Enova International (NYSE:ENVA) has reported record originations and revenue in its third quarter of 2023, despite facing challenges such as increased marketing spend and credit normalization in the small business portfolio. The company reported a 13% sequential growth in originations, reaching over $1.2 billion, and a 21% year-over-year increase in revenue, amounting to $551 million. Adjusted EBITDA and EPS were down 5% and 13% sequentially, respectively.
Key takeaways from the call:
- Enova's consumer originations rose 19% sequentially.
- The company is focused on returning capital to shareholders through stock buybacks and has authorized a new $300 million share repurchase program, aligning with the InvestingPro Tip that management has been aggressively buying back shares.
- Enova expects total company revenue to grow between 5% and 7% sequentially in the fourth quarter, resulting in a full-year revenue growth of over 20% compared to 2022. This aligns with InvestingPro's data showing a revenue growth of 3.77% LTM2023.Q2.
- Credit losses for the consumer portfolio remained stable, while the small business portfolio saw a slight improvement.
- Marketing expenses increased to 21% of revenue.
- The company ended the quarter with nearly $1 billion in liquidity, which is supported by the InvestingPro Tip that Enova's liquid assets exceed short term obligations.
- Enova expects sequential adjusted EPS growth of 10% to 20% for the fourth quarter, depending on customer payment rates and the level, timing, and mix of originations growth.
- The company aims to strike a balance between customer acquisition and managing credit risk, and is comfortable pulling back on marketing spend when necessary.
During the earnings call, Enova discussed its credit quality and marketing strategy, expressing confidence in its ability to drive profitable growth. The company expects credit quality to remain stable, with small business loans improving quarter-over-quarter and consumer loans remaining relatively stable. Enova also mentioned that it aims to strike a balance between customer acquisition and managing credit risk, and it is comfortable pulling back on marketing spend when necessary.
The company plans to utilize its share repurchase authorization opportunistically and retire its 2024 senior notes before actively repurchasing shares. Enova's marketing spend is focused on both the small business and consumer segments, with a balanced approach using channels such as direct mail, TV, and digital.
Enova's fair values have been increasing, indicating improved risk-adjusted margins and return on equity (ROE) in new originations. The company does not incorporate excessive conservatism in its fair value marks and aims to provide a realistic view of the value of its portfolios based on credit quality and expected lifetime performance. According to InvestingPro Data, the fair value (Analyst Targets) is $65 USD, whereas InvestingPro's fair value is $45.2 USD.
In response to a question during the earnings call, the speaker acknowledged that fair value accounting has benefited the company during the past two years, allowing them to pursue incremental customers while maintaining positive financial statements. The call concluded with the speaker expressing gratitude and looking forward to the next quarter.
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