Enova(US:ENVA)2020-08-01 00:39Financial Data and Key Metrics Changes - Total second quarter revenue was $253 million, a decline of 2.5% year-over-year, while adjusted EBITDA rose 45% to $94 million and adjusted EPS increased 73% to $1.68 [17][29][40] - The loan portfolio contracted by 15% year-over-year and 29% sequentially, ending the quarter at $823 million [29][40] - The net revenue margin for the second quarter improved to 52%, driven by stabilized credit quality [30][35] Business Line Data and Key Metrics Changes - Second quarter originations declined 83% year-over-year, with new customer originations dropping to 7.4% of total, compared to an average of 37.5% over the prior four quarters [18][19] - Installment products represented 72% of the portfolio, while line of credit products accounted for 28% [19] - The U.S. near-prime product made up 59% of the portfolio, with small business representing 15% [19] Market Data and Key Metrics Changes - The percentage of total portfolio receivables past due 30 days or more declined to 4.5% from 7.5% at the end of the first quarter [33] - Customer payment rates have returned to pre-COVID levels, with 84% of CNU customers remaining in good standing after adjustments [17][36] Company Strategy and Development Direction - The company announced its intent to acquire OnDeck Capital, aiming to create a leading online financial services company with increased scale and diversified revenues [3][8] - The acquisition is expected to achieve $15 million in annual cost synergies by 2022 and be accretive to EPS in the first year post-closing [11][27] - The company plans to leverage its strong liquidity and operating capacity to expand lending as economic conditions stabilize [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fundamentals of the business despite COVID-19 uncertainties, anticipating strong demand for loans as the economy recovers [23][24] - The company is prepared to reaccelerate originations, having built new tools and models to address the unique challenges of the current recession [25][42] - Management noted that the small business lending environment is less competitive and carries less regulatory risk compared to consumer lending [65] Other Important Information - The company ended the second quarter with $379 million in cash and marketable securities, providing a strong liquidity position [28] - Operating expenses were reduced to $42 million, or 17% of revenue, compared to $74 million, or 29% of revenue, in the same quarter of the previous year [37][38] Q&A Session Summary Question: Thoughts on the OnDeck acquisition and potential changes - Management highlighted the complementary nature of the businesses and the potential for increased profitability through scale and product offerings [45] Question: Impact of potential second stimulus on business - Management indicated that while a second stimulus could help, it is not essential for success, as credit behavior improved even after the first stimulus ended [46] Question: Profitability of the OnDeck acquisition in the first year - Management confirmed that the acquisition is expected to be accretive to adjusted EPS in the first year post-closing [48] Question: Characteristics of new customers in the current environment - New customer originations have significantly decreased, with a focus on existing customers, but management expects this to change as certainty increases [73] Question: Correlation between loan demand and geographic openings - Management acknowledged a correlation between loan demand and the stability of state economies, with demand increasing in more stable regions [74]