stifelnicolauscoinc initiatingcoverageofondeckcapitalinc(ondk)withabuyrating jan 11 2015

8/9/2019 StifelNicolausCoInc InitiatingCoverageofOnDeckCapitalInc(ONDK)WithaBuyRating Jan 11 2015

1/26

Christopher C. Brendler, CFA [email protected] (443) 224-1303John Davis [email protected] (443) 224-1265Stifel Equity Trading Desk (800) 424-8870

Initiation of Coverage

Initiating Coverage of On Deck Capital, Inc. (ONDK) with a Buy RatingWe believe OnDeck represents an attractive growth opportunity as its revolutionary online lending platform transforms SMBlending. Relative to traditional bank competitors, OnDeck offers an "Uber-like" experience that SMBs value more than price. Withgrowing brand recognition and key strategic partnerships driving accelerating origination growth, we believe OnDeck can enjoy years of substantial profit growth before competitors start to catch up. While skeptics point to the rich valuation and significant macro risk, we discount the probability of a near-term recession, and in the meantime we think OnDeck should materially exceed today's high expectations. Accordingly, we rate the shares Buy with a $28 target price based on 20x our 2017 EBITDA estimate.

We believe OnDeck has revolutionized SMB lending and despite significant balancesheet risk and a rich valuation, we are bullish due to the unique growth opportunity.

Admittedly, to seasoned, specialty finance analysts, OnDeck appears to be anall-too-familiar story that has rarely had a happy ending. From Advanta to Countrywide,we have covered many high-flying lenders that were quickly reduced to bankruptcy after stretching for growth and underestimating credit problems that led to a deadly liquiditysqueeze.

However, we firmly believe OnDeck is truly different because unlike many in the Spec Fingraveyard, OnDeck brings Uber-like innovation to a grossly overlooked sector. For SMBs,bank loans are not only hard to get (~50% approval rate), but incredibly time consuming(average 26 hours), inconvenient (limited branch hours), and slow (average 4-6 weeks).With OnDeck, the busy entrepreneur can privately apply online anytime, get a decision in15 minutes, and even receive funding same day.

This transformational experience is powered by true innovation: successfully automatingSMB underwriting down to just a 7% loss rate. OnDecks fifth generation credit modelincludes 10,000+ raw inputs from 100 data sources. The model is continuously improvingand with new strategic partnerships now including valuable underwriting data (Intuit,merchant acquirers), we believe OnDeck's credit models should only get better post-IPO.

With such low losses and 40+% effective yields, OnDeck has considerable risk-adjustedmargins that drive impressive returns as the business scales. OnDeck's loans are alsoshort (4-5 month duration) which sharply reduces credit risk and with early detection,OnDeck remains profitable even in our recession scenario.

Still, investing in SMB loans is higher risk, but we share management's confidence asOnDeck has built an entire culture around leveraging data to underwrite credit and webelieve it has just scratched the surface of its lending opportunity. With our current EPSestimates relatively conservative, we see significant upside potential to both earnings andthe stock (see bull scenario). Accordingly, we rate the shares Buy.

Changes Previous Current

Rating BuTarget Price $28.00FY14E EPS (Cash) $(0.16)FY15E EPS (Cash) $(0.22)FY14E Revenue $155.4FY15E Revenue $246.5

Price (01/09/15): $22.652-Week Range: $29 $2Market Cap.(mm): 1,731.Shr.O/S-Diluted (mm): 76. Avg Daily Vol (3 Mo): Dividend($ / %) $0.00 / 0.0S&P Index 2,044.8Note: 52-week range since shares begantrading 12/17/14.

EPS (Cash) 2013A 2014E 2015E

Q1 $(0.13) $(0.12)A $(0.0

Q2 (0.11) 0.03A (0.0

Q3 (0.06) 0.02A (0.0

Q4 (0.06) (0.09) (0.0

FY Dec $(0.36)A $(0.16) $(0.2

Revenue 2013A 2014E 2015E

FY Dec $65.2A $155.4 $246

One Year Price Chart January 12, 2015

On Deck Capital, Inc.ONDK NYSE

BuyFinancial Technology

Stifel does and seeks to do business with companies covered in its research reports. As a result, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors shouldconsider this report as only a single factor in making their investment decision.All relevant disclosures and certifications appear on pages 25 - 26 of this report.


2/26

Company Overview

OnDeck is a leading online platform for small business lending. Small andmedium-size businesses (SMBs) apply online, get approved in minutes, and getfunding as fast as same day. OnDeck launched in 2007 and has now originatedmore than $1.7 billion in loans and collected more than 4.4 million payments.

OnDeck s approach is unique with SMB loans that are shorter term (10-11months) than most banks and lower cost than traditional short-term SMBalternatives like merchant cash advances (MCAs). The company recentlylaunched a second major product (line of credit) that provides more flexibility forthe companys higher quality borrowers .

Investment Rationale

Despite a somewhat speculative valuation (stock closed 13.5%% above IPOprice vs. 1.6% gain in the S&P), we believe OnDeck has a unique growthopportunity within the fin tech sector. In our view, t he companys easy -to-useonline platform coupled with next-gen underwriting models position the companyto take the previously underserved SMB lending market by storm. Althoughbanks have major competitive advantages in scale, funding, and distribution,

ingenuity and innovation have been regulated away post-crisis, leaving SMBswith even fewer options. While the success of OnDeck and the leading P2Plender is attracting attract competing tech-enabled competitors, we believeOnDeck s first mover advantage and relentless reinvestment in its data-drivenunderwriting models will help OnDeck maintain its wide lead over the mediumterm. Indeed, we see significant growth ahead and with OnDeck keeping mostloans (75%) on balance sheet, it should generate rapid earnings growth as thecompany scales. While the downside is significant credit and funding risk, webelieve the tremendous growth opportunity outweighs credit/funding concerns atleast in the current benign credit environment. As such, we are initiatingcoverage of OnDeck with a Buy rating and a $28 target price based on 20x our2017 EBITDA estimate.

PositivesNext-gen underwriting key competitive advantage. OnDeck uses traditionaldata like daily bank account transaction history and credit reports as well as non-traditional data sources like Yelp reviews to predict credit quality and ferret outfraud. Unlike many traditional SMB lenders, OnDeck focuses heavily onborrowers business and its relative financial health rather than personal credit.OnDeck s fifth generation credit model and proprietary OnDeck S core nowincludes more than 10,000 raw inputs from over 100 data sources and can score99% of applicants. With each successive improvement, OnDeck can now slicecredit 2x better than FICO and has yielded stable, predictable losses (6%-8%) inevery quarterly vintage since the recession..

Page 2

On Deck Capital, Inc. (ONDK) January 12, 2015


3/26

Figure 1: OnDeck Score

Source: Company reports

Substantial growth opportunity. Despite supposed political and regulatorysupport, SMB lending is still a significantly underserved market. For banks,SMBs are often not worth the effort due to the smaller loan sizes and expensivemanual underwriting and with rising regulatory requirements, small loans are ashrinking part of banks balance sheets . For the borrower, bank loans areincredibly time consuming and inefficient, taking an average of 26 hours of theSMBs precious time despite only a 50% approval rate and 4-6 weeks to close.Nonbank alternatives are often exceedingly expensive with short-term optionssuch as MCAs often carrying effective APRs well above 100%.

For many of the 28mm small businesses in the U.S., this is simply not worth itand SMBs too often fall back on personal credit (cards, home equity) or chosenot to even try to get the capital they need to grow their businesses. OnDeckbelieves there is $80B-$120B of unmet demand for SMB loans/lines of credit ontop of the $178B currently outstanding. With less than $0.5B on balance sheettoday, we see massive potential for OnDeck s revolutionary solution and notethan even in our bull case scenario, OnDecks loan portfolio grows to $3.4B by2020, just 1% market share.

Figure 2: SMB Market Opportunity


Page 3



4/26

OnDeck s Uber -like experience. Small business owners are busy running theirrespective businesses, and spending time going back and forth with the bank isantiquated and incredibly inconvenient. OnDeck s easy-to-use online platformallows the business owner to privately apply for a loan online, 24 hours a day,and get a decision in a little as 15 minutes. For the roughly two-thirds ofapplicants that are auto-scored with no manual underwriting, many qualify forsame day funding a transformational improvement relative to legacycompetitors. Willing to pay for this convenience. Importantly, unlike many Internetdisruptors from Amazon and Xoom, OnDeck is about convenience, not price.Indeed, for the vast majority of customers, they only apply to OnDeck since itsso convenient. This accessibility comes at a price, however, with effective APRsthat make OnDeck s interest rates look egregious and predatory (often over50%). However, APR is not the right calculation as rates are exaggerated by theshort duration of the loans (4-5 months). Rather, short-term SMB lendingproducts are typically priced on a cents on dollar basis . While OnDeck s ratesare still very expensive relative to banks (4%-15% APRs), its customers areclearly willing to pay for the convenience as evidenced by the companys risingrepeat business (loans/customer now over 2.0) and impressive Net PromoterScore (71). We also note that this is not because borrowers are unaware of the

high APRs since OnDeck s disclo sure is clear and upfront about its pricing.

Figure 3: Clear Disclosure Right on Its Homepage

Source: Company website

Short duration, daily collection reduces risk through cycle. With such higheffective APRs, OnDeck appears to be taking excessive risk especially since,unlike many alt-lending peers, the company keeps most loans (and credit risk) onbalance sheet. Credit risk is also magnified by sourcing loans online, whichtends to be a riskier channel (easy to loan shop, fraud).

OnDeck mitigates these risks not only through sophisticated, data-drivenunderwriting, but also with product design and collections. On the product side,OnDeck reduces SMB lending risk by only offering short-term loans (3-24months) with an average term of 10-11 months. Combined with daily ACH

Page 4



5/26

collection on its loans (straight from the borrowers business checking accountthat was used to underwrite the loan), OnDeck gets timely early warnings onrepayment issues and can respond quicker than traditional competitors. Thisserved the company well during the 2008-2009 recession as losses remainedbelow 10% despite unprecedented economic conditions.

Unparalleled resilience. When specialty finance companies fail, it is almost

always because unforeseen credit problems choke off funding due to shrinkingexcess spread in the warehouse lines and securitizations. While OnDeck isrelying on the same wholesale funding, we believe its model is structurallysuperior. With massive 40+% excess spreads (50+% yields, sub-10% losses)and short loan durations, we expect OnDeck to retain access to funding in all butthe harshest loss scenarios (~25%). We note that in our more modest recessionscenario, OnDeck remains profitable and well capitalized even as losses spike tonearly 20%.

Figure 4: OnDeck Remains Profitable Even In Recession Scenario

Source: Company reports and Stifel estimates

OnDeck is not a bank. Given the significant regulatory headaches that come

with a bank charter, we view the companys non -bank status as a significantpositive and competitive advantage. Although bank deposits are clearly a moresecure source of funding, we expect OnDeck to SMB focused non-bank lendershave long escaped regulatory scrutiny and we do not expect this to changeanytime soon (the C in CFPB stands for consumer). More importantly, regulatorshave become increasingly involved with bank underwriting processes underDodd-Frank and we think it is increasingly difficult for banks to follow OnDeckslead in nontraditional, data-driven underwriting.

Growing, sustainable lead. Although banks should at some point catch up andthere are already a host of start-ups targeting SMBs, we believe OnDeck has asubstantial lead with over 7 years of SMB lending experience and continuousreinvestment in its underwriting models. While a major P2P player recentlystarted offering SMB loans, it only has 9 months of data so it will be starting slowand targeting much higher quality borrowers. The SMB market is not only highlyfragmented with plenty of room for more competition (just 1% market share in our2020 bull case), these borrowers are also hard to reach and we believeOnDeck s growth could accelerate with key partnerships and growing brandrecognition. Combined, we are quite bullish on origination growth and see newloan generation topping $10B in our 2020 bull case scenario.

Note: Excludes $0.62 tax benefit from DTA reversal expected in 2Q17

-$0.20

$0.00

$0.20

$0.40

$0.60

$0.80

Adjusted EPS

Base

Bull

Recession

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

20.0%

Net Charge-offs

Base

BullRecession

Page 5



6/26

Concerns

OnDeck is a wholesale-funded, balance-sheet lender in a high risksegment. History has not been kind to fast-growing lending start-ups as toomany lost sight of credit quality in a quest for maintaining rapid growth. Just inour career, we have numerous examples including Providian, Countrywide, andNew Century of lenders that were different only to watch a spectacular collapse.

Unlike traditional Internet/fin tech companies, securitization-funded lenders cantafford to get it wrong because credit mistakes can quickly turn into liquidityproblems as funding tightens up. This often starts a downward spiral as fundingissues force slower origination growth and without fresh loans, credit problemsaccelerate. We truly believe OnDeck is different with an entire culture builtaround credit and a structurally superior product strategy, but it is a riskierfunding model that may be better off as part of a bank long term.

Growth can obscure true credit performance. With originations growingalmost 100% year over year, traditional credit metrics like delinquencies andcharge-offs are understated as rapidly growing originations of new loans diluteportfolio metrics. While this is less of a concern for OnDeck given the shorterduration, SMB loans are lumpier and more sensitive to macro shocks thanconsumer products and the asset class is very much unproven (OnDeck did firstsecuritization). Fortunately, we have found securitization data more reliable inproviding accurate and timely credit metrics and management has indicated itexpects to be making this data public at least quarterly. While it would certainlybe better to have full monthly details around key metrics like delinquencies,payment rates, and excess spreads, at some point the master trust will growenough to warrant public registration (currently 144A).

Funding sources could dry up if credit turns. OnDeck currently has threedifferent funding sources including warehouse lines (30%), securitizations (57%),and marketplace (13%). While all are widely available now with credit losses nearhistorical lows, OnDeck s funding is not guaranteed and could be reduced oreven pulled if the economic and/or credit environment were to significantlyworsen. Marketplace is the least reliable source of funding as investors can pullout at any time and for any reason and will likely be the first funding source to dryup if credit were to turn. While marketplace only makes up 13% of funding today,

management hopes to increase this channel to 25% by the end of 2015. Additionally, while bank warehouse lines are committed facilities, covenants andfinancial triggers are tight so banks can generally reduce or terminate them ifcertain credit covenants/metrics are not met or if the bank decides to reduce itsoverall credit exposure. Finally, the companys recently executed securitizationprovides the most secure source of funding but still relies on investor appetite,which could fall sharply if credit turned.

Business model unproven through credit cycle. Although OnDeck has theoften-rare benefit of surviving a tough macro cycle and even produced fairlyimpressive credit results during the Great Recession, the company was in itsinfancy and has yet to be truly tested through a credit cycle. The behavior ofSMB credit can be volatile and somewhat unpredictable during times ofeconomic stress. OnDeck has had the good fortune of growing up the past fewyears when credit losses have been near historical lows, but the true metal of theplatform and business model will be how it performs when times get tough and todate that really remains to be seen.

Rich valuation for a lender. OnDeck currently trades at nearly 18x our 2017EBITDA estimate, not cheap especially for a finance company with balance sheetrisk. In our view, the current valuation reflects not only the current growth rate butalso the tremendous market opportunity that lies ahead. That said, any misstepalong the way could result in a sharp correction/revaluation, and the risk ofowning a stock with such lofty expectations and in turn valuation should not beoverlooked or minimized.

Page 6



7/26

Given the rapid, tech-driven growth, we also looked at valuation relative tointernet and similar fin tech peers and compared revenue growth to currentEV/EBITDA multiples. Although we had to use OnDecks 2017 estimate, thecompanys current 16.2x EBITDA multiple does not look too far out of linecompared to other fast growing Internet peers. Admittedly, while none of thesecompanies take credit risk and there should be an inherent discount, we note that

ADS continues to enjoy a rich valuation despite significant consumer credit andfunding risk.Figure 5: Revenue Growth vs. EV/EBITDA

Source: FactSet

Scenario Analysis

With the combination of compelling growth potential and significant macro risk, akey part of our Buy rating is our constructive view of both the upside potentialand perhaps more importantly, OnDecks ability to withstand a significantrecession. In addition to our base earnings forecast, we have built full Bull Caseand Recession scenario s to get a more complete picture of OnDecks potential.

For the Bull Case, we use the following key assumptions:

1. Stronger origination growth, reaching $5.5B in 2017, up from $4.5B

2. Higher top line yields less assumed pricing pressure, 39.7% vs. 37.7%

3. Limited operating leverage despite faster revenue growth, opex 44.5%vs. .44.6% as faster growth requires significant opex investments

4. No change to credit provisioning, constant at 6% of originations

Despite relatively conservative assumptions (3&4), our optimistic model produces

much stronger profit growth with 2020 EPS of $2.92 vs. $1.89 base and $407Min adjusted EBITDA (vs. $264M). Importantly, due to short duration, the loanbook only reaches $3.4B (1% market share) and our model suggests OnDeckwould not need to raise additional capital to fund this growth.

ONDK 2017

ADSFLT

XOOM

FBLNKD

TWTR

EBAYGRUB

SSTK

TRUEYELP

0

10

20

30

40

50

60

5 10 15 20 25 30

% R e v e n u e G r o w t h

( 2 0 1 6

)

EV/EBITDA (2016)

Revenue Growth vs EV/EBITDA

Page 7



8/26

Figure 6: Significant Upside Potential in Bull Case Scenario

Source: Company reports and Stifel estimates

Perhaps even more importantly, OnDeck performs admirably in our recessionscenario. Although 2017 EPS drops to just $0.03 (vs. $0.61), earnings growthrebounds quickly as we would expect higher margins on higher quality growthpost-recession. Again, thanks to the short duration, we would expect the portfolio

to turn over in just a year and by 2020 EPS power should back to base caseestimates.

For the Recession Case, we use the following key assumptions:

1. Starting in 1Q17, the economy starts to deteriorate rapidly drivingOnDeck credit losses up to nearly 20% by 4Q17.

2. OnDeck responds by pulling back on origination growth down to just 5%by 4Q17 vs. 45% in the base case

3. Reduced origination and tighter credit raise top line yields, up to 41.9%from 37.1% base case

4. OnDeck pulls back on expenses especially marketing but lowerrevenues drive opex higher 41% vs. 40% base.

5. OnDeck recovers quickly since it can quickly adjust underwriting andportfolio turns in just 6 months so very profitable post-recession amidlack of competition.

0

1,000

2,000

3,000

4,000

T h o u

s a n

d s

Quarterly Originations

Base Case

Bull Case

Recession

0

100,000

200,000

300,000

400,000

Gross Revenue

Base

Bull

Recession

Page 8



9/26

Key Investment ThemesRecession-Resistant Business ModelOnDeck has a higher risk strategy, but we see many reasons to be optimistic thiscompany is built to survive. It of course starts with revolutionary data-drivenunderwriting but models can break down and often at the worst time recession.We do admit there is a risk OnDeck gets it wrong, but we also see a business

model that is structurally better protected against credit disasters for severalreasons. First and foremost these are short term loans averaging 10 monthswith 5 month durations so in less than two quarters, OnDeck already has half itsprincipal back. More importantly, with such short loans, OnDeck can quicklylearn from its mistakes and make model corrections.

Second, OnDeck has an unparalleled early-warning system to spot problemloans before credit issues spiral out of control. OnDeck the only lender we haveever known in almost 17 years covering this sector that requires daily ACHpayments and collections effort start after just three missed payments.Moreover, OnDeck underwriting models continue to monitor the portfoliocompanies after origination and can spot credit stress even before the firstmissed payment. Combined with constant model improvement, OnDeck shouldalways be well ahead of the credit curve especially relative to its competitors.

Third and most importantly, OnDecks loans are priced to more than account forthe high risk. With massive 40+% excess spreads (50+% yields, sub-10%losses) and short loan durations, we expect OnDeck to retain access to fundingin all but the harshest loss scenarios. We note that losses would have to over20% for a sustainable period before OnDeck would default on its warehouselines and the securitization has even higher thresholds. As such, although arecession or other credit event would be nasty for the stock, we would expectOnDeck to survive and then thrive in the post-recession carnage.

Strong Consistent Credit Performance In our view, OnDeck s biggest accomplishment has been it s impressive trackrecord underwriting SMB loans. Unlike many of its newly formed competitors,OnDeck started providing loans before the 2008-09 recession with impressiveresults. Indeed, despite mostly third party originations (broker) in the formativeyears, the 2008 vintage had cumulative losses under 10% and losses have beenlower in every cohort since. OnDeck s impressive track record and sophisticatedunderwriting helped the company complete the first securitization in this newsector.

Page 9



10/26

Figure 7: Net Charge-offs by Cohort


Continuous Improvement Adds To DifferentiationMore importantly, we expect OnDeck s underwriting models to only get better .The company is highly committed to leveraging new sources of data to improveits ability to predict losses and recently launched its fifth generation model. V5.0can automatically score almost every app received (99%, up from 65% just twoyears ago) and now uses over 100 data sources and up to 10,000 raw attributes,up from 300-400 in 2012. With another year of rapid growth and innovation(originations + 171% YTD), OnDeck has now processed over 4.4M customerpayments only adding to its ability to model credit. Moreover, although OnDeckhas only just started to leverage social data (mostly fraud detection), it is buildinga massive database of indicators just as reviews, check- ins, and +1s. Weexpect OnDeck s sixth generation model next year to represent anothersubstantial leap forward, not only improving its ability to score and predict credit,but also further expand its ability to approve and price a wider range ofborrowers.

True Innovation and Virtuous Circle Drive Long-Term Potential With continuously improving models on an ever-growing database, we thinkOnDeck has a sustainable competitive advantage. Although OnDeck s successhas spawned a host of alt-lender competitors, we think they will struggle to matchOnDeck s scale and data advantage. Longer term, we expect consolidation asbanks are clearly the better platform given not only their stable deposit fundingand SMB relationships, but also data advantage. We note that some ofOnDeck s most predictive data are the daily inflows and outflows of the SMBs

business checking accounts. One SMB lending start up told us that 80% of itscustomers had business checking account with a top 10 bank.

Additionally, iterative, data-driven underwriting should only get better as OnDeckadds new data sources like merchant acquiring data. As the model improves,we expect OnDeck to grow its credit spectrum, especially in longer-term, loweryielding but also lower loss term loans to higher quality borrowers. As OnDecktakes advantage of its substantial head start, we believe its underwritingadvantage should prove sustainable.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2007 2008 2009 2010 2011 2012 2013 2014

Page 10



11/26

Figure 8: OnDeck Scores Proven Results


Improving Channel Mix; Deemphasizing Brokers

SMBs are notoriously hard to reach so historically OnDeck relied heavily onexpensive broker channels to help source loans. However, while brokers canprovide easy access to these SMBs, not only is distribution through brokersexpensive, but the lack of control over the customer experience adds to renewal,credit, and reputation risk. Fortunately, OnDeck has been increasinglydiversifying away from brokers as increased scale and brand recognition haveled to successful strategic partnerships with traditional SMB service providers.These newer partnerships with merchant acquirers as well as banks are ideal asboth have not only SMB access, but also often include valuable underwritingdata.

While funding advisors (brokers) and strategic partnerships remain importantchannels for OnDeck, its fastest growing channel today is Direct. Importantly,OnDeck leverages technology not just for underwriting but for marketing as it is

currently tracking over 10mm SMBs for preapprovals. This SMB database allowsOnDeck to directly target SMBs through mail offers and, coupled with nationalradio and television campaigns, connect OnDeck directly with business owners.With higher repeat business, stronger credit performance, and most importantlyno profit sharing with brokers/partners, Direct is OnDecks most profitablechannel and it will be even more so as the business scales.

Figure 9: OnDeck Acquisition Channels Shifting


Page 11



12/26

Pricing Attractive Even at 50% APRSMB loans have traditionally been quoted on a cents per dollar basis whereborrower pays a fixed amount per dollar borrowed. Given the often short-termnature of the loans, this can make APRs look extraordinarily high (over 50%)when annualized. Despite these high rates, SMBs still benefit as loans pay for

themselves quickly by driving revenue growth. Typical uses include hiring, buyinginventory, marketing, and expansion. Although we expect pricing and yield totrend lower over time due to a higher percentage of cheaper direct loans (nobroker mark-up) coupled with the ramp of the newer credit line product, we donot expect competition or regulation to put pressure on top-line yields.

Repeat Business Key Profit DriverOnDeck customer retention is a key indicator of success as the majority ofborrowers borrow again with an average of more than two loans per customer.Repeat loans are available at 50% pay down and are significantly more profitableas the company has already paid to acquire the customer. Despite obvious risks,repeat loans have lower losses as well as higher profits. In our view, thecompanys ability to continue to drive loans per acquired customer higher will notonly increase top-line growth but also boosts operating leverage imbedded in

OnDecks business model , allowing it to scale faster.Figure 10: Estimated Customer Lifetime Value

1. Based on upfront commissions and direct marketing expenses2. Contribution is interest and fees less acquisition, 3rd third party processing, servicing, funding, and credit costs.


Traditional Specialty Finance Funding Sources OnDeck uses traditional funding sources including warehouse lines andsecuritization. OnDecks f irst securitization transaction in 2Q14 created a new

ABS category, and a competitor has now followed OnDecks lead. While it stillearly and the asset class needs a lot more history before ratings can increase(currently BBB), we expect better execution on its next securitization, likely mid-2015. OnDeck is also starting to sell more loan production to broaden liquidity,from 13% in 3Q14 growing to an estimated 25% by the end of 2015. Still, weexpect OnDeck to become a major securitization issuer and attract at least oneadditional rating agency to DBRS on its next deal. With a master trust structureto help control duration and reduce issuance costs and a growing track record ofstrong excess spread, we expect securitization to power improving funding costsover time.

Page 12



13/26

Figure 11: Securitization Lowers Funding Costs, Maintains High NIM

Source: Company data and Stifel estimates

More Risk = More ReturnWhile balance sheet risk will undoubtedly weigh on valuation relative to its P2Pcompetitor, holding loans is significantly more profitable than selling. We estimateunit economics of holding the risk (managed model) vs. selling (serviced model)is more than twice as profitable. In ad dition, although OnDecks rapid growth andbalance sheet strategy normally would require a capital raise to fund growth, weestimate that OnDeck would not need additional capital in either or bull orrecession scenarios because its loans are so short (limiting balance sheetgrowth) and profitable (equity builds fast).

Figure 12: On Balance Sheet Loans More Than Twice As Profitable

Source: Stifel estimates

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

0%

10%

20%

30%

40%

50%

2 Q 1 2

3 Q 1 2

4 Q 1 2

1 Q 1 3

2 Q 1 3

3 Q 1 3

4 Q 1 3

1 Q 1 4

2 Q 1 4

3 Q 1 4

4 Q 1 4 E

1 Q 1 5 E

2 Q 1 5 E

3 Q 1 5 E

4 Q 1 5 E

1 Q 1 6 E

2 Q 1 6 E

3 Q 1 6 E

4 Q 1 6 E

1 Q 1 7 E

2 Q 1 7 E

3 Q 1 7 E

4 Q 1 7 E

NIM

NIM Yield Cost of Funds

Managed ServicedOrigination costs ($7) ($7)Origination fee $2 $2Purchase proceeds $8Interest income $24Funding costs ($3)Principal losses ($7)Servicing fee $1Unit contribution $9 $4

Page 13



14/26

Estimates and Valuation

Give n OnDecks current origination growth (150%+) , modeling future earningsestimates is challenging as there is considerable uncertainty about its ability tosustain this pace and other key earnings drivers including yield, funding cost,provisions, and operating leverage . Additionally, GAAP accounting requires thecompany to provide for expected losses at the time the loan is originated, making

it very difficult to for the company to earn a GAAP profit until origination growthslows to a more reasonable level. As such, we do not currently expect OnDeck tobecome profitable on a GAAP basis until sometime in 2016 (likely 2Q16 basedon current projections). That said, we expect rapid origination growth to drive50%+ revenue growth through at least 2017.

Our 2015, 2016, and 2017 EPS estimates are -$0.22, $0.86, and $0.61,respectively. Importantly, 2016 estimates are boosted by a one-time $0.62benefit from the DTA reversal. Our revenue estimates of $247mm, $389mm, and$581mm imply growth of 59%, 58%, and 49%, respectively. Despite earningsgrowth muted by high upfront provision expense, top-line growth can acceleraterapidly especially in our bull case where portfolio growth and scale offsets creditcosts.

Figure 13: Valuation by Scenario, 2017 vs. 2020

Source: Stifel estimates

As a result, we think the valuation looks much more attractive, especially on 2020bull case estimates. Granted OnDecks extremely rapid growth makes valuationmore art than science and we admit OnDecks current valuation looks expensiveon traditional metrics. However, we believe the growth potential here is sopowerful that OnDeck can easily grow into this valuation noting that OnDeck

currently trades at just 4.1x our bull case 2020 EBITDA estimate. If we were touse a more growth appropriate 15x multiple and discount it back, it implies ONDKis worth over $40 per share today even at a steep 15% discount rate. Finally,although we note that our bull case origination growth is somewhat aggressive,we have taken a conservative approach to other key drivers such as provisionexpense and operating leverage, implying even greater upside potential.

Base Bull RecessionCurrent Market Cap (M) $1,735 $1,735 $1,735

2017EOriginations (000s) $4,541 $5,509 $4,202Revenue (M) $581 $735 $611Revenue/Origination $0.128 $0.133 $0.145Adj EBTDA Margin 16.8% 19.7% 1.6%Adj EBITDA (M) $98 $145 $10EV/EBITDA 17.8x 12.0x 177.9x

2020EOriginations (000s) $7,909 $10,680 $7,230Revenue (M) $1,028 $1,477 $975Adj EBTDA Margin 25.7% 27.6% 27.2%Adj EBITDA $264 $407 $265EV/EBITDA 6.6 4.3 6.3

Page 14



15/26

Business Model

OnDecks business model is rather simple as the company primarily generatesrevenue from interest income, which is derived from the spread between whatOnDeck can charge SMBs it lends to and the cost to borrow those funds fromeither a bank (warehouse line) or investors (securitizations). Additionally, thecompany generates origination fees as well as gains on sale from loans it

decides not to hold on balance sheet.The companys major expenses are provision expense and eventually lossesfrom loans that default as well as cost to acquire the customer (marketing),investments into the platform and underwriting capabilities (technology), andprocessing and servicing the loans.

OnDeck offers two products a term loan and a line of credit. Term loans makeup over 90% of revenue today as the line of credit product has been rolled outrecently but over time management expects line of credit to contribute moremeaningfully. The differences in the products are highlighted in the table below.

Figure 14: Two Key Products


An important distinction of OnDecks business model that differentiates it fromother lenders is its daily or weekly ACH draft collection process. This not onlyallows OnDeck to know very early on if a customer is having trouble paying backthe loan or line of credit but also gives the customer an Uber-like experience.

Industry Overview

Although regulators have been pushing to inc rease banks willingness to lend,loans to SMBs are still shrinking as a percentage of loans. Banks use anantiquated underwriting process that is time-consuming and inefficient. Onaverage, business owners have to apply to three banks, require approximately26 hours of time, and are approved less than 50% of the time.

Page 15



16/26

Figure 15: SMBs Underserved


Despite banks failure to serve SMBs, there arent many alternatives . Merchant

cash advances (MCA) take a cut of credit card receipts but are very expensivewith effective APRs over 100%. SMBs often are forced to use personal lendingproducts such as credit cards/home equity.

OnDeck fills the gap with reasonably priced short-term loans that undercut MCAsbut are much easier to obtain than a bank loan. OnDeck s proprietary creditengine aggregates and analyzes thousands of data points from unique, disparatedata sources to assess the creditworthiness of small businesses rapidly andmore accurately than traditional underwriting. An entire application can be doneonline in minutes and funded as soon as next day. This quick simple process isa huge competitive advantage over banks that SMBs are willing to pay for.

Additionally, powered by the Internet, we believe OnDeck has just scratched thesurface of the huge SMB lending opportunity. With 28mm SMBs, it is hard to

estimate unmet loan demand, but we conservatively estimate OnDeck can groworiginations at least 50% per year through 2017 and likely longer.

Page 16



17/26

Figure 16: Company Management

Source: Company website

Investment Risks

OnDeck s funding is not guaranteed . The companys funding is provided bybanks and the capital markets, which can be can be fickle especially when timesare tough . If the company is unable to get funding, OnDecks financial results andhealth could be significantly adversely impacted.

SMB credit is volatile and losses could exceed estimates. While it issignificantly more profitable to hold the loans on balance sheet and take creditrisk, if the economic environment were to worsen, losses could exceed estimatesand negatively impact the companys results or in extreme cases the ability tostay in business.

Although OnDeck is not a bank, regulation of SMB lending could change .While it is significantly more attractive to be a non-bank lender today, if theregulatory landscape were to change, OnDeck could be forced to become a bankholding company or at the very least change its practices, which could negativelyimpact the company.

Although reliance on brokers has been declining, disreputable behaviormay impact the companys reputation . In using the broker channel, OnDeckloses the majority of control over the customer experience, and if brokers are

OnDeck Capital, Inc.Officers

Noah BreslowChief Executive Officer

Noah Breslow is the chief executive officer at OnDeck. As OnDecks first employee, Mr. Breslow has held a varietyof leadership roles since the companys 2006 inception and became CEO in June of 2012. During his tenure as CEO,OnDeck has been named to the Inc. 500 | 5000 List of the Fastest Growing Companies in America three years in arow. To date, OnDeck has delivered over $1.5 billion to small businesses nationwide. Previously, Mr. Breslow wasVP of Marketing & Product Management for Tacit Networks, guiding the company from ini tial launch to itssuccessful sale to a public company. He holds a bachelors degree in computer science f rom MIT and an MBA withdistinction from Harvard Business School.

Howard KatzenbergChief Financial Officer

Howard Katzenberg is the chief f inancial offi cer at OnDeck. Under his financial leadership since 2008, OnDeck hasgrown originations five -fold and increased annual revenues by ove r 1,000%. During his tenure, Mr. Katzenberg hasalso negotiated several equity transactions and structured numerous credit facilities, providing OnDeck with amplecapital to scale its business. Prior to joining OnDeck, Mr. Katzenberg spent several years as a consultant specializingin strategy, operational ramp, and fundraising for early- to mid-stage companies, including roles within AmericanExpress OPEN, American Express venture capital group, and Swif t Financial. Mr. Katzenberg graduated summa cum

laude from Cornell University and holds an MBA from the Wharton School of the University of Pennsylvania.

James HobsonChief Operating Officer

James Hobson is the chief operating officer at OnDeck, where he manages the day-to-day operations of thebusiness and provides leadership to OnDecks operations, analytics, credit, risk management, platform solutions,and business development teams. His career spans a wide array of leadership experience in building and leadingtechnology-enabled businesses. Most recently, Mr. Hobson served as SVP, Technology Operations for iQor, Inc., aleading private equity-backed global business process outsourcing company. At iQor he helped build a platform forcommercializing iQors proprietary suite of business appli cations and managed a global technology team. Prior toiQor, Mr. Hobson co-founded BuyYourFriendADrink.com, which was sold to LivingSocial in 2009. Earlier in his career,he was a consultant at McKinsey & Company and worked in the M&A group at AT&T. Mr. Hobson holds a bachelorsdegree in e conomics from Hamilton College and an MBA with high distinction f rom Harvard Business School, wherehe was chosen as a Baker Scholar.

Page 17



18/26

disreputable it could hurt the companys reputation and ultimate ly impact the topand bottom line.

Competition is increasing and may lead to pricing pressure. Although we donot see price competition in the market today, over time competition couldintensify and ultimately lead to pricing pressure. Furthermore, if irrational playersenter the market, the companys ability to effective ly price risk could be impacted

and adversely impact both OnDecks growth and profit ability.

Page 18



19/26

Target Price Methodology/RisksTarget Price MethodologyOur $28 target price is based on 20x our 2017 adjusted EBITDA estimate.

Risks

OnDecks funding is not guaranteed. The companys funding is provided bybanks and the capital markets, which can be can be fickle especially when timesare tough. If the company is unable to get funding, OnDecks financial results andhealth could be significantly adversely impacted.

SMB credit is volatile and losses could exceed estimates. While it issignificantly more profitable to hold the loans on balance sheet and take credit risk,if the economic environment were to worsen, losses could exceed estimates andnegatively impact the companys results or in extreme cases the ability to stay inbusiness.

Although OnDeck is not a bank, regulation of SMB lending could change .While it is significantly more attractive to be a non-bank lender today, if theregulatory landscape were to change, OnDeck could be forced to become a bankholding company or at the very least change its practices, which could negativelyimpact the company.

Company DescriptionOn Deck Capital, Inc. (OnDeck) is a leading online platform for small businesslending. OnDeck is seeking to transform small business lending by making itefficient and convenient for small businesses to access capital. Enabled by thecompanys proprietary technology and analytics, OnDeck aggregates and analyzesthousands of data points from dynamic, disparate data sources to assess thecreditworthiness of small businesses rapidly and accurately. Small businesses canapply for a term loan or line of credit on OnDecks website in minutes and, using thecompanys proprietary OnDeck Score, a funding decision can be made immediatelyand funds transferred as fast as the same day. OnDeck has originated more than$1.7 billion in loans and collected more than 4.4 million customer payments since

the companys first loan in 2007.

Page 19



20/26

OnDeck Comps

Ticker Price Mkt CapYTD Price

Chg %Short

Interest %2015 RevGrowth

2016 RevGrowth

PE2016E

2016EV/REV

2016EV/EBI

Fin TechAlliance Data Systems Corporation ADS 290.75 18,614 1.6 5.9 26.8 9.2 16.9 3.8 12.8Envestnet, Inc. ENV 50.61 1,738 3.0 5.1 23.6 20.5 34.2 3.5 17.5

MarketAxess Holdings Inc. MKTX 71.51 2,673 -0.3 2.5 10.0 12.4 27.2 7.9 13.5Financial Engines, Inc. FNGN 35.45 1,842 -3.0 18.0 14.0 17.9 30.0 4.2 12.9On Deck Capital, Inc. ONDK 22.69 1,501 1.2 NM 58.6 57.8 26.4 4.1 50.3WEX Inc. WEX 98.81 3,831 -0.1 3.1 11.6 10.0 15.6 4.5 10.1FleetCor Technologies, Inc. FLT 143.55 12,034 -3.5 0.9 56.5 10.5 19.3 6.8 11.6Xoom Corporation XOOM 15.97 614 -8.8 10.3 23.0 19.2 24.1 2.2 13.5Average -1.2 6.5 28.0 19.7 24.2 4.6 17.8

High Growth InternetFacebook, Inc. Class A FB 77.74 216,727 -0.4 1.6 37.8 32.2 30.1 8.5 14.3LinkedIn Corporation Class A LNKD 227.13 28,204 -1.1 7.9 34.3 29.3 55.5 6.8 22.7Pandora Media, Inc. P 16.31 3,394 -8.5 12.9 31.9 28.3 18.4 2.0 12.4Twitter, Inc. TWTR 40.17 25,488 12.0 5.3 65.7 49.3 52.8 6.6 22.7Yelp Inc. Class A YELP 56.07 4,066 2.4 15.9 43.3 36.5 62.1 5.4 20.1Zillow, Inc. Class A Z 102.72 4,177 -3.0 35.4 37.5 29.9 63.5 6.5 26.1

Average 0.2 13.2 41.7 34.3 47.1 6.0 19.7

Marketplaces/E-CommerceeBay Inc. EBAY 55.63 69,113 -0.9 1.4 12.1 12.7 15.3 3.0 9.6GrubHub, Inc. GRUB 38.25 3,118 NM 5.3 29.5 19.5 57.1 7.4 22.7Homeaway, Inc. AWAY 27.14 2,560 -8.9 8.8 19.4 19.3 29.5 3.4 12.5Shutterstock, Inc. SSTK 62.63 2,219 -9.4 8.2 32.2 23.5 32.8 3.7 15.3TrueCar, Inc. TRUE 21.25 1,639 NM 6.0 36.2 32.6 48.5 4.1 27.6Amazon.com, Inc. AMZN 296.93 137,480 -4.3 1.7 18.4 17.8 102.6 1.1 13.2Zulily, Inc. Class A ZU 22.27 2,791 -4.8 20.5 47.5 39.0 29.2 1.0 13.2

Average -6.0 6.2 27.9 23.5 39.5 4.4 16.2

Covered companies in BOLDSource: FactSet and Stifel estimates

ValuationMarket Data Revenue

Page 20



21/26

On Deck Capital, Inc. (NYSE: ONDK) $ (0.29) $ (0.36) ($0.12) $0.03 $0.02 ($0.09) $ (0.16) ($0.08) ($0.06) ($0.04) ($0.04) $ (0.22) ($0.02) $0.66 $0.11 $0.11 $ 0.86 $ 0.61 $ 1.26 $ 1.63 $ 1.89Figures in 000's unless otherwise noted

HardcodedCalculationForecast/Assumption

2012 2013 1Q14 2Q14 3Q14 4Q14E 2014E 1Q15E 2Q15E 3Q15E 4Q15E 2015E 1Q16E 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E 2020EINCOME STATEMENTRevenue Interest Income 25,273 62,941 26,348 32,864 40,661 43,202 143,075 44,762 48,900 55,577 59,990 209,229 66,593 74,950 84,957 90,234 316,734 468,492 636,016 761,761 839,474

Gain on Sales of Loans - 788 1,343 1,584 1,642 3,498 8,067 5,245 6,489 8,221 10,135 30,091 11,789 14,138 16,240 18,667 60,835 95,282 119,828 143,794 158,173 Other Revenue 370 1,520 871 1,054 1,206 1,168 4,299 1,500 1,662 1,914 2,104 7,180 2,351 2,673 3,036 3,267 11,327 16,913 22,675 27,167 29,929

Total Gross Revenue 25,643 65,249 28,562 35,502 43,509 47,868 155,441 51,507 57,051 65,713 72,229 246,500 80,734 91,761 104,232 112,168 388,896 580,687 778,519 932,722 1,027,576

Cost of revenue Provision For Loan Losses 12,469 26,570 16,579 13,073 17,359 18,912 65,923 20,390 22,721 26,137 29,342 98,590 31,068 34,412 38,179 42,472 146,131 207,334 269,613 323,535 355,889

Funding Costs 8,294 13,419 4,640 3,801 4,090 5,514 18,045 5,940 6,097 6,177 7,166 25,381 7,728 8,373 8,879 10,227 35,207 50,996 68,623 83,893 94,409 Cost of Revenue 20,763 39,989 21,219 16,874 21,449 24,426 83,968 26,331 28,817 32,314 36,509 123,971 38,796 42,785 47,058 52,699 181,338 258,330 338,236 407,428 450,298

Net Revenue 4,880 25,260 7,343 18,628 22,060 23,442 71,473 25,176 28,234 33,399 35,721 122,530 41,938 48,976 57,174 59,470 207,558 322,357 440,283 525,293 577,278

Operating Expenses S ales and Marketing 6,633 18,095 6,361 7,113 8,325 12,016 33,815 12,121 13,127 15,026 16,096 56,370 17,627 19,662 21,896 22,984 82,169 111,410 138,951 160,757 173,015

Technology and Analytics 5,001 8,760 2,909 3,799 4,649 8,114 19,471 9,561 9,933 11,359 12,189 43,043 13,370 14,902 16,649 17,470 62,391 82,862 100,677 114,902 122,497 Processing and Servicing 2,919 5,577 1,609 2,084 2,235 2,694 8,622 2,823 2,991 3,284 3,401 12,499 3,586 3,825 4,087 4,130 15,628 17,591 19,463 20,986 20,552 General and Administrative 6,935 12,169 3,392 4,434 6,142 7,190 21,158 7,604 8,054 8,784 8,972 33,414 9,378 9,947 10,726 10,855 40,907 47,105 51,657 56,172 57,795

Total Operating Expenses 21,488 44,601 14,271 17,430 21,351 30,013 83,065 32,110 34,105 38,453 40,658 145,326 43,961 48,337 53,358 55,439 201,095 258,968 310,747 352,818 373,858

Operating Income (16,608) (19,341) (6,928) 1,198 709 (6,571) (11,592) (6,934) (5,871) (5,054) (4,937) (22,796) (2,024) 640 3,816 4,031 6,462 63,389 129,537 172,476 203,421

Other (expense) income Interest Expense (89) (1,276) (157) (62) (55) (85) (359) (137) (176) (206) (225) (744) (216) (206) (197) (188) (806) (750) (969) (1,219) (1,469)

Other Expenses (147) (3,739) (6,632) (2,190) (300) (9,122) Total Other Expenses (236) (5,015) (6,789) (2,252) (355) (85) (9,481) (137) (176) (206) (225) (744) (216) (206) (197) (188) (806) (750) (969) (1,219) (1,469)

Income Before Provision for Income Taxes (16,844) (24,356) (13,717) (1,054) 354 (6,657) (21,074) (7,070) (6,047) (5,260) (5,162) (23,540) (2,239) 434 3,619 3,843 5,656 62,639 128,568 171,257 201,952 Provision for Income Taxes - - - - - - - - - - - - 2,500 (47,300) (1,100) (1,500) (47,400) 32,572 53,998 71,928 84,820 Net Income / (Loss) (16,844) (24,356) (13,717) (1,054) 354 (6,657) (21,074) (7,070) (6,047) (5,260) (5,162) (23,540) (4,739) 47,734 4,719 5,343 53,056 30,067 74,569 99,329 117,132

Fully Diluted GAAP EPS ($0.30) ($0.43) ($0.24) ($0.02) $0.01 ($0.12) ($0.37) ($0.11) ($0.09) ($0.08) ($0.08) ($0.35) ($0.07) $0.62 $0.06 $0.07 $0.68 $0.39 $0.96 $1.27 $1.49Fully Diluted Adjusted EPS ($0.29) ($0.36) ($0.12) $0.03 $0.02 ($0.09) ($0.16) ($0.08) ($0.06) ($0.04) ($0.04) ($0.22) ($0.02) $0.66 $0.11 $0.11 $0.86 $0.61 $1.26 $1.63 $1.89

Basic Share Count 56,161 56,161 56,161 56,161 56,161 57,827 56,494 66,258 66,358 66,458 66,558 64,692 66,658 66,758 66,858 66,958 66,758 67,158 67,558 67,958 68,358 Fully Diluted Share Count 66,258 66,258 66,258 66,258 66,258 67,925 66,592 76,258 76,358 76,458 76,558 74,712 76,658 76,758 76,858 76,958 76,758 77,158 77,558 77,958 78,358

Key Income Statement Assumptions:Effective Interest Yield on Loan Balance 38.5% 42.7% 41.2% 41.2% 41.6% 39.3% 41.1% 39.2% 39.9% 40.6% 38.5% 39.1% 38.4% 39.2% 39.8% 37.8% 38.6% 37.7% 37.1% 36.2% 35.4%Gain on Sale of Loans 4.2% 4.4% 7.1% 7.1% 6.0% 6.0% 6.3% 6.5% 6.8% 7.0% 6.7% 7.3% 7.5% 7.8% 8.0% 7.7% 8.0% 8.0% 8.0% 8.0%Other Income as a % of Interest Income and Gain on Sale 1.5% 2.4% 3.1% 3.1% 2.9% 2.5% 2.8% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%Provisions as a % of Originations (Not Sold) 7.2% 6.0% 8.4% 5.8% 6.0% 7.0% 6.7% 7.1% 7.0% 6.9% 6.8% 6.9% 6.7% 6.6% 6.5% 6.4% 6.5% 6.2% 6.0% 6.0% 6.0%Cost of Funds on Non-Recourse Debt 12.5% 10.8% 9.3% 6.4% 5.4% 6.1% 6.5% 6.2% 5.9% 5.2% 5.2% 5.5% 5.1% 5.1% 4.8% 4.8% 4.9% 4.6% 4.5% 4.5% 4.5%Sales and Marketing / Revenue 25.9% 27.7% 22.3% 20.0% 19.1% 25.1% 21.8% 23.5% 23.0% 22.9% 22.3% 22.9% 21.8% 21.4% 21.0% 20.5% 21.1% 19.2% 17.8% 17.2% 16.8%Technology and Analytics / Revenue 19.5% 13.4% 10.2% 10.7% 10.7% 17.0% 12.5% 18.6% 17.4% 17.3% 16.9% 17.5% 16.6% 16.2% 16.0% 15.6% 16.0% 14.3% 12.9% 12.3% 11.9%Processing and Servicing / Revenue 11.4% 8.5% 5.6% 5.9% 5.1% 5.6% 5.5% 5.5% 5.2% 5.0% 4.7% 5.1% 4.4% 4.2% 3.9% 3.7% 4.0% 3.0% 2.5% 2.3% 2.0%General and Administrative / Revenue 27.0% 18.7% 11.9% 12.5% 14.1% 15.0% 13.6% 14.8% 14.1% 13.4% 12.4% 13.6% 11.6% 10.8% 10.3% 9.7% 10.5% 8.1% 6.6% 6.0% 5.6%Total Operating Expense / Revenue 83.8% 68.4% 50.0% 49.1% 49.1% 62.7% 53.4% 62.3% 59.8% 58.5% 56.3% 59.0% 54.5% 52.7% 51.2% 49.4% 51.7% 44.6% 39.9% 37.8% 36.4%Annualized Cost of Funds on Recourse Debt 4.4% 16.8% 7.0% 8.3% 7.3% 6.5% 5.7% 6.3% 6.3% 6.0% 6.0% 6.2% 5.8% 5.5% 5.3% 5.0% 5.4% 5.0% 5.1% 5.1% 5.1%Depreciation and Amortization / Revenue 6.0% 4.1% 3.1% 2.5% 2.5% 3.0% 2.7% 3.2% 3.3% 3.3% 3.2% 3.2% 3.2% 3.1% 3.1% 3.0% 3.1% 2.9% 2.9% 2.9% 2.9%Stock-Based Compensation Expense / Revenue 1.0% 0.7% 0.8% 1.1% 1.9% 2.7% 1.8% 3.8% 3.7% 3.7% 3.6% 3.7% 3.5% 3.4% 3.3% 3.1% 3.3% 3.0% 3.0% 3.0% 3.0%Tax rate 52.0% 42.0% 42.0% 42.0%

Adjusted EBITDA and EarningsAdjusted EBITDA G AA P N et I nc om e ( 16 ,8 44 ) ( 24 ,3 56 ) ( 13 ,7 17 ) (1,054) 354 (6,657) (21,074) (7,070) (6,047) (5,260) (5,162) (23,540) (4,739) 47,734 4,719 5,343 53,056 30,067 74,569 99,329 117,132 + Interest Expense 89 1,276 157 62 55 85 359 137 176 206 225 744 216 206 197 188 806 750 969 1,219 1,469 + Provision for Income Taxes - - - - - - - - - - - - 2,500 (47,300) (1,100) (1,500) (47,400) 32,572 53,998 71,928 84,820

+ Depreciation and Amortization 1,545 2,645 878 877 1,093 1,418 4,266 1,649 1,869 2,145 2,309 7,971 2,556 2,877 3,238 3,416 12,088 16,840 22,577 27,049 29,800 + Stock-Based Compensation Expense 244 438 233 405 809 1,313 2,760 1,945 2,109 2,448 2,587 9,089 2,836 3,101 3,403 3,491 12,831 17,421 23,356 27,982 30,827 + Revaluation on Warrants 147 3,739 6,632 2,190 300 - 9,122 - - - - - - - - - - - - - -

Adjusted EBITDA (14,819) (16,258) (5,817) 2,480 2,611 (3,840) (4,566) (3,339) (1,893) (461) (42) (5,735) 3,368 6,618 10,457 10,938 31,381 97,650 175,469 227,506 264,048 Adjusted EBITDA margin -57.8% -24.9% -20.4% 7.0% 6.0% -8.0% -2.9% -6.5% -3.3% -0.7% -0.1% -2.3% 4.2% 7.2% 10.0% 9.8% 8.1% 16.8% 22.5% 24.4% 25.7%

Adjusted Net IncomeG AA P N et I nc om e ( 16 ,8 44 ) ( 24 ,3 56 ) ( 13 ,7 17 ) (1,054) 354 (6,657) (21,074) (7,070) (6,047) (5,260) (5,162) (23,540) (4,739) 47,734 4,719 5,343 53,056 30,067 74,569 99,329 117,132

+ Stock-Based Compensation Expense 244 438 233 405 809 1,313 2,760 1,945 2,109 2,448 2,587 9,089 2,836 3,101 3,403 3,491 12,831 17,421 23,356 27,982 30,827 + Revaluation on Warrants 147 3,739 6,632 2,190 300 - 9,122 - - - - - - - - - - - - - -

Adjusted Net Income (16,453) (20,179) (6,852) 1,541 1,463 (5,343) (9,191) (5,125) (3,938) (2,812) (2,576) (14,451) (1,903) 50,834 8,122 8,834 65,887 47,487 97,925 127,311 147,959 Adjusted Net Income Margin -64.2% -30.9% -24.0% 4.3% 3.4% -11.2% -5.9% -10.0% -6.9% -4.3% -3.6% -5.9% -2.4% 55.4% 7.8% 7.9% 16.9% 8.2% 12.6% 13.6% 14.4%

Free Cash Flow (8,176) (14,320) (5,073) (2,032) (1,160) (4,849) (13,113) (4,524) (3,559) (2,810) (2,771) (13,664) (845) 904 3,270 3,383 6 ,712 45,974 88,996 116,070 133,257

Key Performance Indicators Originations 173,247 458,917 227,350 248,067 312,889 327,151 1, 11 5, 45 7 369 ,787 424,983 500,885 576,334 1, 871, 989 6 26, 361 709,117 795,983 896,044 3,027,504 4,541,260 5, 991, 396 7,189,675 7,908,643 Unpaid principal balance 90,276 215,966 280,117 338,815 422,050 438,174 438,174 458,476 501,931 572,493 650,227 650, 227 711,657 792,066 886,520 996,489 996,489 1,460,266 1, 891, 907 2,273,184 2,504,487 A verage loans 65,609 147,398 256,044 319,122 391,034 440,083 348,186 457,197 489,702 547,651 622,992 534, 433 693,465 764,933 852,911 955,678 820,738 1,241,081 1, 713, 506 2,101,583 2,374,163

Effective interest yield 38.5% 42.7% 41.2% 41.2% 41.6% 39.3% 41.1% 39.2% 39.9% 40.6% 38.5% 39.1% 38.4% 39.2% 39.8% 37.8% 38.6% 37.7% 37.1% 36.2% 35.4% A verage funding debt outstanding 66,488 124,238 199,545 236,553 304,759 359,232 275,973 382,605 411,291 472,545 547,704 457, 850 603,056 659,434 745,440 843,944 717,142 1,101,007 1, 523, 951 1,869,140 2,111,646 Cost of funds rate 12.5% 10.8% 9.3% 6.4% 5.4% 6.1% 6.5% 6.2% 5.9% 5.2% 5.2% 5.5% 5.1% 5.1% 4.8% 4.8% 4.9% 4.6% 4.5% 4.5% 4.5% Provision rate 7.2% 6.0% 8.4% 5.8% 6.0% 7.0% 6.7% 7.1% 7.0% 6.9% 6.8% 6.9% 6.7% 6.6% 6.5% 6.4% 6.5% 6.2% 6.0% 6.0% 6.0%

Reserve ratio 10.3% 9.0% 9.9% 9.4% 9.4% 10.3% 10.3% 10.8% 11.0% 10.9% 10.7% 10.7% 10.7% 10.7% 10.6% 10.5% 10.5% 9.7% 9.1% 8.8% 8.8%

Source: Company data and Stifel estimates Chris Brendler, CFA 443.224.1303John Davis 443.224.1265

Page 21



22/26

2012 2013 1Q14 2Q14 3Q14 4Q14E 2014E 1Q15E 2Q15E 3Q15E 4Q15E 2015E 1Q16E 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E 2020E 15+ Day Delinquency Ratio 8.9% 7.6% 7.2% 6.1% 5.4%

BALANCE SHEETAssets

Cash and Cash Equivalents 7,386 4,670 22,108 18,983 22,642 160,321 160,321 162,234 154,441 168,675 153,044 153,044 140,868 129,543 146,571 135,824 135,824 141,389 210,297 323,268 487,263 R estricted Cash 9,195 14,842 16,868 15,007 22,615 24,459 24,459 26,086 28,487 34,320 38,355 38,355 41,469 45,637 52,576 58,359 58,359 86,484 112,084 134,735 148,603 Unpaid Principal Balance 90,276 215,966 280,118 338,815 422,050 438,174 438,174 458,476 501,931 572,493 650,227 650,227 711,657 792,066 886,520 996,489 996,489 1,460,266 1,891,907 2,273,184 2,504,487 + Deferred Asset Value 699 6,555 9,449 9,862 11,341 8,602 8,602 9,142 9,854 11,023 12,240 1 2,240 12,806 13,339 13,897 14,450 14,450 21,126 27,420 32,940 36,284 Gross Loans 90,975 222,521 289,567 348,677 433,391 446,776 446,776 467,619 511,784 583,517 662,467 662,467 724,462 805,404 900,417 1,010,939 1,010,939 1,481,392 1,919,326 2,306,124 2,540,771 - Allowance for Loan Losses (9,288) (19,443) (27,723) (31,900) (39,756) (44,983) (4 4, 98 3) (49 ,471 ) (55,210) (62,448) (69,858) (69, 858) ( 76, 458) (84,838) (94,284) (104,873) ( 104,873) (142,232) (172, 517) (200,646) (220,287) Loans, Net 81,687 203,078 261,844 316,777 393,635 401,792 401,792 418,148 456,574 521,069 592,609 592,609 648,005 720,566 806,133 906,066 906,066 1,339,159 1,746,809 2,105,478 2,320,484 Loans Held for Sale - 1,423 2,745 1,105 2,653 2,708 2,708 2,818 3,077 3,512 3,994 3,994 4,367 4,856 5,433 6,107 6,107 9,026 11,773 14,190 15,639 Property, Equipment, and Software, Net 4,005 7,169 8,338 11,548 13,254 15,473 15,473 17,782 19,928 22,153 24,548 24,548 27,015 29,596 32,018 34,545 34,545 44,025 56,106 71,504 91,126 Deferred Tax Asset, Net - - - - - - - - - - - - - 49,820 53,402 57,446 57,446 76,329 76,329 76,329 76,329

Deferred Debt Issuance Costs 2,440 2,327 1,664 4,838 5,281 4,819 4,819 3,989 3,367 5,400 4,425 4,425 3,694 3,145 5,234 4,301 4,301 4,301 4,301 4,301 4,301 Other Assets 1,797 1,941 2,506 2,882 5,927 6,046 6,046 6,166 6,290 6,416 6,544 6,544 6,675 6,808 6,944 7,083 7,083 7,667 8,299 8,983 9,724 Total Assets 106,510 235,450 316,074 371,140 466,007 615,617 615,617 637,224 672,164 761,545 823,520 823,520 872,093 989,972 1,108,312 1,209,730 1,209,730 1,708,379 2,225,999 2,738,788 3,153,469

Liabilities, Convertible Preferred & EquityAccounts Payable 1,731 1,161 828 1,674 3,936 4,133 4,133 4,339 4,556 4,784 5,023 5,023 5,275 5,538 5,815 6,106 6,106 7,422 9,021 10,966 13,329

Interest Payable 1,173 1,120 957 590 717 774 774 836 903 975 1,054 1,054 1,138 1,229 1,327 1,433 1,433 1,950 2,653 3,609 4,910 Debt 104,298 203,297 213,793 265,313 350,204 378,759 378,759 403,950 441,132 531,457 593,951 593,951 642,161 706,708 814,172 903,717 903,717 1,339,240 1,735,673 2,086,434 2,301,191

Income Tax Payable - - - - - - - - - - - - - - - - - - - - - Warrant Liability 707 4,446 11,078 13,272 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802 2,802

Accrued Expenses and Other Liabilities 2,535 6,563 6,778 8,125 10,418 11,564 11,564 12,836 14,248 15,815 17,555 17,555 19,486 21,629 24,009 26,650 26,650 40,456 61,415 93,232 141,533 Total Liabilities 110,443 216,587 233,434 288,974 368,077 398,032 398,032 424,764 463,642 555,834 620,385 620,385 670,861 737,906 848,125 940,708 940,708 1,391,870 1,811,565 2,197,043 2,463,765

Convertible Preferred 53,226 118,343 197,948 201,543 218,363 - - - - - - - - - - - - - - - -

Total Equity ( 57 ,159 ) ( 99, 480) (115,308) (119,377) (120,433) 217,585 217,585 212,460 208,523 205,710 203,135 203, 135 201,232 252,066 260,188 269,022 269,022 316,509 414,434 541,745 689,704

Total Liabilities, Convertible Preferred & Equity 106,510 235,450 316,074 371,140 466,007 615,617 615,617 637,224 672,164 761,545 823,520 823,520 872,093 989,972 1,108,312 1,209,730 1,209,730 1,708,379 2,225,999 2,738,788 3,153,469Check

Memo: Funding Debt 96,298 188,297 210,793 262,313 347,204 371,259 371,259 393,950 428,632 516,457 578,951 578, 951 627,161 691,708 799,172 888,717 888,717 1,324,240 1, 715, 673 2,061,434 2,271,191 Corporate Debt 8,000 15,000 3,000 3,000 3,000 7,500 7,500 10,000 12,500 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 20,000 25,000 30,000 N on-GAAP Equity (3,226) 23,309 93,718 95,438 100,732 220,387 220,387 215,262 211,325 208,512 205,937 205, 937 204,034 254,868 262,990 271,824 271,824 319,311 417,236 544,547 692,506 Funding debt / Unpaid principal balance 106.7% 87.2% 75.3% 77.4% 82.3% 84.7% 84.7% 85.9% 85.4% 90.2% 89.0% 89.0% 88.1% 87.3% 90.1% 89.2% 89.2% 90.7% 90.7% 90.7% 90.7% Property, Equipment, and Software, Net Growth Rate (q/q) 16.3% 38.5% 14.8% 16.7% 14.9% 12.1% 11.2% 10.8% 10.0% 9.6% 8.2% 7.9%

Average Balance Sheet Average Unpaid Principal Balance 64,778 145,978 248,042 309,467 380,433 430,112 339,025 448,325 480,204 537,212 611,360 524,260 680,942 751,861 839,293 941,505 807,392 1,222,157 1,687,376 2,069,590 2,338,114 Average Gross Loans 65,609 147,398 256,044 319,122 391,034 440,083 348,186 457,197 489,702 547,651 622,992 534,433 693,465 764,933 852,911 955,678 820,738 1,241,081 1,713,506 2,101,583 2,374,163 Average Net Loans 59,823 134,230 232,461 289,311 355,206 397,714 315,425 409,970 437,361 488,821 556,839 478,038 620,307 684,286 763,349 856,099 734,676 1,117,999 1,556,536 1,917,101 2,168,227

Average Debt 68,488 131,838 208,545 239,553 307,759 364,482 282,273 391,355 422,541 486,295 562,704 469,850 618,056 674,434 760,440 858,944 732,142 1,116,007 1,542,951 1,893,140 2,140,646 Average Recourse Debt 2,000 7,600 9,000 3,000 3,000 5,250 6,300 8,750 11,250 13,750 15,000 1 2,000 15,000 15,000 15,000 15,000 15,000 15,000 19,000 24,000 29,000 Average Non-Recourse Debt 66,488 124,238 199,545 236,553 304,759 359,232 275,973 382,605 411,291 472,545 547,704 457,850 603,056 659,434 745,440 843,944 717,142 1,101,007 1,523,951 1,869,140 2,111,646 A ve ra ge A ss et s 76 ,712 1 60, 732 27 5, 762 343,607 418,574 540,812 400,858 626,421 654,694 716,855 792,532 702, 014 847,806 931,032 1,049,142 1,159,021 1,000,725 1,450,507 1, 969, 864 2,462,363 2,891,521 Average Equity (Non-GAAP) 4,923 21,553 58,514 94,578 98,085 160,560 106,717 217,825 213,293 209,918 207,225 212,285

Originations Total originations 173,247 458,917 227,350 248,067 312,889 327,151 1,115,457 369,787 424,983 500,885 576,334 1,871,989 626,361 709,117 795,983 896,044 3,027,504 4,541,260 5,991,396 7,189,675 7,908,643 y/y 164.9% 202.2% 165.5% 155.9% 94.8% 143.1% 62.7% 71.3% 60.1% 76.2% 67.8% 69.4% 66.9% 58.9% 55.5% 61.7% 50.0% 31.9% 20.0% 10.0% q/q 35.3% 9.1% 26.1% 4.6% 13.0% 14.9% 17.9% 15.1% 8.7% 13.2% 12.2% 12.6% Originations sold 18,937 30,673 22,325 23,214 58,302 134,514 83,923 99,836 121,799 144,790 450,348 162,614 188,512 209,542 233,343 794,012 1,191,020 1,497,849 1,797,419 1,977,161 % sold 4.1% 13.5% 9.0% 7.4% 17.8% 12.1% 22.7% 23.5% 24.3% 25.1% 24.1% 26.0% 26.6% 26.3% 26.0% 26.2% 26.2% 25.0% 25.0% 25.0% O ri gi na ti on s n ot s ol d 1 73 ,2 47 4 39 ,9 80 1 96 ,6 77 225,742 289,675 268,849 980,943 285,864 325,147 379,086 431,544 1, 421, 641 4 63, 747 520,604 586,441 662,701 2,233,493 3,350,239 4, 493, 547 5,392,257 5,931,482

Unpaid Principal Balance B eg . U np ai d P ri nc ip al B al an ce 2 0, 14 5 9 0, 27 6 2 15 ,9 66 280,117 338,815 422,050 215,966 438,174 458,476 501,931 572,493 438, 174 650,227 711,657 792,066 886,520 650,227 996,489 1,460,266 1,891,907 2,273,184 + O ri gi na ti on s ( No t S ol d) 1 73 ,2 47 4 39 ,9 80 1 96 ,6 77 225,742 289,675 268,849 980,943 285,864 325,147 379,086 431,544 1, 421, 641 4 63, 747 520,604 586,441 662,701 2,233,493 3,350,239 4, 493, 547 5,392,257 5,931,482 - Net-Charge-Offs (6,844) (16,415) (8,300) (8,895) (9,502) (13,686) (4 0, 38 3) (15 ,903 ) (16,982) (18,899) (21,932) (73, 715) ( 24, 469) (26,031) (28,733) (31,882) ( 111,116) (169,975) (239, 328) (295,406) (336,248) - Principal Paid Down (96,272) (297,876) (124,226) (158,149) (196,937) (239,039) ( 71 8, 35 1) ( 24 9, 65 9) (264,711) (289,625) (331,878) ( 1, 13 5, 87 3) ( 37 7, 84 8) (414,164) (463,253) (520,850) ( 1, 77 6, 11 5) ( 2, 71 6, 48 7) ( 3, 82 2, 57 9) ( 4, 71 5, 57 3) ( 5, 36 3, 93 1) End. Unpaid Principal Balance 90,276 215,966 280,117 338,815 422,050 438,174 438,174 458,476 501,931 572,493 650,227 650, 227 711,657 792,066 886,520 996,489 996,489 1,460,266 1, 891, 907 2,273,184 2,504,487

N e t- Ch ar ge -O ff s / Be g. U np ai d P rin cip al Ba la nce ( An nu ali ze d) -3 4. 0% -18 .2% - 15. 4% - 12 .7% - 11. 2% -13.0% -18.7% -14.5% -14.8% -15.1% -15.3% -16.8% -15.1% -14.6% -14.5% -14.4% -17.1% -17.1% -16.4% -15.6% -14.8% P ri nc ip al P ai d / B eg . U np ai d P ri nc ip al B al an ce - 47 7. 9% - 33 0. 0% - 57 .5 % - 56 .5 % - 58 .1 % -56.6% -332.6% -57.0% -57.7% -57.7% -58.0% -259.2% -58.1% -58.2% -58.5% -58.8% -273.2% -272.6% -261.8% -249.2% -236.0%

Deferred Asset Value Beg. Deferred Asset Value 895 698 6,556 9,449 9,853 11,332 6,556 8,602 9,142 9,854 11,023 8 ,602 12,240 12,806 13,339 13,897 12,240 14,450 21,126 27,420 32,940 + New Capitalized, Net of Amortized to Gain on Sale 11,073 19,765 7,665 6,765 8,535 7,170 30,135 6,992 7,294 7,969 8,492 30,747 8,522 8,729 8,961 9,170 35,381 53,247 71,738 86,086 94,695 - Amortized to Interest Income (8,574) (17,322) (5,572) (6,759) (7,044) (9,900) (29,276) (6,451) (6,583) (6,799) (7,275) (27,108) (7,956) (8,196) (8,403) (8,616) (33,171) (46,571) (65,444) (80,565) (91,351) + O th er A dj us tm en ts , N et ( 2, 69 6) 3 ,4 15 801 398 (13) 1,186 - - - - - -

End. Deferred Asset Value 698 6,556 9,449 9,853 11,332 8,602 8,602 9,142 9,854 11,023 12,240 1 2,240 12,806 13,339 13,897 14,450 14,450 21,126 27,420 32,940 36,284

A mo rt iz ed to In te re st In co me as % o f D ef er re d A ss et Va lu e ( Ex . D ef er re d R ev en ue Po rt io n) 7 1. 6% 6 8. 8% 6 7. 9% 80.0% 75.0% 72.0% 69.0% 66.0% 65.0% 64.0% 63.0% 62.0% New Capitalized, Net / Originations (Not Sold) 3.9% 3.0% 2.9% 2.7% 2.4% 2.2% 2.1% 2.0% 1.8% 1.7% 1.5% 1.4%

E nd . D efe rre d A ss et Va lu e ( Ex . D efe rr ed Re ve nu e P or tio n) 5 ,442 7, 782 9,819 10,368 12,466 8,602 8,602 9,142 9,854 11,023 12,240 1 2,240 12,806 13,339 13,897 14,450 14,450 21,126 27,420 32,940 36,284

Asset Quality AnalysisAllowance For Loan Loss Beg. Allowance 9,288 19,443 27,722 31,900 39,757 1 9,443 44,983 49,471 55,210 62,448 4 4,983 69,858 76,458 84,838 94,284 69,858 104,873 142,232 172,517 200,646 + Provisions 10,628 26,570 16,579 13,073 17,359 18,912 6 5,923 20,390 22,721 26,137 29,342 9 8,590 31,068 34,412 38,179 42,472 146,131 207,334 269,613 323,535 355,889 - Net-Charge-Offs (5,630) (16,415) (8,300) (8,895) (9,502) (13,686) (4 0, 38 3) (15 ,903 ) (16,982) (18,899) (21,932) (73, 715) ( 24, 469) (26,031) (28,733) (31,882) ( 111,116) (169,975) (239, 328) (295,406) (336,248) + Other - - - - - - - - - - - - - - - - - - - - -


Page 22



23/26

2012 2013 1Q14 2Q14 3Q14 4Q14E 2014E 1Q15E 2Q15E 3Q15E 4Q15E 2015E 1Q16E 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E 2020E End. Allowance 9,288 19,443 27,722 31,900 39,757 44,983 4 4,983 49,471 55,210 62,448 69,858 6 9,858 76,458 84,838 94,284 104,873 104,873 142,232 172,517 200,646 220,287

STATEMENT OF CASH FLOWCash Flows from Operating Activity Net Income / (Loss) (16,844) (24,356) (13,717) (1,054) 353 (6,657) (21,075) (7,070) (6,047) (5,260) (5,162) (23,540) (4,739) 47,734 4,719 5,343 53,056 30,067 74,569 99,329 117,132 + Provision for Loan Losses 12,469 26,570 16,579 13,073 17,359 18,912 65,923 20,390 22,721 26,137 29,342 98,590 31,068 34,412 38,179 42,472 146,131 207,334 269,613 323,535 355,889 + Depreciation and Amortization 1,545 2,645 878 877 1,093 1,418 4,266 1,649 1,869 2,145 2,309 7,971 2,556 2,877 3,238 3,416 12,088 16,840 22,577 27,049 29,800 + Stock-Based Compensation 229 438 233 404 810 1,313 2,761 1,945 2,109 2,448 2,587 9,089 2,836 3,101 3,403 3,491 12,831 17,421 23,356 27,982 30,827 + Debt Discount - 959 - - - - - - - - - -

Preferred Warrant Liabili ty Fair Value Adjustment and Warrant Iss 524 3,740 6,632 2,193 302 9,127 - - - - - - Common Stock Warrant Issuance - 45 - - 64 64 - - - - - - Amortization of Debt Issuance Costs 1,068 2,184 667 815 528 462 2,472 830 622 (2,033) 975 394 731 548 (2,089) 934 125 - - - - Loss / (Gain) on Disposal - - - - 774 774 - - - - - - in Deferred Tax Asset, Net - - - - - - - ( 49,820) (3,582) (4,044) (57,446) (18,883) - - - in Other Assets (1,253) (143) (565) (375) (3,046) (119) (4,105) (121) (123) (126) (128) (498) (131) (133) (136) (139) (539) (584) (632) (684) (741)

in Accounts Payable 1,430 (570) (332) 846 2,260 197 2,970 207 217 228 239 891 251 264 277 291 1,083 1,316 1,599 1,944 2,363 in Interest Payable 286 (53) (163) (367) 128 57 (345) 62 67 72 78 279 84 91 98 106 380 517 703 956 1,301 in Income Tax Payable - - - - - - - - - - - - - - - - - - - - -

in Accrued Expenses and Other Liabilities 2,228 4,028 215 1,349 2,292 1,146 5,001 1,272 1,412 1,567 1,740 5,991 1,931 2,143 2,379 2,641 9,095 13,806 20,959 31,817 48,301 Originations of Loans Held for Sale - (18,936) (30,673) (22,325) (23,214) (5 8, 30 2) ( 13 4, 51 4) (83 ,923 ) ( 99 ,836 ) ( 121 ,799 ) ( 144 ,790 ) (4 50, 348) (1 62, 614) (18 8, 512) (20 9, 54 2) ( 23 3, 34 3) (79 4, 01 2) (1 ,191 ,020 ) (1, 497, 849) ( 1, 797, 419) (1 ,97 7, 16 1)

Sales of loans held for sale - 17,514 29,351 23,965 21,666 5 8, 24 7 13 3, 22 9 83,813 99,577 121,364 144,308 449,062 162,240 188,023 208,966 232,670 791,899 1,188,102 1,495,102 1,795,002 1,975,712 Net Cash From Operating Activities 1,682 14,063 9,104 19,399 21,369 16,676 66,549 19,054 22,588 24,743 31,497 97,881 34,215 40,728 45,911 53,836 174,689 264,913 409,997 509,511 583,424

Cash Flows from Investing Activity

in Restricted Cash (2,459) (5,647) (2,027) 1,862 (7,608) (1,844) (9,617) (1,627) (2,401) (5,833) (4,036) (13,896) (3,113) (4,168) (6,940) (5,783) (20,004) (28,125) (25,600) (22,651) (13,868) P ur ch as es o f P ro pe rt y, Eq ui pme nt , an d S of tw ar e (3 ,179 ) (5,798) (2,027) (4,033) (3,487) (3,637) (13,185) (3,959) (4,014) (4,370) (4,704) (17,047) (5,022) (5,458) (5,661) (5,942) (22,084) (26,320) (34,659) (42,446) (49,422) Or ig ina ti on s o f L oa ns He ld at A mo rt iza ti on Co st ( 152 ,498 ) (380,357) (167,965) (192,508) (245,648) (268,849) (874,969) (285,864) (325,147) (379,086) (431,544) (1,421,641) (463,747) (520,604) (586,441) (662,701) (2,233,493) (3,350,239) (4,493,547) (5,392,257) (5,931,482) in Deferred Origination Costs 197 (5,858) (2,893) (414) (1,478) 2,739 (2,046) (541) (711) (1,170) (1,217) (3,638) (566) (533) (558) (554) (2,210) (6,675) (6,294) (5,521) (3,343) Repayments of Loans at Amortized Cost 98,806 238,253 95,513 124,913 152,912 239,039 612,377 249,659 264,711 289,625 331,878 1,135,873 377,848 414,164 463,253 520,850 1,776,115 2,716,487 3,822,579 4,715,573 5,363,931

Net Cash From Investing Activities (59,133) (159,407) (79,399) (70,180) (105,309) (32,552) (287,439) (42,331) (67,563) (100,834) (109,622) (320,350) (94,600) (116,600) (136,346) (154,129) (501,676) (694,872) (737,522) (747,301) (634,185)

Cash Flows from Financing Activities P ro ce ed s f ro m E xe rc is e o f S to ck Op ti on s an d W ar ra nt s 24 389 240 125 3,679 4,044

Redemption of Common Stock and Warrants - (6,123) - - - - Proceeds from Issuance of Convertible Preferred 4,675 49,717 77,000 - - 77,000 Redemption of Preferred Stock - (6,282) - - - - Proceeds from Common Stock Raise - - - - - 125,000 125,000 Proceeds from the Issuance of Not es Payable 166,677 216,861 79,298 261,627 87,504 28,555 456,984 25,191 37,182 90,325 62,494 215,192 48,209 64,547 107,464 89,546 309,766 435,523 396,433 350,761 214,757 Repayment of Notes Payable (106,644) (109,862) (68,802) (210,108) (2,614) (281,523) Debt Issuance Costs (2,720) (2,071) (4) (3,989) (971) (4,964)

Net Cash From Financing Activities 62,012 142,629 87,733 47,655 87,598 153,555 376,541 25,191 37,182 90,325 62,494 215,192 48,209 64,547 107,464 89,546 309,766 435,523 396,433 350,761 214,757

Net Change in Cash and Cash Equivalents 4,561 (2,715) 17,438 (3,125) 3,658 137,679 155,650 1,914 (7,793) 14,234 (15,631) (7,276) (12,176) (11,325) 17,028 (10,747) (17,220) 5,565 68,908 112,971 163,995 Beg. Cash and Cash Equivalents 2,825 7,386 4,671 22,109 18,983 22,641 4,671 160,321 162,234 154,441 168,675 160,321 153,044 140,868 129,543 146,571 153,044 135,824 141,389 210,297 323,268 End Cash and Cash Equivalents 7,386 4,671 22,109 18,983 22,641 160,321 160,321 162,234 154,441 168,675 153,044 153,044 140,868 129,543 146,571 135,824 135,824 141,389 210,297 323,268 487,263

ADDITIONAL FINANCIAL INFOGross Revenue Growth Quarterly 23.3% 24.3% 22.6% 10.0% 7.6% 10.8% 15.2% 9.9% 11.8% 13.7% 13.6% 7.6% Year over Year 154.5% 167.7% 160.9% 144.5% 106.6% 138.2% 80.3% 60.7% 51.0% 50.9% 58.6% 56.7% 60.8% 58.6% 55.3% 57.8% 49.3% 34.1% 19.8% 10.2%

% of RevenueProvision Expense 48.6% 40.7% 58.0% 36.8% 39.9% 39.5% 42.4% 39.6% 39.8% 39.8% 40.6% 40.0% 38.5% 37.5% 36.6% 37.9% 37.6% 35.7% 34.6% 34.7% 34.6%

Funding Costs 32.3% 20.6% 16.2% 10.7% 9.4% 11.5% 11.6% 11.5% 10.7% 9.4% 9.9% 10.3% 9.6% 9.1% 8.5% 9.1% 9.1% 8.8% 8.8% 9.0% 9.2% Net Revenue Margin 19.0% 38.7% 25.7% 52.5% 50.7% 49.0% 46.0% 48.9% 49.5% 50.8% 49.5% 49.7% 51.9% 53.4% 54.9% 53.0% 53.4% 55.5% 56.6% 56.3% 56.2% Sales and Marketing 25.9% 27.7% 22.3% 20.0% 19.1% 25.1% 21.8% 23.5% 23.0% 22.9% 22.3% 22.9% 21.8% 21.4% 21.0% 20.5% 21.1% 19.2% 17.8% 17.2% 16.8% Technology and Analytics 19.5% 13.4% 10.2% 10.7% 10.7% 17.0% 12.5% 18.6% 17.4% 17.3% 16.9% 17.5% 16.6% 16.2% 16.0% 15.6% 16.0% 14.3% 12.9% 12.3% 11.9% Processing and Servicing 11.4% 8.5% 5.6% 5.9% 5.1% 5.6% 5.5% 5.5% 5.2% 5.0% 4.7% 5.1% 4.4% 4.2% 3.9% 3.7% 4.0% 3.0% 2.5% 2.3% 2.0% General and Administrative 27.0% 18.7% 11.9% 12.5% 14.1% 15.0% 13.6% 14.8% 14.1% 13.4% 12.4% 13.6% 11.6% 10.8% 10.3% 9.7% 10.5% 8.1% 6.6% 6.0% 5.6%

Total Operating Expense 83.8% 68.4% 50.0% 49.1% 49.1% 62.7% 53.4% 62.3% 59.8% 58.5% 56.3% 59.0% 54.5% 52.7% 51.2% 49.4% 51.7% 44.6% 39.9% 37.8% 36.4%

Margins Operating Income Margin -64.8% -29.6% -24.3% 3.4% 1.6% -13.7% -7.5% -13.5% -10.3% -7.7% -6.8% -9.2% -2.5% 0.7% 3.7% 3.6% 1.7% 10.9% 16.6% 18.5% 19.8% Adjusted EBITDA Margin -57.8% -24.9% -20.4% 7.0% 6.0% -8.0% -2.9% -6.5% -3.3% -0.7% -0.1% -2.3% 4.2% 7.2% 10.0% 9.8% 8.1% 16.8% 22.5% 24.4% 25.7% Adjusted Net Income Margin -64.2% -30.9% -24.0% 4.3% 3.4% -11.2% -5.9% -10.0% -6.9% -4.3% -3.6% -5.9% -2.4% 55.4% 7.8% 7.9% 16.9% 8.2% 12.6% 13.6% 14.4%

% Total OriginationsGross Revenues 14.8% 14.2% 12.6% 14.3% 13.9% 14.6% 13.9% 13.9% 13.4% 13.1% 12.5% 13.2% 12.9% 12.9% 13.1% 12.5% 12.8% 12.8% 13.0% 13.0% 13.0%

Provision Expense 7.2% 5.8% 7.3% 5.3% 5.5% 5.8% 5.9% 5.5% 5.3% 5.2% 5.1% 5.3% 5.0% 4.9% 4.8% 4.7% 4.8% 4.6% 4.5% 4.5% 4.5%Funding Costs 4.8% 2.9% 2.0% 1.5% 1.3% 1.7% 1.6% 1.6% 1.4% 1.2% 1.2% 1.4% 1.2% 1.2% 1.1% 1.1% 1.2% 1.1% 1.1% 1.2% 1.2%

Net Revenues 2.8% 5.5% 3.2% 7.5% 7.1% 7.2% 6.4% 6.8% 6.6% 6.7% 6.2% 6.5% 6.7% 6.9% 7.2% 6.6% 6.9% 7.1% 7.3% 7.3% 7.3% Sales and Marketing 3.8% 3.9% 2.8% 2.9% 2.7% 3.7% 3.0% 3.3% 3.1% 3.0% 2.8% 3.0% 2.8% 2.8% 2.8% 2.6% 2.7% 2.5% 2.3% 2.2% 2.2%

Technology and Analytics 2.9% 1.9% 1.3% 1.5% 1.5% 2.5% 1.7% 2.6% 2.3% 2.3% 2.1% 2.3% 2.1% 2.1% 2.1% 1.9% 2.1% 1.8% 1.7% 1.6% 1.5% Processing and Servicing 1.7% 1.2% 0.7% 0.8% 0.7% 0.8% 0.8% 0.8% 0.7% 0.7% 0.6% 0.7% 0.6% 0.5% 0.5% 0.5% 0.5% 0.4% 0.3% 0.3% 0.3% General and Administrative 4.0% 2.7% 1.5% 1.8% 2.0% 2.2% 1.9% 2.1% 1.9% 1.8% 1.6% 1.8% 1.5% 1.4% 1.3% 1.2% 1.4% 1.0% 0.9% 0.8% 0.7%

Total Operating Expense 12.4% 9.7% 6.3% 7.0% 6.8% 9.2% 7.4% 8.7% 8.0% 7.7% 7.1% 7.8% 7.0% 6.8% 6.7% 6.2% 6.6% 5.7% 5.2% 4.9% 4.7% Operating Income -9.6% -4.2% -3.0% 0.5% 0.2% -2.0% -1.0% -1.9% -1.4% -1.0% -0.9% -1.2% -0.3% 0.1% 0.5% 0.4% 0.2% 1.4% 2.2% 2.4% 2.6%

Adjusted EBITDA -8.6% -3.5% -2.6% 1.0% 0.8% -1.2% -0.4% -0.9% -0.4% -0.1% 0.0% -0.3% 0.5% 0.9% 1.3% 1.2% 1.0% 2.2% 2.9% 3.2% 3.3% Adjusted Net Income -9.5% -4.4% -3.0% 0.6% 0.5% -1.6% -0.8% -1.4% -0.9% -0.6% -0.4% -0.8% -0.3% 7.2% 1.0% 1.0% 2.2% 1.0% 1.6% 1.8% 1.9%

% Average Assets (Annualized)Gross Revenues 33.4% 40.6% 41.4% 41.3% 41.6% 35.4% 38.8% 32.9% 34.9% 36.7% 36.5% 35.1% 38.1% 39.4% 39.7% 38.7% 38.9% 40.0% 39.5% 37.9% 35.5%

Provision Expense 16.3% 16.5% 24.0% 15.2% 16.6% 14.0% 16.4% 13.0% 13.9% 14.6% 14.8% 14.0% 14.7% 14.8% 14.6% 14.7% 14.6% 14.3% 13.7% 13.1% 12.3% Funding Costs 10.8% 8.3% 6.7% 4.4% 3.9% 4.1% 4.5% 3.8% 3.7% 3.4% 3.6% 3.6% 3.6% 3.6% 3.4% 3.5% 3.5% 3.5% 3.5% 3.4% 3.3%

Net Revenues 6.4% 15.7% 10.7% 21.7% 21.1% 17.3% 17.8% 16.1% 17.3% 18.6% 18.0% 17.5% 19.8% 21.0% 21.8% 20.5% 20.7% 22.2% 22.4% 21.3% 20.0% Sales and Marketing 8.6% 11.3% 9.2% 8.3% 8.0% 8.9% 8.4% 7.7% 8.0% 8.4% 8.1% 8.0% 8.3% 8.4% 8.3% 7.9% 8.2% 7.7% 7.1% 6.5% 6.0%

Technology and Analytics 6.5% 5.5% 4.2% 4.4% 4.4% 6.0% 4.9% 6.1% 6.1% 6.3% 6.2% 6.1% 6.3% 6.4% 6.3% 6.0% 6.2% 5.7% 5.1% 4.7% 4.2% Processing and Servicing 3.8% 3.5% 2.3% 2.4% 2.1% 2.0% 2.2% 1.8% 1.8% 1.8% 1.7% 1.8% 1.7% 1.6% 1.6% 1.4% 1.6% 1.2% 1.0% 0.9% 0.7%


Page 23



24/26

2012 2013 1Q14 2Q14 3Q14 4Q14E 2014E 1Q15E 2Q15E 3Q15E 4Q15E 2015E 1Q16E 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E 2020E General and Administrative 9.0% 7.6% 4.9% 5.2% 5.9% 5.3% 5.3% 4.9% 4.9% 4.9% 4.5% 4.8% 4.4% 4.3% 4.1% 3.7% 4.1% 3.2% 2.6% 2.3% 2.0%

Total Operating Expense 28.0% 27.7% 20.7% 20.3% 20.4% 22.2% 20.7% 20.5% 20.8% 21.5% 20.5% 20.7% 20.7% 20.8% 20.3% 19.1% 20.1% 17.9% 15.8% 14.3% 12.9% Operating Income -21.7% -12.0% -10.0% 1.4% 0.7% -4.9% -2.9% -4.4% -3.6% -2.8% -2.5% -3.2% -1.0% 0.3% 1.5% 1.4% 0.6% 4.4% 6.6% 7.0% 7.0% Adjusted EBITDA -19.3% -10.1% -8.4% 2.9% 2.5% -2.8% -1.1% -2.1% -1.2% -0.3% 0.0% -0.8% 1.6% 2.8% 4.0% 3.8% 3.1% 6.7% 8.9% 9.2% 9.1% Adjusted Net Income -21.4% -12.6% -9.9% 1.8% 1.4% -4.0% -2.3% -3.3% -2.4% -1.6% -1.3% -2.1% -0.9% 21.8% 3.1% 3.0% 6.6% 3.3% 5.0% 5.2% 5.1%

Capital / Credit Ratios Debt / Non-GAAP Equity (32.3x) 8.7x 2.3x 2.8x 3.5x 1.7x 1.7x 1.9x 2.1x 2.5x 2.9x 2.9x 3.1x 2.8x 3.1x 3.3x 3.3x 4.2x 4.2x 3.8x 3.3x Non-Recourse Debt % 92.3% 92.6% 98.6% 98.9% 99.1% 98.0% 98.0% 97.5% 97.2% 97.2% 97.5% 97.5% 97.7% 97.9% 98.2% 98.3% 98.3% 98.9% 98.8% 98.8% 98.7% Allowance for Loan Losses / Unpaid Principal Balance 10.3% 9.0% 9.9% 9.4% 9.4% 10.3% 10.3% 10.8% 11.0% 10.9% 10.7% 10.7% 10.7% 10.7% 10.6% 10.5% 10.5% 9.7% 9.1% 8.8% 8.8% Net Charge-Off Ratio 10.6% 11.2% 13.4% 11.5% 10.0% 12.7% 11.9% 14.2% 14.1% 14.1% 14.3% 14.1% 14.4% 13.8% 13.7% 13.5% 13.8% 13.9% 14.2% 14.3% 14.4% Non-GAAP Equity / Assets -3.0% 9.9% 29.7% 25.7% 21.6% 35.8% 35.8% 33.8% 31.4% 27.4% 25.0% 25.0% 23.4% 25.7% 23.7% 22.5% 22.5% 18.7% 18.7% 19.9% 22.0%

Y/Y GROWTH RATESRevenue Interest Income 149.0% 152.5% 148.0% 133.8% 97.6% 127.3% 69.9% 48.8% 36.7% 38.9% 46.2% 48.8% 53.3% 52.9% 50.4% 51.4% 47.9% 35.8% 19.8% 10.2% Gain on Sales of Loans 343.9% 923.7% 290.6% 309.7% 400.7% 189.7% 273.0% 124.8% 117.9% 97.5% 84.2% 102.2% 56.6% 25.8% 20.0% 10.0%

Other Revenue 311.3% 267.5% 194.4% 194.9% 126.3% 182.8% 72.2% 57.7% 58.7% 80.2% 67.0% 56.7% 60.8% 58.6% 55.3% 57.8% 49.3% 34.1% 19.8% 10.2% Total Gross Revenue 154.5% 167.7% 160.9% 144.5% 106.6% 138.2% 80.3% 60.7% 51.0% 50.9% 58.6% 56.7% 60.8% 58.6% 55.3% 57.8% 49.3% 34.1% 19.8% 10.2%

Cost of revenue Provision For Loan Losses 113.1% 223.1% 139.1% 204.5% 84.2% 148.1% 23.0% 73.8% 50.6% 55.1% 49.6% 52.4% 51.5% 46.1% 44.7% 48.2% 41.9% 30.0% 20.0% 10.0%

Funding Costs 61.8% 61.8% 32.6% 11.6% 37.2% 34.5% 28.0% 60.4% 51.0% 30.0% 40.7% 30.1% 37.3% 43.7% 42.7% 38.7% 44.8% 34.6% 22.3% 12.5% Cost of Revenue 92.6% 165.3% 102.4% 129.0% 70.9% 110.0% 24.1% 70.8% 50.7% 49.5% 47.6% 47.3% 48.5% 45.6% 44.3% 46.3% 42.5% 30.9% 20.5% 10.5%

Net Revenue 417.6% 174.8% 253.2% 161.7% 163.9% 182.9% 242.9% 51.6% 51.4% 52.4% 71.4% 66.6% 73.5% 71.2% 66.5% 69.4% 55.3% 36.6% 19.3% 9.9%

Operating ExpensesSales and Marketing 172.8% 68.4% 53.8% 61.2% 165.3% 86.9% 90.6% 84.5% 80.5% 34.0% 66.7% 45.4% 49.8% 45.7% 42.8% 45.8% 35.6% 24.7% 15.7% 7.6%

Technology and Analytics 75.2% 59.4% 99.5% 96.9% 203.9% 122.3% 228.7% 161.5% 144.3% 50.2% 121.1% 39.8% 50.0% 46.6% 43.3% 45.0% 32.8% 21.5% 14.1% 6.6% P rocessing and Servicing 91.1% 44.6% 64.9% 63.3% 47.1% 54.6% 75.5% 43.5% 46.9% 26.3% 45.0% 27.0% 27.9% 24.4% 21.4% 25.0% 12.6% 10.6% 7.8% -2.1% General and Administrative 75.5% 43.2% 13.4% 113.3% 138.8% 73.9% 124.2% 81.7% 43.0% 24.8% 57.9% 23.3% 23.5% 22.1% 21.0% 22.4% 15.2% 9.7% 8.7% 2.9% Total Operating Expenses 107.6% 57.1% 48.9% 81.4% 149.3% 86.2% 125.0% 95.7% 80.1% 35.5% 75.0% 36.9% 41.7% 38.8% 36.4% 38.4% 28.8% 20.0% 13.5% 6.0%

Operating Income 16.5% 8.0% -118.6% -121.2% 108.1% -40.1% 0.1% -590.1% -812.9% -24.9% 96.6% -70.8% -110.9% -175.5% -181.6% -128.3% 880.9% 104.4% 33.1% 17.9%

Income Before Provision for Income Taxes 44.6% 88.2% -83.5% -107.0% 18.7% -13.5% -48.5% 473.7% -1586.0% -22.4% 11.7% -68.3% -107.2% -168.8% -174.4% -124.0% 1007.4% 105.3% 33.2% 17.9%Net I ncome / (Loss) 44.6% 88.2% -83.5% -107.0% 18.7% -13.5% -48.5% 473.7% -1586.0% -22.4% 11.7% -33.0% -889.4% -189.7% -203.5% -325.4% -43.3% 148.0% 33.2% 17.9%

Fully Diluted GAAP EPS 44.6% 88.2% -83.5% -105.9% 15.3% -14.0% -56.3% 385.5% -1581.5% -32.6% -4.9% -33.4% -782.4% -177.6% -189.5% -292.2% -42.9% 146.8% 32.5% 17.3%Fully Diluted Adjusted EPS 22.6% -6.1% -124.3% -137.0% 62.5% -54.1% -36.6% -316.3% -291.6% -58.1% 32.0% -67.9% -1216.1% -349.7% -396.6% -494.1% -28.3% 105.2% 29.4% 15.6%

Adjusted EBITDA 9.7% -1.8% -143.5% -203.2% 82.3% -71.9% -42.6% -176.3% -117.7% -98.9% 25.6% -200.9% -449.6% -2366.8% -26255.9% -647.1% 211.2% 79.7% 29.7% 16.1%Adjusted Net Income 22.6% -6.1% -124.3% -143.6% 67.3% -54.5% -25.2% -355.5% -292.2% -51.8% 57.2% -62.9% -1391.0% -388.8% -443.0% -555.9% -27.9% 106.2% 30.0% 16.2%

Originations 164.9% 202.2% 165.5% 155.9% 94.8% 143.1% 62.7% 71.3% 60.1% 76.2% 67.8% 69.4% 66.9% 58.9% 55.5% 61.7% 50.0% 31.9% 20.0% 10.0%Unpaid principal balance 139.2% 148.2% 147.3% 142.8% 102.9% 102.9% 63.7% 48.1% 35.6% 48.4% 48.4% 55.2% 57.8% 54.9% 53.3% 53.3% 46.5% 29.6% 20.2% 10.2%Gross loans 144.6% 158.3% 158.1% 145.8% 100.8% 100.8% 61.5% 46.8% 34.6% 48.3% 48.3% 54.9% 57.4% 54.3% 52.6% 52.6% 46.5% 29.6% 20.2% 10.2%Net loans 148.6% 157.4% 157.3% 143.7% 97.9% 97.9% 59.7% 44.1% 32.4% 47.5% 47.5% 55.0% 57.8% 54.7% 52.9% 52.9% 47.8% 30.4% 20.5% 10.2%


Page 24



25/26

Important Disclosures and Certifications

I, Christopher C. Brendler, certify that the views expressed in this research report accurately reflect mypersonal views about the subject securities or issuers; and I, Christopher C. Brendler, certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or viewscontained in this research report. For our European Conflicts Management Policy go to the research page atwww.stifel.com .

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q

stifelnicolauscoinc initiatingcoverageofondeckcapitalinc(ondk)withabuyrating jan 11 2015

Documents