Enova International, Inc.

Good day and welcome to the Innova International fourth 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 the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Cassidy Fuller. Please go ahead, ma'am.

Thank you, operator, and good afternoon, everyone. Inova released results for the fourth quarter and full year 2021 ended December 31, 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 in 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, Inova 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 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 first provide an overview of our fourth quarter and full year results. Then I'll discuss our strategy and outlook for 2022. After that, I'll turn the call over to Steve Cunningham, our CFO. We'll discuss our financial results and outlook in more detail. Looking back on 2021, our strong results demonstrated the power of an experienced and talented team combined with world-class machine learning powered analytical and risk management capabilities. We skillfully navigated a complex and rapidly changing market environment, quickly accelerating our originations as the economy recovered and helping our customers get access to fast, trustworthy credit. At the same time, we kept a close eye on credit performance, which has remained much better than pre-pandemic levels. As a result, total company originations doubled year-over-year to $1 billion, and total company combined loan and finance receivables increased by 48% to $2 billion. This growth in our portfolio provides Inova a lot of momentum heading into 2022, and we believe we are extremely well positioned to continue taking advantage of the improving economy and improving consumer and SMB demand. As we anticipated, during the fourth quarter, we saw demand increase, with particularly strong growth in our near-prime and SMB businesses. As I just mentioned, credit quality remains solid across all of our products, including recent vintages, which continue to perform better than pre-pandemic levels. Given these dynamics, we continue to be aggressive with our marketing, resulting in marketing spent as a percentage of revenue of just under 30%. While marketing spend is higher than pre-COVID levels, a portion of that increase is due to our switch to fair value accounting, where no marketing costs are deferred. Steve will provide a little bit more detail on this impact later. But more importantly, At these levels of spend, our expected unit economics on our recent vintages remain well above our targets at our current customer acquisition costs and with the strong credit metrics in our portfolio. But as always, we will keep a close eye on these metrics as we continue to grow the portfolio as we are committed to producing sustainable and profitable growth over the long term. Fourth quarter originations were up 100% from the fourth quarter of last year and increased 25% to last quarter, our third consecutive quarter with greater than 20% sequential origination growth. Importantly, originations from new customers were 46% of total originations, the highest since our first year of business and up from 43% in Q3 and 28% in Q4 of last year. The large number of new customers over the last several quarters is exciting to see, as provides a big tailwind as those customers return for additional credit over time. As a result of the strong origination growth, revenue in the fourth quarter increased 38% year-over-year and 14% sequentially to $364 million. And benefiting from the strong credit performance, we also produced solid bottom line results with adjusted EBITDA of $101 million and adjusted EPS of $1.61. Over the last several years, we've been emphasizing the importance of having a diversified portfolio. In the fourth quarter, small business products represented 52% of our portfolio, while consumer products accounted for 48%. Within consumer, line of credit products represented 31%, and settlement products accounted for 67%, and short-term loans represented just 2%. As is evident by these numbers, our acquisition of OnDeck continues to pay dividends. SMB Q4 originations were 26% higher than Q3 and 99% higher than a year ago, as we've been able to effectively leverage the strong OnDeck brand and expertise. The diversification of our portfolio has been very intentional. The mix between consumer and small business will fluctuate over time based on both macroeconomic factors as well as seasonality. And we do not have specific targets for the mix between consumer and small business funding. Instead, our strategy is to optimize that mix based on the competitive and economic environment to maximize our unit economics and the returns we can generate on our invested capital while providing attractive products to the consumer and small business marketplace that allow us to capture additional share. Thanks to the skillful execution of our team during the last two years 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. As the economy continues its recovery, we are seeing consumers increasing their spend, which is driving demand for credits. In addition, as we have been predicting, small businesses have been beneficiaries of pent-up consumer demand and the resulting increase in spending. We are encouraged by these dynamics heading into 2022 and believe our strong execution in 2021 not only generated great results, but also gives us strong momentum. And encouragingly, we are not currently seeing any major impacts from the most recent spike in COVID cases. That being said, Our highly flexible, online-only business model gives us the ability to quickly adapt to changes in market conditions. And we will, of course, continue to monitor the trends and market environment closely. In particular, while we're keeping an eye on inflation, we do not think it will have a significant impact on either demand or credit. At the moment, wages are rising at a slightly slower rate than overall inflation. This provides our customers additional capital to repay our loans. However, at the same time, spending is increasing, which provides the fuel for additional demand. And given the spreads in our average EPRs over our cost of capital, small increases in the Fed funds rate will not have a meaningful impact on our profitability. In summary, our business has come a long way in the last several years, and as evidenced by our recent stock buybacks, we are confident that we have the right products and the right team to adapt to changing market environments and capture additional shares. 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?