Enova International Aktie

Good day, and welcome to the Enova International First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lindsay Savarese, Investor Relations for Enova. Please go ahead.

Thank you, operator, and good afternoon, everyone. Enova released results for the first quarter 2026 ended March 31, 2026, this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at ir.enova.com.

With me on today's call are Steve Cunningham, Chief Executive Officer; and Scott Cornelis, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website.

Before I turn the call over to Steve, I'd like to note that today's discussion will contain forward-looking statements, and as such, is subject to risks and uncertainties. Actual results may differ materially as a result from various important risk factors, including those discussed in our earnings press release, and in our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Forms 8-K. Please note that any forward-looking statements that are made on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

In addition to U.S. GAAP reporting, and over reports certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release. As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website. And with that, I'd like to turn the call over to Steve.

Thank you, Lindsay, and good afternoon, everyone. I appreciate you joining our call today. Our first quarter results marked a great start to the year. Strong originations growth and solid credit across our portfolio once again drove outstanding financial results that were in line or better than our expectations and highlight the power of our balanced growth strategy and our experienced team's ability to drive differentiated and consistent performance by leveraging our diversified product offerings, scalable operating model and advanced risk management capabilities. Our results also highlight the resiliency of our consumer and small business customers despite recent market volatility and concerns about potential impacts from geopolitical or domestic policy issues.

First quarter originations increased a healthy 33% year-over-year to nearly $2.3 billion. As a result of the strong originations growth, the portfolio increased 28% year-over-year to nearly $5.3 billion of small business products representing 70% of our portfolio at the end of the quarter and consumer products accounting for 30%. Strong demand and solid credit performance enabled us to be more aggressive with our marketing than we typically see in the first quarter of the year as we leveraged our sophisticated technology and analytics to meet this demand while maintaining attractive unit economics. Looking ahead, we'll continue to opportunistically lean into marketing to meet demand that delivers strong returns and meets our unit economics hurdles.

With strong quarterly portfolio growth, revenue increased 17% year-over-year to a record $875 million in the first quarter. Profitability metrics grew even faster as adjusted EPS increased 30% from the first quarter of 2025 driven by strong credit and our significant operating leverage. SMB revenue increased 37% year-over-year to $418 million, and our consumer revenue increased 3% year-over-year to $446 million, both quarterly records. In addition to our strong growth this quarter, credit metrics across the portfolio reflects stable or improving performance with the consolidated net charge-off ratio for the first quarter falling both sequentially and year-over-year to 7.6%, our lowest consolidated quarterly net charge-off rate since the second quarter of 2023.

Looking at our consumer business, year-over-year growth in originations accelerated to 10% as we continue to lean into the strong demand and stable credit that we discussed last quarter. As expected, credit metrics for the consumer portfolio were stable or improved both sequentially and year-over-year. Our SMB business continued to deliver remarkable growth and stable credit. As our leading brand presence, scale and strong competitive position drove 42% year-over-year growth in originations to a record $1.7 billion. Our SMB portfolio has grown 37% over the past year and remains intentionally well diversified across geographies and industries. In addition, the SMB net charge-off ratio remained in a tight range consistent with the past 2 years.

Our performance this quarter and external data reflect a stable and resilient macroeconomic environment despite recent concerns about rising energy costs as a result of the Iran War. The most recent Federal Reserve book released last week continued to highlight increases in economic activity across most districts. In addition, our most recent small business cash flow trend report released in conjunction with Ocrolus, found that 93% of small businesses expect moderate to significant growth over the next year. which is consistent with prior surveys. Similarly, the most recent NFIB small business economic trends report indicated that the number of small business owners rating the health of their business as excellent or good is mostly steady. In the April, ADP National Employment Report noted that small businesses have been the engine for hiring across the country for the second consecutive month. Supported by a stable labor market and growth in real wages, consumers continue to spend and participate in the economy.

March unemployment rate ticked down to 4.3%. New and continuing weekly unemployment claims remains relatively low and manageable and March hourly earnings increased 3.5% compared to a year ago. While market consumer confidence remains stable, consumer sentiment as well as small businesses express concerns about the future impact of the recent spike in gasoline prices. During our more than 20-year operating history, we have successfully managed our business during several energy price spikes, including as recently as 2022. During that energy shock, we observed that significant gas price spikes don't necessarily translate into higher spending as today's consumers have more methods to manage gas price spikes than in the past with the advent of more fuel-efficient autos, electric vehicles, ridesharing services and on-demand delivery.

A review of the electronic bank statement data we collect across our consumer businesses support this. Prior to the start of the Iran War, our consumer borrowers were spending roughly 2% of income on gas. And then even with a meaningful increase in gas prices, we've seen only a small increase in spending on gas relative to income as consumers adapt their behavior to higher cost at the pump. This trend is similar to what we observed during 2022 when geopolitical issues sparked an even sharper rise in gas prices that persisted for many months during a period of much higher overall inflation. Importantly, during that period in 2022, we didn't observe material impacts to our consumer or SMB originations or credit performance as a direct result of the energy price spikes. Notably, historically, we have seen that demand for our products typically increase as customers look to bridge temporary cash flow gaps that could arise from spending due to transitory higher prices.

Before I wrap up, I'd like to spend a few moments discussing our strategy and key focus areas for the remainder of 2026. We've demonstrated a long track record of consistent and profitable lending while navigating a wide range of economic environments. We thoughtfully diversified and built our operating model to be resilient in any economic environment, and are confident in our ability to continue our success by following our focused growth strategy and by leveraging our diversified product offerings, advanced technology and analytics and disciplined unit economics approach.

One key to our success for many years has been the extensive application of machine learning models, automation and other advanced technologies, including applied and generative AI across our company to remain nimble, improve the customer experience, manage risk and increase efficiency. This tech forward and innovation mentality is ingrained in our culture and it's how we've approached our work every day for many, many years. While we've taken a more understated approach to highlighting our innovation compared to others, preferring to let the results speak for themselves. Make no mistake that we've embraced the opportunities to apply generative AI across our organization to defend and extend our competitive advantages and enable our teams to move faster with powerful insights while working smarter and more efficiently.

Finally, we are excited about our combination with Grasshopper Bank later this year. Since our last update, we continue to make great progress and remain engaged in a constructive dialogue with both the OCC and Federal Reserve as we progress through the typical application process. Internally, our teams are deep into integration planning, and we are highly encouraged by the readiness we are building to ensure we hit the ground running on day 1 to deliver on the significant synergies for geographic expansion of our existing products, and lower funding costs from Grasshopper's deposit businesses. As a reminder, we expect net synergies related to the transaction to drive adjusted EPS accretion of more than 25% once the synergies are fully realized in the first 2 years post closing. We continue to anticipate closing the transaction during the second half of this year.

To wrap up, we're pleased with the strong start to the year. And based on what we're seeing today, we're raising our outlook for the year, which Scott will describe in more detail. We believe our diversified product offerings, nimble machine learning powered credit risk management capabilities, talented team and solid balance sheet position us well to continue to drive sustainable and profitable growth this year and beyond. With that, I'd like to turn the call over to Scott Cornelis, our CFO, who will discuss our financial results and outlook in more detail. And following Scott's remarks, we'll be happy to answer any questions you may have. Scott?

Thank you, Steve, and good afternoon, everyone. As Steve noted in his remarks, we're pleased to deliver another solid quarter of top and bottom line financial performance. We started 2026 with strong growth in originations, receivables and revenue along with solid credit, operating efficiency and balance sheet flexibility.

Turning to our first quarter results. Total company revenue of $875 million increased 17% from the first quarter of 2025, exceeding our expectations driven by 28% year-over-year growth in total company combined loan and finance receivable balances on an amortized basis. Total company originations during the first quarter rose 33% from the first quarter of 2025 to $2.3 billion. Revenue from small business lending increased 37% from the first quarter of 2025 to $418 million as small business receivables on an amortized basis ended the quarter at $3.7 billion or 39% higher than the end of the first quarter of 2025.

Small business originations rose 42% year-over-year to $1.7 billion. Revenue from our consumer businesses increased 3% from the first quarter of 2025 to $446 million as consumer receivables on an amortized basis ended the first quarter at $1.6 billion or approximately 8% higher than the end of the first quarter of 2025. Consumer originations grew 10% from the first quarter of 2025 to $559 million. For the second quarter of 2026, we expect total company revenue to be 15% to 20% higher year-over-year. This expectation will depend on the level, timing and mix of originations growth during the quarter.

Now turning to credit, which is the most significant driver of net revenue and portfolio fair value. Consolidated credit performance for the first quarter was solid with year-over-year improvement in the net charge-off rate, the 30-plus day delinquency rate and a stable fair value premium. The consolidated net revenue margin of 60% for the first quarter was at the higher end of our expected range and reflects continued solid credit performance across our portfolios. The consolidated net charge-off ratio for the first quarter of 7.6% declined 100 basis points from the first quarter a year ago as the consumer net charge-off ratio decreased to 14.3%, 90 basis points lower than the first quarter last year, while the small business net charge-off ratio remained stable at 4.6%. These results underscore the strength and consistency of our credit risk management and the quality of our originations. Importantly, we expect future credit performance to remain stable as demonstrated by the year-over-year stability in the consolidated 30-plus day delinquency rate and the consolidated fair value premium, which at 115% remained at levels we have seen over the past 2 years, indicating a stable risk return profile and strong unit economics. Looking ahead, we expect the total company net revenue margin for the second quarter of 2026 to be in the 55% to 60% range. This expectation will depend upon portfolio payment performance and the level, timing and mix of originations growth during the second quarter.

Now turning to expenses. Total operating expenses for the first quarter, including marketing, were 36% of revenue compared to 32% of revenue in the first quarter of 2025. As Steve noted, our marketing spend continues to be efficient, driving strong originations growth. Marketing costs increased to 22% of revenue or $189 million compared to 19% of revenue or $139 million in the first quarter of 2025. We expect marketing expenses to be around 20% of revenue for the second quarter, which will depend upon the growth and mix of originations. Operations and technology expenses for the first quarter increased to 8.7% of revenue or $76 million compared to 8.4% of revenue or $62 million in the first quarter of 2025 driven by growth in receivables and originations over the past year. Given the significant variable component of this expense category, sequential increases in O&T costs should be expected in an environment where originations and receivables are growing and should be around 8% to 8.5% of total revenue going forward.

Our fixed costs continue to scale as we focus on operating efficiency and thoughtful expense management. General and administrative expenses for the first quarter were $48 million or 5.5% of revenue compared to $42 million or 5.7% of revenue in the first quarter of 2025. The current quarter includes $2.7 million of onetime deal-related expenses associated with the pending Grasshopper acquisition. Excluding these items, G&A expenses were $45 million or 5.2% of revenue, reflecting continued operating leverage and disciplined expense management. While there may be slight variations from quarter-to-quarter, we expect G&A expenses in the near term will be around 5% of total revenue, excluding any onetime costs.

Our balance sheet and liquidity position remains strong, giving us the financial flexibility to successfully navigate a range of operating environments, while delivering on our commitment to drive long-term shareholder value through both continued investments in our business and opportunistic share repurchases. We ended the first quarter with approximately $1.1 billion of liquidity, including $436 million of cash and marketable securities and $654 million of available capacity on our debt facilities.

Continuing our track record of strong capital markets execution, during the first quarter, we upsized 4 of our secured consumer and small business warehouse facilities by $377 million at existing terms, providing additional capacity to support our growth. Our cost of funds for the first quarter was 8.2%, down from 8.3% in the fourth quarter, reflecting strong execution in recent financing transactions. During the first quarter, we acquired approximately 110,000 shares at a cost of approximately $16 million. We continue to believe there remains additional upside in our valuation given our track record of consistent growth and earnings, our expectations for 2026 and the significant future opportunities associated with the Grasshopper acquisition. With that in mind, we will continue stock repurchases opportunistically while ensuring we are prepared to close the Grasshopper Bank acquisition and transition to a bank holding company later this year.

Finally, we continue to deliver solid profitability this quarter. Compared to the first quarter of 2025, adjusted EPS, a non-GAAP measure, increased 30% to $3.87 per diluted share. To wrap up, let me summarize our near-term expectations. For the second quarter, we expect consolidated revenue to be 15% to 20% higher year-over-year with a net revenue margin in the 55% to 60% range. Additionally, we expect marketing expenses to be around 20% of revenue, O&T costs of around 8% to 8.5% of revenue and G&A costs around 5% of revenue. With a more normalized tax rate, these expectations should lead to adjusted EPS for the second quarter of 2026, that is 20% to 25% higher than the second quarter of 2025. For the full year, we expect growth in originations compared to the full year of 2025 of around 20%. We expect that the resulting growth in receivables with stable credit and continued operating leverage should result in full year 2026 revenue growth similar to originations growth and adjusted EPS growth of at least 25%.

Our second quarter and full year 2026 expectations will depend upon the path of the macroeconomic environment and the resulting impact on demand, customer payment rates and the level, timing and mix of originations growth. As a reminder, our 2026 financial expectations do not assume any contribution from the pending acquisition of Grasshopper Bank, which, as Steve noted, we continue to expect to close in the second half of 2026. We are confident that the demonstrated ability of our talented team, combined with our world-class technology and analytics have us well positioned to adapt to an evolving macro environment, and continue to generate meaningful and consistent financial results. Our resilient online-only business model, diversified product offerings, nimble machine learning-powered credit risk management capabilities and solid balance sheet, support our ability to continue to drive profitable growth while also effectively managing risk.

And with that, we'd be happy to take your questions. Operator?

[Operator Instructions] And the first question will come from Moshe Orenbuch with TD Cowen.

I guess for starters, you've got very strong results overall but has kind of tilted a little bit certainly from an asset growth standpoint towards small business. Could you talk a little bit about your originations in both consumer and small business and related to the respective marketing costs, like where were those higher marketing costs incurred and how it drove the originations and whether there's an outlook for that consumer or any reversal, if you will, of that kind of disparate growth between the two businesses?

Moshe, thanks for the question. So I think let me make a couple of comments. Number one, I think our SMB business has been growing plus 20% now for every quarter over the past 2 years. Sometimes it's more than that, like we've seen over the past couple of quarters or sometimes a little bit closer to that. So pretty consistent, pretty steady. I don't think there's anything remarkable to talk about as it relates to marketing. Our marketing remains very efficient. And again, we lean into that marketing where we see opportunities to drive really good growth with strong unit economics. On the consumer portfolio, if you just take a look at the year-over-year trends in the consumer book, we've been reaccelerating growth, as we've talked about now over the past couple of quarters. If you recall back middle of last year, we were making sure that we had credit where we wanted it. There was a product that we slowed -- that slowed our overall consumer growth down a bit, but that's been picking up, the pace has picked up. And in particular, if you look at our consumer products, you can see that our consumer installment growth has been very healthy now for quite some time on a year-over-year basis. And the LOC product year-over-year growth has been accelerating over the past several quarters as we expected. I think you should expect to continue to see the consumer year-over-year growth to accelerate. As we look back into some of the quarters last year where we had purposely slowed down. So I think I expect we'll continue to see healthy SMB growth, but I also think we'll continue to see that acceleration in consumer. So the disparity, I think we should -- all things being equal and with the strong operating backdrop, I think you'll see that disparity diminish. And similar to what I mentioned on the marketing for SMB, the marketing on our consumer side, our teams do a great job of identifying the channels that deliver the best marketing value for the growth that we can achieve against that unit economic framework. So I feel very good about the quarter, the growth that we were able to bring. And as Scott highlighted, our outlook, we nudged up a bit what we think we will be able to do with what we see today with our growth.

Got it. And clearly, you have one of the better lenses into kind of repayment given the shorter term that you've got. Just talk a little bit about what you're seeing both on the consumer and small business side. And if you can talk about -- obviously, we see the delinquency rates at the end of March, but if you can kind of talk about whether that's continued into April and just talk about the repayment side of things.

Yes. I mean, I think the results speak for themselves. At the end of the quarter, as you mentioned, credit looks really, really strong. I mean SMB has been operating in a tight range for charge-offs for quite some time. Our consumer charge-offs are operating, what I would say, towards the lower end of the range that we typically would see for first quarter. And so a few weeks into the second quarter, we're pleased with what we're seeing as it relates to the portfolio performance and the demand regardless of the volatility that -- and the headlines that are out there, sometimes the -- what people are actually doing versus the backdrop and the headlines is very different, and we're pretty encouraged with what we're seeing as we move into the second quarter.

The next question will come from David Scharf with Citizens Capital Markets.

Steve, maybe just kind of following up on Moshe's comment about kind of the mix of originations. Can you just remind us, as we think about the unit economics between consumer and SMB. Obviously, they're approaching sort of 50-50 revenue at this point. But are you still -- should we be indifferent as an investor outside looking in, should there basically be a difference as it relates to the asset mix, are the unit level returns, risk-adjusted pretty much the same? Are you underwriting to kind of similar economics still?

Yes. I mean, listen, we are -- the way our unit economics and our ROE frameworks work is that we're pretty agnostic to the mix. We go where the demand is and where we think we can efficiently underwrite and market to drive volume. And we talked about this a lot over the years, and you've seen us do that. There are some slight differences between the two. Obviously, the yields between the two portfolios are different. The charge-off rates are different, which means the net revenue margins are a bit different. And you can kind of work your way down all the way through, including financing intensity across the two. But ultimately, you get back to a pretty similar ROA across the two portfolios. And so we feel really good that the unit economics and our approach to how we go about meeting that demand is going to work really well for us. Whether we see sometimes where SMB grows a bit faster like we've seen over the past year or so. But we've also seen times where consumers are going to grow faster than SMB. So you should expect that those types of opportunities will continue. Obviously, most recently, it's been more impacted by just the reacceleration as we get consumer rolling again after the middle of last year. So we feel really good about where we're headed, and we feel really good about the economics across both portfolios.

Got it. That's helpful. And switching to credit. I think you read my mind, I literally have written down to ask about sort of gas prices and spending based on the bank data that you started purchasing several years ago. I just wanted to make sure I heard what you said that, that basically as a percentage of income. So far, you're really not seeing any kind of noticeable change and where your borrowers -- how much they're allocating to gas or energy-related expenditures? And are they spending more in total when you look at bank account information and debit charges? Or is the gas spending pulling from other categories of spend?

So I think overall, spending compared to income is about where it has been. So on average, it's about the same. I mean the proportion spending on gas is pretty small. I mentioned it's around 2%, and we saw a slight increase. So it's not materially crowding out like other categories of spending. And that's kind of what we saw, again, as I mentioned, in the last shock we saw in 2022 it really reflects, I think this isn't sort of a static environment, right? These consumers and small businesses as well are going to adapt to the environment, change their behaviors if it's becoming a pressure for them. But I think it should encourage you that we've got a bit of a track record. We have a handle on what we expect to see. We're going to keep an eye on it. And like we always do, we'll adapt if we see something different. But right now, we think we're not really seeing anything that would cause us concern about the recent gas price increases on our consumers.

Okay. Got it. Which is consistent with what pretty much all lenders have been saying thus far. If I can squeeze just one more in, a lot of calls this reporting season have had questions focusing on agentic commerce and particularly for sort of any kind of point-of-sale lender, there's more talk about kind of having to integrate with some AI platforms, ultimately. Could you talk about how you best guess how you see your digital marketing evolving as traditional search kind of transforms into some other platforms, perhaps directing consumers to various financial services providers. Are certain integration kind of planning underway. How should we be thinking about how the customer acquisition model might change over the next few years?

Yes. I mean, our marketing teams are -- have been very active in this for quite some time, looking at shifts. You talk about search to the extent that people are using the AI models to do more search versus the traditional browsers, all over the tools that allow you to understand where you stack up very similar to how you would look at -- how you stack up in a search. So we're well underway on that. It's not so dissimilar from when you think about traditional TV a few years ago and how things have quickly migrated into social media and a lot more targeted marketing versus a little bit more scatter shot. So I think our teams are very good at understanding where our customers are trending towards in terms of where they look to find products that we would offer. And we're making great progress on making sure that we're migrating and being a leader in marketing in those channels so that we can maintain our competitive advantage and continue to meet our customers where they want to be met.

The next question will come from Bill Ryan with Seaport Research Partners.

First question, just kind of following up on the consumer loan origination side, specifically on the line of credit. It looks like it was up about 3%, 4% year-over-year on what was arguably a very difficult comp a year ago of 22%. And so the comps are getting quite a bit easier as the year progresses. But just overall, what's kind of -- what changes have you made that gives you a lot more confidence about stepping back into that market.

Yes. So we talked about this a bit over the past couple of quarters. In particular, the line of credit was that particular segment that you were talking about with those growth rates was impacted by our purposeful look at credit back in the middle of last year, slow growth, make sure we were calibrated correctly, meeting our unit economics. And then we started reaccelerating, right? And so we've reopened. We're back to business the way we historically had been. And I feel pretty confident with what we're seeing and what we've seen thus far into the second quarter as well that we're making good progress in getting back to business that's very different than where we were say, in the second or third quarter of last year. So I think a lot of it has to do with the demand we're seeing, the credit metrics that we monitor on a regular basis every week, and the results that we've been able to generate, not just this quarter but so far into the second quarter.

Okay. And just one follow-up on the consumer loan yield, not overly material, but it looked like a little bit of a dip in the yield. I think it's about 300 basis points quarter-over-quarter. Any specific call-outs on that?

It's Scott. Yes, I think Steve mentioned it earlier, some of the mix on the consumer side, more installment that has a little lower yield than the line of credit. So that's most of that. But we expect that, as Steve mentioned, again, flip back a little bit to the norm.

[Operator Instructions] The next question will come from Vincent Caintic with BTIG.

First, I wanted to go back to the origination volume and marketing discussion. So really strong origination grew at 33%. The marketing expense as a percent of revenues, that was a bit -- a little bit higher than your guidance. We just fine with the origination growth you're able to get. But I was just curious if in the quarter after you gave the guidance last call. What did you see that was -- that drove that incremental originations? And is the originations you're seeing kind of a better margin business than what you kind of typically plan for, kind of is that originations from maybe less competition? Or I don't know where the outsized growth we come from? I'm just curious about that.

Yes. I mean, sometimes it's hard to tell. I mean, I think what the demand that we saw, I think, again, as I mentioned in my comments, is a reflection of our consumer and small business customers have been resilient as they navigated some of the market volatility and really the concerns about the future because if you look at the macro environment right now, it's actually in pretty good shape and really good for driving our customer demand to us. And so I don't think anything really changed other than we saw a lot of healthy demand from those customer bases. And we were able to underwrite that with our unit economics approach. So I think that's -- at the end of the day, that's really what it's reflecting is that regardless of the headlines, and regardless sometimes of what customers say about the future, which, by the way, can snap back pretty quickly when things stabilize. I mean their behaviors have been relatively stable over the past several quarters.

Okay. Great. That's helpful. And then second question on the funding side. I don't know once you have Grasshopper, this will be less of a concern. But if you could talk about kind of the funding appetite right now from your partners for whether it's small business loans or subprime consumer loans, given that there's been -- there have been some concerns in the quarter about private credit and just the funding appetite out there, if you could talk about how your spreads are doing and your funding partners are.

Yes. Vincent. So you saw us talk about the access we had on increasing four different warehouses across both consumer and SMB. So I think that's testament to the performance and the track record that we have in those portfolios. So we're able to upsize those warehouses, about $377 million in total to give us room to grow. So that's been our latest touch point and spreads held firm, and we did that at the existing terms with no widening like you've seen maybe in some of the other funding markets. So we feel good about where we're at.

Okay, great. And maybe just sneaking one more in. I don't know if you could talk about anything in terms of the process of where you are with Grasshopper Bank acquisition. I know we're still planning for the second quarter close, but if there's any update on the regulatory or close process, that would be great.

Yes. It's actually the second half of 2026, not the second quarter, Vincent. So just so you're clear, I think we were clear in our remarks on that. But no, I don't -- I think we said it all. I mean I think there's a process you go through when you file a formal application with the regulators. We're going through that process now. It's pretty typical for anybody who's applying for a bank charter or to become a bank holding company. So as I mentioned in my remarks, I think we're making progress, and we remain engaged on that, what I would call, a pretty typical application process. And more importantly, just our ability to work with the Grasshopper team. We've been really pleased with the progress that we're making to be ready to go when we do have the approvals to close the deal and hit the ground running to deliver on some of these really significant opportunities that we expect from the combination of the two companies. So I think that sums it up, and second half of the year is still our expectation.

The next question will come from John Hecht with Jefferies.

Congrats on another good quarter. I wondered that maybe the first one was the origination, call it, flow pretty consistent during the quarter? Or did it -- was it -- is it back weighted from a seasonal perspective? Or did anything like geopolitical events accelerate or decelerate during the quarter?

No. John, I would describe our origination pattern pretty consistent with what we've seen in prior first quarters. As you know, SMB really doesn't have the same type of quarterly seasonality that we see on the consumer side. There tends to be some month-to-month variations. But in the quarter, we didn't see anything that was unusual as it relates to that typical month-to-month change that we would see from January to March. I think on the consumer side, as we mentioned on the last call, we saw some of the post-holiday strength into January, but that fades pretty quickly as you move into the later parts of January into the tax refund season, and then you start to see some of that come back a little bit later in Q1 and a little bit more in earnest as you move into the second quarter. So I would say pretty typical originations patterns. I wouldn't say that there's any influence that we could see related to any type of the macro or geopolitical type issues that are out there.

And then I guess, I mean, on a similar topic -- well, it's a similar topic in the sense that are you seeing any fluctuations in spend or payment patterns, but higher fuel prices and maybe they don't stay high for long, maybe they do. But do you -- in your mind, does that impact small businesses in any way like it does the consumer?

I mean, as I mentioned in the comments, if you look back at the last time we went through something like this in 2022 the fuel spike was actually much greater than where we are today, and it lasted for quite a while during 2022. And listen, I think -- just like I mentioned on the consumer side, I think small businesses, they will adapt to those cost pressures if they have them. But again, I think very similar to the consumer -- it's not a static environment. So to the extent that there's these transitory pressures, they figure out ways to manage that either through reduced spending or bridging or whatever it may be. More broadly, to the extent it impacts to specific industries. We've talked before about industries like trucking, which we are very careful with. Those are probably the industries that have the most direct impact because of the input costs are such a large part of their business. So those are the industries we've been watching for quite some time, and we know our exposures, they're manageable, and we choose operators that are -- that we think are high quality and that we'll be able to manage the credit that we extend to them.

Next question will come from Kyle Joseph with Stephens.

Most have been answered, but just kind of looking for an update on the SMB side in terms of kind of competitive environment where you guys have been taking share, from who you've been taking share and kind of just where you are now given the growth, kind of the overall share you guys retain in that market?

Yes, sure. So I mean, listen, this -- the SMB market is large to begin with. And we've talked about in the past, new business formation over the past 5 or 6 years has been really, really strong if you look at new business applications. If so those companies that are formed and they are a couple of years into their life and have shown staying ability, they're going to become our potential customers or part of that market. So the market is actually growing. It's probably growing a little bit faster than the overall consumer market. And then when you look at our -- just our presence in that market, our brand, our scale and our capabilities. Most of our -- most -- our set of competitors hasn't really changed much over time. And we feel like we have a lot of advantages on them. So it's kind of a great setup. We've got a large market. It seems to be growing quite nicely, and we've got some competitive advantages that allow us to be very successful, to be very selective and generate the growth that we think is going to create really strong returns for us and our shareholders.

This concludes our question-and-answer session. I would like to turn the conference back over to Steve Cunningham, CEO, for any closing remarks.

We thank everyone for joining our call today, and have a good night. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Enova International Fourth Quarter and Full Year 2025 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Lindsay Savarese, Investor Relations for Enova. Please go ahead.

Thank you, operator, and good afternoon, everyone. Enova released results for the fourth quarter and full year 2025 ended December 31, 2025, this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at ir.enova.com.

With me on today's call are David Fisher, Executive Chairman of the Board of Directors; Steve Cunningham, Chief Executive Officer; and Scott Cornelis, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to David, I'd like to note that today's discussion will contain forward-looking statements, and as such, is subject to risks and uncertainties.

Actual results may differ materially as a result from various important risk factors, including those discussed in our earnings press release and in our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Please note that any forward-looking statements that are made on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

In addition to U.S. GAAP reporting, Enova reports certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release.

As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website. And with that, I'd like to turn the call over to David.

Thanks, and good afternoon, everyone. I appreciate you joining our call today. Also with me today are Steve Cunningham and Scott Cornelis. As I'm sure most of you know, effective January 1, Steve became CEO of Enova and Scott became CFO as I transitioned to the Executive Chairman role, have committed to remain as an executive chair for at least 2 years.

With the full support of the Board, this move was thoroughly, thoughtfully and deliberately planned over more than a year and having worked closely with both Steve and Scott for many years, I'm confident that they are the right leaders to see Enova through its next phase of growth. And the timing has worked out even better than we had hoped.

As Steve and Scott will discuss in more detail, Q4 was another very strong quarter, wrapping up a record year for Enova. And as announced in December, with our pending acquisition of Grasshopper Bank. We believe we have found the perfect partner at the perfect time to take Enova to the next level by simplifying our regulatory structure, opening up additional markets for our consumer products adding additional low-cost funding sources, providing a platform for new product opportunities.

When I first joined Enova, I never anticipated staying for more than a few years. But this role unexpectedly grew into the longest, most challenging and most rewarding of my career. I unequivocally attribute that to the extraordinary people and the culture at Enova and due in large part to that team, the future of Enova is bright.

Steve and I share a common vision that our focused growth strategy will steer our path forward. We will continue to adapt and innovate and remain committed to producing sustainable and profitable growth, while meeting the needs of our customers and driving shareholder value. With that, I would like to turn the call over to Steve.

Thank you, David, and good afternoon, everyone. I appreciate you joining our call today. Our fourth quarter results capped off another exceptional year for Enova. Strong originations growth and solid credit across our portfolio once again drove strong financial performance. For the full year 2025, originations grew 27%, leading to revenue growth of nearly 20% which when combined with stable credit and the significant operating leverage in our business model drove adjusted EPS growth of 42%.

2025 was our second consecutive year of adjusted EPS growth in excess of 30%, demonstrating the resiliency of our balanced growth strategy, and the ability of our experienced team to deliver consistent and differentiated performance by leveraging our diversified product offerings, flexible online-only model and world-class risk management and technology.

Turning to the quarter. We're pleased to deliver fourth quarter results that were in line or better than our expectations. Fourth quarter originations increased 32% year-over-year to $2.3 billion. As a result of the strong originations growth, our portfolio increased 23% year-over-year to a record $4.9 billion. Small Business products represented 68% of our portfolio at the end of the year, while consumer accounted for 32%.

Strong demand and solid credit performance enabled us to be more aggressive with our marketing during the quarter as we leveraged our sophisticated technology and analytics to capture this demand at attractive unit economics. Marketing expense was 23% of our total revenue during the fourth quarter, driving record quarterly originations. We expect marketing spend to revert back to more typical levels although we'll continue to opportunistically lean into marketing to meet demand with attractive unit economics.

The strong quarterly portfolio growth revenue increased to the top of our expected range, growing 15% year-over-year to $839 million in the fourth quarter and profitability metrics grew even faster as adjusted EPS increased 33%, driven by strong credit and our significant operating leverage. SMB revenue accelerated to 34% year-over-year to $383 million and our consumer revenue increased 3% year-over-year to $446 million, both quarterly records.

In addition to our strong growth this quarter, our fourth quarter credit results also demonstrate that both our small business and consumer customers remain on solid footing. The consolidated net charge-off ratio for the fourth quarter of 8.3% was down both sequentially and compared to the fourth quarter of 2024. External data highlighted that the U.S. economy ended 2025 on a good note.

The Federal Reserve's recent wage book pointed to economic gains across most of the country. In addition, the unemployment rate ticked down to 4.4% in December, with recent unemployment claims status underscoring that the labor market remains relatively stable and resilient. Further, real wage growth continues to be positive, with average hourly earnings rising 3.8% year-over-year in December after rising 3.6% during November.

In early reads indicate December consumer spending grew moderately and continues to support economic activity. Looking at our consumer business. This constructive economic backdrop supported the reacceleration of growth and improvement in credit metrics that we discussed last quarter. With the strong early default performance we were seeing at that time, we leaned into boosting consumer originations, which accelerated as we moved through the fourth quarter.

And as we expected, credit metrics for the consumer portfolio improved both sequentially and compared to the year ago quarter. Turning to small business. Our SMB business continues its stream of outstanding performance. Our leading brand presence, scale and competitive landscape again resulted in significant growth in remarkably stable credit performance.

Fourth quarter originations for SMB increased 20% sequentially and 48% year-over-year to $1.6 billion, marking the eighth consecutive quarter of year-over-year originations growth of 20% or more. Credit metrics for the small business portfolio continue to be very stable as they have been for the past 2 years. Our internal and external beta highlight that SMBs continue to express confidence in the economy and expect favorable operating conditions during 2026.

In conjunction with Ocrolus, we released the nonfederation of our small business cash flow trend report, which offers key insights into the state of small businesses and highlights ongoing trends observed over the past year. Consistent with previous findings, the survey found that small business is still optimistic about future growth. Overall, growth expectations massed an all-time high with 94% of small businesses projecting growth over the next 12 months.

Nearly 75% of small business owners reported bypassing traditional banks in favor of alternative lenders like Enova. Of those that went to a traditional bank first, 46% of those reported being denied alone. External data also supports these findings as the NFIB Small Business Optimism Index rose to 99.5% in December and remained above its 52-year average of 98%. NFIB's Chief Economist pointed out that while Main Street business owners remain concerned about taxes, they anticipate favorable economic conditions in 2026 due to waning cost pressures, easing labor challenges in an increase in capital investments.

While these surveys and external economic data provide useful context, our proprietary data offers more real time and granular views into trends in the operating environment and the conditions of our customers. This data allows us to react quickly and nimbly as the operating environment is changing.

Our deep experience serving non-prime consumers and small businesses, meaningful diversification, powerful technology and analytics and our disciplined unit economics approach have been key to our ability to navigate varying operating environments, while generating consistently strong financial results.

And as we've demonstrated for many years, we believe our business is resilient across a wide range of macroeconomic environments. Before I wrap up, I'd like to spend a few moments discussing our strategy and outlook for 2026. We've demonstrated a long track record of consistency between stated priorities and execution and we remain committed to this approach.

Our balanced growth strategy works, and we expect to generate sustainable and profitable growth, while delivering on our commitment to driving long-term shareholder value and on our mission of helping hardworking people get access to fast, trustworthy credit.

Another key focus for 2026 will be closing the acquisition of Grasshopper branch that we announced last month. We're excited about this powerful combination by uniting Enova's sophisticated online lending platform with Grasshoppers national charter and deposit gathering capabilities, we'll be able to expand access to more consumers and small businesses, who've been traditionally underserved by banks.

In addition, this combination simplifies our product and operational model under a national bank charter, providing significant opportunities to accelerate the growth of our existing products with an enhanced ability to serve our customers in more states and an ability to expand into new complementary products. Since our announcement of the energy and excitement from the teams for both companies have been tremendous.

As together, we recognize the opportunities in our complementary capabilities, cultural alignment and significant synergies. As a reminder, we expect net synergies related to the transaction to increase adjusted net income by $125 million to $220 million annually within the first 2 years post closing. Driving adjusted EPS accretion of more than 25% once the synergies are fully realized.

We filed our regulatory applications earlier this month, seeking approval from the Federal Reserve and the OCC and we continue to make great progress on integration planning in anticipation of closing during the second half of 2026. Overall, we're pleased to end the year with another strong quarter of solid revenue and profit growth. We have considerable momentum heading into 2026. And while it's still very early in the year, we're off to a great start with solid originations growth across our businesses.

As Scott will discuss in more detail, and based on what we're seeing today, we expect 2026 to be another year of significant origination revenue and adjusted EPS growth. Before turning the call over to Scott, I'd like to sincerely thank the entire Enova team for all their hard work and dedication. You all are the force behind our success.

We're thrilled to celebrate our 13-year streak on Computerworld's 2026 Best Places to Work in IT list, reflecting the creativity, collaboration and passion that fuel our technology teams. We're looking forward to another great year ahead. Thank you.

And with that, I'd like to turn the call over to Scott Cornelis, our CFO, and who will discuss our financial results and outlook in more detail. And following Scott's remarks, we'll be happy to answer any questions you may have. Scott?

Thank you, Steve, and good afternoon, everyone. We're pleased to close 2025 with solid fourth quarter financial results that once again met or exceeded our expectations. Our strong financial performance in the fourth quarter and the full year 2025 continues to demonstrate how the powerful combination of our diversified product offerings, scalable operating model, world-class risk management capabilities and balance sheet flexibility allow us to consistently deliver strong top and bottom line results.

Turning to our fourth quarter results. Total company revenue of $839 million increased 15% from the fourth quarter of 2024 at the top end of our expectations as total company combined loan and finance receivable balances on an amortized basis increased 23% from the end of the fourth quarter of 2024.

Total company originations during the fourth quarter rose 32% from the fourth quarter of 2024 to $2.3 billion. Revenue from small business lending increased 34% from the fourth quarter of 2024 to $383 million as small business receivables on an amortized basis ended the quarter at $3.3 billion or 34% higher than the end of the fourth quarter of 2024. Small business originations rose 48% year-over-year to $1.6 billion.

Revenue from our consumer businesses increased approximately 3% from the fourth quarter of 2024 to $446 million as consumer receivables on an amortized basis ended the fourth quarter at $1.6 billion or approximately 6% higher than the end of the fourth quarter of 2024. Consumer originations grew 2% from the fourth quarter of 2024, to $613 million.

As Steve mentioned earlier, we successfully reaccelerated our consumer originations as we move through the quarter, particularly in December, thanks to strong demand and credit. For the first quarter of 2026, we expect total company revenue to be flat to slightly higher sequentially. This expectation will depend on the level, timing and mix of originations growth during the quarter.

Now turning to credit, which is the most significant driver of net revenue and portfolio fair value. The consolidated net revenue margin of 60% for the fourth quarter was also at the higher end of our expected range and reflects continued strong credit performance across our portfolios. The consolidated net charge-off ratio in the fourth quarter declined 60 basis points from the fourth quarter a year ago to 8.3%.

As we expected, the consumer net charge-off ratio improved to 16%, which was flat sequentially and compared to the year-over-year quarter. The small business net charge-off ratio was 4.6% which was within our expected range. And as Steve noted, has been remarkably stable over the past 2 years. Expectations for our future credit performance remains solid. As reflected by sequential and year-over-year stability or improvement in the 30-plus day delinquency rates and fair value premiums for the consolidated consumer and small business portfolios.

The consolidated 30-plus day delinquency ratio at the end of the fourth quarter declined 70 basis points from the end of the fourth quarter a year ago to 6.7% and the consolidated fair value premium of 115% remains stable and consistent with levels we have reported over the past 2 years. Looking ahead, we expect the total company net revenue margin for the first quarter of 2026 to be between 55% to 60% as the impact of lower consolidated originations from our typical consumer seasonality is offset by the sequential improvement in the consolidated net charge-off rate we typically see in the first quarter.

This expectation will depend upon portfolio payment performance and the level, timing and mix of originations growth during the first quarter. Now turning to expenses. Total operating expenses for the fourth quarter, including marketing, were 36% of revenue compared to 34% of revenue in the fourth quarter of 2024.

As Steve noted, we leaned into our efficient marketing spend to meet demand with strong unit economics, resulting in record originations growth. Fourth quarter marketing increased to $192 million or 23% of revenue compared to $151 million or 21% of revenue in the fourth quarter of 2024. With the seasonality we typically experienced during the first quarter of the year, we expect marketing expenses as a percentage of revenue to range in the upper teens for the first quarter and will depend upon the growth and mix of originations.

Operations and technology expenses for the fourth quarter increased to $68 million or 8% of revenue compared to $58 million or 8% of revenue in the fourth quarter of 2024, driven by growth in receivables and originations over the past year. Given the significant variable component of this expense category, sequential increases in O&T costs should be expected in an environment, where originations and receivables are growing and should be around 8% of total revenue.

Our fixed costs continue to scale as we focus on operating efficiencies and thoughtful of expense management. General and administrative expenses for the fourth quarter were $47 million or 5.6% of revenue compared to $38 million or 5.2% of revenue in the fourth quarter of 2024. The current quarter included $6.7 million of onetime deal-related expenses associated with the pending Grasshopper acquisition.

Excluding these items, G&A expenses were $41 million or 4.8% of revenue, reflecting continued operating leverage and disciplined expense management. While there may be slight variations from quarter-to-quarter, we expect G&A expenses in the near term will be between 5% and 5.5% of total revenue, excluding any onetime costs. Our balance sheet and liquidity position remain strong and give us financial flexibility to successfully navigate a range of operating environments, while delivering on our commitment to drive long-term shareholder value through continued investment in our business and disciplined capital allocation.

During the fourth quarter, we acquired approximately 278,000 shares at a cost of $35 million. And we started 2026 with share repurchase capacity of approximately $106 million available under our senior note covenants. We were pleased to see the improvement in our valuation during 2025. Though we believe there remains additional upside given our track record of consistent growth and earnings, our expectations for 2026 and the significant future opportunities associated with the Grasshopper acquisition.

With that in mind, we will continue stock repurchases opportunistically, while ensuring we are well prepared to close the Grasshopper Bank acquisition and transition to a bank holding company later this year. We ended the fourth quarter with approximately $1.1 billion of liquidity, including $422 million of cash and marketable securities and $649 million of available capacity on our debt facilities, providing us with flexibility to support our strategic objectives.

Our cost of funds for the fourth quarter was 8.3% down from 8.6% in the third quarter, reflecting lower SOFR rates and strong execution on recent financing transactions. Even with no additional rate cuts by the Fed, we expect some reduction in our cost of funds during 2026. But the level will depend upon credit spreads on new financing transactions, our funding mix and the level of timing and mix of originations growth.

Our effective tax rate for the fourth quarter was 20%. The sequential decline was driven by favorable state changes, a decrease in our uncertain tax position reserve and related interest and tax benefits resulting from share price increases on stock options exercised during the fourth quarter. While there may be variations from quarter-to-quarter, we expect our normalized annual effective tax rate to remain in the mid-20% range.

Finally, we continue to deliver solid profitability this quarter. Compared to the fourth quarter of 2024, adjusted EPS, a non-GAAP measure, increased 33% to $3.46 per diluted share and adjusted EBITDA a non-GAAP measure increased 21% to $211 million. To wrap up, let me summarize our first quarter and full year 2026 expectations. For the first quarter, we expect revenue to follow our typical seasonality and to be flat to slightly higher sequentially.

We expect net revenue margin of 55% to 60% on a consolidated basis as seasonally lower originations are offset by an improvement in the net charge-off rate. In addition, we expect marketing expenses as a percentage of revenue to be in the upper teens. O&T costs of around 8% of revenue and G&A costs of between 5% and 5.5% of revenue.

Interest expense as a percentage of revenue is expected to be around 10.5% with a more normalized tax rate, these expectations should lead to adjusted EPS for the first quarter of 2026, that is 20% to 25% higher than the first quarter of 2025. Our first quarter expectations will depend upon customer payment rates and the level, timing and mix of originations growth.

Now turning to our expectations for the full year of 2026. Assuming a stable macroeconomic environment with no material changes in the employment situation and a largely unchanged interest rate environment, we would expect growth in originations for the full year 2026 compared to the full year of 2025 to increase by around 15%. The resulting growth in receivables with stable credit continued operating leverage and a reduced cost of funds should result in full year 2026 revenue growth similar to originations growth and adjusted EPS growth of at least 20%.

Our expectations for 2026 will depend on the macroeconomic environment and the resulting impact on demand, customer payment rates and the level timing and mix of originations growth. As a reminder, our 2026 financial expectations do not assume any contribution from the pending acquisition of Grasshopper Bank, which we expect to close in the second half of 2026.

Our results in 2025 reinforce the flexibility and scalability of our business model. As we move into 2026, we are well positioned to drive meaningful financial results supported by a diversified product set, a continued focus on unit economics, favorable competitive positioning and balance sheet flexibility. And with that, we'd be happy to take your questions. Operator?

[Operator Instructions] The first question comes from Moshe Orenbuch with TD Cohen.

Great. And congrats, David, Steve and Scott on all of the management changes and promotions. I'm hoping, Steve, if you could talk a little bit about the consumer business. You talked about the growth having slowed and then accelerated. How much faster kind of is the exit rate? How should we think about it? And are there impacts that we should be aware of given this upcoming tax season and new withholding types of patterns?

Moshe, thanks for the question. So as I mentioned in my comments and as we expected after seeing really remarkably good credit last quarter, we did accelerate the growth in the consumer business. And that growth rate accelerated as we went through the quarter. Similar to last year, we saw December exceptionally strong.

So sometimes the seasonal pattern of consumer growth in the fourth quarter can vary depending on the timing of the holidays, but really for the second year in a row, we saw a significant amount of the growth coming in, in December. So we were really pleased with that. And as you can see, our nimble and efficient marketing allowed us to continue to kind of lean into that.

I think we learned from last year, where we saw sort of a similar pattern and new -- if that demand sort of showed up the same way, we could take more of that down. So we're really pleased with that. When you look forward to the first quarter, similarly, we're seeing some of that strength continue into early January, similar to what we saw last year.

And so we'll continue to meet that demand, where it is. It tends to fall off fairly quickly once it does fall off as you move through later January and into the -- further into the first quarter. With the tax refund season, I mean I would -- based on what we know today, it sounds like there's potential for some larger refunds this year, which would be great for credit for us. And so a lot of the originations that we put on should perform very, very well.

And what we've tended to see over time is that can just shift around the demand curve a little bit in terms of when the demand timing restarts. But typically, it's just a matter of weeks. So -- we have a lot of experience with different tax refund seasons over our history, and our guidance reflects sort of our expectations, and we're feeling really good about how the fourth quarter wrapped up for consumer and how the 2026 consumer business is starting.

Great. And good to hear that you're moving, I'm sorry -- is it good to hear that you're moving forward with all the steps for Grasshopper. Are there things that you're going to do differently in your core portfolio prior to closing or maybe talk a little bit about what the early kind of earliest impacts that you might see starting in the second half of the year after closing?

I mean until we close the transactions -- the transaction, both companies are business as usual. So the outlook that Scott gave you is our expectation of continuing that track record of strong growth in our business and being opportunistic as we see demand and following our balanced growth approach.

So you should expect more of that. And as we talked about on the Grasshopper call, I think once we're beyond the close of that transaction, step #1 is really with the product set that we have today, expanding our footprint to continue to serve more customers. And that's really the basis for the revenue synergies that we laid out and that I discussed on the call as well.

The next question comes from Bill Ryan with Seaport Research Partners.

Following Moshe, I'd like to say congratulations to everybody. A couple of questions. I mean you talked about mix of origination -- or the origination growth being about 15% in 2026. If you can maybe elaborate on kind of what you're expecting in terms of the mix between consumer and small business?

Yes. Bill. So yes, we feel like we're in a pretty good position with what we know today to grow around 15% for the year. With the resumption of the consumer growth that we just talked about, we think we'll settle in at more typical levels than maybe what we saw for some quarters in 2025. We think we'll continue a pattern that you've seen with SMB.

Obviously, some of the growth rates that we've seen have been really, really strong, but we've had a track record of growing that business now at 20%-plus now for quite a while. So you may see what we've seen over the past couple of years, which is a slow tilt in our portfolio towards SMB, just in terms of where the demand has been, but we'll continue to be opportunistic.

And then in prior years, we've seen sometimes where there's more opportunity in the consumer business, and it's grown faster. And we've seen in recent times, the SMB portfolio is growing a bit faster. We'll continue to follow that approach that we follow with the balanced growth approach to make sure that we're meeting the demand in both that makes sense to follow our unit economics and so that's what we expect from where we sit today.

Okay. And just 1 follow-up. I know you guys can continue to make adjustments on your underwriting -- if you can maybe talk about that, any changes that you made on the consumer side in the fourth quarter? And specific to small businesses, was there any change in industry focus. Anything you dialed back on, anything you kind of opened back up a little bit?

Yes. As you know, Bill, we are making credit adjustments all the time. We talked an awful lot about that in 2025. So we continue to follow that same approach continue to be very nimble. So as we see -- sometimes there's always adjustments that we're going to make in both of the portfolios. In consumer, in particular, after we saw sort of the exceptionally strong credit in the third quarter we did try to move back to more typical levels of credit. And you can see that the consumer net charge-off ratio settled in as sort of the middle of the expected range we would have had that we would have expected for the fourth quarter.

So we're really pleased about how that landed. And so I feel like we are sort of back to that making adjustments as we need sometimes opportunistic, sometimes pulling it back where we see things we don't like.

I think on the small business side, it's been remarkably stable. I think our industry focus, we've talked about over time. We continue to keep a close eye on things like construction and transportation as well as some of those industries that we had felt could be most impacted by tariff and the trade policies. But we've been pleased to see that those have fell in really well. And it's business as usual in our credit space there, similar to consumer.

We're always always making adjustments to make sure that we're serving as many customers as we can, while generating the returns that our shareholders expect.

[Operator Instructions] The next question comes from David Scharf with Citizens Capital Markets.

Great. I'll echo the congrats to the new team or new physicians actually. Steve, I wanted to switch just to sort of the post Grasshopper operations, and you may have discussed this when you first announced the transaction. But can you remind us post close, how we ought to think about regulatory capital ratios, you're going to adhere to and whether or not existing levels of buybacks are likely to continue under the new structure?

Yes. David, thanks for the question. So we did talk about regulatory capital a bit on that call. I think where we sit today, we're sitting at around 17%, 18% tangible capital ratio, which feels that's sort of analogous to the Tier 1 leverage ratio. We would expect to sort of be in that same ZIP code. So I would not expect us to be changing our leverage position dramatically 1 way or the other.

And as we've done, with that said, then we get back to as we get post close, there should be opportunities with the strong ROEs that we expect to generate versus the strong asset growth to have some opportunity to return capital. But I think our focus early on will be investing in the opportunities that the new structure will present to us and the combination in making sure, as you know, our rank ordering on our capital allocation is organic opportunities that generate really strong returns in our unit economic model.

Share buybacks and then inorganic is sort of down the list at [ 1/3 ]. We have the capital to do all of those things. But I think we will be most focused on all the opportunities that are in front of us with the new structure after we get past the close.

Got it. No, that's helpful. And maybe just a follow-up on the consumer products. It's been quite a while. I mean as we look at sort of the quarterly disclosures that you provide in sort of the company schedules. It's been quite a while since line of credit volumes have materially eclipsed installment. And can you just speak to maybe not just today where we sit, but as you think about the risk-adjusted returns of those 2 products going forward, is there anything on the installment side that would lead us to believe that, that's going to kind of regain maybe its position is half the consumer sort of product suite?

Or is there just something about either the credit profile or anything else structurally that is going to continue to kind of lean into a line of credit? Because it seems like there's less competition in line of credit, certainly.

Well, as you know, David, we're pretty agnostic across our products in terms of the growth. What we try to do is meet the demand that meets our unit economic hurdle rates. And so I think if you look back in our supplement, I think you can probably see that LOC sometimes is leading the way. We've had some opportunities in 2025 with our consumer installment products, particularly as it relates to refinance, which I spoke about last quarter.

And so I don't think we're sitting back thinking we're going to grow 1 faster necessarily than the other. We let the demand kind of push us there, and we follow our unit economic approach and our ROEs to take down, we think the demand that's going to, again, meet as many customers as we can while generating really strong returns.

So I think from time to time, you're going to see variations just like you have over time where you might see 1 quarter or 2, 1 product might be growing more strongly than the other and not just with consumer but across SMB and consumer as well.

The next question comes from John Hecht with Jefferies.

Again, congratulations on all the movement at the executive level. You definitely a testament to the long success of the company. I guess most of my questions have been asked. I guess when it comes to Grasshopper. Are there -- and forgive me if you mentioned this, are there certain geographies that you know you can go into that are not approachable by you or limited access at this point in time that would be somewhat meaningful?

John, thanks. So when we talked about some of that expansion last month on the call, -- there definitely are some states with our NetCredit brand that we would like to take on that perhaps we could with our current licensing and partnerships today, but we just haven't chosen to do so that a national bank charter will make it easier for us to do that.

So there definitely are specific states that we have in mind when you think about states like California, Pennsylvania, Ohio, which we're in, but not to the extent that we might otherwise if we were a bank, just to kind of give you some flavor. So we definitely have a hit list and a plan for where we want to go first.

Okay. And then I know this gives you some benefits from a regulatory perspective, just because you'll be able to centralize some of that that's within the bank. But then you'll have some stuff still outside the bank and the CFPB has really become less active -- so question is, can you just give me the quick description of how the regulatory framework and reporting mechanisms will look? And then are you observing any activity at the state level at this point in time that's worth pointing out?

So starting with that last question, it's relatively quiet at the state level. There's not really any -- outside of some of the noise that you've heard in the political arena, we haven't really heard any real policy or regulatory changes at the state level that we're particularly concerned about. As it relates to post-close structure, we will -- we expect to have CashNet in Brazil sitting outside of the National Bank as part of our nonbank affiliates under the holding company.

The Federal Reserve will have some oversight of that. And obviously, -- we've talked to them for many years about that plan. In terms of reporting, I mean, I think we'll continue there'll be some transparency, obviously, continue with our SEC filings, that we call reports at the National Bank and then the Federal Reserve suite of filings for holding companies as well. So that's the -- that's our plan that we're working against today, and we hope to get that done here later this year.

The next question comes from Vincent Caintic with BTIG.

Actually, another regulatory question, and it's kind of a broader topic, but when I was getting a lot from investors earlier in January about kind of broader consumer finance, and it was specifically, when the government started contemplating rate caps, and that was specifically on credit cards. But I wanted to get your thoughts, if you had any on this push for affordability and maybe how rate caps might have a potential positive or negative benefits to Enova and the industry beyond just the credit cards?

Yes. So I think the cap that's been discussed very specific to credit cards for 1 year. I think there's been a lot of commentary from the card banks on that and not just from them but from a lot of others, I think if that was to happen, that actually would probably be a positive for us, particularly for I think that there's a lot of studies that have shown rate caps tend to reduce availability for the very folks who need it the most, which tend to be those that are less served and so to the extent that some of those credit card customers are not able to access credit, we would be an alternative for them.

So we would view that positively. And Vincent, you know over the years, I think 17, 18 years in a row that Congress or a member of Congress has introduced a federal rate cap. It tends to revolve around election time. It's a very popular topic around affordability, but hasn't really had any meat to it. And I think -- if anything, this ongoing conversation is probably highlighted how irrational rate caps can be as it tends to hurt again, the very people that you're trying to help.

So while the probability is likely not exactly 0, it's very, very low. And obviously, from a policy point of view, we're not supportive of any actions that reduce the ability to provide credit to those who need it the most.

Okay. Great. That's super helpful and clear. And then switching over to small business. So you gave helpful color earlier about the kind of the improvement to consumer loan growth. But consumer loan growth that accelerated quite a bit beyond your run rate. So it was up 34% year-over-year and you highlighted some of the surveys in your prepared remarks, but maybe you could talk about what you're seeing on the ground, how the environment is for small business and kind of what you think is sustainable for 2026 and the health of that's a small business customer.

Yes, you bet. So I mean, clearly, the numbers kind of speak for themselves. SMB is a -- now has a long track record of successful growth. And the credit profile has been remarkably stable in sort of a very narrow range that we've expected. So I think that reflects the strength of our ability to underwrite those customers, but it also reflects the stability of the customer base that we're serving.

So there's been a lot of noise over the year of 2025 around the impacts of tariffs and the macro economy and where we are. But I think what I wanted to highlight in my commentary is that it's not quite as gloomy it seems on the ground. It seems that small businesses are looking forward positively. And I think it's reflecting in the demand that we're seeing.

And clearly, our brands and our scale are allowing us to win competitively and grow very quickly. Sustaining 30%, 40% growth rates is not something that I would just be planning on. that would be fantastic. But I think we're expecting to continue a strong growth rate with the guide that Scott gave and continue to have a successful credit profile for 2026.

Next question comes from Kyle Joseph with Stephens. .

You've had some solid year and reiterate all the congratulations on promotions, et cetera. Yes, most of my questions have been taken, but just kind of wanted to get your perspective. We talked a bit about the expected changes in tax refunds on the consumer side of things. Anything we should be thinking about on the SMB side from changes to the -- as a result of the BBB and any sort of implications for seasonality on that business for '26?

No, I don't anticipate any big changes in seasonality for 2026. And I think to the extent that customers, again, have a larger refund. It's good for our credit profile, but it also probably means they're going to spend it, which is going to be good for the economy, and that tends to be very good for our small business customers as well. So I think we're not expecting any disruption for our small business customers in 2026. If anything, it should be a positive.

Great. And then on the expense side, I appreciate the guidance you gave for the first quarter. And then obviously, we know what your EPS expectations are for the year, but kind of just walk us through maybe a little bit more color in terms of how you're thinking about the scalability of the business in '26, obviously, because first quarter has some seasonal impacts on marketing and whatnot?

Yes. Well, we think we're going to continue to generate that operating leverage and scale that you've seen. I mean, listen, the marketing, I think last quarter, we were remarking that we hadn't been quite at our 20% level of marketing spend. I think this quarter, we showed that when the market presents itself, we will lean into it to drive profitable growth.

And I think you should continue to expect, as Scott laid out some of those numbers, you're going to continue to see a grind lower in some of those expense categories as we continue to grow overall. So you should continue to expect us to scale the OpEx and invest in marketing, where we see the demand, and we know we can generate the unit economics that we need.

This concludes our question and other session. I would like to turn the conference back over to Steve Cunningham for any closing remarks. Please go ahead.

We thank you all for joining our call today, and we look forward to updating you next quarter. Have a good night.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Enova International Update Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ms. Lindsay Savarese, Investor Relations for Enova. Please go ahead.

Thank you, operator, and good morning, everyone. Enova announced this morning that it has signed a definitive agreement to acquire Grasshopper Bancorp and its wholly owned subsidiary, Grasshopper Bank, N.A. You may obtain a copy of the transaction press release on the Investor Relations section of our website at ir.enova.com, along with a presentation discussing the transaction.

With me on today's call are David Fisher, Chief Executive Officer of Enova; and Steve Cunningham, Chief Financial Officer of Enova. This call is being webcast and will be archived on the Investor Relations section of Enova's website.

Before I turn the call over to David, I'd like to note that today's discussion will contain forward-looking statements and as such, is subject to risks and uncertainties. These risks and uncertainties include those risk factors discussed in the most recent reports on Form 10-Q and 10-K as well as those discussed in the press release and presentation announcing this acquisition. Any forward-looking statements that are made on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

Also throughout this discussion, we may refer to non-GAAP financial measures, which are intended to enhance the understanding of our performance, not substitute for comparable GAAP measures. Definitions of these non-GAAP financial measures are included in the presentation. They are also in our most recent Form 10-K and Forms 10-Q, which include a full description of non-GAAP measures and reconciliations to the nearest GAAP measures.

And with that, I'd like to turn the call over to David.

Thank you, Lindsay, and good morning, everyone. Thank you for joining us today. Earlier this morning, we announced that we have signed a definitive agreement to acquire Grasshopper Bank in a cash and stock transaction valued at $369 million. We are very excited about this powerful combination, and I'm delighted to warmly welcome the entire Grasshopper team to Enova.

Acquiring a bank has been an aspiration of ours for a long time, and we believe we have found the perfect partner, and we believe now is the perfect time to move forward with this important strategic step. Grasshopper Bank is a client-first full-service digital bank serving the business and innovation economy. Like Enova, Grasshopper is known for providing solution-driven products and superior service through a combination of leading product offerings, passionate people and modern technology.

Grasshopper launched in 2019 and has grown to $1.4 billion in assets, anchored by a growing deposit base and a focused lending portfolio. Its strategy is quite similar to Enova's as it emphasizes disciplined credit, diversified funding and the use of digital channels to acquire and serve customers efficiently.

By uniting Enova's sophisticated online lending platform with Grasshopper's national charter and deposit gathering capabilities, we will be able to provide access to more consumers and small businesses who have traditionally been underserved by banks. By simplifying our product and operational model under this charter, we believe there are significant opportunities to accelerate the growth of our existing products with enhanced ability to serve our customers in more states as well as an ability to expand into new complementary products.

As a result, and as Steve will discuss in more detail, from a financial perspective, the benefits of this transaction are substantial. We anticipate meaningful and achievable synergies through geographic expansion, lower funding costs and further product diversification.

After closing, Enova will become a bank holding company and Grasshopper will be the bank subsidiary. Mike Butler, the current CEO of Grasshopper will serve as President of Grasshopper. There's probably no one in the country with more expertise in building digital banks than Mike, and we couldn't be more excited to have him on the team. Mike will report to Steve Cunningham, who will be appointed CEO of Grasshopper.

As a reminder, in July, we announced that Steve will assume the role of CEO of Enova effective January 1, 2026, at which time I will transition to Executive Chairman of the Board. Given Steve's 9 years at Enova and his deep banking and financial services experience, I'm confident that he is the right leader to see Enova through its next phase of growth.

As I mentioned back in July, I intend to serve as Executive Chairman for a minimum of 2 years. During that time, I will be very focused on facilitating a smooth transition and supporting the seamless integration of Grasshopper. Our mission has been steadfast since day 1, helping hard-working people get access to fast, trustworthy credit. And over the past 20 years, we have helped more than 13 million customers.

This transaction accelerates our ability to execute on this mission by directly expanding access to more customers with more products more efficiently and more broadly than ever.

Now Steve will discuss the transaction rationale and the financial aspects in more depth. Steve?

Thanks, David, and good morning, everyone. I'd like to add my personal welcome to the entire team at Grasshopper. We look forward to working together to continue delivering innovative tech-forward financial solutions nationwide.

As David mentioned, we're thrilled to announce our agreement to acquire Grasshopper. We're paying $369 million in total consideration to Grasshopper shareholders in the form of approximately 50% cash and 50% newly issued Enova shares, with stock options and warrant holders to also receive cash.

The transaction was unanimously approved by our Board of Directors and is subject to regulatory approvals from the OCC and the Federal Reserve, Grasshopper shareholder approval and other customary closing conditions. We expect the transaction to close in the second half of 2026.

As you may have seen, we posted a presentation on our website this morning, highlighting the strategic benefits of the transaction, which we believe will enhance our ability to produce consistent and sustainable growth and deliver significant financial benefits. Our strength in online lending, combined with Grasshopper's expertise in online deposit gathering, creates a powerful pairing that makes the combined company stronger and positions us to serve our customers even better than we do today.

With a unified regulatory framework under Federal Bank supervision, we have the opportunity to offer more consistent products across a greater number of states, which we expect to simplify compliance, risk management and back-office operations.

We've significantly diversified our lending business over the last decade, and that has been -- and that has been key to our ability to navigate varying operating environments, while producing consistently strong financial results. This transaction builds upon that progress by expanding our consumer geographic footprint and introducing new products such as small business administration lending, secured consumer lending and lending products tied to consumer depository accounts.

We expect expanded lending products, access to new markets and operational simplification, combined with our marketing expertise, nimble machine learning powered risk management and disciplined unit economics approach to deliver revenue synergies of between $175 million and $230 million annually within the first 2 years post-closing.

The Grasshopper team has built an award-winning and world-class deposits business and its powerful online deposit capabilities will immediately diversify the funding profile of Enova. Through its direct and Banking-as-a-Service deposit offerings, Grasshopper holds approximately $3 billion of relatively low-cost deposits on and off balance sheet that will further enhance our balance sheet strength and flexibility, lower our funding costs, and we expect will deliver funding synergies of between $50 million and $100 million annually within the first 2 years post-closing.

It's important to note that our business plan does not assume any material operational cost savings. In fact, we expect to thoughtfully invest in our infrastructure and capabilities to bring Enova and Grasshopper together, support meaningful growth and ensure that Enova smoothly transitions to meet the expectations of operating a bank and bank holding company.

As you can see, the financial benefits of this transaction are tremendous. We expect net synergies to increase adjusted net income by $125 million to $220 million annually within the first 2 years post-closing, driving adjusted EPS accretion of more than 25% once the synergies are fully realized.

In addition to the powerful economics of the combination, bringing Enova and Grasshopper together creates a top-performing banking organization that is well capitalized with significant liquidity and highly efficient with ROAs and ROEs expected to be among the best in the industry. There are more financial profile details in the transaction presentation that we posted this morning.

Turning to integration. We believe our cultures are strongly aligned. We're both digital-first values-based organizations with a shared focus on innovation. We both have highly flexible online-only business models that serve consumers and small businesses, and we have complementary product offerings that together will improve our ability to meet the needs of consumers and businesses, allowing us to take market share from both bank and nonbank competitors.

As a result, we are confident in our ability to execute a successful integration, and we have a successful history of integrating transactions, most notably with our acquisition of On Deck, which we acquired in 2020 during a period of great macroeconomic uncertainty. The strategic and financial benefits of that acquisition ultimately have surpassed our expectations.

I think it's important to reiterate, as I mentioned a moment ago, that the anticipated synergies resulting from the transaction are focused on loan growth and reduced funding costs, not people and operational savings. The aligned culture, combined with our experienced management teams and operational discipline position us well to smoothly integrate Grasshopper, combining our banking and lending capabilities to deliver a unified experience for our customers. We recognize the integration will be a large effort and are confident in our talented teams to deliver fantastic results.

To wrap up, let me again express how thrilled I am to welcome Mike Butler and the entire Grasshopper team to Enova. We have a tremendous opportunity to create a leading digital bank that will further scale our business, diversify our revenue and greatly increase our balance sheet strength and flexibility, while driving significant revenue and funding synergies and meaningful EPS accretion.

Aside from my time at Enova, I personally spent more than 2 decades of my career in the banking industry, and I'm excited to lead the combined company and Enova into its next chapter. We look forward to discussing our fourth quarter and full year results as well as additional details of this transaction on our next earnings call during early 2026.

And with that, we'd be happy to take your questions. Operator?

[Operator Instructions] And our first question for today will come from Moshe Orenbuch with TD Cowen.

Great. I guess, Steve, if there's a way to kind of give us a little bit of bigger or deeper insight into the synergies, whether it's by product, type of product that you'll be offering either at Enova or Grasshopper, I think that would be very helpful.

Yes. Today, in the near term, I think what we're talking about is we're not counting on some of the large innovations that we've talked about. We're expecting to continue to offer the products that we offer today. We would expect to be able to expand some of the growth, particularly in our near-prime consumer product, as we have access to more markets, more states across the country.

And we would expect to continue to offer a suite of the products today that on the revenue side that Grasshopper offers today. Obviously, with some changes as we get further into the integration and closer to the closing. But most of the real opportunities are going to come from the ability to grow more into these new markets with our near-prime consumer product.

Okay. And maybe on the opposite side of that, are there things that you will not be able to do that Enova currently does? Or does -- will some of Enova's current activities be outside the bank? How do we think about that? And does that have any bearing on the transaction?

We will -- we expect to continue to do everything that we do today. There will be some changes in terms of legal entities. But for example, our subprime CashNet business, we expect to sit outside of our bank subsidiary, but we expect to continue to operate it as we have for 20 years.

Yes. But outside of the bank, I guess?

Yes.

The next question will come from John Rowan with Janney.

So you kind of answered my main question. CashNet operating outside of the bank, so kind of the higher rate consumer stuff is still going to be run on a state-by-state basis, correct?

Yes. I mean I think that is our expectation in the near term, John. And as you know that business, we operate in a little bit smaller footprint, but it's been a nice growing business. It doesn't require any external financing, and it tends to be very cash flow positive. So we think it's a great business that will continue to operate as we have, as I mentioned before, for a very long time. We're just -- we don't need it to be sitting inside of the bank subsidiary when we look down the road for that business to be successful.

Okay. And then can you just give us an idea of the deposit base for Grasshopper? Is it -- I'm sure I can take a look at the call reports have been on calls all morning, broker deposits. Just give us an idea of what's kind of core at Grasshopper?

No, they have no broker deposits. It's a very strong core deposit-driven balance sheet. Mostly heavy on consumer, and they've got -- as I mentioned before, they've got both a commercial direct business and a consumer direct business with an affinity program with the AAA business. And then they have a large Banking-as-a-Service embedded finance deposit business that is largely focused on small businesses and commercial, which is a great complement to our lending business.

Okay. And then as far as -- obviously, you guys' repurchased stock. Are there any additional hopes you'll have to jump through to continue to repurchase stock as a bank holding company?

So I mean, we're putting the business plan together. As you know, I think in the near term, we'll have to make some adjustments to the buyback as we navigate filings and some of the transitions. But over the long haul, if you just look at our financial profile that we posted out there, very profitable organization, and we expect to capitalize very similarly to where we are today.

So if you look down the road, you should expect that we're going to have excess capital, and that we will continue to return that to our shareholders where that makes the most sense.

The next question will come from Vincent Caintic with BTIG.

Congratulations. First, I wanted to focus on the revenue synergies, expand on that a bit. First, on the, I guess, the geographical footprint side, if you can remind us how many states you're currently in and where you can expand to? If I remember correctly, a couple of years ago, you had to exit a couple of states that had an EPS impact. So just kind of wondering where you're at now and where you can expand to geographically?

And then from that product set kind of synergies, if you can maybe expand on that a bit as well. I saw that Grasshopper is in auto lending. And so just kind of wanting to get maybe a further sense of that near-prime consumer product opportunity that you were discussing.

Sure. Yes. So I think the bulk of the revenue synergies are from our -- at least the initial ones are from our existing near-prime products that are mostly originated under the NetCredit brand name. And in terms of the state expansion, it depends a little bit by the specific products. There's multiple products under that NetCredit brand, but we're only covering kind of between 50% and 60% of the total population in those products today. So there is a very significant opportunity to expand geographically as a result of this transaction.

In terms of Grasshoppers products, they do have a variety of consumer products, some of which are very interesting to us and that we'll dive deeper into as we get further in integration. And I think slightly longer term, although not super long-term, we absolutely think there is the opportunity for additional consumer products, think of alternative products to what Chime, Cash App and Dave are doing today.

Okay. That's perfect color. And then last question, just on maybe thoughts on regulatory changes. I think you've talked a little bit about it so far, but just any broader thoughts now that you're becoming a bank on how we should think about regulatory framework and any regulatory changes?

Yes. I mean, obviously, we're very confident that we'll be able to get through the application processes with the OCC and the Federal Reserve. And we've been in dialogue for many years with those organizations. So we are not new to them.

And if you recall, we do -- we have bank servicing programs on our NetCredit and small business programs. So we have been servicing commercial banks for many, many years. And as a result of that, there are many aspects of Enova that look very bank-like.

And so I think while we'll have to make some pivots to become a bank holding company, a lot of the way we operate the organization should mesh very well with the expectations of the prudential regulators.

And from a financial point of view, if you look at our balance sheet and earnings performance, those fit very well with expectations also. So obviously, we have some work to do, and we're very focused on it, but we feel very good about making the transition to a bank.

[Operator Instructions] Our next question will come from Bill Ryan with Seaport Research Partners.

I'd also like to extend my congratulations on this acquisition. A couple of questions. One, kind of following up on the last question. Curious about the decision process to become a bank holding company, because I'm sure it was analyzed about staying where you are and having an unregulated part of the company, and then a regulated part of the company. So if you can maybe elaborate on that a little bit more? And then I have one follow-up.

Yes. I mean becoming a bank holding company, I think, is the practical answer to the way we're thinking about structuring the company. And over time, the vast majority of our operations are going to be sitting in the bank subsidiary. And having the nonbank activities, obviously, the Federal Reserve will be focused on those.

But again, as we mentioned before, the bank holding company and maybe the financial holding company structure will make the most sense for us going forward as we look at those activities that will not be sitting inside of the bank, which, again, I think will be, over time, will become a much smaller part of the consolidated Enova organization.

Okay. And as a follow-up, just on the deposit growth strategy. Obviously, you've kind of alluded to the fact that will become a bigger part of the business going forward on the funding side. Could you maybe talk about your growth plans for that business? How do you plan to expand and collect deposits? And maybe a clarification. You talked about an off-balance sheet deposit structure. Could you maybe talk about how that works?

Yes. I mean -- so Grasshopper has been very successful raising core deposits more than they can use for their own asset businesses. So by off-balance sheet, those are deposits that they've sold through the syndication networks that deposits are sold through.

So step number one is there's deposits available on their balance sheet and off balance sheet that we'll be able to put to use for growing our combined asset businesses right out of the gate. And then when you look down the road, the -- bringing the 2 organizations together with their deposit expertise, bringing our marketing expertise together with that is going to give us opportunities to do things that we haven't really done before.

And again, as I highlighted on the call, the opportunities with the deposit synergy -- with the deposit funding is going to create some synergies that are very significant in the near term for us.

The next question will come from John Hecht with Jefferies.

Congratulations. A lot of my questions have been asked and answered, but I'm wondering just trying to think about structurally -- the structural part of it, like will you -- like do you -- will you be reporting it as like a separate segment initially? Or how do we think about kind of the mechanics of the P&L when you guys' combine next year?

Yes. So John, we have a little bit of work to do on sorting out exactly how we'll report the new combined organization going forward. But our commitment will be that it will be clear, and you'll be able to understand it. So more to come on that as we get a little closer to the closing next year.

Okay. And then you mentioned that you think the majority of the business, which I assume is like assets and so forth will be in the bank over time. Is that -- do you envision that being mostly the small business? Because -- yes, I looked at the Grasshopper website, it looks like they're focused more on the small business side of things. Will it be more the small business category? Or will you be putting both the consumer assets and the business assets in the bank over time?

Yes. So our small business products, which you know are a large and growing part of our business will be within the bank subsidiary as well our near-prime products, which are probably half -- roughly half depending on what measurement you're using of our consumer products will also be within the bank subsidiary.

So really, the only things outside of it will be our CashNet products, the deeper subprime products as well as our Brazilian subsidiary and our payments business, Pangea. We really envision everything else being within the bank.

Okay. That's super helpful. And then within the bank and the consumer side, I mean, I guess because of the funding structure and all that, it does seem like you can offer a broader set of customers, your financial services, but will -- do you envision new lending products to consumers or just more of an extension of your diverse suite of products that you have right now?

Yes. So a couple of things. So those consumer products that will be moving into the bank subsidiary are the products today that we already originate through the bank partners that we service bank partners through and help them originate today. So something we're very familiar doing, which should make that integration relatively easy. It's basically just Grasshopper kind of becomes a bank partner of us, but we are them all at the same time. But that's something we know how to do.

And then as I kind of alluded to a minute ago, we do think there are a wide variety of additional products we can offer to consumers and small businesses. And an example of those, but certainly not the only ones or kind of those alternative products that I mentioned to like Chime, Cash App and Dave.

Yes. Okay.

John, I would just add, I mean, today, Grasshopper offers a secured auto loan as well, which there's potential opportunities to take a look at that product and expand that offering across a broader customer segment. So we haven't really been in secured lending in that way before, but that would be one way that we could get started in that on the consumer side.

Okay. And then you mentioned Dave and Chime and so forth. And there's a lot of -- you added deposit services, and I guess, customer credit services. And some of those companies also have like subscription kind of services where the customers or the bank members will pay monthly fees to get access to short-term forms of credit. Is that the type of revenue stream and services you're considering offering through the bank?

Yes. I would think probably not the subscription type of businesses. That's why I kind of said alternatives. But certainly, Grasshopper always -- already has a great consumer deposit products and small business as well. I think utilizing those deposit products to offer loan-linked products to them is a huge opportunity for us. We've tried to figure out ways of doing it historically because there is a tremendous amount of power of having insights into customers deposits and habits. And so being able to link those depository accounts, we think, is a very large opportunity.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. David Fisher for any closing remarks. Please go ahead.

Thank you, everyone, for joining us early in the morning today. And as Steve mentioned, we look forward to speaking with you again in January with our Q4 results. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Enova International Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Lindsay Savarese, Investor Relations for Enova. Please go ahead.

Thank you, operator, and good afternoon, everyone. Enova released results for the third quarter 2025 ended September 30, 2025 this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at ir.enova.com.

With me on today's call are David Fisher, Chief Executive Officer; and Steve Cunningham, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website.

Before I turn the call over to David, I'd like to note that today's discussion will contain forward-looking statements and as such, is subject to risks and uncertainties. Actual results may differ materially as a result from various important risk factors, including those discussed in our earnings press release, and in our annual report on Form 10-K, quarterly reports on Forms 10-Q and current reports on Forms 8-K. Please note that any forward-looking statements that are made on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

In addition to U.S. GAAP reporting, Enova reports certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release.

As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website. And with that, I'd like to turn the call over to David.

Thanks, and good afternoon, everyone. I appreciate you joining our call today. We are pleased to report another great quarter, highlighted by solid loan growth and strong credit metrics across our portfolios, driven by our nimble online-only business model and well-diversified portfolio.

Before we dive into the quarter, as a reminder, last quarter, we announced that Steve Cunningham, our CFO, will take over as CEO on January 1, at which time I will transition to the Executive Chairman role. I've committed to remain as an exec chair for at least two years. Scott Cornelis, our Treasurer, will succeed Steve as CFO. Steve and Scott are preparing well for their new roles, and we expect a seamless transition with the continuation of our focused growth strategy and consistent performance.

Now turning to the quarter. In Q3, we once again generated strong growth supported by stable credit and significant operating leverage. Thanks to our diversified product offerings, the sophistication of our machine learning models and outstanding team, we've been able to consistently deliver significant portfolio growth while maintaining stable credit, resulting in strong financial results.

Third quarter originations increased 22% year-over-year and 9% sequentially to almost $2 billion. The stronger origination growth produced a 20% year-over-year increase in our combined loan and finance receivables to a record $4.5 billion. Small Business Products represented 66% of the total portfolio and consumer 34%.

Revenue increased 16% year-over-year and 5% sequentially to $803 million in the third quarter. SMB revenue increased an impressive 29% year-over-year and 7% sequentially to a record $348 million, and our consumer revenue increased 8% year-over-year and 4% sequentially to $443 million. Overall, the stability of our customer base continues to underpin our growth as credit quality is solid across the portfolio.

The consolidated net charge-off ratio for the quarter was 8.5% compared to 8.1% last quarter and 8.4% in Q3 of last year. Despite some noise in the macro environment, the underlying trends for our customers continues to be positive. The job market remains healthy with unemployment rates staying historically low at 4.3% as of August, and wage growth continues to outpace inflation for our target customers. In addition, August consumer spending data showed a meaningful uptick, reinforcing steady household demand.

When looking at external data, it's helpful to keep a couple of key factors in mind. First, our consumer customers in some ways are always in recession. As a result, they are adept at managing variabilities in their finances. Second, these customers tend to have jobs with more fungibility in terms of being able to move between companies. This can lead to less volatility in the earnings over time.

Looking back to our Q2 earnings call, we discussed how early in the spring, we've seen some minor elevated default metrics in one of our consumer products. As we mentioned, in response, we tightened our credit models for that product, particularly for new customers. Because we're able to adjust so quickly, we avoided any significant impact to our consumer business, taking swift action like this to adjust our models is routine for us. We're able to do this because of the rapid performance feedback we get as a result of the design of our products and the sophistication of our credit models. It's something we do all the time, hundreds of times for a year, and this goes both ways, whether we're making adjustments in tightened credit or to expand it. So as expected, following the adjustments to this one product credit performance has quickly returned to normal.

In fact, credit in that product now exceeds our expectations with some of the lowest early default metrics we have witnessed. As a result, we've begun rapidly reaccelerating its growth. So looking forward to Q4, we expect to see consumer origination growth rate to accelerate sequentially and credit metrics continue to improve.

Also contributing to our stable financial performance through market fluctuations are the benefits of having a diversified portfolio. Having operated in the nonprime space for decades, it's common to see short-term fluctuations in demand and credit in any one product or customer segment.

In addition to being well diversified across our SMB and consumer businesses, within each of those, we offer a wide variety of products, adding multiple layers of diversification across our portfolio. This structure gives us the flexibility to allocate resources towards the strongest opportunities and have the confidence to moderate exposure where risks are elevated.

With this in mind, we continue to see compelling opportunities within our SMB business, which had another fantastic quarter in Q3. Our leading brand presence, scale, solid credit and low levels of competition again resulted in solid demand and credit performance.

Originations for SMB increased 11% sequentially and 31% year-over-year to nearly $1.4 billion in Q3. Insights from internal and external sources reflect solid underlying trends for small businesses.

In conjunction with Ocrolus, we released the eighth iteration of our small business cash flow trend report earlier this week. This offers key insights into the state of small businesses and highlights ongoing trends observed over the past year.

Small business confidence is high as tariffs remain manageable and the economy and, in particular, consumer spending remains strong. While business growth expectations stayed strong in Q3 with 93% of owners anticipating moderate to significant growth over the next year. In approximately 3/4 of small businesses prefer nonbank lenders with nearly 40% of those in business reporting being denied by traditional banks. Further, external data aligns with these observations. Small business sentiment reached a new high in the third quarter with the MetLife and U.S. Chamber of Commerce Small Business Index climbing to 72, it's higher reading ever and up from 65.2 last quarter, signaling strong optimism across the sector.

Driven by the operating leverage inherent in our online-only business, Growth in EPS again outpaced both origination and revenue growth in Q3. Adjusted EPS increased 37% year-over-year, primarily as a result of our strong growth efficient marketing and a lower cost of funds.

Before I wrap up, I'd like to spend a few moments discussing our strategy and outlook for the remainder of 2025 and beyond. We've carefully designed our business with a thoughtful unit economics approach that has enabled us to operate profitably for more than two decades. This is through many different environments, including downturns in consumer spending, interest rate hikes, surges and inflation, not to mention the great recession and a global pandemic. During this time frame, we've successfully navigated periods where the unemployment rate was more than double where it is today. And our business is better prepared than ever to withstand changes in the macro environment as our technology and analytics continue to be more sophisticated and our balance sheet is stronger than ever, while our portfolio has become more diversified.

I said this last quarter, but I've never been more excited about Enova's future. We have an incredibly experienced team, a strong foundation, a time-tested playbook and industry-leading products, all clear signs of the opportunity ahead of us. Steve and I share a common vision that our focused growth strategy will continue to steer our path forward. We continue to adapt and innovate and remain committed to producing sustainable and profitable growth while meeting the needs of our customers and driving shareholder value.

With that, I would like to turn the call over to Steve Cunningham, our CFO, who will discuss our financial results and outlook in more detail. And following Steve's remarks, we'll be happy to answer any questions you may have. Steve?

Thank you, David, and good afternoon, everyone. As David noted in his remarks, we're pleased to deliver another solid quarter of top and bottom line results that were in line or better than our expectations. The strong growth in originations, receivables and revenue, along with solid credit operating efficiency and balance sheet flexibility.

Turning to our third quarter results. Consistent with our expectations, total company revenue of $803 million increased 16% from the third quarter of 2024, driven by 20% year-over-year growth in total company combined loan and finance receivables balances on an amortized basis.

Total company originations during the third quarter rose 22% from the third quarter of 2024 to nearly $2 billion. Revenue from small business lending increased 29% from the third quarter of 2024 to $348 million of small business receivables on an amortized basis ended the quarter at $3 billion or 26% higher than the end of the third quarter of 2024.

Small business originations rose 31% year-over-year to $1.4 billion. Revenue from our consumer businesses increased 8% from the third quarter of 2024 to $443 million as consumer receivables on an amortized basis ended the third quarter at $1.5 billion or 9% higher than the end of the third quarter of 2024. Consumer originations grew 4% year-over-year to $590 million. As David mentioned, the slower consumer growth this quarter was intentional to ensure we were maintaining solid credit quality across the portfolio.

For the fourth quarter of 2025, we expect total company revenue to be 10% to 15% higher than the fourth quarter of 2024 as a result of strong SMB growth and a reacceleration of growth in our consumer portfolios. This expectation will depend upon the level, timing and mix of originations growth during the quarter.

Now turning to credit, which is the most significant driver of net revenue and portfolio fair value. Our consolidated credit performance continues to demonstrate that our diversified product offerings and discipline around our unit economics enable consistent results across different operating environments.

The third quarter consolidated net revenue margin of 57.4% was in line with our expectations. It reflects continued solid credit performance. The consolidated net charge-off ratio for the third quarter was 8.5%, flat to the third quarter of 2024 and reflects our typical consumer seasonality and continued strong small business credit performance. Sequential stability and year-over-year improvement in the consolidated 30-plus day delinquency rate and a stable consolidated portfolio fair value premium reflect our expectation of stable future consolidated portfolio credit performance.

Small Business Credit performance remained strong sequentially and compared to the third quarter of 2024. The net charge-off ratio, the net revenue margin, fair value premium and 30-plus delinquency rate for our small business portfolio, all improved and reflect continued and expected stable credit performance.

Consumer credit also remains solid. Following our typical seasonality, the consumer net charge-off ratio rose sequentially to 16.1% for the third quarter. And while higher than the year ago quarter, remained in our expected range.

The consumer net revenue margin and credit metrics for the third quarter were influenced primarily by mix shifts and the rate of originations growth on the heels of consumer portfolio adjustments that we discussed last quarter. Those adjustments and our overall balanced approach to growth meaningfully reduced the year-over-year change in the consumer 30-plus delinquency rate compared to last quarter. And as David noted, we exited the third quarter with the lowest ever initial default and weekly vintages on the consumer product we adjusted, allowing us to accelerate sequential growth opportunities into the fourth quarter.

Additionally, during the quarter, year-over-year consumer installment originations grew at the fastest rate that we've seen in several years as we saw higher demand from existing customers for refinancing and debt consolidation. This is another example of how the breadth of our consumer products and credit segments combined with our disciplined approach to unit economics, enables us to navigate varying operating environments and generate consistent consolidated results.

The fair value premium on our consumer portfolio at the end of the third quarter was flat to last quarter and remained consistent with levels observed over the past two years, indicating a stable risk return profile and strong underlying unit economics for our portfolio. Looking ahead, we expect the total company net revenue margin for the fourth quarter of 2025 to be in the range of 55% to 60%. This expectation will depend upon portfolio payment performance and the level timing and mix of originations growth during the quarter.

Now turning to expenses. Total operating expenses for the third quarter including marketing, were 31% of revenue compared to 34% of revenue in the third quarter of 2024. As we continue to see the benefits of our efficient marketing activities to leverage inherent in our online-only model, and thoughtful expense management. Our marketing spend continues to be efficient, driving strong originations growth and was in line with our guidance range for the quarter.

Marketing cost as a percentage of revenue were 18% compared to 20% for the third quarter of 2024. We expect marketing expenses to be around 20% of revenue for the fourth quarter, but will depend upon the growth and mix of originations.

Operations and technology expenses, which were driven by growth in receivables and originations were 8% of revenue for the third quarter, similar to the third quarter of 2024. Given the significant variable component of this expense category, sequential expenses in O&T costs should be expected in an environment where originations and receivables are growing and should be between 8% to 8.5% of total revenue.

Our fixed costs continue to scale as we focus on operating efficiency and thoughtful expense management. General and administrative expenses for the third quarter increased to $40 million or 5% of revenue versus $39 million or 6% of revenue in the third quarter of 2024. While there may be slight variations from quarter-to-quarter, we expect G&A expenses in the near term should be between 5% and 5.5% of total revenue.

We continued to deliver solid profitability and strong returns on equity this quarter compared to the third quarter of 2024. Adjusted EPS, a non-GAAP measure increased 37% to $3.36 per diluted share, delivering an annualized third quarter return on equity of 28%. We ended the third quarter with $1.2 billion of liquidity, including $366 million of cash and marketable securities and $816 million of available capacity on debt facilities. Cost of funds declined to 8.6% or 15 basis points lower sequentially and nearly 100 basis points lower than the third quarter of 2024 as a result of lower short-term interest rates and strong execution on recent financing transactions.

Continuing our track record of strong capital markets execution that reflects our solid credit performance. During the third quarter, we have sized our corporate revolver by $160 million to $825 million, extending the final maturity to 2029, reduced the cost by 25 basis points and expanded our bank lender group. Our balance sheet and liquidity position remains strong and give us the financial flexibility to successfully navigate a range of operating environments, while delivering on our commitment to drive long-term shareholder value through both continued investments in our business, and share repurchases. During the third quarter, we acquired 339,000 shares at a cost of $38 million, and we started the fourth quarter with share repurchase capacity of approximately $80 million.

Before wrapping up with our fourth quarter expectations, I'd like to touch on our valuation. Enova has delivered strong and consistent results over many years and operates a highly scalable online-only model, with more diversification than any nonbank specialty finance company. Since our acquisition of OnDeck five years ago, we've not only maintained our strong profit margins. We've done so while cutting our consolidated net charge-off rate in half. Our demonstrated world-class risk management capabilities and approach to unit economic decisioning has driven our differentiated financial performance and return on equity as well as our ability to finance the business at market-leading spreads.

To put this in perspective, Enova has never reported a quarter of negative adjusted EPS. And over the past 10 years, has delivered $1.8 billion of adjusted net income and grown annual adjusted EPS at a compound average annual growth rate of approximately 20%. Over that same time, we've reduced our financing costs by hundreds of basis points from lower credit spreads that are a direct result of our portfolio credit performance and predictability.

Despite our demonstrated operating model advantages and unmatched financial performance as a public company, we remain frustrated by a persistent valuation gap. We continue to trade at discounts to the S&P 600 and Russell 2000, the financial components of each of those indexes and to other specialty finance lenders that have less consistent performance and profitability. In fact, at the end of the third quarter, Enova traded at a similar price multiple on 2026 consensus adjusted EPS estimates, that's similar to 2016 and 2017 forward PE ratios, when we were a much smaller consumer-centric company.

We continue to believe there is meaningful upside to our current share price and continuing to unlock the value our company creates remains a top focus of Enova's leadership. You should expect that we will continue our focus on growth with financial consistency and we'll continue to lean into our capital returns through opportunistic share repurchases.

To wrap up, let me summarize our fourth quarter expectations. For the fourth quarter, we expect consolidated revenue to be 10% to 15% higher than the fourth quarter of 2024, with a net revenue margin in the range of 55% to 60%. Additionally, we expect marketing expenses to be around 20% of revenue, O&T cost to be between 8% to 8.5% of revenue and G&A cost to be between 5% and 5.5% of revenue. These expectations should lead to adjusted EPS for the fourth quarter of 2025, that is 20% to 25% higher than the fourth quarter of 2024.

Our fourth quarter expectations will depend upon the path of the macroeconomic environment and the resulting impact on demand, customer payment rates and the level timing and mix of originations growth. Our third quarter results reflect the strength of our diversified product offerings and the ability of our team to consistently deliver strong growth, revenue and profitability while maintaining solid credit. Our operating model has now delivered six consecutive quarters of year-over-year adjusted EPS growth of at least 25% or more, and we remain confident in our ability to generate meaningful financial results for the remainder of 2025 and beyond.

And with that, we'd be happy to take your questions. Operator?

[Operator Instructions] The first question today comes from David Sharf with Citizens Capital Markets.

Dave and Steve, you're the latest in the what's becoming a long line of lenders that have reported a very stable, positive and constructive credit commentary this earnings season. So I'm going to leave the credit questions to some others to ask about.

I was curious maybe two more granular things. One is just on kind of capital actions. This is, I think, similar commentary on how you perceive the stock's valuation as you provided in the last couple of calls. Is there any kind of update you can provide us on whether you would ever consider seeking additional covenant relief to return potentially even more capital in terms of buybacks or whether a dividend is potentially something the Board would consider?

Yes. I think everything is on the table. Certainly, both of those over time as well as other ways of utilizing excess cash. We have plenty of excess capital. The other way is using excess capital to maybe further diversify the businesses and increase our valuation.

I think, as Steve said very well in his prepared remarks, given the incredibly strong track record of our -- the performance of our business, how much it's evolved over the last 7 or 8 years just in terms of stability, diversification, balance sheet strength to be trading at the same Ps we were back then as obviously not where we take the value of the business is. So yes, opportunities to increase the buyback -- the returns on our buybacks over time has been very, very, very strong. certainly, a dividend at the right time, although that's, I think, usually a better tool when the stock is more fully valued. And then are there places -- other places in the market where we can utilize our capital.

Understood. Maybe as a follow-up. On the marketing side, there have been quite a number of quarters now where at least as a percentage of revenue, marketing dollars have come in below your guidance and I think you guided to 20% last quarter. It came in at 18% again. And at some point, trying to figure out what's a feature versus a bug. And are you seeing anything about the composition of either by channel or just percentage of repeat borrowers or just maybe it's the mix shift towards more SMB. But is there anything that would kind of lead you to tell us structurally the operating model is potentially more profitable than we've been sort of modeling and that 20% is maybe too high a ceiling?

Yes. I mean, look, the model continues to get more profitable, and I'll give a lot of credit to our marketing and business teams who are continuing to get more efficient on the marketing and acquisition and conversion side, those all tie together. But some of it is also just a confluence of events.

If you kind of go back to Q4 of last year, volume came really, really late in the quarter, and so we probably underspent because we didn't see the volume earlier in the quarter. Q1, there was just a tremendous amount of volume that we never would expect to see in Q1. So we're probably underspending again. And then we had a lot of excess revenue from the strong Q4 and Q1, kind of increasing the denominator for Q2 where actually the spend was actually kind of pretty near where we would have thought it was going to be. And then as we talked about in Q3, we pulled back a bit on the consumer side just while we were letting the credit settle in that one consumer product. So we look for Q4 as we're now accelerating growth, especially on the consumer side.

Now the credit, as I mentioned on my prepared remarks, credit looks incredibly good right now, not just solid. I mean it looks like incredibly good at the moment. We're going to lean into that accelerate growth. And look, a lot can change between now and the end of the year, and it's hard to predict the holiday season. But we would -- we are certainly expecting higher levels of spend in Q4.

The next question comes from Bill Ryan with Seaport Research Partners.

Question on the growth outlook. I mean you obviously seem very optimistic on the consumer originations going into Q4. Looking at Q3, consumer installment, as you noted, was very, very strong, a little bit of decline in consumer line of credit originations. I presume that might be reflective of the tightening and kind of the wait-and-see approach that you took from Q2 to Q3. Just was that the case? And do you expect kind of a mix of growth between the two products going into Q4 like a reacceleration and line of credit?

Yes. I mean, very observant of you, Bill, so I'll give you credit for sure. Steve guessed that someone is going to pick that up, and he was right. So yes, that was the product. And yes, that is where we're expecting the most acceleration going into Q4. Again, we're filling demand here. So we don't always know for sure. But that is certainly our expectation on the consumer side that we'll see a reacceleration of that line of credit and a mix shift in favor of line of credit, not that there's any issue with installment right now, there's not. But there's just -- there's more acceleration opportunities in line of credit given the -- yes, the slight pullback we had intentionally in Q3.

Okay. And I assume this might relate to that as well, but the change in fair value on the consumer loan portfolio, a little bit of an uptick in Q3 as well. I assume was that related to some of the adjustments that were made?

Yes. I mean if you think about the change in fair value line item in terms of dollars, there's two components. One of them is the back book sort of running its course, which the fair value premium is very stable. So all of that was as expected as we just sort of continue to mature the back book. the bigger difference would have been the slower originations growth overall in the consumer portfolio, which would have been a negative in the change in fair value line item for the quarter.

The next question comes from Vincent Caintic with BTIG.

I guess I'll ask the credit question. But so your credit trends have been strong, both in SMB and consumer and I was just wondering, I guess, with the applications you're getting at or maybe just kind of a broad industry outlook, if you have any of where you might be seeing or where there might be any sort of deterioration that might be out there, like perhaps are you getting more applications in certain areas where you might be declining more or anything where you might be seeing that?

I mean, look, we adjust credit hundreds of times a quarter. So there's always something here or something there, but there's no significant pockets at all. our subprime business has some of the best credit metrics we've seen in a long, long time. And so our near prime both business has like some of the best credit metrics we've seen in a long, long time. So it's broad-based. I know there's been a lot of questions about it because of subprime auto and maybe one or two vintages and some of the upstart's older securitizations. But I mean those -- that want kind of one vintage doesn't mean much of anything. And subprime auto, we've seen many, many times over Enova's history is just not correlated to what we do. It's so much based on asset prices and supply and demand. So no, we are seeing top to bottom consumer and small business incredibly good credit. And it's not surprising. The economy remains strong. The job market remains strong. Inflation has moderated. There's no reason to expect that it wouldn't be. So yes, no areas that we're really concerned about at all right now.

Okay. Great. And I guess relatedly on the competitive front. So I know maybe banks aren't your direct competitors, but some of the failings that maybe have happened amongst other lenders, particularly in commercial side. There's -- maybe some of those lenders are now relooking at their portfolios and so forth and maybe tightening up a bit. So I'm kind of wondering if you're seeing that and if in turn that allows you to take more share or maybe that's part of the marketing opportunities that you're seeing? If you could talk about that?

Yes. I mean, yes, sure. On the small business side, we continue to see banks being extremely conservative, and that's created an enormous opportunity for us over the years. And we don't -- we haven't seen that change at all. I mean, if anything, we've seen more conservatism from banks, which has obviously been a huge positive for us there. And then on the consumer side, there haven't been any new entrants into that space in a long, long time. And when we see kind of people on the fringes, more prime lenders try to dip their toes into near prime, we see them pull back very, very quickly. It's just that they're just different businesses and they're not good at lending above 36%, no different than we would not be good at lending at 12% or 18%. It's just not what we do. We're not going to compete with Capital One, and I think they've been pretty smart about not trying to compete with us. So yes, I think -- as we've talked about, the competitive dynamic is good for us. And we continue to not see many changes there.

The next question comes from Kyle Joseph with Stephens.

Just in terms of growth, obviously, it's been weighted towards the small business side of things. And kind of -- you guys mentioned kind of the credit blip you saw in the spring. But yes, in touching on competitive dynamics, and then I think you mentioned that you expect consumer to reaccelerate. Just give us a sense for kind of the competitive dynamics between the two?

Yes. So look, we don't purposely push growth in one versus the other. You've heard us talk about -- it's all based on our unit economics framework. We have excess capital. So where we can originate loans above our ROE targets, we will. And we let the market dynamics play out. And I would say the variances in the growth rates between the two businesses over the last few years have been almost all market and credit driven.

So in 2023, for example, consumer outgrew small business by a fair amount, this year, small businesses are growing consumer. That's fine. That's great. This quarter, you might see that revert especially with the reacceleration on the consumer side. And next year, we don't know. What we do know is we have a lot of good products across a pretty wide spectrum of the nonprime credit base. And so if one market is stronger than the other, we'll lean into it and take advantage of that diversification. But -- so that's kind of a longer term and shorter term.

Like I said, we are pushing pretty hard on the consumer side right now. Pushing hard relative for Enova, obviously. I mean we're always very balanced between growth and credit. You've never seen us get out ahead of our [ skis ], and we're certainly not going to do that now. But we just -- credit looks so good on the consumer side that we're certainly leaning in.

The next question comes from Alexander Villalobos with Jefferies.

Congrats on the results. My question was more on the cap market side and just interest expense. I know you guys generate a ton of cash. And is there anything on the bond side or just cap market side where you guys can -- in the future, kind of lower interest expense a little bit more and kind of get a little more push on the EPS side from there.

Yes, for sure. So we've talked about the expectation that we're going to see lower benchmark rates in the short end of the curve, which is where we tend to fund. So that we expect over the near term over the next year or two, that's going to be a tailwind for us. But more importantly, just the performance of the portfolio has allowed us to continue to bring our spreads down. You saw that, I mentioned in my commentary, every transaction here over the last year or so, we've talked about the decline in the credit spreads over the benchmark because of that performance. So I think there's clearly some opportunity between those two things to capture some of the tailwinds in the capital markets to help support growth in EPS.

The next question comes from John Hecht with Jefferies.

Two Jefferies back to back. Anyway -- so I will only ask one question, but it's kind of -- I guess a broad question. I mean you've got rates declining. It sounds like very good consistent current trends. I think the competitive environment is considerably favorable for you. But then we're eying high [indiscernible] activity, which, in some cases, looks like [indiscernible] excessive amount of liquidity in the system. So the point is like these seem good, but they are on the margin at a moving target. How do those things affect your kind of the way you think about near-term and intermediate-term strategies?

Yes. It was a little hard to hear some of that with the background noise. I think you -- look, competitively, you talked about, there's not much [ new ]. I think you said you asked about prepays like elevated prepays. Look, in the subprime and near prime space, that just doesn't move the needle much. I mean it's just these -- our customers need the cash. And so we don't tend to see that a lot. So again, look, we don't get overly confident in Enova. It's just something we don't do. But the model, the products are looking really strong and stable right now. We're not seeing many cracks. We're not seeing many changes other than improving credit. Our customer bases look very solid kind of across any metric that we can look at. I mean when we think about prepayment rates haven't changed, average loan sizes are staying steady, we're not seeing customers being more or less price sensitive. It's just -- it's a very stable environment right now. Again, we're fully cognizant that, that can change, and we're watching all the metrics every day. But right now, things are looking very stable.

The next question comes from John Rowan with Janney.

Obviously, you spent a lot of time talking about current credit given obviously what's going on in the news. But maybe just touch on quickly what you think about 2026, in particular, think about what's going on with the tax laws and tips and overtime and changes to our child care tax credits and some of those other programs. Just give us an idea of maybe how much of your consumers are impacted by some of those large changes in tax policy.

Yes. Well, I think the estimates are for higher tax refunds next year, which should help with credit. And then, look, I think this year, we saw what we thought was going to be one of the bigger impacts, which was the resumption of payments on student loans and the resumption of collections on student loans and we've been able to navigate with that with no problem at all. And I think some of the tax, some of the tax changes next year kind of pale in comparison to that in terms of magnitude and if anything, are likely to be helpful. So again, you don't know until it actually plays out, but it doesn't seem like it's going to be an issue for us at all.

The next question comes from Moshe Orenbuch with TD Cowen.

Most of my questions have actually been asked and answered, but I was sort of hoping to kind of just -- and maybe the idea of -- you talked about leaning in kind of on the line of credit side of the consumer and the consumer being significantly stronger in Q4 than Q3. I guess given that -- your approach, does that mean that you will have less origination on the small business side? Or does it mean that we should just think about you kind of investing just incrementally heavily in Q4?

Completely incremental. As you know, we have plenty of excess capital. I think we had about $1 billion of excess liquidity at the end of at the end of Q3. So we have plenty of capital to invest in both in Q4. And SMB looks really good as well. I mean they had a just killer Q3. And that momentum has continued into Q4. So the only reason we've talked -- haven't talked more about SMB is because it's just doing well and it's continuing to do well. And we'll -- yes, we have plenty of capital to keep that business going at full speed. And then -- so it's really just that the change is really just on the consumer side, [indiscernible] operating growth again should see stronger growth in the consumer book.

Got you. Okay. And the -- and this may be just our forecast, but you bought back a little less stock in Q3 than we had in our model. Given that you've got -- that you've got this kind of extra kind of faster growth expected in Q4, should we think that buybacks would be similar to Q3 or more like prior quarters?

H

Moshe, so as we've talked about, we have the capital and liquidity to do all of it, organic growth as well as buybacks. And our buyback is we run an opportunistic program. So we still bought 60% of the capacity this quarter, but you also remember, we touched all-time highs for a couple of weeks which at those levels, we would still be buying but at a lower level than we would, say, for example, right now. And in those quarters where we were buying nearly all of the capacity, we were trading off of where we are today. So you should expect us to follow that approach. We have about $80 million available in Q4, which is we kept some of that powder dry in case there's volatility as we go forward from here, and we'll continue to be opportunistic and buy as much as we can against that program and continue to grow the business as fast as we can against our focused growth -- balanced growth approach.

This concludes our question-and-answer session. I would like to turn the conference back over to David Fisher for any closing remarks.

Thanks, everyone, for joining our call today. We certainly appreciate it and look forward to speaking with you again next quarter. Have a good evening.

Good afternoon, and welcome to the Enova International Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Lindsay Savarese, Investor Relations for Enova. Please go ahead.

Thank you, operator, and good afternoon, everyone. Enova released results for the second quarter 2025 ended June 30, 2025, this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at ir.enova.com. With me on today's call are David Fisher, Chief Executive Officer; and Steve Cunningham, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website.

Before I turn the call over to David, I'd like to note that today's discussion will contain forward-looking statements and as such is subject to risks and uncertainties. Actual results may differ materially as a result from various important risk factors, including those discussed in our earnings press release and in our annual report on Form 10-K, quarterly reports on Forms 10-Q and current reports on Forms 8-K. Please note that any forward-looking statements that are made on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

In addition to U.S. GAAP reporting, Enova reports certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release. As noted in our earnings release, we have posted the supplemental financial information on the IR portion of our website.

And with that, I'd like to turn the call over to David.

Thanks, and good afternoon, everyone. I appreciate you joining our call today. Before we jump into our quarterly earnings discussion, I want to take a moment to touch on the upcoming leadership changes that we announced this afternoon. After over 12 years serving as the Chairman and CEO of Enova, I've decided that now is the time to transition into the role of Executive Chairman effective January 1, 2026. With the full support of the Board, this move was thoroughly, thoughtfully and deliberately planned as part of the company's disciplined and measured long-term leadership transition planning, and I'm confident that it's the right decision for the future of Enova.

In my new role, I will continue to lead the Board, providing strategic advice to the company, facilitating a seamless transition, and ensuring that we continue our mission of helping hardworking people get access to fast and trustworthy credit. I've committed to stay in this role for a minimum of 2 years. Steve Cunningham, our CFO, will replace me as CEO concurrent with my transition to Executive Chairman on January 1. And Scott Cornelis, our Treasurer, will succeed Steve as CFO. In addition, Steve is joining our Board of Directors as of today. Having worked closely with both Steve and Scott over many years, I'm confident that they are the right leaders to see Enova through its next phase of growth. Steve's leadership and execution have been critical to our success and performance consistency. His deep understanding of the company's culture, processes, and strategy, combined with his outstanding leadership acumen, operational excellence, and decades of financial services experience, make him an ideal candidate to build on our momentum and position the company for continued success. And Scott has been instrumental in transforming Enova's financial profile, leveraging his deep financial expertise to optimize capital structure, enhance liquidity, refine our ROE framework, and support the company's strategic growth initiatives. I'd like to congratulate Steve and Scott on their new roles and thank the entire Enova team for their hard work over the years. I've never been more excited about Enova's future. If I wasn't, we wouldn't be making this transition now. We have an incredibly deep team, a strong foundation, a time-tested playbook, and industry-leading products, all clear signs that we have a lot of success ahead of us.

Now turning to our quarterly results. In the second quarter, we once again leveraged the strength of our team, the breadth of our product offerings, our flexible online-only business model, and the sophistication of our machine learning models to deliver solid revenue and profitable growth, driven by strong demand and stable credit. For the fifth quarter in a row, we generated greater than 20% year-over-year growth in revenue, originations, and adjusted EPS. Second quarter originations increased 28% year-over-year and 4% sequentially to $1.8 billion. The strong origination growth produced a 20% year-over-year increase in our combined loan and finance receivables to a record $4.3 billion.

Small business products represented 65% of this portfolio and consumer was 35%. Revenue increased 22% year-over-year and 2% sequentially to $764 million in the second quarter. SMB revenue increased 30% year-over-year and 7% sequentially to a record $326 million, and our consumer revenue increased $428 million, 17% higher than a year ago and basically flat sequentially off an unexpectedly strong Q1 as we discussed last quarter.

Driven by the operating leverage inherent in our online-only business, growth in EPS again outpaced origination and revenue growth. Adjusted EPS increased 48% year-over-year, primarily as a result of efficient marketing and a lower cost of funds combined with our growth. Marketing expense was 19% of our total revenue, slightly below our expectations and compared to 19% in Q2 of 2024. Credit quality continues to be solid across the portfolio. The consolidated net charge-off ratio for the quarter declined to 8.1% from 8.6% last quarter and 7.7% in Q2 of last year. Overall, our consumer customer base remains on solid footing, driven by healthy wage and job growth and low levels of unemployment.

As you may have seen, the U.S. economy added 147,000 jobs in June, well above the forecast, while the unemployment rate fell to 4.1% and hourly wages continued to rise. These data points continue to highlight ongoing resilience in the labor market. While the labor market remains strong, it's important to note that we have carefully designed our business to operate and succeed in any environment. We serve nonprime borrowers, many of whom regularly face income volatility and are experienced in managing variabilities in their finances. Because of this, recessions or market downturns tend to have less of an impact on our nonprime customers than on prime borrowers. And as we've discussed before, our unit economics framework, combined with our sophisticated technology and analytics, are designed to assess risk in real time with the short duration and payment frequency of our products, providing rapid feedback. This has enabled us to consistently deliver strong growth in margins while driving shareholder value, whether facing significant macroeconomic shocks like the Great Recession, COVID, or rising inflation as we experienced in 2023, or these more typical seasonal and cyclical variations in demand and sentiment.

In Q2 of this year, while the overall economy remained solid, we did observe some of these minor cyclical fluctuations I just mentioned, particularly in our consumer book early in the quarter. This was likely in response to the uncertainty around the impacts of tariffs on the job market and inflation. This led to slightly elevated default metrics from new customers. In response, we quickly tightened our credit models to slow originations. With the combination of the fast feedback we get from the design of our products, our sophisticated models, and our world-class team, we routinely make these types of adjustments to ensure our originations are meeting our credit and ROE targets.

For Q2, this meant consumer originations were slightly softer than we anticipated, but still reflected healthy growth. And combined with the benefits of our diversified business, we were able to generate almost 30% consolidated origination growth, along with strong profitability. And looking forward, performance in our backbook remains strong. And because we adjusted so quickly, we do not anticipate any significant impact to our consumer business in the upcoming quarters. As we know from our years of experience, it is normal to see short-term fluctuations in demand and credit in any one product or customer segment highlighting the importance of the diversification in our business, which gives us the flexibility to shift resources between consumer and SMB as macro conditions dictate.

This is unique in our industry, and we believe critical to delivering long-term consistent growth and stable results. Our SMB business had another very strong quarter as we continued to benefit from our leading brand presence, scale and low levels of competition, resulting in solid demand and credit across the portfolio. Originations for SMB were a record $1.2 billion in Q2, marking the fourth quarter over $1 billion. Insights from internal and external sources reflect solid underlying trends for small businesses. In conjunction with Ocrolus, we released the sixth iteration of our Small Business Cash Flow Trend Report in May. This offers key insights into the state of small businesses and highlights ongoing trends observed over the past year. Consistent with previous findings, the survey found that small businesses feel increasingly optimistic about future growth, as over 90% of small business owners are expecting moderate to significant growth over the next year.

In addition, 76% of small businesses now prefer nonbank lenders for their speed and convenience, an all-time high according to the survey. These findings highlight continued optimism among small businesses, which is a key driver of economic growth and job creation. Access to capital is crucial as they invest in growth opportunities, manage cash flow needs, and weather unexpected challenges. And we believe our differentiated solutions position us exceptionally well to continue to meet these demands. In addition, our SMB portfolio continues to be well diversified across a wide range of industries, geographies, loan sizes, product types, and price levels. As I mentioned on our last call, we continue to expect that tariffs will not have a substantial impact to our portfolio, largely due to the diversity, size, and industries of our borrowers.

Before I wrap up, I'd like to spend a few moments to discuss our strategy and outlook for the remainder of 2025 and beyond. Steve and I share a common vision that our focused growth strategy continues to be the right path forward for the company. We remain committed to prudently managing the business to produce sustainable and profitable growth, and we believe our diversified business, strong competitive position, world-class team, advanced technology and analytics platform position us very well for the remainder of the year and beyond.

With that, I'd like to turn the call over to Steve, who will discuss our financial results and outlook in more detail. And following Steve's remarks, we'll be happy to answer any questions you may have. Steve?

Thank you, David, and good afternoon, everyone. I'd like to start by thanking David Fisher for his exceptional leadership and guidance over the years. His vision and dedication have not only shaped the trajectory of our business, but also Enova's culture of excellence, collaboration, and innovation. And I'm thrilled to have the opportunity to become CEO in January and build upon the standard of excellence that David has established at our company. I know he'll continue to be a valuable resource to me and the rest of Enova as Executive Chairman of the Board on the strategic direction of the company, and I look forward to continuing to work closely with him.

I'd also like to echo David's sentiment. I've never been more excited about what lies ahead. We have an incredible team, a diversified business, strong competitive position, and world-class risk management and technology. We'll continue to execute our focused growth strategy to produce sustainable and profitable growth, while delivering on our commitment to driving long-term shareholder value and our mission of helping hardworking people get access to fast, trustworthy credit. I'm also pleased to have Scott assume the CFO role in January. Many of you have gotten to know Scott over the years, and as David noted, he's been an important part of transforming the financial profile of our business. I'm confident he will thrive in his new role while continuing to build on the momentum we've created together.

Now turning to our second quarter results. Total company revenue of $764 million increased 22% from the second quarter of 2024, exceeding our expectations and driven by 20% year-over-year growth in total company combined loan and finance receivables balances on an amortized basis. Total company originations during the second quarter rose 28% from the second quarter of 2024 to $1.8 billion. Revenue from small business lending increased 30% from the second quarter of 2024 to $326 million as small business receivables on an amortized basis ended the quarter at $2.8 billion or 22% higher than the end of the second quarter of 2024. Small business originations rose 35% year-over-year to $1.2 billion. Revenue from our consumer businesses increased 17% from the second quarter of 2024 to $428 million as consumer receivables on an amortized basis ended the second quarter at $1.5 billion, or 17% higher than the end of the second quarter of 2024. Consumer originations grew 15% from the second quarter of 2024 to $564 million. For the third quarter of 2025, we expect total company revenue to be more than 15% higher than the third quarter of 2024. This expectation will depend upon the level, timing, and mix of originations growth during the quarter.

Now turning to credit, which is the most significant driver of net revenue and portfolio fair value. Our consolidated credit performance continues to demonstrate that our diversified product offerings and discipline around our unit economics enables consistent results across different operating environments. Consolidated net revenue margin of 58% for the second quarter was in line with our expectations and reflects continued solid credit performance. The consolidated net charge-off ratio for the second quarter was 8.1%, a 50 basis point improvement sequentially and slightly higher than the second quarter of 2024, primarily from the year-over-year trends in consumer net charge-offs, as David discussed.

Sequential and year-over-year improvement in the consolidated 30-plus day delinquency rate, as well as the stability in the consolidated portfolio fair value premium, reflect expectations for stable future consolidated portfolio credit performance. Small business credit performance remained strong. Sequentially and compared to the second quarter of 2024, the net charge-off ratio, net revenue margin, fair value premium, and 30-plus delinquency rate all reflect continued and expected stable credit performance. Consumer credit also remains solid. Consumer net revenue margin for the second quarter was 50%, flat sequentially and in the same range we have seen over the past 2 years. The consumer net charge-off ratio declined sequentially 70 basis points to 14.5%, following our typical seasonality. While higher than the year ago quarter, the second quarter consumer net charge-off ratio remained within our historical ranges, and as David noted, was influenced by some minor fluctuations in consumer new customer performance early in the quarter, along with our adjustments to originations as part of our normal credit risk management process.

As we've discussed in the past, quarter-to-quarter net charge-off rates, delinquency rates, and net revenue margins for our portfolios are heavily influenced by the seasoning of origination vintages along their expected loss curves, sequential changes in the growth and mix of originations, as well as our balanced approach to growth across varying macro environments. This is why we have a range of expected credit metrics. You should anticipate that we will have results through these ranges over time. It's important to understand that with results anywhere in these ranges and even temporarily above or below, we are still able to produce solid returns as we did this quarter. Our unit economics decisioning framework considers the lifetime return on equity of our product vintages and incorporates not just the level of credit risk, but the pricing for the risk being taken. The risk-return profile is reflected in the level and trend of our fair value premiums. At the end of the second quarter, the fair value premium on our consumer portfolio remained consistent with levels observed over the past 2 years, indicating a stable risk return profile and strong underlying unit economics for our consumer portfolio. Looking ahead, we expect the total company net revenue margin for the third quarter of 2025 to be in the range of 55% to 60%. This expectation will depend upon portfolio payment performance and the level, timing and mix of originations growth during the quarter.

Now turning to expenses. Total operating expenses for the second quarter, including marketing, were 32% of revenue, compared to 34% of revenue in the second quarter of 2024, as we continue to see the benefits of our efficient marketing activities, the leverage inherent in our online-only model and thoughtful expense management. Our marketing spend continues to be efficient, driving strong originations growth and was in line with our guidance range for the quarter. Marketing costs as a percentage of revenue were 19%, flat compared to the second quarter of 2024. We expect marketing expenses to be around 20% of revenue for the third quarter, but will depend upon the growth and mix of originations. Operations and technology expenses, which are driven by growth in receivables and originations, declined to 8% of revenue for the second quarter, or $64 million, compared to 9% of revenue, or $55 million, in the second quarter of 2024.

Given the significant variable component of this expense category, sequential increases in O&T costs should be expected in an environment where originations and receivables are growing and should be around 8.5% of total revenue. Our fixed costs continue to scale as we focus on operating efficiency and thoughtful expense management. General and administrative expenses for the second quarter increased to $41 million, or 5% of revenue, versus $40 million, or 6% of revenue in the second quarter of 2024. While there may be slight variations from quarter-to-quarter, we expect G&A expenses in the near term should be around 5.5% of total revenue.

We continue to deliver solid profitability and strong returns on equity this quarter. Compared to the second quarter of 2024, adjusted EPS, a non-GAAP measure, increased 46% to $3.23 per diluted share, delivering an annualized second quarter return on equity of 28%. We ended the second quarter with $1.1 billion of liquidity, including $388 million of cash and marketable securities and $712 million of available capacity on debt facilities. Our cost of funds declined to 8.8%, or 15 basis points lower sequentially, primarily as a result of strong execution on recent financing transactions. Continuing our track record of strong capital markets execution and solid credit performance, last week, we closed a new secured warehouse to support growth in our NetCredit line of credit product. Solid credit performance has allowed us to expand our lender group and reduce our spreads on this new facility by 125 basis points compared to a similar facility that closed last year.

Before wrapping up with our near-term expectations, I'd like to discuss our progress with unlocking shareholder value. Consistent performance has distinguished us as a leader within the industry. While we've seen improvement in our P/E ratio over the past year that better reflects the strength of our business, our PEG ratio on 2025 estimates was only 0.3 at the end of the second quarter. And we remain well positioned to use our opportunistic share repurchase program to continue to close this valuation disconnect with our strong and consistent results, solid balance sheet, and business fundamentals. During the second quarter, we acquired 574,000 shares at a cost of $54 million, using nearly all of our $57 million of capacity that was available under our senior note covenants. We started the third quarter with share repurchase capacity of approximately $60 million available under our senior note covenants. Our balance sheet and liquidity position remains strong and give us the financial flexibility to successfully navigate a range of operating environments, while delivering on our commitment to drive long-term shareholder value through both continued investments in our business and share repurchases.

To wrap up, let me summarize our near-term expectations. For the third quarter, we expect consolidated revenue to be more than 15% higher than the third quarter of 2024, with a net revenue margin in the range of 55% to 60%. Additionally, we expect marketing expenses to be around 20% of revenue, O&T costs to be around 8.5% of revenue, and G&A costs to be around 5.5% of revenue. These expectations should lead to adjusted EPS for the third quarter of 2025 that is 20% to 25% higher than the third quarter of 2024. For the full year, we now expect revenue growth compared to the full year of 2024 of around 20% and adjusted EPS growth of around 30%. Our third quarter and full year 2025 expectations will depend upon the path of the macroeconomic environment and the resulting impact on demand, customer payment rates, and the level, timing, and mix of originations growth.

Our second quarter results reflect the strength of our diversified product offerings and the ability of our team to consistently deliver strong growth, revenue, and profitability while maintaining solid credit, and we remain confident in our ability to generate meaningful financial results for the remainder of 2025 and beyond. And with that, we'd be happy to take your questions. Operator?

[Operator Instructions] Our first question today comes from Moshe Orenbuch with TD Cowen.

congrats, David, Steve, and Scott. Maybe to kind of just start a little bit on the credit side of things. The comments that David -- both you, David and Steve, made about the consumer portfolio, could you maybe flesh that out a little bit more? Like what is it that now gives you the confidence that whatever issues you saw at the beginning of the quarter are not persistent? And how does that reflect itself in originations and loan growth in the back half of 2025?

Yes, sure, absolutely. So first of all, I think one thing to clarify is we essentially have 5 consumer products. This was one of the 5. So this wasn't even broad-based across our consumer portfolio. It was in one of our 5 products and not the biggest product. And that doesn't even count the small business side of the house. So again, the advantage of having a diversified business. And like we probably would -- we probably spent more time on it in the script than we needed to. We knew somebody would ask the question because they'd see the higher DQ rates on the consumer book. And so we did decide to take it head on. But these were slightly elevated defaults, still performing within our ROE targets, but kind of at the very low end of the ROE targets, I mean kind of defaults at the high end of tolerable defaults. And like we do all the time, when we see places that need adjustments, we adjust. So we tightened the credit models, cut back on originations, and credit came back in line, just like we would expect. We do it hundreds of times a year. We do it the other way as well. Credit looks too good or CPS look too low, and we expand to get more volume when we see the opportunity. So it happens all of the time. Most of the time, it averages out with another product that is doing better than expected, and we don't need to talk about it. This quarter, most of the other consumer products were kind of right where they were supposed to be. This one was a little bit worse. We addressed it early in the quarter, and now credit is back to normal. And even with -- as we mentioned on the call, even with pulling back on that one product, we still generated upper teens origination growth year-over-year in consumer and obviously even stronger consolidated with the great results from the small business book. So again, this is not a big thing for us. It happens all the time. We're just trying to get ahead of the question we knew we'd get from you or others about slightly elevated DQ rates on the consumer side.

And maybe just to talk for a moment about the small business. Normally, you do have a seasonal lower level of originations in the second quarter from the first, and you've talked about the strong environment. Maybe, again, could you expand on what you saw in there that allowed you to do that? And how do you think about the level of certainty or uncertainty, I guess, in the minds of your customers?

Yes. Small business just had a couple of rock-solid quarters in a row. I'd say internally, it's not like we necessarily looked at the business and said, this thing is just doing great. Let's lean in, let's lean in. It's just so solid. We're just -- it's almost like running downhill. It's not like you're trying that hard. It just kind of happens. Credit has been incredibly stable. And really, since that third quarter of 2023 where we had the little credit blip that kind of resolved itself almost immediately. We've had probably 6, 7 quarters of just rock-solid credit. And when you have rock-solid credit and you're a very strong competitive position, yes, generating origination growth is, like I said, it's kind of like running downhill. It's not like we were trying super hard to do it. We just let the business perform the way it was performing. And looking forward, just like we said, we have confidence on the consumer side because we addressed the issues, I think we have really good confidence on the small business side just because things continue to be very, very solid. This is just right down the middle of the fairway day after day, week after week, month after month.

The next question is from David Scharf with Citizens Capital Markets.

I appreciate the proactive discussion on the delinquency fluctuations. Just curious, David, I think last quarter, you may have specifically mentioned about taking more market share in the CashNet product, which I believe is the highest APR. Is that the one of the 5 products that you're referring to?

Yes, we basically have 2 subprime products, LOC and installment, 2 near-prime products, LOC and installment. And they're pretty different products at the end of the day. They're not just like different forms of the same thing, especially in the near-prime side. And then we have Brazil in a different market. So like I said, those products, again, this is one quarter. Those products are all good products. Long term, we're optimistic about all of them. We know how to manage credit across all of them. We have good competitive positions in all of them. But there's going to be fluctuations over time. They don't act exactly the same. They have slightly different market segments, they have different credit models, they have different marketing strategies. Obviously, they're not siloed. They're all -- we work together and make sure we're bringing best practices to all of them, but they don't all end up in the same place. And again, that's what we saw a little of this quarter.

Understood. And then I'll echo Moshe's comments in terms of congratulating everyone on the leadership transition. It's almost compulsory on these calls to ask if there's anything, David, you want to add just about maybe why this was the right time in your mind in terms of stepping aside.

Yes, well, look, I think the business is on super stable footing. And if it wasn't, I wouldn't be making this change now. I have more riding on the future of Enova than pretty much any other -- not pretty much, than any other human being on the planet. So I wouldn't be making this change if I didn't think it was the right time. And if I didn't think it was the right time and Steve was the right person to take over from me. We've worked together for 9 years. We have an incredibly strong relationship. We see eye to eye 99% of the time. And so great opportunity to make sure Enova's future is handed over to somebody who deserves to have that opportunity.

The next question is from Bill Ryan with Seaport Research Partners.

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I'd also like to express my congratulations to everyone. A couple of questions. First, on the marketing, it obviously came in a bit better than expectations as a percentage of revenues, as you discussed, also looked good as a percentage of originations. Could you maybe give us some idea, was that related to channels, repeat customers, is it the small business just being more efficient? If you can maybe provide some insight on that.

Yes. Bill, this is Steve. It was largely driven by a little bit, as David mentioned, a little bit lower origination expectation or a little bit lower originations in consumer than we expected, which would lead to less marketing in that channel. Some of that, though, was definitely offset by the strength in small business. So you saw it be a little bit better maybe than what we -- that ratio being a little bit better than what we would have thought, but still pretty close to the range that we would have expected because of the small business growth as well.

Okay. And just a quick follow-up on the consumer portfolio. The yield was down a little bit quarter-over-quarter. I think it's about 250 basis points. Was that related to some of the credit adjustments that were made at the beginning of the quarter? And do you expect that maybe to bump back up over the next couple of quarters to trendline?

No. I mean, that was really more of -- you'll see that ratio can move around a little bit as we're opportunistic across those products that David mentioned, because they all play in slightly different APR ranges. So I think you're probably going to see it probably hang around the 115 to 120 as you look out the rest of the year is what I would expect to see there.

The next question is from John Hecht with Jefferies.

Congratulations to all of you guys. This is exciting for the company, and wish you all the best in the new roles and look forward to working with you, Scott. Just a couple of questions. Most of mine actually just were recently asked and answered. But thinking about marketing channels that you've been using, any change to that? I know you've been more active on the small business stuff on TV, but anything to think about productivity on marketing channels and anything you're learning over time, especially as AI is being developed?.

No. Look, it continues to evolve. I mean, at a high level, we're in the exact same marketing channels we were in 10 years ago. But as we think about how we actually operate in those channels and access them, it's incredibly different. And I think it all comes down to technology and the ability to be more and more targeted. So 10 years ago, we were running a lot of national TV. Now it's almost all digital TV where you can almost target city by city and certainly state by state and even different types of groups within those markets. So that all plays into what we do super well, right? Because we develop models that the more data-focused that we're looking at, the easier it is for us. So national TV was never our favorite thing. But if we can target specific states, specific groups, specific times of days, figuring out which types of programming work the best, that's really amazing for us and be able to plug that all into our algorithms and become more and more efficient with marketing. So that's the big change. And it's incremental, but it happens every single quarter. Every single quarter, we find new opportunities to use technology to our advantage in our marketing channels.

Okay. And then I mean, thinking -- I mean, this is sort of a mishmash of questions, but you've got private credits influencing the capital markets or funding ability within consumer finance. Spreads are at all-time lows. So obviously, the liquidity and the funding component of the market is very constructive. And interest rates have come down a little bit, may come down a little bit more. So Steve, just thinking about that set of opportunities for you and your balance sheet positioning, how does that change or does that impact the way you think about the next several quarters in terms of funding and balance sheet management?

Yes the credit markets have been pretty favorable. And you saw last week, we actually had a second-generation facility against our NetCredit line of credit business, which saw some pretty significant decrease in spreads. So I think as we always do, Scott and his team will continue to be opportunistic on making sure we are raising the right level of liquidity at the right time and balancing that with what we need. So I think right now, the markets are pretty favorable. We're not counting on rate cuts. Our outlook doesn't assume that there's going to be any rate cuts for the rest of this year. So I think we're pretty well positioned on the balance sheet and the performance of the portfolios have us in a really good spot to execute when we need to across the different channels we play in.

[Operator Instructions] The next question is from Vincent Caintic with BTIG.

Also want to put my congratulations. David, it's been a pleasure working with you. And then for Steve and Scott, look forward to continuing our relationship. So first question,you spoke very favorably about the macro trends in SMB and then also talking positively about consumer other than the little blip you had in the second quarter. And I guess with all that macro positivity, just wondering how you think that translates directly into the originations growth or revenue growth, because it seems like regardless of the environment, you do tend to do well. So I'm wondering if we should be reading into anything in terms of the macro trends kind of turbocharging any of the growth. And then maybe alternatively, are there any macro trends that you're watching and wary about?

Yes, sure. It's a really good question. Look, as we've been talking about for probably coming out a year now, we think even with the solid macro trends, it's a good time to be balanced between originations growth and risk. And I guess that's easy to say when you're generating the kind of growth that we're generating while being balanced. It's not like we're a single-digit grower. North of 20% grower even being balanced. And I think just the inherent risk in any economy and certainly with a bit more of uncertainty we've seen over the last couple of years, almost 5 years actually since COVID, that there's no reason to be overly aggressive when we can grow as much as we're growing while being balanced. And certainly, you know we don't have to get into the long valuation discussion right now. When you look at our PEG ratio well below 0.5 and then closer to 0.3 on forward earnings, there's a little bit of a disincentive there to grow faster as well. Again, that doesn't mean we're going to retrench and we'll be growing at single digits or low teens. That's not our intent at all. But it does reinforce our belief that being balanced is a smart place to be, and we don't need to be flooring it at the moment.

And then a follow-up on the line of some of the questions earlier, just about the blip in the second quarter. I think the reason people are asking is just if there's something that we should be watching. And maybe it was just -- I don't know, if there was just a macro trend like earlier in the quarter, we had tariffs. So I don't know if that drove anything or if there's any -- you mentioned one product, but if there's any particular customer set that we should be watching for just in the future that maybe like with the blip, it takes out a little bit of the addressable market or something that we should be watching. So just if there's anything you could help in terms of categorizing that, that would be helpful.

Yes. No, really good clarification question, actually. We think no and almost like categorically, no. It just -- look, it can happen, right? I mean it's a confluence of events. We market differently, the products are positioned slightly differently, the competitive dynamics can be different, and like all the things can move against you for a short period of time, and then you adjust and recalibrate and get back on track. And if we saw broad-based issues across consumer, we'd be talking about it very differently. And if we weren't able to address the credit issues we had quickly and early in the quarter, we'd be talking about it very differently as well. But being isolated to one product, us being able to bring it back in line extremely quickly, again, internally, operationally, this was a nonevent. And again, as I mentioned, the only reason we spent the time on it in our prepared remarks, because we knew we'd get questions once you guys dug into the numbers about the slightly higher DQ rates in the consumer book. So no, I think we're feeling really good really about all of our consumer products headed into the back half of the year.

The next question is from Kyle Joseph with Stephens.

Let me echo congratulations on the transition. And just to follow up on Johnny's question earlier. It sounds like from a macro perspective, demand is really strong for both SMB and consumer. But piggybacking on his question, can you give us a sense for the competitive environment and how that differs between consumer and SMB? Just David, earlier you referenced that SMB is almost easy, or like sliding downhill at this point. And I don't doubt that from your perspective. It's a hard business. But once you are where you are, I'm sure it's relatively easy, but just want to get a sense for the competitive dynamics there.

Yes. I mean, look, some of this is cyclical and some of it, like the competitive dynamics ebb and flow. About a 1.5 year ago, we would not have been saying the same thing. Consumer was rocking and rolling and SMB we were recovering from that little credit blip in 2023. So now you see a little bit of the opposite dynamic. And that's the great thing about having a diversified business. They can play off each other. I would say that the competitive dynamics on the small business side are more stable. There's fewer players. We know who they are. Brand matters more. And so, that super strong position we have in SMB, I think, helps with the stability a bit. On the consumer side, there's many, many more players. It's much more fragmented. And so if a couple of them get aggressive for a quarter or 2, that can be a little bit of a headwind. But as we've seen over time, that tends to result in issues for our competitors over time, and they end up pulling back and ends up being a tailwind in future quarters. So we still feel great about our competitive position on both products. And they'll ebb and flow over time. And again, as we look into the back half of the year, we look at -- our consumer business looks as good as it has ever looked. It's bigger, it's stronger, the technology is better, the models are more predictive, and nothing new on the competitive front that would concern us.

[Operator Instructions] The next question is from John Rowan with Janney.

I'll also add my congratulations as well. I guess just 2 really quick questions. Can you -- Steve, should we talk about whether or not the heightened DQs affected the fair value marks at all?

They've been very -- the fair value marks have been very stable, right? So I think sometimes the metrics that we report, the 30-plus DQs and the NCOs can be impacted by numerator denominator type issues and mix changes, all the things that I mentioned in my commentary, whereas the fair value is really looking at a lot more like at the unit economic decisionings that we make, right, lifetime expectations. And so both portfolios reflect a lot of stability and have for now over the past 2 years. So those are all incorporated into the fair value for sure. And you can see that we continue to expect there to be a lot of stability in the credit outlook. I would just add, on the consumer side and on the small business side, we've talked historically about ranges that we expect every quarter. SMB, we typically would expect net charge-offs every quarter to be in the 4.5% to 5% range. We've been there for a long time. Consumer is a bit more seasonal. I would expect the second quarter ratio, which tends to be a bit more of the trough seasonally, to be in the 13% to 15% range. In Q4, I would expect it to be 15% to 17%. And you can go back and look historically, the first and third quarters tend to be somewhere in between. Those are all perfectly acceptable. And sometimes we've been below, sometimes we've been a little bit above. And I think you can see it doesn't impact -- moving through those ranges, does not impact the overall ability to drive strong results. So just a little reminder on how to think about the quarterly metrics within the context of the way we think about making decisions and the way the fair value calculations work.

Okay. Fair enough. And just last question for me. Can you remind us how much of your debt is floating rate and what the rate sensitivity is? I know your guidance doesn't have any rate cuts in it, but obviously, there's still a possibility of that.

Yes, it's been about 50% floating for a while, and it's really most sensitive to SOFR.

This concludes our question-and-answer session. I would like to turn the conference back over to David Fisher for any closing remarks.

Thanks, everybody, for joining our call today. We really appreciate your congratulatory remarks. You'll have me on this call for the next couple of quarters, so I'm not going away anytime soon before Steve takes over next year. So thanks again, and have a good rest of your day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.