Enova International, Inc.

Good day and welcome to the ANOVA International First Quarter 2024 Earnings Conference Call. All participants will be in 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 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Lindsay Sarayev. Please go ahead.

Thank you, Operator, and good afternoon, everyone. The NOVA release results for the first quarter, 2024, ended March 31, 2024, 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 begin with an overview of our first quarter results, and then I'll discuss our strategy going forward. After that, I'll turn the call over to Steve Cunningham, our CFO, to discuss our financial results and outlook in more detail. This year marks 20 years since Enobo was founded and 10 years as a public company. We work hard to reap the benefits of that experience, and during the first quarter, our skillful team continued to execute incredibly well, combining our diverse product offerings and world-class machine learning analytics and technology to deliver another quarter of consistent and profitable growth. Originations were seasonally strong, down only 3% sequentially and up 30% compared to Q1 of last year. Revenue fares well also, increasing 26% year-over-year and 5% sequentially to $670. As you may recall, first quarter seasonality, particularly in our consumer business, typically results in sequential origination and revenue decline in the fourth quarter, driven by tax refunds. This year, consumer seasonality was tempered by S&V origination, which grew 4% sequentially And as a result, we generated $1.4 billion in originations during the quarter, our 10 consecutive quarters of over $1 billion in originations. Even with our 20 years in business, we've been able to consistently generate strong growth, all at the same time, successfully managing credit risk. As a result of strong revenue growth, prudent credit management, and cost efficiency in G1, Adjusted EBITDA increased 18% year-over-year and 15% sequentially to $149 million, while adjusted EPS rose a bit more modestly due to higher interest expense, resulting primarily from higher Fed funds rates, increasing 7% year-over-year, 4% sequentially, to $1.91. Similar to the last number of quarters, a diversified portfolio and efficient marketing continued to drive our growth. Our combined loan and finance receivables increased 23% year-over-year to a record $3.5 billion. Small business products represented 65% of this total portfolio and consumer 35%. Marketing was 18% of our total revenue compared to 17% in Q1 of last year, well within our target range. SMB revenue increased 22% year-over-year and 12% sequentially to a record $236 million, while consumer revenue increased 30% year-over-year to flat sequentially, reflecting typical first quarter season out. Outside of our core products, we continue to generate strong growth in Brazil, where first quarter originations increased 29% sequentially and 83% year-over-year on a constant currency basis. While this continues to be a small part of Inova, we are excited about the opportunities to continue to grow their service. As I mentioned, credit quality across our portfolio remains solid. Total company net charge-offs as a percentage of average combined loan and finance receivables were 8.5% in D1, compared to 9.7% last quarter. Notably, net charge-offs remain well below pre-COVID levels at 16.4% in Q1 of 2019 and 13.9% in Q1 of 2018 due to a combination of makeshift and good credit management. Before closing, I'd like to take a few moments to discuss our strategy and outlook for the remainder of 2024. We're encouraged by the strong start to the year and continued good credit across our portfolio. Both our SMB and consumer customers remain on solid footing and were confident in our ability to further drive profitable growth. We believe our diversified portfolio puts us in a unique competitive position to take market share in the non-prime lending landscape. Our SMB business runs across a wide range of industries, providing good diversification across the macroeconomic environment. And we have both consumer line of credit and installment products that span the subprime and neoprime consumer segments. As you've heard from us before, we're very disciplined when it comes to our unit economics approach to decisioning across both our F&B and consumer businesses. This capability has enabled us to uniquely and profitably expand at this, and as a result, support both small businesses and consumers with their capital needs by offering them safe, transparent, and appropriate lending solutions. Looking forward, we believe the current macroeconomic environment will yield consistent demand for a product, solid credit performance. In our consumer business, demand and credit are driven in large part by jobs and wage growth. As you know, the job market has been very strong for the last couple of years. It shows little signs of slowing. And wage growth has been solid as well. While inflation does have an impact, it's a much smaller factor for our customers, and they're navigating persistent inflation well. I know this may be a surprise to some, given all the focus on inflation over the last couple of years. But inflation impacts our customers' income by a couple of percentage points at most. while loss of a job is 100% of the risk. In addition, high employment rates increase our addressable market as we only lend to individuals with income. Further, as we've said many times before, in some ways our consumer customers are always in a recession. They are experiencing living paycheck to paycheck in sophisticated and managed variabilities in their finances. As a result, The recessions tend to have less of an impact on their non-prime customers than on prime buyers. On the SMB side, the two main drivers are their confidence in the economy and consumer spending. While small businesses are concerned about inflation, strong consumer spending and the ability to increase prices are offsetting that, and we are seeing stable performance in that portfolio. While both internal and external data show encouraging signs, they are mindful of the uncertainty that remains in the macro economy, and we will continue to prudently manage our business. Driven by our intense focus on unit economics, we've demonstrated our ability to quickly adapt to changes in the economy and to consistently produce differentiated results. Given this ability, our company's solid fundamentals and our track record of strong profitability, we continue to believe our shares are undervalued. As Steve will discuss in more detail, our balance sheet and liquidity position remain strong, which gives us the financial flexibility to deliver on our commitment to drive long-term shareholder value. In 2021, we were more aggressive with our share buybacks than in prior quarters. which led to total shares repurchase of $139 million. This equates to 62% of the $300 million share repurchase program that we just launched in late October. Looking ahead, with our belief that our stock remains undervalued, we are committed to returning additional capital to our shareholders while still maintaining significant liquidity to generate attractive growth. We will also continue to explore additional avenues to unlock shareholder value, but our near-term focus is to do so through opportunistic funds. Overall, we are pleased to have started the year with a strong first quarter demonstrated by our solid growth. We remain focused on further unlocking shareholder value and believe that our strong balance sheet and solid liquidity position gives us the flexibility to continue to return capital to our shareholders going forward, while maintaining significant liquidity to generate attractive growth. And we're confident that our focused approach to balance growth, along with our talented team, world-class machine learning technology and analytics, and strong balance sheets, will drive profitable growth in 2024 and beyond. With that, I would like to turn the call over to Steve to discuss our financial results and outlook in more detail. And following these remarks will answer any questions you may have.