Enova International Inc

Previous wording

We are a leading technology and analytics company focused on providing online financial services. In 2023, we extended approximately $4.9 billion in credit or financing to borrowers and for the three months ended March 31, 2024, we extended approximately $1.4 billion in credit or financing to borrowers. As of March 31, 2024, we offered or arranged loans or draws on lines of credit to consumers in 37 states in the United States and Brazil. We also offered financing to small businesses in 49 states and Washington D.C. in the United States. We use our proprietary technology, analytics and customer service capabilities to quickly evaluate, underwrite and fund loans or provide financing, allowing us to offer consumers and small businesses credit or financing when and how they want it. Our customers include the large and growing number of consumers who and small businesses which have bank accounts but use alternative financial services because of their limited access to more traditional credit from banks, credit card companies and other lenders. We were an early entrant into online lending, launching our online business in 2004, and through March 31, 2024, we have completed approximately 61.9 million customer transactions and collected more than 65 terabytes of currently accessible customer behavior data since launch, allowing us to better analyze and underwrite our specific customer base. We have significantly diversified our business over the past several years, having expanded the markets we serve and the financing products we offer. These financing products include installment loans and line of credit accounts.

Current wording

We are a leading technology and analytics company focused on providing online financial services. In 2023, we extended approximately $4.9 billion in credit or financing to borrowers and for the six months ended June 30, 2024, we extended approximately $2.8 billion in credit or financing to borrowers. As of June 30, 2024, we offered or arranged loans or draws on lines of credit to consumers in 37 states in the United States and Brazil. We also offered financing to small businesses in 49 states and Washington D.C. in the United States. We use our proprietary technology, analytics and customer service capabilities to quickly evaluate, underwrite and fund loans or provide financing, allowing us to offer consumers and small businesses credit or financing when and how they want it. Our customers include the large and growing number of consumers who and small businesses which have bank accounts but use alternative financial services because of their limited access to more traditional credit from banks, credit card companies and other lenders. We were an early entrant into online lending, launching our online business in 2004, and through June 30, 2024, we have completed approximately 62.9 million customer transactions and collected more than 65 terabytes of currently accessible customer behavior data since launch, allowing us to better analyze and underwrite our specific customer base. We have significantly diversified our business over the past several years, having expanded the markets we serve and the financing products we offer. These financing products include installment loans and line of credit accounts.

Previous wording

In March 2024, the Governor of the State of Washington signed into law a bill that amends the Consumer Loan Act (“CLA”) to add anti-evasion language and a predominant economic interest test for closed-end and open-end loans. In addition, the bill would prohibit engaging in “any activity subject to” the CLA without a license as required by the CLA. The law expands the CLA’s coverage to include any loan made to a “person physically located” in Washington, in addition to the existing coverage of any loan made to a “resident” of Washington, “by a licensee, or persons subject to this chapter”. The current rate cap under the CLA is 25%. The law will take effect on June 6, 2024, and applies to loans or advances originated on or after that date. We do not expect the changes brought about by this law to have a material impact on our consolidated financial statements.

Current wording

In March 2024, the Governor of the State of Washington signed into law a bill that amends the Consumer Loan Act (“CLA”) to add anti-evasion language and a predominant economic interest test for closed-end and open-end loans. In addition, the bill would prohibit engaging in “any activity subject to” the CLA without a license as required by the CLA. The law expands the CLA’s coverage to include any loan made to a “person physically located” in Washington, in addition to the existing coverage of any loan made to a “resident” of Washington, “by a licensee, or persons subject to this chapter”. The current rate cap under the CLA is 25%. The law took effect on June 6, 2024, and applies to loans or advances originated on or after that date. We do not expect the changes brought about by this law to have a material impact on our consolidated financial statements.

Previous wording

On November 15, 2023, we consented to the issuance of a Consent Order by the CFPB pursuant to which we agreed, without admitting or denying any of the facts or conclusions, to pay a civil money penalty of $15 million. The Consent Order relates to issues, the majority of which were self-disclosed, including payment processing and debiting errors. We remain subject to the restrictions and obligations of the Consent Order, including prohibitions from engaging in certain conduct. Any noncompliance with the Consent Order or similar orders or agreements from other regulators could lead to further regulatory penalties and could have a material adverse impact on our business, prospects, results of operations, financial condition and cash flows and could prohibit or directly or indirectly impair our ability to continue current operations.

Current wording

On November 15, 2023, we consented to the issuance of a Consent Order by the CFPB pursuant to which we agreed, without admitting or denying any of the facts or conclusions, to pay a civil money penalty of $15 million. The Consent Order relates to issues, the majority of which were self-disclosed, including payment processing and debiting errors. We remain subject to the restrictions and obligations of the Consent Order, including prohibitions from engaging in certain conduct for a period of seven years from the date of the Consent Order. Any noncompliance with the Consent Order or similar orders or agreements from other regulators could lead to further regulatory penalties and could have a material adverse impact on our business, prospects, results of operations, financial condition and cash flows and could prohibit or directly or indirectly impair our ability to continue current operations.

Previous wording

On October 6, 2017, the CFPB issued its final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the “Small Dollar Rule”), which covers certain consumer loans that we offer. The Small Dollar Rule requires that lenders who make short-term loans and longer-term loans with balloon payments reasonably determine consumers’ ability to repay the loans according to their terms before issuing the loans. The Small Dollar Rule also introduces new limitations on repayment processes for those lenders as well as lenders of other longer-term loans with an annual percentage rate greater than 36 percent that include an ACH authorization or similar payment provision. If a consumer has two consecutive failed payment attempts, the lender must obtain the consumer’s new and specific authorization to make further withdrawals from the consumer’s bank account. For loans covered by the Small Dollar Rule, lenders must provide certain notices to consumers before attempting a first payment withdrawal or an unusual withdrawal and after two consecutive failed withdrawal attempts. On June 7, 2019, the CFPB issued a final rule to set the compliance date for the mandatory underwriting provisions of the Small Dollar Rule to November 19, 2020. On July 7, 2020, the CFPB issued a final rule rescinding the ability to repay (“ATR”) provisions of the Small Dollar Rule along with related provisions, such as the establishment of registered information systems for checking ATR and reporting loan activity. The payment provisions of the Small Dollar Rule remain in place. In April 2018, an action was filed against the CFPB making a constitutional challenge to the Small Dollar Rule. On October 19, 2022, a three-judge panel of the Fifth Circuit U.S. Circuit Court of Appeals ruled that the funding structure of the CFPB is unconstitutional and vacated the Small Dollar Rule. The Supreme Court granted the Petition on February 27, 2023 but declined to expedite the proceeding. The Supreme Court heard oral arguments on October 3, 2023. The Supreme Court is expected to rule on the matter in spring of 2024. If the Small Dollar Rule does become effective in its current proposed form, we will need to make certain changes to our payment processes and customer notifications in our U.S. consumer lending business.

Current wording

On October 6, 2017, the CFPB issued its final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the “Small Dollar Rule”), which covers certain consumer loans that we offer. The Small Dollar Rule initially required that lenders who make short-term loans and longer-term loans with balloon payments reasonably determine consumers’ ability to repay (“ATR”) the loans according to their terms before issuing the loans. The Small Dollar Rule also introduced new limitations on repayment processes for those lenders as well as lenders of other longer-term loans with an annual percentage rate greater than 36 percent that include an ACH authorization or similar payment provision. If a consumer has two consecutive failed payment attempts, the lender must obtain the consumer’s new and specific authorization to make further withdrawals from the consumer’s bank account. For loans covered by the Small Dollar Rule, lenders must provide certain notices to consumers before attempting a first payment withdrawal or an unusual withdrawal and after two consecutive failed withdrawal attempts. On July 7, 2020, the CFPB issued a final rule rescinding the ATR provisions of the Small Dollar Rule along with related provisions, such as the establishment of registered information systems for checking ATR and reporting loan activity. The payment provisions of the Small Dollar Rule remain in place. In April 2018, an action was filed against the CFPB making a constitutional challenge to the Small Dollar Rule. On October 19, 2022, a three-judge panel of the Fifth Circuit U.S. Circuit Court of Appeals ruled that the funding structure of the CFPB is unconstitutional and vacated the Small Dollar Rule. The CFPB filed a petition for a writ of certiorari to the Supreme Court. The Supreme Court granted the petition on February 27, 2023. The Supreme Court heard oral arguments on October 3, 2023 and, on May 16, 2024, upheld the constitutionality of the funding structure of the CFPB and remanded the case back to the Fifth Circuit. On June 19, 2024, the Fifth Circuit rendered judgment in favor of the CFPB declaring that the CFPB’s funding structure and the Small Dollar Rule are constitutional, and reinstated its judgment in favor of the CFPB for the Community Financial Services Association of America’s (“CFSA”) alternative arguments. On July 3, 2024, the CFSA filed a petition for rehearing en banc. The Small Dollar Rule will not take effect until 286 days after resolution of the appeal as ordered by the Fifth Circuit when it extended the district court’s stay of the compliance date in 2021. If the Small Dollar Rule does become effective in its current proposed form, we will need to make certain changes to our payment processes and customer notifications in our U.S. consumer lending business.

Previous wording

Consolidated total revenue increased $126.6 million, or 26.2%, to $609.9 million in the current quarter compared to $483.3 million for the three months ended March 31, 2023, or the prior year quarter.

Current wording

Consolidated total revenue increased $129.0 million, or 25.8%, to $628.4 million in the current quarter compared to $499.4 million for the three months ended June 30, 2023, or the prior year quarter.

Previous wording

Consolidated income from operations increased $21.5 million, or 19.7%, to $130.8 million in the current quarter compared to $109.3 million in the prior year quarter.

Current wording

Consolidated income from operations increased $33.5 million, or 30.0%, to $145.1 million in the current quarter compared to $111.6 million in the prior year quarter.

Previous wording

Consolidated net income was $48.4 million in the current quarter compared to $50.9 million in the prior year quarter. Consolidated diluted income per share was $1.64 in the current quarter compared to $1.56 in the prior year quarter.

Current wording

Consolidated net income was $53.9 million in the current quarter compared to $48.1 million in the prior year quarter. Consolidated diluted income per share was $1.93 in the current quarter compared to $1.50 in the prior year quarter.

Previous wording

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

Current wording

We carry our loans and finance receivables at fair value with changes in fair value recognized directly in earnings. We estimate the fair value of our loans and finance receivables primarily using internally-developed, discounted cash flow analyses to more accurately predict future payments. We adjust contractual cash flows for estimated losses, prepayments and servicing costs over the estimated duration of the underlying assets and discount the future cash flows using a rate of return that we believe a market participant would require. Model results may be adjusted by management if we do not believe the output reflects the fair value of the portfolio, as defined under GAAP.

Previous wording

During 2023 and continuing into the first fiscal quarter of 2024, views in the marketplace on the economy and its near-term prospects remained mixed with concerns on employment, inflation, and other macroeconomic trends. In certain situations, management concluded that the probability of future charge-offs or prepayments was different than what we had experienced in the past and, therefore, altered those assumptions in our fair value models. We continue to utilize this approach and have adjusted these assumptions where appropriate. We also evaluate the discount rates used in our models on a quarterly basis and adjust when appropriate to be responsive to changes in the market and representative of what a market participant would use. As of March 31, 2024, we deemed the resulting fair value of our loans and finance receivables to be an appropriate market-based exit price that considers current market conditions.

Current wording

During 2023 and continuing into the first half of 2024, views in the marketplace on the economy and its near-term prospects remained mixed with concerns on employment, inflation, and other macroeconomic trends. In certain situations, management concluded that the probability of future charge-offs or prepayments was different than what we had experienced in the past and, therefore, altered those assumptions in our fair value models. We continue to utilize this approach and have adjusted these assumptions where appropriate. We also evaluate the discount rates used in our models on a quarterly basis and adjust when appropriate to be responsive to changes in the market and representative of what a market participant would use. As of June 30, 2024, we deemed the resulting fair value of our loans and finance receivables to be an appropriate market-based exit price that considers current market conditions.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

We provide adjusted earnings and adjusted earnings per share, or, collectively, the Adjusted Earnings Measures, which are non-GAAP measures. We believe that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments and amortization methods, which can provide a more complete understanding of our financial performance, competitive position and prospects for the future. We utilize, and also believe that investors utilize, the Adjusted Earnings Measures to assess operating performance, recognizing that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. In addition, we believe that the Adjusted Earnings Measures are useful to management and investors in comparing our financial results during the periods shown without the effect of certain items that are not indicative of our core operating performance or results of operations.

Previous wording

(b) In the first quarters of 2024 and 2023, we recorded other nonoperating expenses of $0.5 million ($0.4 million net of tax) and $0.1 million ($0.1 million net of tax), respectively, related to early extinguishment of debt.

Current wording

(c) In the first and second quarters of 2024 and 2023, we recorded other nonoperating expenses of $0.5 million ($0.4 million net of tax) in each quarter and $0.1 million ($0.1 million net of tax) in each quarter, respectively, related to early extinguishment of debt.

Previous wording

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

Current wording

We provide Adjusted EBITDA, which is a non-GAAP measure that we define as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, taxes, stock-based compensation expense and certain other items, as appropriate, that are not indicative of our core operating performance. We utilize, and also believe that investors utilize, Adjusted EBITDA to analyze operating performance and evaluate our ability to incur and service debt and our capacity for making capital expenditures. We believe Adjusted EBITDA is useful to management and investors in comparing our financial results during the periods shown without the effect of certain non-cash items and certain items that are not indicative of our core operating performance or results of operations. Adjusted

Previous wording

(c) In the first quarters of 2024 and 2023, we recorded other nonoperating expenses of $0.5 million ($0.4 million net of tax) and $0.1 million ($0.1 million net of tax), respectively, related to early extinguishment of debt.

Current wording

(b) In the first quarters of 2024 and 2023, we recorded other nonoperating expenses of $0.5 million ($0.4 million net of tax) in each quarter and $0.1 million ($0.1 million net of tax) in each quarter, respectively, related to early extinguishment of debt.

Previous wording

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

Current wording

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

Previous wording

Revenue increased $126.6 million, or 26.2%, to $609.9 million for the current quarter as compared to $483.3 million for the prior year quarter. The increase was driven by a 29.8% increase in revenue from our consumer portfolio and a 21.6% increase in revenue from our small business portfolio as higher levels of originations have led to higher loan balances for both portfolios.

Current wording

Revenue increased $129.0 million, or 25.8%, to $628.4 million for the current quarter as compared to $499.4 million for the prior year quarter. The increase was driven by a 32.2% increase in revenue from our small business portfolio and a 21.6% increase in revenue from our consumer portfolio as higher levels of originations have led to higher loan balances for both portfolios.

Previous wording

Net revenue for the current quarter was $345.9 million compared to $285.9 million for the prior year quarter. Our consolidated net revenue margin was 56.7% for the current quarter compared to 59.2% for the prior year quarter. The decrease in consolidated net revenue margin was driven primarily by lower net revenue margin in the consumer portfolio, partially offset by higher net revenue margin in the small business portfolio. Refer to “—Consumer Loans and Finance Receivables” and “—Small Business Loans and Finance Receivables” below for additional discussion of net revenue for the current quarter.

Current wording

Net revenue for the current quarter was $370.2 million compared to $299.4 million for the prior year quarter. Our consolidated net revenue margin was 58.9% for the current quarter compared to 59.9% for the prior year quarter. The decrease in consolidated net revenue margin was driven primarily by lower net revenue margin in the consumer portfolio, partially offset by higher net revenue margin in the small business portfolio. Refer to “—Consumer Loans and Finance Receivables” and “—Small Business Loans and Finance Receivables” below for additional discussion of net revenue for the current quarter.

Previous wording

The fair value of our loan and finance receivable portfolio in our consolidated financial statements was $3,795.2 million and $3,003.4 million as of March 31, 2024 and 2023, respectively. The outstanding principal balance of our loan and finance receivables portfolio was $3,298.4 million and $2,700.1 million as of March 31, 2024 and 2023, respectively. The fair value of the combined loan and finance receivables portfolio includes $14.8 million and $13.9 million with an outstanding principal balance of $10.8 million and $10.5 million of consumer loan balances that are guaranteed by us but not owned by us, which are not included in our consolidated financial statements as of March 31, 2024 and 2023, respectively.

Current wording

The fair value of our loan and finance receivable portfolio in our consolidated financial statements was $3,939.2 million and $3,092.4 million as of June 30, 2024 and 2023, respectively. The outstanding principal balance of our loan and finance receivables portfolio was $3,423.7 million and $2,756.9 million as of June 30, 2024 and 2023, respectively. The fair value of the combined loan and finance receivables portfolio includes $17.3 million and $19.1 million with an outstanding principal balance of $12.5 million and $14.2 million of consumer loan balances that are guaranteed by us but not owned by us, which are not included in our consolidated financial statements as of June 30, 2024 and 2023, respectively.

Previous wording

The consumer portfolio balance was 35.7% of our combined loan and finance receivable portfolio balance at fair value as of March 31, 2024, which is flat compared to 35.7% as of March 31, 2023. Our small business portfolio of loans and finance receivables was 64.3% of our combined loan and finance receivable portfolio at fair value as of March 31, 2024, compared to 64.3% as of March 31, 2023. See “—Non-GAAP Disclosure—Combined Loans and Finance Receivables Measures” above for additional information related to combined loans and finance receivables.

Current wording

The consumer portfolio balance was 36.4% of our combined loan and finance receivable portfolio balance at fair value as of June 30, 2024, which decreased slightly compared to 38.2% as of June 30, 2023. Our small business portfolio of loans and finance receivables was 63.6% of our combined loan and finance receivable portfolio at fair value as of June 30, 2024, compared to 61.8% as of June 30, 2023. See “—Non-GAAP Disclosure—Combined Loans and Finance Receivables Measures” above for additional information related to combined loans and finance receivables.

Previous wording

At March 31, 2024 and 2023, the ratio of fair value as a percentage of principal was 115.1% and 111.2%, respectively, on company owned loans and finance receivables and 115.1% and 111.3%, respectively, on combined loans and finance receivables. These ratios increased compared to the prior year due to improvement in both the consumer and small business portfolios. Refer to “—Consumer Loans and Finance Receivables” and “—Small Business Loans and Finance Receivables” below for additional discussion of fair value ratios for the current quarter.

Current wording

At June 30, 2024 and 2023, the ratio of fair value as a percentage of principal was 115.1% and 112.2%, respectively, on company owned loans and finance receivables and 115.1% and 112.3%, respectively, on combined loans and finance receivables. These ratios increased compared to the prior year due to improvement in both the consumer and small business portfolios. Refer to “—Consumer Loans and Finance Receivables” and “—Small Business Loans and Finance Receivables” below for additional discussion of fair value ratios for the current quarter.

Previous wording

The average loan and finance receivable origination amount decreased to $1,675 from $1,901 during the current quarter compared to the prior year quarter, due primarily to a higher percentage of line of credit draws in comparison to installment loan originations, as the former are typically lower in average dollar amount.

Current wording

The average loan and finance receivable origination amount decreased slightly to $1,515 during the current quarter from $1,580 during the prior year quarter, due primarily to a higher percentage of line of credit draws in comparison to installment loan originations, as the former are typically lower in average dollar amount.

Previous wording

The ending balance, including principal and accrued fees/interest outstanding, of combined consumer loans and finance receivables at March 31, 2024 increased 23.2% to $1,221.6 million compared to $991.6 million at March 31, 2023, due primarily to originations outpacing repayments.

Current wording

The ending balance, including principal and accrued fees/interest outstanding, of combined consumer loans and finance receivables at June 30, 2024 increased 19.8% to $1,300.7 million compared to $1,085.7 million at June 30, 2023, due primarily to originations outpacing repayments.

Previous wording

The percentage of loans greater than 30 days delinquent decreased slightly to 6.9% at March 31, 2024 from 7.3% at March 31, 2023 due primarily to stronger credit performance in most of our consumer products. Charge-offs (net of recoveries) as a percentage of average combined loan balance also decreased slightly to 14.9% for the current quarter, compared to 15.2% for the prior year quarter due to stronger credit performance of the blended portfolio. Demand for our consumer loan products and services in the United States has historically been highest in the third and fourth quarters of each year, corresponding to the holiday season, and lowest in the first quarter of each year, corresponding to our customers’ receipt of income tax refunds. Lower originations, particularly to new customers, which typically default at a higher percentage than returning customers, generally result in lower delinquencies and charge-offs as the book is more seasoned.

Current wording

The percentage of loans greater than 30 days delinquent of 6.3% was lower at June 30, 2024, compared to 6.8% at June 30, 2023, due primarily to stronger credit performance in most of our consumer products. Charge-offs (net of recoveries) as a percentage of average combined loan balance was flat at 12.8% for the current quarter, compared to 12.7% for the prior year quarter. Demand for our consumer loan products and services in the United States has historically been highest in the third and fourth quarters of each year, corresponding to the holiday season, and lowest in the first quarter of each year, corresponding to our customers’ receipt of income tax refunds. Lower originations, particularly to new customers, which typically default at a higher percentage than returning customers, generally result in lower delinquencies and charge-offs as the book is more seasoned. Charge-off performance in the current quarter follows this seasonal pattern.

Previous wording

Revenue related to our consumer loans and finance receivables was $364.7 million for the current quarter, compared to $281.0 million for the prior year quarter. The increase in revenue was driven primarily by growth in the overall portfolio. The net revenue margin related to our consumer loans and finance receivables was 49.8% for the current quarter, compared to 59.2% for the prior year quarter, but has been stable for the past three sequential quarters.

Current wording

Revenue related to our consumer loans and finance receivables was $367.6 million for the current quarter, compared to $302.3 million for the prior year quarter. The increase in revenue was driven primarily by growth in the overall portfolio, particularly our line of credit products. The net revenue margin related to our consumer loans and finance receivables of 55.4% was lower in the current quarter compared to 61.6% for the prior year quarter, but higher compared to the past three sequential quarters.

Previous wording

The ratio of fair value as a percentage of principal on consumer loans and finance receivables was 121.9% at March 31, 2024, compared to 117.2% at March 31, 2023 and 121.4% at December 31, 2023. The increase from the prior year quarter was due primarily to a mix shift towards line of credit products, which generally have a higher fair value as a percentage of principal compared to installment loans. Refer also to “Results of Operations—Valuation of Loans and Finance Receivables” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion on loan valuation.

Current wording

The ratio of fair value as a percentage of principal on consumer loans and finance receivables was 121.0% at June 30, 2024, compared to 119.0% at June 30, 2023 and 121.9% at March 31, 2024. The increase from the prior year quarter was due primarily to a mix shift towards line of credit products, which generally have a higher fair value as a percentage of principal compared to installment loans. Refer also to “Results of Operations—Valuation of Loans and Finance Receivables” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion on loan valuation.

Previous wording

The ending balance, including principal and accrued fees/interest outstanding, of small business loans and finance receivables at March 31, 2024 increased 23.4% to $2,229.9 million compared to $1,806.5 million at March 31, 2023, due primarily to originations outpacing repayments.

Current wording

The ending balance, including principal and accrued fees/interest outstanding, of small business loans and finance receivables at June 30, 2024 increased 27.7% to $2,284.0 million compared to $1,788.8 million at June 30, 2023, due primarily to originations outpacing repayments.

Previous wording

The percentage of loans greater than 30 days delinquent was 8.8% at March 31, 2024, compared to 7.0% at March 31, 2023. Charge-offs (net of recoveries) as a percentage of average loan balance increased to 4.7% for the current quarter, compared to 4.2% in the prior year quarter. The credit performance of our small business portfolio was stronger in 2022 as the portfolio was more seasoned due to reductions in originations in response to the pandemic. Delinquency and charge-offs have since increased to more normal levels due to the acceleration in originations and macroeconomic pressures on our customers and their businesses.

Current wording

The percentage of loans greater than 30 days delinquent of 8.1% was slightly lower at June 30, 2024, compared to 8.3% at June 30, 2023. Charge-offs (net of recoveries) as a percentage of average loan balance were flat at 4.8% for the current quarter, compared to 4.7% in the prior year quarter. These metrics evidence stability in credit performance of our small business portfolio.

Previous wording

Revenue related to our small business loans and finance receivables was $236.5 million for the current quarter, compared to $194.5 million for the prior year quarter. The increase in revenue was driven primarily by growth in the overall portfolio. The net revenue margin related to our small business loans and finance receivables was 66.5% for the current quarter, compared to 58.7% for the prior year quarter, due to improved performance of more recent vintages. The net revenue margin in the current quarter was more consistent with historical levels as credit performance has returned to more normalized levels.

Current wording

Revenue related to our small business loans and finance receivables was $251.8 million for the current quarter, compared to $190.5 million for the prior year quarter. The increase in revenue was driven primarily by growth in the overall portfolio. The net revenue margin related to our small business loans and finance receivables was 63.5% for the current quarter, compared to 56.9% for the prior year quarter, due to improved performance of more recent vintages.

Previous wording

The ratio of fair value as a percentage of principal on small business loans and finance receivables was 111.7% at March 31, 2024, compared to 108.3% at March 31, 2023 and 111.5% at December 31, 2023. The increase from March 31, 2023 was due primarily to recent vintages, which have exhibited improved performance, being a higher percentage of the portfolio.

Current wording

The ratio of fair value as a percentage of principal on small business loans and finance receivables was 112.0% at June 30, 2024, compared to 108.5% at June 30, 2023 and 111.7% at March 31, 2024. The increase from June 30, 2023 was due primarily to recent vintages, which have exhibited improved performance, being a higher percentage of the portfolio.

Previous wording

Marketing expense increased to $110.6 million in the current quarter compared to $79.7 million in the prior year quarter due primarily to growth in the overall business as well as higher online advertising costs intended to capture increasing market demand for both our consumer and small business loan products and higher commissionable originations in our small business portfolio.

Current wording

Marketing expense increased to $120.8 million in the current quarter compared to $96.0 million in the prior year quarter due primarily to growth in the overall business with higher commissionable originations in our small business portfolio and higher online advertising costs intended to capture increasing market demand for both our consumer and small business loan products.

Previous wording

Operations and technology expense increased to $54.4 million in the current quarter compared to $49.2 million in the prior year quarter, due primarily to higher variable costs, particularly underwriting, collection and personnel costs, due to the increase in originations and the size of the loan portfolio. As a percentage of revenue, operations and technology expense decreased to 8.9% in the current year quarter from 10.2% in the prior year quarter, as increased originations and revenues outpaced fixed costs.

Current wording

Operations and technology expense increased to $54.9 million in the current quarter compared to $47.0 million in the prior year quarter, due primarily to higher variable costs, particularly personnel costs, underwriting, and other selling expenses, due to the increase in originations and the size of the loan portfolio. As a percentage of revenue, operations and technology expense decreased to 8.7% in the current year quarter from 9.4% in the prior year quarter, as increased originations and revenues outpaced fixed costs.

Previous wording

General and administrative expense increased to $39.9 million in the current quarter compared to $37.2 million in the prior year quarter, due largely to higher personnel costs, partially offset by lower occupancy and legal and consulting costs. As a percentage of revenue, general and administrative expense decreased to 6.6% in the current year quarter from 7.7% in the prior year quarter, as increased originations and revenues outpaced fixed costs.

Current wording

General and administrative expense increased to $39.7 million in the current quarter compared to $36.2 million in the prior year quarter, due largely to higher personnel costs, partially offset by lower legal and consulting costs. As a percentage of revenue, general and administrative expense decreased to 6.3% in the current year quarter from 7.3% in the prior year quarter, as increased originations and revenues outpaced fixed costs.

Previous wording

Interest expense, net increased $22.3 million, or 51.4%, to $65.6 million in the current quarter compared to $43.3 million in the prior year quarter. The increase was due primarily to an increase in the average amount of debt outstanding, which increased $640.1 million to $2,919.8 million during the current quarter from $2,279.7 million during the prior year quarter, and an increase in the weighted average interest rate on our outstanding debt to 9.18% during the current quarter from 7.84% during the prior year quarter resulting primarily from year-over-year increases in benchmark rates.

Current wording

Interest expense, net increased $25.4 million, or 55.7%, to $71.0 million in the current quarter compared to $45.6 million in the prior year quarter. The increase was due primarily to an increase in the average amount of debt outstanding, which increased $813.2 million to $3,081.6 million during the current quarter from $2,268.4 million during the prior year quarter, and an increase in the weighted average interest rate on our outstanding debt to 9.33% during the current quarter from 8.16% during the prior year quarter resulting primarily from year-over-year increases in benchmark rates.

Previous wording

Net income decreased $2.5 million, or 4.9%, to $48.4 million during the current quarter compared to $50.9 million during the prior year quarter. The decrease was due primarily to higher interest expense as a result of an increase in the average amount of debt outstanding and an increase in the weighted average interest rate on our outstanding debt. The increase in interest expense was partially offset by an increase in income from operations due primarily to increased net revenue and lower operating expenses as a percentage of revenue.

Current wording

Net income increased $5.8 million, or 12.0%, to $53.9 million during the current quarter compared to $48.1 million during the prior year quarter. The increase was due primarily to an increase in income from operations due primarily to increased net revenue and lower operating expenses as a percentage of revenue, partially offset by higher interest expense as a result of an increase in the average amount of debt outstanding and an increase in the weighted average interest rate on our outstanding debt.

Previous wording

The effective tax rate of 25.1% in the current quarter was higher than the 22.4% rate recorded in the prior year quarter due primarily to additional interest expense on unrecognized tax benefits and a remeasurement of the net deferred tax liability due to state rate adjustments, which was partially offset by excess tax benefits on stock compensation due to stock price appreciation.

Current wording

The effective tax rate of 26.0% in the current six-month period was higher compared to the effective tax rate of 24.0% in the prior year six-month period. The increase is primarily attributable to additional interest expense on unrecognized tax benefits and a remeasurement of the net deferred tax liability due to state rate adjustments.

Previous wording

We seek to maintain a stable and flexible balance sheet to ensure that liquidity and funding are available to meet our business obligations. As of March 31, 2024, we had cash, cash equivalents, and restricted cash of $228.9 million, of which $152.5 million was restricted, compared to $377.4 million, of which $323.1 million was restricted, as of December 31, 2023. During the three months ended March 31, 2024, we entered into a new $150.0 million consumer loan securitization facility. As of March 31, 2024, we had funding capacity of $505.6 million. Based on numerous stressed-case modeling scenarios, we believe we have sufficient liquidity to run our operations for the foreseeable future. Further, we have no recourse debt obligations due until September 2025. As part of our capital and liquidity management, we may from time to time acquire our outstanding debt securities, including through redemptions, tender offers, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws and in compliance with the indentures governing our outstanding debt securities, upon such terms and at such prices as we may determine.

Current wording

We seek to maintain a stable and flexible balance sheet to ensure that liquidity and funding are available to meet our business obligations. As of June 30, 2024, we had cash, cash equivalents, and restricted cash of $271.3 million, of which $211.2 million was restricted, compared to $377.4 million, of which $323.1 million was restricted, as of December 31, 2023. During the six months ended June 30, 2024, we issued $217.2 million of asset-backed notes and entered into a $150.0 million consumer loan securitization facility to fund our growth in our near-prime consumer loan business and issued $399.6 million of asset-backed notes to fund our growth in our small business loan business. As of June 30, 2024, we had funding capacity of $610.8 million. Based on numerous stressed-case modeling scenarios, we believe we have sufficient liquidity to run our operations for the foreseeable future. Further, we have no recourse debt obligations due until September 2025. As part of our capital and liquidity management, we may from time to time acquire our outstanding debt securities, including through redemptions, tender offers, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws and in compliance with the indentures governing our outstanding debt securities, upon such terms and at such prices as we may determine.

Previous wording

On June 23, 2022, we entered into an amendment and restatement of our existing secured revolving credit agreement (as amended, the “Credit Agreement”) that, among other things, increased the borrowing capacity to $440.0 million, with a $20.0 million letter of credit sublimit and $10.0 million swingline loan sublimit. On October 19, 2023, we amended the Credit Agreement to, among other changes, increase the total commitment amount from $440.0 million to $515.0 million. The Credit Agreement bears interest, at our option, at the base rate plus 0.75% or the Secured Overnight Financing Rate plus 3.50%. In addition to customary fees for a credit facility of this size and type, the Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the commitment, and ranges from 0.15% per annum to 0.50% per annum depending on usage. The Credit Agreement contains certain prepayment penalties if it is terminated on or before the first and second anniversary dates, subject to certain exceptions. The Credit Agreement matures on June 30, 2026. As of April 22, 2024, our available borrowings under the Credit Agreement were $96.4 million. Since 2016, we have entered into several loan securitization facilities and offered asset-backed notes to fund our growth, primarily in our near-prime consumer installment loan and small business loan businesses. As of April 22, 2024, we had funding capacity of $406.1 million. We expect that our operating needs, including satisfying our obligations under our debt agreements and funding our working capital growth, will be satisfied by a combination of cash flows from operations, borrowings under the Credit Agreement, or any refinancing, replacement thereof or increase in borrowings thereunder, and securitization or sale of loans and finance receivables under our consumer and small business loan securitization facilities.

Current wording

On June 23, 2022, we entered into an amendment and restatement of our existing secured revolving credit agreement (as amended, the “Credit Agreement”) that, among other changes, increased the borrowing capacity to $440.0 million, with a $20.0 million letter of credit sublimit and $10.0 million swingline loan sublimit. On October 19, 2023, we amended the Credit Agreement to, among other changes, increase the total commitment amount from $440.0 million to $515.0 million. The Credit Agreement bears interest, at our option, at the base rate plus 0.75% or the Secured Overnight Financing Rate plus 3.50%. In addition to customary fees for a credit facility of this size and type, the Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the commitment, and ranges from 0.15% per annum to 0.50% per annum depending on usage. The Credit Agreement contains certain prepayment penalties if it is terminated on or before the first and second anniversary dates, subject to certain exceptions. The Credit Agreement matures on June 30, 2026. As of July 22, 2024, our available borrowings under the Credit Agreement were $81.4 million. Since 2016, we have entered into several loan securitization facilities and offered asset-backed notes to fund our growth, primarily in our near-prime consumer installment loan and small business loan businesses. As of July 22, 2024, we had funding capacity of $482.4 million. We expect that our operating needs, including satisfying our obligations under our debt agreements and funding our working capital growth, will be satisfied by a combination of cash flows from operations, borrowings under the Credit Agreement, or any refinancing, replacement thereof or increase in borrowings thereunder, and securitization or sale of loans and finance receivables under our consumer and small business loan securitization facilities.

Previous wording

Total stockholders’ equity decreased by $90.0 million to $1,150.2 million at March 31, 2024 from $1,240.2 million at December 31, 2023. The decrease of stockholders’ equity was driven primarily by repurchases of our outstanding common stock, partially offset by net income for the three months ended March 31, 2024 and, to a lesser extent, stock-based compensation expense. Our book value per share outstanding decreased to $42.06 at March 31, 2024 from $42.63 at December 31, 2023, which was primarily driven by the increase in treasury stock as a result of share repurchases, which is discussed in more detail below, partially offset by net income during the current year.

Current wording

Total stockholders’ equity decreased by $92.7 million to $1,147.5 million at June 30, 2024 from $1,240.2 million at December 31, 2023. The decrease of stockholders’ equity was driven primarily by repurchases of our outstanding common stock, which is discussed in more detail below, partially offset by net income for the six months ended June 30, 2024 and, to a lesser extent, stock-based compensation expense. Our book value per share outstanding increased to $43.31 at June 30, 2024 from $42.63 at December 31, 2023, which was primarily driven by net income, partially offset by share repurchases.

Previous wording

On November 7, 2022, we announced the Board of Directors authorized an increase to our share repurchase program of up to $150.0 million through December 31, 2023 (the “November 2022 Authorization”). The November 2022 Authorization went into effect in March 2023 upon exhaustion of our previous authorization. On October 24, 2023, we announced the Board of Directors authorized a new share repurchase program totaling $300.0 million through December 31, 2024. The new program replaced the November 2022 Authorization. The Company repurchased $91.5 million of common stock under the November 2022 Authorization before it was terminated. Repurchases under our repurchase program will be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions or otherwise. The share repurchase program does not obligate us to purchase any shares of our common stock. The authorization for the share repurchase program may be terminated, increased or decreased by the Board of Directors in its discretion at any time. During the three months ended March 31, 2024, we had $138.8 million in repurchases of common stock under our share repurchase program.

Current wording

On November 7, 2022, we announced the Board of Directors authorized an increase to our share repurchase program of up to $150.0 million through December 31, 2023 (the “November 2022 Authorization”). The November 2022 Authorization went into effect in March 2023 upon exhaustion of our previous authorization. On October 24, 2023, we announced the Board of Directors authorized a new share repurchase program totaling $300.0 million through December 31, 2024. The new program replaced the November 2022 Authorization. The Company repurchased $91.5 million of common stock under the November 2022 Authorization before it was terminated. Repurchases under our repurchase program will be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions or otherwise. The share repurchase program does not obligate us to purchase any shares of our common stock. The authorization for the share repurchase program may be terminated, increased or decreased by the Board of Directors in its discretion at any time. During the six months ended June 30, 2024, we had $200.8 million in repurchases of common stock under our share repurchase program.

Previous wording

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

Current wording

Our restricted cash typically consists of funds held in accounts as reserves on certain debt facilities and as collateral for issuing bank partner transactions. We have no ability to draw on such funds as long as they remain restricted under the applicable arrangements but have the ability to use these funds to finance loan originations, subject to meeting borrowing base requirements. Our policy is to invest restricted cash held in debt facility related accounts, to the extent permitted by such debt facility, in investments designed to preserve the principal balance and provide liquidity. Accordingly, such cash is invested primarily in money market instruments that offer daily purchase and redemption and provide competitive returns consistent with our policies and market conditions. As of December 31, 2023, restricted cash also included $173.6 million in escrow related to the redemption of our 2024 Senior Notes on January 3, 2024.