Q1 2024 Enova International Inc Earnings Call
Operator: Good day, and welcome to the Enova International First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Lindsay Sarayev. Please go ahead.
Good day and welcome to the Nova International first quarter 'twenty 'twenty four earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two please.
Please note this event is being recorded.
I would now like to turn the conference over to Lindsey <unk>. Please go ahead.
Lindsay Savarese: Thank you, Operator, and good afternoon, everyone. The NOVA will release results for the first quarter 2024, which ended March 31st, 2024, this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it from the investor relations section of our website at ir.enova.com. With me on today's call are David Fisher, Chief Executive Officer, and Steve Cunningham, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website.
Lindsey: Thank you operator, and good afternoon, everyone.
Lindsey: <unk> released results for the first quarter 'twenty 'twenty four ended March 31st 2024.
Lindsey: Afternoon after market close if you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at IR Dot.
Speaker Change: Uh huh.
Speaker Change: With me on today's call are David Fisher, Chief Executive Officer, and Steve Cunningham, Chief Financial Officer.
Speaker Change: This call is being webcast and will be archived on the Investor Relations section of our website.
Lindsay Savarese: Before I turn the call over to David, I'd like to note that today's discussion will contain forward-looking statements and is subject to risks and uncertainties. Actual results may differ materially as a result of various important risk factors, including those discussed in our earnings press release and in our annual report on Form 10-K, quarterly reports on Forms 10-Q, and current reports on Forms 8-K. 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.
Speaker Change: 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.
Speaker Change: Actual results may differ materially as a result from various important 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.
David Fisher: 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.
Lindsay Savarese: In addition to U.S. GAAP reporting, Enova 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 GAP and non-GAAP measures are included in the tables found in today's press release. Additionally, as noted in our earnings release, we have posted supplemental financial information on the IR portion of our website. And with that, I'd like to turn the call over to David.
David Fisher: In addition to U S GAAP reporting and November reports certain financial measures that do not conform to generally accepted accounting principles.
David Fisher: We believe these non-GAAP measures enhance the understanding of our performance.
David Fisher: Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release.
David Fisher: As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website.
David Fisher: And with that I'd like to turn the call over to David.
David Fisher: Thanks and good afternoon, everyone. I'll begin with an overview of our first quarter results, and then I'll discuss our strategies going forward. After that, I'll turn the call over to Steve Cunningham, trustee at Enova, to discuss our financial results and outlook in more detail. This year marks 20 years since Enova was founded and 10 years as a public school.
David Fisher: Thanks, and good afternoon, everyone. I appreciate you joining our call today I'll begin with an overview of our first quarter results, then I'll discuss our strategy going forward.
David Fisher: After that I'll turn the call over to Steve Cunningham, our CFO to discuss our financial results and outlook in more detail.
Steven Cunningham: This year much money.
Steven Cunningham: It was founded 10 years as a public company.
David Fisher: We work hard to reap the benefits of that experience, and during the first quarter, our skillful team continued to execute incredibly well. Thank you for joining us for another quarter of consistent and profitable growth. Originations were seasonally strong, down only 3% sequentially, and up 30% compared to Q1 of last year. Revenue is fairly low also, increasing 26% year-over-year and 5% sequentially to $650,000. As you may recall, first-quota seasonality, particularly among our consumers, typically results in sequential origination and revenue decline in the fourth quarter, driven by tax rates.
Steven Cunningham: We work hard to reap the benefits of that and during the first quarter a skillful team.
Speaker Change: Incredibly well.
Steven Cunningham: I think our diverse product offering world class machine.
Steven Cunningham: Analytics and technology.
Steven Cunningham: We delivered another quarter.
Steven Cunningham: And profitable growth.
Originations were seasonally strong down only 3% sequentially and up 30% compared to Q1 of last year.
Steven Cunningham: Revenues increased.
Steven Cunningham: Increasing 26% year over year, and 5% sequentially to 600.
Steven Cunningham: As you may recall first quarter seasonality, particularly in our consumerism.
Speaker Change: Great results.
Speaker Change: Origination and revenue decline.
Speaker Change: Fourth quarter, driven by tax reform.
David Fisher: This year, consumer seasonality was tempered by a severe, which grew 4% sequentially, and as a result, which generated $1.4 billion in originations during the, are the tiniest consecutive quarters of over $1 billion in originations. Even with our 20 years in business, we've been able to consistently generate strong growth, all at the same time. It's absolutely manageable, as a result of strong revenue growth, prudent credit management, and cost-efficiency in GEO. Justin Evonat increased 18% year-over-year and 15% sequentially to $149 million.
Speaker Change: This year.
Speaker Change: Seasonality tempered by SBA origination.
Speaker Change: Grew 4% sequentially.
Speaker Change: A result, we trend has generated $1 $4 billion no regulations during the quarter.
Speaker Change: China consecutive quarters of over $1 billion.
Speaker Change: Origination.
Speaker Change: Even with 31 years in business, we have been able to consistently generate strong growth.
All at the same time.
Speaker Change: It's really managing credit risk.
Speaker Change: As a result of strong revenue growth.
Speaker Change: Good credit management and cost efficiency in Q1.
Speaker Change: Adjusted EBITDA increased 18% year over year.
15% sequentially to $149 million.
David Fisher: Well, it's just that EPS rose a bit more modestly due to higher interest expectancy, resulting primarily from higher Fed funds rates, increasing 7% year-over-year and 4% sequentially to $1.91. Moving to the left on the quarters, a diversified portfolio and efficient marketing continue to drive our growth. Our combined loan and finance receivables increased 23% year-over-year to a record $3.5 billion. Small business products represented 65% of this total portfolio, and consumer 35%. Marketing was 18% of our total revenue compared to 17% in Q1 of last year, well within our target range. SMB revenue increased 22% year-over-year and 12% sequentially to a record $236 million.
Speaker Change: While adjusted EPS rose a bit more modestly.
Speaker Change: Interest expense.
Speaker Change: We don't think primarily from higher fed funds rate, increasing 7% year over year.
Speaker Change: And 1% sequentially.
Speaker Change: $1 91.
Similar to the last couple of quarters.
Speaker Change: Five portfolio and efficient marketing continues to drive our growth.
Speaker Change: Our combined loan and finance receivables increased 23% year over year to a record $3 5 billion.
Speaker Change: Small business products represented 65%.
Speaker Change: Total portfolio.
Seemed like 35%.
Marketing was 18% of our total revenue compared to 72% in Q1 of last year, well within our target range.
Speaker Change: SMB revenue increased 22% year over year, and 12% sequentially to a record $236 million.
David Fisher: While consumer revenue increased 30% year-over-year, supply of sequential, reflecting the typical first quarter season. Outside of our core products, we continue to generate strong growth in Brazil for first quarter originations increased 29% sequentially and 83% year-over-year on a constant currency basis. WAMIS continues to be a small part of Enova. We are excited about the opportunities to continue to grow. As I mentioned, credit quality across our portfolio remains solid. Total company net charge-offs as a percentage of average combined loan and financial receivables were 8.5% in Q1, compared to 9.7% last year.
Our consumer revenue increased 30% year over year.
Speaker Change: Flat sequentially, reflecting typical first quarter seasonality.
Speaker Change: Outside of our core products.
Speaker Change: Continued to generate strong growth in Brazil for first quarter, which an agent increased 29% sequentially.
Speaker Change: 3% year over year on a constant currency basis.
Speaker Change: While this continues to be a small part of it.
Speaker Change: About the opportunities to continue to grow.
Speaker Change: As I mentioned credit quality across our portfolio remains solid.
Speaker Change: Total company net charge offs as a percentage of average combined loan.
Speaker Change: Receivables are.
Speaker Change: Eight 5% in Q1 compared to nine 7% last quarter.
David Fisher: Notably, net charge-offs remain well below pre-COVID levels at 16.4% in Q1 of 2018, and 13.9% in Q1 of 2018, due to a combination of makeshift and good credit. Before closing, I'd like to take a few moments to discuss our strategy and outlook for the remainder of 2020. We're encouraged by the strong start to the year and continued good credit across our portfolio. Both our SMB and consumer customers remain on sound footing, and we're confident in our ability to further drive profitable growth.
Speaker Change: Notably net charge offs remain well below pre COVID-19 levels at 15, 4% in Q1 of 2019.
Speaker Change: And 13, 9% Q1 of 'twenty.
Speaker Change: Due to a combination of mix you're good credit management.
Speaker Change: Before closing I'd like to take a few moments to discuss our strategy and outlook for the remainder of 2024.
Speaker Change: We're encouraged by the strong start to the year, we continued good credit across the portfolio.
Speaker Change: With our SMB and consumer customers.
Speaker Change: Footing, we're confident in our ability to further drive profitable growth.
David Fisher: We believe our diversified portfolio puts us in a unique competitive position to take market share in a non-prime lending way. Our SMB business runs across a wide range of industries, providing good diversification for the Economic Environment. And we have both consumer line of credit and installment products that span the subprime and neoprime consumer.
Speaker Change: We believe our diversified portfolio.
Speaker Change: Unique.
Speaker Change: Okay marketshare in the non prime lending.
Speaker Change: Yeah.
Speaker Change: The new business wins across a wide range of industries, providing good diversification across the macroeconomic environment.
Speaker Change: And we are both consumer line of credit and installment products that span the subprime and near Prime consumer.
David Fisher: As you've heard from us before, we're very disciplined when it comes to our unit economics approach to decisioning across both our S&B and consumer markets. This capability has enabled us to meaningfully and profitably expand at this, and as a result, support both small businesses and consumers with their capital needs by offering them safe, transparent, and appropriate lending services. Looking forward.
Speaker Change: Did you heard from us before.
Speaker Change: But when it comes to our unit economics approach.
Speaker Change: Across both are up.
Okay.
Speaker Change: [laughter] capability has enabled us to.
Speaker Change: Profitably expand I think.
Speaker Change: Oh.
Speaker Change: The port both small businesses and consumers.
Our capital needs by offering them safe transparent.
Speaker Change: That makes sense.
Speaker Change: Looking forward, we believe the current macroeconomic environment.
David Fisher: We believe the current macroeconomic environment to give you consistent demand for a product. Solid, credible. Our consumers, as a man in credit, are driven in large part by jobs and wage growth. As you know, the job market has been very strong for the last couple of years and shows little signs of slowing. And Weinshort has been solid as well.
Speaker Change: Okay.
Speaker Change: For our profit solid credit Mark.
Speaker Change: In our consumer business.
Speaker Change: And credit are driven in large part by job and wage growth.
Speaker Change: And you know the job market has been very strong for the last couple of years.
Speaker Change: It was a little signs of slowing.
Speaker Change: And we drive has been solid as well.
David Fisher: While inflation does have an impact, it's a much smaller factor for our customers, and they're navigating persistent inflation well. I know this may be a surprise to some, given all the focus on inflation over the last couple years. Unemployment impacts our customers' income by a couple of percentage points at most. But, loss of a job is a hundred percent.
While inflation does have an impact.
Speaker Change: It's a much smaller factor for our customers and then navigating persistent inflation.
Speaker Change: I know this may be a surprise given all the focus on inflation over the last couple of years.
Speaker Change: And inflation impacts our customers they can buy a couple of percentage points at most.
Lots of the job is 100% of the way.
David Fisher: In addition, high employment rates increase our addressable market, and we only want the individuals with it who have been said many times before. In some ways, our consumer customers are always in a recession. They are experienced at living paycheck-to-paycheck and sophisticated and manage volatility in their finances. As a result, recessions tend to have less of an impact on non-prime customers than on prime buyers.
Speaker Change: In addition, I employment break increased our addressable market.
Individuals with them.
Speaker Change: Hi, there.
Speaker Change: The times before.
Speaker Change: Consumer customers are always in a recession.
Speaker Change: We are experiencing living paycheck to paycheck [laughter] everything.
Speaker Change: Variability in their finances.
Speaker Change: As a result they.
Speaker Change: Tend to have less of an impact.
Speaker Change: Private customers.
Speaker Change: No.
David Fisher: On the F&B side, the two main drivers of their confidence in the economy and consumers, while small businesses are concerned about inflation. Strong consumer spending and the ability to increase prices are all studying that, and we were seeing stable performance in that platform, while both internal and external data show encouraging signs. They're mindful of the uncertainty that remains in the back row, and we will continue to prudently manage our business because our intense focus on united economics has demonstrated our ability to quickly adapt to changes in the past and to consistently produce differentiated results.
Speaker Change: On the SMB side, the two main drivers of their confidence in the economy.
Speaker Change: Consumer Scott.
Speaker Change: While small businesses aren't concerned about inflation.
Consumer spending and the ability to increase prices are offsetting that.
Speaker Change: And we are seeing stable performance in that portfolio.
Speaker Change: Well, both internal and external data show encouraging signs, we're mindful of the uncertainty that remains in the background.
We will continue to prudently manage our business.
Driven by our intense focus on unit economics.
Speaker Change: Demonstrated our ability to quickly adapt to changes in the economy.
Speaker Change: To consistently produce differentiated results.
David Fisher: and our track record of strong profitability, we continue to believe our shares are undervalued, and Steve will discuss this in more detail. Our balance sheet and cash position remain strong, which gives us the financial flexibility to deliver on a commitment to drive long-term shareholder value. We were more aggressive with our share buybacks than in prior quarters, which led to total shares repurchased of $139 million. This equates to 62% of the $300 million dollar shared resources program that we just launched in late October.
Speaker Change: Given the stability.
Speaker Change: Company's solid fundamentals and our track record of strong profitability.
Speaker Change: I need to burden our shares are undervalued.
Speaker Change: Steve will discuss in more detail.
Steven Cunningham: Our balance sheet and liquidity position remains strong.
Steven Cunningham: Which gives us the financial flexibility.
However, our commitment to drive long term shareholder value.
The Q1, we were more aggressive with our share buyback than in prior quarters.
Which brought the total shares repurchase of 139000.
Steven Cunningham: [laughter], 10% of the $300 million share repurchase program.
Steven Cunningham: We just launched in late October.
David Fisher: Looking ahead, with our belief that our stocks remain undervalued, we are committed to returning additional capital to our shareholders, also maintaining significant liquidity to generate attractive growth. We will also continue to explore additional avenues from Bob Sheridan, and our near-term focus is to do so through opportunistic. Overall, we are pleased to have started the year with a strong first quarter, demonstrated by our solid growth. We remain focused on further unlocking Sherwood Valley, things that are strong balance sheets.
Steven Cunningham: Looking ahead.
Our belief that our stock remains undervalued.
Steven Cunningham: Returning additional capital to our shareholders.
Steven Cunningham: So maintaining significant liquidity and generate attractive growth.
Steven Cunningham: We will also continue to explore additional avenues to unlock shareholder value.
Steven Cunningham: Our near term focus is to do so opportunistically.
Steven Cunningham: Overall, we are pleased to have started the year with a strong first quarter demonstrated by our solid growth.
Steven Cunningham: We remain focused on further unlocking shareholder value.
Steven Cunningham: I'm pleased that our strong balance sheet.
David Fisher: Sound of Equity gives us the flexibility to continue to return capital to our shareholders going forward while maintaining significant liquidity to generate attractive growth. And we're confident that our focus approach to balance grants, along with our talented team, world-class machine learning technology and analytics, and strong balance, will drive profitable growth in 2024 and beyond. With that, I would like to turn the call over to Steve, who will discuss our financial results, and I'll look at them in more detail, and all of these remarks will be followed by any questions you may have.
Steven Cunningham: Solid liquidity position.
Steven Cunningham: Like I said ability to continue to return capital to our shareholders going forward I'll.
Steven Cunningham: While maintaining significant liquidity and generate attractive growth.
Steven Cunningham: And we're confident that our focused approach to college grads.
Steven Cunningham: Along with our talented team.
Steven Cunningham: Last machine learning technology and analytics.
Steven Cunningham: Our balance sheet.
Steven Cunningham: Profitable growth in 2024 and beyond.
Steven Cunningham: With that I would like to turn the call over to Scott.
Scott: Our financial results and outlook in more detail.
Scott: All of them are lumpy.
Scott: Is there any questions you may have.
Steven Cunningham: Thank you, David. And good afternoon, everyone.
Scott: Yeah.
Scott: Thank you David and good afternoon, everyone. We're.
Steven Cunningham: We're pleased with our start to 2024; strong growth in originations, receivables, and revenue, along with solid credit and operating efficiency, drove another quarter of better than expected financial results. During the quarter, we also executed the largest quarterly return of capital through share repurchases in our company's history as our balance sheet flexibility continues to support the creation of long-term shareholder value from both portfolio growth and significant capital returns. Turning to our first quarter results, total company revenue of $610 million increased 26% from the first quarter of 2023.
Speaker Change: We're pleased with our start to 2024, a strong growth in originations receivables and revenue along with solid credit and operating efficiency drove another quarter of better than expected financial results.
Speaker Change: During the quarter, we also executed the largest quarterly return of capital through share repurchases in our company's history as our balance sheet flexibility continues to support the creation of long term shareholder value from both portfolio growth.
Significant capital returns.
Speaker Change: Turning to our first quarter results total company revenue of $610 million increased 26% from the first quarter of 2023 is.
Steven Cunningham: As total company combined loan and finance receivables balances on an amortized basis increased 23% from the end of the first quarter of last year to a record $3.5 billion at March 31st, total company origination during the first quarter was 30% from the first quarter of 2023 to $1.4 billion. Small business revenue increased 22% from the first quarter of 2023 to $236 million as small business receivables on an amortized basis ended the quarter at $2.2 billion, or 23% higher than the end of the first quarter of last year. Small business originations rose 25% year over year to $960 million.
Speaker Change: That's total company combined loan and finance receivables balances on an amortized basis increased 23% from the end of the first quarter of last year to a record $3 $5 billion at March 31.
Speaker Change: Total company origination during the first quarter was 30% up from the first quarter of 2023 to one $4 billion.
Speaker Change: Small business revenue increased 22% from the first quarter of 2000 $23 million to $236 million as small business receivables on an amortized basis ended the quarter at $2 $2 billion or 23% higher than the end of the first quarter of last year.
Speaker Change: Small business originations rose, 25% year over year to $960 million.
Steven Cunningham: Revenue from our consumer businesses increased 30% from the first quarter of 2023 to $365 million, as consumer receivables, on an amortized basis, ended the first quarter at $1.2 billion, or 23% higher than the end of the first quarter of 2023. Consumer originations grew 43% from the first quarter of 2023 to $417 million. For the second quarter, we expect total company revenue to increase slightly sequentially, resulting in year-over-year growth and consolidated revenue in excess of 20%.
Speaker Change: Revenue from our consumer businesses increased 30% from the first quarter of 2000 $23 million to $365 million as consumer receivables on an amortized basis ended the first quarter at $1 $2 billion or 23% higher than the end of the first quarter of 2023.
Speaker Change: Consumer originations grew 43% from the first quarter of 2000 $23 million to $417 million.
Speaker Change: For the second quarter, we expect total company revenue to increase slightly sequentially, resulting in year over year growth in consolidated revenue in excess of 20%.
Steven Cunningham: This expectation will depend upon the level, timing, and mix of originations during the quarter. Now turning to credit, which is the most significant driver of net revenue and portfolio fair value. Credit remained solid in the quarter and reflected our typical seasonality, resulting in a consolidated net revenue margin of 57 percent for the first quarter, which was slightly higher than our expectations. In addition, the consolidated consumer and small business fair value premiums were generally unchanged from last quarter, reflecting a stable outlook for future credit performance.
Speaker Change: This expectation will depend upon the level of timing and mix of originations growth during the quarter.
Speaker Change: Now turning to credit, which is the most significant driver of net revenue and portfolio fair value.
Speaker Change: Credit remained solid in the quarter reflected our typical seasonality, resulting in a consolidated net revenue margin was 57% for the first quarter.
Which was slightly higher than our expectations.
Speaker Change: In addition, the consolidated consumer and small business fair value premiums were generally unchanged from last quarter, reflecting a stable outlook for future credit performance.
Steven Cunningham: The continued solid outlook for future credit is also reflected in the sequentially stable consolidated ratio receivables pass due 30 days or more at the end of the first quarter, as is typical for the first quarter due to consumer seasonality. The total company ratio of net charge-offs, its percentage of average combined loan and finance receivables, decreased sequentially to 8.5% from 9.7% last quarter. The consumer portfolio net charge-off ratio declined to 14.9 percent in the first quarter compared to 17.3 percent last quarter and 15.2 percent in the first quarter of 2023. As David noted, consumer credit losses typically follow the sequential pattern of portfolio growth through the year, peaking in the fourth quarter and reaching their lowest point during the second quarter.
Speaker Change: Continued solid outlooks for future credit is also reflected in the sequentially stable consolidated ratio receivables past due 30 days or more at the end of the first quarter.
Speaker Change: As is typical for the first quarter due to consumer seasonality.
Speaker Change: The total company ratio of net charge offs as a percentage of average combined loan and finance receivables decreased sequentially to eight 5% from nine 7% last quarter.
The consumer portfolio net charge off ratio declined to 14, 9% for the first quarter compared to 17, 3% last quarter.
Speaker Change: <unk>, 2% in the first quarter of 2023.
Speaker Change: As David noted consumer credit losses, typically follow the sequential pattern of portfolio growth through the year.
Peaking in the fourth quarter and reaching their lowest point during the second quarter.
Steven Cunningham: We expect credit losses for our consumer portfolio to generally follow the seasonal pattern during 2024, but it will depend upon the timing and the level of consumer originations throughout the year. The net charge-off ratio for our small business portfolio declined to 4.7% from 4.8% last quarter and was in line with our expected quarterly range of four to five percent. As we've discussed in the past, we make many changes each quarter across our businesses to optimize originations, credit performance, and unit economics.
Speaker Change: We expect credit losses for our consumer portfolio.
Generally followed the seasonal pattern during 2024.
Speaker Change: It depends upon the timing and the level of consumer originations throughout the year.
Speaker Change: The net charge off ratio for our small business portfolio declined to 47% from four 8% last quarter.
Speaker Change: It was in line with our expected quarterly range of 4% to 5%.
Speaker Change: As we've discussed in the past, we make many changes each quarter across our businesses to optimize originations credit performance and unit economics.
Steven Cunningham: In our S&B business, we've identified opportunities that we believe will support continued strong growth and strong unit economics. As we execute on these opportunities, we expect the SMB revenue yield to continue to move higher in the near term, and the quarterly small business net charge-off ratio will likely remain around 5%. Looking ahead, we expect the total company net revenue margin for the second quarter of 2024 to be in the upper 50% range. This expectation will depend upon portfolio payment performance and the level, timing, and mix of originations growth during the second quarter.
Speaker Change: In our SMB business, we've identified opportunities that we believe will support continued strong growth strong unit economics.
Speaker Change: As we execute on these opportunities we expect the SMB revenue yield to continue to move higher in the near term.
And the quarterly small business net charge off ratio will likely remain around 5%.
Looking ahead, we expect the total company net revenue margin for the second quarter of 2024.
Speaker Change: To be in the upper 50% range.
Speaker Change: Expectation will depend upon portfolio of payment performance.
Speaker Change: The level timing and mix of originations growth during the second quarter.
Steven Cunningham: Now turning to expenses, first quarter operating costs were driven by efficient marketing activities and continued leverage inherent in our online-only model and thoughtful expense management. Total operating expenses for the first quarter, including marketing, were $205 million, or 34% of revenue, compared to $166 million, or 34% of revenue, in the first quarter of 2023. First quarter marketing spend remained efficient and was within our expected range.
Speaker Change: Now turning to expenses first quarter operating costs were driven by efficient marketing activities and continued leverage inherent in our online only model and thoughtful expense management.
Speaker Change: Total operating expenses for the first quarter, including marketing with $205 million or 34% of revenue.
Speaker Change: <unk> $266 million or 34% of revenue in the first quarter of 2023.
First quarter marketing spend remained efficient and was within our expected range.
Steven Cunningham: Marketing costs increased to $111 million, or 18% of revenue, compared to $80 million, or 17% of revenue, in the first quarter of 2023. We expect marketing expenses to be around 20% of revenue for the second quarter, but it will depend upon the growth and mix of origination. Operations and technology expenses for the first quarter increased to $54 million, or 9% of revenue, compared to $49 million, or 10% of revenue, in the first quarter of 2023, driven by growth in receivables and originations over the past year.
Speaker Change: Operating costs increased to $111 million or 18% of revenue compared to $80 million or 17% of revenue in the first quarter of 2023.
Speaker Change: We expect marketing expenses to be around 20% of revenues for the second quarter, but will depend upon the growth mix of originations.
Speaker Change: Operations and technology expenses for the first quarter increased to $54 million or 9% of revenue.
Speaker Change: Compared to $49 million or 10% of revenue in the first quarter of 2023, driven by growth in receivables in originations over the past year.
Steven Cunningham: Given the significant variable component of this expense category, sequential increases in O&T costs should be expected in an environment where originations and receivables are growing. It should be around 9% of total revenue. Our fixed costs continue to reflect our focus on operating efficiency and thoughtful expense management. General and administrative expenses for the first quarter increased to $40 million, or 7% of revenue.
Speaker Change: Given the significant variable component of this expense category sequential increases in O. A T cost should be expected in an environment, where originations and receivables are growing it should be around 9% of total revenue.
Speaker Change: Our fixed costs continue to reflect our focus on operating efficiency and thoughtful expense management.
Speaker Change: General and administrative expenses for the first quarter increased to $40 million or 7% of revenue.
Steven Cunningham: $37 million, or 8% of revenue, in the first quarter of 2023. While there may be slight variations from quarter to quarter, we expect GNA expenses in the near term will range between 6% and 7% of total revenue. Our balance sheet and liquidity position remain strong and give us the financial flexibility to successfully navigate a range of operating environments while delivering on our commitment to driving long-term shareholder value through both continued investments in our business and Sherry Purchase.
Speaker Change: $37 million or 8% of revenue in the first quarter of 2023.
Speaker Change: While there may be slight variations from quarter to quarter.
Speaker Change: We expect G&A expenses in the near term range between six and 7% of total revenue.
Speaker Change: Our.
Speaker Change: On a sheet and our liquidity position remains strong and gives us the financial flexibility to successfully navigate a range of operating environments, while delivering on our commitment to driving long term shareholder value through both continued investments in our business.
Speaker Change: Share repurchases.
Steven Cunningham: We ended the first quarter with $738 million of liquidity, including $232 million of cash and marketable securities and $506 million of available capacity on facilities. During the first quarter, we acquired approximately 2.4 million shares at a cost of $139 million. When we started the second quarter, we had repurchase capacity of approximately $65 million available under our senior no cover.
Speaker Change: We ended the first quarter was $738 million of liquidity, including $232 million of cash and marketable securities.
Speaker Change: $506 million of available capacity on facilities.
Speaker Change: During the first quarter, we acquired approximately 2.4 million shares at a cost of $139 million and we started the second quarter with share repurchase capacity.
Speaker Change: Approximately $65 million available under our senior note covenants.
Steven Cunningham: We expect to utilize most of that capacity during the second quarter, but the timing and amount will depend upon market and trading conditions. As expected, our cost of funds for the first quarter was 9.2 percent, or approximately 140 basis points higher than the first quarter of 2023, primarily due to increases in SOFR and funding mix changes over the past year. We currently expect market interest rates to remain higher for longer this year.
Speaker Change: We expect to utilize most of that capacity during the second quarter, but the timing and amount will depend upon market and trading conditions.
Speaker Change: As expected our cost of funds for the first quarter was nine 2%.
Speaker Change: Approximately 140 basis points higher than the first quarter of 2023.
Speaker Change: Merely due to increasingly sofa and funding mix changes over the past year.
Speaker Change: We currently expect market interest rates to remain higher for longer this year and as a result interest expense as a percentage of revenue will likely remain in the upper half of our expected range of 10% to 11% during 2024.
Steven Cunningham: And as a result, interest expenses as a percentage of revenue will likely remain in the upper half of our expected range of 10 to 11 percent during 2024. That being said, the impact of lower market rates in the future should create longer-term tailwinds for Enova's profitability. Finally, we continue to deliver solid profitability this quarter, as adjusted EBITDA increased 18% from the first quarter of 2023 to $149 million. Adjusted earnings, a non-gap measure, were $56 million, or $1.91 per diluted share, compared to $59 million, or $1.79 per diluted share, in the first quarter of last year.
Speaker Change: That being said the impact of lower market rates in the future should create longer term tailwind for Nov is profitability.
Yeah.
Speaker Change: Finally, we continued to deliver solid profitability this quarter.
Speaker Change: Adjusted EBITDA increased 18% from the first quarter of 2000 $23 million to $149 million adjusted earnings a non-GAAP measure were $56 million or $1.91 per diluted share compared to $59 million or $1.79 per diluted.
Speaker Change: Sure in the first quarter of last year.
Speaker Change: Yeah.
Steven Cunningham: To wrap up, let me summarize our near-term expectations for the second quarter. We expect consolidated revenue growth to increase slightly sequentially, with a net revenue margin in the upper 50% range. Additionally, we expect marketing expenses to be around 20% of revenue, O&T costs of around 9% of revenue, G&A costs between 6% and 7% of revenue, and interest expense as a percentage of revenue between 10 12 and 11%. These expectations should result in a 5% to 10% sequential increase or around a 20% year-over-year increase in adjusted EPS.
Speaker Change: To wrap up let me summarize our near term expectations.
Speaker Change: The second quarter, we expect consolidated revenue growth to increase slightly sequentially.
Speaker Change: But the net revenue margin in the upper 50% range. Additionally, we expect marketing expenses to be around 20% of revenue, but with T cost of around 9% of revenue.
Speaker Change: And a cost between six and 7% of revenue and interest expense as a percentage of revenue between 10, five and 11%.
Speaker Change: These expectations should result in a 5% to 10% sequential increase or around a 20% year over year increase in adjusted EPS.
Steven Cunningham: For the full year, we expect growth and originations for 2024 compared to the full year of 2023 of at least 15%, and continue to believe the resulting growth in receivables, with stable credit and continued operating leverage, should result in full year 2024 growth for both revenue and adjusted EPS in the upper teens, which is slightly higher than the expected origination growth. Our second quarter and full year 2024 expectations will depend upon the macroeconomic environment, as well as the resulting impact on demand, customer payment rates, and the level, timing, and mix of originations.
Speaker Change: For the full year, we expect growth in originations for 2024 compared to the full year of 2023 of at least 15%.
Speaker Change: We continue to believe the resulting growth in receivables with stable credit and continued operating leverage.
Speaker Change: The resulting full year 2020 for growth for both revenue and adjusted EPS in the upper teens or slightly higher than expected originations growth.
Speaker Change: Our second quarter and full year 2024 expectations will depend on the macroeconomic environment and the resulting impact on demand customer payment rate and the level of timing and mix of originations growth.
Steven Cunningham: In closing, we remain in a strong position to continue to generate meaningful financial results this year and beyond, thanks to diversified product offerings, world-class machine learning risk management algorithms, a nimble online only model, a solid balance sheet, and our ability to differentiate our ability to deliver consistent financial results and return significant capital to shareholders through shared repurchase. Operator. We will now begin the quiz.
Speaker Change: In closing we remain in a strong position to continue to generate meaningful financial results this year and beyond.
Speaker Change: Our diversified product offerings and World class machine learning risk management algorithms.
Speaker Change: Nimble online only model and solid balance sheet continued to differentiate our ability to deliver consistent financial results and returned significant capital to shareholders through share repurchases.
Speaker Change: And with that we'd be happy to take your questions operator.
Speaker Change: We will now begin the question and answer session.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then one, on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the key. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from David Scharf of Citizens JMP. Please go ahead. Hiya, G'day.
To ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from David Scharf of citizens JMP. Please go ahead.
David Scharf: Hi, good afternoon. Thanks.
David Scharf: Hi, good afternoon. Thanks for taking my questions.
David Scharf: Taking my questions.
David Fisher: Hey, I wanted to start off on the topic of capital returns, which she noted was a record during the quarter. You know, it seems like regardless of nuances in the macro environment or the mix of consumer versus SMB, the cash flow characteristics of your business model given short-duration loans are always going to be very healthy. And I just think about your comment, David, that you still feel that the stock is undervalued or attractively valued.
David Scharf: He wanted to start off.
David Scharf: Just with the topic of capital returns, which you noted was a record during the quarter.
David Scharf: It seems like regardless of sort of nuances in the macro environment.
David Scharf: The mix of consumer versus SMB, the cash flow characteristics.
David Scharf: Of your business model, given short duration loans.
David Scharf: There's always going to be very healthy.
David Scharf: And just thinking about your comment David that you still feel that the stock is undervalued or attractively valued.
David Fisher: After you exhaust the remaining $65 million... Would you consider, based on your liquidity position, seeking another consent from note holders, because it seems like that excess liquidity is just going to continue to build up?
David Scharf: After you exhaust the remaining 65 million.
Would you consider based on kind of.
David Scharf: Your liquidity position.
David Scharf: Another consent.
David Scharf: Noteholders, because it seems like that.
David Scharf: This liquidity is just going to continue to build up.
David Fisher: Hey David, thanks for the question. So, as you know, with our retirement of our 2024 senior notes and the issuance of the 2028 senior notes, we had slightly better opportunities with some of the covenants around capital returns, and we would expect with that print when we come around to 2025. Senior Note Refinance, which, you know, we will be focused on here over the next year or so, will have an opportunity to align that covenant set with 2028, which will give us a bit more room to do capital returns based on our earnings than what we have had historically.
David Scharf: Hey, David Thanks for the question.
David: So as you know with our.
David: Retirement of our 2024 senior notes and the issuance of the 2028 senior notes.
Speaker Change: We had a slightly better opportunities with some of the covenants around capital return.
Speaker Change: We would expect with that print when we when we come around to the 2025.
Senior note refinancing, which we.
Speaker Change: We'll be focused on here over the next year or so.
Speaker Change: That will have an opportunity to align that covenant set with the 2020 eights, which will give us.
Speaker Change: A bit more room to do capital returns based on our earnings than what we've had historically.
Steven Cunningham: And hey, just a little mechanically, Steven, you know, since you were buying throughout the quarter. Can you give us a sense of what the diluted share count was at the end of the quarter versus the average that shows up on the P&L or even better, you know, if you were to exhaust the 65 million remaining and throw in the 50% of net income covenant limit? You know, what we ought to think about what the cheer count looks like at mid-year.
Speaker Change: Understood.
Speaker Change: And he just mechanically as Stephen you know since you were buying throughout the quarter.
Stephen: Can you give us a sense for.
Stephen: Hmm.
Stephen: What the diluted share count was at the end of the quarter.
Stephen: As the average that shows up on the P&L or.
Stephen: Or even better if you were to exhaust the $65 million remaining pro in the 50% of net income covenant.
Stephen: Limit.
Stephen: How how we ought to have a share count looks like at mid year.
Steven Cunningham: Yeah, I don't have the ending right in front of me, but... You should be able to glean something from it. You know, you can get our ending in the press release, which I don't have right in front of me. And then when we file our queue here shortly, you should probably be able to do some math to figure that out.
Speaker Change: Yeah, I don't have the ending right in front of me, but.
Speaker Change: You should be able to glean something from it.
Speaker Change: You know if you can get are ending in the press release, which I don't have right in front of me and then when we file our Q here. Shortly you should probably be able to do some math to figure that out.
David Scharf: Okay, got it. And if I can just squeeze one more in on the credit side, Just trying to get a sense for how much of the improvement from sort of pre-pandemic levels you would characterize as mix-related, just a much bigger proponent of SMBs, you know, versus. This is kind of where the credit box is now, and whether there are any expectations that this issue perhaps will loosen up the consumer credit box over time. Should we expect a return to 2019 levels for losses, or? This is sort of a new benchmark, a lower benchmark going forward.
Speaker Change: Okay got it and if I can just squeeze one more in on the credit side.
Speaker Change: Hum.
Speaker Change: Just trying to get a sense for you.
Speaker Change: You know how how much of the.
Speaker Change: Proven from sort of pre pandemic levels, you would characterize as is mix related.
Speaker Change: Much bigger proponent of F N b.
Speaker Change: You know versus.
Speaker Change: Just kind of where the credit boxes now.
Speaker Change: And whether there are any.
Speaker Change: Expectations that issue, perhaps you know loosen up the consumer credit box overtime, you know should we expect to return to 2019 levels for losses or.
Speaker Change: Is this sort of a.
Speaker Change: A new benchmark, a lower benchmark going forward.
David Fisher: Yeah, good question, David. Look, I think most of it is mixed, but it's not just the consumer versus SMB mix. It's also mixed within the consumer business. So, 2018, 2019, we're still doing lots of single-pay lending, which obviously has much higher default charge-off rates. Now our consumer business is exclusively line of credit and installment products, which have much lower loss rates. So you have that, you know, kind of those two different components of the mixed shift, which has brought that down significantly.
Speaker Change: Yeah.
Speaker Change: Good question, David look I think most of it is next but it's not just consumer versus SMB next it's often mix within the consumer business. So 2018 2019, we're still doing lots of single pay lending, which has obviously much higher default and charge off rates now our consumer business is exclusively.
Speaker Change: Our line of credit and installment products, which has much lower loss rates. So you have that kind of took those two different components of the mix shift which has brought that down.
David Fisher: In terms of our credit box, I mean, we're reasonably open right now. We're not wide open, for sure, but we're not super tight. I mean, the economic environment, as I talked about in my prepared remarks, the economic environment is good for our customers, lots of jobs and good wage growth. And so we don't feel the need to be super conservative.
Speaker Change: Significantly in terms of our credit box more reasonably open right now we're not wide open for sure.
Speaker Change: But we're not super tight.
Speaker Change: Economic environment is like because I talked about in my prepared remarks, the economic environment is good for our customers.
Speaker Change: Lots of jobs and good wage growth and so we don't feel the need to be.
David Fisher: You know, we are probably, like I said, not as aggressive as we could be, but we're, you know, kind of reasonably aggressive, maybe a seven and a half out of ten or eight out of ten on the aggressiveness scale, which is normal. I mean, for us to be at like a five or below would mean something's wrong. So, you know, we're kind of where we'd like to be. It's kind of our sweet spot, kind of in this range.
Speaker Change: Super Conservative you know we are probably like I said, we're not as aggressive as we could be but we're you know kind of reasonably aggressive maybe a seven and a half out of 10 eight out of 10 on their aggressiveness scale.
Speaker Change: Which is normal I mean for us to be at like a five or below would mean something's wrong. So you know what you know where were you know kind of where we'd like to me, it's kind of our sweet spot kind of in this range, let's say the only thing you know kind of smaller change out a big one, but smaller changes, which Steve alluded to.
David Fisher: I would say the only, you know, kind of smaller change, not a big one, but a smaller change is what Steve alluded to. So we've had a shift within our S&B business to higher-yielding products. We just found higher returns there, better ROEs, than at the very low end of the yield spectrum, from SMB, where we get more competition with the banks. And so we're not totally out of that.
Speaker Change: I had a shift within our SMB business to more higher yielding products. We just found the higher returns there under our lease and at the very low end of kind of the yields.
Speaker Change: Yield spectrum.
Speaker Change: Sunday, when we get more competition with the banks and so we're not totally out of that so we're not out of the lower APR Sop, we've just shifted more towards.
David Fisher: We're not out of the lower APR stuff. We've just shifted more towards the middle to upper end of our APR range for the SMB products. And so with those higher APRs come slightly higher default rates. So you'll see over the next few quarters, just slightly elevated compared to historic levels, default rates in the SMB business, and eventually slightly higher net charge-offs as a percentage of AR. But what will come along with that is higher yields and higher revenue. And so the ROEs on those products, those originations, are looking really, really good.
Kind of the middle to upper end of our APR range for the SMB products and so with those higher a P hours can slightly higher.
Speaker Change: Oh I'm, sorry, so you'll see over the next few quarters just slightly elevated.
Speaker Change: Compare to historic levels default rates in the F&B business kind of eventually slightly higher net charge offs as a percentage of our a R. But what will come along with that.
Speaker Change: Higher yields and higher revenue until the ROE is on those products. Those originations are looking really really good.
Speaker Change: Got it great. Thanks very much.
David Scharf: Great, thanks very much.
Speaker Change: Yeah.
Operator: Again, if you have a question, please press star, then 1. The next question comes from John Hecht with Jeffreys. Please go ahead.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: The next question comes from John Hecht with Jefferies. Please go ahead.
John Hecht: Afternoon guys. Congratulations on a good quarter and thanks very much. The first question is, you know, the strength and originations and the kind of balance in the small business category that kind of bucks seasonal trends. Is that something we should think about seasonality differently for that segment now, or was this sort of just an outlier quarter where you were able to be more active?
John Hecht: Afternoon, guys congratulations on a good quarter and thanks very much.
John Hecht: First question is you know the strength in originations and the and the kind of balance in the small business category that kind of Buck seasonal trends.
John Hecht: Is that something is it should we think about seasonality different for that that segment now or was this sort of just to that where you have a quarter, where you were able to be more active.
David Fisher: Seasonality is more muted in the S&B space. It exists, but it's much more muted than the consumer side because the tax returns just have such a big impact on the consumer business. That's much, much muted than in the S&B space.
Speaker Change: Yeah seasonality is more F&B space it exists, but it's much more muted on the consumer side because that you know the tax returns just have such a big impact.
Speaker Change: On the consumer business.
Speaker Change: That's much much more muted than in the in the SMB space. So it's a nice thing about being a diversified business. The overall company wide seasonality.
David Fisher: So, it's a nice thing about being a diversified business. The overall company-wide seasonality isn't as strong as it would be if we were a pure consumer business. So, that works out really well. Consumer business, as we talked about, is pretty much back to pre-pandemic-type seasonality. So, we're really happy with the first quarter. If anything, consumers overperformed a little bit to our expectations. Absolutely no weakness in that business at all in Q1, just kind of back to those historic seasonality trends.
Speaker Change: Isn't as strong as it was if we were a pure a pure consumer business. So that it works out.
Speaker Change: Really well consumer business as we talked about is pretty much back to pre pandemic type seasonality. So we're really happy with the fourth or the first quarter, if anything consumer over performed a little bit to our expectations.
Speaker Change: Absolutely no weakness in that business at all in Q1, just kind of back to those historic kind of seasonality trends.
David Fisher: Okay, and then you're thinking about, well, the originations, the composition of new versus recurring customers, and then for the new customers, maybe the tightening in other parts of the market is giving you a different type of new customer, or is it pretty much what you've been seeing over the past few years?
Speaker Change: Okay, and then thinking about like the originations the composition of new versus recurring customers and then for the new customers. You know maybe it is the tightening in other parts of the market, giving us different type of characteristic of new customers or is it pretty much.
What you've been seeing over the past few years.
David Fisher: Yeah, I don't think we've seen a big change in the types of new customers that we've seen. And the mix of new customers has been pretty steady. We don't really talk about it as much as we used to, but it's been pretty steady and meaningful for a really long time now. It's a really important part of building our franchise.
Speaker Change: Yeah, I don't think we've seen a big change in the types of new customers that we've that we've seen.
Speaker Change: And the mix of new customers has been pretty stay we don't really talk about it as much as we used to but it's been pretty steady and meaningful.
Speaker Change: For a really long time now so a really important part of building our franchise.
David Fisher: And then maybe the last question would be, how do you like the marketing spend relative to originations becoming a lot more efficient? And I know you guys have been optimizing your marketing tactics, but maybe can you give us an update on the channels of marketing and where you're finding some of the best efficacy of productivity?
Speaker Change: And then the baby.
Speaker Change: The last question would be.
Speaker Change: How do you like the euro.
Speaker Change: The marketing spend relative to originations is becoming a lot more efficient.
Speaker Change: And I know you guys had been optimizing your.
Speaker Change: You are kind of the marketing tactics, but maybe can you give us an update on the channels of marketing and where you're finding some of the yeah. The best efficacy of productivity.
David Fisher: Yeah, you know, it hasn't changed a ton over the last, you know, kind of four or five years. The main channels for us are what you would expect. We do a significant amount of direct mail, especially in the consumer business. I'm sure you've seen our TV, both on the consumer S&B side. We've gotten heavier and heavier on TV.
Speaker Change: Yeah, you know it hasnt.
Speaker Change: It hasn't changed a ton over the last four or five years that you know the main channels for US are what you would expect we do a significant amount of direct mail, especially on the consumer business I'm sure you've seen our TV both on the consumer SMB side, we've gotten heavier and heavier in TV and that's been an area of success.
David Fisher: That's been an area of success for us, for sure, relative to, say, five to seven years ago, I think, certainly relative to our competitors. And then digital, I think, has improved for us in ways that we probably wouldn't have guessed a few years ago. And a lot of that growth, I think, is that you know, kind of taken share away from leads. I think the lead has continued to shrink as a share of the total, which, you know, it's fine. We like to control our own destiny.
Speaker Change: As for Us.
Speaker Change: For sure relative to say five to seven years ago, and I think certainly relative to our competitors and then digital I think has improved for us and ways that we probably wouldn't have guessed a few years ago and a lot of that growth I think is that.
Speaker Change: You know kind of has taken share away from leads I believe has continued to shrink as a share of the total which it was fine we'd like to control our own Destiny, We love our lead partners, we work really well with them, where some of our biggest clients in the world.
David Fisher: We love our lead partners. We work really well with them. We're some of their biggest clients in the world. And you know, that's great.
Speaker Change: And those great that's a great peripheral partnerships, where we control our own destiny.
David Fisher: Those are great fruitful partnerships, but when we control our own destiny, we like that as well. I think one of the things that, you know, look, I think in terms of the efficiency that we've seen, part of it is just experience and doing more and more of it. You know, we were kind of a lead generation only business eight, nine years ago. And so, you know, kind of, you know, kind of really hitting the sweet spot in terms of experience and being more multi-pronged in our marketing.
Speaker Change: We like that as well I think one of the you know look I think in terms of the efficiency that we've seen part of it is just experience and doing more and more of it and we were all kind of a leaves only business you know eight nine years ago, and so you have kind of you know kind of really hitting the sweet spot in terms of experiencing.
Speaker Change: Be more multi pronged and our marketing.
David Fisher: But I think it's also a sign that the competitive environment's not super strong for us right now, which is, I know, a theme we've been talking about for a while. You've certainly seen many of our competitors stumble over the last three, four years. And, you know, we've just continued to execute and been beneficiaries of that.
Speaker Change: It's also a sign that the competitive environment is not super strong.
Speaker Change: For US right now, which is I know a theme we've been talking about for awhile.
Speaker Change: You certainly have seen many of our competitors stumble over the last three or four years and you know we've just continued to execute and then beneficiaries of that.
Speaker Change: Okay.
John Hecht: Wonderful. Thanks very much, guys.
Speaker Change: Wonderful thanks, very much guys.
Yeah.
Right.
Speaker Change: The next question comes from John Rowan with Janney. Please go ahead.
Operator: The next question comes from John Rowan with Jannie. Please go ahead. Good afternoon, guys.
John Rowan: The loan growth in the quarter, was there any benefit from it from the late refund season?
John Rowan: Afternoon, guys.
John Rowan: The the loan growth in the quarter or was there any benefit in there from the late refund season.
David Fisher: Um, you know, it's hard to say. Not a ton.
John Rowan:
John Rowan: It's hard to say not not a ton I mean I think it helps if you. If you work that month will either help January or March.
David Fisher: I mean, I think it helped if you looked at it a month later, you know, it helped January and hurt March. I think mostly, I don't think there's any big carryover into it that you're going to see into April. Q2 started off fine, kind of right where we would expect it to. So yeah, intra-quarter, yes, but you know, for the quarter as a whole, not much.
John Rowan: I think mostly I don't think there's any big carryover into it that youre going to see in the April Q2 started off fine I'm kind of a kind of right, where we would expect it too so yeah. It intra quarter, yes, but you know for the quarter as a total not much okay.
John Rowan: Okay, and then, I'm trying to square up the guidance for the second quarter, so, correct me if I'm wrong, but you said earnings growth would be, you know, what it is, 5 to 10% sequential earnings growth, correct?
John Rowan: And then I'm trying to square up the guidance for the second quarter. So correct me if I'm wrong, but you said the earnings growth would be you know what is it 5% to 10% sequential earnings growth correct.
Steven Cunningham: Yeah, I just did EPS 5 to 10% sequential.
Speaker Change: Yeah, adjusted EPS, a 5% to 10% sequential okay, I'm, just trying to square that up because you know the O N cheek the guidance for O N T. In G&A seem very much in line with where they came in for this quarter, but the marketing guidance at 20% is higher than the 18% for this quarter. So.
John Rowan: Okay, I'm just trying to square that up because, you know, the O&T and G&A guidance for O&T and G&A seems very much in line with where they came in for this quarter, but the marketing guidance at 20% is higher than the 18% for this quarter. So, I guess what I'm trying to ask is, you know, where's the 5% to 10% going to come from? Obviously, revenue is going to be up slightly, but you do have some slightly higher, you know, marketing expenses, and, you know, the only other variable here to kind of hone in on is where there's that 5% to 10% growth in gross profit.
Speaker Change: I guess, what I'm trying to ask is you know where's what's going to drive that five to 10 per cent. Obviously revenue is going to be up slightly but you do have some slightly higher mark.
Speaker Change: Marketing expenses and you know the only other variable here to kind of hone in on as to where you know, there's 5% to 10% growth as gross profit and you said upper Fifty's and I'm, just trying to maybe narrow that down a little bit to to make sure I can get to that you know that operating EPS growth. I mean are we talking high Fifty's north of where you were in the.
John Rowan: And you said upper 50s, and I'm just trying to maybe narrow that down a little bit to make sure I can get to that operating, you know, EPS growth. I mean, are we talking high 50s north of where you were in the first quarter, or would you consider the first quarter run rate high 50s? I know it's a long-winded question, but... I'm just trying to triangulate correctly.
Speaker Change: First quarter or is would you consider kind of the first quarter run rate and high Fifty's I know it was a long winded question, but.
Speaker Change: Just trying to triangulate correctly.
Steven Cunningham: Yeah John, thanks for the question. So here's how I think about Q2. So I gave you, you know, we should see sequential growth, some slight sequential growth in revenue, which we don't always see if you go back in time, which again gets back to some of our diversification and the blended portfolio that we have. We're continuing our march up on the net revenue margin, which you should expect to see in Q2, as consumer gets a bit better with more originations and lower losses. SMB is pretty stable.
Speaker Change: Yeah, John Thanks for the question so here's how to think about Q2. So I gave you we should see sequential growth from slight sequential growth in revenue.
Speaker Change: Which we don't always see if you go back in time, which again gets back to some of our diversification and our and the blended portfolio that we have.
Speaker Change: We're continuing our March up on the net revenue margin, which you should expect to see in Q2.
Speaker Change: As consumer gets a bit better with more originations and lower losses in.
Speaker Change: F&B is pretty steady hum.
John Rowan: And then, as you typically see outside of the first quarter, we've been around 20% of marketing for 20% of revenue for quite some time. And then, as you mentioned, the ONT and GNA guides, we continue to see some scaling there. So we, you know, we'll see some EBITDA growth when you do the math on all that. But I also talked a bit about interest expense. So I think you'll see there will be some offset to that growth from interest expense, as I talked about, given that we think rates will be higher for longer. And so I gave a guide more towards the top end of our 10 to 11 percent interest expense. [inaudible] Okay, you answered my question. Thanks.
Speaker Change: And then I think you typically see outside of the first quarter, we've been around 20% of marketing for 20% of revenue for marketing for a while.
Speaker Change: And then as you mentioned the O N T. In G&A Guide you know we continue to see some scaling there. So we will see some EBITDA growth when you do the math on all that but I also talked a bit about interest expense. So I think you'll see.
Speaker Change: There will be some offset to the to that growth from interest expense as I talked about given that we think rates will be higher for longer.
Speaker Change: And so I gave a guide more towards the top end of our 10% to 11% interest expense to revenue range and I think if you kind of take a look at the the EBITDA, which you kind of talked about and then take a look at below the line interest expense that'll get you a bit closer to the sequential adjusted each.
John Rowan: Okay, you answered my question. Thanks. That's it for me.
Speaker Change: S Guy that I mentioned.
Speaker Change: Okay. You you answered my question. Thanks.
Speaker Change: Good for me.
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 Change: Thanks, Sean.
Speaker Change: Oh.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to David Fisher for any closing remarks.
David Fisher: Thanks, everyone, for joining our call today. We really appreciate your time, and we look forward to speaking with you again next quarter. Have a good evening.
David Fisher: Thanks, everyone for joining our call today really appreciate it appreciate your time and we look forward to speaking with you again next quarter have a good evening.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
David Fisher: Yes.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yeah.
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