Good afternoon and welcome to the Enova International Fourth Quarter 2021 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 Ms. Cassidy Fuller. Please go ahead, ma’am.

Thank you, operator, and good afternoon, everyone. Enova released results for the fourth quarter and full year 2021 ended December 31, 2021, this afternoon after the 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.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, in our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 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 US GAAP reporting, Enova 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.

Good afternoon, everyone. Thanks for joining our call today. I’ll first provide an overview of our fourth quarter and full year results, then I’ll discuss our strategy and outlook for 2022. After that, I’ll turn the call over to Steve Cunningham, our CFO, who will discuss our financial results and outlook in more detail. Looking back on 2021, our strong results demonstrated the power of an experienced and talented team combined with world-class machine learning-powered analytical and risk-management capability. We skillfully navigated a complex and rapidly changing market environment, quickly accelerating our originations as the economy recovered and helping our customers get access to fast, trustworthy credit. At the same time, we kept a close eye on credit performance, which has remained much better than pre-pandemic levels. As a result, total company originations doubled year-over-year to $1 billion and total company combined loan and finance receivables increased by 48% to $2 billion. This growth in our portfolio provides Enova a lot of momentum heading into 2022 and we believe we are extremely well-positioned to continue taking advantage of the improving economy and improving consumer and SMB demand. As we anticipated, during the fourth quarter, we saw demand increase with particularly strong growth in our near prime and SMB businesses. As I just mentioned, credit quality remains solid across all of our products, including recent vintages, which continue to perform better than pre-pandemic levels. Given these dynamics, we continue to be aggressive with our marketing resulting in marketing spent as a percentage of revenue of just under 30%. Our marketing spend is higher than pre-COVID levels, a portion of that increase is due to our switch to fair value accounting, where no marketing costs are deferred. Steve will provide a little bit more detail on this impact later. But more importantly,…

Thank you, David, and good afternoon, everyone. As David mentioned in his remarks, we finished 2021 with strong results and great momentum as fourth quarter and full year 2021 total company originations, originations from new customers, ending receivables, and revenue are all the largest and among the most diverse in our company’s history. Our diversified product offerings, scalable online-only business model, machine learning powered risk management and analytical capabilities combined with our solid balance sheet have us well-positioned to continue this momentum into 2022 and beyond to consistently generate profitable growth. Turning to a Enova’s fourth quarter results, total company revenue for the fourth quarter rose 14% sequentially and 38% from the fourth quarter of 2020, to $364 million. Revenue was driven by the continued acceleration in growth of total company combined loan and finance receivables balances, which on an amortized basis were $2 billion at the end of the fourth quarter, up 18% sequentially, and up 48% compared to the fourth quarter of the prior year. Total company originations rose 25% sequentially to $1.1 billion and doubled from the fourth quarter of 2020. The originations from new customers once again set a record totaling 46% of total origination, as our accelerated marketing activities remain highly effective. Small business revenue increased 14% sequentially and 79% from the fourth quarter of the prior year, when we closed the OnDeck acquisition. Small business receivables on an amortized basis totaled $1 billion at December 31, 15% sequential increase and 47% higher than the end of the fourth quarter of 2020, as small business originations increased 26% sequentially to $580 million. Revenue from our consumer businesses increased 13% sequentially and 24% from the fourth quarter of 2020. Consumer receivables on an amortized basis ended the year at $941 million, up 20% sequentially and 50%…

[Operator Instructions] And the first question will come from David Scharf with JMP. Please go ahead.

Hi. Good afternoon and thanks for taking my questions. I’m wondering, obviously the demand is -- for both asset classes, consumer and SMB, has really picked up. I guess my question is, given that so many of the various metrics that were just guided to margins, loss rates, net revenue margin and so forth are dependent on origination volume. Are you comfortable giving us any kind of, if not explicit guidance, just parameters for how we ought to think about origination volume this year or maybe starting with kind of that 1.1 billion in Q4 as a jumping off point because it would certainly help kind of frame the earnings power and velocity of the business.

Yeah, I mean, the reason why we don’t give specific guidance on origination because it’s dependent on so many macroeconomic factors that we just don’t control. So it’s just a gasps, shot in the dark. But we feel confident about good originations growth in 2022. We ended 2021 with a lot of momentum. It’s only one month into the year, but January started the year, much stronger than we expected. January is usually a pretty weak month, both on consumer and SMB, and that wasn’t the case at all this year. So, look, we’re not going to see the 20 plus percent sequential quarterly growth that we saw during the last three quarters, that’s obviously an unsustainable rate but we feel really good about the ability to continue to grow originations at a healthy pace.

Got it. And maybe just a follow up shifting to kind of just the asset mix. Are you seeing small business demand kind of outpacing consumer demand at this point? Is there anything on the horizon that would kind of result in sort of a mix shift reverting back in terms of balances? And one of the reasons I’m asking is, you know, obviously, as we think about loss rates that mix is so critical and the loss rates for the SMB product are running at notably low levels. Just kind of thinking maybe frame the origination outlook in terms of asset class.

Yeah, again, I mean, it’s -- as I said in my comments, we don’t have specific targets, it’s based largely on where we think we can get the highest returns with our capital. SMB isn’t necessarily outpacing. Consumer, as you dig in a little deeper, our numbers had a very strong fourth quarter. The SMB did as well but I actually think -- I think they’re pretty close in terms of growth rate, one had a higher origination growth, the other had higher portfolio growth rates, so they were pretty close in Q4. And, look, the next will likely vary somewhat over time, but we don’t expect any dramatic shifts going forward, unless, again, something happens significant from a macroeconomic perspective. To your point about it affecting loss rates, yeah, they do have very different loss rates but their kind of bottom line profitability, the EBITDA margins, ROEs on the two products are actually not very different and we do that on purpose. When we have unit economic targets, we don’t set them very different based on the products, we want similar returns on our invested capital. So, the bottom line results aren’t affected as much by the mix shift.

Got it. Got it. Hey, I apologize, maybe one quick one for Steve, just on the fair value mark, sort of another 2% increase. How sensitive is the fair value calculation, the discount rate to kind of the rising rate environment that we’re in now?

Well, I think it’ll have some impact, David, on base rates, but a lot of the discount rates for us really depend on credit spreads, which have been holding in pretty well are actually coming in. So I’m not sure you’ll see a dramatic change if there’s a move in the underlining rate environment but it’s something we’ll continue to update on as we need to.

Got it. All right. Thanks very much.

Yeah. Thanks, David.

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

Good afternoon, guys.

Hey, John.

I’m trying to just wrap my head around the guidance on gross profit margin. It seems like we’re talking about a number, at least at the midpoint of the range of slightly above, kind of the mid 50% number that you’d been guiding to previously and to make sure that I’m kind of interpreting the guidance correctly.

Yeah, John, we did nudge it up just a bit from the normalized level that we’ve been talking about for a few quarters. I think there’s a couple of reasons. There’s a little bit of variation across our different product groupings, small business, near primary and subprime. I think also, it’s really the first big growth quarter we’ve had, if you think about it, since we adopted fair value. So I think we’ve gotten a better handle on as we move into 2022, a better handle on what does that normalized level look like now that we’ve got a very different company than when we went into the COVID in the fair value transition. So I think it just reflects a better refined outlook on where we think we will end up landing in that range and right now, we think it’s 55 to 65 is our more normalized range at a consolidated level.

Okay, you gave guidance on the O&C [phonetic] cost relative to revenue, if I’m not mistaken that was 10% to 12%. You have a G&A number, I did not get that written down. Can you repeat that?

Sure. I basically said we would expect that to continue to scale as we move through 2022 and likely trend down below 10%.

Okay. And then, just last for me, there was obviously the CFPB action that you announced last quarter. Any updates on that?

No, I mean, we continue to make progress and have good conversations with them. As we indicated last quarter, we fully expect to see something we’ll be able to work out with them without any major impact given the kind of our cooperativeness and relatively small impact on customers and the fact that this was largely self-reported and has already been remediated. So, the CFPB take takes their time and we’re okay with that, but we expect over time that it’ll be resolved satisfactorily.

Okay, thank you.

Yep.

[Operator Instructions] Our next question will come from Vincent Caintic with Stephens. Please go ahead.

Hey, thanks. Good afternoon. Thanks for taking my questions. First question on marketing, so you had really good results for originations on both products, it’s interesting to hear from other companies and other fintechs talking about maybe marketing challenges or customer acquisition cost challenges, but it seems like yours is [phonetic] doing a good job. So if you could maybe talk about what you’re seeing in marketing, competition there and how your strategy is with marketing, we’re able to generate such good origination volume so efficiently.

Yeah, I think a lot of it has to do with kind of our diversified approach to marketing. We use a number of different channels. We’re fairly agnostic to which one we’re stressing it and where we think we’re seeing the returns. And so, for example, in Q4 TV was quite expensive for a whole variety of macroeconomic reasons, including holidays, so we’re able to back down on TV, but kind of up direct mail and digital. In Q1, when TV is all of a sudden a lot cheaper, we’re able to ramp up TV and I think that in part is the reason for a very strong start to 2022. We’ve also been doing this a long time, so we’ve been marketing to these customer bases for over 16 years on the consumer side and seven or eight years on the small business side. So we just have a lot of experience at it and teams doing a terrific job. And we have not felt some of those issues that, yeah, we’ve heard as well. We’re really not seeing them at all.

Okay, great. Thank you. And then next question is about the fair values. Appreciate the detail on where the fair values are marked at. I was wondering, you’ve had strong credit performance for the past couple of quarters. When you think about where we are in terms of fair value marks and the discount rates and so on versus maybe a normalized level, just wondering, I guess, how much room there is left, before you think we’re at a kind of a normalized level?

Yeah, so I think we think back to the beginning of fair value, which was on January 1, 2020, we were a bit more of a consumer centric portfolio at that time, but we went into fair value, and we announced that 107 [phonetic] was our original mark. So we’re still below where we were back in those days in a sort of a full growth economy with sort of more normalized credit. So we probably have a few points of room to go, but some of that obviously is going to depend on mix and timing and all those all those qualifications that I mentioned in my comment but this is not today -- where we are today is not a normalized level.

Okay, understood. Great. Thanks very much.

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

Afternoon guys. Thanks very much for taking my questions. I guess we talked about, Steve, there is kind of cadence for -- well, not necessarily the cadence but the expectations for the normalizing credit. You -- maybe can you talk about a small business credits been so strong, how do we think about that relative to consumer or is it pretty correlated in terms of the normalization there?

I think -- I mean, I think what you’re going to see is you’ve seen consumer start to normalize a little bit more quickly and I think you’re seeing delinquencies continue to come down on the small business portfolio overall, to more normal levels. And at some point that will start to -- as we continue to add new vintages and new customers, you’ll start to see that begin to normalize to more normal historical levels. That’s how we make our marginal decisions. That’s how we look at our vintages and our unit economics around those vintages. So I think they’re a little out of sequence. I think consumers are starting to get there just a little bit quicker, just mainly, because there’s probably a little younger portfolio there temporarily but eventually you’ll see the portfolio as we continue to grow at these rates. If we continue to grow at those rates, you’ll see those both start to look a bit more like pre-COVID delinquency and charge off levels across the two groupings.

Okay. And then you guys have -- I mean, just we’ve been getting all sorts of commentary on tax refunds this year or the influence of the Child Tax Credit, and the timing and this and that. Do you guys have a kind of, I guess, a firm opinion about how they may change and what that might do to seasonality for the first quarter relative to normally, relative to past years?

Yeah, I think a firm opinion might be a little strong, because we’re all going through this for the first time but our best guess or educated guess is that it’ll kind of mute the Q1 seasonality for what we’ve seen historically, because tax returns are likely to be smaller. And maybe that’s part of what we’re seeing in January as well as consumers anticipating that with their tax returns, and leading to higher levels of borrowing to start the year. But, it’ll probably be another month to six weeks before we really have strong visibility on that. And I guess the second question will be what is the impact, as we get into the summer, when we usually see a tick up on originations after the after tax season, will that be different this year. So, it’s a little hard to guess but, overall, our view is it’ll have kind of mute seasonality a little bit, which from our perspective is great. It’s much easier from an operational perspective not to have the big drop off in Q1 and then be sitting around kind of waiting for volume to pick up in May or sometimes not even till June. So we’re hopeful that’s what will happen. We had good time so far, but having going through this the first time, it’s certainly not something we’re 100% confident in.

Okay. Okay. And then, you know, last one is, just because I know these are growing in smaller platforms, but with Pangea and then maybe what’s going on in Latin America, just any update on those business lines?

Sure. Yeah. Brazil is doing well. We were waiting for kind of last year, kind of a revamping of how their banking system works with electronic debiting and that kind of went through and it’s allowed us to get more aggressive with growing that business again, so still super small and that worth us providing a lot of detail on this point. But renewed optimism in Brazil with how it’s operating at the moment. And Pangea, obviously did tiny little business, but off to a great start, actually, with us just in the first six months. I mean, super, super high growth rates, but off a tiny base. So again, a long time until it can be meaningful to Enova, at which point we spend more time talking about it, but off to a really, really nice start. We are kind of pleased with that business so far.

Great. Thanks very much, guys.

Yep.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. David Fisher, for any closing remarks. Please go ahead.

Thanks, everybody, for joining us today. We appreciate you taking your time and we look forward to speaking with you again next quarter. Have good evening.

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