Enova International Q1 2023 Earnings Call Transcript

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April 25, 2023

There are 8 speakers on the call.

Operator

Afternoon, and welcome to the Enova International First Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Lindsay Savarese of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Enova released results for the Q1 2023 ended March 31, 2023, this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it on 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

Speaker 2

of our

Speaker 1

website. Before I turn the call over to David, I'd like to note that today's discussion will contain forward looking statements and as such is subject to risks and uncertainties. Actual results may differ materially as a result from various important risk factors, including those discussed in our earnings press release and in our annual report on Form 10 ks, quarterly reports on Form 10 Q and current reports on Form 8 ks. Please note that any forward looking statements that are made 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.

Speaker 1

S. GAAP reporting, Inova reports 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.

Speaker 1

And with that, I'd like to turn the call over to David.

Speaker 2

Thanks and good afternoon everyone. I appreciate you joining our call today. I'll start with an overview of our Q1 results and then I'll discuss our strategy and outlook for 2023. After that, I'll turn the call over to Steve Cunningham, Our CFO, who will discuss our financial results and outlook in more detail. We once again delivered strong results.

Speaker 2

Our balanced approach to growth combined with our diversified product offerings have enabled us to successfully navigate the current macroeconomic backdrop. Thanks to the skillful execution of our world class team, we're able to generate more than $1,000,000,000 in originations for the 6th quarter in a row. Revenue in the Q1 of $483,000,000 increased 25% year over year, demonstrating our ability to drive profitable growth, while remaining focused on maintaining stable credit in this environment. Q1 revenue was flat sequentially due to normal first quarter seasonality. As a result of strong revenue growth and diligence credit management, adjusted EBITDA increased 19% year over year and 5% sequentially to $126,000,000 And adjusted EPS increased 7% year over year and 2% sequentially to $1.79 While demand is seasonally weakest in Q1, We remain relatively solid this year.

Speaker 2

Our customers across both consumer and small business are underserved by traditional banks You may need access to capital during a variety of economic environments. That being said, in Q1, we prioritized Strong credit metrics as opposed to maximizing origination growth, especially early in the quarter. Our combined loan and finance receivables increased 28% year over year to $2,800,000,000 Originations increased 2% year over year, but were down 9% sequentially in line with typical Q1 seasonality. Marketing was very efficient in the quarter and decreased as a percentage of our total revenue to 17% from 24% last year, evidencing the solid demand I just mentioned. Similar to the past few quarters, the growth came from our SMB business and our consumer line of credit products demonstrating the clear importance of having a diversified portfolio.

Speaker 2

Today, small business products represent 65% of our portfolio, up from 56% in Q1 of last year. SMB revenue increased 47% year over year and 1% sequentially. Given our strong brand presence, minimal competition and diverse portfolio, we continue to see a long runway ahead to drive meaningful volume. Our consumer businesses also performed well in Q1. Consumer revenue increased 13% year over year, Was down 2% from a strong Q4, again reflecting typical Q1 seasonality.

Speaker 2

In line with our expectations, The percentage of consumer installment loans in our portfolio decreased in Q1, while our line of credit products increased as a percentage of total consumer loans. We have continued to deemphasize our longer term near prime installment loans and have emphasized instead our shorter And smaller dollar line of credit consumer products, resulting in higher payment frequency and a relatively short duration of our portfolio. This gives us a more real time view into credit performance. In addition, last year we made the decision to wind down our Short term single pay or payday product. We made our final single pay loan in Q2 of last year And all single pay loans had run off our books by the end of Q3.

Speaker 2

In Enova's early years, Single pay loans were the large majority of our business. However, over the years, their significance dwindled largely due to customer preference for other products we offer. This move allowed us to simplify our operations and focus on our faster growing products. Prior to discontinuance last year, they represented less than 2% of our total portfolio. Given how small of a contribution this product had on our overall results, exiting it has had no material impact on our business as you can see from our results over the past few quarters.

Speaker 2

Turning to credit performance. Overall credit was very good in the quarter and is looking even better heading into Q2 as we continue to successfully manage Credit through numerous changes in the macroeconomic environment, leading to continued solid profitability. Net charge offs were 8.2% in the 1st quarter, down from 8.8% last quarter. Notably, net charge offs remain well below pre COVID levels of 15.8% in Q1 of 2019 and 13.7% in Q1 of 2018 from a combination of mix shift and good credit management. To give Adam perspective on how we manage credit, over the past 5 years, we've been using a sophisticated recession monitoring analysis to assess the macroeconomic environment.

Speaker 2

This is what led us to increase our ROE targets across all of our products during the back half of twenty twenty two to strike a more prudent balance between growth and risk. In addition, our sophisticated machine learning models combined with our experienced team, are continually making small operational changes to address areas of concern and take advantage of opportunities. We are literally making hundreds of small changes each quarter to optimize between originations and credit performance. It's important to understand that not all products move in lockstep. For example, in mid-twenty 22, consumer defaults became elevated.

Speaker 2

Accordingly, we timed our underwriting in late Q2 and into Q3 to bring these metrics back in line with our targets. And the results with some of the strongest credit metrics we had ever seen by Q1. In contrast, Credit metrics for the SMB portfolio blagged consumer by a quarter or 2 as we saw much better than historical averages for most of 2022 in that business. Over late in the year, as we saw the impact to our credit metrics of the portfolio normalizing to historic levels, We tightened the small business miles and increased our focus on collections to ensure strong credit performance and unit economics. Now, credit metrics across SMB look solid, although there will be a bit of a lag with net charge offs into Q2, as Steve will discuss.

Speaker 2

Again, this demonstrates the importance of having a diversified portfolio, world class machine learning algorithms and a deep and experienced team. Looking forward, as a result of the current solid credit performance And strong demand we are observing, we believe there is opportunity to be moderately more aggressive with originations now, particularly on the consumer side. And in fact, volume has been quite strong so far in April. To wrap up, While other financial service companies have struggled to access liquidity in the current market environment, our solid balance sheet, More than $900,000,000 of liquidity and proven ability to access the capital markets gives us the flexibility to continue to deliver on our commitment to drive long term value for our shareholders. The macroeconomic environment was obviously noisy in Q1, Panada de nova, we had another strong quarter again demonstrating that is not an overly risky business, but instead one that can operate well and a variety of economic environments.

Speaker 2

This consistent and industry leading performance combined with our strong recent results And lackluster stock price has made it more clear to us than ever that there's meaningful upside to our current share price that we need to do more to unlock shareholder value. We are working with external advisors to gauge various alternatives. In addition, as you may have noticed, we're providing more insights about our business to show its strength. Last quarter, we discussed how large and strong our SMB business has become. And this quarter, we've discussed more on how we manage credit.

Speaker 2

We have not yet identified all the tactics we will take to unlock value. We are confident that we have the right strategy, Products, Tech and Analytics team and balance sheet in place to build on our success. With that, I would like to turn the call over to Steve, who will discuss our financial results and outlook in more detail. And following Steve's remarks, we'll be happy to answer any questions that you may have. Steve?

Speaker 3

Thank you, David, Good afternoon, everyone. Over the past several years, the powerful combination of our flexible online only business model, Diversified product offerings, nimble machine learning powered credit risk management capabilities and solid balance She has allowed us to deliver consistent and differentiated financial results across a range of operating environments. This can again be seen in our solid top and bottom line financial results this quarter, reflecting our ability to adapt and pivot in this uncertain macroeconomic environment. Turning to our Q1 results, as expected, total company revenue was flat sequentially And rose 25% from the Q1 of 2022 to $483,000,000 The year over year increase in revenue was driven by the growth of total company combined loan and finance receivables balances, which on an amortized basis increased 28% from the end of the Q1 of 2022 to $2,800,000,000 at March 31. 1st quarter total company originations totaled $1,100,000,000 up slightly from the same period a year ago We're driven by small business and our continued emphasis on originating shorter duration and smaller dollar line of credit consumer products as we continue to balance growth and risk across our businesses.

Speaker 3

Small Business revenue increased 47% from the first Quarter of 2022 to $194,000,000 as small business receivables on an amortized basis Ended the quarter at $1,800,000,000 or 48% higher than the end of the Q1 of last year. Small business originations of $770,000,000 grew 17% from the Q1 a year ago. Revenue from our consumer businesses increased 13% from the Q1 of 2022 to $281,000,000 As consumer receivables on an amortized basis ended the Q1 at $1,000,000,000 or 3% higher and the end of the Q1 of 2022. Consumer originations of $291,000,000 were lower sequentially Due to tax return seasonality, we were lower compared to the prior year quarter due to our emphasis during the uncertain economic on originating shorter duration and smaller dollar line of credit consumer products, while reducing exposure to longer duration And larger dollar near prime consumer installment loans. As evidence of this, consumer line of credit receivables and originations in this quarter Grew 57% and 53%, respectively, from the Q1 of 2022.

Speaker 3

Consumer demand for these products remains strong and the mix shift supports our ability to adapt more quickly In an uncertain macroeconomic environment. Looking ahead, as is typical for the 2nd quarter, We expect total company revenue to be flat sequentially and will depend upon the level, timing and mix of originations growth during the quarter. Now turning to credit, the net revenue margin for the Q1 of 59% was on the high end of our expected range. Credit quality, which is the most significant driver of net revenue and portfolio fair value remains solid. Credit metrics for the total company reflects strong consumer credit performance and the expected seasoning and normalization of our growing small business portfolio that we discussed last quarter.

Speaker 3

Total company ratio of net charge offs as a percentage of average combined loan and finance receivables for the Q1 was 8.2% compared to 8.8% last quarter, as the small business net charge off ratio was steady The consumer net charge off ratio declined more than 100 basis points. The percentage of total portfolio receivables past due 30 days or more 7.1% at March 31, compared to 6.7% at the end of 2022, driven by the continued seasoning of recent growth in our small business portfolio, which was partially offset by improvement in the delinquency rate for our consumer portfolio. As discussed last quarter, the meaningful growth in our small business portfolio over the past year, Credit metrics for that portfolio are settling at more normal levels as compared to the unsustainably low levels we experienced exiting the pandemic. With that normalization, we expect some quarter to quarter variability in small business credit metrics in net revenue margin in the near term, including temporarily falling above or below typical ranges, can be especially evident in this uncertain macroeconomic environment where we could have slight quarter to quarter variations in growth and performance as we actively manage credit and our balanced approach to growth.

Speaker 3

Increased ROE targets across our portfolio that were implemented last year help to ensure we have additional cushion in the profitability profile of our loans to protect against potential credit variability in market environments like we're in now. So even though our small business Net revenue margin this quarter of 59% fell just below the low 60% to low 70% range that we would expect in a more normal operating environment. We still generated solid returns on the portfolio and delivered consolidated company results that were in line or better than our expectation. Lifetime credit outlook for our small business portfolio continues to reflect stability at the end of the first quarter. The fair value premium as a percentage of principal, 108%, remaining consistent with levels reported over the past year.

Speaker 3

Now turning to consumer, performance and credit metrics for our consumer portfolio remain solid and are reflecting the aforementioned mix shifts toward line of credit loans. Consistent with that shift, we've seen a meaningful increase The fair value of our consumer portfolio as a percentage of principal over the past year, including 5 percentage points this quarter to 117%, reflecting seasoning of the portfolio and a better than expected outlook for consumer lifetime credit losses versus original expectations. As a result of the aforementioned trends in our small business and consumer portfolios, the fair value of the consolidated portfolio as a percentage of principal Increased slightly to 111% at the end of the first quarter. Looking ahead with overall credit performance remaining Relatively stable. We expect total company net revenue margin for the Q2 of 2023 to be around 60%.

Speaker 3

The future net revenue margin expectation will depend upon portfolio payment performance and the level of timing and mix of originations growth. Now turning to expenses. Our operating costs this quarter reflect efficient marketing activities, The continued leverage inherent in our online only model and thoughtful expense management. Total operating expenses for the Q1, including marketing, $166,000,000 or 34 percent of revenue compared to $168,000,000 or 44 percent of Our marketing activities remain effective and efficient with marketing spend for the Q1 of $80,000,000 were 17% of revenue compared to $93,000,000 or 24% of revenue in the Q1 of 2022. We expect marketing expenses as a percentage of revenue to be near 20% in the near term, but will depend upon the growth Especially from new customers.

Speaker 3

With growth in receivables and originations over the past year, Operations and technology expenses for the Q1 increased to $49,000,000 or 10% of revenue compared to $41,000,000 or 11 percent of revenue in the Q1 of 2022. Given the significant variable component of this expense category, Sequential increases in O and T costs should be expected in an environment where originations and receivables are growing It should range between 9% 10% of total revenue. Our fixed costs continue to reflect our focus on operating efficiency With thoughtful expense management, general and administrative expenses for the Q1 increased to $37,000,000 or 8% of revenue from $35,000,000 or 9 percent of revenue in the Q1 of 2022. Excluding $2,500,000 of one time costs, mostly related to a lease termination, G and A expenses would have been flat to the Q1 of 2022. While there may be slight variations from quarter to quarter, we expect G and A expenses as a percentage of revenue of around 8% in the near term.

Speaker 3

We recognized adjusted earnings, a non GAAP measure of $59,000,000 or $1.79 per diluted share for the Q1 compared to $58,000,000 or $1.67 per diluted share in the Q1 of the prior year. Our solid balance sheet and ample liquidity give us the financial flexibility to Navigate a range of operating environments and has allowed us to deliver on our commitment to driving long term shareholder value through continued investments in our business as well as share repurchases and open market purchases and retirement of our senior notes. We ended the Q1 with $905,000,000 of liquidity, including $304,000,000 of cash and marketable securities $601,000,000 of available capacity on facility. Our cost of funds for the Q1 was 7.8%, 190 basis points higher than the Q1 a year ago, primarily due to the 4 75 basis point increase in sulfur over the past year. Demonstrating our confidence in the continued strength of our business relative to our current valuation, During the Q1, we acquired 375,000 shares at a cost of approximately $17,000,000 At March 31, we had $141,000,000 remaining under our authorized share repurchase program.

Speaker 3

In addition, during the quarter, we also opportunistically purchased $44,000,000 of our 2024 senior unsecured notes in the open market at a slight discount to par. Without a material improvement in the current high cost to refinance our senior notes due to market volatility, We expect to leverage our liquidity position and to continue to purchase and retire our 2024 notes over the next 16 months, leading up to their September 1, 2024 maturity. To wrap up, let me summarize our Q2 expectation. As is typical for the Q2 of the year, we expect revenue to be flat sequentially as we continue to focus on an origination strategy that balances growth and risk against the current macro environment. This should lead to stable credit resulting in a total company net revenue margin of around 60%.

Speaker 3

In addition, we expect marketing expenses to be near 20% of revenue, O and T costs between 9% 10% of revenue and G and A costs of around 8% of revenue. These expectations should lead to an adjusted EBITDA margin in the mid-twenty percent and flat to slightly higher adjusted EPS compared to the Q2 of 2022. Our 2nd quarter expectations will depend upon customer payment rates and the level timing and mix of originations growth. Barring a material change in the macroeconomic environment for the remainder of this year, we continue to expect originations As we maintain our focus on an origination strategy that balances growth and risk. As we discussed last quarter, the resulting growth in receivables, Stable credit and continued operating leverage should result in full year 2023 growth in both revenue And adjusted EPS compared to 2022, it is faster than our expected originations growth.

Speaker 3

Our expectations for the remainder of this year will depend upon the macroeconomic environment and the resulting impact on demand, customer payment rates The level timing and mix of originations growth. This quarter, we continue to demonstrate that our balanced approach to growth is working. Our talented team, diversified product offerings and financial flexibility have enabled us to consistently meet or exceed our expectations Thanks for growth and profitability despite uncertainty in the macro economy and we remain confident that we are well positioned to quickly adapt

Operator

And our first question will come from David Scharf of JMP Securities. Please go ahead.

Speaker 4

Hi, good afternoon. Thanks for taking my questions. I guess right off the bat, David, I guess I'm probably obliged To ask if there's any kind of timeframe you're able to communicate either A target or benchmark for when you and the Board expect to kind of reach some sort of conclusion on The efforts to explore some opportunities for shareholder value.

Speaker 2

Yes, sure. So yes, we don't know. We're in the process. We're not in a rush. Company is in great shape.

Speaker 2

This isn't like Yes. One of those is stress situations where you have to get something done. We just think there's more value to be created. And look, there might be like an end Or it might be ongoing, might be a series of things we do over this year, next year for years to come. That's something We're exploring, but, the amount of value we're creating versus, the amount of value that's reflected in the marketplace makes us There is more to do, but again given the stability of the company, the strength of the balance sheet, our originations trajectory, Obviously, no rush whatsoever.

Speaker 4

Got it. No, that's helpful. And on the credit side, I'm curious, You're in a unique position being both a small business and a direct to consumer lender. Do you get any insights into layoff trends, employment trends through your SMB The OnDeck platform that can translate into consumer? And if so, is it still Seeming pretty stable?

Speaker 2

Not really. We don't get a great I mean, we have a great sense of the health of small businesses generally. I would say we get a better sense of the health of the consumer from Originating millions and millions of consumer loans and especially as we've increasingly Obtained electronic bank statement data from our customers as part of those originations, we get a very good sense of employment, Employment trends, changes in employment, changes in income. And I can say the consumer is still very, very strong. Unemployment Employment rates kind of at or near lows.

Speaker 2

Jobless claims have ticked up a teeny bit, but still very, very, very low. Wages are still incredibly strong. So, we're seeing a very healthy consumer. And as I mentioned in my call, we've had some of the strongest credit metrics we've ever had In Q1 of this year and combined with very solid demand, it's making for a strong consumer business for us right now.

Speaker 4

Got it. And then I'll wrap up. Quick question on marketing and customer acquisition. Obviously, we understand That 20% is more of a normalized level. It can fluctuate quarter to quarter.

Speaker 4

But is there anything in the competitive environment and specifically just competitors that don't have The access to funding or as low cost funding as you do, is there anything about weakened competition that could Kind of lead that customer acquisition spend to be below 20% this year To be usually efficient, if you will?

Speaker 2

Yes. I mean, look, it's a balance. The competitive environment It's certainly weak. We definitely saw that in Q1. Our credit models, as we discussed in our Q4 call, were tight throughout the majority of the quarter with kind of our elevated ROE targets that we've now talked about for a couple of quarters, Quarter is in a row.

Speaker 2

And even with that, we had much lower marketing as a percentage of revenue And I think that we've had since we acquired OnDeck really since post the pandemic, so that weekend economic environment certainly helps. Now the flip side of that is with the good credit metrics and entering a more seasonably attractive time of year, That gives us incentive to accelerate originations a bit, which I also mentioned on the call. And those could push up The metrics a bit because it's important to remember there's 2 ways of accelerating originations. You can open up your credit model And bring in more lower credit quality customers or you can spend more per customer and attract more higher credit quality Credit quality customers and we vary those tactics based on what we're seeing in our data each and every day. We're twisting those dials each and every day to adjust marketing spend and adjust where our credit metrics are.

Speaker 2

But Certainly, as we mentioned, as Steve wrapped up with, in this balanced approach between risk and growth, we're more sensitive to opening up the credit too much, so that might push us a bit to spend a tiny bit more on marketing. The good news is with that very Marketing number in Q1, we have plenty of room to do that and still have very attractive ROEs.

Speaker 4

Got it. Understood. Great. Well, thanks very much.

Speaker 2

Yes. Thanks, David.

Operator

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

Speaker 5

Afternoon, guys. Congratulations on another good quarter. First question is, This seem to be I've been tracking this, I guess, loosely. They put out some small business data collection, I guess, proposals. I guess what's your general commentary that and does that do anything from an operational perspective to you guys?

Speaker 5

Yes.

Speaker 2

I mean, that's now a final rule. It goes into effect. I think we have to start collecting in 2024. I can't remember the exact date. I think we'll report for the first time in 2025, I might be off a teeny bit on that, but I think that's about right.

Speaker 2

There's some similar to what's going what you have to do in mortgage These days they want demographic type data, gender, race, those kinds of things. Super easy for us as an online lender to collect. It's not mandatory. It's voluntary for the customer. So we just add a couple of fields to our Application they fill it in or not fill it in and then we send the data to CFPB.

Speaker 2

So really not much of a burden for us at all.

Speaker 5

Okay. That's helpful. And then you mentioned that credit is getting better into the second Quarter and I think that's despite the fact that most of us are aware that tax refunds are down a little bit this year, actually down quite a bit. So is that a function of tightening? Is that a function of mix?

Speaker 5

Obviously, yes, you guys are in the markets Managing credit risk. So obviously, it's the platform. But relative to where I kind of thought I heard that You are very pleased and maybe the credit might be formed a little better than expected. I'm just wondering kind of what your perspective is in the attribution of that result?

Speaker 2

Sure. Well, not better than expected. It performed well. But let me break it up into 2 components because they were slightly different, which was part of The point I was trying to make when kind of going through how we manage credit. On the consumer side, credit was extremely strong all quarter.

Speaker 2

And almost from the very beginning of the quarter, we saw some of the strongest credit metrics We've really ever seen in the consumer business. And yes, tax returns are down a little bit. But As I mentioned in the answer to David's question, the consumer as far as we can see is still very, very strong with the strong jobs market And strong wages. So, that with us not being super aggressive with terms of originations, that balanced approach to risk Growth, I think led to those very, very good credit metrics and that's continued so far into Q2. On the small business side, we did see a little bit of weakness in credit At the end of 2022 and we were very aggressive with origination.

Speaker 2

So I'm sure that That was part of it. And I do think businesses also got a bit skittish, kind of around the end of the year and then into Q1. But again, our models work really, really well and our team is incredibly good at their jobs. And again, by twisting and turning those dials and by the machine learning models Adjusting by the end of the quarter, small business credit was looking very solid again. Not all time great like on the consumer side, but certainly that to a range we're very happy with.

Speaker 5

Wonderful guys. Thanks very much.

Speaker 2

Yes. Thank you.

Operator

And our next question will come from Vincent Caintic of Stephens. Please go ahead.

Speaker 6

Good afternoon. Thanks for taking my questions. First question also on small business. So we have these kind of bank turmoil over the past since mid March. And since then, we've had heard of banks starting to tighten up on certain types of lending categories and small business seems to be one of them.

Speaker 2

I'm sort

Speaker 6

of just wondering if you're hearing or seeing anything, and how the competitive landscape is looking for you and perhaps

Speaker 2

Yes. No, great question. Look, In general, our small business products are structured to attract businesses that generally can't qualify for traditional Loans from banks. So there's not a direct overlap. But over time, as those banks continue to pull back, Obviously, those customers that maybe those small businesses that maybe historically would have been able to get a bank No longer will be able to and as they search out cash, we do think we are a viable option for them.

Speaker 2

So we haven't seen A ton of that yet, we didn't see a spike of volume in March, but that's not unexpected. I mean those businesses that have traditionally Borrowed from banks, it could take them some time to adjust to having to borrow from a different type of lender. But The banking pullback does seem to be continuing. So I think as we look forward into Q2 into the summer, If that pullback continues, certainly an opportunity for our small business products.

Speaker 6

Okay, great. Thank you. And second question just kind of pivoting over kind of related to on the financing side, Steve, if you could talk about Kind of your funding availability as well as how you're thinking about the capital structure, it's nice to see taking advantage of And using some share repurchases, but how you're thinking about your funding availability access to the funding markets and then the capital structure? Thank you.

Speaker 3

Yes, sure. So I think our approach to financing hasn't really changed dramatically over time with our approach to securitization and a combination of facilities and term in the securitization markets as well as where we need term financing Using it, so we're going to continue to be opportunistic just like we have been over the past several years as we've been dealing with a range of operating environments. I would say if anything, after some of the banking noise calmed down earlier in March, We've seen opportunities in the financing markets continue to improve. So to the extent that we need to raise new money to fund growth, I feel like we'll continue to have access At economical levels that will allow us to continue to fund growth, but also to do some of the things we talked about, which is Continuing our share repurchase program where it makes sense and continuing to retire the Upcoming 2024 senior notes over the next year plus.

Speaker 6

Okay, great. That's very helpful. Thanks very much.

Operator

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

Speaker 7

Good afternoon, guys.

Speaker 3

Hey, John.

Speaker 7

I guess I'm struggling to understand conceptually where you stand in the process Evaluating kind of strategic alternatives, if you will. Are you still in the idea generation phase? Or are you starting to like Look through actual proposals and eliminate potential options. I'm just trying to conceptually understand where we sit in Kind of the process of unlocking shareholder value. Yes.

Speaker 2

I mean, I think we're kind of still doing both of us. I would say we're on the earliest And again, this isn't like the outcome is, hey, we're going to go sell the company, where are we in the process of selling the company. This could take many, many different forms from M and A transactions as buyers and sellers kind of Balance sheet restructurings, repositioning the business in different ways. So it takes lots of different forms. And because of that, we're talking to kinds of advisors to help figure it out.

Speaker 2

So we've heard some ideas that are interesting. We've heard some ideas that are And we'll continue to evaluate. And as I mentioned earlier, this may be a process that has a definitive outcome, like we're going to do X, But it might be something we're going to do a whole series of things. So over the next couple of years, We're able to extract value better than we've been able to over the last couple of years.

Speaker 7

Okay. And then just lastly, obviously, you're buying debt. I think you said it was at a slight discount to par. Any implications from credit rating agencies or This is such a buying back below par.

Speaker 3

Yes, John. No, we're not buying it at levels that would raise the concerns You would typically see that they would raise from buying back debt. It's just a touch below par, but still the bonds are callable at par, so it's still an opportunistic Bye for us. And we've been in dialogue with the agencies about our plan. This particular bond is pretty small In the scheme of things for Enova and our liquidity position is very strong.

Speaker 3

So we're not in a situation where this is creating distress for us in any way. So I think we're in good shape to continue to take this on over the next year or so.

Speaker 7

Okay. Well, I was more talking about obviously when If you buy back bonds at a significant discount to par, some of the rating agencies will consider it a technical default. I just want to make sure that we're not I don't think we're in that zone, but I just wanted to make sure.

Speaker 3

Yes. No, these are around above 99. So we're not talking about any of that any of those levels. Okay, fair enough. Thank you.

Speaker 3

Yes.

Operator

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

Speaker 2

Thank you, operator, and thank you everyone for joining our call today. We look forward to speaking with

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Enova International Q1 2023
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