Q1 2023 Enova International Inc. Earnings Call
Good afternoon, and welcome to the a Nova International first quarter 2023 earnings Conference call.
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I would now like to turn the conference over to Lindsay Savarese Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everyone and November released results for the first quarter 2023, and then March 31st 2023. This afternoon after market close.
If you did not receive a copy of our earnings press release in the opinion from the Investor Relations section of our website at IR that you know that dot 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 like to note that today's discussion will contain forward looking statements and as such is subject to bank and uncertainty.
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-K quarterly reports on Form 10-Q, and current reports on forms 8-K. Please note that any forward looking statements that are made on this call are.
Just on assumptions as of today.
I take no obligation to update these statements as a result of new information or future events.
In addition to U S GAAP reporting and there were reports certain financial measures that do not cause one to generally accepted accounting principles.
These non-GAAP measures enhance the understanding about the funding.
Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release.
As noted in the 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, and good afternoon, everyone. I appreciate you joining our call today.
Start with an overview of our first quarter 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 our balanced approach to growth combined with our diversified product offerings.
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 billion in originations for the sixth quarter in a row.
Revenue in the first quarter, a $483 million increased 25% year over year, demonstrating our ability to drive profitable growth.
Our remaining focus 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 diligent credit management, adjusted EBITDA increased 19% year over year, and 5% sequentially to $126 million.
And adjusted EPS increased 7% year over year and 2% sequentially.
The $1.79.
Well demand is seasonally weakest in Q1 remained relatively solid this year.
Customers across both consumer and small business are underserved by traditional banks.
And they need access to capital during a variety of economic environments.
That being said in Q1, we prioritize meaning 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 $2.8 billion.
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 decrease as a percentage of our total revenue grew 17% from 24% last year.
Evidence in 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.
Today small business products represent 65% of our portfolio up from 56% in Q1 of last year.
F&B 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 business has also performed well in Q1.
Consumer revenue increased 13% year over year was down 2% from a strong Q4 again, reflecting typical Q1 seasonality.
In line with our expectations, our 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.
To emphasize instead, our shorter duration and smaller dollar a lot of credit consumer products.
<unk> had higher payment frequency.
In 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 for pay their product.
We made our final think single pay loan in Q2 of last year and all single pay loans had run off our books by the end of Q3.
I didn't know if his early years single pay loans, where the large majority of our business.
Well over the years Theres significant dwindled largely due to customer preference for other products we offer.
Let's move to allow 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 that is product that on our overall result exiting it has had no material impact on our business as you can see from our results over the past few quarters.
Turning to credit performance overall credit was very good in the quarter and is looking even better heading into Q2 as we continued to successfully manage credit through numerous changes in the macroeconomic environment.
Leading to continued solid profitability.
Net charge offs were 8.2% in the first quarter down from eight 8% last quarter.
Notably net charge offs remain well below pre COVID-19 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 a perspective on how we manage credit over the past five years, we had been using a sophisticated recession monitoring analysis.
Assess the macroeconomic environment.
This is what led us to increase our ROE targets across all of our products during the back half of 2022 to.
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're literally making hundreds of small changes each quarter to optimize between originations and credit performance.
It's important to understand and not all products move in lockstep.
For example in mid 2022 consumer defaults became elevated.
Accordingly, we tightened 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, when a consumer by a quarter or two.
We saw much better than historical averages for most of 2022 on that business.
However, late in the year, because we saw the impact to our credit metrics of the portfolio normalizing to historic levels.
We tightened our small business models 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.
He will discuss.
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 what the originations now, particularly on the consumer side.
And in fact, all of them 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 million 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.
And over.
We had another strong quarter again, demonstrating that is not an overly risky business.
<unk> had one that can operate well in a variety of economic environments.
This consistent and industry leading performance.
Combined with our strong recent results and blackhawk's their stock price has made it more clear to us whenever 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 are providing more insights about our business to show its strength.
Last quarter, we discussed how large and stronger SMB business has become.
This quarter, we used to discuss more on how we manage credit.
We have not yet identified all the tactics, we will take to unlock value.
We are confident that we have the right strategy products pack and analytics.
Our 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 you may have.
Heath.
Thank you David and 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. It's solid balance sheet has allowed us to deliver consistent and differentiated financial results.
Across a range of operating environments.
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 first quarter results as expected total company revenue was flat sequentially and rose 25% from the first quarter of 2000 $22 million to $483 million a year.
Year over year increase in revenue was driven by the growth in total company combined loan and finance receivables balances.
Which on an amortized basis increased 28% from the end of the first quarter of 2022.
$248 billion at March 31st.
First quarter total company originations totaled $1 $1 billion up slightly from the same period, a year ago were driven by small business and our continued emphasis on originating shorter duration smaller dollar line of credit consumer products as we continued to balance growth and returns across our businesses.
Small business revenue increased 47% from the first quarter of 2000 $22 million to $194 million in small business receivables on an amortized basis ended the quarter at $1 $8 billion or 48% higher than the end of the first quarter of last year.
Small business originations of $770 million grew 17% from the first quarter a year ago.
Revenue from our consumer businesses increased 13% from the first quarter of 2000 $22 million to $281 million.
Tumor receivables on an amortized basis.
We ended the first quarter at $1 billion or 3% higher than the end of the first quarter of 2022.
Consumer originations of $291 million were lower sequentially due to tax returns seasonality.
There were lower compared to the prior year quarter due to our emphasis during the uncertain economic environment on originating shorter duration.
Moller dollar line of credit consumer products.
Reducing exposure to longer duration larger dollar near prime consumer installment loans.
As evidence of this consumer line of credit receivables in origination in this quarter grew 57%, 53% respectively. In the first quarter of 2022.
Consumer demand for these products remained strong and the mixed shifts supports our ability to adapt more quickly.
Certain macroeconomic environment.
Looking ahead as it's typical for the second quarter, we expect total company revenue to be flat sequentially will depend upon the level timing and mix of originations growth during the quarter.
Now turning to credit.
Net revenue margin for the first quarter at 59%. It was on the high end of our expected range credit quality, which is the most significant driver of net revenue and portfolio fair value.
It remains solid.
Metrics for the total company reflect strong consumer credit performance and the <unk>.
Good seasoning and normalization of our growing small business portfolio that we discussed last quarter.
Total company ratio of net charge offs as a percentage of average combined loan and finance receivables for the first quarter.
Eight 2%.
To eight 8% last quarter.
Small business net charge off ratio was steady in the consumer net charge off ratio declined more than 100 basis points.
The percentage of total portfolio receivables past due 30 days or more was seven 1% at March 31, compared to six 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 and small business credit metrics and net revenue margin in the near term.
Including temporarily following above or below typical ranges.
It 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.
Decrease our ROE targets across our portfolio that were implemented last year hope to ensure we have additional cushion and the profitability profile of our loans to protect against potential credit variability in market environments. Like we are in like we're in now.
So even though our small business net revenue margins in this quarter, a 59% fell just below the low 60, <unk> to low 70% range that we would expect in a more normal operating environment.
We still generated solid returns in the portfolio.
<unk> consolidated company results that were in line or better than our expectation.
The 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.
Now turning to consumer.
Credit metrics for our consumer portfolio remain solid and are reflecting the aforementioned mix shifts toward line of credit loans.
Consistent with that <expletive>, we've seen a meaningful increase in the fair value of our consumer portfolio as a percentage of principal over the past year.
Including five percentage points this quarter to 117%.
Reflecting seasoning of the portfolio in 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 remained relatively stable.
We expect total company net revenue margin for the second quarter of 2023 to be around 60%.
Future net revenue margin expectation will depend upon our portfolio payment performance and the level of timing and mix of originations growth.
Now turning to expenses, our operating cost this quarter reflect efficient marketing activities continued leverage inherent in our online only model and thoughtful expense management.
Total operating expenses for the first quarter, including marketing $166 million or 34% of revenue.
Compared to $168 million for 44% of revenue in the first quarter 2022.
Our marketing activities remain effective and efficient with marketing spend for the first quarter $80 million were 17% of revenue compared to $93 million or 24% of revenue in the first quarter 2022.
We expect marketing expenses as a percentage of revenue to be near 20% in the near term.
It will depend upon the growth in Mexico originations, especially for new customers.
With growth in receivables in originations over the past year operations and technology expenses for the first quarter increased to $49 million or 10% of revenue.
Compared to $41 million or 11% of revenue in the first quarter of 2022.
Given the significant variable component of this expense category sequential increases in O N T cost should be expected in an environment, where originations and receivables are growing.
Should range between nine and 10% of total revenue.
Our fixed costs continue to reflect our focus on operating efficiency.
Full expense management.
General and administrative expenses for the first quarter.
Kris to $37 million or 8% of revenue from $35 million or 9% of revenue in the first quarter of 2022.
Excluding $2 $5 million of one time cost mostly related to a lease termination.
G&A expenses would have been flat to the first quarter of 2022.
Well, there may be slight variations from quarter to quarter.
We expect G&A expenses as a percentage of revenue of around 8% in the near term.
We recognized adjusted earnings a non-GAAP measure of $59 million or $1.79 per diluted share for the first quarter.
Third to $58 million or $1.67 per diluted share in the first quarter of the prior year.
Our solid balance sheet and ample liquidity.
The financial flexibility to successfully 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 in the open market purchases and retirement of our senior notes.
We ended the first quarter with $905 million of liquidity, including $304 million of cash and marketable securities.
$601 million of available capacity on facility.
Our cost of funds for the first quarter was seven 8%.
190 basis points higher than the first quarter, a year ago, primarily due to the 475 basis point increase in sofa over the past year.
Demonstrating our confidence in the continued strength of our business relative to our current valuation.
During the first quarter, we acquired 375000 shares at a.
At a cost of approximately $17 million.
At March 31st we had $141 million remaining under our authorized share repurchase program.
In addition, during the quarter. We also opportunistically purchased $44 million 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 1st 'twenty, 'twenty, four and maturity.
To wrap up let me summarize our second quarter expectation.
As is typical for the second quarter 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%.
In addition, we expect marketing expenses to be near 20% of revenue, but when T cost between nine and 10% of revenue.
And G&A costs of around 8% of revenue.
These expectations should lead to an adjusted EBIT margin in the mid 20%.
And flat to slightly higher adjusted EPS compared to the second quarter of 2022.
Our second 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.
Continue to expect originations for the full year 2023 to grow between 10 and 15% compared to 2022.
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 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.
Our expectations for the remainder of this year will depend upon the macroeconomic environment and the resulting impact on demand customer payment rate.
The level of timing and mix of originations growth.
This quarter, we continued to demonstrate that our balanced approach to growth is working.
Clinton teen diversified product offerings, and financial flexibility have enabled us to consistently meet or exceed our expectations for growth and profitability. Despite uncertainty in the macro economy and we remain confident that we are well positioned to quickly adapt to the evolving macro environment.
And with that we'd be happy to take your questions operator.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
Okay.
And our first question will come from David Scharf of.
Security.
Please go ahead.
Hi, yes. Good afternoon, thanks for taking my questions.
I guess, you know right off the bat, David I guess I'm, probably obliged to ask if there's any kind of time.
Timeframe, you're able to communicate either.
You know a target or a benchmark for you know what when you and the board you know expect to.
Kind of reach some sort of conclusion on.
Uh huh.
The efforts to explore some.
Opportunities for shareholder value.
Yeah sure. So yeah, we don't know.
We're in the process, we're not in a rush the company is in great shape. So there's not like 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 series of things. We do in all of this year and next year for for years to come you know, that's something where we're exploring.
But the amount of value, we're creating versus the amount of value. That's reflected in the marketplace makes us confident that there is more more to do but again given the stability of this company the strength of the balance sheet, our origination trajectory.
Obviously, no rush whatsoever.
Got it no that's helpful and then on the credit side I'm curious you know.
You're in a unique position being both a small business.
Direct to consumer lender.
Did you get do you get any insights.
Into.
Layoff trends employment trends through your SMB.
Dec platform that can translate into consumer.
And if so is it still.
They've been pretty stable.
Not not really we don't get a great sense of that I mean should we have a great sense of the health of small businesses generally I would say I would say, we get a better sense of the health of the consumer from originating millions and millions of consumer consumer loans and I'm, especially.
She was increasingly.
Obtain electronic bank statement data from our customers as part of those originations we get a very good chance of employment employment trends changes in employment changes in income and I can say the consumer so very very strong.
Unemployed deployment rates, you know kind of at at or near lows.
Jobless claims have ticked up a teeny that it's 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 to Q1 of this year and you know.
Combined with very solid demand, it's making for a strong consumer business for us right now.
Got it and then I'll wrap up just a quick quick question on marketing and customer acquisition.
Obviously, we understand that that 20% is.
More of a normalized level again, it can fluctuate quarter to quarter.
Is that but is there anything in the competitive environment and specifically just competitors that don't have T.
Access to funding or as low cost funding as you do.
Is there anything about weaken competition that could.
[noise] kind of lead that customer acquisition spend to be below 20%. This year you know too.
Actually efficient if you will.
Yeah, I mean look at it as a balanced and competitive environment.
It's certainly week, we definitely saw that in Q1, our credit models as we discussed on our Q4 call.
Pretty tight throughout the majority of the quarter with you know kind of our elevated ROA targets that we've now talked about for a couple of quarters.
Quarters in a row and even with that you know we've had we had much lower marketing as a percentage of revenue.
I think we've had since we acquired are on deck.
Since the post post the pandemic. So that you know that weekend that kind of environment certainly helps.
The flip side of that is you know with a good credit metrics and entering a more seasonably attractive time of year. It gives us an incentive to accelerate originations a bit which I also mentioned mentioned on the call you know that those could push up the metrics I bet, because it's important to remember theres two ways two ways of.
<unk> originations.
Can open up the 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 too.
Just.
Marketing span, just where where our credit metrics are but certainly as.
As we mentioned as Steve wrapped up with them this balanced approach between risk and growth.
We're more sensitive to opening up the credit bottles too much so now that might push us a bit to spend.
A tiny bit more on marketing and the good news is with that very low you know.
Marketing number in Q1, we have plenty of room to do that and still have very attractive rois.
Got it understood great well, thanks very much.
Yeah. Thanks, David.
The next question comes from John Hecht of Jefferies. Please go ahead.
Afternoon, guys. Congratulations are another good quarter.
First question is this it does seem to be a you know.
I've been tracking this I guess it loosely they they've put out some small business data collection it gets proposals.
I guess whats your general commentary that it is does that do anything from an operational perspective to you guys.
Yeah, I mean, though that that's now a final rule. It goes into effect I think we have to start collecting in 'twenty 'twenty four I can't remember the exact date.
For the first time in 2025, I might be off a teeny bit of thinking around that and I think that's that's about right.
There's some similar to whats going you know what you have to do in mortgage lending these days they want.
Yeah.
Demographic type type data gender or race that those kinds of things Super easy process, an online lender to collect its not mandatory what it's voluntary for the customer. So we just add a couple of fields to our application that they felt that or are not fill it in and then we send send the data to see a few days.
So really not much of a burden for us at all.
Okay.
That's helpful. And then you mentioned that credit is getting.
Getting better into the second quarter and I you know 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.
Is that a function of tightening is that a function of mix. Obviously, yes, you guys are in the markets managing credit risk. So obviously that it's the platform, but yeah relative to where I got I thought I heard that you know you were you were very pleased and maybe that their credit might be for me a little better than expected.
I'm, just wondering kind of what your perspective is on the attribution of that result.
Sure well not better than I expected it performed well, but let me break it up into two components because they were slightly different which was part of the the point I was trying to make one kind of going through how we manage credit on the consumer side credit was extremely strong all quarter.
And you know almost from the very beginning of the quarter, we saw some of the strongest credit metrics.
We've really ever seen.
The consumer business and yeah tax returns were down a little bit but.
As I mentioned in the answer to Davids question, the consumer as far as we can see is still very very strong with a strong jobs market.
And strong wages so.
You know that with us not being.
Super aggressive with terms of origination that balanced approach to risk and growth I think lots of those very very good credit metrics and that's continued so far into Q2.
Small business side, we did see a little bit of weakness in credit at the end of 2022, and we were very aggressive with the origination. So I'm I'm I'm sure that was that was part of it and I do think business has 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 in nearby the machine learning models adjusting now by the end of the quarter or small business credit was looking very solid Saturday.
So you know not not all time, great like on the on the consumer side, but certainly that to a range, we're very happy with.
Hi, guys.
Guys. Thanks very much.
Yeah. Thank you.
Oh.
The next question once again, if you would like to ask a question. Please press Star then one.
Good afternoon, Thanks for taking my questions.
First question also on small business.
So.
These are the kind of bank turmoil over the past, yes, that's the mid March.
Since then we've had heard of banks tighten up on certain types of lending categories.
The business seems to be one of them sort of just wondering if you're hearing or seeing anything.
So looking for you and perhaps that there might be some opportunities as others pull back from smokers.
Yeah, No great Great question look in general our small business products our structure to you.
You know attract businesses that generally can't qualify for traditional loans, well turn back so there's not a direct overlap.
But over time as those banks continue to pull back obviously those customers that maybe are those small businesses that maybe historically would have been able to get a bank loan.
No longer will be able to and you know as they search out Kash. We do think we are a viable option for them. So we haven't seen a ton of that yet, but 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 that can take them some time to adjust to having a ball for them from a different type of a blender, but they're taking pullback does seem to be continuing so I think as we look toward.
You know in the Q2 under this summer.
You know if that pull that continues certainly an opportunity for a small business products.
Okay, great. Thank you and the 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 youre thinking about the capital structure is nice to see you know taking advantage of them.
And using some share repurchases, but how you're thinking about your funding available to access the funding markets.
Got the structure right.
Yeah sure. So I think our approach to financing hasn't really changed dramatically over time with our approach to our securitization and a.
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 had 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 have 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 will continue to have access.
Economical AR levels will allow us to continue to fund growth, but also to do some of the things we talked about which is <unk>.
Continuing our share repurchase program, where it makes sense and continuing to retire.
Hum.
The upcoming 2024 senior notes over the next year plus.
Okay, Great. That's very helpful. Thanks, so much.
Yep.
The next question comes from John Rowan of Janney. Please go ahead.
Good afternoon guys.
Hey, John .
I guess I'm struggling to understand conceptually, where you stand in the process of evaluating kind of strategic alternatives. If you will you know or are you still in the idea generation fees or are you starting to like.
You know look through actual proposal, then you know and eliminate potential options I'm, just trying to conceptually understand where we sit in.
The process of unlocking shareholder value.
Yeah, I mean, I think were you know kind of still doing still doing both of US I would say we're in the earliest side and again this isn't like.
I'll come as you know Hey, we're gonna go sell the company, where where are we in the process of selling the company.
This could take many many different forms from <unk>.
M&A transactions as buyers and sellers kind of balance sheet, our balance sheet restructurings repositioning the business in different ways. So it takes a lots of different forms and because of that we're talking to different kinds of advisors.
To figure it out so we've heard some ideas that are interested and we've heard some ideas that matter not more we'll continue to evaluate and as you know.
I mentioned earlier this maybe a process that has a definitive outcome like we're gonna do X.
But it might be something where we're going to do a whole series of things. So over the next couple of years, we're able to extract value that better than we've been able to over the last couple of years.
Okay, and then just lastly, obviously you're buying debt.
Said it was at a slight discount to par.
Any implications from credit rating agencies are you know decides if buying back below par.
Yeah.
Yeah, John No. We're not you know we're not buying it at levels that would raise it the concerns that you would typically see that they would raise from buying back debt. Its just a touch below par, but still the bonds are callable at par. So it's still an opportunistic buy for us.
And we've been in dialogue with the agencies about our plan. This particular bond it's pretty small in the scheme of things for Nova and our liquidity position is very strong. 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 to take this on over the next year or so.
Okay, well I was more talking about you know.
Obviously, when you buy back bonds at a significant discount to par than some of the rating agencies will consider it a technical default I want to make sure that we're not I don't think we're in that zone, but I just want to make sure.
Yeah. I know these are these are round about 99, so we're not talking about any of that any of those loans.
Okay fair enough. Thank you.
Yeah.
Okay.
This concludes our question and answer session I would like to turn the conference back over to David Fisher for any closing remarks.
Thank you operator, and thank you everyone for joining our call today, we look forward to speaking with you again next quarter have a grade.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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