10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-35503

Enova International, Inc.

(Exact name of registrant as specified in its charter)


Delaware		45-3190813
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

175 West Jackson Blvd. Chicago, Illinois		60604
(Address of principal executive offices)		(Zip Code)

(312) 568-4200

(Registrant’s telephone number, including area code)

NONE

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $.00001 par value per share	ENVA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

31,213,536 of the Registrant’s common shares, $0.00001 par value, were outstanding as of April 26, 2023.

CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements give current expectations or forecasts of future events and reflect the views and assumptions of senior management with respect to the business, financial condition, operations and prospects of Enova International, Inc. and its subsidiaries (collectively, the “Company”). When used in this report, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “intends,” “anticipates,” “may,” “forecast,” “project” and similar expressions or variations as they relate to the Company or its management are intended to identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties that are beyond the ability of the Company to control and, in some cases, predict. Accordingly, there are or will be important factors that could cause the Company’s actual results to differ materially from those indicated in these statements. Key factors that could cause the Company’s actual financial results, performance or condition to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following:

•

the effect of laws and regulations targeting our industry that directly or indirectly regulate or prohibit our operations or render them unprofitable or impractical;

•

the effect of and compliance with domestic and international consumer credit, tax and other laws and government rules and regulations applicable to our business, including changes in such laws, rules and regulations, or changes in the interpretation or enforcement thereof, and the regulatory and examination authority of the Consumer Financial Protection Bureau with respect to providers of consumer financial products and services in the United States;

•

the effect of and compliance with enforcement actions, orders and agreements issued by applicable regulators, such as the January 2019 Consent Order issued by the Consumer Financial Protection Bureau;

•

changes in federal or state laws or regulations, or judicial decisions involving licensing or supervision of commercial lenders, interest rate limitations, the enforceability of choice of law provisions in loan agreements, the validity of bank sponsor partnerships, the use of brokers or other significant changes;

•

our ability to process or collect loans and finance receivables through the Automated Clearing House system;

•

the deterioration of the political, regulatory or economic environment in countries where we operate or in the future may operate;

•

the actions of third parties who provide, acquire or offer products and services to, from or for us;

•

public and regulatory perception of the consumer loan business, small business financing and our business practices;

•

the effect of any current or future litigation proceedings and any judicial decisions or rulemaking that affects us, our products or the legality or enforceability of our arbitration agreements;

•

changes in demand for our services, changes in competition and the continued acceptance of the online channel by our customers;

•

changes in our ability to satisfy our debt obligations or to refinance existing debt obligations or obtain new capital to finance growth;

•

a prolonged interruption in the operations of our facilities, systems and business functions, including our information technology and other business systems;

•

compliance with laws and regulations applicable to our international operations, including anti-corruption laws such as the Foreign Corrupt Practices Act and international anti-money laundering, trade and economic sanctions laws;

•

our ability to attract and retain qualified officers;

•

cyber-attacks or security breaches;

•

acts of God, war or terrorism, pandemics and other events;

•

interest rate and foreign currency exchange rate fluctuations;

•

changes in the capital markets, including the debt and equity markets;

•

the effects of macroeconomic conditions on our business, including inflation, recession and unemployment;

•

the effect of any of the above changes on our business or the markets in which we operate;

•

the risk that the Company will not successfully integrate acquired companies or that costs associated with integration are higher than anticipated;

•

the risk that the cost savings, synergies, growth and cash flows from acquisitions will not be fully realized or will take longer to realize than expected;

•

litigation risk related to acquisitions; and

•

other risks and uncertainties described herein.

The foregoing list of factors is not exhaustive and new factors may emerge or changes to these factors may occur that would impact the Company’s business and cause actual results to differ materially from those expressed in any of our forward-looking statements. Additional information regarding these and other factors may be contained in the Company’s filings with the Securities and Exchange Commission (the “SEC”). Readers of this report are encouraged to review the Company’s filings with the SEC, including the risks described under “Risk Factors” contained in the Company’s Form 10-K and any updates to those risk factors contained in subsequent Forms 10-Q, to obtain more detail about the Company’s risks and uncertainties. All forward-looking statements involve risks, assumptions and uncertainties. The occurrence of the events described, and the achievement of the expected results, depends on many events, some or all of which are not predictable or within the Company’s control. If one or more events related to these or other risks or uncertainties materialize, or if management’s underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. The forward-looking statements in this report are made as of the date of this report, and the Company disclaims any intention or obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of this report. All forward-looking statements in this report are expressly qualified in their entirety by the foregoing cautionary statements.

ENOVA INTERNATIONAL, INC.

INDEX TO FORM 10-Q


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets – March 31, 2023 and 2022 and December 31, 2022	1
	Consolidated Statements of Income – Three Months Ended March 31, 2023 and 2022	3
	Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2023 and 2022	4
	Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2023 and 2022	5
	Consolidated Statements of Cash Flows – Three Months Ended March 31, 2023 and 2022	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37

SIGNATURES		38

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(Unaudited)


	March 31,						December 31,
	2023			2022			2022
Assets
Cash and cash equivalents(1)	$	97,680		$	131,692		$	100,165
Restricted cash(1)		190,713			96,150			78,235
Loans and finance receivables at fair value(1)		3,003,366			2,231,884			3,018,528
Income taxes receivable		37,884			56,572			43,741
Other receivables and prepaid expenses(1)		55,478			60,151			66,267
Property and equipment, net		95,413			81,031			93,228
Operating lease right-of-use assets		12,398			22,507			19,347
Goodwill		279,275			279,275			279,275
Intangible assets, net		25,046			33,431			27,390
Other assets(1)		49,739			54,451			54,713
Total assets	$	3,846,992		$	3,047,144		$	3,780,889
Liabilities and Stockholders’ Equity
Accounts payable and accrued expenses(1)	$	177,869		$	136,944		$	198,320
Operating lease liabilities		25,695			39,085			33,595
Deferred tax liabilities, net		108,294			96,414			104,169
Long-term debt(1)		2,314,381			1,696,751			2,258,660
Total liabilities		2,626,239			1,969,194			2,594,744
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, $0.00001 par value, 250,000,000 shares authorized, 44,917,916, 44,057,935 and 44,326,999 shares issued and 31,334,875, 32,830,838 and 31,220,928 outstanding as of March 31, 2023 and 2022 and December 31, 2022, respectively		—			—			—
Preferred stock, $0.00001 par value, 25,000,000 shares authorized, no shares issued and outstanding		—			—			—
Additional paid in capital		258,806			233,437			251,878
Retained earnings		1,364,108			1,158,204			1,313,185
Accumulated other comprehensive loss		(7,337	)		(5,074	)		(5,990	)
Treasury stock, at cost (13,583,041, 11,227,097 and 13,106,071 shares as of March 31, 2023 and 2022 and December 31, 2022, respectively)		(394,824	)		(308,617	)		(372,928	)
Total stockholders’ equity		1,220,753			1,077,950			1,186,145
Total liabilities and stockholders’ equity	$	3,846,992		$	3,047,144		$	3,780,889

(1) Includes amounts in wholly owned, bankruptcy-remote special purpose subsidiaries (“VIEs”) presented separately in the table below.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(Unaudited)

The following table presents the aggregated assets and liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. See Note 1 for additional information.


	March 31,				December 31,
	2023		2022		2022
Assets of consolidated VIEs, included in total assets above
Cash and cash equivalents	$	316	$	419	$	420
Restricted cash		174,937		81,911		65,546
Loans and finance receivables at fair value		1,775,732		1,100,426		1,699,698
Other receivables and prepaid expenses		4,706		13,888		17,413
Other assets		5,156		2,844		5,597
Total assets	$	1,960,847	$	1,199,488	$	1,788,674
Liabilities of consolidated VIEs, included in total liabilities above
Accounts payable and accrued expenses	$	8,982	$	3,835	$	7,528
Long-term debt		1,367,754		873,625		1,329,009
Total liabilities	$	1,376,736	$	877,460	$	1,336,537

See notes to consolidated financial statements.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)


	Three Months Ended
	March 31,
	2023			2022
Revenue	$	483,256		$	385,731
Change in Fair Value		(197,366	)		(117,042	)
Net Revenue		285,890			268,689
Operating Expenses
Marketing		79,755			93,171
Operations and technology		49,169			40,730
General and administrative		37,158			34,528
Depreciation and amortization		10,540			9,514
Total Operating Expenses		176,622			177,943
Income from Operations		109,268			90,746
Interest expense, net		(43,321	)		(22,483	)
Foreign currency transaction loss		(171	)		(314	)
Equity method investment (loss) income		(6	)		328
Other nonoperating expenses		(133	)		—
Income before Income Taxes		65,637			68,277
Provision for income taxes		14,714			15,834
Net income	$	50,923		$	52,443
Earnings Per Share
Earnings per common share:
Basic	$	1.62		$	1.57
Diluted	$	1.56		$	1.50
Weighted average common shares outstanding:
Basic		31,341			33,374
Diluted		32,711			34,882

See notes to consolidated financial statements.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)


	Three Months Ended
	March 31,
	2023			2022
Net income	$	50,923		$	52,443
Other comprehensive gain, net of tax:
Foreign currency translation gain(1)		960			3,466
Unrealized loss on investments, net of tax		(2,307	)		—
Total other comprehensive (loss) gain, net of tax		(1,347	)		3,466
Comprehensive Income	$	49,576		$	55,909

(1) Net of tax benefit (provision) of $(305) and $(1,123) for the three months ended March 31, 2023 and 2022, respectively.

See notes to consolidated financial statements.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)



									Accumulated
					Additional				Other									Total
	Common Stock				Paid in		Retained		Comprehensive			Treasury Stock, at cost						Stockholders’
	Shares		Amount		Capital		Earnings		Loss			Shares			Amount			Equity
Balance at December 31, 2021		43,424	$	—	$	225,689	$	1,105,761	$	(8,540	)		(9,280	)	$	(229,858	)	$	1,093,052
Stock-based compensation expense		—		—		5,367		—		—			—			—			5,367
Shares issued for vested RSUs		524		—		—		—		—			—			—			—
Shares issued for stock option exercises		110		—		2,381		—		—			—			—			2,381
Net income		—		—		—		52,443		—			—			—			52,443
Foreign currency translation gain, net of tax		—		—		—		—		3,466			—			—			3,466
Purchases of treasury shares, at cost		—		—		—		—		—			(1,947	)		(78,759	)		(78,759	)
Balance at March 31, 2022		44,058	$	—	$	233,437	$	1,158,204	$	(5,074	)		(11,227	)	$	(308,617	)	$	1,077,950

Balance at December 31, 2022		44,327	$	—	$	251,878	$	1,313,185	$	(5,990	)		(13,106	)	$	(372,928	)	$	1,186,145
Stock-based compensation expense		—		—		5,969		—		—			—			—			5,969
Shares issued for vested RSUs		510		—		—		—		—			—			—			—
Shares issued for stock option exercises		81		—		959		—		—			—			—			959
Net income		—		—		—		50,923		—			—			—			50,923
Unrealized loss on investments, net of tax		—		—		—		—		(2,307	)		—			—			(2,307	)
Foreign currency translation gain, net of tax		—		—		—		—		960			—			—			960
Purchases of treasury shares, at cost		—		—		—		—		—			(477	)		(21,896	)		(21,896	)
Balance at March 31, 2023		44,918	$	—	$	258,806	$	1,364,108	$	(7,337	)		(13,583	)	$	(394,824	)	$	1,220,753

See notes to consolidated financial statements.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three Months Ended
	March 31,
	2023			2022
Cash Flows from Operating Activities
Net income	$	50,923		$	52,443
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,540			9,514
Amortization of deferred loan costs and debt discount		1,822			1,139
Change in fair value of loans and finance receivables		195,055			115,629
Stock-based compensation expense		5,969			5,367
Loss on early extinguishment of debt		133			—
Operating leases, net		(951	)		(1,308	)
Deferred income taxes, net		4,125			8,398
Changes in operating assets and liabilities:
Finance and service charges on loans and finance receivables		13,608			(4,303	)
Other receivables and prepaid expenses and other assets		14,258			(7,074	)
Accounts payable and accrued expenses		(25,996	)		(33,747	)
Current income taxes		12,530			7,481
Net cash provided by operating activities		282,016			153,539
Cash Flows from Investing Activities
Loans and finance receivables originated or acquired		(919,869	)		(950,624	)
Loans and finance receivables repaid		724,818			574,247
Capitalization of software development costs and purchases of fixed assets		(10,378	)		(10,118	)
Net cash used in investing activities		(205,429	)		(386,495	)
Cash Flows from Financing Activities
Borrowings under revolving line of credit		60,000			34,000
Repayments under revolving line of credit		—			(30,000	)
Borrowings under securitization facilities		278,342			323,926
Repayments under securitization facilities		(238,076	)		(16,350	)
Repayments of senior notes		(43,646	)		—
Debt issuance costs paid		(2,128	)		(669	)
Proceeds from exercise of stock options		959			2,381
Treasury shares purchased		(21,896	)		(78,759	)
Net cash provided by financing activities		33,555			234,529
Effect of exchange rates on cash, cash equivalents and restricted cash		(149	)		386
Net increase in cash, cash equivalents and restricted cash		109,993			1,959
Cash, cash equivalents and restricted cash at beginning of year		178,400			225,883
Cash, cash equivalents and restricted cash at end of period	$	288,393		$	227,842

Supplemental Disclosures
Non-cash renewal of loans and finance receivables	$	130,846		$	70,926

See notes to consolidated financial statements.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Significant Accounting Policies

Nature of the Company

Enova International, Inc. and its subsidiaries (collectively, the “Company”) operates an internet-based lending platform to serve customers in need of cash to fulfill their financial responsibilities. Through a network of direct and indirect marketing channels, the Company offers funds to its customers through a variety of loan and finance receivable products that are primarily unsecured. The business is operated primarily through the internet to provide convenient, fully-automated financial solutions to its customers. The Company originates, arranges, guarantees or purchases consumer loans and provides financing to small businesses through a line of credit account, installment loan or, until recently, receivables purchase agreement product (“RPAs”). Consumer loans include installment loans and line of credit accounts. RPAs represent a right to receive future receivables from a small business. The Company also provides services related to third-party lenders’ consumer loan products in some markets by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws (“CSO program”).

Basis of Presentation

The consolidated financial statements of the Company included herein have been prepared on the basis of accounting principles generally accepted in the United States (“GAAP”) and reflect the historical results of operations and cash flows of the Company during each respective period. The consolidated financial statements include goodwill and intangible assets arising from businesses previously acquired. The financial information included herein may not be indicative of the consolidated financial position, operating results, changes in stockholders’ equity and cash flows of the Company in the future. Intercompany transactions are eliminated.

The Company consolidates any VIE where it has been determined it is the primary beneficiary. The primary beneficiary is the entity which has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.

The consolidated financial statements presented as of March 31, 2023 and 2022 and for the three-month periods ended March 31, 2023 and 2022 are unaudited but, in management’s opinion, include all adjustments necessary for a fair presentation of the results for such interim periods. Operating results for the three-month period are not necessarily indicative of the results that may be expected for the full fiscal year.

These consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020 and related notes, which are included on Form 10-K filed with the SEC on February 24, 2023.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheets (in thousands):


	March 31,
	2023		2022
Cash and cash equivalents	$	97,680	$	131,692
Restricted cash		190,713		96,150
Total cash, cash equivalents and restricted cash	$	288,393	$	227,842

Loans and Finance Receivables

The Company utilizes the fair value option on its entire loan and finance receivable portfolio. As such, loans and finance receivables are carried at fair value in the consolidated balance sheet with changes in fair value recorded in the consolidated income statement. To derive the fair value, the Company generally utilizes discounted cash flow analyses that factor in estimated losses, prepayments, utilization rates and servicing costs over the estimated duration of the underlying assets. Loss, prepayment, utilization and servicing cost assumptions are determined using historical data and include appropriate consideration of recent trends and anticipated future performance. Future cash flows are discounted using a rate of return that the Company believes a market participant would require. Accrued and unpaid interest and fees are included in “Loans and finance receivables at fair value” in the consolidated balance sheets.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Current and Delinquent Loans and Finance Receivables

The Company classifies its loans and finance receivables as either current or delinquent. Excluding OnDeck loans and finance receivables, when a customer does not make a scheduled payment as of the due date, that payment is considered delinquent, and the remainder of the receivable balance is considered current. If the customer does not make two consecutive payments, the entire account or loan is classified as delinquent and placed on a non-accrual status. For the OnDeck portfolio, a loan is considered to be delinquent when the scheduled payments are one day past due. Loans are placed in nonaccrual status and the accrual of interest income is stopped on loans that are delinquent and non-paying. Loans are returned to accrual status if they are brought to non-delinquent status or have performed in accordance with the contractual terms for a reasonable period of time and, in the Company’s judgment, will continue to make periodic principal and interest payments as scheduled. The Company allows for normal payment processing time before considering a loan delinquent but does not provide for any additional grace period.

Where permitted by law and as long as a loan is not considered delinquent, a customer may choose to renew or extend the due date on certain installment loans. In order to renew or extend a single-pay loan, a customer must agree to pay the current finance charge for the right to make a later payment of the outstanding principal balance plus an additional finance charge. In order to renew an installment loan, the customer enters into a new installment loan contract and agrees to pay the principal balance and finance charge in accordance with the terms of the new loan contract. In certain situations, the Company offers forbearance options, such as payment deferrals, on its loan products without the incurrence of additional finance charges or late fees. If a loan is deemed to be current and the customer makes a deferral or payment modification, the loan is still deemed to be current until the next scheduled payment is missed.

The Company generally charges off loans and finance receivables between 60 and 65 days delinquent. If a loan or finance receivable is deemed uncollectible prior to this, it is charged off at that point. For the small business portfolio, the Company generally charges off a loan when it is probable that it will be unable to collect all of the remaining principal payments, which is generally after 90 days of delinquency and 30 days of non-activity. Loans and finance receivables classified as delinquent generally have an age of one to 64 days from the date any portion of the receivable became delinquent, as defined above. Recoveries on loans and finance receivables that were previously charged off are generally recognized when collected or sold.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with Accounting Standards Codification (“ASC”) 350, Goodwill, the Company tests goodwill and intangible assets with an indefinite life for potential impairment annually as of October 1 and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount.

The Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In assessing the qualitative factors, management considers relevant events and circumstances including but not limited to macroeconomic conditions, industry and market environment, overall financial performance of the Company, cash flow from operating activities, market capitalization and stock price. If the Company determines that the quantitative impairment test is required, management uses the income approach to complete its annual goodwill assessment. The income approach uses future cash flows and estimated terminal values for the Company that are discounted using a market participant perspective to determine the fair value, which is then compared to the carrying value to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and economic standpoint.

Revenue Recognition

The Company recognizes revenue based on the financing products and services it offers and on loans it acquires. “Revenue” in the consolidated statements of income includes: interest income, finance charges, fees for services provided through the Company’s CSO program (“CSO fees”), revenue on RPAs, service charges, draw fees, minimum billing fees, purchase fees, origination fees, late fees and non-sufficient funds fees as permitted by applicable laws and pursuant to the agreement with the customer. Interest is generally recognized on an effective yield basis over the contractual term of the loan on installment loans, the estimated outstanding period of the draw on line of credit accounts, or the projected delivery term on RPAs. CSO fees are recognized over the term of the loan. Late and nonsufficient funds fees are recognized when assessed to the customer.

Marketing Expenses

Marketing expenses consist of digital costs, lead purchase costs and offline marketing costs such as television and direct mail advertising. All marketing expenses are expensed as incurred.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Equity Method Investments

In the second quarter of 2022, the Company sold its remaining interest in On Deck Capital Canada Holdings, Inc. (“OnDeck Canada”), which resulted in a net loss of $4.4 million. Prior to this, the Company recorded its interest in OnDeck Canada under the equity method of accounting. As of March 31, 2022 the carrying value of the Company’s investment in OnDeck Canada was $14.3 million, which the Company has included in “Other assets” on the consolidated balance sheets.

On February 24, 2021, the Company contributed the platform-as-service business assumed in the OnDeck acquisition to Linear Financial Technologies Holding LLC (“Linear”) in exchange for ownership units in that entity. The Company records its interest in Linear under the equity method of accounting. As of March 31, 2023 and 2022 and December 31, 2022, the carrying value of the Company’s investment in Linear was $16.0 million, $5.6 million and $18.3 million, respectively, which the Company has included in “Other assets” on the consolidated balance sheets.

In December 2021, the Company sold a portion of its interest in On Deck Capital Australia PTY LTD (“OnDeck Australia”). Prior to this, the Company had consolidated the financial position and results of operations of OnDeck Australia under the voting interest model. Subsequent to the transaction, the Company owns a 20% equity interest in OnDeck Australia and no longer has control over the entity; as such, the Company has deconsolidated OnDeck Australia from its financial statements and now records its interest under the equity method of accounting. As of March 31, 2023 and 2022 and December 31, 2022, the carrying value of the Company’s investment in OnDeck Australia was $1.1 million, $1.6 million and $1.1 million, respectively, which the Company has included in “Other assets” on the consolidated balance sheets.

Equity method income has been included in “Equity method investment income” in the consolidated income statements.

Variable Interest Entities

As part of the Company’s overall funding strategy and as part of its efforts to support its liquidity from varying sources, the Company has established a securitization program through several securitization facilities. The Company transfers certain loan receivables to VIEs, which issue notes backed by the underlying loan receivables and are serviced by another wholly-owned subsidiary of the Company. The cash flows from the loans held by the VIEs are used to repay obligations under the notes.

The Company is required to evaluate the VIEs for consolidation. The Company has the ability to direct the activities of the VIEs that most significantly impact the economic performance of the entities as the servicer of the securitized loan receivables. Additionally, the Company has the right to receive residual payments, which expose it to potentially significant losses and returns. Accordingly, the Company determined it is the primary beneficiary of the VIEs and is required to consolidate them. The assets and liabilities related to the VIEs are included in the Company’s consolidated financial statements and are accounted for as secured borrowings.

2. Loans and Finance Receivables

Revenue generated from the Company’s loans and finance receivables for the three months ended March 31, 2023 and 2022 was as follows (dollars in thousands):


	Three Months Ended
	March 31,
	2023		2022
Consumer loans and finance receivables revenue	$	281,011	$	248,547
Small business loans and finance receivables revenue		194,456		132,594
Total loans and finance receivables revenue		475,467		381,141
Other		7,789		4,590
Total revenue	$	483,256	$	385,731

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Loans and Finance Receivables at Fair Value

The components of Company-owned loans and finance receivables at March 31, 2023 and 2022 and December 31, 2022 were as follows (dollars in thousands):


	As of March 31, 2023
			Small
	Consumer		Business		Total
Principal balance - accrual	$	823,844	$	1,704,336	$	2,528,180
Principal balance - non-accrual		84,243		87,637		171,880
Total principal balance		908,087		1,791,973		2,700,060

Loans and finance receivables at fair value - accrual		1,054,257		1,902,935		2,957,192
Loans and finance receivables at fair value - non-accrual		8,610		37,564		46,174
Loans and finance receivables at fair value		1,062,867		1,940,499		3,003,366
Difference between principal balance and fair value	$	154,780	$	148,526	$	303,306


	As of March 31, 2022
			Small
	Consumer		Business		Total
Principal balance - accrual	$	805,439	$	1,163,477	$	1,968,916
Principal balance - non-accrual		83,218		46,912		130,130
Total principal balance		888,657		1,210,389		2,099,046

Loans and finance receivables at fair value - accrual		926,826		1,274,563		2,201,389
Loans and finance receivables at fair value - non-accrual		7,525		22,970		30,495
Loans and finance receivables at fair value	$	934,351	$	1,297,533	$	2,231,884
Difference between principal balance and fair value	$	45,694	$	87,144	$	132,838


	As of December 31, 2022
			Small
	Consumer		Business		Total
Principal balance - accrual	$	857,682	$	1,656,312	$	2,513,994
Principal balance - non-accrual		108,071		117,099		225,170
Total principal balance		965,753		1,773,411		2,739,164

Loans and finance receivables at fair value - accrual		1,073,100		1,878,253		2,951,353
Loans and finance receivables at fair value - non-accrual		9,962		57,213		67,175
Loans and finance receivables at fair value	$	1,083,062	$	1,935,466	$	3,018,528
Difference between principal balance and fair value	$	117,309	$	162,055	$	279,364

As of March 31, 2023 and 2022 and December 31, 2022, the aggregate fair value of loans and finance receivables that were 90 days or more past due was $5.9 million, $4.3 million and $8.2 million, respectively, of which, $5.7 million, $4.3 million and $8.0 million, respectively, was in non-accrual status. The aggregate unpaid principal balance for loans and finance receivables that were 90 days or more past due was $14.8 million, $9.3 million and $17.9 million, respectively.

Changes in the fair value of Company-owned loans and finance receivables during the three months ended March 31, 2023 and 2022 were as follows (dollars in thousands):


	Three Months Ended March 31, 2023
				Small
	Consumer			Business			Total
Balance at beginning of period	$	1,083,062		$	1,935,466		$	3,018,528
Originations or acquisitions		280,551			770,164			1,050,715
Interest and fees(1)		281,011			194,456			475,467
Repayments		(467,533	)		(879,183	)		(1,346,716	)
Charge-offs, net(2)		(156,272	)		(76,215	)		(232,487	)
Net change in fair value(2)		41,621			(4,189	)		37,432
Effect of foreign currency translation		427			—			427
Balance at end of period	$	1,062,867		$	1,940,499		$	3,003,366

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	Three Months Ended March 31, 2022
				Small
	Consumer			Business			Total
Balance at beginning of period	$	890,144		$	1,074,546		$	1,964,690
Originations or acquisitions		362,809			658,741			1,021,550
Interest and fees(1)		248,547			132,594			381,141
Repayments		(451,822	)		(569,486	)		(1,021,308	)
Charge-offs, net(2)		(137,224	)		(20,860	)		(158,084	)
Net change in fair value(2)		20,457			21,998			42,455
Effect of foreign currency translation		1,440			—			1,440
Balance at end of period	$	934,351		$	1,297,533		$	2,231,884

(1) Included in “Revenue” in the consolidated statements of income.

(2) Included in “Change in Fair Value” in the consolidated statements of income.

Guarantees of Consumer Loans

In connection with its CSO program, the Company guarantees consumer loan payment obligations to an unrelated third-party lender for consumer loans and is required to purchase any defaulted loans it has guaranteed. The guarantee represents an obligation to purchase specific loans that go into default. As of March 31, 2023 and 2022 and December 31, 2022, the consumer loans guaranteed by the Company had an estimated fair value of $13.9 million, $14.4 million and $16.3 million, respectively, and an outstanding principal balance of $10.5 million, $10.0 million and $12.9 million, respectively. As of March 31, 2023 and 2022 and December 31, 2022, the amount of consumer loans, including principal, fees and interest, guaranteed by the Company were $12.8 million, $11.9 million and $15.6 million, respectively. These loans are not included in the consolidated balance sheets as the Company does not own the loans prior to default.

3. Leases

The Company has operating leases primarily for its corporate headquarters, other offices located in the U.S. and certain equipment. The Company’s leases have remaining lease terms of less than one year to twelve years. Certain leases include options to extend the leases for up to five years, while others include options to terminate the leases within one year. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. All other operating leases are recorded on the consolidated balance sheet with right-of-use assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The right-of-use assets represent the lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received. If a lease does not provide an implicit rate, the Company uses its incremental secured borrowing rate, adjusted for the maturity date, based on information available at the commencement date in determining the present value of lease payments. Lease agreements with lease and non-lease components are accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in general and administrative expense.

During the first quarter of 2023, the Company entered into the third amendment to the lease (the “Amendment”) for its headquarters in Chicago. The Amendment, among other changes, will result in the surrender of a portion of space currently leased by the Company, the addition of remaining space on a separate floor that is currently partially occupied by the Company, a change to the base rent schedule and an extension of the lease term from August 2027 to February 2035. As a result of the Amendment, the Company recognized an adjustment to decrease both its operating lease liability and operating lease right of use asset balances by $7.9 million and recognized a $1.7 million loss on the impairment of leasehold improvement assets related to the surrendered space that have no future utility.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Lease expenses for the three months ended March 31, 2023 and 2022 were as follows (in thousands):


	Three Months Ended
	March 31,
	2023			2022
Operating lease cost	$	1,570		$	1,812
Variable lease cost		234			97
Short-term lease cost		251			44
Sublease income		(57	)		(82	)
Total lease cost	$	1,998		$	1,871

Future minimum lease payments as of March 31, 2023 are as follows (in thousands):


Year	Amount
2023	$	4,674
2024		3,341
2025		3,401
2026		3,425
2027		4,088
Thereafter		21,113
Total lease payments	$	40,042
Less: interest		14,347
Present value of lease liabilities	$	25,695

The weighted average remaining lease term and discount rate as of March 31, 2023 and 2022 were as follows:


	March 31,						December 31,
	2023			2022			2022
Weighted average remaining lease term (years)
Operating leases		8.5			5.1			4.5
Weighted average discount rate
Operating leases		8.93	%		9.97	%		10.12	%

Supplemental cash flow disclosures related to leases for the three months ended March 31, 2023 and 2022 were as follows (in thousands):


	Three Months Ended
	March 31,
	2023			2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,613		$	2,862
Noncash transactions related to adjustments to lease liability and right-of-use asset
Operating leases		(6,147	)		—

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

4. Long-term debt

The Company’s long-term debt instruments and balances outstanding as of March 31, 2023 and 2022 and December 31, 2022, including maturity date, weighted average interest rate and borrowing capacity as of March 31, 2023, were as follows (dollars in thousands):


			Weighted				Outstanding
			average	Borrowing			March 31,						December 31,
	Maturity date		interest rate(1)	capacity			2023			2022			2022
Funding Debt:
2018-1 Securitization Facility	March 2027	(2)	8.77%	$	200,000		$	—		$	150,000		$	192,717
2018-2 Securitization Facility	July 2025	(3)	8.88%		225,000			142,200			175,000			179,654
2019-A Securitization Notes	June 2026		—		—			—			11,534			—
NCR 2022 Securitization Facility	October 2026	(4)	9.44%		125,000			51,095			—			43,958
ODR 2021-1 Securitization Facility	November 2024	(5)	7.59%		233,333			197,167			62,000			197,167
ODR 2022-1 Securitization Facility	June 2025	(6)	7.79%		420,000			282,000			—			187,000
RAOD Securitization Facility	November 2025	(7)	7.47%		230,263			230,263			177,631			230,263
ODAST III Securitization Notes	May 2027	(8)	2.07%		300,000			300,000			300,000			300,000
2023-A Securitization Notes	December 2027		7.78%		170,014			170,014			—			—
Total funding debt			6.63%	$	1,903,610		$	1,372,739		$	876,165		$	1,330,759
Corporate Debt:
8.50% Senior Notes Due 2024	September 2024		8.50%	$	206,205		$	206,205		$	250,000		$	250,000
8.50% Senior Notes Due 2025	September 2025		8.50%		375,000			375,000			375,000			375,000
Revolving line of credit	June 2026		8.29%		440,000	(9)		369,000			204,000			309,000
Total corporate debt			8.42%	$	1,021,205		$	950,205		$	829,000		$	934,000
Less: Long-term debt issuance costs							$	(6,134	)	$	(6,981	)	$	(5,112	)
Less: Debt discounts								(2,429	)		(1,433	)		(987	)
Total long-term debt							$	2,314,381		$	1,696,751		$	2,258,660

(1) The weighted average interest rate is determined based on the rates and principal balances on March 31, 2023. It does not include the impact of the amortization of deferred loan origination costs or debt discounts.

(2) The period during which new borrowings may be made under this facility expires in March 2025.

(3) The period during which new borrowings may be made under this facility expires in July 2023.

(4) The period during which new borrowings may be made under this facility expires in October 2024.

(5) The period during which new borrowings may be made under this facility expires in November 2023.

(6) The period during which new borrowings may be made under this facility expires in June 2024.

(7) The period during which new borrowings may be made under this facility expires in November 2024.

(8) The period during which new borrowings may be made under this facility expires in April 2024.

(9) The Company had outstanding letters of credit under the Revolving line of credit of $0.8 million as of each of the periods ended March 31, 2023 and 2022 and December 31, 2022.

Weighted average interest rates on long-term debt were 7.84% and 5.92% during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and 2022 and December 31, 2022, the Company was in compliance with all covenants and other requirements set forth in the prevailing long-term debt agreements.

Recent Updates to Debt Facilities

2023-A Notes

On March 3, 2023 (the “2023-A Closing Date”), the Company issued $170.0 million in aggregate principal notes (the “2023-A Notes”) through an indirect subsidiary, NetCredit Combined Receivables 2023, LLC (the “Issuer”). The 2023-A Notes were sold at a discount of the principal amount to yield 9.00% to expected maturity (equivalent to 3.975% spread above interpolated U.S. Treasuries) and are backed by a pool of unsecured consumer installment loans (“Securitization Receivables”). The 2023-A Notes represent obligations of the Issuer only and are not guaranteed by the Company. Under the 2023-A Notes, approximately $200.0 million of Securitization Receivables have been sold to a wholly-owned subsidiary of the Company and serviced by another subsidiary of the Company.

The net proceeds of the offering of the 2023-A Notes on the 2023-A Closing Date were used to acquire the Securitization Receivables from certain subsidiaries of the Company, fund a reserve account and pay fees and expenses incurred in connection with the transaction.

The 2023-A Notes were offered only to “qualified institutional buyers” pursuant to Rule 144A under the Securities Act and to certain persons outside of the United States in compliance with Regulation S under the Securities Act.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

8.50% Senior Notes Due 2024

During the three months ended March 31, 2023, the Company repurchased $43.8 million principal amount of the 8.50% Senior Notes Due 2024 for aggregate cash consideration of $43.6 million plus accrued interest. In connection with these purchases, the Company recorded a loss on extinguishment of debt of $0.1 million ($0.1 million, net of tax), which is included in “Other nonoperating expenses” in the consolidated statements of income.

5. Income Taxes

The Company’s effective tax rate for the three months ended March 31, 2023 was 22.4%, compared to 23.2% for the three months ended March 31, 2022. The decrease is primarily attributable to larger excess tax benefits on stock compensation due to stock price appreciation.

As of March 31, 2023, the balance of unrecognized tax benefits was $94.4 million, which is included in “Accounts payable and accrued expenses” on the consolidated balance sheet, $12.6 million of which, if recognized, would favorably affect the effective tax rate in the period of recognition. The Company had $57.1 million and $87.7 million of unrecognized tax benefits as of March 31, 2022 and December 31, 2022, respectively. The Company believes that it has adequately accounted for any material tax uncertainties in its existing reserves for all open tax years.

The Company’s U.S. tax returns are subject to examination by federal and state taxing authorities. The statute of limitations related to the Company’s consolidated Federal income tax returns is closed for all tax years up to and including 2018. However, the 2014 tax year is still open to the extent of the net operating loss that was carried back from the 2019 tax return. The years open to examination by state, local and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three years from the date the tax return is filed. For jurisdictions that have generated net operating losses, carryovers may be subject to the statute of limitations applicable for the year those carryovers are utilized. In these cases, the period for which the losses may be adjusted will extend to conform with the statute of limitations for the year in which the losses are utilized. In most circumstances, this is expected to increase the length of time that the applicable taxing authority may examine the carryovers by one year or longer, in limited cases.

6. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the period. Restricted stock units issued under the Company’s stock-based employee compensation plans are included in diluted shares upon the granting of the awards even though the vesting of shares will occur over time.

The following table sets forth the reconciliation of numerators and denominators of basic and diluted earnings per share computations for the three months ended March 31, 2023 and 2022 (in thousands, except per share amounts):


	Three Months Ended
	March 31,
	2023		2022
Numerator:
Net income	$	50,923	$	52,443
Denominator:
Total weighted average basic shares		31,341		33,374
Shares applicable to stock-based compensation		1,370		1,508
Total weighted average diluted shares		32,711		34,882
Earnings per common share:
Earnings per common share – basic	$	1.62	$	1.57
Earnings per common share – diluted	$	1.56	$	1.50

For the three months ended March 31, 2023 and 2022, 339,765 and 225,419 shares of common stock underlying stock options, respectively, and 346,194 and 285,887 shares of common stock underlying restricted stock units, respectively, were excluded from the calculation of diluted net income per share because their effect would have been antidilutive.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

7. Operating Segment Information

The Company provides or had provided online financial services to non-prime credit consumers and small businesses in the United States, Australia and Brazil and has one reportable segment. The Company has aggregated all components of its business into a single operating segment based on the similarities of the economic characteristics, the nature of the products and services, the nature of the production and distribution methods, the shared technology platforms, the type of customer and the nature of the regulatory environment.

Geographic Information

The following table presents the Company’s revenue by geographic region for the three months ended March 31, 2023 and 2022 (dollars in thousands):


	Three Months Ended
	March 31,
	2023		2022
Revenue
United States	$	479,053	$	382,156
Other international countries		4,203		3,575
Total revenue	$	483,256	$	385,731

The Company’s long-lived assets, which consist of the Company’s property and equipment, were $95.4 million, $81.0 million and $93.2 million at March 31, 2023 and 2022 and December 31, 2022, respectively. The operations for the Company’s businesses are primarily located within the United States, and the value of any long-lived assets located outside of the United States is immaterial.

8. Commitments and Contingencies

Litigation

On April 23, 2018, the Commonwealth of Virginia, through Attorney General Mark R. Herring, filed a lawsuit in the Circuit Court for the County of Fairfax, Virginia against NC Financial Solutions of Utah, LLC (“NC Utah”), a subsidiary of the Company. The lawsuit alleges violations of the Virginia Consumer Protection Act (“VCPA”) relating to NC Utah’s communications with customers, collections of certain payments, its loan agreements, and the rates it charged to Virginia borrowers. The plaintiff sought to enjoin NC Utah from continuing its then-existing lending practices in Virginia, and still seeks restitution, civil penalties, and costs and expenses in connection with the same. Due to a change in the law, NC Utah no longer lends to Virginia residents and the injunctive remedies sought against NC Utah’s lending practices are no longer applicable. Neither the likelihood of an unfavorable decision nor the ultimate liability, if any, with respect to this matter can be determined at this time, and the Company is currently unable to estimate a range of reasonably possible losses, as defined by ASC 450-20-20, Contingencies–Loss Contingencies–Glossary, for this litigation. The Company carefully considered applicable Virginia law before NC Utah began lending in Virginia and, as a result, believes that the Plaintiff’s claims in the complaint are without merit and intends to vigorously defend this lawsuit.

The Company is also involved in certain routine legal proceedings, claims and litigation matters encountered in the ordinary course of its business. Certain of these matters may be covered to an extent by insurance or by indemnification agreements with third parties. The Company has recorded accruals in its consolidated financial statements for those matters in which it is probable that it has incurred a loss and the amount of the loss, or range of loss, can be reasonably estimated. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.

9. Related Party Transactions

In October 2019, the Company announced its intent to exit its operations in the U.K. market, and Grant Thornton LLP, a licensed U.K. insolvency practitioner, was appointed as administrators (“Administrators”) to take control of management of the U.K. businesses. The effect of the U.K. businesses’ entry into administration was to place their management, affairs, business and property under the direct control of the Administrators. The Company entered into a service agreement with the Administrators under which the Company provided certain administrative, technical and other services in exchange for compensation by the Administrators. The agreement expired on July 8, 2022 and was not extended beyond that date. During the three months ended March 31, 2022, the Company recorded $0.2 million in revenue related to these services. As of March 31, 2022 the Administrators owed the Company $0.3 million related to services provided.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

In the second quarter of 2022, the Company sold its remaining interest in OnDeck Canada. Prior to this, the Company recorded its interest in OnDeck Canada under the equity method of accounting; as such, OnDeck Canada was deemed a related party. As of March 31, 2022, the Company had a due from affiliate balance of $1.3 million related to OnDeck Canada that was primarily the result of labor and software charges from people and technology assets at the OnDeck parent company.

On February 24, 2021, the Company contributed the platform-as-service business assumed in the OnDeck acquisition to Linear in exchange for ownership units in that entity. The Company records its interest in Linear under the equity method of accounting. As of March 31, 2023 and 2022 and December 31, 2022, there was no outstanding balance between Linear and the Company.

In December 2021, the Company divested a portion of its interest in OnDeck Australia and began recording its remaining interest utilizing the equity method of accounting. As of March 31, 2023 and 2022 and December 31, 2022, the Company had a due from affiliate balance of $0.2 million, $0.1 million and $0.2 million, respectively, related to OnDeck Australia.

10. Fair Value Measurements

Recurring Fair Value Measurements

The Company uses a hierarchical framework that prioritizes and ranks the market observability of inputs used in its fair value measurements. Market price observability is affected by a number of factors, including the type of asset or liability and the characteristics specific to the asset or liability being measured. Assets and liabilities with readily available, active, quoted market prices or for which fair value can be measured from actively quoted prices generally are deemed to have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The Company classifies the inputs used to measure fair value into one of three levels as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable.

Level 3: Unobservable inputs for the asset or liability measured.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level of input that is significant to the entire measurement. Such determination requires significant management judgment.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

During the three months ended March 31, 2023 and 2022, there were no transfers of assets or liabilities in or out of Level 3 fair value measurements. It is the Company’s policy to value any transfers between levels of the fair value hierarchy based on end of period fair values.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023 and 2022 and December 31, 2022 are as follows (dollars in thousands):


	March 31,		Fair Value Measurements Using
	2023		Level 1		Level 2		Level 3
Financial assets:
Consumer loans and finance receivables(1)(2)	$	1,062,867	$	—	$	—	$	1,062,867
Small business loans and finance receivables(1)(2)		1,940,499		—		—		1,940,499
Non-qualified savings plan assets(3)		7,168		7,168		—		—
Investment in trading security(4)		15,506		15,506		—		—
Total	$	3,026,040	$	22,674	$	—	$	3,003,366

	March 31,		Fair Value Measurements Using
	2022		Level 1		Level 2		Level 3
Financial assets:
Consumer loans and finance receivables(1)(2)	$	934,351	$	—	$	—	$	934,351
Small business loans and finance receivables(1)(2)		1,297,533		—		—		1,297,533
Non-qualified savings plan assets(3)		6,358		6,358		—		—
Investment in trading security(4)		18,614		18,614		—		—
Total	$	2,256,856	$	24,972	$	—	$	2,231,884

	December 31,		Fair Value Measurements Using
	2022		Level 1		Level 2		Level 3
Financial assets:
Consumer loans and finance receivables(1)(2)	$	1,083,062	$	—	$	—	$	1,083,062
Small business loans and finance receivables(1)(2)		1,935,466		—		—		1,935,466
Non-qualified savings plan assets(3)		5,884		5,884		—		—
Investment in trading security(4)		17,406		17,406		—		—
Total	$	3,041,818	$	23,290	$	—	$	3,018,528

(1) Consumer and small business loans and finance receivables are included in “Loans and finance receivables at fair value” in the consolidated balance sheets.

(2) Consumer loans and finance receivables include $460.5 million, $432.5 million and $528.8 million in assets of consolidated VIEs as of March 31, 2023 and 2022 and December 31, 2022, respectively. Small business loans and finance receivables include $1,315.2 million, $668.0 million and $1,170.9 million in assets of consolidated VIEs as of March 31, 2023 and 2022 and December 31, 2022, respectively.

(3) The non-qualified savings plan assets are included in “Other receivables and prepaid expenses” in the Company’s consolidated balance sheets and have an offsetting liability, which is included in “Accounts payable and accrued expenses” in the Company’s consolidated balance sheets.

(4) Investment in trading security is included in “Other assets” in the Company’s consolidated balance sheets.

The Company primarily estimates the fair value of its loan and finance receivables portfolio using discounted cash flow models that have been internally developed. The models use inputs, such as estimated losses, prepayments, utilization rates, servicing costs and discount rates, that are unobservable but reflect the Company’s best estimates of the assumptions a market participant would use to calculate fair value. Certain unobservable inputs may, in isolation, have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. An increase to the net loss rate, prepayment rate, servicing cost, or discount rate would decrease the fair value of the Company’s loans and finance receivables. When multiple inputs are used within the valuation techniques for loans, a change in one input in a certain direction may be offset by an opposite change from another input.

The fair value of the nonqualified savings plan assets was deemed Level 1 as they are publicly traded equity securities for which market prices of identical assets are readily observable.

The fair value of the investment in trading security was deemed Level 1 as it is a publicly traded fund with active market pricing that is readily available.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Company had no liabilities measured at fair value on a recurring basis as of March 31, 2023 and 2022 and December 31, 2022.

Fair Value Measurements on a Non-Recurring Basis

The Company measures non-financial assets and liabilities such as property and equipment and intangible assets at fair value on a non-recurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired. At March 31, 2023 and 2022 and December 31, 2022, there were no assets or liabilities recorded at fair value on a non-recurring basis.

Financial Assets and Liabilities Not Measured at Fair Value

The Company’s financial assets and liabilities as of March 31, 2023 and 2022 and December 31, 2022 that are not measured at fair value in the consolidated balance sheets are as follows (dollars in thousands):


	Balance at
	March 31,		Fair Value Measurements Using
	2023		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	97,680	$	97,680	$	—	$	—
Restricted cash (1)		190,713		190,713		—		—
Investment in unconsolidated investee (2)		6,918		—		—		6,918
Total	$	295,311	$	288,393	$	—	$	6,918
Financial liabilities:
Revolving line of credit	$	369,000	$	—	$	—	$	369,000
Securitization notes		1,370,310		—		1,348,595		—
8.50% senior notes due 2024		206,205		—		203,130		—
8.50% senior notes due 2025		375,000		—		355,410		—
Total	$	2,320,515	$	—	$	1,907,135	$	369,000


	Balance at
	March 31,		Fair Value Measurements Using
	2022		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	131,692	$	131,692	$	—	$	—
Restricted cash (1)		96,150		96,150		—		—
Investment in unconsolidated investee (2)		6,918		—		—		6,918
Total	$	234,760	$	227,842	$	—	$	6,918
Financial liabilities:
Revolving line of credit	$	204,000	$	—	$	—	$	204,000
Securitization notes		874,732		—		861,264		—
8.50% senior notes due 2024		250,000		—		248,595		—
8.50% senior notes due 2025		375,000		—		373,335		—
Total	$	1,703,732	$	—	$	1,483,194	$	204,000

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	Balance at
	December 31,		Fair Value Measurements Using
	2022		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	100,165	$	100,165	$	—	$	—
Restricted cash (1)		78,235		78,235		—		—
Investment in unconsolidated investee (2)		6,918		—		—		6,918
Total	$	185,318	$	178,400	$	—	$	6,918
Financial liabilities:
Revolving line of credit	$	309,000	$	—	$	—	$	309,000
Securitization notes		1,329,772		—		1,304,702		—
8.50% senior notes due 2024		250,000		—		237,185		—
8.50% senior notes due 2025		375,000		—		346,523		—
Total	$	2,263,772	$	—	$	1,888,410	$	309,000

(1) Restricted cash includes $174.9 million, $81.9 million and $65.5 million in assets of consolidated VIEs as of March 31, 2023 and 2022 and December 31, 2022, respectively.

(2) Investment in unconsolidated investee is included in “Other assets” in the consolidated balance sheets.

Cash and cash equivalents and restricted cash bear interest at market rates and have maturities of less than 90 days. The carrying amount of restricted cash and cash equivalents approximates fair value.

The Company measures the fair value of its investment in unconsolidated investee using Level 3 inputs. Because the unconsolidated investee is a private company and financial information is limited, the Company estimates the fair value based on the best available information at the measurement date.

The Company measures the fair value of its revolving line of credit using Level 3 inputs. The Company considered the fair value of its other long-term debt and the timing of expected payment(s).

The fair values of the Company’s Securitization Notes and senior notes are estimated based on quoted prices in markets that are not active, which are deemed Level 2 inputs.

11. Subsequent Events

Subsequent events have been reviewed through the date these financial statements were issued.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of financial condition, results of operations, liquidity and capital resources and certain factors that may affect future results, including economic and industry-wide factors, of Enova International, Inc. and its subsidiaries should be read in conjunction with our consolidated financial statements and accompanying notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Please see “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

BUSINESS OVERVIEW

We are a leading technology and analytics company focused on providing online financial services. In 2022, we extended approximately $4.5 billion in credit or financing to borrowers and for the three months ended March 31, 2023, we extended approximately $1.1 billion in credit or financing to borrowers. As of March 31, 2023, we offered or arranged loans or draws on lines of credit to consumers in 37 states in the United States and Brazil. We also offered financing to small businesses in 47 states and Washington D.C. in the United States. We use our proprietary technology, analytics and customer service capabilities to quickly evaluate, underwrite and fund loans or provide financing, allowing us to offer consumers and small businesses credit or financing when and how they want it. Our customers include the large and growing number of consumers who and small businesses which have bank accounts but use alternative financial services because of their limited access to more traditional credit from banks, credit card companies and other lenders. We were an early entrant into online lending, launching our online business in 2004, and through March 31, 2023, we have completed approximately 58.4 million customer transactions and collected more than 60 terabytes of currently accessible customer behavior data since launch, allowing us to better analyze and underwrite our specific customer base. We have significantly diversified our business over the past several years having expanded the markets we serve and the financing products we offer. These financing products include installment loans and line of credit accounts.

We believe our customers highly value our products and services as an important component of their personal or business finances because our products are convenient, quick and often less expensive than other available alternatives. We attribute the success of our business to our advanced and innovative technology systems, the proprietary analytical models we use to predict the performance of loans and finance receivables, our sophisticated customer acquisition programs, our dedication to customer service and our talented employees.

We have developed proprietary underwriting systems based on data we have collected over our more than 18 years of experience. These systems employ advanced risk analytics, including machine learning and artificial intelligence, to decide whether to approve financing transactions, to structure the amount and terms of the financings we offer pursuant to jurisdiction-specific regulations and to provide customers with their funds quickly and efficiently. Our systems closely monitor collection and portfolio performance data that we use to continually refine machine learning-enabled analytical models and statistical measures used in making our credit, purchase, marketing and collection decisions. Approximately 90% of models used in our analytical environment are machine learning-enabled.

Our flexible and scalable technology platforms allow us to process and complete customers’ transactions quickly and efficiently. In 2022, we processed approximately 2.5 million transactions, and we continue to grow our loans and finance receivable portfolios and increase the number of customers we serve through desktop, tablet and mobile platforms. Our highly customizable technology platforms allow us to efficiently develop and deploy new products to adapt to evolving regulatory requirements and consumer preference, and to enter new markets quickly. In 2012, we launched a new product in the United States designed to serve near-prime customers. In 2014, we launched our business in Brazil, where we arrange financing for borrowers through a third-party lender, and we introduced a new line of credit product in the United States to serve the needs of small businesses. In 2015, we further expanded our product offering by acquiring certain assets of a company that provides financing and installment loans to small businesses by offering receivables purchase agreements ("RPAs"). In October 2020, we acquired, through a merger, On Deck Capital Inc. (“OnDeck”), a small business lending company offering lending and funding solutions to small businesses in the U.S., Australia and Canada, to expand our small business offerings. In March 2021, we acquired Pangea Universal Holdings (“Pangea”), which provides mobile international money transfer services to customers in the U.S with a focus on Latin America and Asia. These new products have allowed us to further diversify our product offerings and customer base.

We have been able to consistently acquire new customers and successfully generate repeat business from returning customers when they need financing. We believe our customers are loyal to us because they are satisfied with our products and services. We acquire new customers from a variety of sources, including visits to our own websites, mobile sites or applications, and through direct marketing,

affiliate marketing, lead providers and relationships with other lenders. We believe that the online convenience of our products and our 24/7 availability to accept applications with quick approval decisions are important to our customers.

Once a potential customer submits an application, we quickly provide a credit or purchase decision. If a loan or financing is approved, we or our lending partner typically fund the loan or financing the next business day or, in some cases, the same day. During the entire process, from application through payment, we provide access to our well-trained customer service team. All of our operations, from customer acquisition through collections, are structured to build customer satisfaction and loyalty, in the event that a customer has a need for our products in the future. We have developed a series of sophisticated proprietary scoring models to support our various products. We believe that these models are an integral component of our operations and allow us to complete a high volume of customer transactions while actively managing risk and the related credit quality of our loan and finance receivable portfolios. We believe our successful application of these technological innovations differentiates our capabilities relative to competing platforms as evidenced by our history of strong growth and stable credit quality.

PRODUCTS AND SERVICES

Our online financing products and services provide customers with a deposit of funds to their bank account in exchange for a commitment to repay the amount deposited plus fees and interest. We originate, arrange, guarantee or purchase installment loans and line of credit accounts to consumers and small businesses. We have one reportable segment that includes all of our online financial services.

•

Installment loans. Certain subsidiaries (i) directly offer installment loans, (ii) as part of our Bank Programs, purchase or purchase a participating interest in, installment loans or (iii) as part of our CSO program, arrange and guarantee installment loans, as discussed below. Certain subsidiaries offer, or arrange through our Bank Programs and CSO program, unsecured consumer installment loan products in 37 states in the United States and small business installment loans in 47 states and in Washington D.C. Internationally, we also offer or arrange unsecured consumer installment loan products in Brazil. Terms for our installment loan products range between two and 60 months. Loans may be repaid early at any time with no additional prepayment charges.

•

Line of credit accounts. Certain subsidiaries directly offer, or purchase a participation interest in receivables through our Bank Programs, new consumer line of credit accounts in 31 states (and continue to service existing line of credit accounts in two additional states) in the United States and business line of credit accounts in 47 states and in Washington D.C. in the United States, which allow customers to draw on their unsecured line of credit in increments of their choosing up to their credit limit. Customers may pay off their account balance in full at any time or make required minimum payments in accordance with the terms of the line of credit account. As long as the customer’s account is in good standing and has credit available, customers may continue to borrow on their line of credit.

•

CSO program. We currently operate a credit services organization or credit access business ("CSO") program in Texas. Through our CSO program, we provide services related to a third-party lender’s installment consumer loan products by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws. Services offered under our CSO program include credit-related services such as arranging loans with an independent third-party lender and assisting in the preparation of loan applications and loan documents (“CSO loans”). When a consumer executes an agreement with us under our CSO program, we agree, for a fee payable to us by the consumer, to provide certain services, one of which is to guarantee the consumer’s obligation to repay the loan received by the consumer from the third-party lender if the consumer fails to do so. For CSO loans, the lender is responsible for providing the criteria by which the consumer’s application is underwritten and, if approved, determining the amount of the consumer loan. We, in turn, are responsible for assessing whether or not we will guarantee such loan. The guarantee represents an obligation to purchase the loan, which has terms of up to six months, if it goes into default.

•

Bank programs. Certain subsidiaries operate programs with certain banks to provide marketing services and loan servicing for near-prime unsecured consumer installment loans and, beginning in January 2021, line of credit accounts. Under the programs, those subsidiaries receive marketing and servicing fees. The bank has the ability to sell, and the participating subsidiaries have the option, but not the requirement, to purchase, the loans or a participating interest in receivables the bank originates. We do not guarantee the performance of the loans and line of credit accounts originated by the bank. As part of the OnDeck business both prior and subsequent to Enova’s acquisition, OnDeck operates a program with a separate bank to provide marketing services and loan servicing for small business installment loans and line of credit accounts. Under the OnDeck program, we receive marketing fees while the bank receives origination fees and certain program fees. The bank has the ability to sell and we have the option, but not the requirement, to purchase the installment loans the bank originates and, in the case of line of credit accounts, extensions under those line of credit accounts. We do not guarantee the performance of the loans or line of credit accounts originated by the bank.

•

Money transfer business. Through the acquisition of Pangea, we operate a money transfer platform that allows customers to send money from the United States to Mexico, other Latin American countries and Asia. The customer pays us in U.S. dollars, and we

then make local currency available to the intended recipient of the transfer in one of many termination countries. Our revenue model includes a fee per transfer and an exchange rate spread. Our customers can access our proprietary platform via the website, Android app, or iOS (Apple) app.

OUR MARKETS

We currently provide our services in the following countries:

•

United States. We began our online business in the United States in May 2004. As of March 31, 2023, we provided services in all 50 states and Washington D.C. We market our financing products under the names CashNetUSA at www.cashnetusa.com, NetCredit at www.netcredit.com, OnDeck at www.ondeck.com, Headway Capital at www.headwaycapital.com and Pangea at www.pangeamoneytransfer.com.

•

Brazil. In June 2014, we launched our business in Brazil under the name Simplic at www.simplic.com.br, where we arrange unsecured consumer installment loans for a third-party lender. We plan to continue to invest in and expand our financial services program in Brazil.

Our internet websites and the information contained therein or connected thereto are not intended to be incorporated by reference into this Quarterly Report on Form 10-Q.

RECENT REGULATORY DEVELOPMENTS

Consumer Financial Protection Bureau (“CFPB”)

On May 24, 2021, we received a Civil Investigative Demand (“CID”) from the CFPB concerning certain loan processing issues. We cooperated fully with the CFPB and provided all requested data and information in response to the CID. We anticipate being able to expeditiously complete the investigation as several of the issues were self‐disclosed and we have provided restitution to customers who may have been negatively impacted. We received a second CID in April 2022 requesting additional information. We have provided all requested information in response to the CID.

On October 6, 2017, the CFPB issued its final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the “Small Dollar Rule”), which covers certain consumer loans that we offer. The Small Dollar Rule requires that lenders who make short-term loans and longer-term loans with balloon payments reasonably determine consumers’ ability to repay the loans according to their terms before issuing the loans. The Small Dollar Rule also introduces new limitations on repayment processes for those lenders as well as lenders of other longer-term loans with an annual percentage rate greater than 36 percent that include an ACH authorization or similar payment provision. If a consumer has two consecutive failed payment attempts, the lender must obtain the consumer’s new and specific authorization to make further withdrawals from the consumer’s bank account. For loans covered by the Small Dollar Rule, lenders must provide certain notices to consumers before attempting a first payment withdrawal or an unusual withdrawal and after two consecutive failed withdrawal attempts. On June 7, 2019, the CFPB issued a final rule to set the compliance date for the mandatory underwriting provisions of the Small Dollar Rule to November 19, 2020. On July 7, 2020, the CFPB issued a final rule rescinding the ability-to-repay (“ATR”) provisions of the Small Dollar Rule along with related provisions, such as the establishment of registered information systems for checking ATR and reporting loan activity. The payment provisions of the Small Dollar Rule remain in place. In April 2018, an action was filed against the CFPB making a constitutional challenge to the Small Dollar Rule. On October 19, 2022, a three-judge panel of the Fifth Circuit U.S. Circuit Court of Appeals ruled that the funding structure of the CFPB is unconstitutional and vacated the Small Dollar Rule. On November 14, 2022, the CFPB filed a Petition for Writ of Certiorari with the U.S. Supreme Court to review the Fifth Circuit ruling. The Supreme Court granted the Petition on February 27, 2023 but declined to expedite the proceeding. If the Small Dollar Rule does become effective in its current proposed form, we will need to make certain changes to our payment processes and customer notifications in our U.S. consumer lending business.

On March 30, 2023, the CFPB issued its final rule to implement Section 1071 of the Dodd-Frank Act. Section 1071 amended the Equal Credit Opportunity Act to require financial institutions to collect and report certain data in connection with credit applications made by small businesses, including women- or minority-owned small businesses, and applies to small-business loans that we offer. For loans covered by the small business lending rule, a “covered lender” will be required to collect and report on certain information pursuant to an application for credit. Section 1071 requires covered lenders to collect and report information the financial institution generates and information obtained from the applicant, including the applicant’s minority-owned business status, women-owned business status and LGBTQI+-owned status and the applicant’s principal owners’ ethnicity, race and sex, and expressly prohibits a financial institution from discouraging an applicant from responding to requests for applicant-provided data. We anticipate that we will be required to begin collecting data on October 1, 2024 and report 2024 data by June 1, 2025.

New Mexico HB 132

On February 15, 2022, the New Mexico Legislature passed HB 132. The bill imposes a 36% rate cap on loans up to $10,000. Additionally, HB 132 provides for the application of a predominant economic interest test for bank service arrangements whereby a broker or servicer with a predominant economic interest in a loan is considered to be the “true lender” for purposes of applying the 36% rate cap. The New Mexico Governor signed the bill into law on March 1, 2022. The law took effect on January 1, 2023.

RESULTS OF OPERATIONS

Highlights

Our financial results for the three-month period ended March 31, 2023, or the current quarter, are summarized below.

•

Consolidated total revenue increased $97.6 million, or 25.3%, to $483.3 million in the current quarter compared to $385.7 million for the three months ended March 31, 2022, or the prior year quarter.

•

Consolidated net revenue was $285.9 million compared to $268.7 million in the prior year quarter.

•

Consolidated income from operations increased $18.5 million, or 20.4%, to $109.3 million in the current quarter, compared to $90.8 million in the prior year quarter.

•

Consolidated net income was $50.9 million in the current quarter compared to $52.4 million in the prior year quarter. Consolidated diluted income per share was $1.56 in the current quarter compared to $1.50 in the prior year quarter.

Overview

The following tables reflect our results of operations for the periods indicated, both in dollars and as a percentage of total revenue (dollars in thousands, except per share data):


	Three Months Ended March 31,
	2023			2022
Revenue
Loans and finance receivables revenue	$	475,467		$	381,141
Other		7,789			4,590
Total Revenue		483,256			385,731
Change in Fair Value		(197,366	)		(117,042	)
Net Revenue		285,890			268,689
Operating Expenses
Marketing		79,755			93,171
Operations and technology		49,169			40,730
General and administrative		37,158			34,528
Depreciation and amortization		10,540			9,514
Total Operating Expenses		176,622			177,943
Income from Operations		109,268			90,746
Interest expense, net		(43,321	)		(22,483	)
Foreign currency transaction loss		(171	)		(314	)
Equity method investment (loss) income		(6	)		328
Other nonoperating expenses		(133	)		—
Income before Income Taxes		65,637			68,277
Provision for income taxes		14,714			15,834
Net income	$	50,923		$	52,443
Earnings per common share - diluted	$	1.56		$	1.50

Revenue
Loans and finance receivables revenue		98.4	%		98.8	%
Other		1.6			1.2
Total Revenue		100.0			100.0
Change in Fair Value		(40.8	)		(30.3	)
Net Revenue		59.2			69.7
Operating Expenses
Marketing		16.5			24.2
Operations and technology		10.2			10.6
General and administrative		7.7			8.9
Depreciation and amortization		2.2			2.5
Total Operating Expenses		36.6			46.2
Income from Operations		22.6			23.5
Interest expense, net		(9.0	)		(5.8	)
Foreign currency transaction loss		—			(0.1	)
Equity method investment income		—			0.1
Other nonoperating expenses		—			—
Income before Income Taxes		13.6			17.7
Provision for income taxes		3.0			4.1
Net income		10.5	%		13.6	%

Valuation of Loans and Finance Receivables

We carry our loans and finance receivables at fair value with changes in fair value recognized directly in earnings. We estimate the fair value of our loans and finance receivables primarily using discounted cash flow analyses to more accurately predict future payments. We adjust contractual cash flows for estimated losses, prepayments and servicing costs over the estimated duration of the underlying assets and discount the future cash flows using a rate of return that we believe a market participant would require. Model results may be adjusted by management if we do not believe the output reflects the fair value of the portfolio, as defined under GAAP. The models are updated at each measurement date to capture any changes in internal factors such as nature, term, volume, payment trends, remaining time to maturity, and portfolio mix, as well as changes in underwriting or observed trends expected to impact future performance. We have validated model performance by comparing past valuations with actual performance noted after each valuation.

Since the onset of the COVID-19 pandemic in early 2020, there has been substantial volatility in the financial markets, which has impacted the valuation of our loans and finance receivables. In 2022 and thus far in 2023, views in the marketplace on the economy and its near-term prospects remain mixed with concerns on employment, inflation, and other macroeconomic trends. In certain situations,

management concluded that the probability of future charge-offs was different than what we had experienced in the past and, therefore, altered anticipated charge-offs in our fair value models. We continue to utilize this approach and have adjusted charge-off expectations where appropriate. From a discount rate perspective, over the course of 2022, we deemed it appropriate to increase the discount rates used in our internally-developed valuation models, thereby lowering loan fair values, to be responsive to changes in the market and representative of what a market participant would use. The rates used in our models have been stable thus far in 2023. As of March 31, 2023, we deemed the resulting fair value of our loans and finance receivables to be an appropriate market-based exit price that considers current market conditions.

NON-GAAP FINANCIAL MEASURES

In addition to the financial information prepared in conformity with GAAP, we provide historical non-GAAP financial information. We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. Readers should consider the information in addition to, but not instead of or superior to, our consolidated financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Adjusted Earnings Measures

In addition to reporting financial results in accordance with GAAP, we have provided adjusted earnings and adjusted earnings per share, or, collectively, the Adjusted Earnings Measures, which are non-GAAP measures. We believe that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments and amortization methods, which provides a more complete understanding of our financial performance, competitive position and prospects for the future. We also believe that investors regularly rely on non-GAAP financial measures, such as the Adjusted Earnings Measures, to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. In addition, we believe that the adjustments shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items.

The following table provides reconciliations between net income and diluted earnings per share calculated in accordance with GAAP to the Adjusted Earnings Measures (in thousands, except per share data):


	Three Months Ended
	March 31,
	2023			2022
Net income	$	50,923		$	52,443
Adjustments:
Lease termination and cease-use costs(a)		1,698			—
Equity method investment loss		6			—
Other nonoperating expenses(b)		133			—
Intangible asset amortization		2,344			2,013
Stock-based compensation expense		5,969			5,367
Foreign currency transaction loss		171			314
Cumulative tax effect of adjustments		(2,571	)		(1,927	)
Adjusted earnings	$	58,673		$	58,210

Diluted earnings per share	$	1.56		$	1.50
Adjustments:
Lease termination and cease-use costs		0.05			—
Equity method investment loss		—			—
Other nonoperating expenses		—			—
Intangible asset amortization		0.07			0.06
Stock-based compensation expense		0.18			0.15
Foreign currency transaction loss		0.01			0.01
Cumulative tax effect of adjustments		(0.08	)		(0.05	)
Adjusted earnings per share	$	1.79		$	1.67

(a) In the first quarter of 2023, we incurred expenses totaling $1.7 million ($1.3 million net of tax) related to the exit of leased office space.

(b) In the first quarter of 2023, we recorded other nonoperating expenses of $0.1 million ($0.1 million net of tax) related to early extinguishment of debt.

Adjusted EBITDA

The table below shows Adjusted EBITDA, which is a non-GAAP measure that we define as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, taxes and stock-based compensation expense. We believe Adjusted EBITDA is used by investors to analyze operating performance and evaluate our ability to incur and service debt and our capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value. In addition, we believe that the adjustments for equity method investment income and other nonoperating expenses shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of the income or expense items. The computation of Adjusted EBITDA, as presented below, may differ from the computation of similarly-titled measures provided by other companies (in thousands):


	Three Months Ended
	March 31,
	2023			2022
Net income	$	50,923		$	52,443
Depreciation and amortization expenses		10,540			9,514
Interest expense, net		43,321			22,483
Foreign currency transaction loss		171			314
Provision for income taxes		14,714			15,834
Stock-based compensation expense		5,969			5,367
Adjustment:
Equity method investment loss (income)		6			(328	)
Other nonoperating expenses(a)		133			—
Adjusted EBITDA	$	125,777		$	105,627

Adjusted EBITDA margin calculated as follows:
Total Revenue	$	483,256		$	385,731
Adjusted EBITDA		125,777			105,627
Adjusted EBITDA as a percentage of total revenue		26.0	%		27.4	%

(a) In the first quarter of 2023, we recorded other nonoperating expenses of $0.1 million ($0.1 million net of tax) related to early extinguishment of debt.

Combined Loans and Finance Receivables Measures

In addition to reporting loans and finance receivables balance information in accordance with GAAP (see Note 2 in the Notes to Consolidated Financial Statements included in this report), we have provided metrics on a combined basis. The Combined Loans and Finance Receivables Measures are non-GAAP measures that include both loans and RPAs we own or have purchased and loans we guarantee, which are either GAAP items or disclosures required by GAAP. See “—Loan and Finance Receivable Balances” and “—Credit Performance of Loans and Finance Receivables” below for reconciliations between Company owned and purchased loans and finance receivables, gross, change in fair value and charge-offs (net of recoveries) calculated in accordance with GAAP to the Combined Loans and Finance Receivables Measures.

We believe these non-GAAP measures provide investors with important information needed to evaluate the magnitude of potential receivable losses and the opportunity for revenue performance of the loans and finance receivable portfolio on an aggregate basis. We also believe that the comparison of the aggregate amounts from period to period is more meaningful than comparing only the amounts reflected on our consolidated balance sheet since both revenue and cost of revenue are impacted by the aggregate amount of receivables we own and those we guarantee as reflected in our consolidated financial statements.

THREE MONTHS ENDED MARCH 31, 2023 COMPARED TO THREE MONTHS ENDED MARCH 31, 2022

Revenue and Net Revenue

Revenue increased $97.6 million, or 25.3%, to $483.3 million for the current quarter as compared to $385.7 million for the prior year quarter. The increase was driven by a 46.7% increase in revenue from our small business portfolio and a 13.1% increase in revenue from our consumer portfolio as higher levels of originations have led to higher loan balances for both portfolios.

Net revenue for the current quarter was $285.9 million compared to $268.7 million for the prior year quarter. Our consolidated net revenue margin was 59.2% for the current quarter compared to 69.7% for the prior year quarter. The net revenue margin in the prior year quarter was elevated in our small business portfolio due primarily to delinquency rates and charge-offs that were lower than what we had typically experienced in a more normal macroeconomic environment. With originations having increased across 2021 and 2022, delinquency and charge-off rates have also increased as expected, resulting in a net revenue margin in the current quarter that is closer to a more normalized range.

The following table sets forth the components of revenue and net revenue, separated by product for the current quarter and the prior year quarter (in thousands):


	Three Months Ended March 31,
	2023			2022			$ Change			% Change
Revenue by product:
Consumer loans and finance receivables revenue	$	281,011		$	248,547		$	32,464			13.1	%
Small business loans and finance receivables revenue		194,456			132,594			61,862			46.7
Total loans and finance receivables revenue		475,467			381,141			94,326			24.7
Other		7,789			4,590			3,199			69.7
Total revenue		483,256			385,731			97,525			25.3
Change in fair value		(197,366	)		(117,042	)		(80,324	)		68.6
Net revenue	$	285,890		$	268,689		$	17,201			6.4	%

Revenue by product (% to total):
Consumer loans and finance receivables revenue		58.2	%		64.4	%
Small business loans and finance receivables revenue		40.2			34.4
Total loans and finance receivables revenue		98.4			98.8
Other		1.6			1.2
Total revenue		100.0			100.0
Change in fair value		(40.8	)		(30.3	)
Net revenue		59.2	%		69.7	%

Loan and Finance Receivable Balances

The fair value of our loan and finance receivable portfolio in our consolidated financial statements was $3,003.4 million and $2,231.9 million as of March 31, 2023 and 2022, respectively. The outstanding principal balance of our loan and finance receivables portfolio was $2,700.1 million and $2,099.0 million as of March 31, 2023 and 2022, respectively. The fair value of the combined loan and finance receivables portfolio includes $13.9 million and $14.4 million with an outstanding principal balance of $10.5 million and $10.0 million of consumer loan balances that are guaranteed by us but not owned by us, which are not included in our consolidated financial statements as of March 31, 2023 and 2022, respectively.

Our small business portfolio of loans and finance receivables increased to 64.3% of our combined loan and finance receivable portfolio at fair value as of March 31, 2023, compared to 57.8% as of March 31, 2022 due primarily to more accelerated growth in the small business portfolio. The consumer portfolio balance decreased to 35.7% of our combined loan and finance receivable portfolio balance at fair value as of March 31, 2023, compared to 42.2% as of March 31, 2022. See “—Non-GAAP Disclosure—Combined Loans and Finance Receivables Measures” above for additional information related to combined loans and finance receivables.

The following tables summarize loan and finance receivable balances outstanding as of March 31, 2023 and 2022 (in thousands):


	As of March 31, 2023									As of March 31, 2022
				Guaranteed									Guaranteed
	Company			by the						Company			by the
	Owned(a)			Company(a)			Combined			Owned(a)			Company(a)			Combined(b)
Consumer loans and finance receivables
Principal	$	908,087		$	10,549		$	918,636		$	888,657		$	10,027		$	898,684
Fair value		1,062,867			13,901			1,076,768			934,351			14,433			948,784
Fair value as a % of principal		117.0	%		131.8	%		117.2	%		105.1	%		143.9	%		105.6	%
Small business loans and finance receivables
Principal	$	1,791,973		$	—		$	1,791,973		$	1,210,389		$	—		$	1,210,389
Fair value		1,940,499			—			1,940,499			1,297,533			—			1,297,533
Fair value as a % of principal		108.3	%		—	%		108.3	%		107.2	%		—	%		107.2	%
Total loans and finance receivables
Principal	$	2,700,060		$	10,549		$	2,710,609		$	2,099,046		$	10,027		$	2,109,073
Fair value		3,003,366			13,901			3,017,267			2,231,884			14,433			2,246,317
Fair value as a % of principal		111.2	%		131.8	%		111.3	%		106.3	%		143.9	%		106.5	%

(a) GAAP measure. The loans and finance receivables balances guaranteed by us relate to loans originated by a third-party lender through the CSO program that we have not yet purchased and, therefore, are not included in our consolidated financial statements.

At March 31, 2023 and 2022, the ratio of fair value as a percentage of principal was 111.2% and 106.3%, respectively, on company owned loans and finance receivables and 111.3% and 106.5%, respectively, on combined loans and finance receivables. These ratios increased compared to the prior year due primarily to an improvement in delinquency rates and credit outlook on most consumer products.

Average Amount Outstanding per Loan and Finance Receivable

The average amount outstanding per loan and finance receivable is calculated as the total combined loans and finance receivables, gross balance at the end of the period divided by the total number of combined loans and finance receivables outstanding at the end of the period. The following table shows the average amount outstanding per loan and finance receivable by product at March 31, 2023 and 2022:


	As of March 31,
	2023		2022
Average amount outstanding per loan and finance receivable(a)
Consumer loans and finance receivables(b)	$	1,964	$	2,037
Small business loans and finance receivables		38,021		37,411
Total loans and finance receivables(b)		5,065		4,315

(a) The disclosure regarding the average amount per loan and finance receivable is statistical data that is not included in our consolidated financial statements.

(b) Includes loans guaranteed by us, which represent loans originated by a third-party lender through the CSO program that we have not yet purchased and, therefore, are not included in our consolidated financial statements.

The average amount outstanding per loan and finance receivable increased to $5,065 from $4,315 during the current quarter compared to the prior year quarter, due primarily to an increase in the mix of loans and finance receivables held by small businesses in our portfolio, which are larger on average than our consumer portfolio.

Average Loan and Finance Receivable Origination

The average loan and finance receivable origination amount is calculated as the total amount of combined loans and finance receivables originated, renewed and purchased for the period divided by the total number of combined loans and finance receivables originated, renewed and purchased for the period. The following table shows the average loan and finance receivable origination amount by product for the current quarter compared to the prior year quarter:


	Three Months Ended
	March 31,
	2023		2022
Average loan and finance receivable origination amount(a)
Consumer loans and finance receivables(b)(c)	$	569	$	660
Small business loans and finance receivables(c)		16,398		17,257
Total loans and finance receivables(b)		1,901		1,686

(a) The disclosure regarding the average loan origination amount is statistical data that is not included in our consolidated financial statements.

The average loan and finance receivable origination amount increased to $1,901 from $1,686 during the current quarter compared to the prior year quarter, due primarily to an increase in the mix of loans and finance receivables issued to small businesses, which are larger on average than our consumer portfolio.

Credit Performance of Loans and Finance Receivables

We monitor the performance of our loans and finance receivables. Internal factors such as portfolio composition (e.g., interest rate, loan term, geography information, customer mix, credit quality) and performance (e.g., delinquency, loss trends, prepayment rates) are reviewed on a regular basis at various levels (e.g., product, vintage). We also weigh the impact of relevant, internal business decisions on the portfolio. External factors such as macroeconomic trends, financial market liquidity expectations, competitive landscape and legal/regulatory requirements are also reviewed on a regular basis.

The payment status of a customer, including the degree of any delinquency, is a significant factor in determining estimated charge-offs in the cash flow models that we use to determine fair value. The following table shows payment status on outstanding principal, interest and fees as of the end of each of the last five quarters (in thousands):


	2022												2023
	First			Second			Third			Fourth			First
	Quarter			Quarter			Quarter			Quarter			Quarter
Ending combined loans and finance receivables, including principal and accrued fees/interest outstanding:
Company owned	$	2,169,140		$	2,377,514		$	2,630,537		$	2,837,799		$	2,785,235
Guaranteed by the Company(a)		11,858			13,997			14,330			15,644			12,841
Ending combined loan and finance receivables balance(b)	$	2,180,998		$	2,391,511		$	2,644,867		$	2,853,443		$	2,798,076
> 30 days delinquent		113,798			121,459			147,688			190,119			198,011
> 30 days delinquency rate		5.2	%		5.1	%		5.6	%		6.7	%		7.1	%

(a) Represents loans originated by a third-party lender through the CSO program that we have not yet purchased, which are not included in our consolidated balance sheets.

(b) Non-GAAP measure.

Consumer Loans and Finance Receivables

The following table includes financial information for our consumer loans and finance receivables. Delinquency metrics include principal, interest and fees, and only amounts that are past due (in thousands):


	2022												2023
	First			Second			Third			Fourth			First
	Quarter			Quarter			Quarter			Quarter			Quarter
Consumer loans and finance receivables:
Consumer combined loan and finance receivable principal balance:
Company owned	$	888,657		$	936,601		$	972,320		$	965,753		$	908,087
Guaranteed by the Company(a)		10,027			11,873			11,843			12,937			10,549
Total combined loan and finance receivable principal balance(b)	$	898,684		$	948,474		$	984,163		$	978,690		$	918,636
Consumer combined loan and finance receivable fair value balance:
Company owned	$	934,351		$	989,128		$	1,056,205		$	1,083,062		$	1,062,867
Guaranteed by the Company(a)		14,433			17,860			16,144			16,257			13,901
Ending combined loan and finance receivable fair value balance(b)	$	948,784		$	1,006,988		$	1,072,349		$	1,099,319		$	1,076,768
Fair value as a % of principal(b)(c)		105.6	%		106.2	%		109.0	%		112.3	%		117.2	%
Consumer combined loan and finance receivable balance, including principal and accrued fees/interest outstanding:
Company owned	$	951,560		$	1,004,847		$	1,039,792		$	1,040,517		$	978,730
Guaranteed by the Company(a)		11,858			13,997			14,330			15,644			12,841
Ending combined loan and finance receivable balance(b)	$	963,418		$	1,018,844		$	1,054,122		$	1,056,161		$	991,571
Average consumer combined loan and finance receivable balance, including principal and accrued fees/interest outstanding:
Company owned(d)	$	953,108		$	966,816		$	1,027,100		$	1,038,389		$	1,015,849
Guaranteed by the Company(a)(d)		12,960			12,591			14,421			15,050			14,206
Average combined loan and finance receivable balance(b)(d)	$	966,068		$	979,407		$	1,041,521		$	1,053,439		$	1,030,055

Revenue	$	248,547		$	253,043		$	277,096		$	286,347		$	281,011
Change in fair value		(116,767	)		(133,078	)		(135,646	)		(145,276	)		(114,651	)
Net revenue		131,780			119,965			141,450			141,071			166,360
Net revenue margin		53.0	%		47.4	%		51.0	%		49.3	%		59.2	%

Delinquencies:
> 30 days delinquent	$	70,480		$	72,300		$	77,258		$	86,884		$	72,092
> 30 days delinquent as a % of combined loan and finance receivable balance(b)(c)		7.3	%		7.1	%		7.3	%		8.2	%		7.3	%

Charge-offs:
Charge-offs (net of recoveries)	$	137,224		$	134,524		$	167,762		$	171,421		$	156,272
Charge-offs (net of recoveries) as a % of average combined loan and finance receivable balance(b)(d)		14.2	%		13.7	%		16.1	%		16.3	%		15.2	%

(a) Represents loans originated by a third-party lender through the CSO program that we have not yet purchased, which are not included in our consolidated balance sheets.

(b) Non-GAAP measure.

(d) The average combined loan and finance receivable balance is the average of the month-end balances during the period.

The ending balance, including principal and accrued fees/interest outstanding, of combined consumer loans and finance receivables at March 31, 2023 increased 2.9% to $991.6 million compared to $963.4 million at March 31, 2022, due primarily to the residual impact of higher originations of our longer duration installment products in early 2022 that are still outstanding as of March 31, 2023.

The percentage of loans greater than 30 days delinquent was flat at 7.3% at March 31, 2023 and 2022.

Charge-offs (net of recoveries) as a percentage of average combined loan balance increased to 15.2% for the current quarter, compared to 14.2% for the prior year quarter. After increasing in the third and fourth quarters of 2022, charge-offs (net of recoveries) as a percentage of average combined loan balance decreased in the current quarter, which was driven primarily by lower seasonal demand in the first quarter. Lower originations, particularly to new customers, which typically default at a higher percentage than returning customers, generally results in lower delinquencies and charge-offs as the book is more seasoned.

The ratio of fair value as a percentage of principal on consumer loans and finance receivables was 117.2% at March 31, 2023, compared to 105.6% at March 31, 2022 and 112.3% at December 31, 2022. The increase from December 31, 2022 was primarily driven by lower originations in the current quarter. As discussed above, lower originations typically result in lower delinquencies and a more mature book that has higher credit quality. Refer also to “Results of Operations—Valuation of Loans and Finance Receivables” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion on loan valuation.

Small Business Loans and Finance Receivables

The following table includes financial information for our small business loans and finance receivables. Delinquency metrics include principal, interest, and fees, and only amounts that are past due (in thousands):


	2022												2023
	First			Second			Third			Fourth			First
	Quarter			Quarter			Quarter			Quarter			Quarter
Small business loans and finance receivables:
Total loan and finance receivable principal balance	$	1,210,389		$	1,364,055		$	1,580,289		$	1,773,411		$	1,791,973
Ending loan and finance receivable fair value balance		1,297,533			1,471,723			1,708,918			1,935,466			1,940,499
Fair value as a % of principal(a)		107.2	%		107.9	%		108.1	%		109.1	%		108.3	%

Ending loan and finance receivable balance, including principal and accrued fees/interest outstanding	$	1,217,580		$	1,372,667		$	1,590,745		$	1,797,282		$	1,806,505

Average loan and finance receivable balance(b)	$	1,122,609		$	1,288,384		$	1,488,029		$	1,684,617		$	1,809,800

Revenue	$	132,594		$	149,909		$	172,721		$	192,598		$	194,456
Change in fair value		1,138			(8,764	)		(24,662	)		(49,099	)		(80,404	)
Net revenue		133,732			141,145			148,059			143,499			114,052
Net revenue margin		100.9	%		94.2	%		85.7	%		74.5	%		58.7	%

Delinquencies:
> 30 days delinquent	$	43,318		$	49,159		$	70,430		$	103,235		$	125,919
> 30 days delinquent as a % of loan balance(a)		3.6	%		3.6	%		4.4	%		5.7	%		7.0	%

Charge-offs:
Charge-offs (net of recoveries)	$	20,860		$	27,867		$	43,778		$	69,110		$	76,215
Charge-offs (net of recoveries) as a % of average loan and finance receivable balance(b)		1.9	%		2.2	%		2.9	%		4.1	%		4.2	%

(a) Determined using period-end balances.

(b) The average loan and finance receivable balance is the average of the month-end balances during the period.

The ending balance, including principal and accrued fees/interest outstanding, of small business loans and finance receivables at March 31, 2023 increased 48.4% to $1,806.5 million compared to $1,217.6 million at March 31, 2022, due primarily to the continued impact of strong originations.

The percentage of loans greater than 30 days delinquent was 7.0% at March 31, 2023, compared to 3.6% at March 31, 2022. Charge-offs (net of recoveries) as a percentage of average loan balance increased to 4.2% for the current quarter, compared to 1.9% in the prior year quarter. When compared to the pre-COVID-19 period, the credit performance of our small business portfolio was stronger in 2021 and into 2022 as the portfolio was more seasoned due to reductions in originations in response to the pandemic. Delinquency and charge-offs have since increased to more normal levels due to the acceleration in originations and macroeconomic pressures on our customers and their businesses.

The ratio of fair value as a percentage of principal on small business loans and finance receivables was 108.3% at March 31, 2023, compared to 107.2% at March 31, 2022 and 109.1% at December 31, 2022. The decrease from December 31, 2022 was due primarily to a slight increase in delinquencies.

Total Operating Expenses

Total expenses decreased $1.3 million, or 0.7%, to $176.6 million in the current quarter, compared to $177.9 million in the prior year quarter.

Marketing expense decreased to $79.7 million in the current quarter compared to $93.2 million in the prior year quarter due primarily to seasonally lower originations in our consumer portfolio as well as higher non-commissionable renewals in our small business portfolio.

Operations and technology expense increased to $49.2 million in the current quarter compared to $40.7 million in the prior year quarter, due primarily to higher variable costs, particularly personnel and underwriting, due to the increase in originations and the size of the loan portfolio.

General and administrative expense increased to $37.2 million in the current quarter compared to $34.5 million in the prior year quarter, due primarily to higher personnel costs.

Depreciation and amortization expense increased $1.0 million or 10.8% compared to the prior year quarter driven primarily by general growth in the business and additional internally-developed software placed into service.

Nonoperating Items

Interest expense, net increased $20.8 million, or 92.7%, to $43.3 million in the current quarter compared to $22.5 million in the prior year quarter. The increase was due primarily to an increase in the average amount of debt outstanding, which increased $715.7 million to $2,279.7 million during the current quarter from $1,564.0 million during the prior year quarter, and an increase in the weighted average interest rate on our outstanding debt to 7.84% during the current quarter from 5.92% during the prior year quarter resulting from year-over-year increases in benchmark rates.

Provision for Income Taxes

The effective tax rate of 22.4% in the current quarter was lower than the 23.2% rate recorded in the prior year quarter due primarily to larger excess tax benefits on stock compensation due to stock price appreciation.

As of March 31, 2023, the balance of unrecognized tax benefits was $94.4 million, which is included in “Accounts payable and accrued expenses” on the consolidated balance sheet, $12.6 million of which, if recognized, would favorably affect the effective tax rate in the period of recognition. We had $57.1 million and $87.7 million of unrecognized tax benefits as of March 31, 2022 and December 31, 2022, respectively. We believe that we have adequately accounted for any material tax uncertainties in our existing reserves for all open tax years.

Our U.S. tax returns are subject to examination by federal and state taxing authorities. The statute of limitations related to our consolidated Federal income tax returns is closed for all tax years up to and including 2018. However, the 2014 tax year is still open to the extent of the net operating loss that was carried back from the 2019 tax return. The years open to examination by state, local and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three years from the date the tax return is filed. For jurisdictions that have generated net operating losses, carryovers may be subject to the statute of limitations applicable for the year those carryovers are utilized. In these cases, the period for which the losses may be adjusted will extend to conform with the statute of limitations for the year in which the losses are utilized. In most circumstances, this is expected to increase the length of time that the applicable taxing authority may examine the carryovers by one year or longer, in limited cases.

Net Income

Net income decreased $1.5 million, or 2.9%, to $50.9 million during the current quarter compared to $52.4 million during the prior year quarter. The decrease was due primarily to higher interest expense as a result of an increase in the average amount of debt outstanding and an increase in the weighted average interest rate on our outstanding debt. The increase in interest expense was partially offset by an increase in income from operations due primarily to increased revenue and a decrease in total operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

Capital Funding Strategy

We seek to maintain a stable and flexible balance sheet to ensure that liquidity and funding are available to meet our business obligations. As of March 31, 2023, we had cash, cash equivalents, and restricted cash of $288.4 million, of which $190.7 million was restricted, compared to $178.4 million, of which $78.2 million was restricted, as of December 31, 2022. During the three months ended March 31, 2023, we issued $170.0 million of asset-backed notes to fund our growth in our near-prime consumer loan business. As of March 31, 2023, we had funding capacity of $601.1 million. Based on numerous stressed-case modeling scenarios, we believe we have sufficient liquidity to run our operations for the foreseeable future. Further, we have no recourse debt obligations due until September 2024. As part of our capital and liquidity management, we may from time to time acquire our outstanding debt securities, including through redemptions, tender offers, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws and in compliance with the indentures governing our outstanding debt securities, upon such terms and at such prices as we may determine.

Historically, we have generated significant cash flow through normal operating activities for funding both long-term and short-term needs. Our near-term liquidity is managed to ensure that adequate resources are available to fund our seasonal working capital growth, which is driven by demand for our loan and financing products. On September 1, 2017, we issued and sold $250.0 million in aggregate principal amount of 8.50% Senior Notes due 2024 (the “2024 Senior Notes”) and used the net proceeds, in part, to retire $155.0 million in existing indebtedness. On September 19, 2018, we issued and sold $375.0 million in aggregate principal amount of 8.50% Senior Notes due 2025 (the “2025 Senior Notes”) and used the net proceeds, in part, to retire existing indebtedness.

On June 30, 2017, we entered into a secured revolving credit agreement (as amended, the “Credit Agreement”). On June 23, 2022, we entered into an amendment and restatement of our Credit Agreement that, among other things, increased the borrowing capacity to $440.0 million, with a $20.0 million letter of credit sublimit and $10.0 million swingline loan sublimit. The Credit Agreement bears interest, at our option, at the base rate plus 0.75% or the Secured Overnight Financing Rate plus 3.50%. In addition to customary fees for a credit facility of this size and type, the Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the commitment, and ranges from 0.15% per annum to 0.50% per annum depending on usage. The Credit Agreement contains certain prepayment penalties if it is terminated on or before the first and second anniversary dates, subject to certain exceptions. The Credit Agreement matures on June 30, 2026. As of April 26, 2023, our available borrowings under the Credit Agreement were $105.3 million. Since 2016, we have entered into several loan securitization facilities and offered asset-backed notes to fund our growth, primarily in our near-prime consumer installment loan and small business loan businesses. As of April 26, 2023, we had funding capacity of $549.5 million. We expect that our operating needs, including satisfying our obligations under our debt agreements and funding our working capital growth, will be satisfied by a combination of cash flows from operations, borrowings under the Credit Agreement, or any refinancing, replacement thereof or increase in borrowings thereunder, and securitization or sale of loans and finance receivables under our consumer and small business loan securitization facilities.

As of March 31, 2023, we were in compliance with all financial ratios, covenants and other requirements set forth in our debt agreements. Unexpected changes in our financial condition or other unforeseen factors may result in our inability to obtain third-party financing or could increase our borrowing costs in the future. To the extent we experience short-term or long-term funding disruptions, we have the ability to adjust our volume of lending and financing to consumers and small businesses that would reduce cash outflow requirements while increasing cash inflows through repayments. Additional alternatives may include the securitization or sale of assets, increased borrowings under the Credit Agreement, or any refinancing or replacement thereof, and reductions in capital spending, which could be expected to generate additional liquidity.

Capital

Our Total stockholders’ equity increased by $34.6 million to $1,220.8 million at March 31, 2023 from $1,186.1 million at December 31, 2022. The increase of stockholders’ equity was driven primarily by net income for the three months ended March 31, 2023 and, to a lesser extent, stock-based compensation expense, partially offset by repurchases of our outstanding common stock. Our book value per share outstanding increased to $38.96 at March 31, 2023 from $37.99 at December 31, 2022, which was primarily driven by net income during the current quarter, partially offset by the increase in treasury stock as a result of share repurchases, which is discussed in more detail below.

On February 9, 2022, we announced the Board of Directors authorized a share repurchase program totaling $100.0 million through June 30, 2023 (the “February 2022 Authorization”). On November 7, 2022, we announced the Board of Directors authorized an increase to our share repurchase program of up to $150.0 million through December 31, 2023 (the “November 2022 Authorization”). The November 2022 Authorization went into effect in March 2023 upon exhaustion of the February 2022 Authorization. Repurchases under our repurchase program will be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions or otherwise. The share repurchase program does not obligate us to purchase any shares of our common stock. The authorization for the share repurchase program may be terminated, increased or decreased by the Board of Directors in its discretion at any time. During the three months ended March 31, 2023, we had $16.7 million in repurchases of common stock under our share repurchase program.

Cash

Our cash and cash equivalents are held primarily for working capital purposes and are used to fund a portion of our lending activities. From time to time, we use excess cash and cash equivalents to fund our lending activities. We do not enter into investments for trading or speculative purposes. Our policy is to invest cash in excess of our immediate working capital requirements in short-term investments, deposit accounts or other arrangements designed to preserve the principal balance and maintain adequate liquidity. Our excess cash may be invested primarily in overnight sweep accounts, money market instruments or similar arrangements that provide competitive returns consistent with our polices and market conditions.

Our restricted cash primarily consists of funds held in accounts as reserves on certain debt facilities and as collateral for issuing bank partner transactions. We have no ability to draw on such funds as long as they remain restricted under the applicable arrangements but have the ability to use these funds to finance loan originations, subject to meeting borrowing base requirements. Our policy is to invest restricted cash held in debt facility related accounts, to the extent permitted by such debt facility, in investments designed to preserve the principal balance and provide liquidity. Accordingly, such cash is invested primarily in money market instruments that offer daily purchase and redemption and provide competitive returns consistent with our policies and market conditions.

Current Debt Facilities

The following table summarizes our debt facilities as of March 31, 2023 (dollars in thousands).


	Maturity date		Weighted average interest rate(a)	Borrowing capacity			Principal outstanding
Funding Debt:
2018-1 Securitization Facility	March 2027	(b)	8.77%		200,000			—
2018-2 Securitization Facility	July 2025	(c)	8.88%		225,000			142,200
NCR 2022 Securitization Facility	October 2026	(d)	9.44%		125,000			51,095
ODR 2021-1 Securitization Facility	November 2024	(e)	7.59%		233,333			197,167
ODR 2022-1 Securitization Facility	June 2025	(f)	7.79%		420,000			282,000
RAOD Securitization Facility	November 2025	(g)	7.47%		230,263			230,263
ODAST III Securitization Notes	May 2027	(h)	2.07%		300,000			300,000
2023-A Securitization Notes	December 2027		7.78%		170,014			170,014
Total funding debt			6.63%	$	1,903,610		$	1,372,739
Corporate Debt:
8.50% Senior Notes Due 2024	September 2024		8.50%		206,205			206,205
8.50% Senior Notes Due 2025	September 2025		8.50%		375,000			375,000
Revolving line of credit	June 2026		8.29%		440,000	(i)		369,000
Total corporate debt			8.42%	$	1,021,205		$	950,205

(a) The weighted average interest rate is determined based on the rates and principal balances on March 31, 2023. It does not include the impact of the amortization of deferred loan origination costs or debt discounts.

(b) The period during which new borrowings may be made under this facility expires in March 2025.

(d) The period during which new borrowings may be made under this facility expires in October 2024.

(e) The period during which new borrowings may be made under this facility expires in November 2023.

(f) The period during which new borrowings may be made under this facility expires in June 2024.

(g) The period during which new borrowings may be made under this facility expires in November 2024.

(h) The period during which new borrowings may be made under this facility expires in April 2024.

(i) We had an outstanding letter of credit under the Revolving line of credit of $0.8 million as of March 31, 2023.

Our ability to fully utilize the available capacity of our debt facilities may also be impacted by provisions that limit concentration risk and eligibility.

Cash Flows

Our cash flows and other key indicators of liquidity are summarized as follows (dollars in thousands):


	Three Months Ended March 31,
	2023			2022
Total cash flows provided by operating activities	$	282,016		$	153,539
Cash flows used in investing activities
Loans and finance receivables		(195,051	)		(376,377	)
Capitalization of software development costs and purchases of fixed assets		(10,378	)		(10,118	)
Total cash flows used in investing activities		(205,429	)		(386,495	)
Cash flows provided by financing activities	$	33,555		$	234,529

Cash Flows from Operating Activities

Net cash provided by operating activities increased $128.5 million, or 83.7%, to $282.0 million in the current quarter from $153.5 million for the prior year quarter. The increase was driven primarily by additional interest and fee income from growth in the loan portfolio. Net cash provided by operating activities for the three months ended March 31, 2022 was relatively low due to the strategic reduction in originations implemented at the onset of the COVID-19 pandemic.

We believe cash flows from operations and available cash balances and borrowings under our loan securitization facilities and Credit Agreement, which may include increased borrowings under our Credit Agreement, any refinancing or replacement thereof, and

additional securitization of loans, will be sufficient to fund our future operating liquidity needs, including to fund our working capital growth.

Cash Flows from Investing Activities

Net cash used in investing activities was $205.4 million for the current quarter compared to $386.5 million for the prior year quarter. This change was due primarily to loan originations outpacing repayments by a wider margin in the prior year quarter compared to the current quarter.

Cash Flows from Financing Activities

Cash flows provided by financing activities for the current quarter were driven primarily by $60.0 million and $40.3 million in net borrowings under our revolving line of credit and securitization facilities, respectively, partially offset by $43.6 million in repayments of our 2024 Senior Notes and $21.9 million in share repurchases. Cash flows provided by financing activities for the prior year quarter were driven primarily by $307.6 million and $4.0 million in net borrowings under our securitization and revolving line of credit facilities, respectively, partially offset by $78.8 million in share repurchases.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to the information on critical accounting estimates described in our Annual Report on Form 10‑K for the year ended December 31, 2022.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See Note 1 in the Notes to Consolidated Financial Statements included in this report for a discussion of recent accounting pronouncements that may be significant to Enova.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk since the most recent fiscal year end. Refer to our market risk disclosures in our Annual Report on Form 10‑K for the year ended December 31, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the “Exchange Act”) as of March 31, 2023 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective and provide reasonable assurance (i) to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See the “Litigation” section of Note 8 of the notes to our consolidated financial statements (unaudited) of Part I, “Item 1 Financial Statements.”

ITEM 1A. RISK FACTORS

There have been no material changes from the Risk Factors described in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides the information with respect to purchases made by us of shares of our common stock.


Period	Total Number of Shares Purchased(a)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan(b)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan(b) (in thousands)
January 1 – January 31, 2023		86,317	$	39.06		85,241	$	154,880
February 1 – February 28, 2023		183,853		50.51		82,900		150,700
March 1 – March 31, 2023		206,800		44.68		206,800		141,462
Total		476,970	$	45.91		374,941	$	141,462

(a) Includes shares withheld from employees as tax payments for shares issued under the Company’s stock-based compensation plans of 1,076 and 100,600 for the months of January and February, respectively.

(b) On February 9, 2022, the Company announced the Board of Directors authorized a share repurchase program totaling $100.0 million through June 30, 2023 (the “February 2022 Authorization”). On November 7, 2022, the Company announced the Board of Directors authorized an increase to its share repurchase program of up to $150.0 million through December 31, 2023 (the “November 2022 Authorization”). The November 2022 Authorization went into effect in March 2023 upon exhaustion of the February 2022 Authorization. All share repurchases made under these repurchase authorizations have been through open market transactions. Our share repurchase program is subject to market conditions, do not obligate us to purchase any shares of our common stock, and may be terminated, increased or decreased by the Board of Directors in its discretion at any time.

We do not plan to declare cash dividends in the foreseeable future. Any declaration of dividends is at the discretion of our Board of Directors. Our agreements governing our existing debt contain restrictions which limit our ability to pay dividends.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit No.		Exhibit Description

3.1		Enova International, Inc. Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on November 17, 2017)

3.2		Enova International, Inc. Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on November 17, 2017)

10.1*		Third Amendment to Lease Agreement, dated March 21, 2023, between Mark Zettl, as Court Appointed Receiver, and Enova International, Inc.

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: April 28, 2023	ENOVA INTERNATIONAL, INC.

	By:	/s/ Steven E. Cunningham
		Steven E. Cunningham
		Chief Financial Officer
		(On behalf of the Registrant and as Principal Financial Officer)