Enova International, Inc.(ENVA)Q2 2026 法說會逐字稿

Good afternoon. And welcome to the Enova International Second Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Lindsay Savarese, Investor Relations, Enova. Please go ahead.

Thank you, operator, and good afternoon, everyone. Enova released results for the second quarter 2026 ended 06/30/2026 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 Steven E. Cunningham, Chief Executive Officer, and Scott Cornelis, Chief Financial Officer. This call is being webcast and will be archived on our Investor Relations section of our website. Before I turn the call over to Steven, I would 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 of various important risks, including those discussed in our earnings press release and in our annual report on Form 10-Ks, 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 U.S. 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 would like to turn the call over to Steven.

Thank you, Lindsay, and good afternoon, everyone. I appreciate you joining our call today. In the second quarter, healthy originations growth and credit supported by a stable macro environment drove top- and bottom-line financial results that exceeded our expectations. Our second quarter results and our long track record of consistent and differentiated financial performance reflect the strength and resiliency of our business. That is powered by our talented team, diversified product offerings, scalable operating model, and world-class risk management capabilities. Second quarter originations were strong across both consumer and small business, driving consolidated originations 27% higher year over year to nearly $2.3 billion and marked the eleventh consecutive quarter of consolidated year-over-year originations growth of 20% or more. Originations growth drove 28% year-over-year growth in the portfolio to $5.5 billion, with small business products representing 69% of the portfolio and consumer products accounting for 31%. Market demand and the credit we observed across our products drove our marketing spend this quarter, allowing us to efficiently scale our investments and originate loans with attractive unit economics. As we have discussed in the past, our unit economics framework combined with our sophisticated technology and analytics are designed to assess risk in real time, and the short duration and payment frequency of our products provide rapid feedback. This lets us react quickly not only to emerging risks, but also to quickly respond to opportunities we see in the market, as we did in the second quarter. With strong portfolio growth, revenue growth accelerated, growing 22% year over year to $929 million. Profitability grew even faster, with adjusted EPS growing 33% from the second quarter of 2025, marking our eighth consecutive quarter of year-over-year adjusted EPS growth of 30% or more. Positive credit was a key driver of our EPS growth, as the consolidated net charge-off rate of 7.3% declined both sequentially and year over year, and was the best we have seen in quite some time. As consumer credit improved and small business credit remained stable. Turning to our consumer business, year-over-year originations growth and credit performance were the best we have seen in two years. Consumer originations growth accelerated to 23%, and revenue grew 11% as we captured higher demand in the market with attractive unit economics. The consumer net charge-off rate improved sequentially, as is typical with seasonality, and declined 170 basis points from the second quarter of 2025 to 12.8%. Our consumer results reflect the resiliency of the U.S. consumer that is benefiting from a stable labor market, steady wage gains, and moderating inflation. During June, the unemployment rate improved to 4.2%. Average hourly earnings grew 3.5%, and recent weekly unemployment claims remain low. In addition, even with persistent geopolitical headlines and energy price volatility, consumer sentiment has improved and consumer spending has remained solid. Consumer spending is a critical component of overall economic growth and a key driver of the health of small businesses. The June 2026 Fiserv Small Business Index showed expanding consumer spending at small businesses, with both sales and transaction volume increasing. In addition, the latest Federal Reserve Beige Book highlighted a resilient economy with expansion noted across most districts. In light of these trends, the most recent NFIB Small Business Optimism Index increased, reaching its highest level since earlier this year, driven by expectations for better business conditions and higher retail sales. In that survey, two-thirds of small business owners rated the overall health of their businesses as excellent or good. Additionally, our eleventh small business cash flow trend report released in conjunction with Ocrolus found that 93% of small businesses expect moderate to significant growth over the next year, and 75% of these small businesses reported bypassing a traditional bank for their capital needs in favor of capital providers like Enova. Supported by this constructive backdrop, our SMB business had another solid quarter of growth and stable credit. As we continue to leverage our leading brand presence, scale competitive position, and intentional diversification across geographies and industries, second quarter SMB originations grew 29% year over year. Revenue grew 35%, and the SMB net charge-off ratio remained relatively stable at 4.8%. Before I wrap up, I would like to spend a few moments discussing our strategy and outlook for the remainder of this year and beyond. Our long track record of financial consistency across a wide range of operating environments demonstrates that our focused growth strategy works. We remain well positioned to deliver meaningful financial results for the rest of this year and beyond as our experienced and talented team leverages our unit economics discipline, diversified product offerings, flexible online-only business model, sophisticated machine learning-powered risk management capability, and our solid balance sheet. We are excited to build upon our proven approach with our planned combination with Grasshopper Bank, which we look forward to closing later this year. We remain engaged in a constructive dialogue with both the OCC and the Federal Reserve as the agencies continue their application review process. In addition, our integration planning is largely complete, and once we receive approval, we stand ready for a speedy close, and we will immediately start delivering on the significant synergies from geographic expansion of our existing products and lower funding costs from Grasshopper's existing deposit businesses. As a reminder, we expect the net synergies related to the transaction to drive adjusted EPS accretion of more than 25% once the synergies are fully realized in the first two years post-closing. To wrap up, we are pleased with our second quarter results and, based on what we are seeing today, we are raising our outlook for the year, which Scott will describe in more detail. We remain focused on continuing to generate sustainable and profitable growth, while delivering on our commitment to driving long-term shareholder value, and on our mission of helping hardworking people get access to fast, trustworthy credit. With that, I would like to turn the call over to Scott Cornelis, our CFO, who will discuss our financial results and outlook in more detail. And following Scott's remarks, we will be happy to answer any questions you might have. Scott?

Thank you, Steven, and good afternoon, everyone. As Steve noted in his remarks, we are pleased to deliver another solid quarter of top- and bottom-line financial performance. Our second quarter results reflect strong growth in originations, receivables, and revenue, complemented by solid credit, operating efficiency, and balance sheet flexibility. Turning to our second quarter results, total company revenue of $929 million increased 22% from the second quarter of 2025, driven by 28% year-over-year growth in total company combined loan and finance receivable balances on an amortized basis. Total company originations during the second quarter rose 27% from the second quarter of 2025 to $2.3 billion. Revenue from small business lending increased 35% from the second quarter of 2025 to $439 million as small business receivables on an amortized basis ended the quarter at $3.8 billion, or 36% higher than the end of the second quarter of 2025. Small business originations rose 29% year over year to $1.6 billion. Revenue from our consumer businesses increased 11% from the second quarter of 2025 to $477 million as consumer receivables on an amortized basis ended the quarter at $1.7 billion, or approximately 14% higher than the end of the second quarter of 2025. Consumer originations grew 23% from the second quarter of 2025 to $691 million, an acceleration from the first quarter that reflects the demand and solid credit we saw during the quarter. For the third quarter of 2026, we expect total company revenue to be around 25% higher year over year. 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. Second quarter net charge-off ratios for the consumer, small business, and consolidated portfolios were all stable or improved year over year. As a result, the consolidated net revenue margin for the second quarter of 61% was slightly better than expected. The consolidated net charge-off ratio for the second quarter was 7.3%, an improvement from 8.1% a year ago and 7.6% in the first quarter, driven largely by continued improvement in our consumer portfolio. The consumer net charge-off ratio improved to 12.8%, 170 basis points lower than the second quarter a year ago, while the small business net charge-off ratio was 4.8%, roughly in line with the 4.7% a year ago. These results underscore the consistency of our credit risk management and the quality of our originations. The consolidated fair value premium remained at approximately 115%, consistent with the levels we have seen over the past two years, indicating a stable risk-return profile and strong unit economics. A consolidated 30-plus day delinquency rate ended the quarter at 7.5%, essentially flat with the first quarter. Looking ahead, we expect the total company net revenue margin for the third quarter of 2026 to be in the 55% to 60% range. This expectation will depend upon the portfolio payment performance and the level, timing, and mix of originations growth during the third quarter. Now turning to expenses. Total operating expenses for the second quarter, including marketing, were 35% of revenue compared to 32% of revenue in the second quarter of 2025. As Steve noted, our marketing spend continues to be efficient and drove healthy originations growth during the quarter, especially from new consumer customers. Marketing costs were 22% of revenue, or $204 million, compared to 19% of revenue, or $143 million, in the second quarter of 2025. We expect marketing expenses to be around 20% of revenue for the third quarter, which will depend upon the growth and mix of originations. Operations and technology expenses for the second quarter were 8.1% of revenue, or $75 million, compared to 8.3% of revenue, or $64 million, in the second quarter of 2025. 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 we expect O&T costs to be around 8% to 8.5% of total revenue going forward. Our fixed costs continue to scale as we focus on operating efficiency and thoughtful expense management. General and administrative expenses for the second quarter were $44 million or 4.7% of revenue, compared to $41 million or 5.3% of revenue in the second quarter of 2025. The current quarter includes $1.5 million of deal-related expenses associated with the pending Grasshopper acquisition. Excluding these items, G&A expenses were $43 million or 4.6% of revenue. While there might be slight variations from quarter to quarter, we expect G&A expenses in the near term will be around 5% of total revenue, excluding any one-time costs. Our balance sheet and liquidity position continue to 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 opportunistic share repurchases. We ended the second quarter with approximately $929 million of liquidity, including $478 million of cash and marketable securities, and $451 million of available capacity on our debt facilities. Our cost of funds for the second quarter was 8.1%, down from 8.2% in the first quarter and 8.8% for the second quarter of 2025, and we continue to see strong execution in the capital markets. During the second quarter, we acquired 117 thousand shares at a cost of approximately $19 million. We will continue stock repurchases opportunistically, while also ensuring we are prepared to close the Grasshopper Bank acquisition and transition to a bank holding company later this year. Finally, we continue to deliver significant profitability this quarter. Compared to the second quarter of 2025, adjusted EPS, a non-GAAP measure, increased 33% to $4.31 per diluted share, resulting in an annualized quarterly return on equity in excess of 30%. To wrap up, let me summarize our expectations. For the third quarter, we expect consolidated revenue to be around 25% higher year over year, with a net revenue margin in the 55% to 60% range. Additionally, we expect marketing expenses to be around 20% of revenue, O&T costs of around 8% to 8.5% of revenue, and G&A costs of around 5% of revenue. These expectations should lead to adjusted EPS for the third quarter of 2026 that is around 30% higher than the third quarter of 2025. For the full year, we now expect revenue growth of 20% to 25%, compared to the full year of 2025, with continued operating leverage and full year 2026 adjusted EPS growth of 30% to 35%. Our third quarter and full year 2026 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. As a reminder, our 2026 financial expectations do not assume any contribution from the pending acquisition of Grasshopper Bank which, as Steven noted, we continue to expect to close later this year. The strength of our second quarter reflects the scalability of our business model, our diversified product set, and our unit economics discipline. Combined with the demonstrated ability of our talented team, our world-class technology and machine learning-driven analytics, and a solid balance sheet, we remain well positioned to continue delivering profitable growth and creating long-term value for our shareholders. And with that, we would be happy to take your questions. Operator?

We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from David Scharf with Citizens Capital Markets. Please go ahead.

Thanks for taking my questions. To start off with, Steven, I'm kind of wondering if you can provide maybe a little more color on what was behind the acceleration in consumer volumes. I mean, we kind of hear you loud and clear about the commentary regarding consumer health and resiliency, but it seems like over especially the last year, SMB has been far and away the primary growth driver. And it feels like something changed in which you, if not necessarily expanded the credit box, you leaned into more marketing and volumes. Was there anything in consumer behavior that just felt or looked different versus one or two quarters ago?

Hey, David. Thanks for the question. So a couple things I would highlight. Number one, we did not 'lean in' to marketing. In the commentary, really what I was trying to describe is our marketing is an output of us meeting the demand that we see in the marketplace. So it is very dependent on the originations from quarter to quarter. In this quarter, we did see healthy demand overall in the consumer space. In particular, if you take a look at what is happening with our portfolio, SMB has been a very consistent grower as you have talked about. On the consumer side, installment loans have been a very steady year-over-year grower as well. Some of the growth in the past couple of quarters has been more in the line-of-credit space on the consumer side, which, if you may recall, last year was an area where we had slowed down a bit because there were some things that we did not like. So the year-over-year growth pickup is in part a slightly easier lap from last year and is somewhat focused in that product, which again is a very popular product across consumers, a product that we have differentiated very well and that is very well received by our consumers. So I think what you saw on the consumer side is a reflection of that strength and resiliency in the consumer space, an increase in demand that we saw during the quarter, and us being able to capture that demand very consistently with our risk appetite, which has not changed, and with the unit economic requirements that we have to book new loans.

Got it. Understood. And maybe just kind of related to that, the net revenue margin outlook, that 55% to 60% range for the full year, that sort of existed in your guidance for a couple of years now. And as we think about whether there could be, you know, an annual figure above that at some point, is there anything that is just sort of unusually strong about the 57% consumer net revenue margin this quarter that we should not rely on as sort of a new benchmark?

Yeah, hey, it is Scott. I think we have been pretty consistently in that 55% to 60% range on a consolidated basis, and we think we will continue there. You are right, the consumer was a little higher, and that is a reflection of the strong growth and solid credit that we are seeing. We expect that within the historical ranges that we have been in with consumer, it is usually a little lower. So kind of a version of that. But overall, a good outlook on both SMB and consumer credit that will kind of keep us in that range we provide.

Hey, David. I would just add that we typically sit around 50% on the consumer side, plus or minus. As Scott said, as we start to see some of the line-of-credit on the consumer side lap those periods from last year and settle in, you will start to see that revert back just the way our unit economics work. That is what we would expect, and that is what is in our guidance. In SMB, we are sort of sitting right in the center of our expected range of 60% to 70% that we typically would see. So as Scott said, higher originations growth, particularly when it is accelerating, can drive a little bit higher net revenue margin within the range, but you should not count on it being at that elevated level.

Okay. Got it. No, that is helpful. It definitely stood out. If I can just maybe ask one final one: I know in the bank application review process you are very limited in what you can publicly discuss. Just wondering, is there anything you could help maybe just educate us a little on the nature of the process in terms of are you still in sort of an iterative, question-and-response kind of period? Do the reviewers at any point in time provide updates on their expected timing or backlog? Just if there is any incremental color, that would be helpful.

Yeah. I have a lot of respect for the agencies and the process that they follow. As I said on the call, I think we remain in a constructive dialogue with both of the agencies as they are going through that process. So I do not think there is a lot of additional color to provide beyond that. We have pointed to the second half of the year since the beginning. We are three weeks into the second half of the year; I have a lot of confidence in our application, I have a lot of confidence in the process, and I look forward to closing later this year.

Great. Perfect. Thank you.

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

Good afternoon. Thanks for taking my questions. Question is just on the credit: looking at the delinquency numbers, consumer obviously year over year looked really, really strong, and the small business delinquency rate was up a little bit, I believe 6.6 to 7.4 this year, and that impacted the change in the fair value marks that ran through the P&L for both consumer and small business. Was wondering if you can maybe elaborate on kind of what you are seeing in the mix between the two, like specifically on consumer credit, what is driving some of the outperformance? And was there anything going on specific in small business lending? Thank you.

Yeah, sure. Thanks for the questions, Bill. On the consumer side, as we talked about towards the end of last year, we were seeing some of the best credit that we had seen in some time and we had pointed to the fact that we were going to cap some of that growth, obviously with the focus on our unit economics. I think you are starting to see us continue to optimize our growth within that framework. So we are hanging around the lower end of our net charge-off range on the consumer side. I would expect us to sort of settle back into those more typical ranges, which again would drive some reversion back in the more typical net revenue margin ranges. That is all expected in our outlook. On the SMB side, it's been remarkably stable. You can see quarter to quarter we can have some growth variations, but we have had very healthy growth. Our net charge-off ratio has been hanging within the 4% to 5% range that we would expect every quarter for quite some time. The delinquency ratio that we printed this quarter was relatively stable on a sequential basis, but compared to a year ago we had some pretty low delinquency levels back last year, and I think it reflects the team's ability to capture some of the growth and optimize within our frameworks. So think you should expect more of us operating in that 4% to 5% range on net charge-off. The delinquency number can move around a bit depending on period-to-period growth, but I feel good about us being able to deliver on that for quite some time.

And just one follow-up on the yield on the consumer portfolio. It did move up, looks like about 400 basis points quarter over quarter, and I assume that is product mix going a little bit more to the line of credit. If you could talk about that, and do you see some additional upside in that yield? I think if you take not just the last quarter, but look back over the last few quarters, it has been right around 115% for quite some time.

I think that is kind of where we landed this quarter, so I would expect it to sort of level out around that level plus or minus from here.

Okay. Thanks for taking my questions.

Next question is from Vincent Caintic with BTIG. Please go ahead.

Hey, good afternoon. Thanks for taking my questions. Great results. I wanted to kind of ask a follow-up on the marketing. So marketing as a percentage was higher, but your revenues were also really strong, so kind of an overall beat there. But the marketing dollars came in higher than the initial guidance. I was sort of wondering from a macro perspective, if you could—you kind of touched on what you saw and the opportunities you saw—Is that macro environment or are those opportunities still existing in the third quarter? Can you lean into it? Basically trying to delve into the framework of the guidance, which has been consistent in the medium term for some time versus the opportunities that might exist today to lean into marketing and originations further? Thank you.

So again, I want to just clarify: when I say 'leaning in,' what I intend to do is meet demand. Our capabilities on tech and analytics and our real-time feedback allow us to move quickly on the demand that we are seeing and work back from the return-on-equity and unit economics that we expect. In terms of the environment, Vincent, these are not going to change dramatically week to week. I think the latest stats, including the unemployment claims this morning, were very strong. It feels like the employment situation, despite some volatility in energy prices, is pretty strong underneath. The consumer overall is hanging in there and is resilient given the labor situation. On marketing, if you take marketing as a percent of originations, that is probably the better way to look at it. On the SMB side, I do not think there was anything remarkably different particularly as it relates to our commissions on originations. We had a touch higher on new customers on the consumer side, which we are happy to have because those new customers will be returning customers in the future, and that drove some of the marketing outperformance. But overall, really positive growth that is going to deliver strong unit economics for us.

Okay. Great. That is super helpful. And then separate question about Grasshopper Bank, and I know we cannot talk about the acquisition mechanics, so I want to talk about the regulatory part. I've been paying attention to Grasshopper's releases, and it seems like they are doing a lot of interesting things beyond what we would think about as SMB lending. Looking at the website, they are launching instant payments on stablecoins, treasury management, expense management for small business, and a lot of interesting high-growth areas when we think about some of the fintechs out there in the commercial space. We kind of think of Grasshopper in terms of the funding side, maybe in terms of product synergies, but I was wondering if you can talk broadly about how you are thinking about Grasshopper and the fintech things that you can get into on a combined basis with a couple of these interesting ideas on the commercial side.

Yeah, great question. I think you are recognizing why we thought Grasshopper was such a great partner. Mike Butler and his team are very innovative and have done a great job of building payments, banking, deposit, and lending capabilities in particular on the commercial and small business side. Some of the press releases on product releases reflect that. We are excited first and foremost to close because that is what is going to drive the bulk of the synergies we have talked about—really just the expansion of our existing net credit products and our ability to tap into the deposit programs that Grasshopper has. You are getting a preview into the future of our ability to innovate across the two companies, particularly as payments and banking converge. We are excited about it. Our focus right now is on getting to close and starting to deliver on the known synergies and quickly pivoting to the innovation roadmaps that we know will be pretty exciting to talk about in the future.

Great. Very helpful. Thank you.

Again, if you have a question, please press star then 1. Next question is from Kyle Joseph with Stephens. Please go ahead.

Hey, good afternoon, guys. Thanks for taking my questions. Just to round out the near-term NIM outlook, you guys talked about expectations for consumer loan yields. Can you give us any color on changes you would expect, or whether they would be stable on small business? And then in the interim, before the acquisition closes, any changes you would expect on the cost of funds side of things?

Let me talk about SMB, and then I will let Scott talk about cost of funds. Our yield on the SMB side has been relatively stable. It ticked up a little bit recently as we focused on strategies around some higher-APR segments, which we delivered on. You can see our balance of originations settling back to more typical levels, so I think the yield where we are sitting this quarter is probably plus or minus pretty close to what you are likely to see in the foreseeable future given the mix of originations that we would expect on the SMB side.

Kyle, on cost of funds, we would expect that to be pretty flat to possibly down if we can continue to execute in the capital markets. They are pretty strong right now for us, and so we've had a few things done; we had one renewal in the quarter that came with a credit spread tightening. Execution is there and the outlook in the capital markets is good. We will see what rates do as we move along, but we're not expecting a huge change on cost of funds—more likely where it is or better.

Got it. Helpful. And then just following up, I think a year ago you guys highlighted some underwriting changes in consumer, and towards the end of the year it got more aggressive. Appreciate the color you just gave in terms of the mix shift on SMB, but in terms of risk appetite on SMB, any underwriting changes over the recent period?

Our risk appetite has not changed, Kyle. We have had a very consistent approach to how we are tackling credit for our decision-making. What you are seeing is the power of our brand resonating with borrowers and the demand in the marketplace. Both portfolios—consumer and SMB—our risk appetite has been consistent for quite some time.

Got it. Very helpful. Thanks for taking my questions, guys.

Again, if you have a question, please press star then 1. The next question is from John Hecht with Jefferies. Please go ahead.

Good afternoon. Congrats on another great quarter. The question I have, and you may or may not be able to answer given where you guys are in the journey of acquiring Grasshopper, is: if it is approved, if and when it is approved, will there be a shift in geographic focus, or would there be a mix shift in either consumer or small business, given the framework that it would be under?

Hi, John. I would expect that soon after close, with some of the benefits of having a national bank charter that we have talked about on prior calls, we will have the ability to expand our consumer products, which are net credit within the bank. We will have some opportunities to expand our geographic reach with our bank directly. Today, SMB is already in all 50 states, but there will be some opportunities to tap into capabilities there in addition to some of the existing small business products that Grasshopper has, which will serve as an adjacency to some of our existing small business programs. So the revenue synergies we have talked about are really related to us doing what we do with net credit in some new geographies—something we are prepared to do and have been planning to do once we get to close.

Okay. And then, you guys have clearly been growing nicely and there is very strong loan demand. Are you able to attribute how much of your growth is market share gains versus just a function of an active borrower base?

It has always been a tough thing to quantify exactly, but clearly we are taking share in both business segments given the growth rates we are printing. Those markets are not growing that fast overall, so we are capturing demand from new entrants to the space and also from customers who were perhaps satisfied with their current providers but are coming to our brands for a better experience. I do not have an exact number, but it is clear we are taking share with our capabilities.

Okay. Great. Thanks very much.

This concludes our question-and-answer session. I would like to turn the conference back over to Steven E. Cunningham for any closing remarks.

Thank you. We appreciate you joining our call today, and we look forward to updating you next quarter.

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