Following Earnings Miss, BTIG Downgrades On Deck Capital

On Deck Capital Inc ONDK reported its 1Q16 results on May 2, with the earnings missing expectations driven by gross revenue that came in below the low end of the guidance range.

BTIG’s Mark Palmer downgraded the rating on the company from Buy to Neutral, following the earnings miss.

1Q Miss

On Deck reported its gross revenue for the quarter at $62.6 million, with adjusted EBITDA at negative $7.3 million.

The company also lowered its FY16 gross revenue guidance and adjusted EBITDA guidance to $278–$288 million and negative $41–49 million, respectively.

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Reasons For The Miss

“While we had noted that ONDK management had reduced the expectations bar by setting its annual guidance well below consensus estimates in conjunction with its 4Q15 report, it turned out that they had not lowered it nearly enough,” Palmer mentioned.

The analyst also stated that management attributed the weak 1Q performance and reduced guidance to a shift in the company’s funding mix, with marketplace funding accounting for 15–25 percent of its loans, as compared to the earlier guidance of 35–45 percent.

“As a consequence, ONDK will retain more loans on its balance sheet and the provision expense it must book against those loans will drag down its operating results for the remainder of 2016,” Palmer explained.