Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Enova International Inc (NYSE:ENVA) reported over 20% growth in revenue, originations, adjusted EBITDA, and adjusted EPS compared to 2023.
• The company achieved record levels of revenue, originations, and EPS for the year 2024.
• Fourth quarter originations increased 20% year over year and 6% sequentially to $1.7 billion.
• Small business products represented 62% of the total portfolio, indicating strong demand in this segment.
• The company has a strong balance sheet with $1.3 billion of liquidity, including $326 million in cash and marketable securities.

Negative Points

• Origination growth moderated from the 25% plus growth seen in the first nine months of the year.
• The company is cautious about potential changes in the macroeconomic environment that could impact future performance.
• Marketing expenses as a percentage of revenue are expected to range in the upper 10s for the first quarter of 2025.
• The company faces potential regulatory challenges, such as the small business disclosure rule and payment provisions of the small dollar rule.
• Despite strong performance, the company acknowledges that its stock is still undervalued, indicating market skepticism.

Q & A Highlights

• Warning! GuruFocus has detected 8 Warning Signs with ENVA.

Q: Can you talk about the competitive environment in both consumer and small business lending? Are there any changes, and how are you seeing it? A: David Fisher, CEO: We haven't seen any negative impacts from competition. Our strong origination growth in Q4 and a strong start to Q1 indicate that competition hasn't been a significant issue. While some lenders may come and go, their impact tends to be small and fleeting. We haven't seen a sustained competitive push in a long time.

Q: Are you seeing any signs of a healthier consumer compared to a year ago, or is it more about having a better loan book due to tightened credit? A: David Fisher, CEO: We see our target consumers as strong, benefiting from a robust labor market and rising wages. We were slightly conservative on risk a year ago and added some risk during the year. We feel good about the current portfolio and the health of non-prime consumers, which supports our ability to originate additional loans.

Q: Regarding the mix of new and recurring customers in both portfolios, has there been any shift over the past year? A: Steve Cunningham, CFO: The mix has been stable, with around 40% of originations from new customers for both consumer and small business portfolios. We continue to focus on attracting new customers while serving returning ones, and we don't anticipate significant changes in this mix.

Q: Can you provide insights into the cost of capital savings expected for 2025, and the sensitivity to interest rate changes? A: Steve Cunningham, CFO: Assuming no further rate cuts, we expect a 50 basis point reduction in our cost of funds for 2025. Our guidance assumes one rate cut. For every 25 basis point reduction in SOFR, we anticipate a $0.10 increase in EPS over a year.

Q: What is the outlook for expenses and efficiency improvements in 2025? A: Steve Cunningham, CFO: We expect G&A costs as a percentage of revenue to continue scaling down. Marketing expenses will remain around 20% of revenue, with potential for slight reductions over time. We aim to maintain efficiency while supporting growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.