OnDeck Australia. April 2015

Transcription

1 OnDeck Australia April 2015

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. Forward-looking statements include statements about the prospects for our expansion to Australia and the anticipated timing of commencement of our Australian lending activities, 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 the commencement of Australian lending activities may take longer than currently anticipated, that the potential Australian customers are less inclined to borrow from us than currently expected, 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 described under the heading Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014 and described 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, Adjusted EBITDA is not 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 stockbased 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. 2

3 Summary of OnDeck s International Expansion Strategy Utilize focused, strategic approach to establish and scale international operations while optimizing risk/reward Target markets with good data, credit and payment infrastructure, significant unmet demand and strong predisposition to online channel Leverage domestic experience and technology platform to establish early mover advantage Generate sustainable and high-quality, long-term growth Position OnDeck for continued leadership in selected markets 3

4 OnDeck Australia Overview Compelling market opportunity with significant unmet demand Strategic partnership with MYOB, leading SMB accounting software provider in the region Ability to leverage existing credit models and technology platform for efficient and scalable market penetration Experienced CEO with strong e-commerce background Partnering with group of credible, local entrepreneurs and investors 4

5 OnDeck Australia Investment 1 Up to $23.0 million aggregate investment from OnDeck, MYOB and local investor group Initial $15.3 million funding to follow shortly after closing in 2Q 2015 OnDeck owns 55% stake, MYOB owns 30% stake, and local group owns 15% stake at close Initial funding facility of approximately $7.7 million, anticipated to be provided by OnDeck 1 Entity funded in AUD. Conversion to USD for illustrative purposes only, which assumes recent AUD currency conversion rate of USD. 5

6 OnDeck Australia Partners Majority owner with 55% stake $8.4 million initial investment; $4.2 million potential followon Market leading SMB technology, data and credit analytics platform 8+ years of small business lending experience $2.0+ billion of total originations 500+ FTEs, HQ d in New York City Minority owner with 30% stake $4.6 million initial investment; $2.3 million potential followon SMB-focused accounting software provider with 60-65% market share 1.2+ million SMB users in Australia & New Zealand AUD$299 million FY 14 Revenue 1,110 FTEs, HQ d in Melbourne, Australia Investor Group Minority owner with 15% stake $2.3 million initial investment; $1.2 million potential followon Operational and local market expertise Strong technology and financial services network Includes participation from OnDeck Australia CEO Source: MYOB Group Limited Prospectus Entity funded in AUD. Conversion to USD for illustrative purposes only, which assumes recent AUD currency conversion rate of USD. 6

7 Cameron Poolman, CEO of OnDeck Australia Founder and CEO of Grays Online, one of Australia s largest e- commerce groups Grew the company to over AUD$500 million in sales volume and >2 million unique visitors per month to its websites Strong focus on small business as part of Grays Industrial segment, with over AUD$300 million annual sales volume Mechanical Engineer with a Masters in Business 7

8 The Australia Opportunity Large & Growing Market Significant SMB Lending Opportunity Australian population ~23 million; GDP ~$1.6 trillion ~2 million SMBs account for 68% of all industry employment and 56% of industry gross value added 237,800 new SMBs formed in Australia during the 12 months ended June 2013 Availability of electronic credit/banking data and sophisticated financial technology infrastructure No significant, established direct competitors For balances under $410k, there were ~$33 billion in total originations during 2014 and ~$98 billion in total outstanding balances as of Dec 31, % of SMB owners said conditions of credit were a barrier to growth and 51% said availability of credit was a barrier About 44% of SMBs that applied for new credit were unsuccessful Only 50-55% of SMB owners expect to receive external financing from banks in the next 12 months Sources: Australian Bureau of Statistics, Worldbank, Scottish Pacific SME Growth Index, East & Partners survey, Seeking synergy in SME financing by Dr. Ian Ronald Freeman, CPA Australia Asia-Pacific Small Business Survey, Reserve Bank of Australia 1 Conversion to USD for illustrative purposes only, which assumes AUD currency conversion rate as of 12/31/14 of USD. 8

9 Financial Considerations for OnDeck 1 Expect OnDeck Australia loan originations to commence 2H 2015 Anticipate loan portfolio to be initially funded via additional $7.7 million OnDeck debt facility; diversified, third-party funding sources anticipated to follow Consolidation method of accounting for majority stake Expect OnDeck Australia to generate minimal revenue and have an incremental negative impact in the low single digit millions to consolidated company s Adj. EBITDA in OnDeck will provide an update to its quarterly and annual financial guidance when the company reports first quarter 2015 earnings results. Entity funded in AUD. Conversion to USD for illustrative purposes only, which assumes recent AUD currency conversion rate of USD. 9

10 Summary of OnDeck s International Expansion Strategy Utilize focused, strategic approach to establish and scale international operations while optimizing risk/reward Target markets with good data, credit and payment infrastructure, significant unmet demand and strong predisposition to online channel Leverage domestic experience and technology platform to establish early mover advantage Generate sustainable and high-quality, long-term growth Position OnDeck for continued leadership in selected markets 10