Good day, and welcome to the Enova International Third Quarter 2019 Earnings Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lindsay Savarese, Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Enova released results for the third quarter ended September 30, 2019, this afternoon after the market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at ir.enova.com. With me on today’s call are David Fisher, Chief Executive Officer; and Steve Cunningham, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to David, I’d like to note that today’s discussion will contain forward-looking statements 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 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'd like to turn the call over to David.

Thanks Lindsay, and good afternoon everyone. Thanks for joining our call today. I'm going to start by giving you a brief overview of the third quarter and then I’ll update you on our strategy. After that I'll turn the call over to Steve Cunningham, our CFO who’ll discuss our financial results and guidance in more detail. We're pleased to deliver another quarter of strong, top and bottom line growth. Our third quarter results demonstrate our ability to effectively manage growth with profitability. Compared to Q3 of last year, we delivered 12% year-over-year revenue growth. Third quarter revenue of $330 million was primarily driven by growth in our U.S. businesses. Third quarter adjusted EBITDA increased 39% and adjusted EPS rose 87%. While strong revenue growth particularly from new customers can lead to more muted earnings growth in the short term, we continue to demonstrate our ability to manage a business for both growth and profitability through rational, new customer growth, efficient marketing spend, stable credit and our ability to leverage our fixed costs with our online model. As has been the case for the last couple of years, our Q3 financial performance was buoyed by robust new customer acquisition, which we're able to achieve with only a 3% increase in marketing expense year-over-year. During the quarter, loans to new customers represented 38% of total originations, the highest quarterly proportion we’ve seen since 2004 and up from 31% in Q3 of last year. As we've mentioned in the past, these new customers become profitable over time and expand our revenue potential going forward. Even with the high percentage of new customers this year, gross margins are essentially in line with last year and up 400 basis points over Q3 of last year. This clearly evidences the strong credit performance we're seeing as…

Thank you, David, and good afternoon, everyone. I'll start by reviewing our financial and operating performance for the third quarter of 2019 and then provider our outlook and guidance for the fourth quarter and the full year 2019. As David mentioned we are pleased to report another quarter of financial performance with top and bottom line results once again either meeting or exceeding our expectations. Third quarter results demonstrate our continued ability to deliver meaningful receivables, revenue and profit growth. Our breadth of product offerings, operational execution, best-in-class analytics and solid balance sheet have been key to our ability to meet or exceed our investor guidance for 16 consecutive quarters. As David mentioned in his remarks, we intend to exit the U.K. market and wind down our operations there. In conjunction with the exit, we anticipate recording a onetime after tax charge of approximately $74 million in the fourth quarter which is comprised of onetime cash charges of approximately $43 million and non-cash charges of approximately $31 million that are primarily related to the write-off of the remaining net assets associated with the operations of the U.K. business. In the quarterly supplemental financial information posted on our Investor Relations website today, we provided selected historical financial results for Enova excluding the operations of our U.K. business. In my remarks today, historical information includes the U.K. operations but any guidance on future results exclude the U.K. in any onetime charges related to the exit unless otherwise noted. Total company third quarter 2019 revenue increased 12% to $330 million at the midpoint of our guidance range of $320 million to $340 million. On a constant currency basis, revenue increased 13% year-over-year. Revenue growth was driven by a 17% year-over-year increase in total company combined loan and finance receivables balances which grew to…

[Operator Instructions]. Your first question comes from John Rowan, Janney. Go ahead please.

I just want to make sure I understood some of the guidance points and just understand kind of how we take out the U.K. business. So the way I'm kind of reading it roughly 60 some odd million dollars of earning assets, that sound about right. I'm looking at the financial supplement to generate that figure.

Yes, I mean, I think, John, if you look at the financial supplement, you can see the historical selected information for Enova with or without the U.K. So obviously the delta that is that...

Yes. That’s what I was looking at. Okay. And then there is $20 million of operating expense in the quarter for international. How much of that is U.K. and how much of that do we strip out from each of the consolidated income statement lines?

Yes. So I think with the guidance I gave you for each of the lines, marketing, operations, the technology in G&A has the percent of revenue range excluding the U.K. The biggest change - you will see the biggest changes in the operations and technology line.

Okay, so you said marketing mid-teens and operation and technology, if I’m not – I make sure I had right written down correctly 7% to 8% of revenue. And then, G&A was 8% to 9%, Correct?

That's right.

And can you discuss just moving on from U.K., can you discuss a little bit how you are going to be providing underwriting services to banks that we're going to continue providing installment loans in California. What does that product look like?

Yes. So banks that operate nationally and originate in California will provide marketing and underwriting for the banks who then originate the loans.

But we're still talking about - what was it in excess of 36% in California, correct? With for that underwriting product that you're going to be providing.

Yes, kind of right around 35%, 36% and above.

I’ll hop back in the queue if I have any further questions.

Your next question comes from Vincent Caintic, Stephens. Go ahead please.

I guess two broad questions. So first on exiting the U.K. So now you have five cylinders instead of six cylinders. Is there going to be another six cylinder or should we expect other like actions like more buybacks?

I think likely both. So if you, as Steve mentioned, our Board authorized a significant increase or a buyback up to $75 million, which is great, gives us the flexibility to be a proactive going out into the market where we see opportunities in the stock. But there is always been plenty of great ideas floating around in Enova that we purposely camp down because we thought our plate was full with six businesses. Now that we're down to five I do think that provides us an opportunity and resources to potentially explore one or more of those other opportunities that have bubbled up over the years.

And then second question so on the bank partnerships and just wondering if you could update us on the appetite on the discussions you've had and maybe when we can expect to maybe hear about one or more of partnerships. Thanks.

I mean that sounds great. We have one contract signed and working on others. So we think it's going to be a good opportunity for us going forward.

Your next question comes from John Hecht, Jefferies. Go ahead please.

And it sounds like John Rowan name, it is now Johnny if I heard that right.

But you're still John.

Anyway, so a couple of things is new customers at the highest percent, yet - I know you're guiding marketing - consistent with prior guidance, but marketing has taken a step down relative to last year in terms of percentage to revenue. Is this just - are you work in certain channels more productively? Is this a reflection of the competitive markets? Question being how are you still attracting a lot of new customers, while that marketing level is going down.

We try to be conservative with how aggressively we ramp up marketing spend, but what we've seen really over the last two years is, every time we lean into marketing and spend more dollars in some ways becomes more efficient not less, which is a great problem to have. Probably won't continue forever, but we still have room to spend meaningfully more as a percentage of revenue and still have attractive unit economics. So we don't want to be silly and go out and spend it all at once and potentially not only spend too much as a percentage of revenue, but maybe attract unprofitable loans or the wrong types of loans. So we're going to continue to increase that cautiously. But we do think there is the opportunity to continue to spend more over time across a variety of channels, direct mail continues to do well. TV has been a strong channel for us this year as well as our online and direct channels.

And then with respect to credit, clearly it's stable and - it results came in well in line with what we expected in your guidance, but the installment portfolio we saw credit improving pretty markedly, the line of credit there was a slight migration. Is that more of a function of kind of the seasoning of those sort of total portfolios or different standards of underwriting or how do I think about that different - the different trajectories there?

We saw something, I can't remember the exact number, about 45% or 46% increase in line of credit originations. I mean that's what the leading to that -- that's what's leading to the little tick up there. It's just the strong, strong growth. I mean it's completely natural and is that portfolio seasons, we expect really good credit performance for it. And we were fine with the credit performance where it is, but expect it to continue to improve over time certainly as the growth rate comes down from that very high level.

Okay that makes ton of sense. And the last question, Steve, any commentary on CECL or anyway we should be thinking about that as we kind of head toward that implementation?

Yes, John, so we're making great progress toward our adoption of the new life of loan loss accounting requirements that become effective January 1. I think you guys know that the FASB is allowing both CECL as well as fair value as options for compliance. And given that this adoption has no impact on cash flow or how we make marginal investment decisions. I think you should expect that we'll be adopting an accounting policy for compliance that best captures the economics of our business. But I would just say regardless we expect implementation impacts to be manageable for both the balance sheet and the P&L.

Okay so well, I assume we'll get good guidance on that next quarter then in terms of…?

That’s correct.

[Operator Instructions] Your next question comes from David Scharf, JMP Securities. Go ahead please.

A lot to unpack this quarter hey - David and or Steve just as it relates to the U.K. exit. I want to make sure I interpret the guidance correctly because obviously I mean it seems like you're raising the full year earnings outlook when excluding the U.K. and you know roughly speaking even ignoring kind of the drilling down and what the earning assets are and the like. If I just look at the year-to-date operating loss internationally it was like $16.5 million I realize there is some Brazil in there. But if I annualize its $22 million, maybe there is some more coming out of the Corporate Services segment. But that seems to be the amount by which your EBITDA guidance went up. Is that a way to frame things that pulling it you know that we’re effectively pulling out $20 million, $25 million of operating loss, pretax and net the remaining core guidance for the year is pretty much unchanged from last quarter?

Yes, that's right, I mean I think what we were trying to do given that was going to be a little bit of apples and oranges if we just gave our guidance without the U.K. Just to give you a bit of that pro forma implied guidance from last quarter right. So, it would have had our actual performance as well as what we expected for the remainder of the year. And I think the takeaways if you just look at the midpoints of the guidance we're basically affirming maybe just slightly increasing, but very close to where we expected which is consistent with the performance of the third quarter overall.

Yes, that’s what it seem like. No just want to make sure and then you know switching gears maybe echoing John Hecht’s question, there was such dramatic growth in the line of credit product. And obviously you know just based on the allowance levels and losses it seems it’s a little different credit profile than installment which has so much near prime. I'm just wondering, is that something that’s specifically baked into your marketing strategy, is it just consumer choice. It seems to be a pretty big concentration and rebalancing if you will of the type of loan and I'm wondering if you have any thoughts on what's driving the demand for that type of product to this extent?

Yes, I think there is a couple things I mean we learned a couple years ago that customers really prefer the line of credit products over either a single pay product or even in most cases a subprime installment loan product. And so, we continue to look for opportunities to rollout those products in various states including getting some states authorize specific line of credit products where they weren’t previously available. And so that's been a great success story for us over the past two, two and a half years. In that number also for total company wide originations and line of credit is also small – one of our two small business products which has or had is a line of credit product and that's had over a 100% year-over-year growth as well. So small businesses like consumers also seem to really appreciate the small business product and has been very successful for us this year.

And I know it's something we don't see with just the end of period balances you disclose. But can you give us a sense for I guess what the open to borrow is. I mean like how much at any point in time like it's September 30th just curious how much has actually been drawn in aggregate on those lines versus what your borrowers have been approved for and whether that's a pretty stable figure each quarter?

It is pretty stable it's actually very stable it's something we track. We don't disclose that exactly, but I would not, it's really more like a line. It's more – it's not really like a credit card or more like or like a corporate revolver. Customers tend to take a draw upfront that’s usually less than the total amount that they're authorized for. And then start making repayments and maybe take some of the additional draws over time. So we don't tend to see very low utilization like you would see unlike a corporate line of credit like our line of credit facility where we tend to have very low utilization. But it's also not like a subprime credit card where people tend to get up to 100% and then just stay there forever. So tends to be in between those two with really the initial draw being the large proportion of that.

Just last question more strategically maybe a different counterintuitive twist on the questions regarding California. Just given all of your analytical capabilities and you've been lending online pretty much longer than anyone is there anything in this sub 36% market that may start to look appealing to you or the risk adjusted returns and the competition just not as attractive?

Yes I would say two things, one in terms of direct lending in the sub 36 market no, a clear no. Banks have too big of a cost of capital advantage for us sub 36 and it's not and there's a lot of competition down there. So it's not where we want to be. In terms of analytics, I think our analytics are good and work really well there, but we have nowhere near the advantage we do in the subprime space. So we have a near prime space where a deep, deep experience. Underwriting near prime and subprime customers is much harder. And so, – our better analytics capabilities provide – a much bigger advantage than in prime customers where underwriting is frankly much easier.

No, no it makes sense. Hey, if I sneak one more in and I know you're not keeping 2020 guidance yet. But you called out a few times how – the level of new customer acquisition has been rising despite keeping marketing spend pretty level – or not increasing at the same rate. I mean you know that – low to mid-teens percentage of revenue. I mean Steve is that's something – I know that's the guidance, but is that something that you specifically sort of target as a goal in your operating model. I'm trying to get a sense for looking out a year, where incremental operating leverage surfaces the most and whether marketing is one of those areas?

No marketing, we really are focused on getting that level of marketing into that range and solidly into that range. The operating leverage is really going to arise from G&A and the fixed pieces of operations and technology not marketing.

Well I saw my first net credit commercial on television yesterday, so I assume I'll be seeing more. Great, thanks guys.

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

Thanks everybody for joining our call today. We’re very much appreciate it and look forward to speaking with you again next quarter.

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