Enova International, Inc.

And welcome to the Enova International fourth quarter and full year 2022 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 a touch-tone phone. 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 Lindsay Savarese, Director of Investor Relations for Innova. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Innova released results for the fourth quarter and full year 2022 and to December 31, 2022, this afternoon after market close. 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 in our annual report on Form 10-K, quarterly reports on Forms 10-Q, and current reports on Forms 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, ANOVA 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.

Thanks, and good afternoon, everyone. I appreciate you joining our call today. I'll start with an overview of our fourth quarter and full year results, and then I'll discuss our strategy and outlook for 2023. After that, I'll turn the call over to Steve Cunningham, our CFO, who will discuss our financial results and outlook in more detail. We once again produced a strong quarter, tapping a great year for NOVA, with solid revenue and profitable growth, combined with stable credit across both our SMB and consumer businesses. Our talented team, diversified product offerings, and powerful machine learning credit risk management capabilities have enabled us to successfully navigate through the uncertain macroeconomic backdrop. Revenue in the fourth quarter increased 34% year over year and 7% sequentially to $486 million. Adjusted EBITDA increased 18% year over year and 4% sequentially to $120 million. and adjusted EPS increased 9% year-over-year and 1% sequentially to $1.76. Similar to Q3, the growth came from our SMB business as well as our consumer line of credit products. These results are driven by our ability to effectively manage credit through the current market environment. Net charge-offs were 8.8% in the fourth quarter, which is slightly higher than Q3 as we continue to add a large number of new customers, which were 42% of total originations. That being said, net charge-offs remain well below pre-COVID levels of 15.6% in Q4 of 2019 and 16.1% in Q4 of 2018 from a combination of mixed shift and good credit management. our analytics team has continuously refined our machine learning-powered models that have been the foundation of our ability to successfully manage credit risk. And as we discussed in our last earnings call, we increased our ROE targets across all of our products during the back half of 2022. Those higher ROE targets remain in place, and we continue to de-emphasize our longer-term near-prime installment loans, limiting our duration risk, and allowing us to adapt more quickly in an uncertain macroeconomic environment. Given our continued focus on shorter maturity products in line with our expectations, the percentage of consumer installment loans in our portfolio decreased in the fourth quarter, and within consumer, line of credit products significantly increased as a percent of total consumer loans. While we have a more conservative approach to originations and our balanced approach to growth and risk, customer demand remained strong. As a result, we have maintained strong origination volume. Total company originations increased 9% year over year, and we're down only 3% sequentially. And we still generated substantial growth for the year with combined loan and finance receivables increasing 46% year over year to a record of $2.9 billion. Looking back on 2022 and more broadly to the past five years, We are proud of a world-class execution that has delivered sustained, strong results with both meaningful growth and meaningful returns. In just five years, we've more than doubled our annual revenue, tripled our adjusted EBITDA, and our adjusted EPS has grown more than six times. A lot has happened over the last five years, and the market environment continues to rapidly change. But we've demonstrated that we are exceptional operators with an ability to adapt in any environments That is rooted in our focused growth strategy. We've also demonstrated that we can maintain a strong balance sheet, which currently has over $700 million in liquidity, even with difficult capital markets. The result of these efforts has been industry-leading performance for Inova. Over the last five years, we've transformed the business in a number of ways. We've been laser-focused on offering products with the features customers want, through our flexible online model, which is preferred by borrowers. This has enabled us to grow our share of the non-prime credit market. As part of this transformation, we have diversified almost every aspect of the business, including our revenue streams, marketing channels, funding capacity, and more. The diversification has been very intentional. It has contributed to our growth while decreasing our macro and regulatory risk. Despite those results, we are trading at only 5.5 times 2023 consensus earnings estimates, while EPS grew at a CAGR of almost 50% over the last five years. Accordingly, we are going to increase our focus on unlocking significant more value for our stockholders. Our confidence in the value of our company is related not only to the consistency of our performance over the past several years, but also the growing contribution of our large and market-leading small business lending franchise. Our SMB business has a diversified portfolio across a wide range of industries, dates, product types, loan sizes, and prices. Today, small business products represent more than 60% of our total portfolio, up from 10% in 2017. And from 2019 to 2022, the contribution of small business to total company EBITDA has increased from 6% to approximately 60%. Our SMB business has generated a significant growth at attractive unit economics. As with our consumer businesses, we target ROEs of over 30% and EBITDA margins north of 20%. Even with their significant growth over the last couple of years, we are still a very small percentage of our addressable market, leaving ample room for future growth. Despite this demonstrated success in SMB lending, the implied multiple in our valuation is similar to other non-prime consumer-only lenders. While commercial lending sectors, such as equipment leasing and business development companies, are currently valued at significantly higher multiples of 2023 earnings. Even with a modest application of these valuation differences, we believe there's meaningful upside to our current share price. Before I turn the call over to Steve, I'd like to take a few moments to discuss our outlook and strategy for 2023. While in this environment, we will remain focused on our balanced approach to growth and risk. While it's hard to predict how the macro backdrop plays out this year, In any event, we believe that we have the right strategy in place to continue our success and help hardworking people get access to fast, trustworthy credit. As Steve will discuss in more detail, based on what we are seeing in the current market environment, we expect growth on both our top and bottom line in 2023 compared to 2022. For our SMB business, we will continue to analyze real-time cash flows as well as external data monitor industries that are more prone to recession. While there may be pockets of challenging credit, given our diversified portfolio and strong brand presence coupled with continued strong demand and low levels of competition, we believe we are well positioned to grow that business further. For a consumer business, we know that non-prime customers are familiar with living paycheck to paycheck and are adept at managing variabilities in their cash flows. In some ways, our customers are always in a recession, and so we believe that recessions have less of an impact on our customers than on prime borrowers. This is especially true when employment and wages remain high, as we are currently experiencing. Finally, I want to wrap up by giving a big thanks to the amazing team we have built at Inova. Our collaborative work environment challenging development opportunities, and industry-leading benefits help ANOVA rank among the computer place's best places to work for the 10th consecutive year in a row. We believe that having diverse perspectives creates the best answers. I would now like to turn the call over to Steve, who will discuss our financial results and outlook in more detail. And following Steve's remarks, we will be happy to answer any questions that you may have.