ondeck australia · 2016-05-31 · this presentation contains “forward-looking...
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Forward-Looking Statements
2
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 www.sec.gov. 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 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.
Summary of OnDeck’s International Expansion Strategy
3
Leverage domestic experience and technology platform to establish
early mover advantage
Generate sustainable and high-quality, long-term growth
Utilize focused, strategic approach to establish and scale international
operations while optimizing risk/reward
Position OnDeck for continued leadership in selected markets
Target markets with good data, credit and payment infrastructure,
significant unmet demand and strong predisposition to online channel
OnDeck Australia Overview
4
Ability to leverage existing credit models and technology platform for
efficient and scalable market penetration
Experienced CEO with strong e-commerce background
Compelling market opportunity with significant unmet demand
Partnering with group of credible, local entrepreneurs and investors
Strategic partnership with MYOB, leading SMB accounting software
provider in the region
OnDeck Australia Investment1
5
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
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
1 Entity funded in AUD. Conversion to USD for illustrative purposes only, which assumes recent AUD currency conversion rate of 0.7674 USD.
OnDeck Australia Partners
Source: MYOB Group Limited Prospectus
Investor Group
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Majority owner with 55%
stake
$8.4 million initial investment;
$4.2 million potential follow-
on
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 follow-
on
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
Minority owner with 15%
stake
$2.3 million initial investment;
$1.2 million potential follow-
on
Operational and local market
expertise
Strong technology and
financial services network
Includes participation from
OnDeck Australia CEO
Entity funded in AUD. Conversion to USD for illustrative purposes only, which assumes recent AUD currency conversion rate of 0.7674 USD.
Cameron Poolman, CEO of OnDeck Australia
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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
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
The Australia Opportunity
Large & Growing Market
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
Significant SMB Lending Opportunity
For balances under $410k, there were ~$33 billion
in total originations during 2014 and ~$98 billion in
total outstanding balances as of Dec 31, 20141
61% 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 Australia1 Conversion to USD for illustrative purposes only, which assumes AUD currency conversion rate as of 12/31/14 of 0.8156 USD. 8
Financial Considerations for OnDeck1
9
Expect OnDeck Australia loan originations to commence 2H 2015
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 2015
Consolidation method of accounting for majority stake
Anticipate loan portfolio to be initially funded via additional $7.7 million
OnDeck debt facility; diversified, third-party funding sources
anticipated to follow
1 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 0.7674 USD.
Summary of OnDeck’s International Expansion Strategy
10
Leverage domestic experience and technology platform to establish
early mover advantage
Generate sustainable and high-quality, long-term growth
Utilize focused, strategic approach to establish and scale international
operations while optimizing risk/reward
Position OnDeck for continued leadership in selected markets
Target markets with good data, credit and payment infrastructure,
significant unmet demand and strong predisposition to online channel
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