Operator: Ladies and gentlemen, thank you for standing by, and welcome to the OnDeck Second Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to one of your speakers for today, Steve Klimas, Head of Investor Relations. Please go ahead, sir.

Stephen Klimas: Thank you, Carol. Good morning, everyone, and welcome to OnDeck's second quarter earnings call. Joining me on the call this morning are Noah Breslow, our Chief Executive Officer; Ken Brause, our Chief Financial Officer; and Nick Brown, our Chief Risk Officer. Our earnings release was issued last night and is available with our earnings presentation and financial data supplement, in the Investor Relations section of our website. Certain statements, including those related to our third quarter and second half 2020 outlook are forward-looking statements. They are not facts and are subject to material risks and uncertainties described in our SEC filings. These statements are based on currently available information, and we undertake no duty to update them, except as required by law. Today's discussion is also subject to the forward-looking statement limitations in the earnings release and our actual results could differ materially and adversely from those anticipated. During this call, we will use terms defined in the earnings release and refer to non-GAAP financial measures. For definitions and reconciliations to GAAP, please refer to the non-GAAP tables in the earnings release and the appendix of the earnings presentation posted on our website. With that, I'll turn the call over to Noah.

Noah Breslow: Thank you, Steve, and thank you all for joining us today. Before we get into our second quarter highlights and financial results, I want to make a few brief comments on last night's announcement regarding the acquisition of OnDeck by Enova. For anyone that may not have seen that announcement, we entered into a definitive agreement whereby Enova will acquire OnDeck in a transaction valued at $90 million, with an approximate all in per share value of $1.38 for OnDeck shareholders, which equates to about a 90% premium closing share price on July 27. We are extremely excited about our combination with Enova. This transaction combines two businesses with complementary expertise and capabilities. Both companies are pioneers in leveraging proprietary analytics and the digital experience to deliver financing to underserved small businesses and consumers. Following an extensive review of our strategic options conducted over the last few months, we believe this is the best path forward for our customers, employees and shareholders. Joining forces with Enova and leveraging our collective scale and strength as well as our complementary portfolio of products and brands provides the best opportunity for our long-term success. Together, the combined companies share innovative and customer-oriented cultures, and we believe shareholders of both firms will benefit from the substantial synergies expected to be realized as we integrate the businesses. The transaction is anticipated to close later this year, subject to OnDeck's shareholder approval and customary closing requirements. During this pendency period, we remain committed to transparency with all stakeholders and focused on running our business in what remains an unprecedented public health and economic environment. Now turning to our second quarter's results. We made significant progress executing the COVID response plan we outlined during our first quarter earnings call over the last 90 days, and we reported a second quarter profit. On the call today, I will provide you with an update on the progress we've made against our near-term priorities. Then I'll turn the call over to Nick to provide an update on our portfolio performance and discuss our strategy for growing originations.. After that, Ken will walk you through our financial results and our progress with respect to funding and liquidity. And finally, before opening the call to questions, I will discuss our second half objectives. We dramatically curtailed originations of our core small business loan product in the second quarter as most states went into different degrees of lock down. During this time, we focused on helping our customers and other small businesses managed through this unprecedented environment by facilitating Paycheck Protection Program or PPP loans through partnerships with experienced SBA lender banks. We also reallocated team members from sales to payment support and collections functions in a comprehensive effort to maintain constructive paying relationships with our customers. We worked with our customers to offer temporary payment reductions, payment deferrals or term extensions that were appropriate to each situation. Our actions on the customer side have increased the percentage of our customers and paying relationships and a large reduction in our delinquencies from peak levels. Nick will go into greater detail on this shortly, but our 1 plus delinquent loan balance improved from a peak of nearly $500 million in April to around $275 million this week. We also took actions to preserve liquidity and increase funding flexibility in the second quarter. We amended our 4 U.S. warehouse facilities to receive temporary relief for COVID impacted loans, and we received a waiver on our corporate line of credit. In Canada, we paid off our Crédit Agricole facility and amended our facility with Bank of Montreal. And in Australia, we executed an amendment with Crédit Suisse. And we continue to constructively work with our lending partners on further amendments as we adapt to this dynamic environment. We also aggressively reduced costs. And ultimately exceeded our targeted second quarter operating expense savings of $13 million. This was accomplished through a temporary 90-day austerity program we implemented in early April, in response to the uncertainty in the economy and the impact of COVID on our business. Ken will go into more detail on this later, but given we now expect the journey back to our pre COVID scale will take quarters instead of weeks or months, we decided to make permanent changes to reduce our expenses to better align with projected revenue. In July, we laid off approximately 20% of our U.S. staff. This decision was difficult, but necessary for us to navigate the environment we are going to be in for the next 6 to 12 months. Finally, we began originating new term loans and lines of credit again in June after a brief pause in May. We have a targeted and disciplined strategy to prudently originate our products, focused on shorter-term loans in select states and industries that are reopened. I am encouraged by recent trends as we continue to grow application and approval volumes week over week. With that, I'm going to turn the call over to Nick, who will be back to provide an update on our second half priorities before opening the call for questions.

Nicholas Brown: Thank you, Noah. I am glad to join this morning and provide an update on our portfolio performance and discuss the strategy we are following for ramping origination. For those reviewing our earnings presentation, slide 7 through 9 provide some of the context to the trends that I will be discussing. Delinquency and collection trends have continued to improve during the second quarter from their peak in April. This improvement has been driven by improvement in industries less impacted by the pandemic and in geographies that began to reopen early, although most industries and geographies are seeing some improvement since May. We are able to identify and analyze these trends because we track delinquencies when they are 1 day past due, which allows us to react more dynamically than if we were using industry standard views of 30 days plus past due. As you can see on Slide 8, our total U.S. 1 plus days past due balance, which includes all customers on temporary payment reductions, payment deferrals or term extensions increased from prior quarter, but declined from its peak of 47% in May to 43% at June 30 and today sits well below 40%. And the percentage of delinquent loan balances on which we are collecting more than 25% of the normal payment has improved from approximately 30% at March 31 and 45% at April 30 to 62% as of June 30. Collectibility trends are also improving. And we are deploying substantial additional internal resources to moving customers into paying status as the economy reopens, including putting merchants on specific payment plans. Since COVID, we have set company goals each month on improving the number of customers in a paying relationship, which we have achieved in each month throughout the quarter. The percentage of total U.S. customers making a payment in the last 7 days of at least 25% of the original contractual amount increased from a low of 75% on April 17 to approximately 87% on June 30 and approximately 88% this week. Now getting into our allowance for credit losses. Our allowance for credit losses decreased $32 million as expected losses were realized and the portfolio paid down. During the quarter, we had a slight reserve build on the existing portfolio due to a seasoning of accounts within the COVID debit stock population and an increasing certainty of a more gradual recovery than initially estimated at the end of the first quarter. Accounts in this population are still not paying despite a range of collections efforts and offers and therefore, are more likely to default. Slide 9 depicts the composition of our reserve between the normal and each COVID subpopulation. Overall, our portfolio delinquency trends and roll rates have been in line with our expectations. And our net charge-off rate has increased in line with expectations as delinquency on the earliest COVID impacted loans in our portfolio seasoned into charge-offs. As we mentioned during the first quarter call, you cannot apply existing roll rates to our delinquency buckets as illustrated in our financial data supplement as the loss expectations are different. And finally, we are assuming global economic activity remains muted throughout the second half of 2020, with a slow recovery commencing in 2021 in our allowance for credit losses. And while this is a slower recovery than previously forecast, our belief in the quality of our delinquent customers and their desire to work through their situation to achieve full principal payoff has not changed since last quarter. Now I will share some thoughts on our reentry strategy. We have used a phased and prudent approach to grow our originations, starting with the customers, industry and geographies that we have the best visibility on, and our data shows are most resilient in this environment. Each credit strategy is tested with safe and sound credit and pricing strategies before full rollout. We are continuing to watch the rapidly changing climate and adapt as necessary. Like an accordion, we can scale up or down in industries or geographies that are or are not performing. What we have seen so far is that demand is tempered due to COVID uncertainty and some overhang from the government stimulus programs, but we do feel confident, our reentry approach and value proposition will allow us to prudently scale our businesses, albeit on a slower pace because of the macro environment and more muted demand function. And with that, I'll turn the call over to Ken to walk through second quarter financial results and provide an update on our funding strategy.

Kenneth Brause: Well, thank you, Nick, and good morning, everyone. As Nick said, I'd like to provide some additional detail on our second quarter results, our funding and liquidity position and our outlook for the remainder of the year. Second quarter net income was $2 million or $0.04 per diluted share, significantly improved from the $59 million net loss in the first quarter. Included in this quarter's results are a net $6.4 million noncash goodwill impairment and a $2.8 million restructuring charge related to the actions we took to reduce ongoing costs. Excluding these items and roughly $2 million of stock-based compensation, our adjusted net income was $13.6 million or $0.23 per diluted share compared to an adjusted net loss of $58 million last quarter. So getting into some of the details. Loan and finance receivables ended the quarter at just over $900 million, a $390 million decrease from March 31, reflecting a pullback in originations and strong portfolio collections. Origination volume decreased about 90% sequentially to $66 million, reflecting our decision to temporarily suspend originating new term loans and lines of credit. And the greater-than-expected 30% portfolio contraction was driven in part by a high level of prepayments. Gross revenue was $81 million, down 27% from the prior quarter largely due to portfolio and yield contraction. Portfolio yield declined roughly 500 basis points sequentially to 28.4%, reflecting COVID related impacts. Interest expense decreased to $10 million as debt balances decline commensurate with portfolio runoff. Our cost of funds rate improved 20 basis points from the prior quarter to 4.6% driven primarily by the reduction in market interest rates in March. Net interest income and net interest margin also declined. Net interest margin was 21.5%, a sequential decline of 610 basis points, reflecting the change in yield and the negative carry on the excess liquidity we maintained. Now turning to credit. As a result of the trends that Nick discussed, our provision for credit losses was $24 million, down $84 million from the prior quarter when we increased reserves for higher expected losses due to COVID. The net charge-off ratio increased as expected to 20.9% as the earliest COVID impacted loans in our portfolio seasoned and were charged off. The 15-plus day delinquency ratio increased from 10.3% at March 31 to 39.5% on June 30 as COVID impacted loans age. However, this ratio improved from its peak of 42% in May even with the declining loan portfolio impacting the denominator. As Noah and Nick mentioned, the percentage of customers and paying relationships increased meaningfully, while the balance of delinquent loans is significantly down from its peak. As a result, the allowance for credit losses decreased $32 million from March 31 to $174 million at June 30, reflecting the realization of expected losses and the portfolio pay down. The reserve ratio increased modestly to just under 20%, in line with portfolio trends and our updated loss expectations. We made meaningful progress on operating expenses, which decreased $11 million from the first quarter to $40 million, which included a $2.8 million restructuring charge. Excluding that charge, operating expenses decreased $14 million or 28% from the first quarter as we exceeded our targeted expense savings. The temporary expense actions we took in the quarter included an almost complete elimination of marketing spend, a significant reduction in discretionary costs and broad-based employee actions, including a hiring freeze, the placement of employees on part-time or furlough status and salary reductions. This approach enabled us to act quickly and gave us maximum optionality while preserving franchise value. As Noah mentioned, we made the tough decision earlier this month to lay off approximately 20% of our U.S. staff which resulted in the $2.8 million restructuring charge, which has an expected payback period of approximately 1 quarter. As a result of the continued decline in our market capitalization, we impaired the entire $11 million of goodwill that was recorded when we combined our Canadian business with Evolocity during the second quarter of 2019. Since we are a single segment company, testing is done on a consolidated basis. And as a result, we had to record this noncash charge. However, since the goodwill is booked in our Canadian subsidiary, $4.6 million of it was attributable to noncontrolling interests, making the net impact to OnDeck, $6.4 million. And finally, we did not record any income tax expense or benefit in the second quarter due to the continued uncertainties in our full year 2020 taxable income forecast. Turning to the balance sheet. As Noah just mentioned, preserving our liquidity was a top priority during the second quarter. We managed both loan origination and operating cost outflows and made significant progress amending our debt facilities. These amendments provided temporary relief on borrowing base requirements and portfolio performance tests for a specified period and reduced facility advance rates. Our debt balances continued to decline in line with portfolio collections, which have continued strong. And as Noah also mentioned, we continue to have constructive dialogue with our lenders on potential future amendments. Total cash and equivalents at quarter end was $150 million, essentially unchanged from March 31 and though the composition changed with the proportion of restricted cash increasing, primarily due to the higher balances related to the early amortization of our securitizations. Debt outstanding decreased $364 million to $680 million as cash collected was primarily used to pay down debt. OnDeck stockholders' equity increased to $217 million, up $5 million from March 31 and now represents 22% of assets. Our debt-to-equity ratio also improved to 3x at quarter end, reflecting our debt pay down. Before I turn the call over to Noah for closing remarks, I want to share our thoughts on the near-term outlook. We are again not guiding to explicit revenue and income ranges. However, as we execute on our second half 2020 priorities, we expect to report a modest net loss in the third quarter, reflecting the following trends: lower revenue, reflecting continued, albeit slower portfolio contraction; a stable net interest margin; provision for loan losses consistent with increasing originations and portfolio quality trends, and operating expenses of around $40 million per quarter. And as Nick mentioned, this outlook assumes U.S. and global economic activity remains muted throughout the second half of 2020 with a slow recovery beginning in 2021. With that, I'll turn it back to Noah for final comments before opening the call for questions.

Noah Breslow: Thanks, Ken. I am so proud of the way our team responded in the second quarter to this challenging environment. But one thing we know for sure is that COVID-19 is going to be here longer than we all hoped. Cases continue to rise in many areas in the U.S. warding many small businesses opening plans and increasing uncertainty for those businesses that have reopened. While there will always be a need for online small business lending, we recognize the need to make more permanent business changes to adapt to this reality. As a result, we have aligned our second half origination strategy and operating expense levels to fit our liquidity position and position us for success when the pandemic abates and the economy begins to recover. Our second half 2020 priorities are focused on near-term sustainability, and positioning the company for a return to portfolio growth in 2021. First, we will prudently increase originations, focusing on industries and geographies that will remain resilient given the current and expected environment; second, continue to improve collections from existing accounts and manage credit quality on new originations through active portfolio management; third, increased automation and operating efficiency across the company; and finally, we will continue to focus on maintaining ample liquidity and funding flexibility during this transitionary period. Our business combination with Enova will bring together 2 FinTech leaders to create a company with over $40 billion in loans originated since inception, a highly complementary portfolio of leading brands addressing the needs of underserved consumers and small businesses, leadership in leveraging advanced analytics and technology to make efficient lending decisions online, an experienced management team and innovative culture, increased scale and financial strength to weather the current environment and emerge stronger and significant shareholder value creation opportunities. These strategic and financial benefits are compelling. And we believe provide our customers, employees and shareholders, the best opportunity for growth and success. With that, we'll turn the call back over to Carol for your questions about the quarter.

Operator: [Operator Instructions]. Our first question today comes from Steven Wald from Morgan Stanley.

Steven Wald: Congratulations on the deal, guys. Maybe just a quick high-level question about sort of the conversations you're having with your clients as we think about the go-forward and condition of the ground obviously, like you pointed out, Noah, this is going to be with us for longer. I'm curious, given what we're seeing with the complexion of the portfolio, what your clients' thoughts are on the extent to which stimulus is supporting them right now, the extent to which the removal of that stimulus could drive further portfolio deterioration for you guys. Could you give us some comment there?

Noah Breslow: Yes. No, absolutely. So the sentiment we're seeing, I think, as we go into the restart, we actually just posted some customer stories on our website. It is an uncertain time for small businesses. And I think the experience can't be simply distilled into a single overwhelming sentiment because it really depends on where you are and what you do. And so the government stimulus, I think, undoubtedly played a positive role in the second quarter in terms of helping customers in our portfolio, either through loans that we facilitated ourselves through PPP or others did, helping them sort of maintain their businesses and their payrolls during that time when we did see, I think, better collections in our back book than we expected. Going forward, though, I don't think small businesses are banking on a second round of government stimulus. If you saw the PPP fund still had a decent amount of their allocation left. So demand for that particular type of stimulus, I think, abated. But we are seeing, just again, some uncertainty in businesses as they reopen as to their levels of demand as they think about the growth investments required. So we are reopening originations, not only with a focus on geography and industry, but also with a focus on existing customers, where we have that long history. We've seen their businesses, in some cases, over a period as long as years. And we're able to make really sound lending decisions, and we've sort of watched those customers have payment activity during the COVID crisis. So especially customers who have worked with OnDeck for a long time and have exhibited strong payment behavior during COVID is where we're starting in our restart, and we'll sort of expand from there.

Steven Wald: That's very helpful. And maybe just one quick other one. I noticed in the call last night with Enova, I didn't see any specific number unless I missed something on the extent of the mark that they're planning to take on the acquisition. Just curious if you guys had a sense of where that might be shaking out or just the logic behind to mark that at fair value at a specific point in time later this year, given the ever-changing conditions on the ground affecting the book.

Noah Breslow: Of course. Yes. No, that's a really important question, but we're not suited to answer it ourselves. It's really a question for Enova's management team. But certainly, as was mentioned on the call last night, they are strongly considering moving the portfolio to fair value, which is aligned with their accounting strategy.

Operator: Our next question comes from Eric Wasserstrom from UBS.

Eric Wasserstrom: Maybe on a similar line of thought around end market conditions. I mean, I think one of the things we've observed is many small businesses pivoting, they were primarily an in-store model to maybe a hybrid model to even if they are a restaurant to pivot towards primarily preparing for delivery and take out and that kind of thing. Do you guys have any sense of how much revenue recapture is occurring as your small business customers make that pivot?

Noah Breslow: Yes. Thanks, Eric. This is Noah. So it's hard for us to peg the exact level of revenue recapture for our customers. But I will say 100%, you are right. Main street small business owners, especially if they were more brick-and-mortar are doing kind of anything and everything to go more digital and go more distance. So if we look at some of the customer experiences we've had in the restart and why small businesses are taking loans, the folks who are growing, either they're in industries that are directly, if you will, benefiting from the current conditions. And there's a few industries that fit those criteria, but a number of the use cases have been around buying inventory to support kind of e-commerce or digital type revenue expansion for these businesses, while they're unable to operate in the normal course. So I think the trend is absolutely there. The level of revenue recapture, I think, really varies by the type of business and the industry they're in. So it's tough to generalize, but I think all business owners are accelerating their plans to have a digital component even if their brick-and-mortar business ultimately comes back to its former size.

Nicholas Brown: The only other thing that I would add to what Noah said is a lot of our customers are anticipating that in their local geography they will be seeing consolidation, i.e., some of their competitors are having difficulties, and they anticipate that competition being reduced. But the consolidation is unknown in their mind as to the timing of when that will occur because of the support of the government stimulus programs that have allowed them to continue to operate beyond that, which they would normally be able to survive.

Eric Wasserstrom: Got it. Got it. And then one deal-related question. Noah, can you just walk us through the milestones from here that we should be following towards the continuation of the deal?

Noah Breslow: I can do it at a very high level, Eric, but I'd rather not respond too much about the deal. The focus of this call is really on the second quarter earnings for OnDeck stand-alone. But this is really -- it's a standard deal. There's a stock component. Both companies are public. And so a lot of these next steps are very customary in terms of a filing of a proxy and a shareholder vote to approve the deal on OnDeck side. And those are really the domain milestones that we see. Otherwise, it's a very straightforward stock deal. There's the usual checks on antitrust, which we are fairly confident will not yield any issues, and that's about it.

Operator: [Operator Instructions]. Your next question comes from Melissa Wedel from JPMorgan.

Melissa Wedel: Curious to explore the elevated prepayments. It seems a little bit inconsistent with what we're seeing in some other consumer categories this quarter. I'm curious if there were any specific incentives that you guys were offering to drive those prepayments?

Nicholas Brown: Yes. So I'll answer that in two ways. The first of which was, I think most of our customers are saying that although it's still a lot of uncertainty ahead of them, they are seeing more certainty than when COVID initially started. And so those customers who either receive PPP money or had fairly deep capital reserved as that certainty on their future increased, their willingness to expend their capital to become current with their loans became greater. And as a result, we saw that, that sentiment improvement resulted in payment improvement in our portfolio. The second thing is that a lot of the increased payments initially were coming for early payoffs and that early payoff has started to level out over the last week or 2. And what we're seeing now is that it's mostly customers who are resuming their normal payment schedule that's driving the improvements. We are seeing some move in terms of how much of their original payment that they are paying moving from 25% to 50%, 50% to 70%, et cetera. But the biggest change is from those that moved from a short-term deferral to paying greater than 25%.

Melissa Wedel: Okay. So looking ahead, I guess, given those trends, do you feel like the payment rate or the prepayments that you saw in 2Q were sort of a blip driven by perhaps some of the PPP or other relief efforts and that, that might fall a bit relative to Q2 going forward?

Nicholas Brown: Yes, at least based upon the trends for the last couple of weeks. The early payoffs have decreased. And what we're seeing is that, overall, the increase in collectibility and payments that has been really strong in the last couple of weeks are being driven less by early payoffs and more by increasing percentages of payments within the paying population and some movement from nonpaying to above 25%.

Operator: And we have no further questions in queue at this time. We would like to thank you for participating on today's call. This does conclude our conference call for today. You may now disconnect.