Enova(US:ENVA)2020-04-29 03:33Financial Data and Key Metrics Changes - Total revenue for Q1 2020 increased by 37% year-over-year to $362 million, exceeding guidance of $328 million to $348 million [47] - Adjusted EBITDA declined by 55% year-over-year to $36 million, with an adjusted EBITDA margin decreasing to 10% from 30% in the prior year [67] - Net income from continuing operations was $6 million or $0.18 per diluted share, compared to $39 million or $1.13 per diluted share in Q1 2019 [69] - The company ended Q1 with $214 million in cash and marketable securities, with a projected cash balance of at least $350 million to $400 million by the end of Q2 [41][43] Business Line Data and Key Metrics Changes - Domestic lending businesses, including U.S. subprime, net credit, and small business financing, drove growth with a 38% revenue increase year-over-year [22] - Line of credit revenue increased by 78%, while installment loan and finance receivables revenue rose by 23% [22] - The composition of the total portfolio was 66% installment products, 32% line of credit products, and 2% single payer products [23] Market Data and Key Metrics Changes - In Brazil, first quarter originations increased by 10% sequentially and 7% year-over-year on a constant currency basis [24] - The company noted that subprime customers are accustomed to managing cash flow variations, which may mitigate the impact of economic downturns [18] Company Strategy and Development Direction - The company is focused on supporting existing customers and adjusting to emerging risks due to COVID-19, with a significant reduction in originations of 60% to 80% depending on the product [15][14] - Enova's online-only business model and proprietary analytics provide a competitive advantage, allowing for quick adjustments to market conditions [25][36] - The management team emphasized a commitment to long-term sustainable and profitable growth, with plans to resume lending once the economy stabilizes [34] Management's Comments on Operating Environment and Future Outlook - Management highlighted the unprecedented nature of the current recession, driven by unemployment rather than typical economic slowdowns [12] - The company is adjusting its analytics models to account for the unique economic deterioration and is prepared to reaccelerate lending when conditions improve [30][19] - Management expressed confidence in the company's ability to navigate the downturn, citing a strong balance sheet and ample liquidity [31][40] Other Important Information - The adoption of fair value accounting for receivables resulted in a one-time non-cash increase to retained earnings of $99 million [45] - Marketing expenses increased to $35 million, or 10% of revenue, due to the new accounting method, compared to $19 million, or 7% of revenue in Q1 2019 [63] Q&A Session Summary Question: Trends related to stimulus and payments - Management noted stabilization in performance likely due to stimulus payments, but cautioned that it is too early to identify a definitive trend [73] Question: Composition of marketing spend and customer performance - Marketing spend was consistent with previous quarters, and no significant differences were observed in performance between new and existing customers [75][76] Question: Small business lending environment - The small business portfolio remains manageable, with diversified sector exposure and limited impact from high-risk industries [78] Question: Payment frequency and borrower relief requests - Approximately three-quarters of the portfolio had payments due in late March, with over half having three or more payments due since then [86] Question: Fair value assumptions and macroeconomic scenarios - Fair value adjustments were based on current conditions and volatility, with no immediate liquidity concerns anticipated [95] Question: Underwriting tightening and origination volume - The company is focusing on higher credit quality customers and expects better unit economics from current originations [101]