ENVA - Earnings call transcript Q3 2017 | Enova International, Inc.

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Operator

Good afternoon and welcome to the Enova International third quarter 2017 earnings conference call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now Monica Gould. would like to to over conference the turn I Please go ahead.

Monica Gould

ended this Brian Enova the XXXX released you results XX, Thank and for third good quarter closed. after market afternoon afternoon everyone. September XXXX, of

Chief receive the David and If from me our and earnings obtain Relations on Officer. ir.enova.com. Fisher, With section Officer of Financial today's copy press you section a Cunningham, on is of are, you of Chief call release, Executive being Steve be did website. will may at the call not Investor Relations it This Investor our our website webcast archived

the could call a that on SEC today's this Please we results currently today's business Before assumptions statements information the these over no make our we I such, that David, see it to discussion and I turn filings include more uncertainties. on forward-looking would and factors for obligation projections release as certain we contain to risks press that and and future discussion. are note new as Any to risk based in on today the from cause environment statements as like call on will described specific the result does refer information as to based undertake our materially of to forward-looking differ actual of or update our events. statements

and that release. included certain performance. found Principles. measures our enhance press report In these understanding We measures we are non-GAAP in in do conform between addition these the to Reconciliations measures tables to GAAP U.S. Accepted today's GAAP believe financial not the Generally Accounting reporting, non-GAAP of

the on portion over our to supplemental turn financial in our And I David. to would the have posted website. noted earnings we that, with As call IR like of release, information

David Fisher

and today. Monica Thanks call for our afternoon joining good everyone. Thanks

over turn strategy on will am by the I and As giving going I guidance you overview forward. with In to then brief we our we on to performance perspectives and After our pleased are share call our will and discuss usual, update detail. focus continued more growing our finally, profitability I results to quarter, our and looking Cunningham, generated. we of the will QX, the CFO, six Steve start financial I businesses to a in remarks,

Third quarter EBITDA healthy $XXX adjusted and increase of saw $X.X net per end at over our last million, million third of revenue at products. quarter was our quarter the high for income million across an $XX.X XX% guidance as the or Adjusted year $X.XX was the share of we was marketing, also combined at transaction of expenses the non-marketing driven operating by offset continued credit somewhat efficient to our technology investments well as analytics and strong as guidance variable in These were growth. results personnel which related higher solid high expenses support from end ranges. loan financial with demand

mentioned, just continue I our credit see to stable across we As metrics portfolio.

volumes the charge-offs higher exclusively over quarters. net almost to last is this have the year, our While seen several strong customer new last than are we attributable

new customers of generating I going forward. base tailwind Enova. as asset creates nice customers QX In This since new a mix revenue fact, us our been generated we these in increase have highest the at for

of we our in credit performance XX%, our are near-term been stable our the in guidance risk Another credit sign portfolio. of within and for profit gross yields credit receiving margin our as adequate was QX is range has which good

the second in in the quarter, year. slightly As declined was prior QX case companywide originations the from

XX% of to The expenses. and grow marketing and of lines and past will credit and with increase Including longer to line up business and from and finance allows installment Steve loans balance in and installment installment have small lower loans durations. of our several this into diversified higher comprise receivable this later. costs products successfully with lines last discuss year us we is detail loan our credit revenue. However, offerings, over portfolio in originations our the our revenue more decline despite XX% as now other of over credit XX% in years, balances

strong our business and continued U.S. and and success be our our businesses. U.K. are results Decisions, U.S. our short business and our Our by of driven brands, Enova across a purchase receivable line our six in agreement growth analytics offerings, consumer Brazil term near-prime U.S. installment These and subprime loan installment small on business. financing, segments credit service to our as focus

XX$ market and if one We the from by the $XXX at the year. million, higher of of that That year-over-year. portfolio originations lender end consumer generated year In now even and up number with profitability our increased in especially of strong this of and Across installment only of single new pay products. generating consisting products less time, credit last of grow to up was pound over last quarter portfolio, are loan QX quarter become business loan continues another more strengthens. the entire NetCredit to share XX% and line remain profitability. diversified rose subprime XX% pay products, XX%. of business Our products subprime the the levels which business number large U.K., of single third quarter U.S. the U.K. is XX% see XX% than customers balances from XX%

loans brick from near-prime loan to that taking is market incumbents. continue U.S. online and we grown represents Consumer NetCredit to our mortar of near-prime for XX% believe with portfolio. U.S. that total quick efficient has serve the and well-positioned is product remain share Our demand strong and to model our

the of market. ago of discussed to financing decreased we cautious total year-over-year, end XX% while originations this XX% fallout approach at the business reflecting ongoing the in small business more navigate products portfolio as compared this QX for we our represented Our year

over Our Brazilian the at portfolio quarter. $XX the grown end has loan third million of to

and from successful XXX% been from X% QX there have originations with QX year. up We of QX in last increasing originations

combination strong demand population, large see from a of for in to stable a We credit, banking interconnected advanced environment continue and a substantial Brazil regulatory a opportunity system.

Enova a analytics Finally gaining real-time is traction. business our Decisions, as service

we to continue the product additional evolve will quarter. and during have the signed contracts offerings and We several

and pleased verticals. While this with are business so across still of different success far very small the initial to has much number prove, is a we

want the Now process. CFPB to to rulemaking I turn

to Following storefront who We the positioned ago, are profitable a of significantly renewals the will standards issuance underwriting and year in the CFPB's few the rules. very under the are remain diversification. than well as impact confident weeks on continued regulations impacted ability to we well rule that be ever to rule rule expect struggle of is final we prepared the dollar as much implement last when proposed our Moreover, loan in be large lenders as the to smaller limitation on the estimated repay particularly we a of than focused player published industry. to believe by a the a result and landing we relative preliminary will more more and our ability small the

the XX% you revenue levels products the composed second XX% the than XX% based XXXX on revenue rule to changes released short expect last we XX%. that our may the the recall, be XX% approximately mix As to was portions our subject at year, to when products revenue of revenue be to time, will estimated that and subject comprise to by decline then and impact be impact our subject that of that total revenue specific less that of the of now for current as for time XX% XX% at products be the also to products the to an may total term those that to XX% XX% only rule to revenue process. from XX% XX% loan will payment revenue potential rule quarter could additional represent final of We impacted to preauthorization the

assumes rule additional that is implemented all that changes. without Now the

by the impact execute Now growth rule that to we mentioned two nearly we that the to at strategy as substantially I new be a a diversification to minimum, below and years continue the expand. to on adapt time to initiatives just actual revenue expect we levels have our and

market forced regulations opportunity the time. Enova XX% the lenders share U.S. as the rule less comply in market. to subprime we gain lenders federal have substantial Today to implement continue In that for than to to new addition, first tribal market and storefront have believe we are an with share will struggle

is it market our that conceivable certainly could So share increase meaningfully.

mitigate Now this the and the And CFPB several be will if sophisticated diversification significant additional us we any whether to from In will implement all event, effective to its any efforts regulation. summer, believe in of changes. rule analytics online quickly director required uncertainty and to adapt rule with current form. said, a as is customer that to adds any successful that to sooner, next being not there allow lender than become leaving continue the uncertainty. specter should the will likely our legal history other our impact There challenges more

this. at experience have also We

In addition changes over to of through in have at dozens state changes regulatory the U.K. managed the last U.S. few significant years, the regulation level. we

and solid. pleased and credit our wrap business. favorable continued momentum our progress environment to the we So be macro up, remains to are in The with continues

mission position credit. and success we decrease growth. regulatory us Our will focused is growth us and confident customers business strong commitment trustworthy fast sheet a direction and achieve spur to our competitive diversify count our people to with team, and enable driving continued their to our delivering exceptional fulfill of helping to hardworking financial risk services that continue remain who trust believe to and world-class products growth strategy, and in to I solid on drive our and balance responsibilities

Cunningham, you be Now then Steve? more remarks, financials I we that Steve will Steve's would to may any answer happy our detail. go like over who to the will call have. to questions following CFO, the turn over And in

Steve Cunningham

the and Thank our operating you financial full provide our quarter quarter by and start reviewing for good everyone. and afternoon outlook third XXXX. and fourth the I for performance David year then the will

all within quarter, and Our was solid of increased third the our XX.X% quarter performance EBITDA have the at high $XXX.X the we quarter this delivered in from end the expectations. in where consecutive our EPS and eighth represents which Total million ranges. ago guidance year adjusted quarter. Revenue, was adjusted came revenue financial

XX.X% exchange third year-over-year and rates $XXX.X growth Total year-over-year balances. million impact and installment which loans finance quarter driven have the by increases significant increased in quarter credit continue rose company finance loan on and originations Year-over-year combined decreased last last to revenue to drive sequentially products did to XX.X% year-over-year. was balances year. in Line revenue receivable year. and products of company not $XXX.X the a company currency from X.X% in of million third total receivables the Foreign total by total loans growth compared

on based and total reflects focused loans six higher have diversification David businesses. on slightly line receivables As our loan durations balances generating In faster company particular, effectiveness growth of total six company growth combined been strategy originations finance we mentioned, businesses. in These across the receivables with combined of the our products longer average strong and in and lower across products have growth installment have credit growth our amounts. our loan of our

to receivables expense a growth in higher able and less at marketing originations As the lower drive of trend fewer costs. contributing resulting percentage is to we revenue factor effort lower result, as a a revenue. are with recent of This

our may of some the quarter revenue. increase quarter. sequentially domestic a trend in revenue revenue variation $XXX.X total increased Domestic on a receivables the purchase a our agreement third line in of for revenue and the and Domestically, expect loan XXXX. foreseeable operations of and accounted in credit was domestic to from by Revenue quarter-to-quarter, for we While XX.X% domestic XX.X% these year-over-year primarily XX.X% increase third increased XX.X% in see installment basis in million continue to growth led revenue X.X% we future.

strong were basis. $XX.X on combined to products XX.X% revenue year-over-year XX.X% drove recent up in international revenue international as International and a was revenue XX.X% were we products XX.X% and of the XX.X% loan success by had sequentially. our balances a accounted year-over-year company growth million Continued loan increased business. international International Brazilian revenue the continued installment growth On finance demand balances U.K. XX.X% good balances constant the quarter. benefiting receivable increase loan for a XX% for year-over-year. basis, and third currency our have constant increased from and of in year-over-year. loan with year-over-year total XX.X% driven are up a on domestic On a these primarily in up revenue basis, International basis our installment currency loan

Turning margins. to gross profit

profit of year. quarter gross The third XX.X% decline profit gross modest to third which and businesses, Our last total company a the our all margin in XX% from mix was for quarter. third profit combined the during year-over-year at in with XX.X% in gross margin the in compares The total quarter. businesses. seen comprise and our installment totaled of loans is near-prime in-line and in quarter any have XX.X%, NetCredit expectations This of the installment noteworthy the near-prime the was of the portfolio. grew recent proportion proportion balances loans originations company customers end XX% of higher new given now of the greater new margin highest we particularly originations finance originations Domestic proportion has loans continued and been and of the new customer CNU growth Across the receivable in quarter. our of customers

it our us with continue up pleased sets for very very are We to future. customers new attract as well the ability to

higher a customers upfront calls, a payment history rate higher loss requires performance. of However, as a customers at originations higher customers default successful on mix with of we prior in than new provisions new as have stated returning

The Given average continued of in-line the a these as the in quarter seasoning slightly portfolios by year. the term and was quarter installment percentage loans of in and recent of third our driven from short loan originated receivables particularly charge-offs combined primarily customers was expectations. quarters, trends, year-over-year increase last XX.X% recent net and our increased third with of XX.X% XXXX modest new in for to finance

the of originations in by to of customers mix will We in the in in of gross portfolio. continue and and financings returning the margin consolidated to the expect versus pace new influenced to XX% and of profit growth remain originations, range the be loans XX% mix

short margin line customer quality our of increased from quarter credit partially new gross third in in products of domestic in XX.X% offset last in growth year credit profit third and portfolios. XX.X% Our by the quarter by the and installment of improve our term led

quarter gross profit was prior margin quarter originations compared gross prior products. growth in margin by driven installment third XX.X% The from XX.X% the was to Our international profit quarter. in the year the in international decline our in year

range We and both XX% to well mix of from by as and pace to expect the our and the of international in returning gross XX% U.K. margin Brazil new the be customers. driven profit as growth will

Turning to expenses.

in Our total compared operating the last the in expenses million $XX.X third quarter quarter third were $XX.X of to year. million

compared marketing year were and general quarter efficiency higher which underwriting As David mentioned, and mostly associated we our our technology to this have legal operations portfolio a was ago. expenses larger spend with continued and seen in by and offset costs. including These administrative servicing, expenses receivables transaction fees,

deferral to million higher in certain third of of in million Marketing or of of revenue capabilities. to XX.X% in the year-over-year $XX.X revenue items periods. third In the number which XX.X% a quarter for compares the one-time that of and were the million addition, are $X.X of prior items a these expenses technology related incurred total quarter reduction were which investment will costs personnel primarily one-time year. quarter line of in for expenses Marketing from our $XX included last also marketing development in explain. I accounted are costs third continued There

an administrative well $X.X related a outside previously and The due U.K. to this year settlements quarter costs re-categorization of as include expect million ongoing technology a a increase We in increase teens will the quarter third of spend last as technology in and $XX.X quarter. third for the volume general increase expenses to was quarter were year. remain customer mid the marketing underwriting totaled $XX.X servicing expenses. as in that for ago. compared in revenue Operations and included to Operations from expenses the million primarily in of and million fourth expenses expense compared percentage year-over-year the

grow expenses expenses, and the operations $X.X include compared in expenses last fourth and quarter in the technology XX% expect were between in administrative XX.X% to a and with General of We revenue and administrative volume range third General to expenses million was the multiple in $XX.X now of million of operations to one-time as increase adjustments quarter. quarter decrease the third year. million expenses. And to also well quarter as items. legal technology-related from technology of expenses. and personnel that included included from administrative were higher costs outside in these costs The general due $XXX,XXX primarily and costs ongoing $XX.X

general was quarter. of and for fourth administrative XX.X% between non-GAAP expect range $XX.X XX% flat revenue year-over-year We in and measure, million Adjusted a to the expenses EBITDA, at quarter. third the

EBITDA quarter adjusted margin compared in last Our was XX.X% to XX.X% year. third the of

in in million to quarter last Our which compares expense third of $X.X stock-based the third was year. million compensation $X the quarter

Our quarter year. rate due of quarter to the to third effective nondeductible tax year in items impact was increase relative XX.X% the the to was last higher XX.X% for tax the effective rate quarter. of in compared The the primarily third ago

months tax rate million in the or compared of negative for compares diluted of third year the the loss believe Net diluted the tax in remain net effective or nine XX% year. of nine per mid-XX% month rate range. prior is year the third to period. ending XX% Our for $X.XX last We to September million this per full-year will which $X.XX share was $X.X income quarter share in quarter $X.X our

diluted unsecured quarter. million share or senior Adjusted totaled of results million the loss share impacted or of a $X.XX extinguishment a the of the note notes retiring the quarter year in of during by debt a non-GAAP million million on X.XX% of measure, as the $XXX $X.X to per proceeds diluted X.X% per during from a portion GAAP our Our compared prior $XX.X our quarter issuance. earnings, result $X.X early with were $X.XX

into This our notes at $XXX raise our continued of the We we of market used our a unsecured for move to quarter the notes X.XX% liquidity sheet during during as $XX the placement our which was accessed million million follows note peaks line strengthen last existing seasonal support growth. of bank-led as secured to of of balance X.X%, redeem to we credit quarter. seven-year August in senior portion

In financing securitization we and $XXX million includes during three to the of raised the addition, have facility. XXXX, announced the these of maturity securitization flexibility today cost lowers competitive markets. our markets. April total, into XXXX to facility at million across NetCredit renewal we $XXX to term In renewal The of extends issue the our cost

total of During cash the and $XXX.X million unrestricted third cash ended million $XXX.X cash and operations from the equivalents quarter of totaled quarter, with $XXX.X flows we and million. debt

balance $XXX million million includes of installment at combined the of end securitization $XXX.X outstanding debt the the under quarter Our loan facilities.

like businesses. for to outlook full further I would focused remain Now on expand profitability our as our growth to turn XXXX. and six year fourth the we quarter maintaining We solid

Our also in and rules our to higher from no from levels XXXX. customers U.S. Pound strong reflects could each our originations in new outlook CFPB in impact during current a of our significant of business British Any continued continued growth businesses, mix impact the volatility results.

our per $XX we between to in earnings million be quarter share. and to between and noted EBITDA to million share $X.XX per and XXXX revenue and per to earnings expect be fourth As earnings adjusted million be in be adjusted total share, share million, $XXX between $XXX negative diluted and release, $X.XX the per $X.XX between $XX $X.XX

million full between hand earnings and revenue XXXX, to per share $X.XX back For share. adjusted be to to $XXX and million EBITDA $X.XX we David. total over I that, be $X.XX million, the $XXX share, $XXX earnings the per $XXX and to and and with per be diluted share per call $X.XX will to year between adjusted between million between expect be And

David Fisher

call have. for open Steve. Thanks up any the we now will may you questions And

Operator

Instructions]. [Operator

with Please from David JMP ahead. First question Securities. comes Scharf go

David Scharf

of to or has context, for help taking Maybe what figure a that afternoon. last am XX% years, was Thanks things is over customers. so, that record volume, new my David, been? Good questions. origination the just two the I quarters from put coming into the Hi. wondering, ever eight lowest

David Fisher

was three, mid teens. quarter four that low tell to I have don't years but the as low ago, I as it eight can the of you kind number,

to where to years. marketing here are So has strength teams mid last the improvement from when really up number really over and today able has I sign future. that been the years four, effort which ongoing number sign the be This a of way is an to ago to low we for our that our our come started great increase terrific from four three, is five a teens in

David Scharf

of that you peak? number to margin of close new And gross wide think XXX comfortable users. of there even repeat is a XX%, you that have this obviously not to XX% is mind so it. is Or Got about very guidance, that so going we by driven think feel as above? much mix range in Do a you versus the the

David Fisher

than our you because as following our take the as can is can ranges point ends a There for significantly many quarter guidance, wide is gave will a which driver the for back the it is might new we get swing. several in gross for the that. more imagine, But all factors kind other somewhat have of calendar quarter. could swing what We day we big fairly customers also It margin mix have affects wide why quarter swing on across like will our gross a that quarter. of the week margin of

deeper we other obviously can things ranges move is pretty calendar, business the ranges those, that wide. metrics, very we very EBITDA significantly, look drives been to into around which has keeping like our credit when metrics of been longer-term and and those of positive margin short and positive new mix, trends. But able some and why customer guidance you move with gross the within then term profit trend So have with lot, are growth those continuously which deliver gross results can kinds guidance a

David Scharf

variability us way year-over-year a I growth nicely with and mid balances larger without just the mix think wondering, to you given originations sheet in we balance basis, growing your like credit annual shift of good in the balances for line to originate on looks around teens growth pretty a it are having duration And about realize it. near-term? longer am quarter-to-quarter, installment shift loans lot an Is as for the Got product much. can

David Fisher

of take we that that's And certainly something sustainable. anomaly. kind view an as not more. as we hopefully We But rate growth can do

David Scharf

Got then I jump here. and it. will line back And lastly in

materially? reference of is on to terms cost On securitization, there, the that anything of there I there know the funding the didn't renewal the if Steve? a NetCredit was change

Steve Cunningham

David. was, one. There There is

may You remember had at There issuance one two we is previously. it's plus and LIBOR classes now of XXX. class

X.X% You may the the minimum recall, there in renewal. was cost prior

David Scharf

Right.

Steve Cunningham

once will we quarter. And issue a

is the had than So note monthly the a bit in the little larger variable issuance previous variable we note that renewal.

David Scharf

Got it. Great. guys. much Thanks so

Operator

from Rowan with Janney. question comes Please go Next John ahead.

John Rowan

Good guys. afternoon

David Fisher

Hi John.

John Rowan

to trying are guidance. all just there to the so the not am any type $X.XX. that am trying GAAP about obviously operating difference and It up between quarter I make fourth other I that items going figure are is stock-based large? That square if fourth to coming of in that the looks just like out one-time comp. is GAAP quarter

Steve Cunningham

talking about John? You GAAP EPS, the are

John Rowan

fourth which and differential share $X.XX earnings GAAP a earnings per in than typically lot quarter your it per between is. the operating is There is share your Yes. better

Steve Cunningham

Yes.

you the that and save will this us redemption existing it haul newer trade. on NPV Similarly all that positive be really But us will is securitization over for charge to is to more the senior the allowed to liquidity. overall facility. of during there the draw the an utilize that. advance quarter, the in the refinanced an notes the the rates renewal upfront the So on reason for money we X-K notes And will new see long into

So EPS. that's with really range GAAP what's happening the from

John Rowan

That with wanted Okay. I make sure all the because stock-based comp. run a that sense. just new to obviously differential makes rate wasn't that's there not

quarter going are recognize to to change? charges know that the dollar the So fourth happen you what you in for

Steve Cunningham

$X be It million, between million and $X will likely non-cash.

John Rowan

Non-cash.

versus Okay. prepared And the I of the of products? the under debits that accounts think about rules how it Can your would consumer give and preauthorization to you out what you mentioned idea current authorizing how CFPB installment in accounts out CFPB's of with policies final deduct potentially the would us rules juxtapose for guys when your of an then talked impact you remarks, some David, mandate?

David Fisher

Yes. couple terribly on not ourselves. of a failed debiting They current in limit We our different attempts because loan process supplement are most to cases. self that

major analytics to think to So change a of a and limits. most the debits, the reauthorized to processes. stay of within sure rules. of good isn't set plan already that's getting it's we our the have a those We that change return up within make kind effective going talk to We and customer natural to efficient as we when to don't lot big things. overall number payment use use debiting We possible be the the the

products. And so adapting going those loan our capabilities a credit same of new across have major is analytics we don't to to think the CFPB installment line rules, impact

John Rowan

And of the Okay. hear said right? I XX% question. XX.X% to revenue. last Did I just Steve, you think that G&A expense for fourth quarter between

Steve Cunningham

right. is That

John Rowan

you. Thank Okay.

Operator

Instructions]. [Operator

with Michael Please go from Del ahead. Grosso comes Jefferies. question Next

Michael Del Grosso

Thanks for my taking Hi. questions.

Seasonally a on year last First reserve to third quarter-over-quarter the relatively the is saw one fourth quarter. flat the we from allowance.

expect experienced Given some mentioned this is that you to seasonality the in this year? quarter, mix you customer new it fair more

Steve Cunningham

Yes.

mix, will mix there to aspect be obviously will customer you particularly But the a on that. would to drive growth new and allowance. there I see is depending the think seasonal expect definitely

Michael Del Grosso

Okay.

So expect when flat? you seeing say that bit? you more should growth, tick we Or to a are up

Steve Cunningham

of allowance amount mix the obviously the mix versus the new in portfolio returning. depends The coverage and on of

portfolio. is So growth pieces period. the fourth a have as lot we the mentioned, And non-short term of we of that coming obviously from quarter our growth are seeing strongest

end key just comparability at sit you terms little be of from that. a the issues think But to I periods going would in of drivers of bit So where should prior there maybe the of are because the expect the allowance quarter. those

Michael Del Grosso

we helpful. states That's activity you. Any mentioned terms quarter David, some And put activity? state Thank other of update or last radar in you there you any in level were should Okay. seeing the Maryland? new I on think legislative then

David Fisher

credit Yes. allowed to in was line originate in are a quarters still to can I Maryland we now, rules ago. to We But Credit Maryland. of mean few new two new Maryland. how have effect continue lend customers ago the existing that to quarters under lending lines Maryland our talked installment we went not Maryland. do in We about of

So impact there. significant there hasn't a been

level. Beyond quite it's because kind that final state back being rule federal something at that they CFPB out will are do been the We optimistic them the space impetus getting just of actually will in now. some see as of state little session a somewhat Maryland, to session. there will into are a try published They reduce finally that and activity addressing is not there the the decrease rule are to

have keep of winter. a get of we we and early late continue indications session on here fall of an a as it couple states the and the already into from We eye that to obviously deeper into will couple

Michael Del Grosso

Thank you. Great.

Operator

concludes question-and-answer back turn I conference David for remarks. closing like our Fisher to the over session. any This would

David Fisher

today. progress next Thanks everybody We forward updating again look quarter. for our evening. a Have joining us on good to you

Operator

The conference presentation. Thank you has today's for attending now concluded.

now You disconnect. may

Enova International (ENVA) 26 Oct 172017 Q3 Earnings call transcript