%
7.1%
6.2%
23.5%
18.6%
5.5%
14.8%
62.3%
6.3%
3.2%
3.8%

39.9%
6.5%
3.0%
7.0%
5.9%
23.0%
17.4%
5.2%
14.1%
59.8%
6.3%
3.3%
3.7%

40.6%
6.8%
3.0%
6.9%
5.2%
22.9%
17.3%
5.0%
13.4%
58.5%
6.0%
3.3%
3.7%

38.5%
7.0%
3.0%
6.8%
5.2%
22.3%
16.9%
4.7%
12.4%
56.3%
6.0%
3.2%
3.6%

39.1%
6.7%
3.0%
6.9%
5.5%
22.9%
17.5%
5.1%
13.6%
59.0%
6.2%
3.2%
3.7%

38.4%
7.3%
3.0%
6.7%
5.1%
21.8%
16.6%
4.4%
11.6%
54.5%
5.8%
3.2%
3.5%

39.2%
7.5%
3.0%
6.6%
5.1%
21.4%
16.2%
4.2%
10.8%
52.7%
5.5%
3.1%
3.4%

39.8%
7.8%
3.0%
6.5%
4.8%
21.0%
16.0%
3.9%
10.3%
51.2%
5.3%
3.1%
3.3%

37.8%
8.0%
3.0%
6.4%
4.8%
20.5%
15.6%
3.7%
9.7%
49.4%
5.0%
3.0%
3.1%

38.6%
7.7%
3.0%
6.5%
4.9%
21.1%
16.0%
4.0%
10.5%
51.7%
5.4%
3.1%
3.3%

37.7%
8.0%
3.0%
6.2%
4.6%
19.2%
14.3%
3.0%
8.1%
44.6%
5.0%
2.9%
3.0%
52.0%

37.1%
8.0%
3.0%
6.0%
4.5%
17.8%
12.9%
2.5%
6.6%
39.9%
5.1%
2.9%
3.0%
42.0%

36.2%
8.0%
3.0%
6.0%
4.5%
17.2%
12.3%
2.3%
6.0%
37.8%
5.1%
2.9%
3.0%
42.0%

35.4%
8.0%
3.0%
6.0%
4.5%
16.8%
11.9%
2.0%
5.6%
36.4%
5.1%
2.9%
3.0%
42.0%

Adjusted EBITDA and Earnings


Adjusted EBITDA
GAAP Net Income
+ Interest Expense
+ Provision for Income Taxes
+ Depreciation and Amortization
+ Stock-Based Compensation Expense
+ Revaluation on Warrants
Adjusted EBITDA
Adjusted EBITDA margin

(16,844)
89
1,545
244
147
(14,819)
-57.8%

(24,356)
1,276
2,645
438
3,739
(16,258)
-24.9%

(13,717)
157
878
233
6,632
(5,817)
-20.4%

(1,054)
62
877
405
2,190
2,480
7.0%

354
55
1,093
809
300
2,611
6.0%

(6,657)
85
1,418
1,313
(3,840)
-8.0%

(21,074)
359
4,266
2,760
9,122
(4,566)
-2.9%

(7,070)
137
1,649
1,945
(3,339)
-6.5%

(6,047)
176
1,869
2,109
(1,893)
-3.3%

(5,260)
206
2,145
2,448
(461)
-0.7%

(5,162)
225
2,309
2,587
(42)
-0.1%

(23,540)
744
7,971
9,089
(5,735)
-2.3%

(4,739)
216
2,500
2,556
2,836
3,368
4.2%

47,734
206
(47,300)
2,877
3,101
6,618
7.2%

4,719
197
(1,100)
3,238
3,403
10,457
10.0%

5,343
188
(1,500)
3,416
3,491
10,938
9.8%

53,056
806
(47,400)
12,088
12,831
31,381
8.1%

30,067
750
32,572
16,840
17,421
97,650
16.8%

74,569
969
53,998
22,577
23,356
175,469
22.5%

99,329
1,219
71,928
27,049
27,982
227,506
24.4%

117,132
1,469
84,820
29,800
30,827
264,048
25.7%

Adjusted Net Income


GAAP Net Income
+ Stock-Based Compensation Expense
+ Revaluation on Warrants
Adjusted Net Income
Adjusted Net Income Margin

(16,844)
244
147
(16,453)
-64.2%

(24,356)
438
3,739
(20,179)
-30.9%

(13,717)
233
6,632
(6,852)
-24.0%

(1,054)
405
2,190
1,541
4.3%

354
809
300
1,463
3.4%

(6,657)
1,313
(5,343)
-11.2%

(21,074)
2,760
9,122
(9,191)
-5.9%

(7,070)
1,945
(5,125)
-10.0%

(6,047)
2,109
(3,938)
-6.9%

(5,260)
2,448
(2,812)
-4.3%

(5,162)
2,587
(2,576)
-3.6%

(23,540)
9,089
(14,451)
-5.9%

(4,739)
2,836
(1,903)
-2.4%

47,734
3,101
50,834
55.4%

4,719
3,403
8,122
7.8%

5,343
3,491
8,834
7.9%

53,056
12,831
65,887
16.9%

30,067
17,421
47,487
8.2%

74,569
23,356
97,925
12.6%

99,329
27,982
127,311
13.6%

117,132
30,827
147,959
14.4%

(8,176)

(14,320)

(5,073)

(2,032)

(1,160)

(4,849)

(13,113)

(4,524)

(3,559)

(2,810)

(2,771)

(13,664)

(845)

904

3,270

3,383

6,712

45,974

88,996

116,070

133,257

173,247
90,276
65,609
38.5%
66,488
12.5%
7.2%
10.3%

458,917
215,966
147,398
42.7%
124,238
10.8%
6.0%
9.0%

227,350
280,117
256,044
41.2%
199,545
9.3%
8.4%
9.9%

248,067
338,815
319,122
41.2%
236,553
6.4%
5.8%
9.4%

312,889
422,050
391,034
41.6%
304,759
5.4%
6.0%
9.4%

327,151
438,174
440,083
39.3%
359,232
6.1%
7.0%
10.3%

1,115,457
438,174
348,186
41.1%
275,973
6.5%
6.7%
10.3%

369,787
458,476
457,197
39.2%
382,605
6.2%
7.1%
10.8%

424,983
501,931
489,702
39.9%
411,291
5.9%
7.0%
11.0%

500,885
572,493
547,651
40.6%
472,545
5.2%
6.9%
10.9%

576,334
650,227
622,992
38.5%
547,704
5.2%
6.8%
10.7%

1,871,989
650,227
534,433
39.1%
457,850
5.5%
6.9%
10.7%

626,361
711,657
693,465
38.4%
603,056
5.1%
6.7%
10.7%

709,117
792,066
764,933
39.2%
659,434
5.1%
6.6%
10.7%

795,983
886,520
852,911
39.8%
745,440
4.8%
6.5%
10.6%

896,044
996,489
955,678
37.8%
843,944
4.8%
6.4%
10.5%

3,027,504
996,489
820,738
38.6%
717,142
4.9%
6.5%
10.5%

4,541,260
1,460,266
1,241,081
37.7%
1,101,007
4.6%
6.2%
9.7%

5,991,396
1,891,907
1,713,506
37.1%
1,523,951
4.5%
6.0%
9.1%

7,189,675
2,273,184
2,101,583
36.2%
1,869,140
4.5%
6.0%
8.8%

7,908,643
2,504,487
2,374,163
35.4%
2,111,646
4.5%
6.0%
8.8%

Net Revenue
Operating Expenses
Sales and Marketing
Technology and Analytics
Processing and Servicing
General and Administrative
Total Operating Expenses
Operating Income
Other (expense) income
Interest Expense
Other Expenses
Total Other Expenses
Income Before Provision for Income Taxes
Provision for Income Taxes
Net Income / (Loss)

Key Income Statement Assumptions:


Effective Interest Yield on Loan Balance
Gain on Sale of Loans
Other Income as a % of Interest Income and Gain on Sale
Provisions as a % of Originations (Not Sold)
Cost of Funds on Non-Recourse Debt
Sales and Marketing / Revenue
Technology and Analytics / Revenue
Processing and Servicing / Revenue
General and Administrative / Revenue
Total Operating Expense / Revenue
Annualized Cost of Funds on Recourse Debt
Depreciation and Amortization / Revenue
Stock-Based Compensation Expense / Revenue
Tax rate

Free Cash Flow


Key Performance Indicators
Originations
Unpaid principal balance
Average loans
Effective interest yield
Average funding debt outstanding
Cost of funds rate
Provision rate
Reserve ratio
Source: Company data and Stifel estimates

Chris Brendler, CFA 443.224.1303


John Davis 443.224.1265

Page 21

On Deck Capital, Inc. (ONDK)

January 12, 2015

2012
8.9%

2013
7.6%

1Q14
7.2%

2Q14
6.1%

3Q14
5.4%

4Q14E

2014E

1Q15E

2Q15E

3Q15E

4Q15E

2015E

1Q16E

2Q16E

3Q16E

4Q16E

2016E

2017E

2018E

2019E

2020E

BALANCE SHEET
Assets
Cash and Cash Equivalents
Restricted Cash
Unpaid Principal Balance
+ Deferred Asset Value
Gross Loans
- Allowance for Loan Losses
Loans, Net
Loans Held for Sale
Property, Equipment, and Software, Net
Deferred Tax Asset, Net
Deferred Debt Issuance Costs
Other Assets
Total Assets

7,386
9,195
90,276
699
90,975
(9,288)
81,687
4,005
2,440
1,797
106,510

4,670
14,842
215,966
6,555
222,521
(19,443)
203,078
1,423
7,169
2,327
1,941
235,450

22,108
16,868
280,118
9,449
289,567
(27,723)
261,844
2,745
8,338
1,664
2,506
316,074

18,983
15,007
338,815
9,862
348,677
(31,900)
316,777
1,105
11,548
4,838
2,882
371,140

22,642
22,615
422,050
11,341
433,391
(39,756)
393,635
2,653
13,254
5,281
5,927
466,007

160,321
24,459
438,174
8,602
446,776
(44,983)
401,792
2,708
15,473
4,819
6,046
615,617

160,321
24,459
438,174
8,602
446,776
(44,983)
401,792
2,708
15,473
4,819
6,046
615,617

162,234
26,086
458,476
9,142
467,619
(49,471)
418,148
2,818
17,782
3,989
6,166
637,224

154,441
28,487
501,931
9,854
511,784
(55,210)
456,574
3,077
19,928
3,367
6,290
672,164

168,675
34,320
572,493
11,023
583,517
(62,448)
521,069
3,512
22,153
5,400
6,416
761,545

153,044
38,355
650,227
12,240
662,467
(69,858)
592,609
3,994
24,548
4,425
6,544
823,520

153,044
38,355
650,227
12,240
662,467
(69,858)
592,609
3,994
24,548
4,425
6,544
823,520

140,868
41,469
711,657
12,806
724,462
(76,458)
648,005
4,367
27,015
3,694
6,675
872,093

129,543
45,637
792,066
13,339
805,404
(84,838)
720,566
4,856
29,596
49,820
3,145
6,808
989,972

146,571
52,576
886,520
13,897
900,417
(94,284)
806,133
5,433
32,018
53,402
5,234
6,944
1,108,312

135,824
58,359
996,489
14,450
1,010,939
(104,873)
906,066
6,107
34,545
57,446
4,301
7,083
1,209,730

135,824
58,359
996,489
14,450
1,010,939
(104,873)
906,066
6,107
34,545
57,446
4,301
7,083
1,209,730

141,389
86,484
1,460,266
21,126
1,481,392
(142,232)
1,339,159
9,026
44,025
76,329
4,301
7,667
1,708,379

210,297
112,084
1,891,907
27,420
1,919,326
(172,517)
1,746,809
11,773
56,106
76,329
4,301
8,299
2,225,999

323,268
134,735
2,273,184
32,940
2,306,124
(200,646)
2,105,478
14,190
71,504
76,329
4,301
8,983
2,738,788

487,263
148,603
2,504,487
36,284
2,540,771
(220,287)
2,320,484
15,639
91,126
76,329
4,301
9,724
3,153,469

Liabilities, Convertible Preferred & Equity


Accounts Payable
Interest Payable
Debt
Income Tax Payable
Warrant Liability
Accrued Expenses and Other Liabilities
Total Liabilities

1,731
1,173
104,298
707
2,535
110,443

1,161
1,120
203,297
4,446
6,563
216,587

828
957
213,793
11,078
6,778
233,434

1,674
590
265,313
13,272
8,125
288,974

3,936
717
350,204
2,802
10,418
368,077

4,133
774
378,759
2,802
11,564
398,032

4,133
774
378,759
2,802
11,564
398,032

4,339
836
403,950
2,802
12,836
424,764

4,556
903
441,132
2,802
14,248
463,642

4,784
975
531,457
2,802
15,815
555,834

5,023
1,054
593,951
2,802
17,555
620,385

5,023
1,054
593,951
2,802
17,555
620,385

5,275
1,138
642,161
2,802
19,486
670,861

5,538
1,229
706,708
2,802
21,629
737,906

5,815
1,327
814,172
2,802
24,009
848,125

6,106
1,433
903,717
2,802
26,650
940,708

6,106
1,433
903,717
2,802
26,650
940,708

7,422
1,950
1,339,240
2,802
40,456
1,391,870

9,021
2,653
1,735,673
2,802
61,415
1,811,565

10,966
3,609
2,086,434
2,802
93,232
2,197,043

13,329
4,910
2,301,191
2,802
141,533
2,463,765

15+ Day Delinquency Ratio

53,226

118,343

197,948

201,543

218,363

Total Equity

Convertible Preferred

(57,159)

(99,480)

(115,308)

(119,377)

(120,433)

217,585

217,585

212,460

208,523

205,710

203,135

203,135

201,232

252,066

260,188

269,022

269,022

316,509

414,434

541,745

689,704

Total Liabilities, Convertible Preferred & Equity


Check

106,510

235,450

316,074

371,140

466,007

615,617

615,617

637,224

672,164

761,545

823,520

823,520

872,093

989,972

1,108,312

1,209,730

1,209,730

1,708,379

2,225,999

2,738,788

3,153,469

96,298
8,000
(3,226)
106.7%

188,297
15,000
23,309
87.2%

210,793
3,000
93,718
75.3%
16.3%

262,313
3,000
95,438
77.4%
38.5%

347,204
3,000
100,732
82.3%
14.8%

371,259
7,500
220,387
84.7%
16.7%

371,259
7,500
220,387
84.7%

393,950
10,000
215,262
85.9%
14.9%

428,632
12,500
211,325
85.4%
12.1%

516,457
15,000
208,512
90.2%
11.2%

578,951
15,000
205,937
89.0%
10.8%

578,951
15,000
205,937
89.0%

627,161
15,000
204,034
88.1%
10.0%

691,708
15,000
254,868
87.3%
9.6%

799,172
15,000
262,990
90.1%
8.2%

888,717
15,000
271,824
89.2%
7.9%

888,717
15,000
271,824
89.2%

1,324,240
15,000
319,311
90.7%

1,715,673
20,000
417,236
90.7%

2,061,434
25,000
544,547
90.7%

2,271,191
30,000
692,506
90.7%

64,778
65,609
59,823
68,488
2,000
66,488
76,712
4,923

145,978
147,398
134,230
131,838
7,600
124,238
160,732
21,553

248,042
256,044
232,461
208,545
9,000
199,545
275,762
58,514

309,467
319,122
289,311
239,553
3,000
236,553
343,607
94,578

380,433
391,034
355,206
307,759
3,000
304,759
418,574
98,085

430,112
440,083
397,714
364,482
5,250
359,232
540,812
160,560

339,025
348,186
315,425
282,273
6,300
275,973
400,858
106,717

448,325
457,197
409,970
391,355
8,750
382,605
626,421
217,825

480,204
489,702
437,361
422,541
11,250
411,291
654,694
213,293

537,212
547,651
488,821
486,295
13,750
472,545
716,855
209,918

611,360
622,992
556,839
562,704
15,000
547,704
792,532
207,225

524,260
534,433
478,038
469,850
12,000
457,850
702,014
212,285

680,942
693,465
620,307
618,056
15,000
603,056
847,806

751,861
764,933
684,286
674,434
15,000
659,434
931,032

839,293
852,911
763,349
760,440
15,000
745,440
1,049,142

941,505
955,678
856,099
858,944
15,000
843,944
1,159,021

807,392
820,738
734,676
732,142
15,000
717,142
1,000,725

1,222,157
1,241,081
1,117,999
1,116,007
15,000
1,101,007
1,450,507

1,687,376
1,713,506
1,556,536
1,542,951
19,000
1,523,951
1,969,864

2,069,590
2,101,583
1,917,101
1,893,140
24,000
1,869,140
2,462,363

2,338,114
2,374,163
2,168,227
2,140,646
29,000
2,111,646
2,891,521

173,247

458,917
164.9%

248,067
165.5%
9.1%
22,325
9.0%
225,742

312,889
155.9%
26.1%
23,214
7.4%
289,675

327,151
94.8%
4.6%
58,302
17.8%
268,849

1,115,457
143.1%

424,983
71.3%
14.9%
99,836
23.5%
325,147

500,885
60.1%
17.9%
121,799
24.3%
379,086

576,334
76.2%
15.1%
144,790
25.1%
431,544

1,871,989
67.8%

709,117
66.9%
13.2%
188,512
26.6%
520,604

795,983
58.9%
12.2%
209,542
26.3%
586,441

896,044
55.5%
12.6%
233,343
26.0%
662,701

4,541,260
50.0%

5,991,396
31.9%

7,189,675
20.0%

7,908,643
10.0%

450,348
24.1%
1,421,641

626,361
69.4%
8.7%
162,614
26.0%
463,747

3,027,504
61.7%

134,514
12.1%
980,943

369,787
62.7%
13.0%
83,923
22.7%
285,864

794,012
26.2%
2,233,493

1,191,020
26.2%
3,350,239

1,497,849
25.0%
4,493,547

1,797,419
25.0%
5,392,257

1,977,161
25.0%
5,931,482

Memo:
Funding Debt
Corporate Debt
Non-GAAP Equity
Funding debt / Unpaid principal balance
Property, Equipment, and Software, Net Growth Rate (q/q)

Average Balance Sheet


Average Unpaid Principal Balance
Average Gross Loans
Average Net Loans
Average Debt
Average Recourse Debt
Average Non-Recourse Debt
Average Assets
Average Equity (Non-GAAP)
Originations
Total originations
y/y
q/q
Originations sold
% sold
Originations not sold
Unpaid Principal Balance
Beg. Unpaid Principal Balance
+ Originations (Not Sold)
- Net-Charge-Offs
- Principal Paid Down
End. Unpaid Principal Balance
Net-Charge-Offs / Beg. Unpaid Principal Balance (Annualized)
Principal Paid / Beg. Unpaid Principal Balance
Deferred Asset Value
Beg. Deferred Asset Value
+ New Capitalized, Net of Amortized to Gain on Sale
- Amortized to Interest Income
+ Other Adjustments, Net
End. Deferred Asset Value

173,247

18,937
4.1%
439,980

227,350
202.2%
35.3%
30,673
13.5%
196,677

20,145
173,247
(6,844)
(96,272)
90,276

90,276
439,980
(16,415)
(297,876)
215,966

215,966
196,677
(8,300)
(124,226)
280,117

280,117
225,742
(8,895)
(158,149)
338,815

338,815
289,675
(9,502)
(196,937)
422,050

422,050
268,849
(13,686)
(239,039)
438,174

215,966
980,943
(40,383)
(718,351)
438,174

438,174
285,864
(15,903)
(249,659)
458,476

458,476
325,147
(16,982)
(264,711)
501,931

501,931
379,086
(18,899)
(289,625)
572,493

572,493
431,544
(21,932)
(331,878)
650,227

438,174
1,421,641
(73,715)
(1,135,873)
650,227

650,227
463,747
(24,469)
(377,848)
711,657

711,657
520,604
(26,031)
(414,164)
792,066

792,066
586,441
(28,733)
(463,253)
886,520

886,520
662,701
(31,882)
(520,850)
996,489

650,227
2,233,493
(111,116)
(1,776,115)
996,489

996,489
3,350,239
(169,975)
(2,716,487)
1,460,266

1,460,266
4,493,547
(239,328)
(3,822,579)
1,891,907

1,891,907
5,392,257
(295,406)
(4,715,573)
2,273,184

2,273,184
5,931,482
(336,248)
(5,363,931)
2,504,487

-34.0%
-477.9%

-18.2%
-330.0%

-15.4%
-57.5%

-12.7%
-56.5%

-11.2%
-58.1%

-13.0%
-56.6%

-18.7%
-332.6%

-14.5%
-57.0%

-14.8%
-57.7%

-15.1%
-57.7%

-15.3%
-58.0%

-16.8%
-259.2%

-15.1%
-58.1%

-14.6%
-58.2%

-14.5%
-58.5%

-14.4%
-58.8%

-17.1%
-273.2%

-17.1%
-272.6%

-16.4%
-261.8%

-15.6%
-249.2%

-14.8%
-236.0%

895
11,073
(8,574)
(2,696)
698

698
19,765
(17,322)
3,415
6,556

6,556
7,665
(5,572)
801
9,449

9,449
6,765
(6,759)
398
9,853

9,853
8,535
(7,044)
(13)
11,332

11,332
7,170
(9,900)

6,556
30,135
(29,276)
1,186
8,602

8,602
6,992
(6,451)

9,142
7,294
(6,583)

9,854
7,969
(6,799)

11,023
8,492
(7,275)

12,240
8,522
(7,956)

12,806
8,729
(8,196)

13,339
8,961
(8,403)

13,897
9,170
(8,616)

9,142

9,854

11,023

12,240

8,602
30,747
(27,108)
12,240

12,806

13,339

13,897

14,450

12,240
35,381
(33,171)
14,450

14,450
53,247
(46,571)
21,126

21,126
71,738
(65,444)
27,420

27,420
86,086
(80,565)
32,940

32,940
94,695
(91,351)
36,284

71.6%
3.9%

68.8%
3.0%

67.9%
2.9%

80.0%
2.7%

75.0%
2.4%

72.0%
2.2%

69.0%
2.1%

66.0%
2.0%

65.0%
1.8%

64.0%
1.7%

63.0%
1.5%

62.0%
1.4%
32,940

36,284

Amortized to Interest Income as % of Deferred Asset Value (Ex. Deferred Revenue Portion)
New Capitalized, Net / Originations (Not Sold)
End. Deferred Asset Value (Ex. Deferred Revenue Portion)
Asset Quality Analysis
Allowance For Loan Loss
Beg. Allowance
+ Provisions
- Net-Charge-Offs
+ Other
Source: Company data and Stifel estimates

8,602

5,442

7,782

9,819

10,368

12,466

8,602

8,602

9,142

9,854

11,023

12,240

12,240

12,806

13,339

13,897

14,450

14,450

21,126

27,420

10,628
(5,630)
-

9,288
26,570
(16,415)
-

19,443
16,579
(8,300)
-

27,722
13,073
(8,895)
-

31,900
17,359
(9,502)
-

39,757
18,912
(13,686)
-

19,443
65,923
(40,383)
-

44,983
20,390
(15,903)
-

49,471
22,721
(16,982)
-

55,210
26,137
(18,899)
-

62,448
29,342
(21,932)
-

44,983
98,590
(73,715)
-

69,858
31,068
(24,469)
-

76,458
34,412
(26,031)
-

84,838
38,179
(28,733)
-

94,284
42,472
(31,882)
-

69,858
146,131
(111,116)
-

104,873
207,334
(169,975)
-

142,232
269,613
(239,328)
-

Page 22

172,517
200,646
323,535
355,889
(295,406)
(336,248)
Chris Brendler, CFA 443.224.1303
John Davis 443.224.1265

On Deck Capital, Inc. (ONDK)

January 12, 2015

2012
9,288

2013
19,443

1Q14
27,722

2Q14
31,900

3Q14
39,757

4Q14E
44,983

2014E
44,983

1Q15E
49,471

2Q15E
55,210

3Q15E
62,448

4Q15E
69,858

2015E
69,858

1Q16E
76,458

2Q16E
84,838

3Q16E
94,284

4Q16E
104,873

2016E
104,873

2017E
142,232

2018E
172,517

2019E
200,646

2020E
220,287

STATEMENT OF CASH FLOW


Cash Flows from Operating Activity
Net Income / (Loss)
(16,844)
+ Provision for Loan Losses
12,469
+ Depreciation and Amortization
1,545
+ Stock-Based Compensation
229
+ Debt Discount
Preferred Warrant Liability Fair Value Adjustment and Warrant Issuance
524
Common Stock Warrant Issuance
Amortization of Debt Issuance Costs
1,068
Loss / (Gain) on Disposal
in Deferred Tax Asset, Net
in Other Assets
(1,253)
in Accounts Payable
1,430
in Interest Payable
286
in Income Tax Payable
in Accrued Expenses and Other Liabilities
2,228
Originations of Loans Held for Sale
Sales of loans held for sale
Net Cash From Operating Activities
1,682

(24,356)
26,570
2,645
438
959
3,740
45
2,184
(143)
(570)
(53)
4,028
(18,936)
17,514
14,063

(13,717)
16,579
878
233
6,632
667
(565)
(332)
(163)
215
(30,673)
29,351
9,104

(1,054)
13,073
877
404
2,193
815
(375)
846
(367)
1,349
(22,325)
23,965
19,399

353
17,359
1,093
810
302
64
528
774
(3,046)
2,260
128
2,292
(23,214)
21,666
21,369

(6,657)
18,912
1,418
1,313

(7,070)
20,390
1,649
1,945

(6,047)
22,721
1,869
2,109

(5,260)
26,137
2,145
2,448

(5,162)
29,342
2,309
2,587

47,734
34,412
2,877
3,101

4,719
38,179
3,238
3,403

5,343
42,472
3,416
3,491

830

622

(2,033)

975

731

548

(2,089)

934

(121)
207
62
1,272
(83,923)
83,813
19,054

(123)
217
67
1,412
(99,836)
99,577
22,588

(126)
228
72
1,567
(121,799)
121,364
24,743

(128)
239
78
1,740
(144,790)
144,308
31,497

(23,540)
98,590
7,971
9,089
394
(498)
891
279
5,991
(450,348)
449,062
97,881

(4,739)
31,068
2,556
2,836

(119)
197
57
1,146
(58,302)
58,247
16,676

(21,075)
65,923
4,266
2,761
9,127
64
2,472
774
(4,105)
2,970
(345)
5,001
(134,514)
133,229
66,549

(131)
251
84
1,931
(162,614)
162,240
34,215

(49,820)
(133)
264
91
2,143
(188,512)
188,023
40,728

(3,582)
(136)
277
98
2,379
(209,542)
208,966
45,911

(4,044)
(139)
291
106
2,641
(233,343)
232,670
53,836

53,056
146,131
12,088
12,831
125
(57,446)
(539)
1,083
380
9,095
(794,012)
791,899
174,689

30,067
207,334
16,840
17,421
(18,883)
(584)
1,316
517
13,806
(1,191,020)
1,188,102
264,913

74,569
269,613
22,577
23,356
(632)
1,599
703
20,959
(1,497,849)
1,495,102
409,997

99,329
323,535
27,049
27,982
(684)
1,944
956
31,817
(1,797,419)
1,795,002
509,511

117,132
355,889
29,800
30,827
(741)
2,363
1,301
48,301
(1,977,161)
1,975,712
583,424

(1,844)
(3,637)
(268,849)
2,739
239,039
(32,552)

(9,617)
(13,185)
(874,969)
(2,046)
612,377
(287,439)

(1,627)
(3,959)
(285,864)
(541)
249,659
(42,331)

(2,401)
(4,014)
(325,147)
(711)
264,711
(67,563)

(5,833)
(4,370)
(379,086)
(1,170)
289,625
(100,834)

(4,036)
(4,704)
(431,544)
(1,217)
331,878
(109,622)

(13,896)
(17,047)
(1,421,641)
(3,638)
1,135,873
(320,350)

(3,113)
(5,022)
(463,747)
(566)
377,848
(94,600)

(4,168)
(5,458)
(520,604)
(533)
414,164
(116,600)

(6,940)
(5,661)
(586,441)
(558)
463,253
(136,346)

(5,783)
(5,942)
(662,701)
(554)
520,850
(154,129)

(20,004)
(22,084)
(2,233,493)
(2,210)
1,776,115
(501,676)

(28,125)
(26,320)
(3,350,239)
(6,675)
2,716,487
(694,872)

(25,600)
(34,659)
(4,493,547)
(6,294)
3,822,579
(737,522)

(22,651)
(42,446)
(5,392,257)
(5,521)
4,715,573
(747,301)

(13,868)
(49,422)
(5,931,482)
(3,343)
5,363,931
(634,185)

25,191

37,182

90,325

62,494

215,192

48,209

64,547

107,464

89,546

309,766

435,523

396,433

350,761

214,757

End. Allowance

462

Cash Flows from Investing Activity


in Restricted Cash
Purchases of Property, Equipment, and Software
Originations of Loans Held at Amortization Cost
in Deferred Origination Costs
Repayments of Loans at Amortized Cost
Net Cash From Investing Activities

(2,459)
(3,179)
(152,498)
197
98,806
(59,133)

(5,647)
(5,798)
(380,357)
(5,858)
238,253
(159,407)

(2,027)
(2,027)
(167,965)
(2,893)
95,513
(79,399)

1,862
(4,033)
(192,508)
(414)
124,913
(70,180)

(7,608)
(3,487)
(245,648)
(1,478)
152,912
(105,309)

Cash Flows from Financing Activities


Proceeds from Exercise of Stock Options and Warrants
Redemption of Common Stock and Warrants
Proceeds from Issuance of Convertible Preferred
Redemption of Preferred Stock
Proceeds from Common Stock Raise
Proceeds from the Issuance of Notes Payable
Repayment of Notes Payable
Debt Issuance Costs
Net Cash From Financing Activities

24
4,675
166,677
(106,644)
(2,720)
62,012

389
(6,123)
49,717
(6,282)
216,861
(109,862)
(2,071)
142,629

240
77,000
79,298
(68,802)
(4)
87,733

125
261,627
(210,108)
(3,989)
47,655

3,679
87,504
(2,614)
(971)
87,598

153,555

4,044
77,000
125,000
456,984
(281,523)
(4,964)
376,541

25,191

37,182

90,325

62,494

215,192

48,209

64,547

107,464

89,546

309,766

435,523

396,433

350,761

214,757

4,561
2,825
7,386

(2,715)
7,386
4,671

17,438
4,671
22,109

(3,125)
22,109
18,983

3,658
18,983
22,641

137,679
22,641
160,321

155,650
4,671
160,321

1,914
160,321
162,234

(7,793)
162,234
154,441

14,234
154,441
168,675

(15,631)
168,675
153,044

(7,276)
160,321
153,044

(12,176)
153,044
140,868

(11,325)
140,868
129,543

17,028
129,543
146,571

(10,747)
146,571
135,824

(17,220)
153,044
135,824

5,565
135,824
141,389

68,908
141,389
210,297

112,971
210,297
323,268

163,995
323,268
487,263

154.5%

23.3%
167.7%

24.3%
160.9%

22.6%
144.5%

10.0%
106.6%

138.2%

7.6%
80.3%

10.8%
60.7%

15.2%
51.0%

9.9%
50.9%

58.6%

11.8%
56.7%

13.7%
60.8%

13.6%
58.6%

7.6%
55.3%

57.8%

49.3%

34.1%

19.8%

10.2%

Net Change in Cash and Cash Equivalents


Beg. Cash and Cash Equivalents
End Cash and Cash Equivalents
ADDITIONAL FINANCIAL INFO
Gross Revenue Growth
Quarterly
Year over Year

125,000
28,555

% of Revenue
Provision Expense
Funding Costs
Net Revenue Margin
Sales and Marketing
Technology and Analytics
Processing and Servicing
General and Administrative
Total Operating Expense

48.6%
32.3%
19.0%
25.9%
19.5%
11.4%
27.0%
83.8%

40.7%
20.6%
38.7%
27.7%
13.4%
8.5%
18.7%
68.4%

58.0%
16.2%
25.7%
22.3%
10.2%
5.6%
11.9%
50.0%

36.8%
10.7%
52.5%
20.0%
10.7%
5.9%
12.5%
49.1%

39.9%
9.4%
50.7%
19.1%
10.7%
5.1%
14.1%
49.1%

39.5%
11.5%
49.0%
25.1%
17.0%
5.6%
15.0%
62.7%

42.4%
11.6%
46.0%
21.8%
12.5%
5.5%
13.6%
53.4%

39.6%
11.5%
48.9%
23.5%
18.6%
5.5%
14.8%
62.3%

39.8%
10.7%
49.5%
23.0%
17.4%
5.2%
14.1%
59.8%

39.8%
9.4%
50.8%
22.9%
17.3%
5.0%
13.4%
58.5%

40.6%
9.9%
49.5%
22.3%
16.9%
4.7%
12.4%
56.3%

40.0%
10.3%
49.7%
22.9%
17.5%
5.1%
13.6%
59.0%

38.5%
9.6%
51.9%
21.8%
16.6%
4.4%
11.6%
54.5%

37.5%
9.1%
53.4%
21.4%
16.2%
4.2%
10.8%
52.7%

36.6%
8.5%
54.9%
21.0%
16.0%
3.9%
10.3%
51.2%

37.9%
9.1%
53.0%
20.5%
15.6%
3.7%
9.7%
49.4%

37.6%
9.1%
53.4%
21.1%
16.0%
4.0%
10.5%
51.7%

35.7%
8.8%
55.5%
19.2%
14.3%
3.0%
8.1%
44.6%

34.6%
8.8%
56.6%
17.8%
12.9%
2.5%
6.6%
39.9%

34.7%
9.0%
56.3%
17.2%
12.3%
2.3%
6.0%
37.8%

34.6%
9.2%
56.2%
16.8%
11.9%
2.0%
5.6%
36.4%

Margins
Operating Income Margin
Adjusted EBITDA Margin
Adjusted Net Income Margin

-64.8%
-57.8%
-64.2%

-29.6%
-24.9%
-30.9%

-24.3%
-20.4%
-24.0%

3.4%
7.0%
4.3%

1.6%
6.0%
3.4%

-13.7%
-8.0%
-11.2%

-7.5%
-2.9%
-5.9%

-13.5%
-6.5%
-10.0%

-10.3%
-3.3%
-6.9%

-7.7%
-0.7%
-4.3%

-6.8%
-0.1%
-3.6%

-9.2%
-2.3%
-5.9%

-2.5%
4.2%
-2.4%

0.7%
7.2%
55.4%

3.7%
10.0%
7.8%

3.6%
9.8%
7.9%

1.7%
8.1%
16.9%

10.9%
16.8%
8.2%

16.6%
22.5%
12.6%

18.5%
24.4%
13.6%

19.8%
25.7%
14.4%

% Total Originations
Gross Revenues
Provision Expense
Funding Costs
Net Revenues
Sales and Marketing
Technology and Analytics
Processing and Servicing
General and Administrative
Total Operating Expense
Operating Income
Adjusted EBITDA
Adjusted Net Income

14.8%
7.2%
4.8%
2.8%
3.8%
2.9%
1.7%
4.0%
12.4%
-9.6%
-8.6%
-9.5%

14.2%
5.8%
2.9%
5.5%
3.9%
1.9%
1.2%
2.7%
9.7%
-4.2%
-3.5%
-4.4%

12.6%
7.3%
2.0%
3.2%
2.8%
1.3%
0.7%
1.5%
6.3%
-3.0%
-2.6%
-3.0%

14.3%
5.3%
1.5%
7.5%
2.9%
1.5%
0.8%
1.8%
7.0%
0.5%
1.0%
0.6%

13.9%
5.5%
1.3%
7.1%
2.7%
1.5%
0.7%
2.0%
6.8%
0.2%
0.8%
0.5%

14.6%
5.8%
1.7%
7.2%
3.7%
2.5%
0.8%
2.2%
9.2%
-2.0%
-1.2%
-1.6%

13.9%
5.9%
1.6%
6.4%
3.0%
1.7%
0.8%
1.9%
7.4%
-1.0%
-0.4%
-0.8%

13.9%
5.5%
1.6%
6.8%
3.3%
2.6%
0.8%
2.1%
8.7%
-1.9%
-0.9%
-1.4%

13.4%
5.3%
1.4%
6.6%
3.1%
2.3%
0.7%
1.9%
8.0%
-1.4%
-0.4%
-0.9%

13.1%
5.2%
1.2%
6.7%
3.0%
2.3%
0.7%
1.8%
7.7%
-1.0%
-0.1%
-0.6%

12.5%
5.1%
1.2%
6.2%
2.8%
2.1%
0.6%
1.6%
7.1%
-0.9%
0.0%
-0.4%

13.2%
5.3%
1.4%
6.5%
3.0%
2.3%
0.7%
1.8%
7.8%
-1.2%
-0.3%
-0.8%

12.9%
5.0%
1.2%
6.7%
2.8%
2.1%
0.6%
1.5%
7.0%
-0.3%
0.5%
-0.3%

12.9%
4.9%
1.2%
6.9%
2.8%
2.1%
0.5%
1.4%
6.8%
0.1%
0.9%
7.2%

13.1%
4.8%
1.1%
7.2%
2.8%
2.1%
0.5%
1.3%
6.7%
0.5%
1.3%
1.0%

12.5%
4.7%
1.1%
6.6%
2.6%
1.9%
0.5%
1.2%
6.2%
0.4%
1.2%
1.0%

12.8%
4.8%
1.2%
6.9%
2.7%
2.1%
0.5%
1.4%
6.6%
0.2%
1.0%
2.2%

12.8%
4.6%
1.1%
7.1%
2.5%
1.8%
0.4%
1.0%
5.7%
1.4%
2.2%
1.0%

13.0%
4.5%
1.1%
7.3%
2.3%
1.7%
0.3%
0.9%
5.2%
2.2%
2.9%
1.6%

13.0%
4.5%
1.2%
7.3%
2.2%
1.6%
0.3%
0.8%
4.9%
2.4%
3.2%
1.8%

13.0%
4.5%
1.2%
7.3%
2.2%
1.5%
0.3%
0.7%
4.7%
2.6%
3.3%
1.9%

33.4%
16.3%
10.8%
6.4%
8.6%
6.5%
3.8%

40.6%
16.5%
8.3%
15.7%
11.3%
5.5%
3.5%

41.4%
24.0%
6.7%
10.7%
9.2%
4.2%
2.3%

41.3%
15.2%
4.4%
21.7%
8.3%
4.4%
2.4%

41.6%
16.6%
3.9%
21.1%
8.0%
4.4%
2.1%

35.4%
14.0%
4.1%
17.3%
8.9%
6.0%
2.0%

38.8%
16.4%
4.5%
17.8%
8.4%
4.9%
2.2%

32.9%
13.0%
3.8%
16.1%
7.7%
6.1%
1.8%

34.9%
13.9%
3.7%
17.3%
8.0%
6.1%
1.8%

36.7%
14.6%
3.4%
18.6%
8.4%
6.3%
1.8%

36.5%
14.8%
3.6%
18.0%
8.1%
6.2%
1.7%

35.1%
14.0%
3.6%
17.5%
8.0%
6.1%
1.8%

38.1%
14.7%
3.6%
19.8%
8.3%
6.3%
1.7%

39.4%
14.8%
3.6%
21.0%
8.4%
6.4%
1.6%

39.7%
14.6%
3.4%
21.8%
8.3%
6.3%
1.6%

38.7%
14.7%
3.5%
20.5%
7.9%
6.0%
1.4%

38.9%
14.6%
3.5%
20.7%
8.2%
6.2%
1.6%

40.0%
14.3%
3.5%
22.2%
7.7%
5.7%
1.2%

39.5%
13.7%
3.5%
22.4%
7.1%
5.1%
1.0%

% Average Assets (Annualized)


Gross Revenues
Provision Expense
Funding Costs
Net Revenues
Sales and Marketing
Technology and Analytics
Processing and Servicing
Source: Company data and Stifel estimates

Page 23

37.9%
35.5%
13.1%
12.3%
3.4%
3.3%
21.3%
20.0%
6.5%
6.0%
4.7%
4.2%
0.9%
0.7%
Chris Brendler, CFA 443.224.1303
John Davis 443.224.1265

On Deck Capital, Inc. (ONDK)

January 12, 2015

2012
9.0%
28.0%
-21.7%
-19.3%
-21.4%

2013
7.6%
27.7%
-12.0%
-10.1%
-12.6%

1Q14
4.9%
20.7%
-10.0%
-8.4%
-9.9%

2Q14
5.2%
20.3%
1.4%
2.9%
1.8%

3Q14
5.9%
20.4%
0.7%
2.5%
1.4%

4Q14E
5.3%
22.2%
-4.9%
-2.8%
-4.0%

2014E
5.3%
20.7%
-2.9%
-1.1%
-2.3%

1Q15E
4.9%
20.5%
-4.4%
-2.1%
-3.3%

2Q15E
4.9%
20.8%
-3.6%
-1.2%
-2.4%

3Q15E
4.9%
21.5%
-2.8%
-0.3%
-1.6%

4Q15E
4.5%
20.5%
-2.5%
0.0%
-1.3%

2015E
4.8%
20.7%
-3.2%
-0.8%
-2.1%

1Q16E
4.4%
20.7%
-1.0%
1.6%
-0.9%

2Q16E
4.3%
20.8%
0.3%
2.8%
21.8%

3Q16E
4.1%
20.3%
1.5%
4.0%
3.1%

4Q16E
3.7%
19.1%
1.4%
3.8%
3.0%

2016E
4.1%
20.1%
0.6%
3.1%
6.6%

2017E
3.2%
17.9%
4.4%
6.7%
3.3%

2018E
2.6%
15.8%
6.6%
8.9%
5.0%

2019E
2.3%
14.3%
7.0%
9.2%
5.2%

2020E
2.0%
12.9%
7.0%
9.1%
5.1%

(32.3x)
92.3%
10.3%
10.6%
-3.0%

8.7x
92.6%
9.0%
11.2%
9.9%

2.3x
98.6%
9.9%
13.4%
29.7%

2.8x
98.9%
9.4%
11.5%
25.7%

3.5x
99.1%
9.4%
10.0%
21.6%

1.7x
98.0%
10.3%
12.7%
35.8%

1.7x
98.0%
10.3%
11.9%
35.8%

1.9x
97.5%
10.8%
14.2%
33.8%

2.1x
97.2%
11.0%
14.1%
31.4%

2.5x
97.2%
10.9%
14.1%
27.4%

2.9x
97.5%
10.7%
14.3%
25.0%

2.9x
97.5%
10.7%
14.1%
25.0%

3.1x
97.7%
10.7%
14.4%
23.4%

2.8x
97.9%
10.7%
13.8%
25.7%

3.1x
98.2%
10.6%
13.7%
23.7%

3.3x
98.3%
10.5%
13.5%
22.5%

3.3x
98.3%
10.5%
13.8%
22.5%

4.2x
98.9%
9.7%
13.9%
18.7%

4.2x
98.8%
9.1%
14.2%
18.7%

3.8x
98.8%
8.8%
14.3%
19.9%

3.3x
98.7%
8.8%
14.4%
22.0%

149.0%

152.5%

148.0%

133.8%

311.3%
154.5%

267.5%
167.7%

194.4%
160.9%

194.9%
144.5%

97.6%
343.9%
126.3%
106.6%

127.3%
923.7%
182.8%
138.2%

69.9%
290.6%
72.2%
80.3%

48.8%
309.7%
57.7%
60.7%

36.7%
400.7%
58.7%
51.0%

38.9%
189.7%
80.2%
50.9%

46.2%
273.0%
67.0%
58.6%

48.8%
124.8%
56.7%
56.7%

53.3%
117.9%
60.8%
60.8%

52.9%
97.5%
58.6%
58.6%

50.4%
84.2%
55.3%
55.3%

51.4%
102.2%
57.8%
57.8%

47.9%
56.6%
49.3%
49.3%

35.8%
25.8%
34.1%
34.1%

19.8%
20.0%
19.8%
19.8%

10.2%
10.0%
10.2%
10.2%

Cost of revenue
Provision For Loan Losses
Funding Costs
Cost of Revenue

113.1%
61.8%
92.6%

223.1%
61.8%
165.3%

139.1%
32.6%
102.4%

204.5%
11.6%
129.0%

84.2%
37.2%
70.9%

148.1%
34.5%
110.0%

23.0%
28.0%
24.1%

73.8%
60.4%
70.8%

50.6%
51.0%
50.7%

55.1%
30.0%
49.5%

49.6%
40.7%
47.6%

52.4%
30.1%
47.3%

51.5%
37.3%
48.5%

46.1%
43.7%
45.6%

44.7%
42.7%
44.3%

48.2%
38.7%
46.3%

41.9%
44.8%
42.5%

30.0%
34.6%
30.9%

20.0%
22.3%
20.5%

10.0%
12.5%
10.5%

Net Revenue

417.6%

174.8%

253.2%

161.7%

163.9%

182.9%

242.9%

51.6%

51.4%

52.4%

71.4%

66.6%

73.5%

71.2%

66.5%

69.4%

55.3%

36.6%

19.3%

9.9%

Operating Expenses
Sales and Marketing
Technology and Analytics
Processing and Servicing
General and Administrative
Total Operating Expenses

172.8%
75.2%
91.1%
75.5%
107.6%

68.4%
59.4%
44.6%
43.2%
57.1%

53.8%
99.5%
64.9%
13.4%
48.9%

61.2%
96.9%
63.3%
113.3%
81.4%

165.3%
203.9%
47.1%
138.8%
149.3%

86.9%
122.3%
54.6%
73.9%
86.2%

90.6%
228.7%
75.5%
124.2%
125.0%

84.5%
161.5%
43.5%
81.7%
95.7%

80.5%
144.3%
46.9%
43.0%
80.1%

34.0%
50.2%
26.3%
24.8%
35.5%

66.7%
121.1%
45.0%
57.9%
75.0%

45.4%
39.8%
27.0%
23.3%
36.9%

49.8%
50.0%
27.9%
23.5%
41.7%

45.7%
46.6%
24.4%
22.1%
38.8%

42.8%
43.3%
21.4%
21.0%
36.4%

45.8%
45.0%
25.0%
22.4%
38.4%

35.6%
32.8%
12.6%
15.2%
28.8%

24.7%
21.5%
10.6%
9.7%
20.0%

15.7%
14.1%
7.8%
8.7%
13.5%

7.6%
6.6%
-2.1%
2.9%
6.0%

General and Administrative


Total Operating Expense
Operating Income
Adjusted EBITDA
Adjusted Net Income
Capital / Credit Ratios
Debt / Non-GAAP Equity
Non-Recourse Debt %
Allowance for Loan Losses / Unpaid Principal Balance
Net Charge-Off Ratio
Non-GAAP Equity / Assets

Y/Y GROWTH RATES


Revenue
Interest Income
Gain on Sales of Loans
Other Revenue
Total Gross Revenue

Operating Income

16.5%

8.0%

-118.6%

-121.2%

108.1%

-40.1%

0.1%

-590.1%

-812.9%

-24.9%

96.6%

-70.8%

-110.9%

-175.5%

-181.6%

-128.3%

880.9%

104.4%

33.1%

17.9%

Income Before Provision for Income Taxes


Net Income / (Loss)

44.6%
44.6%

88.2%
88.2%

-83.5%
-83.5%

-107.0%
-107.0%

18.7%
18.7%

-13.5%
-13.5%

-48.5%
-48.5%

473.7%
473.7%

-1586.0%
-1586.0%

-22.4%
-22.4%

11.7%
11.7%

-68.3%
-33.0%

-107.2%
-889.4%

-168.8%
-189.7%

-174.4%
-203.5%

-124.0%
-325.4%

1007.4%
-43.3%

105.3%
148.0%

33.2%
33.2%

17.9%
17.9%

Fully Diluted GAAP EPS


Fully Diluted Adjusted EPS

44.6%
22.6%

88.2%
-6.1%

-83.5%
-124.3%

-105.9%
-137.0%

15.3%
62.5%

-14.0%
-54.1%

-56.3%
-36.6%

385.5%
-316.3%

-1581.5%
-291.6%

-32.6%
-58.1%

-4.9%
32.0%

-33.4%
-67.9%

-782.4%
-1216.1%

-177.6%
-349.7%

-189.5%
-396.6%

-292.2%
-494.1%

-42.9%
-28.3%

146.8%
105.2%

32.5%
29.4%

17.3%
15.6%

Adjusted EBITDA
Adjusted Net Income

9.7%
22.6%

-1.8%
-6.1%

-143.5%
-124.3%

-203.2%
-143.6%

82.3%
67.3%

-71.9%
-54.5%

-42.6%
-25.2%

-176.3%
-355.5%

-117.7%
-292.2%

-98.9%
-51.8%

25.6%
57.2%

-200.9%
-62.9%

-449.6%
-1391.0%

-2366.8%
-388.8%

-26255.9%
-443.0%

-647.1%
-555.9%

211.2%
-27.9%

79.7%
106.2%

29.7%
30.0%

16.1%
16.2%

164.9%
139.2%
144.6%
148.6%

202.2%
148.2%
158.3%
157.4%

165.5%
147.3%
158.1%
157.3%

155.9%
142.8%
145.8%
143.7%

94.8%
102.9%
100.8%
97.9%

143.1%
102.9%
100.8%
97.9%

62.7%
63.7%
61.5%
59.7%

71.3%
48.1%
46.8%
44.1%

60.1%
35.6%
34.6%
32.4%

76.2%
48.4%
48.3%
47.5%

67.8%
48.4%
48.3%
47.5%

69.4%
55.2%
54.9%
55.0%

66.9%
57.8%
57.4%
57.8%

58.9%
54.9%
54.3%
54.7%

55.5%
53.3%
52.6%
52.9%

61.7%
53.3%
52.6%
52.9%

50.0%
46.5%
46.5%
47.8%

31.9%
29.6%
29.6%
30.4%

20.0%
20.2%
20.2%
20.5%

10.0%
10.2%
10.2%
10.2%

Originations
Unpaid principal balance
Gross loans
Net loans

Source: Company data and Stifel estimates

Chris Brendler, CFA 443.224.1303


John Davis 443.224.1265

Page 24

On Deck Capital, Inc. (ONDK)

January 12, 2015

Important Disclosures and Certifications


I, Christopher C. Brendler, certify that the views expressed in this research report accurately reflect my
personal views about the subject securities or issuers; and I, Christopher C. Brendler, certify that no part of
my compensation was, is, or will be directly or indirectly related to the specific recommendations or views
contained in this research report. For our European Conflicts Management Policy go to the research page at
www.stifel.com.
Rating and Price Target History for: On Deck Capital, Inc. (ONDK) as of 01-09-2015

30

27
24
21

Q1

Q2

Q3

2012

Q1

Q2

Q3

2013

Q1

Q2

18
Q1

Q3

2014

2015

Rating Key
B - Buy
H - Hold
S - Sell
I - Initiation
D - Dropped

UR - Under Review
NR - No Rating
NA - Not Applicable
RS - Rating Suspended

Created by BlueMatrix

For a price chart with our ratings and target price changes for ONDK go to
http://sf.bluematrix.com/bluematrix/Disclosure?ticker=ONDK
On Deck Capital, Inc. is a client of Stifel or an affiliate or was a client of Stifel or an affiliate within the past 12 months.
On Deck Capital, Inc. is provided with investment banking services by Stifel or was provided with investment banking
services by Stifel or an affiliate within the past 12 months.
Stifel or an affiliate has received compensation for investment banking services from On Deck Capital, Inc. in the past
12 months.
Stifel expects to receive or intends to seek compensation for investment banking services from On Deck Capital, Inc. in
the next 3 months.
Stifel or an affiliate managed or co-managed a public offering of securities for On Deck Capital, Inc. in the past 12
months.
Stifel makes a market in the securities of On Deck Capital, Inc..
Stifel research analysts receive compensation that is based upon (among other factors) Stifel's overall investment
banking revenues.
Our investment rating system is three tiered, defined as follows:
BUY -For U.S. securities we expect the stock to outperform the S&P 500 by more than 10% over the next 12 months.
For Canadian securities we expect the stock to outperform the S&P/TSX Composite Index by more than 10% over the
next 12 months. For other non-U.S. securities we expect the stock to outperform the MSCI World Index by more than
10% over the next 12 months. For yield-sensitive securities, we expect a total return in excess of 12% over the next 12
months for U.S. securities as compared to the S&P 500, for Canadian securities as compared to the S&P/TSX
Composite Index, and for other non-U.S. securities as compared to the MSCI World Index.
HOLD -For U.S. securities we expect the stock to perform within 10% (plus or minus) of the S&P 500 over the next 12
months. For Canadian securities we expect the stock to perform within 10% (plus or minus) of the S&P/TSX Composite

Page 25

On Deck Capital, Inc. (ONDK)

January 12, 2015

Index. For other non-U.S. securities we expect the stock to perform within 10% (plus or minus) of the MSCI World
Index. A Hold rating is also used for yield-sensitive securities where we are comfortable with the safety of the dividend,
but believe that upside in the share price is limited.
SELL -For U.S. securities we expect the stock to underperform the S&P 500 by more than 10% over the next 12
months and believe the stock could decline in value. For Canadian securities we expect the stock to underperform the
S&P/TSX Composite Index by more than 10% over the next 12 months and believe the stock could decline in value.
For other non-U.S. securities we expect the stock to underperform the MSCI World Index by more than 10% over the
next 12 months and believe the stock could decline in value.
Of the securities we rate, 52% are rated Buy, 46% are rated Hold, and 2% are rated Sell.
Within the last 12 months, Stifel or an affiliate has provided investment banking services for 20%, 7% and 0% of the
companies whose shares are rated Buy, Hold and Sell, respectively.
Additional Disclosures
Please visit the Research Page at www.stifel.com for the current research disclosures and respective target price
methodology applicable to the companies mentioned in this publication that are within Stifel's coverage universe. For a
discussion of risks to target price please see our stand-alone company reports and notes for all Buy-rated stocks.
The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us
and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any
securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the
particular investment objectives, financial situation or needs of individual investors. Employees of Stifel or its affiliates
may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions
expressed within. Past performance should not and cannot be viewed as an indicator of future performance.
Stifel is a multi-disciplined financial services firm that regularly seeks investment banking assignments and
compensation from issuers for services including, but not limited to, acting as an underwriter in an offering or financial
advisor in a merger or acquisition, or serving as a placement agent in private transactions.
These materials have been approved by Stifel Nicolaus Europe Limited, authorized and regulated by the Financial
Conduct Authority (FCA) in the UK, in connection with its distribution to professional clients and eligible counterparties
in the European Economic Area. (Stifel Nicolaus Europe Limited home office: London +44 20 7557 6030.) No
investments or services mentioned are available in the European Economic Area to retail clients or to anyone in
Canada other than a Designated Institution. This investment research report is classified as objective for the purposes
of the FCA rules. Please contact a Stifel entity in your jurisdiction if you require additional information.

Additional Information Is Available Upon Request


2015 Stifel, Nicolaus & Company, Incorporated, One South Street, Baltimore, MD 21202.
All rights reserved.

Page 26