Enova International, Inc. (ENVA) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Enova International Business Update Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lindsay Savarese, Investor Relations for Enova. Please go ahead.

Thank you, operator, and good afternoon, everyone. Enova announced this afternoon that it has withdrawn its applications with the OCC and the Federal Reserve related to the acquisition of Grasshopper. You may obtain a copy of the press release on the Investor Relations section of our website at ir.enova.com. With me on today's call are Steve Cunningham, Chief Executive Officer of Enova; and Scott Cornelis, Chief Financial Officer of Enova. This call is being webcast and will be archived on the Investor Relations section of Enova's website. Before I turn the call over to Steve, I'd like to note that today's discussion will contain forward-looking statements and as such, is subject to risks and uncertainties. These risks and uncertainties include those risk factors discussed in the most recent reports on Form 10-Q and 10-K as well as those discussed in the press release. 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. Also throughout this discussion, we may refer to non-GAAP financial measures, which are intended to enhance the understanding of our performance, not substitute for comparable GAAP measures. Definitions of these non-GAAP financial measures are included in the press release. They are also in our most recent Form 10-K and Forms 10-Q, which include a full description of non-GAAP measures and reconciliations to the nearest GAAP measures. And with that, I would like to turn the call over to Steve.

Thank you, Lindsay, and good afternoon, everyone. I appreciate you joining our call this afternoon. Earlier today, we announced that Enova has withdrawn its regulatory applications with the OCC and the Federal Reserve related to our proposed acquisition of Grasshopper Bank. This decision is not about our capabilities or our strategy. It is about the regulatory process. Over the past 8 months, we have worked constructively and transparently with the bank regulators, and we believe our application satisfies the well-established factors in the statutory framework for approving new bank applications. Throughout that process, our goal was to bring into the banking system our proven business model while staying true to our mission of meeting the financial needs of consumers and small businesses that have been underserved by traditional banks. While regulators have recently encouraged nonbanks to voluntarily come into the banking system to level the playing field and promote more consistent regulation, the bank application process has not evolved enough to clearly articulate the standards for nonbanks like Enova, who serve customers whose credit needs have traditionally been met mostly outside of the banking system. Without these clearly articulated standards, the process is susceptible to influence political pressure and outside advocacy, independent of the merits of the application itself. After a thorough evaluation and consideration of all these factors, we are confident that withdrawing our applications is the best decision for Enova and for our shareholders. Our future growth opportunities and success do not depend on becoming a bank. We have proven capabilities, a clear strategy and the best team in the industry. Our diversified product offerings, flexible, online-only business model, sophisticated machine-learning-powered credit risk management capabilities and solid balance sheet will continue to support our ability to deliver financial growth and consistency across a wide range of operating environments, and we will continue to leverage these strengths as well as new products and innovations to continue meeting the credit needs of the consumers and small businesses that traditional banks are leaving behind. Building on our long record of financial performance, today, we also reaffirm our third quarter and full year 2026 revenue and adjusted EPS guidance that we provided on our July 23 earnings call. And we look forward to providing more details on our third quarter earnings call next month. Additionally, we intend to accelerate our share repurchases for the remainder of 2026 after we have slowed them in anticipation of a closing later this year. As of June 30, 2026, the company had $218 million available for share repurchases under its senior note covenants and $349 million available under its current Board authorization that expires on June 30, 2027. And with that, we'd be happy to take your questions. Operator?

[Operator Instructions] First question today is from David Scharf with Citizens Capital Markets.

Steve, thanks for pulling together the call quickly. Just wondering if you can give any color on whether or not there -- out of curiosity, there were any sort of specific either complaints or objections voiced by maybe outside advocacy groups that the regulators were highlighting or focused on? Or was there just a broader inability to capture kind of your product suite within their regulatory framework?

David, yes, thanks for the question. Well, so first of all, I would just say like we are not the first contested bank application that's ever existed. So I would hope that individual comment letters don't have tremendous sway over an application. But as I said in my remarks, I think our business model was proposing something new for the banking industry, which is really focused on trying to bring these small businesses and consumers, tens of millions of them that today don't have a consistent way of accessing credit. And that was our objective of trying to make the transition over to the banking system. I think that the application -- my view is the application process is well established for banks that are part of the process today or those that lend to prime and super prime type customers. But I think the guidelines for even folks like us who have a very sophisticated risk-based pricing mechanism across a wide range of products and credit segments, once you move out of sort of those traditional banking space, it's a little harder for them because they don't have established guidelines. And I think the point being, it becomes a lot harder for them to make those decisions and set policy with an application like ours. But as I said before, if you take a step back and look at the statutory requirements, they're pretty well established. I feel like we were very, very, very well in a good spot with all of those with the application that we put forward.

Got it. Understood. And maybe just one follow-up, more kind of product specific. You had highlighted that one of the advantages of having a national charter would be potentially a more streamlined rapid ability to roll out some new products. And I believe one of the potential products you had been at least studying had been earned wage access. And there are EWA providers out there that obviously have bank partners. Is that still -- does this decision impact the company's appetite for exploring EWA going forward?

Absolutely not. I think our roots, as you know, David, our roots are in the smaller dollar loans and advances that consumers are using from some of those types of providers. So with or without a bank charter, those are the types of things that we could continue to pursue on our own.

The next question is from Moshe Orenbuch with TD Cowen.

Great. Maybe kind of building on that last question. Could you talk a little bit because obviously, one of the things that you were hoping to accomplish with the bank was funding availability and cost. And the other was sort of the products, although they're not completely unrelated. Can you talk about ways that you can accomplish similar things without buying the bank? Are there kind of things that you kind of thought about that you could share with us?