Good afternoon and welcome to the Enova International fourth quarter and full year 2015 earnings conference call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Monica Gould, Investor Relations for Enova. Please go ahead.

Thank you Gary and good afternoon everyone. Enova released results for the fourth quarter of 2015 ended December 31, 2015 this afternoon after the 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 Robert Clifton, 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 would like to note that today's discussion will contain forward-looking statements based on the business environment as we currently see it and as such, does include certain risks and uncertainties. Please refer to our press release and our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's discussion. Any forward-looking statements that we make 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, we report 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 the 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 would like to turn the call over to David.

Thanks Monica and good afternoon. Thanks for joining our call today. I am going to start by giving a brief overview of the quarter. I will spend some time walking through our strategy and finally we will share our perspectives for the upcoming year. After my remarks, I will turn the call over to Rob to discuss our financial results in more detail. We had a good fourth quarter and are happy with the momentum we are seeing in the business. For the quarter, revenue was $175.4 million, which was 6.2% higher than Q3 and came in at the high end of our guidance. A significant contributor to our revenue growth was solid result in our U.S. business. We were also encouraged by the continued growth of our new initiatives, particularly NetCredit, our U.S. near prime product, as well as our two small business offerings and our Brazilian operations. Adjusted EBITDA for the quarter was $28.3 million, which was in the upper end of our guidance range, driven by the factors I just mentioned as well as more efficient marketing spend across the majority of our products. In the second half of 2015, we grew our topline nearly 10% over the first half of the year while exiting the year with annual adjusted EBITDA run rate in excess of $100 million. We believe that our performance in the back half of 2015 and in particular Q4 demonstrates that our diversification strategy is working. Our large U.S. business generated strong profitability. We are showing our ability to quickly rebuild our U.K. business on substantial regulatory change and we are successfully developing our new initiatives into real long-term opportunities. In Q4 total company wide originations were up over 5% from the prior year. This marks the second sequential quarter of year-over-year growth…

Thank you David and good afternoon everyone. I will first review our financial and operating performance for Q4 and then provide our outlook for the first quarter and the full year 2016. As was the case in the third quarter, new customer acquisitions played a meaningful role in our fourth quarter performance. The dollar amount of new customer combined originations during Q4 was the strongest in Enova's history and represented our highest percentage of total origination volume. Driven by stronger year-over-year total originations in the second half of 2015, our total combined loan and finance receivable balance outstanding increased $53.8 million during the current quarter to a record $536.1 million. The larger portfolio base contributed to increased revenue during the quarter with revenue coming in at the high end of our guidance. This was after absorbing a $2.5 million out of period adjustment to modify our revenue recognition policy in order to recognize line of credit draw fees over the period the draw is outstanding. Historically, draw fees were recognized in income when they were assessed to the borrower, but since they are in essence a yield enhancement, we determine we needed to change our revenue recognition policy. Because the cumulative adjustment amount is not material to prior year's financial statements nor to the full 2015, we elected to record the full correction during the fourth quarter of 2015 and will disclose it is an out of period adjustment in our 2015 financial statements. On a year-over-year basis, total revenue of $175.4 million in the fourth quarter declined 9.9% from $194.7 million in the fourth quarter of last year. This was driven primarily by regulatory changes in the United Kingdom and to a lesser extent the negative impact of currency fluctuations. On a constant currency basis, revenue declined 8.7% from…

Thanks Rob and thanks everyone for joining us today. We will take your questions now. We look forward to updating you again on our progress next quarter.

[Operator Instructions]. The first question comes from Bob Ramsey with FBR. Please go ahead.

Hi. Good evening guys. Thanks for taking the question. First question before I forget. I think your last comment there, Rob, I didn't quite catch. You said NetCredit will have some loss given the growth initially in 2016, but then I thought you said combined NetCredit will be profitable in 2016? Was there a distinction between geography or something there I missed or I just missed some detail?

The real distinction is that that's a new initiative for us, the bank program or the bank partnership. So we have company originated loans in various states and we are going to in 2016 launch the bank program. So when we look at NetCredit in total, we still expect it to be profitable in 2016.

Okay. I got it. So just the new business, if you looked at it on a vintage basis, a vintage would be in 2016, but the legacy book would be.

Yes.

Okay. Great. Thank you guys for including the originations detail in the supplement. I know we have been looking for it for some time. So I certainly do appreciate that. Loan growth looked a lot better this quarter and obviously you guys have been talking about the U.K. turning for some time. But I am just kind of curious, how you are thinking about loan growth as we go through 2016? And could you maybe remind me how to think about seasonality on the NetCredit book? Given that it's so much bigger, I don't think it does the same degree of seasonality that the short-term product does. I would appreciate your perspective.

Yes. So we expect continued growth of our loan book, driven in the largest part by NetCredit, but we see continued growth in our U.S. business despite its large size and the continuation of the regrowth of our U.K. business and then we supplement that with our new initiatives, Brazil and our small business financing products. So really across all those products, all of we expect growth in 2016, leading to an expectation of a much higher loan book at the end of year. Hence the need for the first securitization and likely another facility this year. Regarding your question on NetCredit and the seasonality of it. It certainly is less seasonal than our short-term product, but it's still, while at a smaller level, follows the general seasonality, Q1 being the slowest origination quarter, Q3 being the strongest with Q4 being the second strongest. But certainly less with the NetCredit book than the shorter term book. And given that the rapid growth we have seen in that product over the last two years, it's amassed much of that seasonality.

Okay. Growth, obviously you guys expect to be good, but how should we think about the pace? Do you have more growth in percentage terms in 2016 than 2015, because you are obviously seeing the same degree of headwind from the U.K.? Or is that too much?

So it's a good question. If you look at our guidance and if you look at our guidance, our revenue and EBITDA guidance relative to the back half of 2015 when much of the impact of the regulatory change in the U.K. was baked in, you see some pretty substantial growth, kind of 30% EBITDA growth, strong revenue growth and largely as our product mix is stabilizing a little bit, the loan book growth will be in line with the revenue growth.

Okay. I guess along those lines, there was a fair amount of yield compression this quarter and I am sure that's driven by the growth in the NetCredit book. But shall we think about the yield coming down at a similar pace as we go through 2016? I know in the past, you have talked about seeing less yield compression and I don't think we really have, just because of the growth in that book, but how are you thinking about the yield?

Just because of large numbers, the growth of NetCredit relative to total portfolio will slow and so you should see yield compression slow as well because that's really the primary factor in why those yield are coming down. We are not seeing substantial yield compression in our shorter term products.

Okay. Do you have the NetCredit yield this quarter?

We don't have it broken out that way, but the overall installment portfolio yield was approximately 96%, which was just down slightly from Q3. So for the installment category, fairly stable.

Okay. And I think last quarter you had given the NetCredit yield had ended September in very high 60s. Is it fair that you are still on that zip code?

Yes. I mean, over time that will come down as the bank program expands, but yes. No significant difference from Q3.

How much of the NetCredit book or the total book is sub-36% today?

Yes. We gave that number. It's about 46% of the total book is NetCredit and 43% of the NetCredit loans are sub-36%.

Okay. Great. Thank you. Last question and I will hop out, give someone else a chance. But your tax rate seems a little high this quarter and maybe you mentioned it. But was there something unusual there and what shall we use from a modeling perspective going forward?

Yes. I think it was just because of the lower pretax income and the more significant impact from permanent differences. So for the full year, it was up 37.4%. I think as I look out to 2016 and of course it will depend on where we come from a pretax standpoint, but I would generally say 38% is probably a close estimate.

Okay. Thank you.

The next question comes from David Scharf with JMP Securities. Please go ahead.

Hi. Good afternoon. Maybe I will switch over to credit trends. Maybe just as a clarification of the one timer you had mentioned, Rob, but as I look at the loss rates and gross margins, for short-term they seem to actually hold up pretty stable sequentially. They look to improved for installment. But line of credit had a big drop from Q3. Did we actually see that $2.5 million adjustment fall into the cost of sales line item? Would that be the reason why LOC margins dropped so much?

No. The $2.5 million came out of revenue. So it was a reduction in revenue. But the big drop in line of credit is for two reasons. Number one, as we have been having a declining benefit from the U.K. line of credit product and so that's part of it. But then on the U.S. line of credit, we had pretty strong demand in Q4. So stronger growth there.

Okay. So just the upfront provisioning impact. Okay. Given that because of law of larger numbers, prior questions were addressing the growth rate will tail off a bit on origination side. And given that we have actually seen a few sequential quarters now of stability in gross margins among short-term product and improvement of NetCredit, just trying to understand if the gross margin outlook that's embedded in your 2016 EBITDA guidance is materially different from the percentage you have just put up in Q4?

It's a little bit lower but not substantially as NetCredit continues to grow and also as we anticipate adding, having a good year for new customer volume in 2016, but not significantly. We have finally gotten back to more historical levels of gross margins after the anomalies earlier in the year because of the runoff of the business in the U.K. And so mid-50s to 60s is where we always have been historically and that's kind of the range we see going forward.

Okay. Good. So we have seen the bulk of the normalization pretty much play out. Switching to demand, Dave, can you notwithstanding just the originations figures we have, but can you speak more qualitatively to what trends you are seeing in U.S. demand for the three separate products? Clearly short-term has been under some pressure and we have seen that from even low-end pawn borrowers as well. Are you feeling any benefits from gas prices? Any sense that some of these borrowers might actually want to lever up a little more? Or should we be looking at short-term originations as to being challenged?

We saw good short-term originations in Q4 on relative to our expectations. Remember, in Q3 we had a little bit of head fake where volume looked very good at the beginning of the quarter and then tailed off. It bounced back in Q4 and into the beginning of this year. So that demand is still there on the short-term product, which is very encouraging. And that short-term include the higher interest rate and including the higher interest rate line of credit products as well. And then on the NetCredit product, it's such a big market opportunity that is just beginning to be tapped. The size of the opportunity, I think right now, is overwhelming. Any kind of changes in demand or even as I mentioned before, even overshadowing any normal seasonality. So we are still seeing very good demand for the NetCredit product. And then on the U.K., I think similar to U.S. higher interest rate products, demand is good there. Competition has been relatively stable. We are still early in the authorization process. And we believe there will be companies that don't get authorized. That can change the dynamics there to the positive.

Got it. And the U.K., it looks like we have had, the pickup in origination volume, revenue is actually flatlined these three quarters where we have seen the build from the trough. Is this just a lag effect? Or is there a predominantly different yield outlook for the product there?

There is not materially different yield outlook. So you think you are seeing two things of the originations. One is the runoff of the line of credit product. So that's running off. And so that's counteracting the growth in the revenue. And then, the second, as we talk about, originations build first and then revenue. So we expect to see revenue build in the U.K. in 2016 based on a lot of the hard work that we did in 2015.

Got it. And then just lastly, can you bring us up-to-date on the balance sheet cash and debt levels where we are here in the month of February?

So on a pro forma basis, if we look at the year-end, we had cash at $42.1 million. We have the initial term note and the securitization in mid-January and that brought in approximately $107.4 million. When you set all that up and pay off the revolver, we ended the quarter on a pro forma basis with $88 million in cash plus we had $33 million available, a little over $33 million available on the unsecured revolver. Q1, as the tax season kicks in, so liquidity does increase throughout the quarter.

Got it. Thank you very much.

Yes. Thanks, David.

The next question comes from Henry Coffey with Sterne Agee. Please go ahead.

Thanks for taking my question. Can we start with something really stupid?

Sure.

You will always do, he says. What is getting your license the U.K. mean in terms of the ability to put on volume? Do you still have to sort of move slowly or is this an opportunity to accelerate growth?

Yes. So I think it means a couple of things. One it takes away the binary risk of us not getting a license. Second of all know, they look at all of our practices and procedures and if they have problems with anything we are doing, they would have told us as part of that process. And so it does give us a little bit of a green light to step on the gas. Basically says, okay, we are doing things the way that we should be doing. We can feel more comfortable about investing in that business and growing that business throughout the year.

And then, there will be certain parties that don't get licenses and there is always the issue of the illegal operators. Do they have mechanisms in place unlike we don't in the U.S. to shut down the offshore types that continue to intrude the market?

They do. They have been working on them. They have been talking a lot to the U.S. on how they can a shut a lot of those offshore guys out in the U.S. through stopping them from using the ACA system, which makes it very difficult to operate. And so we haven't seen a strong growth of the offshore lenders, illegal lenders in the U.K. the way we had in the U.S. before they largely got shut down about a year-and-a-half ago.

And then, when you look at the U.S. market, the shorter term loan products, do they have their own growth dynamic? Or you intentionally tighten down there?

So on the short-term single pay product in the U.S., we think that we still have a viable product that's growing there. We think there will still be a viable product there post-CFPB regulations. But we think the installment product and the line of credit product will be more easy to evolve into a post-CFPB product. And so we certainly have been emphasizing those on a state-by-state level where we can and because customers tend to prefer. We can offer the two side-by-side. We almost always customer preference for an installment or line of credit product over a single pay product.

And the biggest issue they are likely to come out with it is just avoiding ability to pay guideline. How does your U.S. product look from there to what maybe some of the stricter ability to pay guidelines, if any, put out?

So all of our underwriting is built around ability to repay. And so for us, once we know where the U.S. guidelines are about how they define ability to pay, it's just a matter of tuning our existing models to reflect those new rules. Similar to our success there in the U.K., the ability to quickly adapt our models the new regulatory environment there, we feel similarly confident about our ability to do it in the U.S. once we see the new rules.

Listen, thank you for answering my questions and congratulations. You have accomplished a bunch of milestones this quarter.

Thanks, Henry. I appreciate it.

Thank you.

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

Good afternoon guys.

Good afternoon, John.

Just first on the guidance. If I look at the EBITDA guidance for the first quarter and then extrapolate that through the rest of the year, it actually looks weaker in the first quarter than through the remainder of the year, just on balance. It seems counterintuitive to the typical seasonal patterns of this business. I just wondered if I am misreading it or if there are some different seasonal dynamic with NetCredit, because obviously you guys touched on that a little bit earlier.

Yes. John, so Q1 2015 adjusted EBITDA was $61.1 million. You have got to keep in mind that last year the run off for the wind down in the U.K. line of credit product was the strongest in Q1 and contributed approximately $19.3 million to the gross profit line. So when you take that out, you are looking at a Q1 of $41.8 million at the Q1 2015. With our guidance at $25 million to $35 million, which again reflects the stronger NetCredit as well as a higher mix of new customers. So I think you have got to keep that in context. Most of it's driven off of the U.K. line of credit product.

Okay. Marketing expenses, I was a little surprised at the sequential contraction. I would have thought near the December quarter, it would be up. And you also talked about ramping up marketing spend in 2016 to support the bank NetCredit product. I am just wondering, how do we look at that going forward? Is it again going to be typically weighted towards the back half of the year for marketing spend?

So Q2 and Q3 marketing spend was high, as we were trying to regrow that U.K. business. And so once we established a solid footing there to gain the number one market share there, we were able to dial back some as we entered Q4. We also put some new marketing analytics models in place in the quarter that ended up being very effective for us. We continue to evaluate the effectiveness of those in early 2016. This will have a little bit of spend, additional spend, as we launch the NetCredit bank program. But at this point, certainly the percentage of revenue don't see the marketing levels getting as high as they were during the midpoint of 2015.

Okay. And just on the bank product, do you have any banks in the NetCredit product yet?

We haven't launched but we are extremely close.

Okay. And then one last question. This is really for the ABS market. There is basically one issuer out there right now that's doing weighted unsecured consumer loan ABS deals. I am wondering what your plans are in the future? I think we will see more lenders come to the market with rated deals and hopefully that will increase the number of buyers who are looking at the space. Are we still quite a ways away from you guys doing a rated deal? Or are we still going to be unrated for a while?

Yes. I wouldn't necessarily say so. I mean, there are several players in the near prime space that are doing public deals, some rated, some unrated. And it is an option we explored prior to putting this facility in place. We thought there was more certainty around the structure that we use. But now that we have the structure in place, we are going to evaluate where we think we can get the best economics and certainly from the research we have got, a rated deal is not off the table at all. It is certainly, we believe, a possibility.

Okay. Thank you.

[Operator Instructions]. The next question comes from Gregg Hillman with First Wilshire Securities. Please go ahead.

Good afternoon. David, I was just wondering if NetCredit, how do you know you modeled the risks correctly in terms of bad debt on a go forward basis, particularly with some adverse economic scenarios? Is it [indiscernible] because for example, plus the length of loans, is like 11 months or is it longer than that?

So the initial terms of loan are three to five years. The average duration tends to be in between the two and three year range. It's a great question. So I think part of it is, we have gone slower in ramping up this product than some of our other competitors. And we have almost over three years of history now in these near prime products. So we have seen these products mature. We have been able to gauge not only default rates by vintages but also equally importantly, we have gotten a better handle on the prepayment curves. Because the prepayment curves effect profitability almost as much as the default propensity does. In addition, it's important to remember, we have 12 years of experience originating consumer loans. No, they don't look exactly like the NetCredit product. But consumers tend to like consumers as consumers move throughout different credit tiers through their life cycle. So we have a wealth of data about consumer behavior, including behavior through the deepest recession this country has seen since the great depression. That extremely valuable data, combined with the three years of now experiential data we have on the product that gives us a lot of confidence in evaluating that loan book looking forward.

Has your experience in the U.K. helped the model lengths for the U.S.? Is it relevant? Since you have doing the installment loans longer there.

So I think our modeling in the U.K., we have been issuing installment loans there since 2007. We have also been issuing shorter term installment loans in the U.S. for many years. So all of that data goes into building our models for the NetCredit product.

So basically you are confident that the U.K. continues this kind of ramp you have experienced in NetCredit without having a really bad loss experience in some sort of exceptional scenarios going forward. Do you think you are okay in just normal scenarios?

Yes. And again, I think two other important points to keep in mind on that. One is, this isn't necessarily a new product. What we are doing is taking share from a legacy brick and mortar lenders who have been issuing installment loans in this interest rate range for decades. If you think about Springleaf, one names on the world acceptances, they have been these products for decades. And so that this isn't something brand new that's completely unknown. I think the other thing we have in our favor is, we have brought in experience in these products in particular, our new COO Greg Zeeman has lots of experience in the near prime space from his stays at Household in HSBC. He is already adding value in terms of how we think about the NetCredit portfolio going forward.

Okay. Thank you, Dave.

Yes. You are welcome.

[Operator Instructions]. As there are no further questions, this concludes our question-and-answer session. I would like the conference back over to David Fisher for any closing remarks.

All right. Thank you and thanks everybody for joining us again. We appreciate your time today and we look forward to talking to you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.