Enova International, Inc.

Good day and welcome to the Inova International second quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star then one on your touch-tone phone. To withdraw your question, press star then two. Please note this event is being recorded. I would now like to turn the conference over to Lindsay Sava-Reese, Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Inova released results for the second quarter of 2021 and did June 30, 2021, this afternoon after the market closed. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at ir.inova.com. With me on today's call are David Fisher, Chief Executive Officer, and Steve Cunningham, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to David, I'd like to note that today's discussion will contain forward-looking statements and as such is subject to risks and uncertainties. Actual results may differ materially as a result from various important risk factors including those discussed in our earnings press release and our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Please note that any forward-looking statements that are made on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, INNOVA reports certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release. As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website. And with that, I'd like to turn the call over to David.

Good afternoon, everyone. Thanks for joining our call today. I'll give an overview of our second quarter results, and then we'll discuss our strategy and outlook for the remainder of 2021. After that, I'll turn the call over to Steve Cunningham, our CFO, who will discuss our financial results and outlook in more detail. The second quarter played out just as we expected and as we discussed on our Q1 earnings call. As the economy began to open back up, consumers rapidly increased their spending, demonstrating the pent-up demand that we believed existed. In addition, as predicted, we are finding that small businesses have been beneficiaries of this pent-up consumer demand. Because of these dynamics, we saw a sharp increase in demand across all of our products during the quarter. To capture this increase in demand, we aggressively and quickly ramped up marketing to lean into the strong demand and solid credit quality we observed. One of the real benefits of our online only model is the ability to rapidly adjust marketing investment based on consumer behavior. For quite some time, we've been trying to increase marketing as a percentage of revenue and are pleased with our ability to do exactly this in Q2. The result was solid originations growth with Q2 originations up 35% sequentially and more than seven times the second quarter of last year when we scaled back originations at the onset of the pandemic. In addition, originations from new customers increased to 39% of total originations, up from 33% in Q1 of 2021 and well above the 7.4% during the pandemic in Q2 of 2020. Given the skillful execution of our team during the last 16 months since the pandemic began, we believe we are continuing to take share in both the SMB and consumer markets with our diversified product offerings and customer-friendly online-only model. Looking forward, while the first part of Q3 tends to be seasonally slow, we are seeing continued strong demand and expected to accelerate as we approach our seasonally stronger fall. Even with the strong growth in demand and originations, credit quality remained historically good during Q2. We expect credit metrics to trend back to pre-pandemic levels over time, but based on what we are seeing right now, we think that transition will be gradual over the next several quarters. As a result of the origination growth, revenue in the second quarter increased 5% year over year and 2% sequentially to $265 million. And benefiting from the strong credit performance, adjusted EBITDA rose 43% year over year to $135 million, and adjusted EPS increased from $1.68 in Q2 of last year to $2.26 in Q2 of 2021. In the second quarter, consumer products accounted for 45% of our portfolio, and small business products represented 55%. Within consumer, line of credit products represented 35% of the consumer portfolio, installment products accounted for 67%, and short-term loans represented just 3%. We expect the mix between consumer and S&B to fluctuate over time based on both seasonality and macroeconomic factors, and we are pleased with the diversified nature of our portfolio going forward. From an operational perspective, as we mentioned on our last earnings call, the integration of ONDEC is essentially complete. ONDEC's performance continues to exceed our expectations, and we will easily exceed our forecast of $50 million of annual cost synergies, primarily from eliminated duplicative resources, as well as $15 million in run rate net revenue synergies. We also continue to expect that the transaction will be accretive in 2021 and generate EPS accretion of more than 40% in 2022. And as we discussed last quarter, while we originally thought that OnDeck's legacy portfolio would have very little value, we now expect to receive over $220 million of total cash from the acquired portfolio net of securitization payments. In fact, we've already realized over $100 million from the legacy portfolio. Turning to our recent acquisition of Pangea, which we closed in mid-March of this year, we have gained another product and high growth business in our portfolio. Since closing, we've been able to leverage our online business expertise and analytics, technology, and marketing capabilities to rapidly accelerate Pangea's growth. While Pangea's results are currently not material to Inova's overall revenues, we believe the market opportunity is vast and we are well positioned to continue to grow in that space. In summary, we are encouraged by the strong momentum we are seeing. The improving economy, combined with our highly scalable and flexible machine learning technology, provide tailwinds heading into the back half of 2021 and beyond. We are focused on producing sustainable and profitable growth and now accelerating our growth as the economy recovers. We will continue to lean into demand and help hardworking people across the nation get access to fast, trustworthy credits. Now I'd like to turn the call over to Steve Cunningham, our CFO, who will discuss our financial results and outlook in more detail. And following Steve's remarks, we'll be happy to answer any questions that you may have. Steve?