Shares of online lender OnDeck Capital (NYSE:ONDK) are trading lower by nearly 21% after the company disappointed investors with its second-quarter origination growth.
On the company's Q2 conference call, OnDeck Capital noted that a recertification program of the company's "funding advisors" negatively affected originations. Loan volume from this channel fell by 11% quarter over quarter, rising just 12% year over year.
In addition, the company pointed to additional competition and some marketing missteps that slowed growth in the company's direct originations. This is the second quarter in a row in which competitive forces have been the subject of discussion surrounding volume and loan yields.
But it wasn't all bad. OnDeck is slowly transitioning to become more of an originator than a lender. The company noted that it earned record gains on the sale of loans to investors this quarter, generating premiums of 7.8% on principal balances sold in its marketplace. OnDeck sold 34% of its term loan originations this quarter, up from 24% last quarter and 10% a year ago. It now expects to sell 35%-40% of term loan originations going forward, up from 25-30%.
OnDeck lowered revenue guidance for the third quarter, mostly due to a reduction in revenue as more loans are sold to third-party investors. It expects revenue of $61 million to $63 million and adjusted EBITDA of $1 million to $2 million. For the full year, the company expects revenue of $422 million to $448 million, while forecasting adjusted EBITDA of $7 million to $9 million, up from its original guidance of negative adjusted EBITDA of $6 million to $8 million.
OnDeck will have to improve its marketing conversion in order to get back on track. The company revealed that it spent $600,000 on ineffective marketing initiatives in the second quarter, but after some tweaks, its origination volume in the last six weeks of the quarter grew 30% over the first six weeks of the quarter.