Enova International (ENVA) 10-Q 2022 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-35503

 

Enova International, Inc.

(Exact name of registrant as specified in its charter)

Delaware	45-3190813
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)
175 West Jackson Blvd. Chicago, Illinois	60604
(Address of principal executive offices)	(Zip Code)

(312) 568-4200

(Registrant’s telephone number, including area code)

NONE

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $.00001 par value per share	ENVA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

31,459,925 of the Registrant’s common shares, $0.00001 par value, were outstanding as of October 26, 2022.

CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements give current expectations or forecasts of future events and reflect the views and assumptions of senior management with respect to the business, financial condition, operations and prospects of Enova International, Inc. and its subsidiaries (collectively, the “Company”). When used in this report, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecast,” “project” and similar expressions or variations as they relate to the Company or its management are intended to identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties that are beyond the ability of the Company to control and, in some cases, predict. Accordingly, there are or will be important factors that could cause the Company’s actual results to differ materially from those indicated in these statements. Key factors that could cause the Company’s actual financial results, performance or condition to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following:

•

the effect of laws and regulations targeting our industry that directly or indirectly regulate or prohibit our operations or render them unprofitable or impractical;

•

the effect of and compliance with domestic and international consumer credit, tax and other laws and government rules and regulations applicable to our business, including changes in such laws, rules and regulations, or changes in the interpretation or enforcement thereof, and the regulatory and examination authority of the Consumer Financial Protection Bureau with respect to providers of consumer financial products and services in the United States;

•

the effect of and compliance with enforcement actions, orders and agreements issued by applicable regulators, such as the January 2019 Consent Order issued by the Consumer Financial Protection Bureau;

•

changes in federal or state laws or regulations, or judicial decisions involving licensing or supervision of commercial lenders, interest rate limitations, the enforceability of choice of law provisions in loan agreements, the validity of bank sponsor partnerships, the use of brokers or other significant changes;

•

our ability to process or collect loans and finance receivables through the Automated Clearing House system;

•

the deterioration of the political, regulatory or economic environment in countries where we operate or in the future may operate;

•

the actions of third parties who provide, acquire or offer products and services to, from or for us;

•

public and regulatory perception of the consumer loan business, small business financing and our business practices;

•

the effect of any current or future litigation proceedings and any judicial decisions or rulemaking that affects us, our products or the legality or enforceability of our arbitration agreements;

•

changes in demand for our services, changes in competition and the continued acceptance of the online channel by our customers;

•

changes in our ability to satisfy our debt obligations or to refinance existing debt obligations or obtain new capital to finance growth;

•

a prolonged interruption in the operations of our facilities, systems and business functions, including our information technology and other business systems;

•

compliance with laws and regulations applicable to our international operations, including anti-corruption laws such as the Foreign Corrupt Practices Act and international anti-money laundering, trade and economic sanctions laws;

•

our ability to attract and retain qualified officers;

•

cyber-attacks or security breaches;

•

acts of God, war or terrorism, pandemics and other events;

•

interest rate and foreign currency exchange rate fluctuations;

•

changes in the capital markets, including the debt and equity markets;

•

the effects of macroeconomic conditions on our business, including inflation, recession and unemployment;

•

the effect of any of the above changes on our business or the markets in which we operate;

•

the risk that the Company will not successfully integrate acquired companies or that costs associated with integration are higher than anticipated;

•

the risk that the cost savings, synergies, growth and cash flows from acquisitions will not be fully realized or will take longer to realize than expected;

•

litigation risk related to acquisitions; and

•

other risks and uncertainties described herein.

The foregoing list of factors is not exhaustive and new factors may emerge or changes to these factors may occur that would impact the Company’s business and cause actual results to differ materially from those expressed in any of our forward-looking statements. Additional information regarding these and other factors may be contained in the Company’s filings with the Securities and Exchange Commission (the “SEC”). Readers of this report are encouraged to review the Company’s filings with the SEC, including the risks described under “Risk Factors” contained in the Company’s Form 10-K and any updates to those risk factors contained in subsequent Forms 10-Q, to obtain more detail about the Company’s risks and uncertainties. All forward-looking statements involve risks, assumptions and uncertainties. The occurrence of the events described, and the achievement of the expected results, depends on many events, some or all of which are not predictable or within the Company’s control. If one or more events related to these or other risks or uncertainties materialize, or if management’s underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. The forward-looking statements in this report are made as of the date of this report, and the Company disclaims any intention or obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of this report. All forward-looking statements in this report are expressly qualified in their entirety by the foregoing cautionary statements.

ENOVA INTERNATIONAL, INC.

INDEX TO FORM 10-Q

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets – September 30, 2022 and 2021 and December 31, 2021	1
	Consolidated Statements of Income – Three and Nine Months Ended September 30, 2022 and 2021	3
	Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2022 and 2021	4
	Consolidated Statements of Stockholders’ Equity – Three and Nine Months Ended September 30, 2022 and 2021	5
	Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2022 and 2021	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
SIGNATURES		43

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(Unaudited)

	September 30,						December 31,
	2022			2021			2021
Assets
Cash and cash equivalents(1)	$	87,727		$	229,088		$	165,477
Restricted cash(1)		84,412			59,053			60,406
Loans and finance receivables at fair value(1)		2,765,123			1,635,282			1,964,690
Income taxes receivable		40,609			4,799			51,104
Other receivables and prepaid expenses(1)		59,470			52,975			52,274
Property and equipment, net		89,375			81,149			78,402
Operating lease right-of-use assets		20,273			36,105			23,101
Goodwill		279,275			279,275			279,275
Intangible assets, net		29,403			37,458			35,444
Other assets(1)		53,747			52,315			51,310
Total assets	$	3,509,414		$	2,467,499		$	2,761,483
Liabilities and Stockholders’ Equity
Accounts payable and accrued expenses(1)	$	168,978		$	124,584		$	156,102
Operating lease liabilities		35,320			61,985			40,987
Deferred tax liabilities, net		99,312			71,297			86,943
Long-term debt(1)		2,059,577			1,075,380			1,384,399
Total liabilities		2,363,187			1,333,246			1,668,431
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, $0.00001 par value, 250,000,000 shares authorized, 44,200,180, 43,224,666 and 43,423,572 shares issued and 31,628,122, 36,427,705 and 34,144,012 outstanding as of September 30, 2022 and 2021 and December 31, 2021, respectively		—			—			—
Preferred stock, $0.00001 par value, 25,000,000 shares authorized, no shares issued and outstanding		—			—			—
Additional paid in capital		245,092			217,051			225,689
Retained earnings		1,262,313			1,057,111			1,105,761
Accumulated other comprehensive loss		(7,255	)		(8,185	)		(8,540	)
Treasury stock, at cost (12,572,058, 6,796,961 and 9,279,560 shares as of September 30, 2022 and 2021 and December 31, 2021, respectively)		(353,923	)		(133,041	)		(229,858	)
Total Enova International, Inc. stockholders’ equity		1,146,227			1,132,936			1,093,052
Noncontrolling interest		—			1,317			—
Total stockholders’ equity		1,146,227			1,134,253			1,093,052
Total liabilities and stockholders’ equity	$	3,509,414		$	2,467,499		$	2,761,483

(1) Includes amounts in wholly owned, bankruptcy-remote special purpose subsidiaries (“VIEs”) presented separately in the table below.

1

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(Unaudited)

The following table presents the aggregated assets and liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. See Note 1 for additional information.

	September 30,				December 31,
	2022		2021		2021
Assets of consolidated VIEs, included in total assets above
Cash and cash equivalents	$	420	$	1,807	$	420
Restricted cash		66,169		47,183		45,706
Loans and finance receivables at fair value		1,444,229		573,303		745,246
Other receivables and prepaid expenses		16,058		3,983		6,378
Other assets		5,145		2,176		2,082
Total assets	$	1,532,021	$	628,452	$	799,832
Liabilities of consolidated VIEs, included in total liabilities above
Accounts payable and accrued expenses	$	6,085	$	3,610	$	2,061
Affiliate note payable		—		5,692		—
Long-term debt		1,130,431		457,537		565,770
Total liabilities	$	1,136,516	$	466,839	$	567,831

See notes to consolidated financial statements.

2

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Revenue	$	456,200		$	320,160		$	1,249,921		$	844,324
Change in Fair Value		(162,005	)		(73,778	)		(422,465	)		(100,443	)
Net Revenue		294,195			246,382			827,456			743,881
Operating Expenses
Marketing		101,278			79,726			286,000			163,548
Operations and technology		45,953			37,966			128,945			108,628
General and administrative		37,182			33,557			105,400			116,321
Depreciation and amortization		11,270			8,914			28,368			23,001
Total Operating Expenses		195,683			160,163			548,713			411,498
Income from Operations		98,512			86,219			278,743			332,383
Interest expense, net		(30,924	)		(18,163	)		(78,357	)		(57,493	)
Foreign currency transaction gain (loss)		363			(109	)		70			(383	)
Equity method investment (loss) income		(129	)		529			6,522			2,558
Other nonoperating expenses		(230	)		—			(1,321	)		(1,128	)
Income before Income Taxes		67,592			68,476			205,657			275,937
Provision for income taxes		15,884			16,667			49,105			67,607
Net income before noncontrolling interest		51,708			51,809			156,552			208,330
Less: Net income attributable to noncontrolling interest		—			261			—			685
Net income attributable to Enova International, Inc.	$	51,708		$	51,548		$	156,552		$	207,645
Earnings Per Share attributable to Enova International, Inc.:
Earnings per common share:
Basic	$	1.62		$	1.40		$	4.80		$	5.68
Diluted	$	1.57		$	1.36		$	4.64		$	5.48
Weighted average common shares outstanding:
Basic		31,912			36,744			32,589			36,554
Diluted		32,966			37,984			33,772			37,874

See notes to consolidated financial statements.

3

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Net income before noncontrolling interest	$	51,708		$	51,809		$	156,552		$	208,330
Other comprehensive (loss) gain, net of tax:
Foreign currency translation loss(1)		(1,222	)		(2,174	)		(325	)		(1,017	)
Ownership change in noncontrolling interest		—			—			—			(270	)
Unrealized gain on investments, net of tax		1,448			—			1,610			—
Total other comprehensive (loss) gain, net of tax		226			(2,174	)		1,285			(1,287	)
Comprehensive Income		51,934			49,635			157,837			207,043
Net income attributable to noncontrolling interest		—			(261	)		—			(685	)
Foreign currency translation loss attributable to noncontrolling interests		—			40			—			52
Ownership change in noncontrolling interest		—			—			—			802
Comprehensive (loss) income attributable to the noncontrolling interest		—			(221	)		—			169
Comprehensive income attributable to Enova International, Inc.	$	51,934		$	49,414		$	157,837		$	207,212

(1) Net of tax benefit (provision) of $345 and $682 for the three months ended September 30, 2022 and 2021, respectively, and $65 and $426 for the nine months ended September 30, 2022 and 2021, respectively.

See notes to consolidated financial statements.

4

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)

																		Total Enova
									Accumulated									International,
					Additional				Other									Inc.						Total
	Common Stock				Paid in		Retained		Comprehensive			Treasury Stock, at cost						Stockholders'			Noncontrolling			Stockholders'
	Shares		Amount		Capital		Earnings		Loss			Shares			Amount			Equity			Interest			Equity
Balance at June 30, 2021		43,185	$	—	$	211,548	$	1,005,563	$	(6,011	)		(6,313	)	$	(117,439	)	$	1,093,661		$	1,096		$	1,094,757
Stock-based compensation expense		—		—		5,018		—		—			—			—			5,018			—			5,018
Shares issued for vested RSUs		14		—		—		—		—			—			—			—			—			—
Shares issued for stock option exercises		26		—		485		—		—			—			—			485			—			485
Net income attributable to Enova International, Inc.		—		—		—		51,548		—			—			—			51,548			—			51,548
Foreign currency translation loss, net of tax		—		—		—		—		(2,174	)		—			—			(2,174	)		(40	)		(2,214	)
Purchases of treasury shares, at cost		—		—		—		—		—			(484	)		(15,602	)		(15,602	)		—			(15,602	)
Net income attributable to noncontrolling interest		—		—		—		—		—			—			—			—			261			261
Balance at September 30, 2021		43,225	$	—	$	217,051	$	1,057,111	$	(8,185	)		(6,797	)	$	(133,041	)	$	1,132,936		$	1,317		$	1,134,253
Balance at June 30, 2022		44,165	$	—	$	239,187	$	1,210,605	$	(7,481	)		(11,982	)	$	(334,230	)	$	1,108,081		$	—		$	1,108,081
Stock-based compensation expense		—		—		5,457		—		—			—			—			5,457			—			5,457
Shares issued for vested RSUs		11		—		—		—		—			—			—			—			—			—
Shares issued for stock option exercises		24		—		448		—		—			—			—			448			—			448
Net income attributable to Enova International, Inc.		—		—		—		51,708		—			—			—			51,708			—			51,708
Unrealized gain on investments, net of tax		—		—		—		—		1,448			—			—			1,448			—			1,448
Foreign currency translation loss, net of tax		—		—		—		—		(1,222	)		—			—			(1,222	)		—			(1,222	)
Purchases of treasury shares, at cost		—		—		—		—		—			(590	)		(19,693	)		(19,693	)		—			(19,693	)
Balance at September 30, 2022		44,200	$	—	$	245,092	$	1,262,313	$	(7,255	)		(12,572	)	$	(353,923	)	$	1,146,227		$	—		$	1,146,227

																		Total Enova
									Accumulated									International,
					Additional				Other									Inc.						Total
	Common Stock				Paid in		Retained		Comprehensive			Treasury Stock, at cost						Stockholders’			Noncontrolling			Stockholders’
	Shares		Amount		Capital		Earnings		Loss			Shares			Amount			Equity			Interest			Equity
Balance at December 31, 2020		41,937	$	—	$	187,981	$	849,466	$	(6,898	)		(6,174	)	$	(113,201	)	$	917,348		$	1,486		$	918,834
Stock-based compensation expense		—		—		16,072		—		—			—			—			16,072			—			16,072
Shares issued for vested RSUs		757		—		—		—		—			—			—			—			—			—
Shares issued for stock option exercises		531		—		11,926		—		—			—			—			11,926			—			11,926
Net income attributable to Enova International, Inc.		—		—		—		207,645		—			—			—			207,645			—			207,645
Foreign currency translation loss, net of tax		—		—		—		—		(1,017	)		—			—			(1,017	)		(52	)		(1,069	)
Purchases of treasury shares, at cost		—		—		—		—		—			(623	)		(19,840	)		(19,840	)		—			(19,840	)
Ownership change in noncontrolling interest		—		—		1,072		—		(270	)		—			—			802			(802	)		—
Net income attributable to noncontrolling interest		—		—		—		—		—			—			—			—			685			685
Balance at September 30, 2021		43,225	$	—	$	217,051	$	1,057,111	$	(8,185	)		(6,797	)	$	(133,041	)	$	1,132,936		$	1,317		$	1,134,253
Balance at December 31, 2021		43,424	$	—	$	225,689	$	1,105,761	$	(8,540	)		(9,280	)	$	(229,858	)	$	1,093,052		$	—		$	1,093,052
Stock-based compensation expense		—		—		15,957		—		—			—			—			15,957			—			15,957
Shares issued for vested RSUs		615		—		—		—		—			—			—			—			—			—
Shares issued for stock option exercises		161		—		3,446		—		—			—			—			3,446			—			3,446
Net income attributable to Enova International, Inc.		—		—		—		156,552		—			—			—			156,552			—			156,552
Unrealized gain on investments, net of tax		—		—		—		—		1,610			—			—			1,610			—			1,610
Foreign currency translation loss, net of tax		—		—		—		—		(325	)		—			—			(325	)		—			(325	)
Purchases of treasury shares, at cost		—		—		—		—		—			(3,292	)		(124,065	)		(124,065	)		—			(124,065	)
Balance at September 30, 2022		44,200	$	—	$	245,092	$	1,262,313	$	(7,255	)		(12,572	)	$	(353,923	)	$	1,146,227		$	—		$	1,146,227

5

See notes to consolidated financial statements.

6

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2022			2021
Cash Flows from Operating Activities
Net income before noncontrolling interest	$	156,552		$	208,330
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		28,368			23,001
Amortization of deferred loan costs and debt discount		3,999			5,022
Change in fair value of loans and finance receivables		417,779			98,254
Stock-based compensation expense		15,957			16,072
Loss on sale of subsidiary		4,388			—
Incomplete transaction costs		710			—
Loss on early extinguishment of debt		—			378
Operating leases, net		(2,839	)		(1,835	)
Lease termination and cease-use loss (gain)		—			(113	)
Deferred income taxes, net		12,442			23,580
Changes in operating assets and liabilities:
Finance and service charges on loans and finance receivables		(12,240	)		(18,265	)
Other receivables and prepaid expenses and other assets		(19,086	)		(10,505	)
Accounts payable and accrued expenses		(20,556	)		(7,560	)
Current income taxes		39,386			(11,202	)
Net cash provided by operating activities		624,860			325,157
Cash Flows from Investing Activities
Loans and finance receivables originated or acquired		(3,036,547	)		(1,832,008	)
Loans and finance receivables repaid		1,836,157			1,361,592
Acquisitions, net of cash acquired		—			(29,153	)
Capitalization of software development costs and purchases of fixed assets		(33,290	)		(22,031	)
Sale of a subsidiary		8,713			—
Other investing activities		—			25
Net cash used in investing activities		(1,224,967	)		(521,575	)
Cash Flows from Financing Activities
Borrowings under revolving line of credit		139,000			102,000
Repayments under revolving line of credit		(30,000	)		(102,000	)
Borrowings under securitization facilities		592,137			390,054
Repayments under securitization facilities		(28,280	)		(260,798	)
Debt issuance costs paid		(6,392	)		(5,909	)
Proceeds from exercise of stock options		3,446			11,926
Treasury shares purchased		(124,065	)		(19,840	)
Net cash provided by financing activities		545,846			115,433
Effect of exchange rates on cash, cash equivalents and restricted cash		517			(74	)
Net decrease in cash, cash equivalents and restricted cash		(53,744	)		(81,059	)
Cash, cash equivalents and restricted cash at beginning of year		225,883			369,200
Cash, cash equivalents and restricted cash at end of period	$	172,139		$	288,141
Supplemental Disclosures
Non-cash renewal of loans and finance receivables	$	239,987		$	152,498

See notes to consolidated financial statements.

7

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Significant Accounting Policies

Nature of the Company

Enova International, Inc. and its subsidiaries (collectively, the “Company”) operates an internet-based lending platform to serve customers in need of cash to fulfill their financial responsibilities. Through a network of direct and indirect marketing channels, the Company offers funds to its customers through a variety of unsecured loan and finance receivable products. The business is operated primarily through the internet to provide convenient, fully-automated financial solutions to its customers. The Company originates, arranges, guarantees or purchases consumer loans and provides financing to small businesses through a line of credit account, installment loan or receivables purchase agreement product (“RPAs”). Consumer loans include installment loans and line of credit accounts. RPAs represent a right to receive future receivables from a small business. The Company also provides services related to third-party lenders’ consumer loan products by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws (“CSO program”).

Basis of Presentation

The consolidated financial statements of the Company reflect the historical results of operations and cash flows of the Company during each respective period. The consolidated financial statements include goodwill and intangible assets arising from businesses previously acquired. The financial information included herein may not be indicative of the consolidated financial position, operating results, changes in stockholders’ equity and cash flows of the Company in the future. Intercompany transactions are eliminated.

The Company consolidates any variable interest entity (“VIE”) where it has been determined it is the primary beneficiary. The primary beneficiary is the entity which has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.

The consolidated financial statements presented as of September 30, 2022 and 2021 and for the three and nine-month periods ended September 30, 2022 and 2021 are unaudited but, in management’s opinion, include all adjustments necessary for a fair presentation of the results for such interim periods. Operating results for the three and nine-month periods are not necessarily indicative of the results that may be expected for the full fiscal year.

These consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 and related notes, which are included on Form 10-K filed with the SEC on February 28, 2022.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheets (in thousands):

	September 30,
	2022		2021
Cash and cash equivalents	$	87,727	$	229,088
Restricted cash		84,412		59,053
Total cash, cash equivalents and restricted cash	$	172,139	$	288,141

Loans and Finance Receivables

The Company utilizes the fair value option on its entire loan and finance receivable portfolio. As such, loans and finance receivables are carried at fair value in the consolidated balance sheet with changes in fair value recorded in the consolidated income statement. To derive the fair value, the Company generally utilizes discounted cash flow analyses that factor in estimated losses, prepayments, utilization rates and servicing costs over the estimated duration of the underlying assets. Loss, prepayment, utilization and servicing cost assumptions are determined using historical data and include appropriate consideration of recent trends and anticipated future performance. Future cash flows are discounted using a rate of return that the Company believes a market participant would require. Accrued and unpaid interest and fees are included in “Loans and finance receivables at fair value” in the consolidated balance sheets.

Current and Delinquent Loans and Finance Receivables

The Company classifies its loans and finance receivables as either current or delinquent. Excluding OnDeck loans and finance receivables, when a customer does not make a scheduled payment as of the due date, that payment is considered delinquent, and the remainder of the receivable balance is considered current. If the customer does not make two consecutive payments, the entire account or loan is classified as delinquent and placed on a non-accrual status. For the OnDeck portfolio, a loan is considered to be delinquent

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

when the scheduled payments are one day past due. Loans are placed in nonaccrual status and the accrual of interest income is stopped on loans that are delinquent and non-paying. Loans are returned to accrual status if they are brought to non-delinquent status or have performed in accordance with the contractual terms for a reasonable period of time and, in the Company’s judgment, will continue to make periodic principal and interest payments as scheduled. The Company allows for normal payment processing time before considering a loan delinquent but does not provide for any additional grace period.

Where permitted by law and as long as a loan is not considered delinquent, a customer may choose to renew or extend the due date on certain installment loans. In order to renew or extend a single-pay loan, a customer must agree to pay the current finance charge for the right to make a later payment of the outstanding principal balance plus an additional finance charge. In order to renew an installment loan, the customer enters into a new installment loan contract and agrees to pay the principal balance and finance charge in accordance with the terms of the new loan contract. In certain situations, the Company offers forbearance options, such as payment deferrals, on its loan products without the incurrence of additional finance charges or late fees. If a loan is deemed to be current and the customer makes a deferral or payment modification, the loan is still deemed to be current until the next scheduled payment is missed.

The Company generally charges off loans and finance receivables between 60 and 65 days delinquent. If a loan or finance receivable is deemed uncollectible prior to this, it is charged off at that point. For the OnDeck portfolio, the Company generally charges off a loan when it is probable that it will be unable to collect all of the remaining principal payments, which is generally after 90 days of delinquency and 30 days of non-activity. Loans and finance receivables classified as delinquent generally have an age of one to 64 days from the date any portion of the receivable became delinquent, as defined above. Recoveries on loans and finance receivables that were previously charged off are generally recognized when collected or sold.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with Accounting Standards Codification (“ASC”) 350, Goodwill, the Company tests goodwill and intangible assets with an indefinite life for potential impairment annually as of October 1 and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount.

The Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In assessing the qualitative factors, management considers relevant events and circumstances including but not limited to macroeconomic conditions, industry and market environment, overall financial performance of the Company, cash flow from operating activities, market capitalization and stock price. If the Company determines that the quantitative impairment test is required, management uses the income approach to complete its annual goodwill assessment. The income approach uses future cash flows and estimated terminal values for the Company that are discounted using a market participant perspective to determine the fair value, which is then compared to the carrying value to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and economic standpoint.

Revenue Recognition

The Company recognizes revenue based on the financing products and services it offers and on loans it acquires. “Revenue” in the consolidated statements of income includes: interest income, finance charges, fees for services provided through the Company’s CSO programs (“CSO fees”), revenue on RPAs, service charges, draw fees, minimum billing fees, purchase fees, origination fees, late fees and non-sufficient funds fees as permitted by applicable laws and pursuant to the agreement with the customer. Interest is generally recognized on an effective yield basis over the contractual term of the loan on installment loans, the estimated outstanding period of the draw on line of credit accounts, or the projected delivery term on RPAs. CSO fees are recognized over the term of the loan. Late and nonsufficient funds fees are recognized when assessed to the customer.

Marketing Expenses

Marketing expenses consist of digital costs, lead purchase costs and offline marketing costs such as television and direct mail advertising. All marketing expenses are expensed as incurred.

Equity Method Investments

In the second quarter of 2022, the Company sold its remaining interest in On Deck Capital Canada Holdings, Inc. (“OnDeck Canada”), which resulted in a net loss of $4.4 million. Prior to this, the Company recorded its interest in OnDeck Canada under the equity method of accounting. As of September 30, 2021 and December 31, 2021, the carrying value of the Company’s investment in OnDeck Canada was $13.3 million and $13.7 million, respectively, which the Company has included in “Other assets” on the consolidated balance sheets.

9

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

On February 24, 2021 the Company contributed the platform-as-service business assumed in the OnDeck acquisition to Linear Financial Technologies Holding LLC (“Linear”) in exchange for ownership units in that entity. The Company records its interest in Linear under the equity method of accounting. As of September 30, 2022 and 2021 and December 31, 2021, the carrying value of the Company’s investment in Linear was $18.2 million, $5.6 million and $5.6 million, respectively, which the Company has included in “Other assets” on the consolidated balance sheets.

In December 2021, the Company sold a portion of its interest in On Deck Capital Australia PTY LTD (“OnDeck Australia"). Prior to this, the Company had consolidated the financial position and results of operations of OnDeck Australia under the voting interest model. The noncontrolling interest, which is presented as a separate component of consolidated equity, represented the minority owners’ proportionate share of the equity of the entity and was adjusted for the minority owners’ share of the earnings, losses, investments and distributions. Subsequent to the transaction, the Company owns a 20% equity interest in OnDeck Australia and no longer has control over the entity; as such, the Company has deconsolidated OnDeck Australia from its financial statements and now records its interest under the equity method of accounting. As of September 30, 2022 and December 31, 2021, the carrying value of the Company’s investment in OnDeck Australia was $1.2 million and $1.8 million, respectively, which the Company has included in “Other assets” on the consolidated balance sheets.

Equity method income has been included in “Equity method investment income” in the consolidated income statements.

Variable Interest Entities

As part of the Company’s overall funding strategy and as part of its efforts to support its liquidity from varying sources, the Company has established a securitization program through several securitization facilities. The Company transfers certain loan receivables to VIEs, which issue notes backed by the underlying loan receivables and are serviced by another wholly-owned subsidiary of the Company. The cash flows from the loans held by the VIEs are used to repay obligations under the notes.

The Company is required to evaluate the VIEs for consolidation. The Company has the ability to direct the activities of the VIEs that most significantly impact the economic performance of the entities as the servicer of the securitized loan receivables. Additionally, the Company has the right to receive residual payments, which expose it to potentially significant losses and returns. Accordingly, the Company determined it is the primary beneficiary of the VIEs and is required to consolidate them. The assets and liabilities related to the VIEs are included in the Company’s consolidated financial statements and are accounted for as secured borrowings.

2. Acquisitions

On March 19, 2021, the Company completed the purchase of Pangea Universal Holdings, Inc. (“PUH”), a Chicago-based payments platform offering mobile international money transfer services. In accordance with the terms of the transaction, PUH was merged into Pangea Transfer Company, LLC (“Pangea”) with the separate corporate existence of PUH thereupon ceasing and Pangea continuing as the surviving, wholly-owned subsidiary of the Company. Pangea serves the international money transfer market with a focus on Latin America and Asia. Customers have the option to transfer funds directly into bank accounts or have cash picked up from partners in minutes. The total consideration of $32.9 million consisted of $30.0 million in cash and $2.9 million in loan forgiveness. The Company performed a valuation analysis of identifiable assets acquired and liabilities assumed and allocated the aggregate purchase consideration based on the fair values of those identifiable assets and liabilities. The allocation of the purchase consideration included $19.8 million and $11.3 million of intangible assets and goodwill, respectively, with all other assets acquired and liabilities assumed being nominal. The operating results of Pangea are included in, but not material to, the Company’s consolidated financial statements from the date of acquisition. Its revenues and cost of revenues are included in “Revenues” and “Change in Fair Value,” respectively, in the Consolidated Statements of Income.

10

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

3. Loans and Finance Receivables

Revenue generated from the Company’s loans and finance receivables for the three and nine months ended September 30, 2022 and 2021 was as follows (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Consumer loans and finance receivables revenue	$	277,096	$	215,432	$	778,686	$	571,681
Small business loans and finance receivables revenue		172,721		100,610		455,224		261,731
Total loans and finance receivables revenue		449,817		316,042		1,233,910		833,412
Other		6,383		4,118		16,011		10,912
Total revenue	$	456,200	$	320,160	$	1,249,921	$	844,324

Loans and Finance Receivables at Fair Value

The components of Company-owned loans and finance receivables at September 30, 2022 and 2021 and December 31, 2021 were as follows (dollars in thousands):

	As of September 30, 2022
			Small
	Consumer		Business		Total
Principal balance - accrual	$	874,800	$	1,495,864	$	2,370,664
Principal balance - non-accrual		97,520		84,425		181,945
Total principal balance		972,320		1,580,289		2,552,609
Loans and finance receivables at fair value - accrual		1,048,516		1,667,639		2,716,155
Loans and finance receivables at fair value - non-accrual		7,689		41,279		48,968
Loans and finance receivables at fair value		1,056,205		1,708,918		2,765,123
Difference between principal balance and fair value	$	83,885	$	128,629	$	212,514

	As of September 30, 2021
			Small
	Consumer		Business		Total
Principal balance - accrual	$	650,377	$	840,778	$	1,491,155
Principal balance - non-accrual		59,404		35,890		95,294
Total principal balance		709,781		876,668		1,586,449
Loans and finance receivables at fair value - accrual		718,194		891,722		1,609,916
Loans and finance receivables at fair value - non-accrual		5,359		20,007		25,366
Loans and finance receivables at fair value	$	723,553	$	911,729	$	1,635,282
Difference between principal balance and fair value	$	13,772	$	35,061	$	48,833

	As of December 31, 2021
			Small
	Consumer		Business		Total
Principal balance - accrual	$	799,678	$	967,950	$	1,767,628
Principal balance - non-accrual		68,073		42,725		110,798
Total principal balance		867,751		1,010,675		1,878,426
Loans and finance receivables at fair value - accrual		885,238		1,051,400		1,936,638
Loans and finance receivables at fair value - non-accrual		4,906		23,146		28,052
Loans and finance receivables at fair value	$	890,144	$	1,074,546	$	1,964,690
Difference between principal balance and fair value	$	22,393	$	63,871	$	86,264

As of September 30, 2022 and 2021 and December 31, 2021, the aggregate fair value of loans and finance receivables that were 90 days or more past due was $5.7 million, $6.2 million and $6.4 million, respectively, of which, $5.7 million, $6.1 million and $6.3 million, respectively, was in non-accrual status. The aggregate unpaid principal balance for loans and finance receivables that were 90 days or more past due was $12.5 million, $11.6 million and $12.4 million, respectively.

11

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Changes in the fair value of Company-owned loans and finance receivables during the three and nine months ended September 30, 2022 and 2021 were as follows (dollars in thousands):

	Three Months Ended September 30, 2022
				Small
	Consumer			Business			Total
Balance at beginning of period	$	989,128		$	1,471,723		$	2,460,851
Originations or acquisitions		380,676			806,739			1,187,415
Interest and fees(1)		277,096			172,721			449,817
Repayments		(454,821	)		(717,603	)		(1,172,424	)
Charge-offs, net(2)		(167,762	)		(43,778	)		(211,540	)
Net change in fair value(2)		32,116			19,116			51,232
Effect of foreign currency translation		(228	)		—			(228	)
Balance at end of period	$	1,056,205		$	1,708,918		$	2,765,123

	Three Months Ended September 30, 2021
				Small
	Consumer			Business			Total
Balance at beginning of period	$	623,975		$	784,728		$	1,408,703
Originations or acquisitions		370,791			461,595			832,386
Interest and fees(1)		215,432			100,610			316,042
Repayments		(389,035	)		(458,212	)		(847,247	)
Charge-offs, net(2)		(57,836	)		(7,060	)		(64,896	)
Net change in fair value(2)		(39,225	)		31,575			(7,650	)
Effect of foreign currency translation		(549	)		(1,507	)		(2,056	)
Balance at end of period	$	723,553		$	911,729		$	1,635,282

	Nine Months Ended September 30, 2022
				Small
	Consumer			Business			Total
Balance at beginning of period	$	890,144		$	1,074,546		$	1,964,690
Originations or acquisitions		1,131,821			2,144,713			3,276,534
Interest and fees(1)		778,686			455,224			1,233,910
Repayments		(1,359,294	)		(1,933,277	)		(3,292,571	)
Charge-offs, net(2)		(439,510	)		(92,505	)		(532,015	)
Net change in fair value(2)		54,019			60,217			114,236
Effect of foreign currency translation		339			—			339
Balance at end of period	$	1,056,205		$	1,708,918		$	2,765,123

	Nine Months Ended September 30, 2021
				Small
	Consumer			Business			Total
Balance at beginning of period	$	625,219		$	616,287		$	1,241,506
Originations or acquisitions		800,101			1,184,405			1,984,506
Interest and fees(1)		571,681			261,731			833,412
Repayments		(1,100,366	)		(1,222,675	)		(2,323,041	)
Charge-offs, net(2)		(121,294	)		(30,204	)		(151,498	)
Net change in fair value(2)		(51,547	)		104,791			53,244
Effect of foreign currency translation		(241	)		(2,606	)		(2,847	)
Balance at end of period	$	723,553		$	911,729		$	1,635,282

(1) Included in “Revenue” in the consolidated statements of income.

(2) Included in “Change in Fair Value” in the consolidated statements of income.

Guarantees of Consumer Loans

In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for consumer loans and is required to purchase any defaulted loans it has guaranteed. The guarantee represents an obligation to purchase

12

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

specific loans that go into default. As of September 30, 2022 and 2021 and December 31, 2021, the consumer loans guaranteed by the Company had an estimated fair value of $16.1 million, $16.9 million and $18.8 million, respectively and an outstanding principal balance of $11.8 million, $11.4 million and $11.8 million, respectively. As of September 30, 2022 and 2021 and December 31, 2021, the amount of consumer loans, including principal, fees and interest, guaranteed by the Company were $14.3 million, $13.2 million and $13.8 million, respectively. These loans are not included in the consolidated balance sheets as the Company does not own the loans prior to default.

4. Long-term debt

The Company’s long-term debt instruments and balances outstanding as of September 30, 2022 and 2021 and December 31, 2021, including maturity date, weighted average interest rate and borrowing capacity as of September 30, 2022, were as follows (dollars in thousands):

			Weighted				Outstanding
			average	Borrowing			September 30,						December 31,
	Maturity date		interest rate(1)	capacity			2022			2021			2021
Funding Debt:
2018-1 Securitization Facility	March 2027	(2)	6.54%	$	200,000		$	175,000		$	17,705		$	72,706
2018-2 Securitization Facility	July 2025	(3)	6.74%		225,000			189,327			75,000			75,000
2018-A Securitization Notes	May 2026		—		—			—			3,925			628
2019-A Securitization Notes	June 2026		7.62%		276			276			29,418			19,255
ODR 2021-1 Securitization Facility	November 2024	(4)	4.33%		200,000			169,000			—			—
ODR 2022-1 Securitization Facility	June 2025	(5)	5.73%		420,000			62,000			—			—
RAOD Securitization Facility	December 2023	(6)	5.10%		236,842			236,842			—			101,000
ODAST III Securitization Notes	May 2027	(7)	2.07%		300,000			300,000			300,000			300,000
Other funding debt(8)	Various		—		—			—			34,651			—
Total funding debt			4.71%	$	1,582,118		$	1,132,445		$	460,699		$	568,589
Corporate Debt:
8.50% Senior Notes Due 2024	September 2024		8.50%	$	250,000		$	250,000		$	250,000		$	250,000
8.50% Senior Notes Due 2025	September 2025		8.50%		375,000			375,000			375,000			375,000
Revolving line of credit	June 2026		6.51%		440,000	(9)		309,000			—			200,000
Total corporate debt			7.84%	$	1,065,000		$	934,000		$	625,000		$	825,000
Less: Long-term debt issuance costs							$	(5,732	)	$	(8,578	)	$	(7,608	)
Less: Debt discounts								(1,136	)		(1,742	)		(1,582	)
Total long-term debt							$	2,059,577		$	1,075,380		$	1,384,399

(1) The weighted average interest rate is determined based on the rates and principal balances on September 30, 2022. It does not include the impact of the amortization of deferred loan origination costs or debt discounts.

(2) The period during which new borrowings may be made under this facility expires in March 2025.

(3) The period during which new borrowings may be made under this facility expires in July 2023.

(4) The period during which new borrowings may be made under this facility expires in November 2023.

(5) The period during which new borrowings may be made under this facility expires in June 2024.

(6) The period during which new borrowings may be made under this facility expires in December 2022.

(7) The period during which new borrowings may be made under this facility expires in April 2024.

(8) These debt facilities supported the Company’s operations in Australia and were denominated in Australian dollars. In December 2021, the Company sold a portion of its interest in OnDeck Australia and, as a result, deconsolidated it, including its long-term debt balances, from the Company's consolidated financial statements.

(9) The Company had outstanding letters of credit under the Revolving line of credit of $0.8 million as of each of the periods ended September 30, 2022 and 2021 and December 31, 2021.

Weighted average interest rates on long-term debt were 6.07% and 7.65% during the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022 and 2021 and December 31, 2021, the Company was in compliance with all covenants and other requirements set forth in the prevailing long-term debt agreements.

Recent Updates to Debt Facilities

ODR 2022-1 Securitization Facility

On June 30, 2022 (the “ODR 2022-1 Closing Date”), the Company and several of its subsidiaries entered into a receivables securitization (the “ODR 2022-1 Securitization Facility”) with lenders party thereto from time to time, BMO Capital Markets Corp. ("BMO") as administrative agent and Deutsche Bank Trust Company Americas as collateral agent. The ODR 2022-1 Securitization Facility finances securitization receivables that have been and will be originated or acquired under the Company’s OnDeck brand by a wholly-owned

13

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

subsidiary and that meet specified eligibility criteria. Under the ODR 2022-1 Securitization Facility, eligible securitization receivables are sold to a wholly-owned subsidiary of the Company (the “ODR 2022-1 Debtor”) and serviced by another subsidiary of the Company.

The ODR 2022-1 Securitization Facility has Class A and Class B revolving commitments of $350.0 million and $70.0 million, respectively, which are required to be secured by eligible securitization receivables. The ODR 2022-1 Securitization Facility is non-recourse to the Company and matures three years after the ODR 2022-1 Closing Date.

The ODR 2022-1 Securitization Facility is governed by a credit agreement, dated as of the ODR 2022-1 Closing Date, between the ODR 2022-1 Debtor, the administrative agent, the lenders, and the collateral agent. The revolving Class A loans shall accrue interest at a rate per annum equal to BMO's prime rate plus 1.75% with an advance rate of 75%. The revolving Class B loans shall accrue interest at a rate per annum equal to BMO's prime rate plus 7.50% with an advance rate of 90%. Interest payments on the ODR 2022-1 Securitization Facility will be made monthly.

All amounts due under the ODR 2022-1 Securitization Facility are secured by all of the ODR 2022-1 Debtor’s assets, which include the eligible securitization receivables transferred to the ODR 2022-1 Debtor, related rights under the eligible securitization receivables, a bank account and certain other related collateral. The Company has issued a limited indemnity to the lenders for certain “bad acts,” and the Company has agreed for the benefit of the lenders to meet certain ongoing financial performance covenants.

The ODR 2022-1 Securitization Facility documents contain customary provisions for securitizations, including representations and warranties as to the eligibility of the eligible securitization receivables and other matters; indemnification for specified losses not including losses due to the inability of customers to repay their loans or lines of credit; covenants regarding special purpose entity matters; and default and termination provisions which provide for the acceleration of the ODR 2022-1 Securitization Facility in circumstances including, but not limited to, failure to make payments when due, certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the eligible securitization receivables, and defaults under other material indebtedness of the ODR 2022-1 Debtor.

Revolving Credit Facility

On June 23, 2022, the Company and certain of its subsidiaries amended and restated the existing secured revolving credit agreement, dated as of June 30, 2017 (as amended, the "Credit Agreement") with the lenders from time to time party thereto, Bank of Montreal, as administrative agent and collateral agent, and BMO Capital Markets, Axos Bank, and Synovus Bank, as the joint lead arrangers and joint lead bookrunners. Bank of Montreal replaces TBK Bank, SSB, as administrative agent. The Credit Agreement provides for a secured asset-backed revolving credit facility in an aggregate principal amount of up to $440.0 million, with a $20.0 million letter of credit sublimit and a $10.0 million swingline loan sublimit. The proceeds of the loans under the Credit Agreement may be used for working capital and other general business purposes.

The loans bear interest, at the Company’s option, at the Secured Overnight Financing Rate plus 3.50% or the base rate, as defined in the Credit Agreement, plus 0.75% with an advance rate of 75%. In addition to customary fees for a credit facility of this size and type, the Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the commitment, and ranges from 0.15% per annum to 0.50% per annum depending on usage. The Credit Agreement contains certain prepayment penalties if it is terminated on or before the first and second anniversary dates, subject to certain exceptions. The loans mature on June 30, 2026.

The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, enter into certain transactions with affiliates, make restricted payments, and enter into restrictive agreements, in each case subject to customary exceptions for a credit facility of this size and type. The Credit Agreement includes financial maintenance covenants, which require the Company to maintain compliance with a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio, each determined in accordance with the terms of the Credit Agreement. The Credit Agreement also contains environmental, social, and governance provisions allowing amendment of the Credit Agreement to reflect subsequently agreed upon key performance indicators with respect to sustainability targets, achievement of which would result in adjustments to the commitment fee and applicable margins.

2018-2 Securitization Facility

On March 14, 2022, the loan securitization facility for EFR 2018-2, LLC (the “2018-2 Securitization Facility”) was amended to, among other changes, increase the commitment amount of the Class A revolving loans from $133.3 million to $200.0 million and the commitment amount of the Class B revolving loans from $16.7 million to $25.0 million.

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

RAOD Securitization Facility

On March 18, 2022, the loan securitization facility for Receivable Assets of OnDeck, LLC (the “RAOD Securitization Facility”) was amended to, among other changes, increase the commitment amount of the Class A revolving loans from $150.0 million to $200.0 million and the commitment amount of the Class B revolving loans from $27.6 million to $36.8 million.

2018-1 Securitization Facility

On March 24, 2022, the loan securitization facility for EFR 2018-1, LLC (the “2018-1 Securitization Facility”) was amended to, among other changes, increase the commitment amount of the revolving loans from $150.0 million to $200.0 million and extend the maturity date from September 15, 2026 to March 24, 2027.

ODR 2021-1 Securitization Facility

On March 29, 2022, the loan securitization facility for OnDeck Receivables 2021, LLC (the “ODR 2021-1 Securitization Facility”) was amended to, among other changes, increase the commitment amount of the revolving loans from $150.0 million to $200.0 million.

5. Income Taxes

The Company’s effective tax rate for the nine months ended September 30, 2022 was 23.9%, compared to 24.5% for the nine months ended September 30, 2021. The decrease is primarily attributable to the revaluation of the deferred tax liability related to reductions in state apportionment in separate company filing states.

As of September 30, 2022, the balance of unrecognized tax benefits was $73.0 million, which is included in “Accounts payable and accrued expenses” on the consolidated balance sheet, $11.1 million of which, if recognized, would favorably affect the effective tax rate in the period of recognition. The Company had $35.3 million and $44.1 million of unrecognized tax benefits as of September 30, 2021 and December 31, 2021, respectively. The Company believes that it has adequately accounted for any material tax uncertainties in its existing reserves for all open tax years.

The Company’s U.S. tax returns are subject to examination by federal and state taxing authorities. The statute of limitations related to the Company’s consolidated Federal income tax returns is closed for all tax years up to and including 2017. However, the 2014 tax year is still open to the extent of the net operating loss that was carried back from the 2019 tax return. The years open to examination by state, local and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three years from the date the tax return is filed. For jurisdictions that have generated net operating losses, carryovers may be subject to the statute of limitations applicable for the year those carryovers are utilized. In these cases, the period for which the losses may be adjusted will extend to conform with the statute of limitations for the year in which the losses are utilized. In most circumstances, this is expected to increase the length of time that the applicable taxing authority may examine the carryovers by one year or longer, in limited cases.

6. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the period. Restricted stock units issued under the Company’s stock-based employee compensation plans are included in diluted shares upon the granting of the awards even though the vesting of shares will occur over time.

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table sets forth the reconciliation of numerators and denominators of basic and diluted earnings per share computations for the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Numerator:
Net income	$	51,708	$	51,548	$	156,552	$	207,645
Denominator:
Total weighted average basic shares		31,912		36,744		32,589		36,554
Shares applicable to stock-based compensation		1,054		1,240		1,183		1,320
Total weighted average diluted shares		32,966		37,984		33,772		37,874
Earnings per common share:
Earnings per common share – basic	$	1.62	$	1.40	$	4.80	$	5.68
Earnings per common share – diluted	$	1.57	$	1.36	$	4.64	$	5.48

For the three months ended September 30, 2022 and 2021, 429,715 and 76,307 shares of common stock underlying stock options, respectively, and 456,205 and 57,398 shares of common stock underlying restricted stock units, respectively, were excluded from the calculation of diluted net income per share because their effect would have been antidilutive. For the nine months ended September 30, 2022 and 2021, 326,898 and 39,399 shares of common stock underlying stock options, respectively, and 409,389 and 57,349 shares of common stock underlying restricted stock units, respectively, were excluded from the calculation of diluted net income per share because their effect would have been antidilutive.

7. Operating Segment Information

The Company provides or had provided online financial services to non-prime credit consumers and small businesses in the United States, Australia and Brazil and has one reportable segment. The Company has aggregated all components of its business into a single operating segment based on the similarities of the economic characteristics, the nature of the products and services, the nature of the production and distribution methods, the shared technology platforms, the type of customer and the nature of the regulatory environment.

Geographic Information

The following table presents the Company’s revenue by geographic region for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenue
United States	$	452,976	$	313,502	$	1,239,670	$	826,923
Other international countries		3,224		6,658		10,251		17,401
Total revenue	$	456,200	$	320,160	$	1,249,921	$	844,324

The Company’s long-lived assets, which consist of the Company’s property and equipment, were $89.4 million, $81.1 million and $78.4 million at September 30, 2022 and 2021 and December 31, 2021, respectively. The operations for the Company’s businesses are primarily located within the United States, and the value of any long-lived assets located outside of the United States is immaterial.

8. Commitments and Contingencies

Litigation

On April 23, 2018, the Commonwealth of Virginia, through Attorney General Mark R. Herring, filed a lawsuit in the Circuit Court for the County of Fairfax, Virginia against NC Financial Solutions of Utah, LLC (“NC Utah”), a subsidiary of the Company. The lawsuit alleges violations of the Virginia Consumer Protection Act (“VCPA”) relating to NC Utah’s communications with customers, collections of certain payments, its loan agreements, and the rates it charged to Virginia borrowers. The plaintiff sought to enjoin NC Utah from continuing its then-existing lending practices in Virginia, and still seeks restitution, civil penalties, and costs and expenses in connection with the same. Due to a change in the law, NC Utah no longer lends to Virginia residents and the injunctive remedies sought against NC Utah’s lending practices are no longer applicable. Neither the likelihood of an unfavorable decision nor the ultimate liability, if any, with respect to this matter can be determined at this time, and the Company is currently unable to estimate a range of reasonably possible

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

losses, as defined by ASC 450-20-20, Contingencies–Loss Contingencies–Glossary, for this litigation. The Company carefully considered applicable Virginia law before NC Utah began lending in Virginia and, as a result, believes that the Plaintiff’s claims in the complaint are without merit and intends to vigorously defend this lawsuit.

The Company is also involved in certain routine legal proceedings, claims and litigation matters encountered in the ordinary course of its business. Certain of these matters may be covered to an extent by insurance or by indemnification agreements with third parties. The Company has recorded accruals in its consolidated financial statements for those matters in which it is probable that it has incurred a loss and the amount of the loss, or range of loss, can be reasonably estimated. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.

9. Related Party Transactions

In October 2019, the Company announced its intent to exit its operations in the U.K. market, and Grant Thornton LLP, a licensed U.K. insolvency practitioner, was appointed as administrators (“Administrators”) to take control of management of the U.K. businesses. The effect of the U.K. businesses’ entry into administration was to place their management, affairs, business and property under the direct control of the Administrators. The Company entered into a service agreement with the Administrators under which the Company provides certain administrative, technical and other services in exchange for compensation by the Administrators. The agreement expired on July 8, 2022 and was not extended beyond that date. During the three months ended September 30, 2022 and 2021, the Company recorded $0.1 million and $0.8 million, respectively, and during the nine months ended September 30, 2022 and 2021, the Company recorded $0.5 million and $2.4 million, respectively, in revenue related to these services. As of September 30, 2022, there was no outstanding balances between the Administrators and the Company. As of September 30, 2021 and December 31, 2021, the Administrators owed the Company $0.7 million and $0.5 million, respectively, related to services provided.

In the second quarter of 2022, the Company sold its remaining interest in On Deck Capital Canada Holdings, Inc. (“OnDeck Canada”). Prior to this, the Company recorded its interest in OnDeck Canada under the equity method of accounting; as such, OnDeck Canada was deemed a related party. As of September 30, 2022, the Company had no outstanding affiliate balance with OnDeck Canada. As of September 30, 2021 and December 31, 2021, the Company had a due from affiliate balance of $1.2 million related to OnDeck Canada that was primarily the result of labor and software charges from people and technology assets at the OnDeck parent company.

On February 24, 2021, the Company contributed the platform-as-service business assumed in the OnDeck acquisition to Linear in exchange for ownership units in that entity. The Company records its interest in Linear under the equity method of accounting. As of September 30, 2022, there was no outstanding balance between Linear and the Company. As of September 30, 2021, the Company had a due from affiliate balance of $0.7 million that was primarily comprised of the remaining balances associated with the contribution and exchange. As of December 31, 2021, the Company had a due from affiliate balance of $2.9 million from Linear that was primarily comprised of reimbursable expenses paid by the Company on behalf of Linear and fees for services provided.

In December 2021, the Company divested a portion of its interest in OnDeck Australia and began recording its remaining interest utilizing the equity method of accounting. As of September 30, 2022, the Company had a due from affiliate balance of $0.1 million related to OnDeck Australia.

10. Fair Value Measurements

Recurring Fair Value Measurements

The Company uses a hierarchical framework that prioritizes and ranks the market observability of inputs used in its fair value measurements. Market price observability is affected by a number of factors, including the type of asset or liability and the characteristics specific to the asset or liability being measured. Assets and liabilities with readily available, active, quoted market prices or for which fair value can be measured from actively quoted prices generally are deemed to have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The Company classifies the inputs used to measure fair value into one of three levels as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable.

Level 3: Unobservable inputs for the asset or liability measured.

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level of input that is significant to the entire measurement. Such determination requires significant management judgment.

During the three and nine months ended September 30, 2022 and 2021, there were no transfers of assets or liabilities in or out of Level 3 fair value measurements. It is the Company’s policy to value any transfers between levels of the fair value hierarchy based on end of period fair values.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and 2021 and December 31, 2021 are as follows (dollars in thousands):

	September 30,		Fair Value Measurements Using
	2022		Level 1		Level 2		Level 3
Financial assets:
Consumer loans and finance receivables(1)(2)	$	1,056,205	$	—	$	—	$	1,056,205
Small business loans and finance receivables(1)(2)		1,708,918		—		—		1,708,918
Non-qualified savings plan assets(3)		5,485		5,485		—		—
Investment in trading security(4)		16,573		16,573		—		—
Total	$	2,787,181	$	22,058	$	—	$	2,765,123
	September 30,		Fair Value Measurements Using
	2021		Level 1		Level 2		Level 3
Financial assets:
Consumer loans and finance receivables(1)(2)	$	723,553	$	—	$	—	$	723,553
Small business loans and finance receivables(1)(2)		911,729		—		—		911,729
Non-qualified savings plan assets(3)		5,192		5,192		—		—
Investment in trading security(4)		17,937		17,937		—		—
Total	$	1,658,411	$	23,129	$	—	$	1,635,282
	December 31,		Fair Value Measurements Using
	2021		Level 1		Level 2		Level 3
Financial assets:
Consumer loans and finance receivables(1)(2)	$	890,144	$	—	$	—	$	890,144
Small business loans and finance receivables(1)(2)		1,074,546		—		—		1,074,546
Non-qualified savings plan assets(3)		5,561		5,561		—		—
Investment in trading security(4)		16,062		16,062		—		—
Total	$	1,986,313	$	21,623	$	—	$	1,964,690

(1) Consumer and small business loans and finance receivables are included in “Loans and finance receivables at fair value” in the consolidated balance sheets.

(2) Consumer loans and finance receivables include $473.0 million, $189.3 million and $274.5 million in assets of consolidated VIEs as of September 30, 2022 and 2021 and December 31, 2021, respectively. Small business loans and finance receivables include $971.2 million, $384.0 million and $470.8 million in assets of consolidated VIEs as of September 30, 2022 and 2021 and December 31, 2021, respectively.

(3) The non-qualified savings plan assets are included in “Other receivables and prepaid expenses” in the Company’s consolidated balance sheets and have an offsetting liability of equal amount, which is included in “Accounts payable and accrued expenses” in the Company’s consolidated balance sheets.

(4) Investment in trading security is included in “Other assets” in the Company’s consolidated balance sheets.

The Company primarily estimates the fair value of its loan and finance receivables portfolio using discounted cash flow models that have been internally developed. The models use inputs, such as estimated losses, prepayments, utilization rates, servicing costs and discount rates, that are unobservable but reflect the Company’s best estimates of the assumptions a market participant would use to calculate fair value. Certain unobservable inputs may, in isolation, have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. An increase to the net loss rate, prepayment rate, servicing cost, or discount rate would decrease the fair value of the Company’s loans and finance receivables. When multiple inputs are used within the valuation techniques for loans, a change in one input in a certain direction may be offset by an opposite change from another input.

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The fair value of the nonqualified savings plan assets was deemed Level 1 as they are publicly traded equity securities for which market prices of identical assets are readily observable.

The fair value of the investment in trading security was deemed Level 1 as it is a publicly traded fund with active market pricing that is readily available.

The Company had no liabilities measured at fair value on a recurring basis as of September 30, 2022 and 2021 and December 31, 2021.

Fair Value Measurements on a Non-Recurring Basis

The Company measures non-financial assets and liabilities such as property and equipment and intangible assets at fair value on a non-recurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired. At September 30, 2022 and 2021 and December 31, 2021, there were no assets or liabilities recorded at fair value on a non-recurring basis.

Financial Assets and Liabilities Not Measured at Fair Value

The Company’s financial assets and liabilities as of September 30, 2022 and 2021 and December 31, 2021 that are not measured at fair value in the consolidated balance sheets are as follows (dollars in thousands):

	Balance at
	September 30,		Fair Value Measurements Using
	2022		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	87,727	$	87,727	$	—	$	—
Restricted cash (1)		84,412		84,412		—		—
Investment in unconsolidated investee (2)		6,918		—		—		6,918
Total	$	179,057	$	172,139	$	—	$	6,918
Financial liabilities:
Revolving line of credit	$	309,000	$	—	$	—	$	309,000
Securitization notes		1,131,310		—		1,106,389		—
8.50% senior notes due 2024		250,000		—		232,958		—
8.50% senior notes due 2025		375,000		—		326,929		—
Total	$	2,065,310	$	—	$	1,666,276	$	309,000

	Balance at
	September 30,		Fair Value Measurements Using
	2021		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	229,088	$	229,088	$	—	$	—
Restricted cash (1)		59,053		59,053		—		—
Investment in unconsolidated investee (2)		6,918		—		—		6,918
Total	$	295,059	$	288,141	$	—	$	6,918
Financial liabilities:
Securitization notes	$	458,958	$	—	$	463,030	$	—
8.50% senior notes due 2024		250,000		—		254,495		—
8.50% senior notes due 2025		375,000		—		387,116		—
Total	$	1,083,958	$	—	$	1,104,641	$	—

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	Balance at
	December 31,		Fair Value Measurements Using
	2021		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	165,477	$	165,477	$	—	$	—
Restricted cash (1)		60,406		60,406		—		—
Investment in unconsolidated investee (2)		6,918		—		—		6,918
Total	$	232,801	$	225,883	$	—	$	6,918
Financial liabilities:
Revolving line of credit	$	200,000	$	—	$	—	$	200,000
Securitization notes		567,007		—		567,903		—
8.50% senior notes due 2024		250,000		—		254,693		—
8.50% senior notes due 2025		375,000		—		386,348		—
Total	$	1,392,007	$	—	$	1,208,944	$	200,000

(1) Restricted cash includes $66.2 million, $47.2 million and $45.7 million in assets of consolidated VIEs as of September 30, 2022 and 2021 and December 31, 2021, respectively.

(2) Investment in unconsolidated investee is included in “Other assets” in the consolidated balance sheets.

Cash and cash equivalents and restricted cash bear interest at market rates and have maturities of less than 90 days. The carrying amount of restricted cash and cash equivalents approximates fair value.

The Company measures the fair value of its investment in unconsolidated investee using Level 3 inputs. Because the unconsolidated investee is a private company and financial information is limited, the Company estimates the fair value based on the best available information at the measurement date.

The Company measures the fair value of its revolving line of credit using Level 3 inputs. The Company considered the fair value of its other long-term debt and the timing of expected payment(s).

The fair values of the Company’s Securitization Notes and senior notes are estimated based on quoted prices in markets that are not active, which are deemed Level 2 inputs.

11. Subsequent Events

Subsequent events have been reviewed through the date these financial statements were issued.

On October 21, 2022, the Company and several of its subsidiaries entered into a receivables funding agreement (the “NCR 2022 Securitization Facility”) with Jefferies Funding LLC, as the initial note purchaser and administrative agent (the “NCR 2022 Administrative Agent”). The NCR 2022 Securitization Facility collateralizes certain receivables that have been and will be originated or acquired under the Company’s NetCredit brand by several of its subsidiaries and that meet specified eligibility criteria in exchange for a note payable. Under the NCR 2022 Securitization Facility, receivables are sold to a wholly-owned subsidiary of the Company (the “NCR 2022 Debtor”) and serviced by another subsidiary of the Company.



The NCR 2022 Debtor will issue notes with an initial maximum principal balance of $125.0 million, which are required to be secured by 1.25 times the drawn amount in eligible receivables. The notes have a revolving period through October 21, 2024 and a final maturity date of October 21, 2026. The NCR 2022 Securitization Facility is non-recourse to the Company.



The NCR 2022 Securitization Facility is governed by a note issuance and purchase agreement, dated as of October 21, 2022, among the NCR 2022 Administrative Agent, the NCR 2022 Debtor, Citibank, N.A., as collateral agent and paying agent, and the other note purchasers from time to time party thereto. The NCR 2022 Securitization Facility bears interest at a rate per annum equal to SOFR (subject to a floor) plus 4.75%. Interest payments on the NCR 2022 Securitization Facility will be made monthly. The NCR 2022 Debtor shall be permitted to prepay the NCR 2022 Securitization Facility, subject to certain fees and conditions. In the event of prepayment for the purposes of securitizations, no fees shall apply. Amounts due under the NCR 2022 Securitization Facility are secured by all of the

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ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NCR 2022 Debtor’s assets, which include the receivables transferred to the NCR 2022 Debtor, related rights under the receivables, a bank account and certain other related collateral.



The NCR 2022 Facility documents contain customary provisions for securitizations, including: representations and warranties as to the eligibility of the receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay their loans; covenants regarding special purpose entity matters; and default and termination provisions which provide for the acceleration of the NCR 2022 Facility in circumstances including, but not limited to, failure to make payments when due, servicer defaults, certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the receivables and defaults under other material indebtedness of the NCR 2022 Debtor.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of financial condition, results of operations, liquidity and capital resources and certain factors that may affect future results, including economic and industry-wide factors, of Enova International, Inc. and its subsidiaries should be read in conjunction with our consolidated financial statements and accompanying notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Please see “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

BUSINESS OVERVIEW

We are a leading technology and analytics company focused on providing online financial services. In 2021, we extended approximately $3.1 billion in credit or financing to borrowers and for the nine months ended September 30, 2022, we extended approximately $3.3 billion in credit or financing to borrowers. As of September 30, 2022, we offered or arranged loans or draws on lines of credit to consumers in 37 states in the United States and Brazil. We also offered financing to small businesses in all 50 states and Washington D.C. in the United States. We use our proprietary technology, analytics and customer service capabilities to quickly evaluate, underwrite and fund loans or provide financing, allowing us to offer consumers and small businesses credit or financing when and how they want it. Our customers include the large and growing number of consumers who and small businesses which have bank accounts but use alternative financial services because of their limited access to more traditional credit from banks, credit card companies and other lenders. We were an early entrant into online lending, launching our online business in 2004, and through September 30, 2022, we have completed approximately 57.2 million customer transactions and collected more than 61 terabytes of currently accessible customer behavior data since launch, allowing us to better analyze and underwrite our specific customer base. We have significantly diversified our business over the past several years having expanded the markets we serve and the financing products we offer. These financing products include installment loans and receivables purchase agreements (“RPAs”) and line of credit accounts.

We believe our customers highly value our products and services as an important component of their personal or business finances because our products are convenient, quick and often less expensive than other available alternatives. We attribute the success of our business to our advanced and innovative technology systems, the proprietary analytical models we use to predict the performance of loans and finance receivables, our sophisticated customer acquisition programs, our dedication to customer service and our talented employees.

We have developed proprietary underwriting systems based on data we have collected over our more than 18 years of experience. These systems employ advanced risk analytics, including machine learning and artificial intelligence, to decide whether to approve financing transactions, to structure the amount and terms of the financings we offer pursuant to jurisdiction-specific regulations and to provide customers with their funds quickly and efficiently. Our systems closely monitor collection and portfolio performance data that we use to continually refine machine learning-enabled analytical models and statistical measures used in making our credit, purchase, marketing and collection decisions. Approximately 90% of models used in our analytical environment are machine learning-enabled.

Our flexible and scalable technology platform allows us to process and complete customers’ transactions quickly and efficiently. In 2021, we processed approximately 2.2 million transactions, and we continue to grow our loans and finance receivable portfolios and increase the number of customers we serve through desktop, tablet and mobile platforms. Our highly customizable technology platform allows us to efficiently develop and deploy new products to adapt to evolving regulatory requirements and consumer preference, and to enter new markets quickly. In 2012, we launched a new product in the United States designed to serve near-prime customers. In June 2014, we launched our business in Brazil, where we arrange financing for borrowers through a third-party lender. In addition, in July 2014, we introduced a new line of credit product in the United States to serve the needs of small businesses. In June 2015, we further expanded our product offering by acquiring certain assets of a company that provides financing and installment loans to small businesses by offering RPAs. In October 2020, we acquired, through a merger, On Deck Capital Inc. (“OnDeck”), a small business lending company offering lending and funding solutions to small businesses primarily in the U.S. to expand our small business offerings. In March 2021, we acquired Pangea Universal Holdings (“Pangea”), which provides mobile international money transfer services to customers in the U.S with a focus on Latin America and Asia. These new products have allowed us to further diversify our product offerings and customer base.

We have been able to consistently acquire new customers and successfully generate repeat business from returning customers when they need financing. We believe our customers are loyal to us because they are satisfied with our products and services. We acquire new customers from a variety of sources, including visits to our own websites, mobile sites or applications, and through direct marketing,

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affiliate marketing, lead providers and relationships with other lenders. We believe that the online convenience of our products and our 24/7 availability to accept applications with quick approval decisions are important to our customers.

Once a potential customer submits an application, we quickly provide a credit or purchase decision. If a loan or financing is approved, we or our lending partner typically fund the loan or financing the next business day or, in some cases, the same day. During the entire process, from application through payment, we provide access to our well-trained customer service team. All of our operations, from customer acquisition through collections, are structured to build customer satisfaction and loyalty, in the event that a customer has a need for our products in the future. We have developed a series of sophisticated proprietary scoring models to support our various products. We believe that these models are an integral component of our operations and allow us to complete a high volume of customer transactions while actively managing risk and the related credit quality of our loan and finance receivable portfolios. We believe our successful application of these technological innovations differentiates our capabilities relative to competing platforms as evidenced by our history of strong growth and stable credit quality.

PRODUCTS AND SERVICES

Our online financing products and services provide customers with a deposit of funds to their bank account in exchange for a commitment to repay the amount deposited plus fees, interest and/or revenue on the receivables purchased. We originate, arrange, guarantee or purchase installment loans, line of credit accounts and receivables purchase agreements (“RPAs”) to consumers and small businesses. We have one reportable segment that includes all of our online financial services.

•

Installment loans. Our installment loans are either written directly by us, purchased as part of our Bank Programs as discussed below, or are those that we arrange and guarantee as part of our CSO program as discussed below. We offer, or arrange through our CSO program, unsecured consumer installment loan products in 37 states in the United States and small business installment loans in 47 states and in Washington D.C. Internationally, we also offer or arrange unsecured consumer installment loan products in Brazil. Terms for our installment loan products range between two and 60 months. Loans may be repaid early at any time with no additional prepayment charges.

•

Line of credit accounts. We directly offer, or purchase a participation interest in receivables through our Bank Programs, new consumer line of credit accounts in 31 states (and continue to service existing line of credit accounts in two additional states) in the United States and business line of credit accounts in 47 states and in Washington D.C. in the United States, which allow customers to draw on their unsecured line of credit in increments of their choosing up to their credit limit. Customers may pay off their account balance in full at any time or make required minimum payments in accordance with the terms of the line of credit account. As long as the customer’s account is in good standing and has credit available, customers may continue to borrow on their line of credit.

•

Receivables purchase agreements. Under RPAs, small businesses receive funds in exchange for a portion of the business’s future receivables at an agreed upon discount. In contrast, lending is a commitment to repay principal and interest and/or fees. A small business customer who enters into an RPA commits to delivering a percentage of its receivables through ACH or wire debits or by splitting credit card receipts until all purchased receivables are delivered. We offer RPAs in all 50 states and in Washington D.C. in the United States.

•

CSO programs. We currently operate a credit services organization or credit access business ("CSO") program in Texas. Through our CSO program, we provide services related to third-party lenders’ installment consumer loan products by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws. Services offered under our CSO program include credit-related services such as arranging loans with independent third-party lenders and assisting in the preparation of loan applications and loan documents (“CSO loans”). When a consumer executes an agreement with us under our CSO program, we agree, for a fee payable to us by the consumer, to provide certain services, one of which is to guarantee the consumer’s obligation to repay the loan received by the consumer from the third-party lender if the consumer fails to do so. For CSO loans, each lender is responsible for providing the criteria by which the consumer’s application is underwritten and, if approved, determining the amount of the consumer loan. We, in turn, are responsible for assessing whether or not we will guarantee such loan. The guarantee represents an obligation to purchase the loan, which has terms of up to six months, if it goes into default.

•

Bank program. We operate programs with certain banks to provide marketing services and loan servicing for near-prime unsecured consumer installment loans and, beginning in January 2021, line of credit accounts. Under the programs, we receive marketing and servicing fees while the bank receives an origination fee. The bank has the ability to sell and we have the option, but not the requirement, to purchase the loans the bank originates and, in the case of line of credit accounts, a participation interest in the receivables from draws on those accounts. We do not guarantee the performance of the loans and line of credit accounts originated by the bank. As part of the OnDeck business both prior and subsequent to Enova’s acquisition, OnDeck operates a program with a separate bank to provide marketing services and loan servicing for small business installment loans and line of credit accounts. Under the OnDeck program, we receive marketing fees while the bank receives origination fees and certain program fees. The bank has the ability to sell and we have the option, but not the requirement, to purchase the installment loans

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the bank originates and, in the case of line of credit accounts, extensions under those line of credit accounts. We do not guarantee the performance of the loans or line of credit accounts originated by the bank.

•

Money transfer business. Through the acquisition of Pangea, we operate a money transfer platform that allows customers to send money from the United States to Mexico, other Latin American countries and Asia. The customer pays us in U.S. dollars, and we then make local currency available to the intended recipient of the transfer in one of many termination countries. Our revenue model includes a fee per transfer and an exchange rate spread. Our customers can access our proprietary platform via the website, Android app, or iOS (Apple) app.

OUR MARKETS

We currently provide our services in the following countries:

•

United States. We began our online business in the United States in May 2004. As of September 30, 2022, we provided services in all 50 states and Washington D.C. We market our financing products under the names CashNetUSA at www.cashnetusa.com, NetCredit at www.netcredit.com, OnDeck at www.ondeck.com, Headway Capital at www.headwaycapital.com, The Business Backer at www.businessbacker.com, and Pangea at www.pangeamoneytransfer.com.

•

Brazil. In June 2014, we launched our business in Brazil under the name Simplic at www.simplic.com.br, where we arrange installment loans for a third-party lender. We plan to continue to invest in and expand our financial services program in Brazil.

Our internet websites and the information contained therein or connected thereto are not intended to be incorporated by reference into this Quarterly Report on Form 10-Q.

RECENT REGULATORY DEVELOPMENTS

Consumer Financial Protection Bureau (“CFPB”)

We received a Civil Investigative Demand (“CID”) from the CFPB concerning certain loan processing issues. We cooperated fully with the CFPB and provided all requested data and information in response to the CID. We anticipate being able to expeditiously complete the investigation as several of the issues were self‐disclosed and we have provided restitution to customers who may have been negatively impacted. We received a second CID in April 2022 requesting additional information. We have provided all requested information in response to the CID.

On October 6, 2017, the CFPB issued its final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the “Small Dollar Rule”), which covers certain consumer loans that we offer. The Small Dollar Rule requires that lenders who make short-term loans and longer-term loans with balloon payments reasonably determine consumers’ ability to repay the loans according to their terms before issuing the loans. The Small Dollar Rule also introduces new limitations on repayment processes for those lenders as well as lenders of other longer-term loans with an annual percentage rate greater than 36 percent that include an ACH authorization or similar payment provision. If a consumer has two consecutive failed payment attempts, the lender must obtain the consumer’s new and specific authorization to make further withdrawals from the consumer’s bank account. For loans covered by the Small Dollar Rule, lenders must provide certain notices to consumers before attempting a first payment withdrawal or an unusual withdrawal and after two consecutive failed withdrawal attempts. On June 7, 2019, the CFPB issued a final rule to set the compliance date for the mandatory underwriting provisions of the Small Dollar Rule to November 19, 2020. On July 7, 2020, the CFPB issued a final rule rescinding the ability to repay (“ATR”) provisions of the Small Dollar Rule along with related provisions, such as the establishment of registered information systems for checking ATR and reporting loan activity. The payment provisions of the Small Dollar Rule remain in place, but remain stayed indefinitely by the United States Court of Appeals for the Fifth Circuit, which is hearing an appeal from the plaintiff on a constitutional challenge to the Small Dollar Rule. On October 14, 2021, the Fifth Circuit ruled that the Small Dollar Rule will not take effect until 286 days after the Fifth Circuit rules on the appeal. On October 19, 2022, a three-judge panel of the Fifth Circuit U.S. Circuit Court of Appeals ruled that the funding structure of the CFPB is unconstitutional and vacated the Small Dollar Rule. The CFPB may appeal the decision. If the Small Dollar Rule does become effective in its current proposed form, we will need to make certain changes to our payment processes and customer notifications in our U.S. consumer lending business.

New Mexico HB 132

On February 15, 2022, the New Mexico Legislature passed HB 132. The bill imposes a 36% rate cap on loans up to $10,000. Additionally, HB 132 provides for the application of a predominant economic interest test for bank service arrangements whereby a broker or servicer with a predominant economic interest in a loan is considered to be the “true lender” for purposes of applying the 36% rate cap. The New Mexico Governor signed the bill into law on March 1, 2022. The law will take effect on January 1, 2023.

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RESULTS OF OPERATIONS

Highlights

Our financial results for the three-month period ended September 30, 2022, or the current quarter, are summarized below.

•

Consolidated total revenue increased $136.0 million, or 42.5%, to $456.2 million in the current quarter compared to $320.2 million for the three months ended September 30, 2021, or the prior year quarter.

•

Consolidated net revenue was $294.2 million compared to $246.4 million in the prior year quarter.

•

Consolidated income from operations increased $12.3 million, or 14.3%, to $98.5 million in the current quarter, compared to $86.2 million in the prior year quarter.

•

Consolidated net income was $51.7 million in the current quarter compared to $51.5 million in the prior year quarter. Consolidated diluted income per share was $1.57 in the current quarter compared to $1.36 in the prior year quarter.

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Overview

The following tables reflect our results of operations for the periods indicated, both in dollars and as a percentage of total revenue (dollars in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue
Loans and finance receivables revenue	$	449,817		$	316,042		$	1,233,910		$	833,412
Other		6,383			4,118			16,011			10,912
Total Revenue		456,200			320,160			1,249,921			844,324
Change in Fair Value		(162,005	)		(73,778	)		(422,465	)		(100,443	)
Net Revenue		294,195			246,382			827,456			743,881
Operating Expenses
Marketing		101,278			79,726			286,000			163,548
Operations and technology		45,953			37,966			128,945			108,628
General and administrative		37,182			33,557			105,400			116,321
Depreciation and amortization		11,270			8,914			28,368			23,001
Total Operating Expenses		195,683			160,163			548,713			411,498
Income from Operations		98,512			86,219			278,743			332,383
Interest expense, net		(30,924	)		(18,163	)		(78,357	)		(57,493	)
Foreign currency transaction gain (loss)		363			(109	)		70			(383	)
Equity method investment (loss) income		(129	)		529			6,522			2,558
Other nonoperating expenses		(230	)		—			(1,321	)		(1,128	)
Income before Income Taxes		67,592			68,476			205,657			275,937
Provision for income taxes		15,884			16,667			49,105			67,607
Net income before noncontrolling interest		51,708			51,809			156,552			208,330
Less: Net income attributable to noncontrolling interest		—			261			—			685
Net income attributable to Enova International, Inc.	$	51,708		$	51,548		$	156,552		$	207,645
Earnings per common share - diluted	$	1.57		$	1.36		$	4.64		$	5.48
Revenue
Loans and finance receivables revenue		98.6	%		98.7	%		98.7	%		98.7	%
Other		1.4			1.3			1.3			1.3
Total Revenue		100.0			100.0			100.0			100.0
Change in Fair Value		(35.5	)		(23.0	)		(33.8	)		(11.9	)
Net Revenue		64.5			77.0			66.2			88.1
Operating Expenses
Marketing		22.2			24.9			22.9			19.4
Operations and technology		10.1			11.9			10.3			12.8
General and administrative		8.1			10.5			8.4			13.8
Depreciation and amortization		2.5			2.8			2.3			2.7
Total Operating Expenses		42.9			50.1			43.9			48.7
Income from Operations		21.6			26.9			22.3			39.4
Interest expense, net		(6.8	)		(5.7	)		(6.3	)		(6.8	)
Foreign currency transaction loss		0.1			—			—			—
Equity method investment income		—			0.2			0.5			0.3
Other nonoperating expenses		(0.1	)		—			(0.1	)		(0.2	)
Income before Income Taxes		14.8			21.4			16.4			32.7
Provision for income taxes		3.5			5.2			3.9			8.0
Net income before noncontrolling interest		11.3			16.2			12.5			24.7
Less: Net income attributable to noncontrolling interest		—			0.1			—			0.1
Net income attributable to Enova International, Inc.		11.3	%		16.1	%		12.5	%		24.6	%

Valuation of Loans and Finance Receivables

The COVID-19 pandemic severely impacted global economic conditions, resulting in substantial volatility in the financial markets, increased unemployment, and operational challenges resulting from measures that governments have imposed to control its spread. We actively worked with our customers to understand their financial situations, waive late fees, offer a variety of repayment options to increase flexibility and reduce or defer payments for impacted customers. We took measures to adjust our underwriting procedures, which reduced exposure to more heavily impacted consumers and businesses. Certain of these measures eased since the height of the pandemic, with improvement of economic conditions and our outlook.

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From a loan valuation perspective, at the onset of the COVID-19 pandemic, we deemed it appropriate to increase the discount rates used in our internally-developed valuation models, thereby lowering loan fair values, to capture the increase in potential volatility in expected cash flows due to the unprecedented nature of the pandemic and governmental response. These rates remained consistent for the remainder of 2020. Over the course of 2021, we noted a tightening of credit spreads in observable pricing in the market; as such, we reduced the discount rates used in our valuations. As of December 31, 2021, our discount rates had generally returned to the levels utilized immediately prior to the pandemic. As of March 31, 2022, June 30, 2022 and September 30, 2022, we increased our discount rates based primarily on movements in the market during each period. We believe the adjustments to our discount rates to be responsive to changes in the market and representative of what a market participant would use.

After seeing increases in delinquency and charge-offs early in the pandemic, we experienced significant improvements to these metrics over the remainder of 2020 and into 2021. The U.S. government provided multiple rounds of stimulus assistance to taxpayers and businesses. Positive COVID-19 test counts in the U.S. generally decreased across the first half of 2021 although have spiked at numerous times in the past year as different variants escalate and abate. In 2022, views in the marketplace on the economy and its near-term prospects remain mixed with concerns on employment, inflation, and other macroeconomic trends. In certain situations, management concluded that the probability of future charge-offs was higher than what we had experienced in the past and, therefore, increased anticipated charge-offs in our fair value models. We continue to utilize this approach and have adjusted charge-off expectations where appropriate. As of September 30, 2022, we deemed the resulting fair value to be an appropriate market-based exit price that considers current market conditions.

NON-GAAP FINANCIAL MEASURES

In addition to the financial information prepared in conformity with generally accepted accounting principles (“GAAP”), we provide historical non-GAAP financial information. We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. Readers should consider the information in addition to, but not instead of or superior to, our consolidated financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Adjusted Earnings Measures

In addition to reporting financial results in accordance with GAAP, we have provided adjusted earnings and adjusted earnings per share, or, collectively, the Adjusted Earnings Measures, which are non-GAAP measures. We believe that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments and amortization methods, which provides a more complete understanding of our financial performance, competitive position and prospects for the future. We also believe that investors regularly rely on non-GAAP financial measures, such as the Adjusted Earnings Measures, to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. In addition, we believe that the adjustments shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items.

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The following table provides reconciliations between net income and diluted earnings per share calculated in accordance with GAAP to the Adjusted Earnings Measures (in thousands, except per share data):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Net income	$	51,708		$	51,548		$	156,552		$	207,645
Adjustments:
Transaction-related costs(a)		—			—			—			1,424
Lease termination and cease-use gain(b)		—			(113	)		—			(113	)
Equity method investment loss (income)(c)		129			—			(6,194	)		—
Other nonoperating expenses(d)		230			—			1,321			1,128
Intangible asset amortization		2,014			2,013			6,041			4,848
Stock-based compensation expense		5,457			5,018			15,957			16,072
Foreign currency transaction (gain) loss		(363	)		102			(70	)		373
Cumulative tax effect of adjustments		(1,871	)		(1,581	)		(3,174	)		(5,843	)
Adjusted earnings	$	57,304		$	56,987		$	170,433		$	225,534
Diluted earnings per share	$	1.57		$	1.36		$	4.64		$	5.48
Adjustments:
Transaction-related costs		—			—			—			0.04
Lease termination and cease-use gain		—			—			—			—
Equity method investment income		—			—			(0.18	)		—
Other nonoperating expenses		0.01			—			0.04			0.03
Intangible asset amortization		0.06			0.05			0.18			0.13
Stock-based compensation expense		0.17			0.13			0.47			0.42
Foreign currency transaction (gain) loss		(0.01	)		—			—			0.01
Cumulative tax effect of adjustments		(0.06	)		(0.04	)		(0.10	)		(0.16	)
Adjusted earnings per share	$	1.74		$	1.50		$	5.05		$	5.95

(a) In the first quarter of 2021, we incurred expenses totaling $1.4 million ($1.1 million net of tax) related to acquisitions and a divestiture of a subsidiary.

(b) In the third quarter of 2021, we recorded a gain of $0.1 million ($0.1 million net of tax) related to the exit of leased office space.

(c) In the second quarter of 2022, we recorded equity method investment income of $6.3 million ($3.6 million net of tax) that was comprised primarily of an $11.0 million gain generated on Linear's sale of its operating company, partially offset by a $4.4 million loss on the sale of OnDeck Canada.

(d) In the third quarter of 2022, second quarter of 2022 and second quarter of 2021, we recorded other nonoperating expenses of $0.2 million ($0.2 million net of tax), $1.1 million ($0.8 million net of tax) and $0.8 million ($0.6 million net of tax), respectively, related to incomplete transactions. In the first quarter of 2021, we recorded other nonoperating expenses of $0.4 million ($0.3 million net of tax) related to the repurchase of securitization notes.

Adjusted EBITDA

The table below shows Adjusted EBITDA, which is a non-GAAP measure that we define as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, taxes and stock-based compensation expense. We believe Adjusted EBITDA is used by investors to analyze operating performance and evaluate our ability to incur and service debt and our capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value. In addition, we believe that the adjustments for transaction-related costs, lease termination and cease-use loss (gain), equity method investment income and other nonoperating expenses shown below are useful to investors in order to allow them to compare our financial results during the

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periods shown without the effect of the income or expense items. The computation of Adjusted EBITDA, as presented below, may differ from the computation of similarly-titled measures provided by other companies (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Net income	$	51,708		$	51,548		$	156,552		$	207,645
Depreciation and amortization expenses(e)		11,270			8,912			28,368			22,990
Interest expense, net(e)		30,924			17,966			78,357			57,013
Foreign currency transaction (gain) loss(e)		(363	)		102			(70	)		373
Provision for income taxes		15,884			16,667			49,105			67,607
Stock-based compensation expense		5,457			5,018			15,957			16,072
Adjustment:
Transaction-related costs(a)		—			—			—			1,424
Lease termination and cease-use gain(b)		—			(113	)		—			(113	)
Equity method investment loss (income)(c)		129			(529	)		(6,522	)		(2,558	)
Other nonoperating expenses(d)		230			—			1,321			1,128
Adjusted EBITDA	$	115,239		$	99,571		$	323,068		$	371,581
Adjusted EBITDA margin calculated as follows:
Total Revenue	$	456,200		$	320,160		$	1,249,921		$	844,324
Adjusted EBITDA		115,239			99,571			323,068			371,581
Adjusted EBITDA as a percentage of total revenue		25.3	%		31.1	%		25.8	%		44.0	%

(a) In the first quarter of 2021, we incurred expenses totaling $1.4 million related to acquisitions and a divestiture of a subsidiary.

(b) In the third quarter of 2021, we recorded a gain of $0.1 million related to the exit of leased office space.

(c) In the second quarter of 2022, we recorded equity method investment income of $6.3 million that was comprised primarily of an $11.0 million gain generated on Linear's sale of its operating company, partially offset by a $4.4 million loss on the sale of OnDeck Canada.

(d) In the third quarter of 2022, second quarter of 2022 and second quarter of 2021, we recorded other nonoperating expenses of $0.2 million, $1.1 million and $0.8 million, respectively, related to incomplete transactions. In the first quarter of 2021, we recorded other nonoperating expenses of $0.4 million related to the repurchase of securitization notes.

(e) Excludes amounts attributable to noncontrolling interests.

Combined Loans and Finance Receivables Measures

In addition to reporting loans and finance receivables balance information in accordance with GAAP (see Note 3 in the Notes to Consolidated Financial Statements included in this report), we have provided metrics on a combined basis. The Combined Loans and Finance Receivables Measures are non-GAAP measures that include both loans and RPAs we own or have purchased and loans we guarantee, which are either GAAP items or disclosures required by GAAP. See “—Loan and Finance Receivable Balances” and “—Credit Performance of Loans and Finance Receivables” below for reconciliations between Company owned and purchased loans and finance receivables, gross, change in fair value and charge-offs (net of recoveries) calculated in accordance with GAAP to the Combined Loans and Finance Receivables Measures.

We believe these non-GAAP measures provide investors with important information needed to evaluate the magnitude of potential receivable losses and the opportunity for revenue performance of the loans and finance receivable portfolio on an aggregate basis. We also believe that the comparison of the aggregate amounts from period to period is more meaningful than comparing only the amounts reflected on our consolidated balance sheet since both revenue and cost of revenue are impacted by the aggregate amount of receivables we own and those we guarantee as reflected in our consolidated financial statements.

THREE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2021

Revenue and Net Revenue

Revenue increased $136.0 million, or 42.5%, to $456.2 million for the current quarter as compared to $320.2 million for the prior year quarter. The increase was driven by a 71.7% increase in revenue from our small business portfolio and a 28.6% increase in revenue from our consumer portfolio as higher levels of originations in 2021 and into 2022 have led to higher loan balances for both portfolios.

Net revenue for the current quarter was $294.2 million compared to $246.4 million for the prior year quarter. Our consolidated net revenue margin was 64.5% for the current quarter compared to 77.0% for the prior year quarter. The net revenue margin in the prior year quarter was elevated due primarily to lower delinquency rates and lower than expected charge-offs as a result of portfolio seasoning

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and lower originations. With originations having increased across the second half of 2021 and through September 30, 2022, the net revenue margin in the current quarter was in a more normalized range.

The following table sets forth the components of revenue and net revenue, separated by product for the current quarter and the prior year quarter (in thousands):

	Three Months Ended September 30,
	2022			2021			$ Change			% Change
Revenue by product:
Consumer loans and finance receivables revenue	$	277,096		$	215,432		$	61,664			28.6	%
Small business loans and finance receivables revenue		172,721			100,610			72,111			71.7
Total loans and finance receivables revenue		449,817			316,042			133,775			42.3
Other		6,383			4,118			2,265			55.0
Total revenue		456,200			320,160			136,040			42.5
Change in fair value		(162,005	)		(73,778	)		(88,227	)		119.6
Net revenue	$	294,195		$	246,382		$	47,813			19.4	%
Revenue by product (% to total):
Consumer loans and finance receivables revenue		60.7	%		67.3	%
Small business loans and finance receivables revenue		37.9			31.4
Total loans and finance receivables revenue		98.6			98.7
Other		1.4			1.3
Total revenue		100.0			100.0
Change in fair value		(35.5	)		(23.0	)
Net revenue		64.5	%		77.0	%

Loan and Finance Receivable Balances

The fair value of our loan and finance receivable portfolio in our consolidated financial statements was $2,765.1 million and $1,635.3 million as of September 30, 2022 and 2021, respectively. The outstanding principal balance of our loan and finance receivables portfolio was $2,552.6 million and $1,586.4 million as of September 30, 2022 and 2021, respectively. The fair value of the combined loan and finance receivables portfolio includes $16.1 million and $16.9 million with an outstanding principal balance of $11.8 million and $11.4 million of consumer loan balances that are guaranteed by us but not owned by us, which are not included in our consolidated financial statements as of September 30, 2022 and 2021, respectively.

Our small business portfolio of loans and finance receivables increased to 61.4% of our combined loan and finance receivable portfolio at fair value as of September 30, 2022, compared to 55.2% as of September 30, 2021 due primarily to more accelerated growth in the small business portfolio. The consumer portfolio balance decreased to 38.6% of our combined loan and finance receivable portfolio balance at fair value as of September 30, 2022, compared to 44.8% as of September 30, 2021. See “—Non-GAAP Disclosure—Combined Loans and Finance Receivables Measures” above for additional information related to combined loans and finance receivables.

The following tables summarize loan and finance receivable balances outstanding as of September 30, 2022 and 2021 (in thousands):

	As of September 30, 2022									As of September 30, 2021
				Guaranteed									Guaranteed
	Company			by the						Company			by the
	Owned(a)			Company(a)			Combined			Owned(a)			Company(a)			Combined(b)
Consumer loans and finance receivables			��
Principal	$	972,320		$	11,843		$	984,163		$	709,781		$	11,354		$	721,135
Fair value		1,056,205			16,144			1,072,349			723,553			16,921			740,474
Fair value as a % of principal		108.6	%		136.3	%		109.0	%		101.9	%		149.0	%		102.7	%
Small business loans and finance receivables
Principal	$	1,580,289		$	—		$	1,580,289		$	876,668		$	—		$	876,668
Fair value		1,708,918			—			1,708,918			911,729			—			911,729
Fair value as a % of principal		108.1	%		—	%		108.1	%		104.0	%		—	%		104.0	%
Total loans and finance receivables
Principal	$	2,552,609		$	11,843		$	2,564,452		$	1,586,449		$	11,354		$	1,597,803
Fair value		2,765,123			16,144			2,781,267			1,635,282			16,921			1,652,203
Fair value as a % of principal		108.3	%		136.3	%		108.5	%		103.1	%		149.0	%		103.4	%

(a) GAAP measure. The loans and finance receivables balances guaranteed by us relate to loans originated by third-party lenders through the CSO programs that we have not yet purchased and, therefore, are not included in our consolidated financial statements.

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At September 30, 2022 and 2021, the ratio of fair value as a percentage of principal was 108.3% and 103.1%, respectively, on company owned loans and finance receivables and 108.5% and 103.4%, respectively, on combined loans and finance receivables. These ratios increased compared to the prior year due primarily to an improvement in credit outlook on most products and improved delinquency rates for certain consumer products, partially offset by higher delinquency rates for certain consumer and small business products.

Average Amount Outstanding per Loan and Finance Receivable

The average amount outstanding per loan and finance receivable is calculated as the total combined loans and finance receivables, gross balance at the end of the period divided by the total number of combined loans and finance receivables outstanding at the end of the period. The following table shows the average amount outstanding per loan and finance receivable by product at September 30, 2022 and 2021:

	As of September 30,
	2022		2021
Average amount outstanding per loan and finance receivable(a)
Consumer loans and finance receivables(b)	$	2,156	$	1,812
Small business loans and finance receivables		37,670		33,581
Total loans and finance receivables(b)	$	4,980	$	3,633

(a) The disclosure regarding the average amount per loan and finance receivable is statistical data that is not included in our consolidated financial statements.

(b) Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs that we have not yet purchased and, therefore, are not included in our consolidated financial statements.

The average amount outstanding per loan and finance receivable increased to $4,980 from $3,633 during the current quarter compared to the prior year quarter, due primarily to an increase in the mix of loans and finance receivables held by small businesses in our portfolio, which are larger on average than our consumer portfolio.

Average Loan and Finance Receivable Origination

The average loan and finance receivable origination amount is calculated as the total amount of combined loans and finance receivables originated, renewed and purchased for the period divided by the total number of combined loans and finance receivables originated, renewed and purchased for the period. The following table shows the average loan and finance receivable origination amount by product for the current quarter compared to the prior year quarter:

	Three Months Ended
	September 30,
	2022		2021
Average loan and finance receivable origination amount(a)
Consumer loans and finance receivables(b)(c)	$	717	$	664
Small business loans and finance receivables(c)		17,849		15,610
Total loans and finance receivables(b)	$	2,014	$	1,372

(a) The disclosure regarding the average loan origination amount is statistical data that is not included in our consolidated financial statements.

(b) Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs that we have not yet purchased and, therefore, are not included in our consolidated financial statements.

(c) For line of credit accounts the average represents the average amount of each incremental draw.

The average loan and finance receivable origination amount increased to $2,014 from $1,372 during the current quarter compared to the prior year quarter, due primarily to an increase in the mix of higher dollar amount loans and finance receivables to small businesses.

Credit Performance of Loans and Finance Receivables

We monitor the performance of our loans and finance receivables. Internal factors such as portfolio composition (e.g., interest rate, loan term, geography information, customer mix, credit quality) and performance (e.g., delinquency, loss trends, prepayment rates) are reviewed on a regular basis at various levels (e.g., product, vintage). We also weigh the impact of relevant, internal business decisions on the portfolio. External factors such as macroeconomic trends, financial market liquidity expectations, competitive landscape and legal/regulatory requirements are also reviewed on a regular basis.

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The payment status of a customer, including the degree of any delinquency, is a significant factor in determining estimated charge-offs in the cash flow models that we use to determine fair value. The following table shows payment status on outstanding principal, interest and fees as of the end of each of the last five quarters (in thousands):

	2021						2022
	Third			Fourth			First			Second			Third
	Quarter			Quarter			Quarter			Quarter			Quarter
Ending combined loans and finance receivables, including principal and accrued fees/interest outstanding:
Company owned	$	1,650,771		$	1,944,263		$	2,169,140		$	2,377,514		$	2,630,537
Guaranteed by the Company(a)		13,239			13,750			11,858			13,997			14,330
Ending combined loan and finance receivables balance(b)	$	1,664,010		$	1,958,013		$	2,180,998		$	2,391,511		$	2,644,867
> 30 days delinquent		90,782			103,213			113,798			121,459			147,688
> 30 days delinquency rate		5.5	%		5.3	%		5.2	%		5.1	%		5.6	%

(a) Represents loans originated by third-party lenders through the CSO programs that we have not yet purchased, which are not included in our consolidated balance sheets.

(b) Non-GAAP measure.

Consumer Loans and Finance Receivables

The following table includes financial information for our consumer loans and finance receivables. Delinquency metrics include principal, interest and fees, and only amounts that are past due (in thousands):

	2021						2022
	Third			Fourth			First			Second			Third
	Quarter			Quarter			Quarter			Quarter			Quarter
Consumer loans and finance receivables:
Consumer combined loan and finance receivable principal balance:
Company owned	$	709,781		$	867,751		$	888,657		$	936,601		$	972,320
Guaranteed by the Company(a)		11,354			11,790			10,027			11,873			11,843
Total combined loan and finance receivable principal balance(b)	$	721,135		$	879,541		$	898,684		$	948,474		$	984,163
Consumer combined loan and finance receivable fair value balance:
Company owned	$	723,553		$	890,144		$	934,351		$	989,128		$	1,056,205
Guaranteed by the Company(a)		16,921			18,813			14,433			17,860			16,144
Ending combined loan and finance receivable fair value balance(b)	$	740,474		$	908,957		$	948,784		$	1,006,988		$	1,072,349
Fair value as a % of principal(b)(c)		102.7	%		103.3	%		105.6	%		106.2	%		109.0	%
Consumer combined loan and finance receivable balance, including principal and accrued fees/interest outstanding:
Company owned	$	768,964		$	927,673		$	951,560		$	1,004,847		$	1,039,792
Guaranteed by the Company(a)		13,239			13,750			11,858			13,997			14,330
Ending combined loan and finance receivable balance(b)	$	782,203		$	941,423		$	963,418		$	1,018,844		$	1,054,122
Average consumer combined loan and finance receivable balance, including principal and accrued fees/interest outstanding:
Company owned(d)	$	702,818		$	836,147		$	953,108		$	966,816		$	1,027,100
Guaranteed by the Company(a)(d)		11,366			13,212			12,960			12,591			14,421
Average combined loan and finance receivable balance(b)(d)	$	714,184		$	849,359		$	966,068		$	979,407		$	1,041,521
Revenue	$	215,432		$	243,570		$	248,547		$	253,043		$	277,096
Change in fair value		(97,061	)		(104,715	)		(116,767	)		(133,078	)		(135,646	)
Net revenue		118,371			138,855			131,780			119,965			141,450
Net revenue margin		54.9	%		57.0	%		53.0	%		47.4	%		51.0	%
Delinquencies:
> 30 days delinquent	$	45,804		$	59,312		$	70,480		$	72,300		$	77,258
> 30 days delinquent as a % of combined loan and finance receivable balance(b)(c)		5.9	%		6.3	%		7.3	%		7.1	%		7.3	%
Charge-offs:
Charge-offs (net of recoveries)	$	57,836		$	112,582		$	137,224		$	134,524		$	167,762
Charge-offs (net of recoveries) as a % of average combined loan and finance receivable balance(b)(d)		8.1	%		13.3	%		14.2	%		13.7	%		16.1	%

(a) Represents loans originated by third-party lenders through the CSO programs that we have not yet purchased, which are not included in our consolidated balance sheets.

(b) Non-GAAP measure.

(c) Determined using period-end balances.

(d) The average combined loan and finance receivable balance is the average of the month-end balances during the period.

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The ending balance, including principal and accrued fees/interest outstanding, of combined consumer loans and finance receivables at September 30, 2022 increased 34.8% to $1,054.1 million compared to $782.2 million at September 30, 2021, due primarily to the acceleration in originations beginning approximately mid-2021, following the strategic reduction in originations at the onset of the COVID-19 pandemic to mitigate risks associated with the pandemic.

The percentage of loans greater than 30 days delinquent increased to 7.3% at September 30, 2022, compared to 5.9% at September 30, 2021. The increase was driven primarily by growth in originations in the current year, particularly to new customers, which typically default at a higher percentage than returning customers.

Charge-offs (net of recoveries) as a percentage of average combined loan balance increased to 16.1% for the current quarter, compared to 8.1% for the prior year quarter, driven primarily by growth in originations, particularly to new customers, which typically default at a higher percentage than returning customers. In the prior year quarter, this charge-off rate was lower due primarily to our having a more seasoned and lower risk portfolio remaining as originations since the onset of the COVID-19 pandemic had been significantly lower and the majority of higher risk loans to new customers originated in prior quarters had been charged off. The charge-off rate in the current quarter is more consistent with rates experienced prior to the COVID-19 pandemic.

The ratio of fair value as a percentage of principal on consumer loans and finance receivables was 109.0% at September 30, 2022, compared to 102.7% at September 30, 2021 and 106.2% at June 30, 2022. The increase from June 30, 2022 was primarily driven by an improvement in early-stage delinquencies. Refer also to “Results of Operations—COVID-19” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion on loan valuation.

Small Business Loans and Finance Receivables

The following table includes financial information for our small business loans and finance receivables. Delinquency metrics include principal, interest, and fees, and only amounts that are past due (in thousands):

	2021						2022
	Third			Fourth			First			Second			Third
	Quarter			Quarter			Quarter			Quarter			Quarter
Small business loans and finance receivables:
Total loan and finance receivable principal balance	$	876,668		$	1,010,675		$	1,210,389		$	1,364,055		$	1,580,289
Ending loan and finance receivable fair value balance		911,729			1,074,546			1,297,533			1,471,723			1,708,918
Fair value as a % of principal(a)		104.0	%		106.3	%		107.2	%		107.9	%		108.1	%
Ending loan and finance receivable balance, including principal and accrued fees/interest outstanding	$	881,807		$	1,016,590		$	1,217,580		$	1,372,667		$	1,590,745
Average loan and finance receivable balance(b)	$	837,606		$	956,110		$	1,122,609		$	1,288,384		$	1,488,029
Revenue	$	100,610		$	115,063		$	132,594		$	149,909		$	172,721
Change in fair value		24,515			22,804			1,138			(8,764	)		(24,662	)
Net revenue		125,125			137,867			133,732			141,145			148,059
Net revenue margin		124.4	%		119.8	%		100.9	%		94.2	%		85.7	%
Delinquencies:
> 30 days delinquent	$	44,978		$	43,901		$	43,318		$	49,159		$	70,430
> 30 days delinquent as a % of loan balance(a)		5.1	%		4.3	%		3.6	%		3.6	%		4.4	%
Charge-offs:
Charge-offs (net of recoveries)	$	7,060		$	7,677		$	20,860		$	27,867		$	43,778
Charge-offs (net of recoveries) as a % of average loan and finance receivable balance(b)		0.8	%		0.8	%		1.9	%		2.2	%		2.9	%

(a) Determined using period-end balances.

(b) The average loan and finance receivable balance is the average of the month-end balances during the period.

The ending balance, including principal and accrued fees/interest outstanding, of small business loans and finance receivables at September 30, 2022 increased 80.4% to $1,590.7 million compared to $881.8 million at September 30, 2021, due primarily to the continued impact of strong originations.

The percentage of loans greater than 30 days delinquent was 4.4% at September 30, 2022, compared to 5.1% at September 30, 2021. Delinquency has improved in all of our small business portfolios, as we have actively worked with our customers to understand their

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financial situations, offering a variety of repayment options to increase flexibility and reducing or deferring payments for impacted customers.

Charge-offs (net of recoveries) as a percentage of average loan balance increased to 2.9% for the current quarter, compared to 0.8% in the prior year quarter, due primarily to growth in originations, particularly to new customers, which typically default at a higher percentage than returning customers. In the prior year quarter, this charge-off rate was lower due primarily to our having a more seasoned portfolio remaining as originations since the onset of the COVID-19 pandemic had been significantly lower and the majority of higher risk loans to new customers originated in prior quarters had been charged off.

The ratio of fair value as a percentage of principal on small business loans and finance receivables was 108.1% at September 30, 2022, compared to 104.0% at September 30, 2021 and 107.9% at June 30, 2022. The increase from June 30, 2022 was nominal as credit metrics remained fairly consistent.

Total Operating Expenses

Total expenses increased $35.5 million, or 22.2%, to $195.7 million in the current quarter, compared to $160.2 million in the prior year quarter.

Marketing expense increased to $101.3 million in the current quarter compared to $79.7 million in the prior year quarter due primarily to our efforts to capture increasing market demand for loan products in the current quarter. Certain marketing costs, such as commissions paid to third-party lead providers, are variable and increase as originations increase.

Operations and technology expense increased to $45.9 million in the current quarter compared to $38.0 million in the prior year quarter, due primarily to higher variable costs, particularly personnel and underwriting, due to the increase in originations and the size of the loan portfolio.

General and administrative expense increased to $37.2 million in the current quarter compared to $33.6 million in the prior year quarter, due primarily to higher personnel costs.

Depreciation and amortization expense increased $2.4 million or 26.4% compared to the prior year quarter driven primarily by $3.6 million in impairment charges recorded in the current quarter on internal-use software that was retired.

Nonoperating Items

Interest expense, net increased $12.8 million, or 70.3%, to $30.9 million in the current quarter compared to $18.1 million in the prior year quarter. The increase was due primarily to an increase in the average amount of debt outstanding, which increased $867.6 million to $1,933.0 million during the current quarter from $1,065.4 million during the prior year quarter, partially offset by a decrease in the weighted average interest rate on our outstanding debt to 6.46% during the current quarter from 6.65% during the prior year quarter.

Provision for Income Taxes

The effective tax rate of 23.5% in the current quarter was lower than the 24.3% rate recorded in the prior year quarter due primarily to the revaluation of the deferred tax liability related to reductions in in state apportionment in separate company filing states, partially offset by higher nondeductible executive compensation.

As of September 30, 2022, the balance of unrecognized tax benefits was $73.0 million which is included in “Accounts payable and accrued expenses” on the consolidated balance sheet, $11.1 million of which, if recognized, would favorably affect the effective tax rate in the period of recognition. We had $35.3 million and $44.1 million of unrecognized tax benefits as of September 30, 2021 and December 31, 2021, respectively. We believe that we have adequately accounted for any material tax uncertainties in our existing reserves for all open tax years.

Our U.S. tax returns are subject to examination by federal and state taxing authorities. The statute of limitations related to our consolidated Federal income tax returns is closed for all tax years up to and including 2017. However, the 2014 tax year is still open to the extent of the net operating loss that was carried back from the 2019 tax return. The years open to examination by state, local and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three years from the date the tax return is filed. For jurisdictions that have generated net operating losses, carryovers may be subject to the statute of limitations applicable for the year those carryovers are utilized. In these cases, the period for which the losses may be adjusted will extend to conform with the statute of limitations for the year in which the losses are utilized. In most circumstances, this is expected to increase the length of time that the applicable taxing authority may examine the carryovers by one year or longer, in limited cases.

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Net Income

Net income increased $0.2 million, or 0.3%, to $51.7 million during the current quarter compared to $51.5 million during the prior year quarter. The increase was due primarily to higher net revenue resulting from growth in the size of the business, which was mostly offset by higher associated costs, particularly marketing and interest.

NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2021

Revenue and Net Revenue

Revenue increased $405.6 million, or 48.0%, to $1,249.9 million for the nine-month period ended September 30, 2022, or current nine-month period, as compared to $844.3 million for the nine-month period ended September 30, 2021, or prior year nine-month period. The increase was driven by a 73.9% increase in revenue from our small business portfolio and a 36.2% increase in revenue from our consumer portfolio as higher levels of originations in 2021 and into 2022 have led to higher loan balances for both portfolios.

Net revenue for the current nine-month period was $827.4 million compared to $743.9 million for the prior year nine-month period. Our consolidated net revenue margin was 66.2% for the current nine-month period compared to 88.1% for the prior year nine-month period. The net revenue margin in the prior year nine-month period was elevated due primarily to lower delinquency rates and lower than expected charge-offs as a result of portfolio seasoning and lower originations. With originations having increased across the second half of 2021 and through September 30, 2022, the net revenue margin in the current nine-month period was in a more normalized range.

The following table sets forth the components of revenue and net revenue, separated by product for the current nine-month period and the prior year nine-month period (in thousands):

	Nine Months Ended September 30,
	2022			2021			$ Change			% Change
Revenue by product:
Consumer loans and finance receivables revenue	$	778,686		$	571,681		$	207,005			36.2	%
Small business loans and finance receivables revenue		455,224			261,731			193,493			73.9
Total loans and finance receivables revenue		1,233,910			833,412			400,498			48.1
Other		16,011			10,912			5,099			46.7
Total revenue		1,249,921			844,324			405,597			48.0
Change in fair value		(422,465	)		(100,443	)		(322,022	)		320.6
Net revenue	$	827,456		$	743,881		$	83,575			11.2	%
Revenue by product (% to total):
Consumer loans and finance receivables revenue		62.3	%		67.7	%
Small business loans and finance receivables revenue		36.4			31.0
Total loans and finance receivables revenue		98.7			98.7
Other		1.3			1.3
Total revenue		100.0			100.0
Change in fair value		(33.8	)		(11.9	)
Net revenue		66.2	%		88.1	%

Average Loan Origination

The average loan and finance receivable origination amount is calculated as the total amount of combined loans and finance receivables originated, renewed and purchased for the period divided by the total number of combined loans and finance receivables originated, renewed and purchased for the period. The following table shows the average loan and finance receivable origination amount by product for the current nine-month period compared to the prior year nine-month period:

	Nine Months Ended
	September 30,
	2022		2021
Average loan and finance receivable origination amount(a)
Consumer loans and finance receivables(b)(c)	$	677	$	602
Small business loans and finance receivables(c)		16,983		15,236
Total loans and finance receivables(b)	$	1,773	$	1,358

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(a) The disclosure regarding the average loan origination amount is statistical data that is not included in our consolidated financial statements.

(b) Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs that we have not yet purchased and, therefore, are not included in our consolidated financial statements.

(c) Represents the average amount of each incremental draw on line of credit accounts.

The average loan origination amount increased to $1,773 from $1,358 during the current nine-month period compared to the prior year nine-month period, due primarily to the gradual easing of restrictions on loan amounts as risks from the COVID-19 pandemic abated as well as an increase in the mix of higher dollar amount loans and finance receivables to small businesses.

Total Expenses

Total expenses increased $137.2 million, or 33.3%, to $548.7 million in the current nine-month period, compared to $411.5 million in the prior year nine-month period.

Marketing expense increased to $286.0 million in the current nine-month period compared to $163.6 million in the prior year nine-month period. The increase was due primarily to our efforts to capture increasing market demand for loan products in the current nine-month period. The prior year nine-month period was abnormally low due to our strategic actions to mitigate risks associated with the COVID-19 pandemic. Certain marketing costs, such as commissions paid to third-party lead providers, are variable and increase as originations increase.

Operations and technology expense increased to $128.9 million in the current nine-month period compared to $108.6 million in the prior year nine-month period, due primarily to higher variable costs, particularly personnel and underwriting, due to the increase in originations and the size of the loan portfolio.

General and administrative expense decreased $10.9 million, or 9.4%, to $105.4 million in the current nine-month period compared to $116.3 million in the prior year nine-month period, due primarily to synergies achieved following the October 2020 acquisition of OnDeck.

Depreciation and amortization expense increased $5.4 million or 23.3% compared to the prior year nine-month period driven primarily by $3.6 million in impairment charges recorded in the current nine-month period on internal-use software that was retired as well as additional internal-use software placed into service and fixed assets and intangible assets acquired with Pangea.

Nonoperating Items

Interest expense, net increased $20.8 million, or 36.3%, to $78.3 million in the current nine-month period compared to $57.5 million in the prior year nine-month period. The increase was due primarily to an increase of $756.2 million in the average amount of debt outstanding to $1,755.5 million during the current nine-month period from $999.3 million during the prior year nine-month period, partially offset by a decrease in the weighted average interest rate on our outstanding debt to 6.07% during the current nine-month period from 7.65% during the prior year nine-month period.

Equity method investment income increased $4.0 million, or 155.0%, to $6.5 million in the current nine-month period compared to $2.5 million in the prior year nine-month period. In the current nine-month period, Linear sold its operating company, resulting in a gain of $11.0 million, which was partially offset by a $4.4 million loss on the sale of OnDeck Canada.

Provision for Income Taxes

The effective tax rate of 23.9% in the current nine-month period was lower than the effective tax rate of 24.5% in the prior year nine-month period due primarily to the revaluation of the deferred tax liability related to reductions in state apportionment in separate company filing states.

Net Income

Net income decreased $51.0 million, or 24.6%, to $156.6 million during the current nine-month period compared to $207.6 million during the prior year nine-month period. The decrease was due primarily to higher costs attributable to growth in the size of the business coupled with a lower but more normalized net revenue margin in the current nine-month period.

LIQUIDITY AND CAPITAL RESOURCES

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Capital Funding Strategy

Since the start of the COVID-19 pandemic, we have taken various actions to maintain a stable and flexible balance sheet that ensures liquidity and funding available to meet our business obligations. As of September 30, 2022, we had cash, cash equivalents, and restricted cash of $172.1 million, of which $84.4 million was restricted, compared to $225.9 million, of which $60.4 million was restricted, as of December 31, 2021. During the three months ended March 31, 2022, we increased the borrowing capacity on four of our loan securitization facilities without having to increase any of the respective borrowing rates. In June 2022, we entered into a new $420.0 million loan securitization facility and increased the aggregate principal on our existing secured revolving credit agreement while extending its term. As of September 30, 2022, we had funding capacity of $579.9 million. Based on numerous stressed-case modeling scenarios, we believe we have sufficient liquidity to run our operations for the foreseeable future. Further, we have no recourse debt obligations due until September 2024.

Historically, we have generated significant cash flow through normal operating activities for funding both long-term and short-term needs. Our near-term liquidity is managed to ensure that adequate resources are available to fund our seasonal working capital growth, which is driven by demand for our loan and financing products. On May 30, 2014, we issued and sold $500.0 million in aggregate principal amount of 9.75% senior notes due 2021 (the “2021 Senior Notes”). On September 1, 2017, we issued and sold $250.0 million in aggregate principal amount of 8.50% Senior Notes due 2024 (the “2024 Senior Notes”) and used the net proceeds, in part, to retire $155.0 million in 2021 Senior Notes. On January 21, 2018, we redeemed an additional $50.0 million in principal amount of the outstanding 2021 Senior Notes. On September 19, 2018, we issued and sold $375.0 million in aggregate principal amount of 8.50% Senior Notes due 2025 (the “2025 Senior Notes”) and used the net proceeds, in part, to retire the remaining $295.0 million in principal amount of the outstanding 2021 Senior Notes.

On June 30, 2017, we entered into a secured revolving credit agreement (as amended, the “Credit Agreement”). On April 13, 2018, October 5, 2018, July 1, 2019 and May 10, 2021, we and certain of our operating subsidiaries entered into amendments to our Credit Agreement. On June 23, 2022, we entered into an additional amendment to our Credit Agreement that, among other things, increased the borrowing capacity to $440.0 million, with a $20.0 million letter of credit sublimit and $10.0 million swingline loan sublimit. The Credit Agreement bears interest, at our option, at the base rate plus 0.75% or the Secured Overnight Financing Rate plus 3.50%. In addition to customary fees for a credit facility of this size and type, the Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the commitment, and ranges from 0.15% per annum to 0.50% per annum depending on usage. The Credit Agreement contains certain prepayment penalties if it is terminated on or before the first and second anniversary dates, subject to certain exceptions. The Credit Agreement matures on June 30, 2026. As of October 26, 2022, our available borrowings under the Credit Agreement were $130.3 million. Since 2016, we have entered into several loan securitization facilities and offered asset-backed notes to fund our growth, primarily in our near-prime consumer installment loan and small business loan businesses. On October 21, 2022, we entered into a receivables funding agreement that provides additional funding capacity of $125.0 million. As of October 26, 2022, we had funding capacity of $506.2 million. We expect that our operating needs, including satisfying our obligations under our debt agreements and funding our working capital growth, will be satisfied by a combination of cash flows from operations, borrowings under the Credit Agreement, or any refinancing, replacement thereof or increase in borrowings thereunder, and securitization or sale of loans and finance receivables under our consumer and small business loan securitization facilities.

As of September 30, 2022, we were in compliance with all financial ratios, covenants and other requirements set forth in our debt agreements. Unexpected changes in our financial condition or other unforeseen factors may result in our inability to obtain third-party financing or could increase our borrowing costs in the future. To the extent we experience short-term or long-term funding disruptions, we have the ability to adjust our volume of lending and financing to consumers and small businesses that would reduce cash outflow requirements while increasing cash inflows through repayments. Additional alternatives may include the securitization or sale of assets, increased borrowings under the Credit Agreement, or any refinancing or replacement thereof, and reductions in capital spending, which could be expected to generate additional liquidity.

Capital

Our Total stockholders’ equity increased by $53.2 million to $1,146.2 million at September 30, 2022 from $1,093.1 million at December 31, 2021. The increase of stockholders’ equity was driven primarily by net income for the nine months ended September 30, 2022 and, to a lesser extent, stock-based compensation expense, partially offset by repurchases of our outstanding common stock. Our book value per share outstanding increased to $36.24 at September 30, 2022 from $32.01 at December 31, 2021, which was primarily driven by the decrease in shares outstanding as a result of share repurchases, which is discussed in more detail below.

On November 5, 2020, we announced the Board of Directors had authorized a share repurchase program for up to $50.0 million of our outstanding common stock through December 31, 2021 (the “2020 Authorization”). On November 4, 2021, we announced the Board of Directors authorized a new share repurchase program totaling $150.0 million through December 31, 2022 (the “2021 Authorization”). The 2021 Authorization replaced the 2020 Authorization. On February 9, 2022, we announced the Board of Directors authorized a new share repurchase program totaling $100.0 million through June 30, 2023 (the "2022 Authorization"). The 2022 Authorization replaced the 2021 Authorization. Repurchases under our share repurchase programs are made in accordance with applicable securities laws from

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time to time in the open market, through privately negotiated transactions or otherwise. Our share repurchase programs do not obligate us to purchase any shares of our common stock. Similar to our previous share repurchase programs, the 2022 Authorization may be terminated, increased or decreased by the Board of Directors in its discretion at any time. During the nine months ended September 30, 2022, we had $118.8 million in repurchases of common stock under our share repurchase programs.

Cash

Our cash and cash equivalents are held primarily for working capital purposes and are used to fund a portion of our lending activities. We do not enter into investments for trading or speculative purposes. Our policy is to invest cash in excess of our immediate working capital requirements in short-term investments, deposit accounts or other arrangements designed to preserve the principal balance and maintain adequate liquidity. Our excess cash may be invested primarily in overnight sweep accounts, money market instruments or similar arrangements that provide competitive returns consistent with our polices and market conditions.

Our restricted cash represents funds held in accounts as reserves on certain debt facilities and as collateral for issuing bank partner transactions. We have no ability to draw on such funds as long as they remain restricted under the applicable arrangements but have the ability to use these funds to finance loan originations, subject to meeting borrowing base requirements. Our policy is to invest restricted cash held in debt facility related accounts, to the extent permitted by such debt facility, in investments designed to preserve the principal balance and provide liquidity. Accordingly, such cash is invested primarily in money market instruments that offer daily purchase and redemption and provide competitive returns consistent with our policies and market conditions.

Current Debt Facilities

The following table summarizes our debt facilities as of September 30, 2022 (dollars in thousands).

	Maturity date		Weighted average interest rate(a)	Borrowing capacity			Principal outstanding
Funding Debt:
2018-1 Securitization Facility	March 2027	(b)	6.54%		200,000	(h)		175,000
2018-2 Securitization Facility	July 2025	(c)	6.74%		225,000	(i)		189,327
2019-A Securitization Notes	June 2026		7.62%		276			276
ODR 2021-1 Securitization Facility	November 2024	(d)	4.33%		200,000	(j)		169,000
ODR 2022-1 Securitization Facility	June 2025	(e)	5.73%		420,000			62,000
RAOD Securitization Facility	December 2023	(f)	5.10%		236,842	(k)		236,842
ODAST III Securitization Notes	May 2027	(g)	2.07%		300,000			300,000
Total funding debt			4.71%	$	1,582,118		$	1,132,445
Corporate Debt:
8.50% Senior Notes Due 2024	September 2024		8.50%		250,000			250,000
8.50% Senior Notes Due 2025	September 2025		8.50%		375,000			375,000
Revolving line of credit	June 2026		6.51%		440,000	(l)		309,000
Total corporate debt			7.84%	$	1,065,000		$	934,000

(a) The weighted average interest rate is determined based on the rates and principal balances on September 30, 2022. It does not include the impact of the amortization of deferred loan origination costs or debt discounts.

(b) The period during which new borrowings may be made under this facility expires in March 2025.

(c) The period during which new borrowings may be made under this facility expires in July 2023.

(d) The period during which new borrowings may be made under this facility expires in November 2023.

(e) The period during which new borrowings may be made under this facility expires in June 2024.

(f) The period during which new borrowings may be made under this facility expires in December 2022.

(g) The period during which new borrowings may be made under this facility expires in April 2024.

(h) During the current nine-month period, we amended this facility to increase the maximum borrowing capacity from $150.0 million to $200.0 million.

(i) During the current nine-month period, we amended this facility to increase the maximum borrowing capacity from $150.0 million to $225.0 million.

(j) During the current nine-month period, we amended this facility to increase the maximum borrowing capacity from $150.0 million to $200.0 million.

(k) During the current nine-month period, we amended this facility to increase the maximum borrowing capacity from $177.6 million to $236.8 million.

(l) During the current nine-month period, we amended the Revolving line of credit to increase the borrowing capacity from $310.0 million to $440.0 million. Additionally, we had an outstanding letter of credit under the Revolving line of credit of $0.8 million as of September 30, 2022.

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Our ability to fully utilize the available capacity of our debt facilities may also be impacted by provisions that limit concentration risk and eligibility.

Cash Flows

Our cash flows and other key indicators of liquidity are summarized as follows (dollars in thousands):

	Nine Months Ended September 30,
	2022			2021
Total cash flows provided by operating activities	$	624,860		$	325,157
Cash flows used in investing activities
Loans and finance receivables		(1,200,390	)		(470,416	)
Acquisitions, net of cash acquired		—			(29,153	)
Capitalization of software development costs and purchases of fixed assets		(33,290	)		(22,031	)
Sale of a subsidiary		8,713			—
Other investing activities		—			25
Total cash flows used in investing activities		(1,224,967	)		(521,575	)
Cash flows provided by financing activities	$	545,846		$	115,433

Cash Flows from Operating Activities

Net cash provided by operating activities increased $299.7 million, or 92.2%, to $624.9 million in the current nine-month period from $325.2 million for the prior year nine-month period. The increase was driven primarily by additional interest and fee income from growth in the loan portfolio, particularly since mid-2021. Net cash provided by operating activities for the nine months ended September 30, 2021 was abnormally low due to the strategic reduction in originations implemented at the onset of the COVID-19 pandemic.

We believe cash flows from operations and available cash balances and borrowings under our loan securitization facilities and Credit Agreement, which may include increased borrowings under our Credit Agreement, any refinancing or replacement thereof, and additional securitization of loans, will be sufficient to fund our future operating liquidity needs, including to fund our working capital growth.

Cash Flows from Investing Activities

Net cash used in investing activities was $1,225.0 million for the current nine-month period compared to $521.6 million for the prior year nine-month period. This change was due primarily to a $730.0 million increase in net cash used to fund loans and finance receivables in the current nine-month period compared to the prior year nine-month period when originations were slowed due to the impact of the COVID-19 pandemic. This increase was partially offset by the acquisition of Pangea for $29.2 million, net of cash acquired, in the prior year nine-month period.

Cash Flows from Financing Activities

Cash flows provided by financing activities for the current nine-month period were driven primarily by $563.9 million and $109.0 million in net borrowings under our securitization facilities and revolving line of credit, respectively, partially offset by $124.1 million in share repurchases. Cash flows provided by financing activities for the prior year nine-month period were driven primarily by $129.3 million in net borrowings under our securitization facilities.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to the information on critical accounting estimates described in our Annual Report on Form 10‑K for the year ended December 31, 2021.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See Note 1 in the Notes to Consolidated Financial Statements included in this report for a discussion of recent accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk since the most recent fiscal year end. Refer to our market risk disclosures in our Annual Report on Form 10‑K for the year ended December 31, 2021.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the “Exchange Act”) as of September 30, 2022 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective and provide reasonable assurance (i) to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See the “Litigation” section of Note 8 of the notes to our consolidated financial statements (unaudited) of Part I, “Item 1 Financial Statements.”

ITEM 1A. RISK FACTORS

There have been no material changes from the Risk Factors described in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides the information with respect to purchases made by us of shares of our common stock.

Period	Total Number of Shares Purchased(a)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan(b)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan(b) (in thousands)
July 1 – July 31, 2022		192,500	$	30.83		192,200	$	40,640
August 1 – August 31, 2022		200,449		35.99		199,000		33,474
September 1 – September 30, 2022		197,200		33.18		197,200		26,932
Total		590,149	$	33.37		588,400	$	26,932

(a) Includes shares withheld from employees as tax payments for shares issued under the Company’s stock-based compensation plans of 300 and 1,449 for the months of July and August, respectively.

(b) On November 4, 2021, the Company announced the Board of Directors authorized a share repurchase program totaling $150.0 million through December 31, 2022 (the "2021 Authorization"). On February 9, 2022, the Company announced the Board of Directors authorized a new share repurchase program totaling $100.0 million through June 30, 2023. The new program replaced the 2021 Authorization. The Company repurchased $132.7 million of common stock under the 2021 Authorization before it was terminated. All share repurchases made under these repurchase authorizations have been through open market transactions. Our share repurchase programs are subject to market conditions, do not obligate us to purchase any shares of our common stock, and may be terminated, increased or decreased by the Board of Directors in its discretion at any time.

We do not plan to declare cash dividends in the foreseeable future. Any declaration of dividends is at the discretion of our Board of Directors. Our agreements governing our existing debt contain restrictions which limit our ability to pay dividends.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit No.	Exhibit Description
3.1	Enova International, Inc. Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on November 17, 2017)
3.2	Enova International, Inc. Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on November 17, 2017).
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October 28, 2022	ENOVA INTERNATIONAL, INC.
	By:	/s/ Steven E. Cunningham
		Steven E. Cunningham
		Chief Financial Officer
		(On behalf of the Registrant and as Principal Financial Officer)

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