Good afternoon, and welcome to the Enova International Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Monica Gould, Investor Relations for Enova. Please go ahead.

Thank you. And good afternoon, everyone. Enova released results for the third quarter of 2018 ended September 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, Monica. Good afternoon, everyone, and thanks for joining our call today. I’m going to start by giving a brief overview of the quarter, then I’ll update you on our 2018 strategy, 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. The third quarter was another impressive quarter for Enova. We once again produced strong, new customer growth that drove record revenue. And stable credit and efficient marketing allowed us to deliver solid profitability even with the high mix of new customers. Revenue increased 35% year-over-year to $294 million. This is well above the high end of our guidance range and marks the 10th consecutive quarter of double-digit year-over-year revenue growth and the third consecutive quarter of growth in excess of 30%. Adjusted EBITDA for the quarter rose 30% year-over-year to $44 million, and adjusted EPS increased 84% to $0.46. Both of these metrics were in line with the midpoint of our guidance. Due to the strong demand, loans to new customers represented 31% of total originations in the quarter. This is the highest level, we have seen since 2004, our first year in business. As we’ve mentioned in the past, these new customers ultimately expand our returning customer base and our revenue potential going forward. As we have commented on many times, strong revenue growth, particularly from new customers, typically leads to more muted earnings as we incur marketing dollars to attract those new customers and reserve a larger provision for losses upfront. However, we have shown our ability to overcome this challenge by keeping marketing expenses low and credit performance high, all while leveraging our efficient online model, which has enabled us to significantly…

Thank you, David, and good afternoon, everyone. I’ll start by reviewing our financial and operating performance for the third quarter and then provide our outlook for the fourth quarter and full year 2018. We are pleased to report another quarter of strong financial results with the receivables growth again above 30%, revenues substantially above our expectations, and adjusted EBITDA and adjusted earnings per share at the midpoint of our guidance. Total third quarter 2018 revenue increased 35% to $294 million, exceeding our guidance range of $260 million to $275 million and rose 16% sequentially. On a constant currency basis, revenue increased 36% year-over-year. And we are growing faster. Revenue growth accelerated from a year ago in the second quarter, driven by an increase in total company combined loan and finance receivables balances, which rose 32% year-over-year to $1.02 billion from $772 million at the end of the third quarter of 2017. Installment loan and line of credit products continue to drive the growth in total loans and finance receivables balances. Total company originations during the quarter increased 23% year-over-year to $698 million while originations in our installment and RPA and line of credit products increased 27% and 44%, respectively. As we’ve discussed in the past, the ongoing diversification of our receivable portfolios has been generating faster receivables growth in our line of credit and installment loan products. These products have longer durations and higher average loan amounts. As a result, we’re 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. This is a leading factor of the recent trend of lower operating expense as a percentage of revenue. Domestically, revenue increased 38% on a year-over-year basis and rose 18% sequentially to $251…

[Operator Instructions] First question comes from David Scharf with JMP Securities. Please go ahead.

Hi. Good afternoon. Thanks for taking my questions. It’s probably similar to what I asked the last couple of quarters, but maybe just starting on the demand side. I know you’ve acknowledged, David, that you still have very limited market share in this overall TAM. But, I’m just curious, I mean, any sense for where a lot of these new customers are coming from, and whether there are other products there -- they may be refinancing with yours as well?

Yes. I think, David, you’re over thinking this a little bit. These are shorter termish loans, even our NetCredit product with an average term of four or five years, the average duration of only two plus. People aren’t refinancing to go into the short-term products, they are taking loans when they need them. So, they are continually back in the market. And when they are in the market, they are going to what they view as the most attractive source. And because of the new products we’ve rolled out, our efficient marketing, our pricing, our website, we are continually winning when they are in the market. It’s a nice thing about the product. It’s not a like a 30-year mortgage where if you lose the customer, it’s a long time until you have another to bite at the apple. We continually bites at the apple. And with single-digit market share, we have lots of opportunity to continue to grow by winning those continuous opportunities. So, it’s been -- it’s really combination of those factors. It’s great product, continuous improvement on the product side, continual shift to installment line of credit. Those aren’t one-off things, we have numerous installment products and numerous line of credit products. You can buy those with really good marketing. We are winning when those customers are in the -- when they are in the marketplace for credit. The advantage of our business over any kind of other longer term product, loan products or any other product, when you’re doing well, you have lots of opportunity to take share.

Well, and maybe what I was getting at, obviously these are short-term in nature, so are a lot of the store based installment lenders that you’re taking share from. And I didn’t know if any of your customers may be in situations where they pay down 50% to 75% of a store based loan, didn’t get re-up maybe by that lender and then are coming online, but it sounds...

Yes. No, it’s not that. I mean, storefront lenders, historically, will continue to fund their customers forever, the storefront guys. I think, what we’re seeing is, customers much rather go online and the efficiency of just logging on their phone any time, any place, anywhere not having to schlep down from the storefront lender with kids and toes, [ph] bringing their paperwork along with them. Instead, just apply to Enova, being approved in as little as five minute. And increasingly we’re able to do same day funding with our customers. So, some of the historic benefits of the storefront lenders in terms of speed are quickly going away with the rapid rise of same day funding.

And turning to the credit side, it’s been a recurring theme obviously with the percentage of new customers within the origination pool that it requires more provisioning upfront. Probably I asked in the past, whether you wanted to go much beyond 30% of volumes being attributable to new customers. It looks like you approached that this quarter. Just trying to get a sense. I mean, should we be thinking about an inflection point in terms of the percentage of the overall portfolio that consists of repeat borrowers and when loss rates might peak? It’s such a fluid moving target in terms of modeling, expected loss, just trying to get a little more of a roadmap into sort of this 14%-ish range for blended quarterly losses, if we should be thinking of that as a peak or should it go beyond that?

I think as I mentioned in my prepared remarks, we’re still seeing very strong demand. We don’t see that abating anytime soon. We could be proven wrong. But from what we see right now, our products are continuing to resonate extremely well in the market. The demand remains strong. And, I think as we tried to emphasize on the call, there’s really two things that are encouraging us to continue to take all the new customer volume, good new customer volume that we can. The first is, even with those -- that high level of new customer growth, we’re still able to generate strong overall profitability, because of the stable credits and kind of efficient operating structure. And then, we are able to -- we are seeing performance across the portfolio and across our vintages. So, the combination of those factors makes us absolutely willing to take all the good and new customer volume we can get because we’re building a strong business ahead without having to invest at levels that are challenging our profitability today. So, we think we’re in a really nice spot that allows us to lean into that strong demand.

One last quick one and I’ll get back in queue. On the small business product, it’s been quite a number of quarters where you provided similar commentary about being cautious and restrained. And I know, the big public comp out there in online small business lending is actually maybe contrasting viewpoint that relative to maybe couple years ago, it’s not as frothy. I’m wondering, David, is there -- are there a few things that you’re looking for in particular that sort of drive a decision about whether you want to reaccelerate that business or perhaps wind it down?

Look, the business is profitable today and it doesn’t require huge amount of focus. It’s got a good team that is kind of separate. So, it’s -- we’re able to tread water a little bit here. I hear comments about OnDeck. But, keep in mind, their focus over the last two years has been retrenching on the origination side and cutting expenses. So, it’s still unclear with -- even at kind of that size of origination they are able to make significant amount of money. So, that keeps us actually remaining cautious with the business not being a drain on the rest of our resources. We’re willing to be patient; we won’t be patient forever. But for now we believe in the market, long-term, unlike other businesses where we’ve exited, where we didn’t believe in the market long-term. So, we we’re still patient. And we will see how the market evolves over the next year or two.

The next question comes from John Rowan with Janney. Please go ahead.

I just wanted to understand, in the press release, it says stable credit. Obviously, charge-offs were higher year-over-year. When you talk about stable credit, we’re talking about is just that the charge-off rates between new customers and existing customers are stable, but the mix shift toward new customers is causing the overall charge-off rate to go higher. Is that an accurate statement and how to interpret your comments?

That’s exactly right. And Steve gave that really detailed example of how -- exactly how it works on the line of credit portfolio, how you can see that effect. So, that’s correct. If you kind of isolated credit performance across vintages with new customers and separated them for existing customers, you would see very stable charge-off rates.

John, I think if you go back -- I was going to add, John, if you go back and look at our allowance coverage through time, which is really covering the next 90 days of losses, I think you can see we’re pretty close from quarter-to-quarter with how we’re doing that, which is another good example of that with expectations and stability.

Okay. What was the data that you gave about new customers? I didn’t get it down, if you could repeat it.

Sure. So, for the quarter, it was 31%. The other piece I gave for the consolidated company was the year-to-date new customer proportion and originations, which for 2018 year-to-date is 29% versus 2017 it was 26%.

We’re talking about new customer origination as a percent of total originations. Correct?

That’s correct.

And then, one question on regulations. You guys kind of opened the door to the question. So, you guys always talk about addressing new customers as if signing a lifetime value to them. Right? Obviously we’re kind of in limbo as far as what the regulations are going to look like. And how do you handicap that And is there any risk of a change in the way you address the new customer going into 2019, based on how you will assess their lifetime value when we don’t necessarily know what the end product is going to be from the CFPB?

We’ve been taking into account to the CFPB’s proposed rule for quite some time now. It’s been out -- the final rule which is now the not final rule for quite some time now, has been a proposed rule for over 2.5 years now maybe. And so, that’s -- we’ve had that calculus for a long time. We don’t know what the new final rule -- the new proposed rule which will become the new final rule will look like. But we certainly expect it to give us more area to operate as opposed to less than the current final that won’t -- sounds like it won’t become effective, so that will only likely increase the expected lifetime value of our customers compared to the current final rule.

So, just to be clear, you are already assessing customers on a lifetime basis based on what the prior final rule was, right?

We are certainly taking that to account in our calculation. Yes.

Okay. So, if we get a better new, new final rule, those lifetime values will look better. And frankly, I mean, I’m just kind of interpreting your comments here. We can even see more aggressive new customer growth, if you’re assigning better lifetime values under the new, new rules, whatever they may be, if they are not restrictive?

It’s certainly possible, but obviously highly dependent on what that new final rule says.

The next question comes from John Hecht with Jefferies. Please go ahead.

The quick first question I have is just in terms of modeling. I mean, you’ve -- obviously, you’ve refied with the lower cost of funds, but it sounds like you’ve added a lot of liquidity, your capacity as well. Can you give us a sense for kind of run rate Q4 interest expense, how should we think about that?

Yes. John, I would -- I gave you the third quarter cost of funds. I think you can probably take a couple of the notes that we released today on the new transactions and start to factor those in as well. I mentioned that we’re not carrying as much cash now as we were at the end of the quarter because we used that to call the remaining non-tendered 2021s. So, I think were increasingly focus on carrying reasonable amounts of cash on the balance sheet and keeping our standby ready-to-go at the levels that we’ve talked about. So, we should expect to see that cost of funds, all things being equal without a big spike in the underlying indexes to continue to creep down from where…

Yes. Cost of funds, clearly, it’s going to go lower, I’m wondering just you’ve added some threshold of that too for kind of growth capacity or liquidity. And so, I’m wondering do you have a sense for what the dollar amount of interest rate should trend for next quarter?

It’s all going to depend on the growth, John.

Most of debt we added is capacity that will get filled with the originations as opposed debt you are taking upfront, cash you are taking upfront and paying interest on upfront.

Yes. The senior note balance is up a little bit. We kind of prefunded, which is the way we always do it when we issue a new note. But the overall coupon is down now to 8.5 versus where we were blended. And as David mentioned, our standby. So, most of our financings now are in standby mode, and you pull them as you need them…

Okay. So, much more efficient. Okay, got it. I appreciate that. Sorry, were you going to say something else? Okay. And then, I don’t understand there is a huge component of the fluctuation or seasonal component of the fluctuations in charge-offs, and then also the mix of new customers and so forth. In the line of credit products, it’s undergone really rapid growth. And I’m just wondering, the range of charge-offs we’re in now, is that more reflective of a maturing mix of new versus used customers or should we still expect some migration there?

I mean, the rate of growth in the line of credit product is still very strong. Now, it is becoming -- just because that product tends to be newer, it is becoming more existing as a proportion faster than some of the other products, just because three years ago it’s almost a 100% new customers. We have been in that product for very long. But, the rate of growth, new customer growth is very, very strong in that. So, it’s still going to have higher charge-offs for some time to come, which is a great, which is from our standpoint, a great, great thing. It’s really strong product; customers love it; retention levels are very, very high. We have good profitability in that product. We are extremely excited to be growing that product as fast as we are.

Okay, great. And then, final question, Steve, have you been able to give any thought to what you’re able to tell us about CECL at this point or is still something you’re kind of working through?

Yes. It’s a little early. We still have a little bit to go, but it’s definitely something that we’re looking at. And as we go into 2019, obviously, we will talk more about that as it relates to impacts on our performance or adjustments to the outlook. So, stay tuned. It’s really just going to be with an implementation of one time, if you recall, sort of one time balance sheet adjustment. And then from there forward, hopefully, it will actually maybe stabilize things a bit, compared to our quarterly approach that we have today.

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

Right. Thanks everybody for joining us on our call today. We’ll look forward to catching up in early 2019 to give you the wrap-up on the year. Thanks a lot. Have a good rest of your day.

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