Shares of On Deck Capital (NYSE: ONDK) were soaring by nearly 25% as of 1 p.m. EDT on Tuesday as the company beat consensus earnings expectations in the second quarter and raised its outlook for the remainder of the year.
The company reported that it earned adjusted net income of $10 million, or $0.13 per diluted share, in the second quarter, far better than the $0.05 analysts were expecting on the same basis.
The big news from On Deck Capital's second quarter was the change in its full-year guidance for 2018. These changes are detailed in the table below.
The company's outlook calls for loan balances to grow by 10% to 15% for the full year 2018, and for the provision rate to be on the low end of its 2018 guidance of 6% to 7% of loan balances.
On Deck Capital benefited from some operating leverage as its originations grow. The company reported that it originated $587 million in loans during the quarter, a 27% increase year over year. That helped it become more efficient, as sales and marketing expenses declined to 1.9% of origination volume, down from 3.3% in the same period last year.
Notably, credit losses appear to be normalizing, too, as the company provisions tallied to just 5.7% of period-end loans compared to 7.2% during the second quarter of 2017. With loan loss reserves equal to 12.1% of loans at the end of the quarter, On Deck could credibly report lower provisions through the balance of the year, even as its portfolio grows.
On the conference call, management was upbeat about the competitive environment. CEO Noah Breslow said, "It's competitive out there, but it's also a rational environment -- much more rational than it was, you know, 18, 24 months ago." He pointed out that On Deck's customer acquisition costs have stabilized, even as originations grew considerably over the year-ago period.
We'll have to see how the rest of the year shakes out, but On Deck's second quarter gave Wall Street a lot to be excited about.