Enova Discussed Its Q3 Performance, Its View on the Small Business Loan Market

Enova originated $783M in small business loans in Q3, which is up from $770M in Q1 and $712M in Q2. Overall company profitability was slightly down but mainly because they increased marketing spend later in the quarter in which there was not enough time to also experience the corresponding revenue increase.

Enova also recorded some slightly higher-than-expected chargeoffs that came from their 2nd half 2022 smb loan vintages.

“As you would expect, our underwriting models adjusted based on this data and vintages since January of this year are back in line with our expectations,” said Enova CEO David Fisher on the earnings call. “But since there is a 9 to 12-month emergence period for charge-offs in our small business products, charge-offs from those second half 2022 vintages were at their peak in Q3 of this year.”

Given the current interest rate environment, the call drew out some insightful information about the small business loan market. Bullet points below:

• “…while prime and super prime borrowers are facing higher interest expense due to the increase in the Fed funds rate, we have not raised our pricing.” – Fisher
• “I think the competitive environment is still pretty benign, like we’ve been talking about for a while. Nothing new on the small business side. I think we’ve seen, as we talked about, competitors struggle with liquidity, also a couple move more towards the prime space in SMB.” – Fisher
• “On the small business side, still a lot coming through the wholesale channel through ISOs, but we continue to grow our direct channel. It’s a very fast-growing channel for us” – Fisher
• “So if the consumer falls on their face, small businesses are in big trouble. We saw that during COVID, but if the consumer is still spending and doing well, the small businesses tend to be a big beneficiary of that incremental spend.” – Fisher
• “While there’s a lot of uncertainty in the economy today, both internal and external data lead us to believe that both our consumer and small business customers are navigating it well.” – Fisher
• “Inflation continues to moderate, while the labor market and wage growth continue to be very strong.” – Fisher
• “To be clear, Enova overall is in great shape, and we’re feeling good about Q4 and next year.” – Fisher