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Related Headlines

03/19/2021Enova acquires Pangea Universal Holdings
02/22/2021LoanMe,Liberty Tax to take on Enova, Intuit
02/05/2021Enova releases Q4 earnings
11/30/2020Enova appoints new chief accountant
11/07/2020Enova to repurchase $50M of its stock



Stories

OnDeck Proving to be Extremely Valuable Acquisition for Enova

April 30, 2021
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OnDeckWhen Enova acquired OnDeck, it thought that the company’s legacy portfolio would have very little value. Now that the dust has settled, it’s become a gold mine. “We now expect to receive over $200 million of total cash from the acquired portfolio, net of securitization repayments,” said Enova CEO David Fisher in the company’s quarterly earnings call.

Enova reported that small business lending was now more than 50% of their portfolio and that they recorded originations of $322 million in small business funding in Q1.

“From an operational perspective, the integration of OnDeck is largely complete,” Fisher added. “Our three SMB products are working together as a single business, and we are on track to deliver more than the forecasted $50 million of annual cost synergies, primarily from eliminated duplicative resources as well as $15 million in run rate net revenue synergies.”

OnDeck’s lending business has also allowed the company to price a $300 million securitization debt facility, backed by OnDeck term loans and lines of credit.

“We’re pleased to report a record first quarter of profitability, driven by solid credit performance, improving originations, and disciplined expense management,” said Fisher. “We are encouraged by the recent signs of a recovery in demand and believe that our diverse product offerings, nimble machine-learning-powered credit risk management capabilities, and solid balance sheet position us well to profitably accelerate growth as the economy continues to recover.”

LoanMe, Liberty Tax Merger to Take on Intuit, Enova

February 22, 2021
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NextPoint Financial will combine LoanMe’s business, consumer, and mortgage lending with Liberty Tax’s tax preparation business, according to merger announced on Monday. Liberty’s “2,700+ locations in the US and Canada” will become consumer and SMB loan shops.

The new firm will also offer Merchant Cash Advances; LoanMe launched MCA funding in January and expects to fund $15 million in MCAs in 2021. Based on the acquisition prospectus, NextPoint will be a tax readiness firm, with the added suite of financial products as a value and growth builder.

Ramping up consumer, installment, and MCA lending, paired with the third-largest tax-prep business in the U.S, NextPoint expects to compete directly with Intuit, H&R Block, Enova, and Elevate.

Fintech firms are setting themselves apart from the competition as one-stop shops for everything a business needs, including MCA products. Why branch into financial services now? NextPoint found that this year alt lenders have outperformed the S&P500 three times over.

“We are a one-stop financial services destination empowering hardworking and credit-challenged consumers and small businesses,” the investor presentation reads. “To get to the next point in their financial futures.”

Intuit offers a variety of financial products, like business loans through Quickbooks Capital, alongside their popular, 60%+ market share of tax prep software. H&R began offering small $1,000 lines of credit this year, but not much more.

The team leading the new company, NextPoint Financial, will feature execs like Brent Turner as CEO, Mike Piper CFO, both keeping their previous Liberty Tax positions. Jonathan Williams, former president and founding shareholder of LoanMe, will become president of lending.

Enova Pleased With The OnDeck Acquisition, Looking to Divest ODX, OnDeck Canada, OnDeck Australia

February 5, 2021
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ondeck rollercoaster“We’re very pleased so far with the OnDeck acquisition and as we view the economic landscape, we continue to believe that it’s an excellent time to be increasing our focus on SMB lending,” Enova CEO David Fisher said on the company’s Q4 earnings call. Enova originated $120 million in small business loans in December and $95 million in November. The October figure wasn’t specified, but back-of-the-napkin math based on other provided statistics suggests it was about $54 million.

Growing those originations will continue to be their primary agenda as the economy improves, the company said, while the ODX side of the business may be shown the door.

“While ODX has been able to sign some high-profile bank clients, divesting ODX will allow for more efficient use of capital as the business has over 70 employees but less than $10 million in revenue,” Fisher said.

OnDeck Canada and OnDeck Australia may also be on the chopping block.

“The Australian and Canadian businesses are viable businesses in their respective market,” Fisher said, “but are small compared to OnDeck US operations and are unlikely to have a significant impact on Enova’s overall growth. In addition, OnDeck only has partial ownership of those two businesses.”

Meanwile, OnDeck’s portfolio outlook is improving.

“The percentage of OnDeck receivables past due 30 days and more declined during the quarter from 23.2% in closing to 15.6% at December 31,” said Enova CFO Steve Cunningham.

On the call, JMP analyst David Scharf asked when OnDeck would return to quarterly origination levels of $550M to $650M as it had been enjoying prior to the pandemic.

“I mean I think there’s just way too much uncertainty to be able to answer that,” Fisher replied. “I mean, does the vaccine work great and the economy opens up soon or is there a new strain of the COVID virus that requires lockdowns during the summer? I mean, there’s no way to know. But I think there’s a couple trends that are super encouraging for us and we saw great sequential growth as we talked about throughout the call.”

Fisher also added that they’ve seen a bunch of competitors go out of business. “We think we have a lot of share in the market that we don’t think has shrunk and so we think we’re really well positioned as this pandemic winds down,” he said.

Enova Appoints James J. Lee to Chief Accounting Officer

November 30, 2020
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Enova International announced the appointment of James J Lee to the position of Chief Accounting Officer. The new role went into effect on November 23rd.

Lee was previously the Controller of Life & Health of Kemper Corporation.

OnDeck Originated $148M in Loans in Q3, is Moving Full Speed Ahead Under Enova

October 27, 2020
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OnDeck NYSEOnDeck more than doubled its Q2 loan volume, according to statements made on Enova’s latest quarterly earnings call. OnDeck originated $148M in Q3 versus the $66M in originated in Q2.

For frame of reference, this is still down significantly from the $618M that the company originated in Q4 2019, well before covid became a factor.

But expect the numbers to ramp up.

“We have basically all of our marketing channels turned on across consumer and small business [lending],” said David Fisher, Enova’s CEO.

“OnDeck is probably a little bit ahead of where we are on the Enova side. We were a little bit more cautious in our re-acceleration of our lending kind of going into the 3rd quarter but we are totally comfortable with that decision. If the biggest mistake we make during all of covid is waiting an extra 60 days to re-accelerate lending, we think that’s a great position to be in. We think that extra conservatism makes sense and with the rate that we’re re-accelerating lending, it won’t hurt that much in the long run.”

And apparently demand and credit quality are looking quite normal, despite covid, according to Fisher.

“On the small business side, the makeup of the demand is surprisingly similar to a year ago. You would expect so many differences given what the economy has been through but there’s actually very very few. It’s pretty broad based. Credit quality look really really strong. If anything it’s stronger- I think it’s the stronger businesses that are trying to borrow at this point that are trying to lean into covid, not the ones that are just trying to survive so if anything on the demand there is a slight improvement on credit quality in small business.”

OnDeck’s annualized quarterly net charge-off rate for the third quarter was 23% and its 15 day+ delinquency rate decreased from 40% at June 30th to 27% at September 30th.

Enova reported monster quarterly earnings of $94M. CEO David Fisher and CFO Steve Cunningham said it was a record-breaking quarter for profitability.

Enova Posts $94M Profit for Q3

October 27, 2020
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Enova, the international lending conglomerate that recently acquired OnDeck, reported a Q3 profit of $93.67M, bringing the company to over $147M in profit for the year so far.

“We are pleased to report strong earnings as the credit quality of the portfolio continued to improve during the third quarter,” said David Fisher, Enova’s CEO in an official announcement. “Encouraged by the better than expected portfolio performance and the stable and predictable credit risk seen in our testing, we thoughtfully began reaccelerating lending in the third quarter.”

Speaking about OnDeck, Fisher said that “OnDeck experienced growth in originations, improving credit quality and solid profitability. Our integration plans and recognition of the expected synergies and financial benefits of the transaction remain on track. With the combination of Enova’s and OnDeck’s complementary, market-leading businesses and our extensive experience navigating changes in the operating environment, we believe we are well positioned to grow profitably and drive long-term shareholder value.”

OnDeck / Enova Merger Overwhelmingly Approved by Shareholders

October 8, 2020
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The drama surrounding what OnDeck allegedly did or did not disclose to shareholders about the Enova merger presumably came to an end on Wednesday. 38 million voting shares approved the deal while less than half a million voted against it.

However, shareholders sent a message by voting against “the compensation that may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger.”

OnDeck has said that the merger is expected to be completed in the fourth quarter of 2020.

Following Nine Lawsuits, OnDeck Discloses Supplementary Details Behind Planned Enova Merger

September 28, 2020
Article by:
Noah Breslow OnDeck CEO at LendIt
Above: OnDeck CEO Noah Breslow speaks at LendIt in 2016

After OnDeck announced its planned merger with Enova, it was sued nine different times (See here and here) by shareholders that accused the company’s Board of Directors that they had failed to disclose material information about the deal.

OnDeck formally responded on Monday, September 28th, wherein they disclosed that plaintiffs in all of those actions had agreed to dismiss their claims in light of the release of this supplemental information:

The Company and Enova believe that the claims asserted in the Actions are without merit and that no supplemental disclosures are required under applicable law. However, in an effort to put the claims that were or could have been asserted to rest, to avoid nuisance, minimize costs and avoid potential transaction delays, and without admitting any liability or wrongdoing, the Company has determined to voluntarily supplement the Proxy Statement/Prospectus as described in this Current Report on Form 8-K to address claims asserted in the Actions, and the plaintiffs in the Actions have agreed to voluntarily dismiss the Actions in light of, among other things, this supplemental disclosure. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality of any of the disclosures set forth herein. To the contrary, the Company and the other defendants specifically deny all allegations in the Actions that any additional disclosure was or is required and expressly maintain that, to the extent applicable, they have complied with their respective legal obligations.

OnDeck first re-explained its background situation leading up to the Enova deal:

Starting in April 2020, OnDeck management commenced a review of potential financing options to secure additional liquidity and potentially replace the Corporate Line Facility and began contacting potential sources of alternative financing, including mezzanine debt. OnDeck contacted, or was contacted by, more than ten potential sources of mezzanine or alternative financing, and received pricing indications from four sources. The interest rates offered by those alternative financing sources ranged from 1-month LIBOR plus 900 basis points to 1,700 basis points (in addition to an upfront fee) and all but one required a significantly dilutive equity component. The one proposal that did not include an equity component was at an interest rate of 1-month LIBOR plus 1,400 basis points to 1,700 basis points. Based on the initial term sheets proposed, OnDeck engaged in negotiations with each of the four potential sources of alternative financing. As these negotiations progressed and COVID-19’s impact on the macro economy and OnDeck’s loan portfolio intensified, two of the four potential sources of alternative financing ceased to actively participate in negotiations. Discussions with the final two potential sources of alternative financing remained ongoing through the time that OnDeck and Enova entered into the merger agreement. Throughout the Process, OnDeck management reported the status of such negotiations on a frequent and ongoing basis to the OnDeck Board for its deliberation in the context of OnDeck’s standalone plan, and the OnDeck Board considered the significant uncertainty of being able to reach agreement on alternative financing in its decision to enter into the merger agreement.

Of particular contention in the deal were OnDeck’s financial projections, prepared to estimate OnDeck’s trajectory as an independent entity. Shareholders complained that there were two sets of books and that they only got to see one. The other set, dubbed Scenario 1, had been used to shop OnDeck around to other suitors. OnDeck published both sets in their supplemental materials on Monday.

Originally Disclosed Projections
OnDeck Projections

Newly Revealed Scenario 1 Projections
Scenario 1 - OnDeck Projections

The difference is stark. Originally disclosed to shareholders was a projected cumulative net loss of $20.4 million through the end of 2024. The other set of projections, Scenario 1, state a cumulative net income of $33.5 million over the same time period, a difference of over $50 million.

The original predicted a 2021 net loss of $19.4 million while Scenario 1 predicted a net income of $14.3 million.

One reason offered for selecting the less optimistic of the two is that OnDeck’s management determined that loan originations were trending below both sets of projections as of July 12th. OnDeck announced the Enova deal about two weeks later.

Shareholders will cast their votes on the merger on October 7th. OnDeck’s Board “unanimously recommends” that they vote in favor of the proposed merger with Enova.

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