Enova Announces Third Quarter 2015 Results

- U.S. revenue increased 6% year over year to $133.7 million in 3Q15

- U.S. installment loan and receivables purchase agreement revenue rose 40% year over year to $53.6 million in 3Q15

- U.K loan originations rose 23% sequentially in 3Q15

04 Nov, 2015, 16:15 ET from Enova International, Inc.

CHICAGO, Nov. 4, 2015 /PRNewswire/ -- Enova International (NYSE: ENVA), a technology and analytics driven online lender, today announced financial results for the quarter ended September 30, 2015.

"Our recent product introductions continue to exceed our expectations and now account for nearly half of our loan portfolio," said David Fisher, CEO of Enova. "Our investments in these new initiatives have muted the impact of U.K. regulatory changes on our business and will continue to reduce regulatory risk both in the U.S. and the U.K. for years to come. Moreover, we remain encouraged by the steady improvement in U.K. loan originations, which accelerated to over 20% sequential growth in the third quarter. Our focus remains on receiving full authorization from the Financial Conduct Authority in the U.K. and as announced earlier today, we took another step forward by successfully completing a third-party review of certain of our processes and controls."

Third Quarter 2015 Summary

  • Total revenue of $165.2 million in the third quarter of 2015 declined 19.5% from $205.2 million in the third quarter of 2014 as a 6.0% increase in U.S. revenue was offset by a 60.1% decrease in international revenue, primarily due to regulatory changes in the United Kingdom.
  • Gross profit margin of 60.3% in the third quarter of 2015 declined from 64.5% in the third quarter of 2014, driven by accelerating growth on the installment loan portfolio and a higher mix of new customers, which require higher loss provisions.
  • Adjusted EBITDA of $25.2 million, a non-GAAP measure, decreased 47.9% from the same quarter last year primarily due to the decrease in revenue, while Adjusted EBITDA margin declined to 15.3% from 23.6%.
  • Net income decreased to $4.4 million, or $0.13 per diluted share, in the third quarter of 2015 from $18.5 million, or $0.56 per diluted share, in the third quarter of 2014.

"We are pleased by the continued traction of our U.S. installment products, particularly the success of our NetCredit near-prime offering. Our installment loan products continue to represent an increasing portion of our revenue mix, accounting for 40% of total revenue in the third quarter, up from 30% of total revenue for the same quarter last year. Moreover, during the third quarter the business originated the largest number of loans to new customers since the fourth quarter of 2013," said Robert Clifton, CFO of Enova.      

Enova ended the third quarter of 2015 with cash and cash equivalents of $34.3 million and over $58 million of borrowing capacity under the company's credit facility. As of September 30, 2015, the company had combined loans and finance receivables of $482.2 million, an increase of 17.9% over the prior year period, and outstanding debt of $494.7 million. During the third quarter, Enova generated $71.0 million of cash flow from operations.

Outlook

For the fourth quarter 2015, Enova expects total revenue of $160 million to $180 million and Adjusted EBITDA of $20 million to $30 million.

For information regarding the non-GAAP financial measures discussed in this release, please see "Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Financial Measures" below.

Conference Call

Enova will host a conference call to discuss its results at 4 p.m. Central Time/ 5 p.m. Eastern Time on November 4, 2015. The live webcast of the call can be accessed at the Enova Investor Relations website at http://ir.enova.com, along with the company's earnings press release and supplemental financial information. The U.S. dial-in for the call is 1- 855-560-2575 (1-412-542-4161 for non-U.S. callers). Please ask to be joined to the Enova International Call. A replay of the conference call will be available until November 11, 2015 at 10:59 p.m. Central Time / 11:59 p.m. Eastern Time, while an archived version of the webcast will be available on the Enova Investor Relations website for 90 days. The U.S. dial-in for the conference call replay is 1-877-344-7529 (1-412-317-0088). The replay access code is 10074951.

About Enova

Enova is a leading provider of online financial services to the large and growing number of customers who use alternative financial services because of their limited access to more traditional credit. Enova offers or arranges loans for consumers and/or financing for small businesses in all 50 states and Washington D.C. in the United States and in five foreign countries:

Enova, through its trusted brands, uses its proprietary technology, analytics, and customer service capabilities to quickly evaluate, underwrite, and fund loans or provide financing to customers when and how they want it. Headquartered in Chicago, Enova has more than 1,100 employees serving its online customers across the globe.

Cautionary Statement Concerning Forward Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about the business, financial condition and prospects of Enova. These forward-looking statements give current expectations or forecasts of future events and reflect the views and assumptions of Enova's senior management with respect to the business, financial condition and prospects of Enova as of the date of this release and are not guarantees of future performance. The actual results of Enova could differ materially from those indicated by such forward-looking statements because of various risks and uncertainties applicable to Enova's business, including, without limitation, those risks and uncertainties indicated in Enova's filings with the Securities and Exchange Commission ("SEC"), including our annual report on Form 10-K, quarterly reports on Forms 10-Q and current reports on Forms 8-K. These risks and uncertainties are beyond the ability of Enova to control, and, in many cases, Enova cannot predict all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this release, the words "believes," "estimates," "plans," "expects," "anticipates" and similar expressions or variations as they relate to Enova or its management are intended to identify forward-looking statements. Enova cautions you not to put undue reliance on these statements. Enova disclaims any intention or obligation to update or revise any forward-looking statements after the date of this release.

Non-GAAP Financial Measures

In addition to the financial information prepared in conformity with generally accepted accounting principles, or GAAP, Enova provides historical non-GAAP financial information. Management believes that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of Enova's operations. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of Enova's business that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

Management provides non-GAAP financial information for informational purposes and to enhance understanding of Enova's GAAP consolidated financial statements. Readers should consider the information in addition to, but not instead of or superior to, Enova's 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.

Combined Loans and Finance Receivables

Enova has provided combined loans and finance receivables, which is a non-GAAP measure. Enova also reports allowances and liabilities for estimated losses on loans and finance receivables individually and on a combined basis, which are GAAP measures that are included in Enova's financial statements. Management believes these measures provide investors with important information needed to evaluate the magnitude of potential cost of revenue and the opportunity for revenue performance of the loan and finance receivables portfolio on an aggregate basis. Management believes that the comparison of the aggregate amounts from period to period is more meaningful than comparing only the residual amount on Enova's balance sheet since both revenue and the cost of revenue for loans and finance receivables are impacted by the aggregate amount of loans and finance receivables owned by Enova and those guaranteed by Enova as reflected in its financial statements.

Adjusted Earnings and Adjusted Earnings Per Share

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

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure that Enova defines as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, taxes, and stock-based compensation, and Adjusted EBITDA margin is a non-GAAP measure that Enova defines as Adjusted EBITDA as a percentage of total revenue. Management believes Adjusted EBITDA and Adjusted EBITDA margin are used by investors to analyze operating performance and evaluate Enova's ability to incur and service debt and Enova's capacity for making capital expenditures. Adjusted EBITDA and Adjusted EBITDA margin are also useful to investors to help assess Enova's estimated enterprise value. In addition, management believes that the adjustment for lease termination and relocation costs shown below is useful to investors in order to allow them to compare Enova's financial results during the periods shown without the effect of the expense item. The computation of Adjusted EBITDA and Adjusted EBITDA margin as presented below may differ from the computation of similarly-titled measures provided by other companies.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

(Unaudited)

September 30,

December 31,

2015

2014

2014

Assets

Cash and cash equivalents

$

34,310

$

104,241

$

75,106

Loans and finance receivables, net

380,805

303,694

323,611

Income taxes receivable

5,683

14

Other receivables and prepaid expenses

19,778

12,738

16,631

Deferred tax assets

28,100

26,558

25,427

Property and equipment, net

48,814

35,598

33,985

Goodwill

271,568

255,865

255,862

Intangible assets, net

3,698

18

39

Other assets

27,398

21,712

29,536

Total assets

$

820,154

$

760,438

$

760,197

Liabilities and Stockholders' Equity

Accounts payable and accrued expenses

$

79,081

$

71,478

$

57,277

Related party payable, net

13,369

Income taxes currently payable

6,802

Deferred tax liabilities

47,107

45,657

47,953

Long-term debt

494,690

494,021

494,181

Total liabilities

620,878

624,525

606,213

Commitments and contingencies

Stockholders' equity:

Common stock, $0.00001 par value, 250,000,000 shares authorized, 33,000,000 shares issued and outstanding

Preferred stock, $0.00001 par value, 25,000,000 shares authorized, no shares issued and outstanding

Additional paid in capital

6,835

294

Retained earnings

196,672

134,975

156,861

Accumulated other comprehensive (loss) income

(4,231)

938

(3,171)

Total stockholders' equity

199,276

135,913

153,984

Total liabilities and stockholders' equity

$

820,154

$

760,438

$

760,197

 

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Revenue

$

165,227

$

205,168

$

477,183

$

615,115

Cost of Revenue

65,614

72,919

145,720

206,195

Gross Profit

99,613

132,249

331,463

408,920

Expenses

Marketing

35,568

33,393

84,431

92,699

Operations and technology

18,590

19,362

54,156

54,370

General and administrative

22,627

31,167

75,282

82,525

Depreciation and amortization

3,882

5,338

14,198

13,772

Total Expenses

80,667

89,260

228,067

243,366

Income from Operations

18,946

42,989

103,396

165,554

Interest expense, net

(13,292)

(13,136)

(39,501)

(25,201)

Foreign currency transaction loss

(212)

(155)

(1,187)

(555)

Income before Income Taxes

5,442

29,698

62,708

139,798

Provision for income taxes

1,025

11,213

22,897

50,629

Net Income

$

4,417

$

18,485

$

39,811

$

89,169

Earnings Per Share:

Earnings per common share:

Basic

$

0.13

$

0.56

$

1.21

$

2.70

Diluted

$

0.13

$

0.56

$

1.21

$

2.70

Weighted average common shares outstanding:

Basic

33,000

33,000

33,000

33,000

Diluted

33,022

33,000

33,015

33,000

 

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(dollars in thousands)

(Unaudited)

Nine Months Ended September 30,

2015

2014

Cash flows provided by operating activities

$

205,541

$

359,037

Cash flows used in investing activities

Loans and finance receivables

(198,684)

(208,064)

Acquisitions

(17,735)

Property and equipment additions

(28,684)

(9,858)

Other investing activities

10

8

Total cash flows used in investing activities

(245,093)

(217,914)

Cash flows used in financing activities

(78,674)

Effect of exchange rates on cash

(1,244)

(5,688)

Net increase in cash and cash equivalents

(40,796)

56,761

Cash and cash equivalents at beginning of year

75,106

47,480

Cash and cash equivalents at end of period

$

34,310

$

104,241

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

GEOGRAPHIC INFORMATION

(dollars in thousands)

The following table presents information on Enova's domestic and international operations for the three and nine months ended September 30, 2015 and 2014.

Three Months Ended September 30,

2015

2014

$ Change

% Change

Domestic:

Revenue

$

133,661

$

126,130

$

7,531

6.0

%

Cost of revenue

59,056

55,058

3,998

7.3

Gross profit

$

74,605

$

71,072

$

3,533

5.0

Gross profit margin

55.8

%

56.3

%

(0.5)

%

(0.9)

%

International:

Revenue

$

31,566

$

79,038

$

(47,472)

(60.1)

%

Cost of revenue

6,558

17,861

(11,303)

(63.3)

Gross profit

$

25,008

$

61,177

$

(36,169)

(59.1)

Gross profit margin

79.2

%

77.4

%

1.8

%

2.4

%

Total:

Revenue

$

165,227

$

205,168

$

(39,941)

(19.5)

%

Cost of revenue

65,614

72,919

(7,305)

(10.0)

Gross profit

$

99,613

$

132,249

$

(32,636)

(24.7)

Gross profit margin

60.3

%

64.5

%

(4.2%)

(6.5)

%

Nine Months Ended September 30,

2015

2014

$ Change

% Change

Domestic:

Revenue

$

366,134

$

344,003

$

22,131

6.4

%

Cost of revenue

133,135

122,892

10,243

8.3

Gross profit

$

232,999

$

221,111

$

11,888

5.4

Gross profit margin

63.6

%

64.3

%

(0.7)

%

(1.1)

%

International:

Revenue

$

111,049

$

271,112

$

(160,063)

(59.0)

%

Cost of revenue

12,585

83,303

(70,718)

(84.9)

Gross profit

$

98,464

$

187,809

$

(89,345)

(47.6)

Gross profit margin

88.7

%

69.3

%

19.4

%

28.0

%

Total:

Revenue

$

477,183

$

615,115

$

(137,932)

(22.4)

%

Cost of revenue

145,720

206,195

(60,475)

(29.3)

Gross profit

$

331,463

$

408,920

$

(77,457)

(18.9)

Gross profit margin

69.5

%

66.5

%

3.0

%

4.5

%

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

LOANS AND FINANCE RECEIVABLES FINANCIAL AND OPERATING DATA

(dollars in thousands)

The following table shows loans and finance receivables and related loss activity, which is based on loan and finance receivable balances, for the three months ended September 30, 2015 and 2014.

Three Months Ended September 30

2015

2014

Change

Cost of revenue

$

65,614

$

72,919

$

(7,305)

Charge-offs (net of recoveries)

51,041

69,542

(18,501)

Average combined loans and finance receivables, gross:

Company owned(a)

407,163

368,502

38,661

Guaranteed by Enova(a)(b)

34,583

35,604

(1,021)

Average combined loans and finance receivables, gross (a)(c)

$

441,746

$

404,106

$

37,640

Ending combined loans and finance receivables, gross:

Company owned

$

445,547

$

373,693

$

71,854

Guaranteed by Enova(b)

36,684

35,429

1,255

Ending combined loans and finance receivables, gross (c)

$

482,231

$

409,122

$

73,109

Ending allowance and liability for losses

$

66,718

$

71,443

$

(4,725)

Loans and finance receivables ratios:

Cost of revenue as a % of average combined loans and finance receivables, gross(a)(c)

14.9

%

18.0

%

(3.1)%

Charge-offs (net of recoveries) as a % of average combined loans and finance receivables, gross(a)(c)

11.6

%

17.2

%

(5.6)%

Gross profit margin

60.3

%

64.5

%

(4.2)%

Allowance and liability for losses as a % of combined loans and finance receivables, gross(c)(d)

13.8

%

17.5

%

(3.7)%

(a)

The average combined loans and finance receivables, gross, is the average of the month-end balances during the period.

(b) 

Represents loans originated by third-party lenders through the credit services organization (or CSO) programs, which are not included in Enova's financial statements.

(c) 

Non-GAAP measure. See the above discussion for additional information regarding combined loans and finance receivables.

(d) 

Allowance and liability for losses as a percentage of combined loans and finance receivables, gross, is determined using period-end balances.

 

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(dollars in thousands, except per share data)

Adjusted Earnings Measures

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Net Income

$

4,417

$

18,485

$

39,811

$

89,169

Adjustments (net of tax):

Lease termination and relocation costs(a)

(94)

2,076

906

Intangible asset amortization

3

4

7

23

Stock-based compensation expense

1,725

55

4,152

164

Foreign currency transaction loss

154

97

754

354

Adjusted earnings

$

6,205

$

18,641

$

46,800

$

90,616

Diluted earnings per share

$

0.13

$

0.56

$

1.21

$

2.70

Adjustments (net of tax):

Lease termination and relocation costs(a)

0.06

0.03

Intangible asset amortization

Stock-based compensation expense

0.06

0.13

0.01

Foreign currency transaction loss

0.02

0.01

Adjusted earnings per share

$

0.19

$

0.56

$

1.42

$

2.75

 

Adjusted EBITDA

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Net Income

$

4,417

$

18,485

$

39,811

$

89,169

Depreciation and amortization expenses

3,882

5,338

14,198

13,772

Interest expense, net

13,292

13,136

39,501

25,201

Foreign currency transaction loss

212

155

1,187

555

Provision for income taxes

1,025

11,213

22,897

50,629

Stock-based compensation expense

2,625

87

6,541

257

Adjustment:

Lease termination and relocation costs(a)

(210)

3,270

1,415

Adjusted EBITDA

$

25,243

$

48,414

$

127,405

$

180,998

Adjusted EBITDA margin calculated as follows:

Total Revenue

$

165,227

$

205,168

$

477,183

$

615,115

Adjusted EBITDA

25,243

48,414

127,405

180,998

Adjusted EBITDA as a percentage of total revenue

15.3

%

23.6

%

26.7

%

29.4

%

(a)

In May 2015, the Company relocated its headquarters and as a result incurred $3.3 million of facility cease-use charges ($2.1 million net of tax) consisting of remaining lease obligations and disposal costs on its prior headquarters. During the third quarter the Company made adjustments to its lease termination costs.

ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(dollars in thousands)

Estimated Adjusted EBITDA For 2015

The following table reconciles estimated Income from operations to Adjusted EBITDA, a non-GAAP measure:

Estimated Results

Three Months Ended December 31, 2015

Low

High

Unaudited

Income from operations

$

12,000

$

20,000

Depreciation and amortization

5,000

6,000

Stock-based compensation expense

3,000

4,000

Adjusted EBITDA

$

20,000

$

30,000

Estimated Results

Year Ended December 31, 2015

Low

High

Unaudited

Income from operations

$

115,200

$

123,200

Lease termination and relocation costs(a)

3,300

3,300

Depreciation and amortization

19,000

20,000

Stock-based compensation expense

9,500

10,500

Adjusted EBITDA

$

147,000

$

157,000

(a) 

In May 2015, the Company relocated its headquarters and as a result incurred $3.3 million of facility cease-use charges ($2.1 million net of tax) consisting of remaining lease obligations and disposal costs on its prior headquarters.

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SOURCE Enova International, Inc.



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