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Company Presentation · PDF file This presentation, including the accompanying oral...

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  • Company Presentation

    May 2015

  • Forward-Looking Statements

    2

    This presentation, including the accompanying oral presentation (collectively, this “presentation”), does not constitute an offer to sell or the solicitation of an offer to buy any securities. This presentation is provided by On Deck Capital, Inc. (“OnDeck”) for informational purposes only. No representations express or implied are being made by OnDeck or any other person as to the accuracy or completeness of the information contained herein.

    This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other legal authority. Forward- looking statements include statements about scalability, growing distribution channels, credit predictability and information concerning our future financial performance, business plans and objectives, potential growth opportunities, financing plans, competitive position, industry environment and potential market opportunities. Forward- looking statements can also be identified by words such as "will," "enables," "expects," "allows," "continues," "believes," "anticipates," "estimates" or similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. They are based only on our current beliefs, expectations and assumptions regarding the future of our business, anticipated events and trends, the economy and other future conditions. Moreover, we do not assume responsibility for the accuracy and completeness of forward-looking statements. As such, they are subject to inherent uncertainties, changes in circumstances, known and unknown risks and other factors that are difficult to predict and in many cases outside our control.

    As a result, you should not rely on any forward-looking statements. Our expected results may not be achieved, and actual results may differ materially from our expectations. Important factors that could cause actual results to differ from our forward-looking statements are the risks that we may not be able to manage our anticipated or actual growth effectively, that our credit models do not adequately identify potential risks, and other risks, including those under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 and in other documents that we file with the Securities and Exchange Commission, or SEC, from time to time which are available on the SEC website at www.sec.gov. We undertake no obligation to publicly update any forward-looking statements for any reason after the date of this presentation to conform these statements to actual results or to changes in our expectations, except as required by law.

    In addition to the U.S. GAAP financial information, this presentation includes certain non-GAAP financial measures. We believe that non-GAAP measures can provide useful supplemental information for period-to-period comparisons of our core business and is useful to investors and others in understanding and evaluating our operating results. These non-GAAP measures have not been calculated in accordance with U.S. GAAP. You should not consider them in isolation or as a substitute for an analysis of our results under U.S. GAAP. There are a number of limitations related to the use of these non-GAAP measures versus their nearest GAAP equivalents. For example, neither Adjusted EBITDA nor Adjusted Net (Loss) Income is a substitute for Net (Loss) Income. In addition, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Adjusted EBITDA excludes some recurring costs, including interest expense associated with debt used for corporate purposes, non-cash stock-based compensation, depreciation and amortization expense and fair value adjustment for our warrant liability. Therefore Adjusted EBITDA does not reflect interest expense, the non-cash impact of stock-based compensation or working capital needs that will continue for the foreseeable future. Adjusted Net (Loss) Income excludes stock-based compensation expense and warrant liability fair value adjustment which will continue for the foreseeable future and therefore will generally be more favorable than Net (Loss) Income determined in accordance with GAAP. Please refer to the Non-GAAP Reconciliations at the end of this presentation for a description of these non-GAAP measures and a reconciliation to Net (Loss) Income.

  • OnDeck Powers the Growth of Small Businesses Through Lending and Technology Innovation

    3

    Card Quest Inc.

    Shannon Schofield

    Mojito Maintenance

    Dan Gonzalo

    Furry Tales Doggy Daycare

    Lena Botwright

    J.a.m.b.s Jewelry

    Mark S. Desrochers

    Seasons

    Gerald Palumbo

  • $2 Billion+ total originations

    Scalable financial model

    5th Generation proprietary credit scoring model

    30,000+ small business served

    73 net promoter score

    150%+ y-o-y originations growth in 2014

    A Leading Online Platform for Small Business Lending

    4

    459

    1,158

    227 416

    2013 2014 Q1 '14 Q1 '15

    Originations $MM

    65

    158

    29 56

    2013 2014 Q1'14 Q1'15

    Gross Revenue $MM

  • Investment Highlights

    5

    Massive and underserved market

    Proprietary analytics and scoring models

    Integrated and scalable technology platform

    Diversified customer acquisition channels

    Robust funding platform

    Experienced management team

    Attractive financial profile

  • Small Business Lending Market is Massive and Underserved

    6

    Sources: U.S. SBA, FDIC, Oliver Wyman, How “New-Form Lending” Will Shape Banks’ Small Business Strategies, 2013

    1. As of 03/31/2015; Loans under management represents the unpaid principal balance plus the amount of principal outstanding for loans held for sale, excluding net deferred origination costs, plus the amount of principal outstanding of term loans the company serviced for others, each at the end of the period.

    $80-120Bn

    Unmet

    Demand for Small

    Business Lines

    of Credit

    $0.7Bn

    OnDeck Loans Under

    Management1

    $80-120Bn Unmet

    Demand for Small

    Business Lines

    of Credit

    $180Bn Business Loan

    Balances Under

    $250,000 in

    the U.S.

    in Q4 ꞌ14

    28MM U.S. Small Businesses

    OnDeck Unique Small

    Businesses Served

    30K

  • Credit Card Rev. Cash Rev. Monthly Exp. Inventory & Payroll

    Landscaping Rev. Snow Removal Rev. Monthly Exp. Fuel & Payroll

    Repair Rev. Subcontractor Rev. Monthly Exp. Supplies & Payroll

    • Diverse businesses require

    manual underwriting

    • Technology and data

    limitations

    • Lack of standardized small

    business credit score

    Diversity of Small Businesses Creates Challenges for Traditional Lenders…

    CHALLENGES FOR

    TRADITIONAL LENDERS

    Cash Flow Profile Restaurant

    Landscaping Company

    Plumbing Company

    7

    Q1 Q2 Q3 Q4

  • …Leading to a Frustrating Borrowing Experience for Small Businesses

    FRUSTRATIONS FOR

    SMALL BUSINESSES

    • Time consuming offline process

    • Non-tailored credit assessment

    • Product mismatch

    • Rigid collateral requirements

    8

  • The OnDeck Score® Proprietary and Purpose Built for Small Business

    100+ external data sources

    5th Generation proprietary credit scoring model

    10 Million+ small businesses in proprietary database

    2,000+ data points per application

    9

    Score

    A

    B

    C

    D

    E

    R is

    k G

    ra d

    in g

    • Probabilistic record linkage

    • Dimensionality reduction

    • Ensemble learning

    • Exhaustive cross validation

    • Feature engineering

    • Adaptive learning

    Proprietary Data

    Analysis Platform

    Public

    Records Credit

    Data

    Social

    Data

    Proprietary

    Data

    Transactional

    Data

    Accounting

    Data F

  • Acceptance Rate (%)

    OnDeck Score Personal Credit Score Random

    Resulting in Funding Significantly More

    Loans for the Same Risk…

    More Accurate than the Personal Credit Score

    at Predicting Bad Credit Risk1…

    We Rely on the OnDeck Score for Greater Accuracy, Predictability and Access

    10

    1. Analysis on OnDeck Score v5 using actual OnDeck loan performance data.

    90%

    100%

    0%

    100% 40% 20% 10% 0%

    % o

    f D

    e fa

    u lt s E

    lim in

    a te

    d

    10%

    10

    20

    40

    Random Personal Credit Score

    OnDeck Score

  • Online Minutes1

    Automated Review As Fast As Immediately3

    As Fast As Same Day

    The OnDeck Solution for Small Business Lending

    11

    1. Application time depends on customer having the required documentation available.

    2. Source: Small business survey conducted by the Federal Reserve Bank of New York, Spring 2014

    3. Approximately 1/3 of customers are subjected to secondary, manual review p

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