Enova(US:ENVA)2020-10-28 02:15Financial Data and Key Metrics Changes - Third quarter revenue was $205 million, a decline of 33% year-over-year, but adjusted EBITDA rose 112% to a record $136 million, and adjusted EPS grew 223% to $2.97 [10][43] - The net revenue margin for the third quarter was 89%, driven by strong credit quality and low net charge-off rates [28][29] - Net income from continuing operations was $94 million or $3.09 per diluted share, compared to $29 million or $0.83 per diluted share in the same quarter last year [43] Business Line Data and Key Metrics Changes - Third quarter originations decreased 77% year-over-year but increased 56% sequentially, with new customer originations rising to approximately 11% of total originations [15] - The loan portfolio contracted 36% year-over-year but only 14% from the second quarter, with installment products representing 72% of the portfolio [16] - OnDeck's total originations for the quarter were $148 million, up from $66 million in the second quarter [47] Market Data and Key Metrics Changes - The company observed strong credit performance from new loans, with net charge-off rates at 4.7%, significantly improved from 15.9% in the previous quarter [29] - The percentage of total portfolio receivables past due 30 days or more declined to 3.7% from 4.5% in the previous quarter [30] Company Strategy and Development Direction - The acquisition of OnDeck is expected to enhance product differentiation and increase presence in small business lending, with a focus on providing capital to small businesses post-pandemic [17][18] - The company plans to finalize its strategy on the optimal number of products and brands to serve SMB borrowers, utilizing market tests to gauge customer needs [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of consumers and the economy, anticipating growth in originations despite ongoing COVID impacts [13][14] - The company noted that customer behavior has shifted, with subprime borrowers returning faster than near-prime borrowers [64] Other Important Information - The company ended the third quarter with $552 million in cash and marketable securities, including $490 million in unrestricted cash [44] - Total operating expenses for the third quarter were $56 million, down from $82 million in the same quarter last year [35] Q&A Session Summary Question: What is the consolidated loss rate embedded in the fair value calculation? - Management indicated that there is no specific charge-off rate provided, but delinquencies are a good indicator for future outlook [50][51] Question: How is the re-acceleration of originations for OnDeck and small business lending? - Management noted that re-acceleration is broad-based across states and marketing channels, with caution in industries heavily impacted by COVID [53][54] Question: What is the expected share count post-transaction? - The expected share count is just under 36 million shares following the transaction [57] Question: What is the outlook for revenue in Q4? - Management expects revenue to be flat to slightly lower than Q3 levels, depending on the timing and level of originations [26][60] Question: How much of the current portfolio has been underwritten post-COVID? - Approximately 25% to 30% of the portfolio has been underwritten since the onset of COVID [67]