Enova International, Inc.

Good day and welcome to the Innova International Second Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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 touchtone phone. 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. Lindsay Savarese, Investor Relations for Innova. Please go ahead, ma'am.

Thank you, Operator, and good afternoon, everyone. Innova released results for the second quarter, 2024, ended June 30, 2024, this afternoon after 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 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, HNOVA 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 second quarter results, and then I'll discuss our strategy going forward. 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 are pleased to have produced another strong quarter of financial results driven by the strength of our talented team our world-class machine learning analytics, our flexible online-only business model, diversified product offerings, and solid balance sheet. We believe we're in a strong position heading into the back half of 2024 with considerable momentum, a conducive macroeconomic environment, and stable credit across our entire product range. In Q2, Originations increased 27% year-over-year and 2% sequentially to $1.4 billion. Strong demand across both the small business and consumer sides of our business, combined with continued solid credit performance, enabled us to be moderately more aggressive with originations and generate strong year-over-year growth. As a result of this strong originations growth, Our combined loan and finance receivables increased 25% year-over-year to a record $3.6 billion. Small business products represented 64% of the total portfolio, and consumer was 36%. The growth in receivables led to a 26% year-over-year increase and a 3% sequential increase in revenue to $628 million. As a result of strong revenue growth combined with skillful credit management and cost efficiency, adjusted EBITDA in Q2 increased 29% year-over-year and 9% sequentially to $163 million, and adjusted EPS increased 28% year-over-year and 16% sequentially to $2.21. S&B revenue increased 32% year over year and 6% sequentially to a record $252 million, while our consumer revenue increased 22% year over year and 1% sequentially to $368 million. Our growth continues to be driven by our diversified product offering and efficient marketing. In Q2, marketing was 19% of our total revenue, in line with our expectations for the quarter and flat to Q2 of last year. As I mentioned, credit quality across our entire portfolio remains solid. Total company net charge-offs as a percent of average combined loan and finance receivables was 7.7% in Q2 compared to 8.5% last quarter, which remains well below pre-pandemic levels. Before closing, I'd like to take a few moments to discuss our strategy and outlook. We're encouraged by the strong start to the first half of the year. Recently, there's been significant talk from both pundits and our competitors about an uncertain macro environment. But our Q2 performance, as well as internal and external data, confirm that both our SMB and consumer customers remain on solid footing as our customers continue to benefit from job growth low unemployment rates, easing inflation, and rising real wages. As we've discussed previously, demand and credit in our consumer business are driven largely by jobs and wage growth. The job market continues to be strong with rising wages and historically low levels of unemployment. We've been lending profitably for over 20 years during many fluctuations in the job market. This has included periods in which the unemployment rate has been more than triple where it is today. It's also important to highlight that we're underwriting to customers who are underserved by the mainstream financial institutions. So when you hear the large banks commenting on what they are seeing in their customer bases, it is frequently not applicable to ours. For small businesses, The two main drivers of growth are business owners' confidence in the economy and consumer spending. Small businesses continue to show resilience, with their outlook remaining positive as they successfully navigate challenges related to inflation and managing cash flow. In conjunction with AcroList, we recently released the second iteration of our Small Business Cash Flow Trend Report. This offers key insights into small business cash flow trends, inflation challenges, and growth opportunities. Our research shows that small businesses feel increasingly optimistic about future growth as expenses decrease. Further, external data points show optimism as well. In June, we saw U.S. small business confidence increase to a six-month high, according to the National Federation of independent businesses. As I mentioned, our confidence in the conducive economic environment isn't just theoretical. You can see it in our Q2 results with originations, receivables, revenue, EBITDA, and EPS all up 25% or more year over year. While we feel good about the current environment, we believe one of the key reasons we've been able to generate strong results over the years in a variety of economic environments, and why we've been able to take market share in the non-prime lending landscape is due to our deep experience and expertise, our diversified portfolio, and our sophisticated and disciplined approach to managing risk. We are very disciplined when it comes to our unit economics approach to decisioning. Further, the short duration of our portfolio and nimbleness of our model allows for more controlled outcomes relative to others. These capabilities have enabled us to meaningfully and profitably expand our business, and as a result, support both small businesses and consumers with their capital needs by offering them safe, transparent, and appropriate lending solutions. We also benefit from diversification within our SMB and consumer businesses. Our SMB businesses operate in all 50 states across 900 plus industries, and our portfolios diversify within those industries and states without significant concentration. On the consumer side, we have a wide breadth of products and segments that services the non-prime and subprime consumers. To wrap up, we continue to believe there's significant upside to our evaluation given our consistent and strong results, solid balance sheet, and business fundamentals. We remain committed to returning capital to our shareholders while still maintaining significant liquidity to generate attractive growth. We ended Q2 with nearly $900 million of total liquidity. This gives us the flexibility to continue to deliver on this commitment to drive long-term value for our shareholders. As we've stated previously, we will continue to explore avenues to unlock shareholder value, but our near-term focus is to do so through opportunistic stock buybacks. Overall, we are pleased to have delivered another strong quarter, and we believe that we are well positioned to deliver sustainable and profitable long-term growth. We are confident that we have the right strategy, products, proven machine learning and credit risk management capabilities, and a strong balance sheet in place to build on our success in 2024 and into 2025. And while both internal and external data show positive signs, we are mindful that the macroeconomic environment can change. We remain balanced in our approach to generating growth and managing risk and believe this will allow us to successfully navigate any such changes. With that, I would like to turn the call over to Steve. We'll discuss our financial results and outlook in more detail. And following Steve's remarks, we'll be happy to answer any questions you may have. Steve?