Good day, and welcome to the Enova International Second Quarter 2018 Earnings Conference Call and webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Monica Gould, Investor Relations for Enova. Please go ahead.

Thank you, Kate, and good afternoon, everyone. Enova released results for the second quarter of 2018 ended June 30, 2018, this afternoon after the market closed. 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 based on the business environment as we currently see it and, as such, does include certain risks and uncertainties. Please refer to our press release and our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's discussion. Any forward-looking statements that we make 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, we report 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 would like to turn the call over to David.

Thanks, and good afternoon, everyone, and thanks for joining our call today. I will start by giving a brief overview of the quarter and I'll update you on our strategy and progress in 2018. And finally, I will share our perspective looking forward. After my remarks, I will turn the call over to Steve Cunningham, our CFO, to discuss our financial results and guidance in more detail. Q2 was another strong quarter for Enova. By successfully executing our focused growth strategy, we were able to exceed our revenue expectations, while delivering adjusted EBITDA and adjusted EPS at the high-end of our guidance range. Our financial results continue to be driven by strong demand and stable credit in each of our six growth businesses, leveraging our scalable online model, diversification efforts and balanced efficient marketing. Following two strong quarters, we have a nice tailwind heading into the back half of 2018. Revenue in the second quarter was $253 million, a robust 33% higher than Q2 of last year. This was above the high end of our guidance range and marked the ninth consecutive quarter of double-digit year-over-year revenue growth. Although we saw growth across all of our products, the strongest growth was in our U.S. and international subprime instalment loan portfolios, our line of credit portfolios and our U.S. near prime products. A significant driver of the recent acceleration in our growth has been the increase in new customers, which represented 28% of total originations in the quarter. As we have mentioned in the past, these new customers ultimately expands our returning customer base and our revenue potential going forward. Although, as we have discussed many times, a higher percentage of new customers could impact near-term profitability as we reserve at a higher provisions for losses upfront. But in Q2, despite…

Thank you, David. The good afternoon, everyone. I will start to review our financial and operating performance for the second quarter and then provide our outlook for the third order and the full year 2018. We are pleased to report another quarter of strong financial results with revenue above our expectations and adjusted EBITDA and adjusted earnings per share at the high-end of our guidance. As David mentioned, total second quarter 2018 revenue increased 33% from a year ago to $253 million, exceeding our guidance range of $230 million to $245 million. On a constant currency basis, revenue increased 33% year-over-year. Year-over-year revenue growth is driven by an increase in total company combined loan and finance receivable balances, which rose 33% year-over-year to $901 million from $676 million at the end of the second quarter of 2017. Installment loan and line of credit products continue to drive the growth in total loan and finance receivable balances. Total company originations during the quarter increased 17% year-over-year to $599 million, driven by originations in our installment and RPA and line of credit products, which increased 33% and 29%, respectively. As David mentioned, our focused growth strategy across our 6 growth businesses continues to diversify our receivables portfolio. As we've discussed in the past, we've been generating faster receivables growth in our line of credit and installment loan product. These products have longer durations and higher average loan amounts. As a result, we are able to drive higher total company receivables and revenue growth with fewer originations, which generally should result in less effort and lower cost to grow over time. Originations from new customers across all of our businesses were 28% of the total, which is the highest proportion for a second quarter that we have ever seen. New customer originations accounted…

Great. Thanks, Steve. At this point, we'll open up the call to any questions you may have.

[Operator Instructions] The first question is from David Scharf of JMP Securities. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. I was wondering, you may have mentioned with respect to the continued focus on new customer acquisition. I know you gave the 28% figure. I'm curious, do you know roughly what percentage of your portfolio ending loan balances is attributable to first-time borrowers of Enova?

David, we don't - off the top of my head, we don't have that in front of us. But I think you can safely assume that we have been generating - it's been increasing over time. If you look back over the past several quarters, we've been in our highest periods around 30% in the back half of last year and then the upper 20s for the other quarters. So you can safely assume we're starting to see the overall amounts start to creep up towards those numbers as we settle in longer term.

And as we think about, and obviously we appreciate the variability in the forecast because of the mix issue how that impacts reserving. When we think about the low end of gross margin levels, is it predominantly related to the new customer mix? Or is a lot of it related to the lengthening of the duration of the loans and the size of the loans? Just trying to get a sense if it's borrower or product related or skewed towards one or the other.

I think you're going to see the low end of the ranges around those periods, where we're growing most quickly, which is related to marketing spend, and as well as we're more having to provide allowance and associated provision for losses. And if you kind of look across historically, that's when you see -- that's how you see the pattern of our gross profit margin playing out between first and fourth quarter, for example, which will typically be our high and low points across our range for the year. Duration is really not so much a factor. In the near term, the next couple of quarters that our guidance covers, mix is not going to have -- product mix isn't going to have a big impact in overall levels of profitability because the EBITDA margins across products just aren't very different. So it's really almost exclusively driven by the rate of growth and the rate of new customer growth, which, as Steve says, impact our marketing spend and our level of provisions.

Okay. That makes sense. And the -- also just thinking about market share, Dave, you made a comment that the near prime product is capturing share at the expense of maybe some traditional brick-and-mortar installment lenders out there. Do you know whether or not a fair amount of your NetCredit product are refinancing some of these brick-and-mortar guys? Or do you just get a sense based on where they have been looking around?

No, they're not necessarily straight up refinances, but there's certainly customers that have used brick-and-mortar installment letters in the past. But we work here, we'll be looking at brick-and-mortar installment lenders as an option.

Got it. One cleanup question, then I'll get in queue for others. Just looking at the sequential rise in share count, it is definitely evidently higher than we are expecting it base. And the stock comp in the quarter, that didn't stand out, it's unusually high. Was there any option granting or was there something that entered the diluted count that took place in the second quarter?

No. The increase was largely exercising our stock options that were already granted out there and not new. But as you exercise those existing rents, as our share price has been raising, as well as the share count.

Okay. So the treasury method getting diluted by the share price?

Yes.

The next question is from John Rowan of Janney.

Two questions. So the gross profit margin guidance of 47% and 57%. I'm assuming that's not 2 half, right? I don't think we've seen a 57% gross profit number for a second half quarter ever. I just want to make sure, that's bracketing the full year, not just the half?

That's correct.

And then marketing spend to minors in that it's going to be materially higher year-over-year, Steve, you said a mid-teen number. Is that mid-teen number full year marketing versus revenue? Or is that mid-teen for the last 2 quarters to revenue?

Yes, it's going to be more like the last half. I mean, you've seen us we've been pretty consistent, but the dollar spent is up substantially because our revenue spend is up quite a bit year-over-year.

And then lastly, can you comment on the net charge-offs right in the line of credit products? It seems like it's higher year-over-year. Is that just a function of the origination? Or is there something else going on there?

Yes, it's kind of like what we've been talking about with new customer growth. You start to see that showing up. And you can see from an allowance coverage as well that it seems we expected as we're building that base and those returning customers, they eventually become returning customers for us.

And we said very strong new customer growth in the line of credit products.

The next question is from John Hecht of Jefferies.

I think you touched on some of this already. But you said it more new customers, but you're still coming at the high-end of your overall guidance range and it's predominantly stable credit in a context of more new customers. Do you think -- is this you're getting better new customers? Or the general customer you're getting is just better off because of the economic backdrop and higher wages? Is there any way to attribute that?

John, I would say that what you're seeing, revenue obviously is benefiting from the overall customer growth from the portfolios. As you move down the EBITDA, I think credit has been very consistent with what we would expect as they season, and you've seen some of that show up in our numbers. But it's also benefiting from EBITDA, it's benefiting from the operating leverage. And you can see as a percent of revenue, in particular, G&A has been coming down pretty consistently and revenue has been outpacing nonmarketing expenses, at least 2 to 1 for a little bit of time. All of that sort of contributes to a lending that figure on the higher end of the range. But obviously, as you move into the periods, some of the seasonal periods as we talked about where there is increasing growth, in particular the higher proportion to new customers that we've typically seen in the second half of the past couple of years, it will be a little harder to continuously be able to do that.

Okay, so more benefits that the scaling of the infrastructure as opposed to some of the other stuff. Second question, is just looking at the calculated yields at the product level, they've been much more stable, with less quarter-to-quarter variability over the last few quarters relative to before. And I think before some of that was tied to maybe some geographical mix changes and so forth. But I'm wondering is that kind of a signal that you're kind of balancing out the mix so we should see less variability on those? Or is this just something else tightening up kind of product structures or something in that realm?

Yes, I think we have more product changes in 2016, early '17 than we have more recently. And also on that credit is still extremely strong grower. It has existing book, so it's making less impact on the overall portfolio than it early on we had a much more different looking product growing very, very quickly. So yes, I think it's just more stable, strong growth, but more stable product offering kind of over the last few quarters.

Okay. And then last question, Steve, what's the right tax rate to think for you guys in the next -- well, I guess, on the outset here?

Yes. I think in the mid-20s is the right way to model it. There is some variability from quarter-to-quarter depending on some of the deductibility of our stock-based compensation best and that's sort of a function of our share price in each quarter, how much is investing. So you will see some variation from that. But as I said on the call, mid-20% should cover you pretty well for the foreseeable future.

[Operator Instructions] The next question comes from Vincent Caintic from Stephens.

First, just had a maybe a 2-part question on the growth pipeline that you've built into the business. Now we have a nice 30%-plus year-over-year loan growth this year so far and also that stretch back a couple of quarters before that. I'm just kind of wondering, given the investments and the marketing that you've already spent, do you have -- what's the visibility into that continuing in terms of getting 20% or 30%-plus year-over-year loan growth. And then the second part, just thinking about the marketing expense, I know the second half of the year has higher marketing spend seasonally, but when you're thinking year-over-year, do you a lot of opportunities to put marketing dollars to work and are there particular channels of that seem to be working particularly well?

Yes, I think that kind of all ties into one unified answer, which is we do continue to see lots of opportunity for growth in the current market environment. Obviously, if the market environment changes meaningfully, that might alter our perspective. But right now, we're our seeing strong demand. Our marketing is working extremely well across a number of channels. We don't feel like we're fully pressed on the gas right now. Were kind of working into it, just to make sure we don't get too far ahead of ourselves. And so as we look in the back half of the year, we definitely see strong growth continuing. We're off to a good start so far in Q3. We've seen the strong demand continue. And so the combination of our strong product offering, of the efficient marketing with maybe some additional levers to pull and a strong demand we continue to see, we're pretty optimistic right now about the back half of the year.

Okay, great. That's really helpful. So the second question on the line of credit products, some nice growth there. Was kind of wondering if you described in particular the growth that you see there in terms of demand. And then relatedly, seems like there's supply coming in from others have been launching line of credit products, some of them, some of your peers have been launching credit cards products. Just wondering how you see the competitive environment as well as the demand for line of credit?

Yes, the "subprime credit cards" aren't really subprime, I think they're competitors of our line of credit products. Their line of credit products is a subprime product, and really differentiated in that way. So we're not -- we have not seen a ton competition in that space so far. We've been able to grow that product, A, by launching additional space, having some legislation passed in certain states that allowed us to have access we haven't had in the past and because we're able to offer it. It's really preferred product by customer as long as it take a lot of shares. So it's really too good product. We've been very successful at it, it's a tricky product to underwrite correctly but we've been able to do it well and I think it's been a nice competitive advantage for us.

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

Thank you so much for joining us today. We look forward to updating you on our progress again next quarter and throughout the remainder of the year. Have a good evening.

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