Participants

Lindsay Savarese; Investor Relations; The Blueshirt Group

David Fisher; Chairman of the Board, Chief Executive Officer; Enova International Inc

Steven Cunningham; Chief Financial Officer; Enova International Inc

David Scharf; Analyst; Citizens

Moshe Orenbuch; Analyst; TD Cowen

Kyle Joseph; Analyst; Stephens Inc.

John Hecht; Analyst; Jefferies

Presentation

Operator

Hello, and welcome to the Enova International first-quarter 2025 earnings conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Lindsay Savarese, Investor Relations. Please go ahead.

Lindsay Savarese

Thank you, operator, and good afternoon, everyone. Enova released results for the first quarter of 2025 ended March 31, 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 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. A reconciliation 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.

David Fisher

Thanks, and good afternoon, everyone. I appreciate you joining our call today. I'm pleased to report that we once again delivered strong results that met or exceeded our expectations, driven by healthy demand and stable credit across our product range. Quarter-after-quarter, we continue to demonstrate that our flexible online-only business model, well diversified portfolio, world class technology, proprietary analytics and experienced team can deliver consistent results. Despite the recent volatility in the stock market and concerns about the impact of increased tariffs, our customer base remains stable as the macro trends for these customers are positive.
Both internal and external data show that our non-prime customers remain on solid footing with a healthy job market and strong wage growth, particularly at lower income levels, and strong consumer spending benefits small and mid-sized businesses as demonstrated by the ongoing strength in our SMB portfolio. While the impact of the government's tariff policy may have on the US economy is difficult to predict, we remain confident in Enova's future and our ability to navigate a wide range of operating environments. We are monitoring both demand and portfolio performance even more closely than normal and continue to see the level demand we would expect, while payment performance remains in line or better than our expectations.
Looking forward, the high payment frequency and relatively short duration of our portfolio provides fast feedback that we incorporate into ongoing decision making, which positions us well to react immediately to changes in credit performance. Longer term, we continue to believe we have the right strategy in place to execute on our mission of helping hardworking people get access to fast trustworthy credit, while continuing to produce sustainable and profitable growth. We remain committed to our balanced approach, which has led to predictable outcomes and our strong track record of consistency.
Our diversified product offerings provide resiliency against an outsized impact to any one portion of our customer base, while the short duration of our portfolio and rapid loss emergence ensures that we can quickly readjust our book to the current environment. As a result, we are confident that these advantages combined with 20 plus years of experience navigating a myriad of macroeconomic environments gives us a strong foundation to build on this success. Now turning to the quarter.
We once again generated greater than 20% year-over-year growth in revenue originations and adjusted EPS as our diversified online-only business model continues to attract customers and generate significant operating leverage. First quarter originations increased 26% year-over-year and 1% sequentially to $1.7 billion. As a result of the strong origination growth, our combined loan and finance receivables increased 20% year-over-year to a record $4.1 billion. Small business products represented 65% of the total portfolio and consumer was 35%. We generated revenue of $746 million in the first quarter, an increase of 22% year-over-year and 2% sequentially.
SMB revenue increased 29% year-over-year and 7% sequentially to a record $305 million. Our consumer revenue increased to $431 million, 18% higher than a year ago and down a less than expected 1% sequentially off a strong Q4. Profitability continued to grow even faster. Adjusted EPS increased 56% year-over-year driven by the operating leverage inherent in our online-only business, a lower cost of funds and efficient marketing. Marketing expense was 19% of our total revenue, in line with our expectations and compared to 18% in Q1 of 2024.
As I've mentioned, credit quality continues to be good across the portfolio due to the stability we have seen in the performance of our customers. The consolidated net charge-off ratio for the quarter declined to 8.6% from 8.9% last quarter, largely driven by a drop in our consumer business. Demand and credit in our consumer business continues to be powered by a strong labor market as rising wages and historically low levels of unemployment continue to benefit our customers. The latest job report highlights a resilient labor market. In March, the US added 228,000 jobs, the fourth highest month for the private payroll growth in the past two years, which was well ahead of expectations.
In addition, new jobless claims have repeatedly come in below expectations. Also, as a reminder, we successfully navigated periods over the last two decades where the unemployment rate has been more than double where it is today. Over this period, we've helped almost 10 million customers get access to fast, trustworthy credit. Further, as we've said many times before, in many ways our customers are always in a recession.
These hardworking people are experienced in living paycheck-to-paycheck and sophisticated in managing variabilities in their finances. As a result, recessions tend to have less of an impact on our non-prime customers than on prime borrowers. Turning to our SMB business. For the third quarter in a row, we produced over $1 billion in originations. We continue to see solid demand in credit across this portfolio as well and we continue to see more businesses proactively seeking out alternative lenders like us.
We're proud to serve as a trusted partner when these businesses need capital to fuel their growth plans. Our SMB portfolio is intentionally well diversified across states, across industries, across product types and across the credit spectrum. We have advanced algorithms that are constantly monitoring performance across all of those variables. As I mentioned above, the consumer is still in a strong position, which is an important driver to the success of small businesses. For example, in March, retail sales increased 1.4%, topping consensus.
While it's difficult to predict how tariffs will impact SMBs and the overall economy, because of the diversity, size and industry of our borrowers, we would not expect a substantial impact to our portfolio. However, with all the fluctuations in the market and in any part of the cycle, there are always risks and opportunities. We have a nimble model and short duration products, where we can rotate in and out of industries quickly. Our analytics are focused on ensuring that we are underwriting into the right industries at the right time and making the right risk adjusted decisions. And as you can see through our consistent results over the years, we have a very talented team that knows how to manage through changes in the environment.
Before I wrap up, I'd like to take a few moments to discuss our strategy and outlook for 2025 and beyond. We are encouraged by the continued strong momentum and good credit performance across our portfolio. We're optimistic that our customers will manage the current economic landscape successfully, but in any event, we have the technology and people in place to ensure that we continue to produce sustainable and profitable growth, and we are confident that our focused growth strategy will continue to deliver value for both our customers and our shareholders.
In addition, our solid balance sheet with more than $1.1 billion in liquidity provides us with the financial flexibility to successfully navigate a range of operating environments and to continue to deliver on our commitment to driving long-term shareholder value through both continued investments in our business as well as share repurchases. We look forward to updating you on our progress throughout the year.
With that, I'd 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 will be happy to answer any questions you may have. Steve?

Steven Cunningham

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 financial performance. We started 2025 with strong growth in originations, receivables and revenue, along with solid credit, operating efficiency and balance sheet flexibility. Turning to our first quarter results. Total company revenue of $746 million increased 22% from the first quarter of 2024, slightly exceeding our expectations, 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 first quarter rose 26% from the first quarter of 2024 to just over $1.7 billion. Revenue from small business lending increased 29% from the first quarter of 2024 to $305 million as small business receivables on an amortized basis ended the quarter at $2.7 billion or 20% higher than the end of the first quarter of 2024. Small business originations rose 27% year-over-year to $1.2 billion. Revenue from our consumer businesses increased 18% from the first quarter of 2024 to $431 million as consumer receivables on an amortized basis ended the first quarter at $1.5 billion or 20% higher than the end of the first quarter of 2024. Consumer originations grew 22% from the first quarter of 2024 to $508 million.
For the second quarter of 2025, we expect total company revenue to be flat to slightly higher sequentially, resulting in year-over-year revenue growth of around 20%. 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. In line with our expectations, the consolidated net revenue margin was 57% for the first quarter, unchanged from last quarter and the first quarter of 2024, and reflects continued solid credit performance. The consolidated net charge-off ratio for the first quarter of 8.6% is also consistent with the first quarter of 2024.
Importantly, we expect future credit performance to remain stable as reflected by the year-over-year improvement in the consolidated 30-plus delinquency rate as well as the stability in the consolidated fair value premium. Small business credit performance remains strong. Compared to the first quarter of 2024, consistency in the net charge-off ratio, the net revenue margin, fair value premium and improvement in the 30-plus delinquency rate all reflect expected stable credit performance. Consumer credit also remains solid as our credit metrics remain within historical ranges and reflect typical seasonal patterns in recent mix shifts, which I'll discuss in a moment. Consumer net revenue margin for the first quarter was 50%, unchanged from the year ago quarter.
As is typical for the first quarter, the consumer net charge-off ratio declined sequentially 90 basis points to 15.2% and is slightly higher than the first quarter of 2024, mainly from mix shifts in our recent originations. As I mentioned late last year, we saw strong demand in our cash net consumer business as a result of some product changes that improved the customer application experience. That demand continued through earlier this year as we thoughtfully took market share in that customer segment, resulting in a higher percentage of new customers to Enova.
As you know, attracting new customers to our company is important to our long-term success as many new customers become repeat customers that deliver strong lifetime economics as they utilize our market-leading products offered across a wider spectrum of the non-prime segment than many of our competitors. As a result of this mix shift in recent cash net vintages and the recent strong consumer demand overall, the consumer 30-plus delinquency ratio was flat sequentially and slightly higher than the year ago quarter, which is consistent with our expectations given the influence of those recent vintages as they season normally.
Our unit economics framework considers the lifetime return on equity of our vintages, which incorporates not just the level of credit risk, but the pricing for the risk being taken. This risk return profile will be reflected in the level and trend of our fair value premiums. At the end of the first quarter, the consumer portfolio fair value premium remains steady at levels we've seen over the past 2 years, indicating a stable risk return profile and strong unit economics for our recent consumer originations. Looking ahead, we expect the total company net revenue margin for the second quarter of 2025 to be in the 55% to 60% range. This expectation will depend upon portfolio payment performance and the level, timing and mix of originations growth during the second quarter.
Now turning to expenses. Total operating expenses for the first quarter, including marketing were 33% of revenue compared to 34% of revenue in the first quarter of 2024 as we continue to see the benefits of our efficient marketing activities to leverage inherent in our online-only model and thoughtful expense management. Efficient first quarter marketing spend drove higher than expected originations and was in line with our guidance range for the quarter. Marketing costs increased slightly to 19% of revenue, or $139 million, compared to 18% of revenue, or $111 million in the first quarter of 2024. We expect marketing expenses to be around 20% of revenue for the second quarter, but will depend upon the growth and mix of originations.
Operations and technology expenses for the first quarter declined to 8% of revenue, or $62 million, compared to 9% of revenue, or $54 million, in the first quarter of 2024, driven by growth in receivables and originations over the past year. Given the significant variable component of this expense category, sequential increases in O&T costs should be expected in an environment where originations and receivables are growing and should be around 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 first quarter increased to $42 million, or 6% of revenue, versus $40 million, or 7% of revenue in the first quarter of 2024. While there may be slight variations from quarter-to-quarter, we expect G&A expenses in the near term will range around 6% of total revenue.
Our balance sheet and liquidity position remains strong and gives 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. We ended the first quarter with $1.1 billion of liquidity, including $318 million of cash and marketable securities and $810 million of available capacity on debt facilities. Our cost of funds declined to 8.9%, or 23 basis points lower than the fourth quarter, primarily as a result of strong execution on recent financing transactions and the impact of the first full quarter of a lower SOFR since the Federal Reserve's 100 basis point reduction in the Fed funds rate late last year.
During the first quarter, we acquired 617,000 shares at a cost of $63 million, and we started the second quarter with share repurchase capacity of approximately $57 million available under our senior note covenants. Given the recent volatility in the stock market and in the share prices of financial companies, including Enova, we used nearly all of our available buyback capacity during the first quarter.
If the recent reduction in our valuation persists through the second quarter from this ongoing volatility, we intend to use most, if not all, of our second quarter capacity to opportunistically repurchase shares. Our effective tax rate for the first quarter was 20% compared to 25% for the first quarter of 2024. The decline was driven by tax benefits on stock compensation from share price increases, a decrease in interest expense accrued on our uncertain tax position reserves and favorable state rate changes. While there may be variations from quarter-to-quarter, we expect our full year effective tax rate to be in the mid 20% range for 2025. Finally, we continued to deliver solid profitability this quarter.
Compared to the first quarter of 2024, adjusted EPS, a non-GAAP measure, increased 56% to $2.98 per diluted share. To wrap up, let me summarize our near-term expectations. For the second quarter, we expect consolidated revenue growth to be flat to slightly higher sequentially with a net revenue margin in the 55% to 60% range. Additionally, we expect marketing expenses to be around 20% of revenue, O&T cost of around 8.5% of revenue and G&A cost around 6% of revenue. With a more normalized tax rate, these expectations should lead to adjusted EPS for the second quarter of 2025 at slightly higher sequentially and over 35% higher than the second quarter of 2024.
For the full year, we expect growth in originations compared to the full year of 2024 of at least 15%. The resulting growth in receivables with stable credit and continued operating leverage should result in full year 2025 growth for revenue that is slightly faster than originations growth and adjusted EPS growth of at least 25%. Our second quarter and full year 2025 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.
We are confident that the demonstrated ability of our talented team has us well positioned to adapt to an evolving macro environment. Our resilient direct online-only business model, diversified product offerings, nimble machine learning-powered credit risk management capabilities and solid balance sheet support our ability to continue to drive profitable growth while also effectively managing risk.
And with that, we'll be happy to take your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) David Scharf, Citizens.

David Scharf

David, you actually addressed much of this in your opening remarks about the diversification of your small business borrower base. I am wondering, as you just -- everybody's obviously trying to get their arms around if and when we see changes in behavior from tariffs and potential inflation. But based on just application flow, application volume, did you get any sense that small businesses in particular or any verticals in particular might be stocking up on inventory that might be kind of pulling forward some loan demand? Or is it just too difficult to tell at this point?

David Fisher

Yes, it's always tough to know if you'd be able to tell, but there's no indication of it at all. I think demand tracks typical seasonal patterns. When tariff talk became louder kind of late in Q1, we didn't see any spike in application volumes. It's difficult to know what they would have been otherwise. So while there is seasonality, there's also just -- different operating environments have different levels of demand.
So you're never going to know for sure. But we certainly didn't see any spikes in application volume kind of late in the quarter once tariff talk really started heating up.

David Scharf

Got it. Helpful. And then as far as just how quickly you've historically been able to kind of gauge any kinds of shifts in behavior -- I mean, obviously, they are short duration assets. But can you just remind us, for most consumer and SMB loans, are most of them two-week payment frequencies or monthly? Like how often are you actually capturing --

David Fisher

Yes. The large -- yes, a large majority are weekly or bi-weekly. There are some monthly both on consumer and small business, but the large majority are weekly or biweekly. So we see -- so we have very, very quick reads in changes in performance. And the overall portfolios -- and as you know, the overall portfolios are relatively short in duration as well, with both consumer and small business kind of around six months weighted average terms.
So we don't have the big back book that we're having to deal with if there's negative changes in credit.

David Scharf

Okay. Maybe if I can just squeeze in one just follow-up kind of clean up question for Steve. Given the decline in funding costs now and SOFR reduction now flowing through, can you give us a sense for how we ought to be thinking about second quarter interest expense either as a percentage of revenue on a dollar basis or just as a weighted average funding cost?

Steven Cunningham

Yes, I don't expect -- from here, our outlook doesn't really have any rate cuts for the remainder of this year. So I wouldn't expect there to be much difference. Maybe a slight tick down just on the cadence of the funding that we have coming up in second quarter, but not an awful lot of change in the cost of funds. So I think pretty steady in terms of as a percent of revenue as you think about the near term.

David Scharf

Okay. Just a follow-up on that. Has there been -- as you think about on debt securitizations, I mean since April 2, I mean have you seen any material change in spreads in the marketplace?

Steven Cunningham

There are ABS transactions getting done from companies sort of adjacent to us and in our space. And remember, we did a -- we closed the price and closed the transaction in mid-March. There was actually quite a bit of noise at that time, and we closed with very good performance. So I think the credit markets relative to the equity markets have been much calmer both on the secured and the unsecured side. Equity markets have been very noisy.
I can't say the same about the credit markets right now.

Operator

Moshe Orenbuch, TD Cowen.

Moshe Orenbuch

You talked a little, Steve, about the fair value premiums and credit performance. Maybe could you just expand a little bit on how that -- I guess how they're likely to perform in the current environment? And maybe if you could -- well -- and I'll follow-up with another one after --

Steven Cunningham

Yes. I mean, I think I've talked about this before. The fair value premiums are most sensitive to changes in the lifetime credit performance that we expect on our various lines of business. And as you know, we have very quick loss emergence. So for the most part -- for example, our subprime consumer business, most of the lifetime expectations for a new vintage are going to be in the quarter that they're originated in.
So there's very fast feedback, as we've talked about. So that's -- and a stable -- when I talk about sensitive to credit, I mean it's -- basically the way to think about it is like a 10% change in the lifetime loss expectation would lead to about a 400 basis point change in fair value premium. And so you can see we've been very stable across the portfolios, and on a consolidated basis, sort of bouncing around in basis points, which is telling you that the outlook where we sit at the end of the quarter is very, very stable.
And if things were to change, like I mentioned, because we can react quickly, we would expect to quickly catch changes that we would need to make if the environment deteriorated. And therefore, you wouldn't see a lot of volatility in those fair value premiums on a consolidated basis in particular.

Moshe Orenbuch

Got it. In terms of -- you also had talked a little bit about the expected impact from newer customers. Can you just kind of flesh that out a little bit more, both like is that a process that continues like into the second quarter? Does it continue into the second half? And should -- do those customers come in at a higher yield, because the revenue margin on the consumer side was sort of flat to down a couple of ticks year-over-year? Like how should we think about the impact on the revenue margin as well?

Steven Cunningham

Yes. So I think for the -- what I was speaking to, which was cash net, the new customers are there. We haven't had to talk about this in many years, but the new customers do charge-off at a higher rate. We just don't know them as well. But over the life of the relationship we have with customers that don't, there's very strong unit economics, because as I mentioned, we have a broad set of products that they can continue their financial journey with.
So I would expect most of the year-over-year increases that you've seen related to that mix will sort of wash through in the second quarter. So you may see a little bit -- it might be a little bit higher year-over-year in 2Q, and I would see that -- expect to see that moderate in the back half of the year, assuming there's not more new customers coming in, in the environment.
And then on the yield side, I think what you're seeing is we definitely have seen steady to good yields on the cash net side, but we've also seen great performance on the net credit side. And as a result of that, we've had customers that have been able to graduate to lower APR products. And so I think what you're seeing is the net effect of that. The yield year-over-year is relatively flat because of those two dynamics.

Moshe Orenbuch

Got it. And so that benefit accrues to you in the form of growth both from those -- the new customers that -- the continuous customers and from that graduation. Is that -- that's the way we should think about it?

Steven Cunningham

Exactly.

Moshe Orenbuch

Great.

Operator

(Operator Instructions) Kyle Joseph, Stephens.

Kyle Joseph

Congrats on a good quarter. Just looking back at -- going back to 2008, we can look back and look at consumer portfolios and look at their performance in non-prime consumer portfolios. And non-prime portfolios have been fairly resilient. We don't have any empirical evidence really on the small business side. But can you give us your expectations for the credit performance of the small business portfolio and any sort of differences you'd anticipate between that and consumer looking back at kind of historical recessions?

David Fisher

Yes. I mean I was -- Enova was around in 2008, so we have some data. And it wasn't that different than our consumer data. I mean what we really saw for both the businesses back then was a slowdown in lending was probably the biggest impact, more than major credit issues. Our small businesses are very small and they tend to act in some ways more like sophisticated consumers than mid-sized businesses.
So I think that's probably why we saw similar payment performance in 2008. Every recession is a little different, and so it's always difficult to predict exactly. But I think we'll just go back to what we've talked about before, is that we have a very diversified small business portfolio across states, across industries, across products, with short duration terms and very frequent payment performance and loss emergence. So given everything we're seeing now, that makes us very comfortable to continue doing what we've been doing over the last several years.

Operator

(Operator Instructions) John Hecht, Jefferies.

John Hecht

Most of them have been asked and answered. I guess one of them -- and I know it's been a very favorable competitive environment for you guys for a few quarters. You did talk about a higher mix of new customers. I'm wondering, is that also a function of the competitive markets? And then are there other pockets like within small business that you're seeing opportunity to lean in as well because of the draw back of competition?

David Fisher

Yes. I mean I think the strong growth we've seen both on the consumer and small business side both over the last couple years, but certainly in the first quarter, where stronger growth -- and we expected it across both of those segments. As almost always, a combination of a conducive competitive environment, no new entrants, no new competitive threats in the last quarter in either of those, plus continued product enhancements. And we have product enhancements on both sides. That certainly made meaningful differences in the quarter on the new customer side.
So that's something we expect to continue. Plenty more product enhancements planned for the rest of the year. And again, not seeing any changes on the competitive side at all.

John Hecht

Okay. And then, Steve, for the buyback, you mentioned if kind of the market conditions stay consistent, then you would probably use most of the buyback in this quarter. Is that sort of saying like at the current stock price? Or is there some sort of, if it drops from here, you'll be more aggressive and take advantage of that? How do I just -- how do I read the kind of levels that you're thinking about from a repurchase perspective?

Steven Cunningham

Yes. I mean, I think at these levels, we would be interested as well. So the stock has been kind of bouncing around for the past couple of months. But I would say even at these levels, we would be looking to take as much as we can out to support the valuation.

John Hecht

Okay. And then final question, and forgive me, is on the guide. The OT expense, is that 8.5% of total revs or 8%?

Steven Cunningham

8.5%. I said around 8.5%. So plus or minus 8.5%.

Operator

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

David Fisher

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

Operator

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