Good day and welcome to the Enova International Fourth Quarter and Full Year 2019 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Monica Gould, Investor Relations for Enova. Please, go ahead, ma'am.

Thank you, Chuck, and good afternoon, everyone. Enova released results for the fourth quarter and full year 2019 ended December 31, 2019, 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. 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 on our earnings release, we have posted supplemental financial information on the IR portion of our website. Lastly, I'd like to note that all results discussed on this call including comparisons to prior periods and guidance will be presented on a continuing operations basis and exclude any one-time charges and results related to the discontinued operations in the U.K., unless otherwise noted. Enova exited the U.K. market in Q4, 2019. And with that, I'd like to turn the call over to Dave.

Thanks, Monica, and good afternoon, everyone. Thank you for joining our call today. I'm going to start by giving you a brief overview of the fourth quarter and full year and then I'll update you on our strategy and outlook for 2020. After that, I'll turn the call over to Steve Cunningham, our CFO, who will discuss our financial results and guidance in more detail. We delivered another quarter of strong growth, capping off a great year for Enova. Compared to the fourth quarter of last year, we delivered 25% revenue growth, 34% adjusted EBITDA growth and 67% adjusted EPS growth. The full year results were similarly strong, with revenue growing 21%, adjusted EBITDA growing 36% and adjusted EPS growing 71%. We believe this exceptional growth demonstrates our team's strong execution, our ability to adapt to changes, as well as the large potential of our industry. For the past 16 quarters, we've consistently delivered results within or above our guidance ranges. And this was true again in Q4, with revenue topping our guidance. This was due, in part, from very high new customer growth, which we're able to generate at attractive unit economics. In fact, loans to new customers represented 38% of total originations, up from 30% in Q4 of last year. This was the highest fourth quarter percentage we have ever seen. The high new customer growth resulted in adjusted EBITDA and EPS slightly below our forecast due to higher provisioning. While near term, the new customer growth slightly impacted our bottom line results. This growth shows that we are continuing to take market share. And based on our models, these new customers look to be very accretive to earnings over time. In addition, gross margins were in line with Q4 of last year, even with the high percentage…

Thank you, David and good afternoon everyone. I'll start by reviewing our financial and operating performance for the fourth quarter of 2019 and then provide our outlook and guidance for the first quarter and the full year 2020. As David mentioned, we are pleased to report another quarter of solid financial performance. Fourth quarter financial results reflect the strong demand across our diverse product offerings and our ability to leverage our solid balance sheet, operating leverage, and disciplined focus on unit economics to deliver both significant growth and profitability. We accelerated our year-over-year receivables growth during the quarter as we captured strong demand with highly effective and efficient marketing and stable credit which drove attractive unit economics. We believe this will create significant shareholder value in the quarters to come as we experienced one of the best fourth quarter receivables growth rates in our history. As we announced on our third quarter earnings call, we exited the U.K. market during October of 2019. As a result, during the fourth quarter, we recorded a one-time after-tax charge in line with our prior guidance of $74 million including one-time cash charges of $52 million related to the exit of that business. As Monica noted in the introduction, in my remarks today, fourth quarter 2019 and full year 2019 results in comparisons to prior periods are presented on a continuing operations basis and exclude discharge and the results of discontinued operations related to the U.K. unless otherwise noted. Total company fourth quarter 2019 revenue increased 25% to $345 million above our guidance range of $329 million to $344 million. Revenue growth was driven by a 33% year-over-year increase in total company combined loan and finance receivables balances which grew to $1.3 billion. Installment loans and line of credit products continue to drive the…

We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from David Scharf of JMP Securities. Please go ahead.

Hi, good afternoon. Thanks for taking my questions and thanks for the additional disclosure Steve on the accounting the restatement. I wanted to start off -- just a quick kind of granular question on credit. Obviously, the very positive commentary is no surprise. It's consistent with what we're hearing obviously from other consumer lenders. One metric that did sort of stick out a little was the fourth quarter loss rate in the line of credit product. And given that it's far and away your fastest growing product, I just want to get a little more color on, if that was concentrated in any particular cohort or geography or something? A – Steve Cunningham: Hi David, this is Steve. So that particular product grouping has our consumer line of credit product as well as our Headway line of credit product from small business. Those two products have seen by far the most new customer volume of any of our other products. And I think if you look the year-over-year quarterly trends have been up year-over-year consistent with that expectation.

Okay. I mean, is those season should -- that move up to a 25% loss rate. Should that therefore trend down throughout this year do you think?

Well it definitely will as you season the portfolio. But as you continue to grow as quickly as those portfolios are growing with an increasing rate of new customers, you may see it rise a little bit more before it levels off. But you're absolutely right and that levels off you will see a leveling off and improvement over time.

Got it. And just one question on fair value and then I'll hop back in queue. I guess as we think about the geography of the income statement you highlighted a 45% to 55% sort of net revenue margin which is strikingly analogous to sort of the current gross profit margin. Should what we think of as cost of revenue right now. I mean, is that replaced by a change in fair value or actual charge-offs on the P&L?

So, that range is just strictly coincidental. And as you know, the change in fair value, there's a number of components that go into that. But one big thing that will be different David is like in our prior years' gross profit; you would typically see from Q1 to Q4 either a pretty flat gross profit level or a declining gross profit level. You will not see that in net revenue. I would expect all things being equal going forward. So even with that margin that we're putting out to you, you'll see a little bit more lift as that comes down into EBITDA which is how you can see our EBITDA margins are a little bit stronger than what you've historically seen under incurred accounting.

Got it. And maybe just a follow-up, maybe just in terms of nomenclature Steve, when we think of sort of growth -- the reported line item between gross and net revenue, what will it be called when you report your first quarter?

That will be the change in fair value of the portfolio which is -- it's essentially going to have net -- your charge-offs, your day one gain on originations and the amortization of the premiums on your prior bookings.

Right. And you're just marking to market the assets not your debt securities, correct?

Exactly, just the loan portfolio.

Got it. Great. Thank you.

Our next question will come from John Hecht with Jefferies. Please go ahead.

Thanks, guys. A couple more questions on fair value accounting, is your entire portfolio migrating at time -- day one to fair value? Or the legacy portfolio is still be running a provision-type accounting as it winds down?

Now the entire portfolio so under the fair value option that FASB provided for life of loan loss accounting, we would move the entire historical book to fair value. And in my commentary, I mentioned the results of that is the $100 million after tax increase to retained earnings to recognize the embedded premium in the historical book.

So is that $100 million over the -- divided by the kind of the loan balance. Is that the kind of day one gain we should expect as you originate going forward?

No that's -- so the $100 million has a few things in it. As you may know you have to for example reverse out the allowance, you have to reverse out accrued interest. I would say about -- on the remember the $100 million is after tax, but probably about 60% of that is related to the premium on principle that is in the embedded book which should be pretty close to what you would see on average on the consolidated portfolio which is 5% to 10% premium on investing.

That's helpful. And then can you get -- is there -- maybe can you give us a sense for the changes -- since you're not capitalizing expenses what that means in terms of like a percentage uplift in expenses?

Yes. So it's really just marketing John. And whereas we've guided in the past to low to mid-teens we're guiding now to mid to upper teens for marketing.

Okay. That's helpful. And then -- I mean you have is -- just to give us a sense directionally I know credit quality has been very stable. It's not good. Embedded in that guidance and fair value chain support, do you have a sense for the product level the direction of NCOs just to give us context?

Yes. I mean in my commentary about guidance, we expect to have those stable and predictable trends. So that means in those areas where we do have more new customers like what we were just talking about with line of credit you may see some uptick and expected uptick and that's part of our stable and expected credit outlook. So we're not expecting there to be any credit turns or unexpected credit for the foreseeable future.

Okay. So more or less in the -- along the lines that we saw in 2019 albeit accounting for strong customer growth in certain products at certain times.

Exactly.

Okay, great guys. Thank you.

[Operator Instructions] Our next question will come from John Rowan of Janney.

So just to understand so there will still be a provision expense, but it's more a charge-off figure than it is an allowance figure. And that's what I'm taking. I mean there's obviously other stuff in there. But the…

John there will not be a provision expense. Provision would imply charge-offs plus any allowance for future losses. We will just be running incurred charge-offs through the fair value line. And we'll still report at net charge-off ratios going forward. But provision it's just going to be charge-offs not provision.

But the -- so the yield of the portfolio the gross revenue will that be a net yield off of your portfolio? No because there's still the charge-off figure in the line below correct?

That's correct. It's just the yield -- the revenue will reflect the yield on the underlying portfolio. The change in fair value there's a number of things that can go into it and we can talk off-line. But the big things that go into the change of fair value are charge-offs the gain on origination from new originations and the amortization of the premium on previously booked premiums from originations.

Okay. And then -- so I understand in the financial supplement the last page, it gives pro forma with and without the fair value? I'm just trying to make sense of this. I mean is there a way to competitors -- and maybe I'm just not understanding the sheet correctly. What's the change to the current run rate of earnings is with a fair value treatment? It might be in the sheet, I'm just not seeing it.

Yes. So on that last page of the supplement those columns labeled 2019 results pro forma. Those -- if we would have adopted fair value in 2019, we're giving you a total revenue adjusted EBITDA and adjusted earnings per share would have been for Q1 and for the full year. So you can compare that to our current guidance.

Okay. And so when you think about the uplift in earnings next year, do you think that -- trying to handicap what is -- what percentage of that is simply an accounting change that's improving your earnings? And what part of that is a change in behavior which might result in you guys taking on as you did in this quarter more loan demand. When in other quarters you have passed on some demand in certain quarters in order to make the quarterly number. I'm just trying to handicap, how much of this upside we're seeing for the 2020 guide is just accounting and pushing numbers around versus how much of it is actually a benefit to the company because of the change in behavior?

So John, this is why we gave you the pro forma comparisons, because if you would have gone apples-to-apples. So for example for the full year guidance, we're showing revenue under pro forma fair value for all of 2019 would have been $1.2 billion. And you can see where our range compares to that. So you can calculate a growth rate which would be related to the way we operate our business. Same logic applies to the other metrics on this page as well. So all of the growth is related to the operation of our business not related to accounting.

Okay. And then just lastly, you guys mentioned going into California with a couple of additional products. Can you just give us an idea of the parameters of the products? Whether there's a bank partnership involved? And what types of rates and structure of the loan products that you're considering?

Yes, we're still working on that. So we don't want to disclose it mostly for competitive reasons, but also because they're not final yet. But there are opportunities both within the new AB 539 law, but also kind of outside it for us to roll out the additional compliance products in California which we hope to do this year.

Okay. Thank you very much.

Thanks.

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

Thanks everybody for joining the call today and for your questions. We look forward to talking to you again next quarter. Have a good evening.

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