Enova International, Inc.

Good day and welcome to the Innova International third quarter 2025 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, Investor Relations for Inova. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Inova release results for the third quarter 2025 ended September 30, 2025, 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.enova.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, 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 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. We are pleased to report another great quarter highlighted by solid loan growth and strong credit metrics across our portfolios, driven by our nimble, online-only business model and well-diversified portfolio. Before we dive into the quarter, as a reminder, last quarter we announced that Steve Cunningham, our CFO, will take over as CEO on January 1, at which time I will transition to the executive chairman role. I've committed to remain as exec chair for at least two years. Scott Cornelius, our treasurer, will succeed Steve as CFO. Steve and Scott are preparing well for their new roles and we expect a seamless transition with a continuation of our focused growth strategy and consistent performance. Now turning to the quarter. In Q3, we once again generated strong growth supported by stable credit, and significant operating leverage. Thanks to our diversified product offerings, the sophistication of our machine learning models, and outstanding team, we've been able to consistently deliver significant portfolio growth while maintaining stable credit, resulting in strong financial results. Third quarter originations increased 22% year-over-year and 9% sequentially to almost $2 billion. The strong origination growth produced a 20% year-over-year increase in our combined loan and finance receivables to a record $4.5 billion. Small business products represented 66% of the total portfolio and consumer 34%. Revenue increased 16% year-over-year and 5% sequentially to $803 million in the third quarter. F&V revenue increased an impressive 29% year-over-year and 7% sequentially to a record $348 million, and our consumer revenue increased 8% year-over-year and 4% sequentially to $443 million. Overall, the stability of our customer base continues to underpin our growth as credit quality is solid across the portfolios. The consolidated net charge-off ratio for the quarter was 8.5% compared to 8.1% last quarter and 8.4% in Q3 of last year. Despite some noise in the macro environment, the underlying trends for our customers continues to be positive. The job market remains healthy, with the unemployment rate staying historically low at 4.3% as of August. And wage growth continues to outplace inflation for our target customers. In addition, August consumer spending data showed a meaningful uptick, reinforcing steady household demand. When looking at external data, it's helpful to keep a couple key factors in mind. First, our consumer customers in some ways are always in a recession. As a result, they are adept at managing variabilities in their finances. Second, These customers tend to have jobs with more fungibility in terms of being able to move between companies. This can lead to less volatility in their earnings over time. Looking back to our Q2 earnings call, we discussed how early in the spring we'd seen some minor elevated default metrics in one of our consumer products. As we mentioned, in response, we tightened our credit models for that product, particularly for new customers. Because we're able to adjust so quickly, we avoided any significant impact to our consumer business. Taking swift action like this to adjust our models is routine for us. We're able to do this because of the rapid performance feedback we get as a result of the design of our products and the sophistication of our credit models. It's something we do all the time, hundreds of times per year. And this goes both ways, whether we're making adjustments to Titan Credit, or to expand it. So as expected, following the adjustments to this one product, credit performance has quickly returned to normal. In fact, credit in that product now exceeds our expectations with some of the lowest early default metrics we have witnessed. As a result, we've begun rapidly re-accelerating its growth. So looking forward to Q4, we expect to see consumer origination growth rates accelerate sequentially and credit metrics continue to improve. Also contributing to our stable financial performance through market fluctuations are the benefits of having a diversified portfolio. Having operated in the non-prime space for decades, it's common to see short-term fluctuations in demand and credit in any one product or customer segment. In addition to being well diversified across our SMB and consumer businesses, within each of those, we offer a wide variety of products, adding multiple layers of diversification across our portfolio. This structure gives us the flexibility to allocate resources towards the strongest opportunities and have the confidence to moderate exposure where risks are elevated. With this in mind, we continue to see compelling opportunities within our SMB business, which had another fantastic quarter in Q3. Our leading brand presence, scale, solid credit, and low levels of competition, again, resulted in solid demand and credit performance. Originations for S&B increased 11% sequentially and 31% year-over-year to nearly $1.4 billion in Q3. Insights from internal and external sources reflect solid underlying trends for small businesses. In conjunction with AcroList, we released the eighth iteration of our Small Business Cash Flow Trend Report earlier this week. This offers key insights into the state of small businesses and highlights ongoing trends observed over the past year. Small business confidence is high as tariffs remain manageable and the economy, and in particular consumer spending, remains strong. While business growth expectations stayed strong in Q3, with 93% of owners anticipating moderate to significant growth over the next year. And approximately three-quarters of small businesses prefer non-bank lenders, with nearly 40% of those in business reporting being denied by traditional banks. Further, external data aligns with these observations. Small business sentiment reached a new high in the third quarter, with the MetLife and U.S. Chamber of Commerce Small Business Index climbing to 72, its highest reading ever, and up from 65.2 last quarter, signaling strong optimism across the sector. Driven by the operating leverage inherent in our online-only business, growth in EPS again outpaced both origination and revenue growth in Q3. Adjusted EPS increased 37% year over year, primarily as a result of our strong growth, efficient marketing, and a lower cost of funds. Before I wrap up, I'd like to spend a few moments discussing our strategy and outlook for the remainder of 2025 and beyond. We've carefully designed our business with a thoughtful unit economics approach that has enabled us to operate profitably for more than two decades. This is through many different environments, including downturns in consumer spending, interest rate hikes, surges in inflation, not to mention the Great Recession and a global pandemic. During this timeframe, we've successfully navigated periods where the unemployment rate was more than double where it is today. And our business is better prepared than ever to withstand changes in the macro environment as our technology and analytics continue to be more sophisticated, and our balance sheet is stronger than ever, while our portfolio has become more diversified. I said this last quarter, but I've never been more excited about Innova's future. We have an incredibly experienced team, a strong foundation, a time-tested playbook, and industry-leading products, all clear signs of the opportunity ahead of us. Steve and I share a common vision that our focused growth strategy will continue to steer our path forward. We continue to adapt and innovate and remain committed to reducing sustainable and profitable growth while meeting the needs of our customers and driving shareholder value. With that, I would 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 you may have. Steve?

Thank you, David, and good afternoon, everyone. As David noted in his remarks, we're pleased to deliver another solid quarter of top and bottom line results that were in line or better than our expectations, with strong growth in originations, receivables, and revenue, along with solid credit, operating efficiency, and balance sheet flexibility. Turning to our third quarter results, Consistent with our expectations, total company revenue of $803 million increased 16% from the third quarter of 2024, driven by 20% year-over-year growth in total company combined loan and finance receivables balances on an amortized basis. Total company originations during the third quarter rose 22% from the third quarter of 2024 to nearly $2 billion. Revenue from small business lending increased 29% from the third quarter of 2024 to $348 million as small business receivables on an amortized basis ended the quarter at $3 billion, or 26% higher than the end of the third quarter of 2024. Small business originations rose 31% year-over-year to $1.4 billion. Revenue from our consumer businesses increased 8% from the third quarter of 2024 to $443 million as consumer receivables, on an amortized basis, ended the third quarter at $1.5 billion, or 9% higher than the end of the third quarter of 2024. Consumer originations grew 4% year-over-year to $590 million. As David mentioned, the slower consumer growth this quarter was intentional to ensure we were maintaining solid credit quality across the portfolio. For the fourth quarter of 2025, we expect total company revenue to be 10% to 15% higher than the fourth quarter of 2024 as a result of strong SMB growth and a re-acceleration of growth in our consumer portfolios. This expectation will depend upon the level, timing, and mix of originations growth during the quarter. Now turning to credit, which is the most significant driver of net revenue and portfolio fair value. Our consolidated credit performance continues to demonstrate that our diversified product offerings and discipline around our unit economics enable consistent results across different operating environments. The third quarter consolidated net revenue margin of 57.4% was in line with our expectations. It reflects continued solid credit performance. The consolidated net charge-off ratio to the third quarter was 8.5%, flat to the third quarter of 2024, and reflects our typical consumer seasonality and continued strong small business credit performance. Sequential stability and year-over-year improvement in the consolidated 30-plus-day delinquency rate and a stable consolidated portfolio fair value premium reflect our expectation of stable future consolidated portfolio credit performance. Small business credit performance remains strong sequentially and compared to the third quarter of 2024. The net charge-off ratio, the net revenue margin, fair value premium, and 30 plus delinquency rate for our small business portfolio all improved and reflect continued and expected stable credit performance. Consumer credit also remained solid. Following our typical seasonality, the consumer net charge off ratio rose sequentially to 16.1% for the third quarter, and while higher than the year ago quarter, remained in our expected range. The consumer net revenue margin and credit metrics for the third quarter were influenced primarily by mixed shifts in the rate of originations growth on the heels of consumer portfolio adjustments that we discussed last quarter. Those adjustments and our overall balanced approach to growth meaningfully reduced the year-over-year change in the consumer 30-plus delinquency rate compared to last quarter. And as David noted, We exited the third quarter with the lowest ever initial default on weekly vintages on the consumer product we adjusted, allowing us to accelerate some sequential growth opportunities into the fourth quarter. Additionally, during the quarter, year-over-year consumer installment originations grew at the fastest rate that we've seen in several years, as we saw higher demand from existing customers for refinancing and debt consolidation. This is another example of how the breadth of our consumer products and credit segments combined with our disciplined approach to unit economics enables us to navigate varying operating environments and generate consistent consolidated results. The fair value premium on our consumer portfolio at the end of the third quarter was flat the last quarter and remained consistent with levels observed over the past two years, indicating a stable risk return profile and strong underlying unit economics for our portfolio. Looking ahead, we expect the total company net revenue margin for the fourth quarter of 2025 to be in the range of 55% to 60%. This expectation will depend upon portfolio payment performance and the level, timing, and mix of originations growth during the quarter. Now turning to expenses, total operating expenses for the third quarter including marketing, were 31% of revenue compared to 34% of revenue in the third quarter of 2024. As we continue to see the benefits of our efficient marketing activities, the leverage inherent in our online-only model, and thoughtful expense management. Our marketing spend continues to be efficient, driving strong originations growth and was in line with our guidance range for the quarter. Marketing costs as a percentage of revenue were 18% compared to 20% for the third quarter of 2024. We expect marketing expenses to be around 20% of revenue for the fourth quarter, but will depend upon the growth and mix of originations. Operations and technology expenses, which were driven by growth in receivables and originations, were 8% of revenue for the third quarter, similar to the third quarter of 2024. Given the significant variable component of this expense category, sequential expenses and ONT costs should be expected in an environment where originations and receivables are growing. It should be between 8% to 8.5% of total revenue. Our fixed costs continue to scale as we focus on operating efficiency and thoughtful expense management. General and administrative expenses for the third quarter increased to $40 million, or 5% of revenue. versus $39 million or 6% of revenue in the third quarter of 2024. While there may be slight variations from quarter to quarter, we expect G&A expenses in the near term should be between 5% and 5.5% of total revenue. We continue to deliver solid profitability and strong returns on equity this quarter. Compared to the third quarter of 2024, adjusted EPS and non-GAAP measure increased 37% to $3.36 per diluted share, delivering an annualized third quarter return on equity of 28%. We ended the third quarter with $1.2 billion of liquidity, including $366 million of cash and marketable securities and $816 million of available capacity on debt facilities. The cost of funds declined to 8.6%, or 15 basis points lower sequentially, and nearly 100 basis points lower than the third quarter of 2024 as a result of lower short-term interest rates and strong execution on recent financing transactions. Continuing our track record of strong capital markets execution that reflects our solid credit performance, during the third quarter, we upsized our corporate revolver by $160 million to $825 million, extending the final maturity to 2029 reduced the cost by 25 basis points, and expanded our bank lender group. Our balance sheet and liquidity position remain strong and give us the financial flexibility to successfully navigate a range of operating environments while delivering on our commitment to drive long-term shareholder value through both continued investments in our business and share repurchases. During the third quarter, we acquired 339,000 shares at a cost of $38 million, and we started the fourth quarter with share repurchase capacity of approximately $80 million. Before wrapping up with our fourth quarter expectations, I'd like to touch on our valuation. Inova has delivered strong and consistent results over many years and operates a highly scalable online-only model with more diversification than any non-bank specialty finance company. Since our acquisition of OnDeck five years ago, we've not only maintained our strong profit margins, we've done so while cutting our consolidated net charge-off rate in half. Our demonstrated world-class risk management capabilities and approach to unit economic decisioning has driven our differentiated financial performance and return on equity, as well as our ability to finance the business at market-leading spreads. To put this in perspective, Inova has never reported a quarter of negative adjusted EPS, and over the past 10 years has delivered $1.8 billion of adjusted net income and grown annual adjusted EPS at a compound average annual growth rate of approximately 20%. Over that same time, we reduced our financing costs by hundreds of basis points from lower credit spreads that are a direct result of our portfolio credit performance and predictability. Despite our demonstrated operating model advantages and unmatched financial performance as a public company, we remain frustrated by a persistent valuation gap. We continue to trade at discounts to the S&P 600 and Russell 2000, the financial components of each of those indexes, and to other specialty finance lenders that have less consistent performance and profitability. In fact, at the end of the third quarter, Inova traded at a similar price multiple on 2026 consensus adjusted EPS estimates, but similar to 2016 and 2017 forward PE ratios, when we were a much smaller consumer-centric company. We continue to believe there is meaningful upside to our current share price, and continuing to unlock the value our company creates remains the top focus of Inova's leadership. You should expect that we will continue our focus on growth with financial consistency and continue to lean into our capital returns through opportunistic share repurchases. To wrap up, let me summarize our fourth quarter expectations. For the fourth quarter, we expect consolidated revenue to be 10% to 15% higher than the fourth quarter of 2024, with a net revenue margin in the range of 55% to 60%. Additionally, we expect marketing expenses to be around 20% of revenue, O&T costs to be between 8% to 8.5% of revenue, and G&A costs to be between 5% and 5.5% of revenue. These expectations should lead to adjusted EPS for the fourth quarter of 2025 that is 20% to 25% higher than the fourth quarter of 2024. Our fourth quarter expectations will depend upon the path of the macroeconomic environment and the resulting impact on demand customer payment rates and the level, timing, and mix of originations growth. Our third quarter results reflect the strength of our diversified product offerings and the ability of our team to consistently deliver strong growth, revenue, and profitability while maintaining solid credit. Our operating model has now delivered six consecutive quarters of year-over-year adjusted EPS growth of at least 25% or more. and we remain confident in our ability to generate meaningful financial results for the remainder of 2025 and beyond. And with that, we'd be happy to take your questions. Operator?

We will now begin the question and answer session. To ask a question, you may press star and 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, send to. At this time, we will pause momentarily to assemble our roster. The first question today comes from David Sharp with Citizens Capital Market. Please go ahead.

Thanks. Good afternoon, and congratulations again. Dave and Steve, you're the latest in what's becoming a long line of lenders that have reported very stable, positive, and constructive credit commentary this earnings season, so I'm going to leave the credit questions to some others to ask about. I was curious, maybe two more granular things. One is just on capital actions, this is, I think, similar commentary on how you perceive the stock's valuation as you provided in the last couple calls. Is there any kind of update you can provide us on whether you would ever consider seeking additional covenant relief to return potentially even more capital in terms of buybacks or whether the dividend is potentially something the board would consider?

Yeah, I think everything is on the table. Certainly both of those over time, you know, as well as – You know, other ways of utilizing excess cash, we have plenty of excess capital. The other ways of using excess capital to, you know, maybe further diversify the businesses and increase our valuation. You know, I think as Steve said very well in his prepared remarks, given the incredibly strong track record of the performance of our business, how much it's evolved over the last, seven or eight years just in terms of stability, diversification, balance sheet strength to be trading at the same PEs we were back then is obviously not where we think the value of the business is. So, yes, opportunities to increase the buyback. The returns on our buybacks over time has been very, very, very strong. Certainly a dividend at the right time, although that's, I think, usually a better term tool when the stock is more fully valued? And then, you know, are there other places in the market where we could utilize our capital?

Understood. Understood. Maybe as a follow-up, you know, on the marketing side, you know, there have been quite a number of quarters now where, at least as a percentage of revenue, marketing dollars have come in below your guidance, and I think you got it to 20% last quarter. It came in at 18 again. And at some point, kind of figure out, you know, what's a feature versus a bug. And, you know, are you seeing anything about the composition of either by channel or just recording? percentage of repeat borrowers or just maybe it's the makeshift, you know, towards more SMB. But is there anything that would kind of lead you to tell us structurally, you know, the operating model is potentially more profitable than we've been sort of modeling and that 20% is maybe too high a ceiling?

Yeah, I mean, look, the model continues to get more profitable, and I'll give a lot of credit to our marketing and business teams who are continuing to get more efficient on the marketing and acquisition and conversion side. Those all tie together. But some of it's also just a confluence of events. You know, if you kind of go back to Q4 of last year, volume came really, really late in the quarter, and so we probably underspent because we didn't see the volume earlier in the quarter. Q1, there was just a tremendous amount of volume that we never would expect to see in Q1, so we were probably underspending again. And then we had a lot of excess revenue from the strong Q4 and Q1, kind of increasing the denominator for Q2, you know, where actually the spend was actually kind of pretty near where we would have thought it was going to be. Then as we talked about in Q3, we pulled back a bit on the consumer side just while we were letting the credit settle. in that one consumer product. So we look for Q4 as we're now accelerating growth, especially on the consumer side. Now the credit, as I mentioned on my prepared remarks, credit looks incredibly good right now, not just solid. I mean, it looks, like, incredibly good at the moment. We're going to lean into that, accelerate growth. And, look, a lot can change between now and the end of the year, and it's hard to predict the holiday season. But we're certainly expecting higher levels of spend in Q4. Got it.

Great. Thank you very much.

The next question comes from Bill Ryan with Seaport Research Partners. Please go ahead.

Thanks. Good afternoon, David and Steve. Question on the growth outlook. I mean, you obviously seem very optimistic. Yes. on the consumer originations going into Q4. Looking at Q3, consumer installment, as you noted, was very, very strong. A little bit of decline in consumer line of credit originations. I presume that might be reflective of the tightening and kind of the wait-and-see approach that you took from Q2 to Q3. Just, you know, was that the case? And do you expect kind of a mix of of growth between the two products going into Q4, like a reacceleration and line of credit?

Yeah, I mean, very observant of you, Bill, so I'll give you credit for sure. Steve guessed that someone was going to pick that up, and he was right. So, yes, that was the product, and, yes, that is where we're expecting the most acceleration going into Q4. Again, you know, we're filling demand here, so we don't always know for sure. But that is certainly our expectation on the consumer side that we'll see a re-acceleration of that line of credit and a mixed shift in favor of line of credit. Not that there's any issue with installment right now. There's not. But there's more acceleration opportunities in line of credit given the slight pullback we had intentionally in Q3.

Okay, and I agree. I assume this might relate to that as well, but the change in fair value on the consumer loan portfolio, a little bit of an uptick in Q3 as well. I assume with that related to some of the adjustments that were made.

Yeah. I mean, if you think about the change in fair value line item in terms of dollars, there's two components. One of them is the back book sort of running its course, which the fair value premium is very stable. So all of that wasn't as expected as we just sort of continue to mature the back book. The bigger difference would have been the slower originations growth overall in the consumer portfolio, which would have been a negative in the change of fair value line item for the quarter.

Okay. Got it. Thanks for the answers. You bet.

The next question comes from Vincent Kingdick with BTIG. Please go ahead.

Good afternoon. Thanks for taking my questions. I guess I'll ask the credit question. So your credit trends have been strong both in S&P and in consumer markets. and was just wondering, I guess, with the applications you're getting in or maybe just kind of a broad industry outlook, if you have any, of where you might be seeing or where there might be any sort of deterioration that might be out there. Like perhaps are you getting more applications in certain areas where you might be declining more or anything where you might be seeing that? Thank you.

I mean, look, we adjust credit, you know, hundreds of times a quarter. So there's always something here, something there. But there's no significant pockets at all. Our subprime business has some of the best credit metrics we've seen in a long, long time. And so our neoprime business has, like, some of the best credit metrics we've seen in a long, long time. So it's broad-based. I know, you know, there's been a lot of questions about it because of subprime auto and, you know, maybe one or two vintages and some of Upstart's older securitizations. But, I mean, those, you know, that one vintage doesn't mean much of anything. And subprime auto we've seen many, many times over Innova's history is just not correlated to what we do. It's so much based on asset prices and supply and demand. So, no, we are seeing top-to-bottom consumer and small business, incredibly good credit, and it's not surprising. The economy remains strong. The job market remains strong. Inflation is moderated. There's no reason to expect that it wouldn't be. So, yeah, no areas that we're really concerned about at all right now.

Okay, great. Thank you for that. I guess relatedly on the competitive front, so I know maybe banks aren't your direct competitors, but some of the failings that maybe have happened amongst other lenders, particularly in commercial side, there's, you know, maybe some of those lenders are now re-looking at their portfolios and so forth and maybe tightening up a bit. So I'm kind of wondering if you're seeing that and if in turn that allows you to take more share. Maybe that's part of the marketing opportunities that you're seeing. If you could talk about that. Thanks.

Yeah, sure. On the small business side, we continue to see banks being extremely conservative, and that's created an enormous opportunity for us over the years. We haven't seen that change at all. If anything, we've seen more conservatism from banks, which has obviously been a huge positive for us there. Then on the consumer side, there hasn't been any new entrants into that space in a long, long time. And, you know, when we see kind of people on the fringes, more prime lenders try to dip their toes into near prime, you know, we see them pull back very, very quickly. They're just different businesses. And, you know, they're not good at lending above 36, no different than we would not be good at lending at 12 or 18%. It's just not what we do. we're not going to compete with Capital One, and I think they've been pretty smart about not trying to compete with us. So, yeah, I think, as we've talked about, the competitive dynamic is good for us, and we continue to not see many changes there.

Great. Very helpful. Thank you.

As a reminder, if you would like to ask a question, press star then 1 to be joined into the question queue. The next question comes from Kyle Joseph with Stevens. Please go ahead.

Hey, good afternoon, guys. Thanks for taking my questions. In terms of growth, obviously it's been weighted towards the small business side of things and kind of you guys mentioned kind of the credit blip you saw in the spring. But, yeah, in touching on, competitive dynamics, and then I think you mentioned that you expect consumer to reaccelerate. Just give us a sense for kind of the competitive dynamics between the two.

Yeah, so, look, we don't purposely, you know, push growth in one versus the other. You've heard us talk about it's all based on our unit economics framework. We have excess capital, so where we can originate loans above our ROE targets, we will. and we let the market dynamics play out. And I would say the variances in the growth rates between the two businesses over the last few years have been, you know, almost all, you know, market and credit driven. So in 2023, for example, consumer outgrew small business by a fair amount. You know, this year small business is, you know, outgrowing consumers. That's fine. But that's correct. You know, this quarter you might see that revert, especially with the reacceleration on the consumer side. And next year we don't know. What we do know is we have a lot of good products across a pretty wide spectrum of the non-prime credit base. And so if one market's stronger than the other, we'll lean into it and, you know, take advantage of that diversification. But, you know, so that's kind of the longer term and shorter term. You know, like I said, we are pushing pretty hard on the consumer side right now. Pushing hard relative for Innova, obviously. I mean, we're always very balanced between growth and credit. You've never seen us get out ahead of our skis, and we're certainly not going to do that now. But we just Credit looks so good on the consumer side that we're certainly leaning in.

Great. That's it for me. Thanks for taking my questions.

Thanks, Scott. The next question comes from Alexander Villalobos with Jeff Reeds. Please go ahead. Hey, guys.

Congrats on the results, and thank you for taking my question. My question was more on the cap market side and just interest expense. I know you guys generate a ton of cash, and, you know, is there anything on the bond side or just cap market side where you guys can, you know, in the future kind of lower the interest expense a little bit more and kind of get, you know, a little more push on the EPSI from there? Thank you.

Yeah, for sure. So we've talked about, you know, the expectation that we're going to see lower benchmark rates in the short end of the curve, which is where we tend to fund so that, you know, we expect over the near term, over, you know, the next year or two, that's going to be a tailwind for us. But more importantly, just the performance of the portfolio has allowed us to continue to bring our spreads down significantly. You saw that. I mentioned it in my commentary. Every transaction here over the last year or so, we've talked about the decline in the credit spreads over the benchmark because of that performance. So I think there's clearly some opportunity between those two things to capture some of the tailwinds in the capital markets to help support growth in EPS.

Perfect. Thank you.

The next question comes from John Hecht with Jefferies. Please go ahead.

To Jefferies, back to back. Anyway, so I will only ask one question, but it's kind of, I guess, a broad question. I mean, you've got rates declining. It sounds like very good, consistent current trend. I think the competitive environment is reasonably favorable for you, but then, you know, we're eyeing high pre-fame activity, which in some cases looks like it's tied to just excessive amounts of liquidity in the system. You know, so the point is, like, things seem good, but they're on the margins at a moving target. How do those things affect your, you know, kind of the way you think about near-term and intermediate-term strategies?

Yeah, it was a little hard to hear some of that with the background noise. I think, you know, look, competitively, you talked about there's not much there. I think you said you asked about prepays, like elevated prepays. Look, in the subprime and near-prime space, that just doesn't move the needle much. I mean, it's just these, you know, our customers need the cash, and so we don't tend to see that a lot. So, again, look, it's... We don't get overly confident in Innova. It's just something we don't do. The model, the products are looking really strong and stable right now. We're not seeing many cracks. We're not seeing many changes other than improving credit. Our customer bases look very solid across any metric that we can look at. When we think about Their payment rates haven't changed. Average loan sizes are staying steady. We're not seeing customers being more or less price sensitive. It's just, you know, it's a very stable environment right now. Again, we're fully cognizant that that can change, and, you know, we're watching all the metrics every day. But, you know, right now things are looking very stable.

Great. Thank you very much.

The next question comes from John Rowan with Jannie. Please go ahead.

Good afternoon, guys. Obviously, you spent a lot of time talking about current credit, given obviously what's going on in the news, but maybe just touch on quickly what you think about 2026. In particular, you know, think about, you know, what's going on with tax laws and, you know, tips and overtime and changes to our, you know, child care tax credit and, you know, and, and some of those other programs, just give us an idea of maybe how much of your consumers are impacted by some of those large changes in tax policy. Thank you.

Yeah, well, I think the estimates are for higher tax refunds next year, which would help with credit. And then, look, I think this year we saw what we thought was going to be one of the bigger impacts, which was the resumption of payments on student loans and the resumption of collections on student loans. And, you know, we've been able to navigate with that with no problem at all. And I think, you know, some of the tax, you know, some of the tax changes next year kind of pale in comparison to that in terms of magnitude and if anything are likely to be helpful. So, you know, again, you don't know until it actually plays out, but it doesn't seem like it's going to be an issue for us at all.

All right. Thank you. Mm-hmm.

Once again, if you would like to ask a question, please press star to join the question queue. The next question comes from Moshi Orenbush with TD Calendars. Please go ahead.

Great. Thanks. Most of my questions have actually been asked and answered. But I was sort of hoping, you know, to kind of just – and maybe the idea of, you know, You talked about leaning in kind of on the line of credit side of the consumer and the consumer being significantly stronger in Q4 than Q3. I guess given your approach, does that mean that you will have less origination on the small business side, or does it mean that we should just think about you kind of investing just incrementally heavily in Q4? Sure.

Completely incremental. As you know, we have plenty of excess capital. I think we had about a billion dollars of excess liquidity at the end of Q3. So we have plenty of capital to invest in both in Q4. And SMB looks really good as well. I mean, they had a just killer Q3. And that momentum has continued into Q4. So Um, the only reason we've talked, haven't talked more about SMB is because it's just, it's just doing well and it's continuing to do well. And we'll, yeah, we have plenty of capital to keep that, that business going, uh, full speed. And then, so it's really just that the change is really just on the consumer side where, you know, now that works out, bringing growth again, um, should see stronger growth on the consumer book.

Gotcha. Okay. Um, and you know, the, and this may be just, you know, our forecast, but, you know, you bought back a little less stock in Q3 than we had in our model. You know, given that you've got, you know, that you've got this kind of extra kind of, you know, faster growth expected in Q4, should we think that, you know, buybacks would be similar to Q3 or, you know, more like prior quarters?

Moshe, So as we talked about, we have the capital and liquidity to do all of it, organic growth as well as buybacks. And our buyback is we run an opportunistic program. So we still bought 60% of the capacity this quarter, but you also remember we touched all-time highs for a couple of weeks, which at those levels we would still be buying, but at a lower level than we would, say, for example, right now. And in those quarters where we were buying nearly all of the capacity, you know, we were trading off of where we are today. So you should expect us to follow that approach. We have about $80 million available in Q4, which is, you know, we kept some of that powder dry in case there's volatility as we go forward from here, and we'll continue to be opportunistic and buy as much as we can against that program and continue to grow the business as fast as we can against our focused growth, balanced growth approach.

Got it. Thanks, Stephen Davis. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to David Fisher for any closing remarks.

Thanks, everyone, for joining our call today. We certainly appreciate it and look forward to speaking with you again next quarter. Have a good evening.

Everyone else has left the call.