Company Presentation. May 2016

Transcription

1 Company Presentation May 2016

2 Forward-Looking Statements 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. Forwardlooking 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. Forwardlooking 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, 2015 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 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 and Operating expense (or any of its components) net of stock-based compensation is not a substitute for Operating expense (or any of its components) presented under GAAP. 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. 2

3 A Leading Online Platform for Small Business Lending $4 Billion+ total originations 37% y-o-y originations growth Scalable financial model 50,000+ small businesses served 5 th Generation proprietary credit scoring model 78 net promoter score 1 Originations $MM 1,158 1, Q1 '15 Q1 '16 Loans Under Management $MM Q1 '15 Q1 '16 Gross Revenue $MM Q1 '15 Q1 '16 1. Based on OnDeck s Direct channel. 3

4 Investment Highlights 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 4

5 Small Business Lending Market is Massive and Underserved 28MM U.S. Small Businesses $80-120Bn $80-120Bn Unmet Demand Unmet for Small Demand Business for Lines Small of Credit Business Lines of Credit $193Bn Business Loan Balances Under $250,000 in the U.S. in Q4 ꞌ15 50K+ OnDeck Unique US Small Businesses Served $1Bn OnDeck Loans Under Management 1 Sources: U.S. SBA, FDIC 12/31/15, Oliver Wyman, How New-Form Lending Will Shape Banks Small Business Strategies, As of March 31, Loans Under Management represents the Unpaid Principal Balance plus the amount of principal outstanding of loans held for sale, excluding net deferred origination costs, plus the amount of principal outstanding of term loans we serviced for others at the end of the period. 5

6 Diversity of Small Businesses Creates Challenges for Traditional Lenders Cash Flow Profile Restaurant Credit Card Rev. Cash Rev. Monthly Exp. Inventory & Payroll Landscaping Company Landscaping Rev. Snow Removal Rev. Monthly Exp. Fuel & Payroll Plumbing Company CHALLENGES FOR TRADITIONAL LENDERS Diverse businesses require manual underwriting Technology and data limitations Lack of standardized small business credit score Repair Rev. Subcontractor Rev. Monthly Exp. Supplies & Payroll Q1 Q2 Q3 Q4 6

7 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 7

8 The OnDeck Score Proprietary and Purpose Built for Small Business 5 th Generation proprietary credit scoring model Transactional Data Score 100+ external data sources 10 Million+ small businesses in proprietary database 2,000+ data points per application Credit Data Proprietary Data Accounting Data Public Records Social Data Proprietary Data Analysis Platform Probabilistic record linkage Dimensionality reduction Ensemble learning Exhaustive cross validation Feature engineering Adaptive learning A B C D E F Risk Grading 8

9 We Rely on the OnDeck Score for Greater Accuracy, Predictability and Access % of Defaults Eliminated More Accurate than the Personal Credit Score at Predicting Bad Credit Risk 1 Resulting in Funding Significantly More Loans for the Same Risk 100% 90% % 0% 100% 40% 20% 10% 0% Acceptance Rate (%) OnDeck Score Personal Credit Score Random Random Personal Credit Score OnDeck Score 1. Analysis on OnDeck Score v5 using actual OnDeck loan performance data. 9

10 The OnDeck Solution for Small Business Lending Apply Approve Fund Online Minutes 1 Automated Review As Fast As Immediately 3 As Fast As Same Day Traditional Lending Offline Manual Review 33 Hours 2 Weeks or Months Several Days 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 Approximately 1/3 of customers are subjected to secondary, manual review process. 10

11 Tailored Products for Small Businesses Term Loan (Launched in 2007) Line of Credit (Launched in 2013) Use Case Buying Inventory Hiring New Staff Marketing Managing Cash Flow Size $5,000 $500,000 $5,000 $100,000 Term 3 36 months 6 months 3 Pricing 4 Annual Interest Rate as low as 5.99% 1 Average 41% APR % 39% APR Payment Automated daily or weekly payments Automated weekly payments Availability Renewal opportunity at ~50% paid down Draw on-demand 1. For select customers. 2. Based on Q1 ꞌ months reset upon each draw. 4. Pricing available through certain OnDeck strategic partners or channels may vary. 11

12 Established and Diverse Customer Base $630,000 Median Annual Revenue 7 Years Median Time in Business 700+ Industries 50,000+ Small Businesses Served 12

13 Integrated and Scalable Technology Platform Online Customer Experience Data Aggregation, Analytics and Scoring Technology Powered Servicing & Collections $4 Billion+ Total Originations 90,000+ Total Loans 10 Million+ Customer Payments 13

14 Diversified and Growing Distribution Channels 29,516 Channel Mix Q1 16 Direct & Strategic Partners 7,103 18, % Funding Advisors 5,955 8,131 7, % Direct and Strategic Partners Funding Advisors Numbers represent loan units. 14

15 Expanding Partner Ecosystem OnDeck Enabling Partners to Expand Core Solutions and Value Added Services SMB Solutions Online Lending Banks ISOs/ Processors as a service Includes affiliates, subsidiaries and divisions. 15

16 Hybrid Funding Model Focused on Diversity Securitization / Warehouse Marketplace OnDeck Funding Mix Q1 16 Securitization Target Mix 75-85% of Term Loan Originations 15-25% of Term Loan Originations Marketplace Investor Type Investors Seeking Fixed Returns Investors Seeking Variable Returns Flexibility Scalable as Originations Grow Greater Product and Investor Flexibility Cost Low Cost Execution Profitable Revenue Stream Resiliency Capital-Light Structure, Equity Contribution Aligns Interests Diversified Risk Exposure, Servicing Fee Aligns Interests Warehouse Lines Funding mix includes the principal balance outstanding in Loans Under Management as of March 31, 2016 for loans financed with funding debt or sold to OnDeck Marketplace investors. 16

17 Consistent Portfolio Performance Over Time Net Charge-offs by Cohort 1 9.0% 5.5% 6.4% 4.4% 5.5% 6.9% 6.9% 7.0% 6.2% 5.1% 3.1% Avg. Term (months) Q1 '15 2 Q2 '15 2 Q3 '15 2 Q4 '15 2 Q1 ' Represents net lifetime charge-offs of the unpaid principal balances charged off less recoveries of loans previously charged off. A given cohort s net lifetime charge-off ratio equals the cohort s net lifetime charge-offs through March 31, 2016 divided by the cohort s total original loan volume. Repeat loans in both the numerator and denominator include the full renewal loan principal amount. The chart includes all term loan originations, regardless of funding source, including loans sold through our OnDeck Marketplace or held for sale on our balance sheet. 2. As of March 31, 2016, principal balance of all term loans in Loans Under Management still outstanding was 0% for all cohorts except the 2014, Q1 15, Q2 15, Q3 15, Q4 15 and Q1 16 cohorts, which had principal outstanding of 0.5%, 4.0%, 9.9%, 28.0%, 60.4% and 87.7%, respectively. 3. Represents the initial contractual term at origination. 0.6% 0.0% 17

18 Growth Strategy Brand and direct marketing Product expansion Strategic partnerships Expand customer lifetime value Data and analytics International expansion 18

19 Industry Leading Management Team Management Team Team Experience Noah Breslow CEO Howard Katzenberg CFO James Hobson COO Pamela Rice Technology Paul Rosen Sales Krishna Venkatraman Data & Analytics Cory Kampfer Legal Andrea Gellert Marketing Zhengyuan Lu Capital Markets Board of Directors Noah Breslow Chairman of the Board Ronald Verni Sage Software James Robinson III RRE Ventures American Express Sandy Miller Institutional Venture Partners Jane J. Thompson Walmart Financial Services CFPB Advisory Board Neil Wolfson SF Capital Group David Hartwig Sapphire Ventures Bruce P. Nolop E*TRADE Financial Corporation 19

20 Financial Highlights Sustainable Growth Compelling Customer LTV Capital Light Funding Model Demonstrated Operating Leverage 20

21 Consistent Loans Under Management Growth OnDeck Marketplace UPB Balance Sheet Loans ($MM) $233 $113 $137 $ % 100% 100% 93% $320 88% $382 89% $466 91% $890 $781 $719 $675 $572 19% 28% 35% 39% 14% 86% 81% 72% 65% 61% $982 33% 67% Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 ' The sum of the quarters may not exactly match the annual numbers due to rounding 21

22 Strong Revenue Growth Gain on Sale and Other Revenue Interest Income ($MM) $18 $14 $11 98% 97% 98% $23 94% $29 92% $36 93% $44 93% $63 $67 $68 $63 $50 $56 14% 21% 28% 30% 15% 90% 86% 79% 72% 70% 85% Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 ' The sum of the quarters may not exactly match the annual numbers due to rounding 22

23 Illustrative Loan Economics Revenues Expenses Origination Fee Acquisition Interest Income - Processing and Servicing Funding Costs = Loan Profit Losses 23

24 Compelling Customer Lifetime Value All Customers Acquired in 2013 Average 2.4 loans per customer through 10 quarters ($MM) $8 $9 $7 2.6x ROI $7 $6 $5 $3 $5 3.3x+ ROI or $88 Return 3 after 10 quarters $27 $17 $20 $27 Investment Acquisition Cost 1 Contribution 2 +Q2 +Q3 +Q4 +Q5 +Q6 +Q7 +Q8 +Q9 +Q10 Through Mar 31, Includes upfront internal and external commissions as well as direct marketing expenses. 2. Contribution is defined to include interest income and fees collected on initial and repeat loans, less acquisition costs for repeat loans, less the following items for both initial and repeat loans: estimated third party processing and servicing expenses, estimated funding costs (excluding any cost of equity capital) and charge offs. For this purpose, processing and servicing expenses are estimated based on the mix of new and renewal originations and outstanding principal balances. Includes all loans originated in the period. New and repeat loans sold funding cost is estimated based on the average on-balance sheet cost of funds rate in the period. Estimates may be adjusted in subsequent periods to reflect updated information. 3. Return on Investment (ROI) is contribution divided by initial acquisition cost. Acquisition costs include upfront internal and external commissions as well as direct marketing expenses. 4. Figures may not foot due to rounding. 24

25 Customer Lifetime Value Has Increased 2014 vs 2013 All Customers Acquired in 2014 Average 2.0 loans per customer through 6 quarters 2013 cohort was 2.6x ROI at comparable seasoning ($MM) $16 $14 $12 $10 2.8x+ ROI or $129 Return 3 after 6 quarters $40 $46 $37 $46 Investment Acquisition Cost 1 Contribution 2 +Q2 +Q3 +Q4 +Q5 +Q6 Through Mar 31, Includes upfront internal and external commissions as well as direct marketing expenses. 2. Contribution is defined to include interest income and fees collected on initial and repeat loans, less acquisition costs for repeat loans, less the following items for both initial and repeat loans: estimated third party processing and servicing expenses, estimated funding costs (excluding any cost of equity capital) and charge offs. For this purpose, processing and servicing expenses are estimated based on the mix of new and renewal originations and outstanding principal balances. Includes all loans originated in the period. New or repeat loans sold funding cost is estimated based on the average on balance sheet cost of funds rate in the period. 3. Figures may not foot due to rounding. 25

26 Lifetime Value Improving Over Time All Customers Acquired in 2013 and 2014 At comparable seasoning points, 2014 shows improved returns. Cohort Contribution Per Customer 1 Return on Investment 2 $8, x x $3, x $(2,000) +6 Quarters +10 Quarters +6 Quarters +10 Quarters 0.5x 1. Cumulative Contribution as defined on the previous page. 2. Return on Investment (ROI) as defined on the previous page. 26

27 Demonstrated Operating Leverage Provision Rate 6.0% 6.6% 5.8% 5.8% Operating Expense ex. SBC as a Percentage of Originations 1 Operating leverage potential as LUM scales in 2016 and % M '16 7% 8% 7% Cost of Funds Rate 11.3% 6.2% 5.5% 5.5% M ' M '16 P&S ex. SBC S&M ex. SBC G&A ex. SBC T&A ex. SBC 1. Please see page 35 for a Non-GAAP Expense Reconciliation. 27

28 Adjusted EBITDA and Adjusted Net (Loss) Income $16.2 $10.3 ($0.2) ($4.6) ($1.8) ($3.3) ($7.3) ($8.8) Q1 ꞌ15 Q1 ꞌ16 Adjusted EBITDA Adjusted Net (Loss) Income See appendix for a reconciliation of these non-gaap measures. 28

29 Building Shareholder Value Expand our addressable market and increase customer lifetime value with a full spectrum of SMB credit products and by investing in long-term customer relationships Drive sustainable net revenue growth for the longer term, prioritizing stable credit quality across the portfolio Leverage technology and analytics leadership to extend our competitive moats while driving operating leverage and enhancing profitability Diversify our funding sources by type and investor to balance risk retention with flexibility and resiliency over an economic cycle 29

30 APPENDIX 1

31 Illustrative $100 1 Loan Accounting and Economics Marketplace Accounting At Origination Future Periods Total Interest Income - Gain on Sale 2 $6 $6 Servicing Fee ~$0 $0 Balance Sheet Accounting At Origination Future Periods Total Interest Income $18 $18 Gain on Sale - Servicing Fee - Provision Expense - Funding Costs - Net Revenue $6 ~$0 $6 Provision Expense ($6) ($6) Funding Costs ($3) ($3) Net Revenue ($6) $15 $9 $9 difference 1. Carrying value. The foregoing table is for illustrative purposes only. It reflects the difference in the initial accounting treatment under GAAP between selling a hypothetical $100 loan under Marketplace compared to holding such loan on balance sheet. The actual results may vary materially based on a variety of factors including but not limited to the rate and amount of interest collected, actual gain on sale, servicing fees, the term of a loan, the period a loan is held before it is sold, cost of funds and delinquency and charge $3 difference 2 offs compared to the assumed provision rate. 2. Assumes Q1 16 Marketplace Gain on Sale Rate. Funding Costs do not include cost of equity. 31

32 Net Cumulative Lifetime Charge-off Ratios All Loans As of March 31, 2016, net charge-off as a percentage of original loan amount for all term loan originations, regardless of funding source, including loans sold through OnDeck Marketplace or held for sale on our balance sheet. 32

33 Current Debt Facilities: Considerable Existing Capacity ($MM) Funding Debt 1,4 Maturity Date WA Interest Rate Principal Outstanding Borrowing Capacity OnDeck Asset Securitization Trust LLC May % $175.0 $175.0 Prime OnDeck Receivable Trust, LLC June % Receivable Assets of OnDeck, LLC May % OnDeck Account Receivables Trust LLC Sept % On Deck Asset Company, LLC May % Small Business Asset Fund 2009 LLC Apr 2016 through Aug % On Deck Asset Pool, LLC Aug % Partner Synthetic Participations 4 Apr 2016 through Feb 2018 Various Total Funding Debt $ $691.4 Corporate Debt 1,4 On Deck Capital, Inc. Oct % $2.7 $ Total funding debt principal. Balances and capacities as of March 31, 2016, subject to borrowing conditions. 2. The period during which remaining cash flow can be used to purchase additional loans expires April 30, The period during which new borrowings may be made expires in August While the lenders under our corporate debt facility and partner synthetic participation have direct recourse to us as the borrower thereunder, lenders to our subsidiaries do not have direct recourse to us. 5. Gross of $3.7 million in deferred debt issuance costs. GAAP Total Funding Debt is $465.6 million. 33

34 Supplemental Key Performance Metrics Revisions 1 Average Loans $MM Revised Historical Effective Interest Yield 36.7% 37.6% 37.9% 35.7% 35.2% 37.6% 35.9% 34.8% 34.2% 34.5% Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Average Funding Debt Outstanding $MM Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 ' Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Cost of Funds Rate 5.8% 5.8% 5.2% 5.2% 5.5% 5.7% 5.8% 5.1% 5.0% 5.4% Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Three Months Ended / Ending Annualization Table Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Business Days in Period Annualization Factor Beginning with the quarter ended March 31, 2016, the Company refined the calculation of Effective Interest Yield (EIY) and certain related definitions to reflect the substantial growth and impact of OnDeck Marketplace and to present EIY on a business day adjusted basis. In addition, effective January 1, 2016, the company adopted a new a GAAP requirement regarding the presentation of deferred debt issuance costs related to average funding debt outstanding. To enhance comparability of prior periods, the above table contains the relevant Key Performance Metrics (1) as originally presented historically and (2) as revised to conform to the adoption of the 2016 calculation methodology and the retrospective application of the new GAAP requirement regarding the presentation of deferred debt issuance costs. For summary purposes only and is qualified in its entirety by the descriptions of the Key Performance Metrics in our earnings release issued February 22,

35 Non-GAAP Operating Expense Reconciliation Technology and Analytics Non-GAAP Expense Reconciliation ($MM) Q1 '15 Q1 '16 GAAP expense $17.4 $42.7 $8.6 $14.1 Stock-based compensation (0.5) (2.4) (0.4) (0.8) Expense excluding stock-based compensation $16.9 $40.3 $8.2 $13.3 Percentage of Gross Revenue GAAP expense 11.0% 16.7% 15.2% 22.5% Stock-based compensation (0.3) (0.9) (0.7) (1.3) Expense excluding stock-based compensation 10.7% 15.8% 14.5% 21.2% Processing and Servicing Non-GAAP Expense Reconciliation ($MM) Q1 '15 Q1 '16 GAAP expense $8.2 $13.1 $2.7 $4.2 Stock-based compensation (0.2) (0.8) (0.1) (0.3) Expense excluding stock-based compensation $8.0 $12.3 $2.6 $3.9 Percentage of Gross Revenue GAAP expense 5.2% 5.1% 4.8% 6.7% Stock-based compensation (0.1) (0.3) (0.2) (0.5) Expense excluding stock-based compensation 5.1% 4.8% 4.6% 6.2% General and Administrative Non-GAAP Expense Reconciliation ($MM) Q1 '15 Q1 '16 GAAP expense $21.7 $45.3 $9.6 $9.7 Stock-based compensation (1.4) (5.4) (0.9) (1.8) Expense excluding stock-based compensation $20.3 $39.9 $8.7 $7.9 Percentage of Gross Revenue GAAP expense 13.7% 17.8% 17.0% 15.5% Stock-based compensation (0.9) (2.1) (1.6) (2.9) Expense excluding stock-based compensation 12.8% 15.7% 15.4% 12.6% Sales and Marketing Non-GAAP Expense Reconciliation ($MM) Q1 '15 Q1 '16 GAAP expense $33.2 $60.6 $12.7 $16.5 Stock-based compensation (0.7) (3.1) (0.6) (0.9) Expense excluding stock-based compensation $32.5 $57.5 $12.1 $15.6 Percentage of Gross Revenue GAAP expense 21.0% 23.8% 22.5% 26.4% Stock-based compensation (0.4) (1.2) (1.1) (1.4) Expense excluding stock-based compensation 20.6% 22.6% 21.4% 25.0% Percentage of Originations GAAP expense 2.9% 3.2% 3.0% 2.9% Stock-based compensation (0.1) (0.2) (0.1) (0.2) Expense excluding stock-based compensation 2.8% 3.1% 2.9% 2.7% Total Operating Expense Non-GAAP Reconciliation ($MM) Q1 '15 Q1 '16 GAAP expense $80.5 $161.6 $33.5 $44.6 Stock-based compensation (2.8) (11.6) (2.0) (3.8) Expense excluding stock-based compensation $77.7 $150.0 $31.5 $40.8 Percentage of Originations GAAP expense 7.0% 8.6% 8.1% 7.8% Stock-based compensation (0.2) (0.6) (0.5) (0.7) Expense excluding stock-based compensation 6.7% 8.0% 7.6% 7.2% Figures may not foot due to rounding. Operating expense (or its components) excluding stock-based compensation expense and the percentages computed using those metrics are not presented in accordance with GAAP and are non-gaap financial measures. Management believes they can provide useful supplemental information to investors and others for comparisons in understanding and evaluating our operating expenses without the impact of non-cash stock-based compensation which can vary significantly from period to period. 35

36 Non-GAAP Adjusted EBITDA Reconciliation Adjusted EBITDA Twelve Months Ended December 31, Three Months Ended March 31, (000s) Net Loss ($18,708) ($2,231) ($5,343) ($13,141) Adjustments: Corporate Interest Expense Income Tax Expense Depreciation and Amortization 4,071 6,508 1,378 2,078 Stock-Based Compensation Expense 2,842 11,582 2,042 3,752 Warrant Liability Fair Value Adjustment 11,232 Adjusted EBITDA ($165) $16,165 ($1,817) ($7,273) Adjusted EBITDA represents our net income (loss), adjusted to exclude interest expense associated with debt used for corporate purposes (rather than funding costs associated with lending activities), income tax expense, depreciation and amortization, stock-based compensation expense and warrant liability fair value adjustment. EBITDA is impacted by changes from period to period in the fair value of the liability related to preferred stock warrants. Management believes that adjusting EBITDA to eliminate the impact of the changes in fair value of these warrants is useful to analyze the operating performance of the business, unaffected by changes in the fair value of preferred stock warrants which are not relevant to the ongoing operations of the business. All such preferred stock warrants converted to common stock warrants upon initial our initial public offering in December

37 Non-GAAP Adjusted (Loss) Income Reconciliation Adjusted Net (Loss) Income Twelve Months Ended December 31, Three Months Ended March 31, (000s) Net Loss ($18,708) ($2,231) ($5,343) ($13,141) Adjustments: Stock-Based Compensation Expense 2,842 11,582 2,042 3,752 Net Loss Attributable to Noncontrolling Interest Warrant Liability Fair Value Adjustment 11,232 Adjusted Net (Loss) Income ($4,634) $10,309 ($3,301) ($8,821) Adjusted Net Income (Loss) per share represents our net income (loss) adjusted to exclude net loss attributable to noncontrolling interest, stock-based compensation expense and warrant liability fair value adjustment, each on the same basis and with the same limitations as described above for Adjusted EBITDA, divided by the weighted average common shares outstanding during the period. Adjusted Net Income (Loss) per share does not include the impact of accretion of dividends on redeemable convertible preferred stock or Series A and B preferred stock redemptions. All such preferred stock converted to common stock upon our initial public offering in December