The following table presents the aggregated assets and liabilities of consolidated VIEs, which are included in the Consolidated Balance Sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. See Note 12 for additional information.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1.
|
Significant Accounting Policies
|
Nature of the Company
The Company operates an internet-based lending platform to serve customers in need of cash to fulfill their financial responsibilities. Through a network of direct and indirect marketing channels, the Company offers funds to its customers through a variety of unsecured loan and finance receivable products. The business is operated primarily through the internet to provide convenient, fully-automated financial solutions to its customers. The Company originates, arranges, guarantees or purchases consumer loans and provides financing to small businesses through a line of credit account, installment loan or receivables purchase agreement product (“RPAs”). Consumer loans include short-term loans, line of credit accounts and installment loans. RPAs represent a right to receive future receivables from a small business. “Loans and finance receivables” include consumer loans, small business lines of credit, small business installment loans and RPAs.
Basis of Presentation
The consolidated financial statements of the Company reflect the historical results of operations and cash flows of the Company during each respective period. The consolidated financial statements include goodwill and intangible assets arising from businesses previously acquired.
The financial information included herein may not be indicative of the consolidated financial position, operating results, changes in stockholders’ equity and cash flows of the Company in the future. Intercompany transactions are eliminated.
The Company consolidates any variable interest entity (“VIE”) where it has been determined it is the primary beneficiary. The primary beneficiary is the entity which has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.
The consolidated financial statements presented as of March 31, 2019 and 2018 and for the three-month periods ended March 31, 2019 and 2018 are unaudited but, in management’s opinion, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for such interim periods. Operating results for the three-month period are not necessarily indicative of the results that may be expected for the full fiscal year.
These consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016 and related notes, which are included on Form 10-K filed with the SEC on February 27, 2019.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet (in thousands):
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Cash and cash equivalents
|
|
$
|
92,829
|
|
|
$
|
69,900
|
|
Restricted cash
|
|
|
25,391
|
|
|
|
34,765
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
118,220
|
|
|
$
|
104,665
|
|
Reclassification of Accumulated Other Comprehensive Income to Net Income
In May 2009 and October 2009, the Company began providing services in Australia and Canada under the brand name DollarsDirect. Due to the small size of the Australian and Canadian markets and our limited operations there, we decided to exit those markets in 2016 and reallocate our resources to our other existing businesses. As a result, we stopped originating loans in those countries and have wound down our loan portfolios. During the quarter ended March 31, 2018, the Company continued the liquidation process of the legal entities related to Australia and Canada and recorded a $2.3 million loss to “Foreign currency transaction loss” in the consolidated statements of income to recognize the cumulative translation adjustment balance that had been previously recorded to “Accumulated other comprehensive loss” on the consolidated balance sheets.
7
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Adopted
Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016‑02,
Leases (Topic 842)
(“ASU 2016‑02”). ASU 2016‑02 requires lessee recognition on the balance sheet of a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. It further requires recognition in the income statement of a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis. It also requires classification of all cash payments within operating activities in the statement of cash flows. In July 2018, the FASB issued ASU 2018‑11,
Leases (Topic 842): Targeted Improvements
(“ASU 2018‑11”), which provides targeted improvements to ASU 2016‑02 by providing an additional optional transition method and a lessor practical expedient for lease and non-lease components. In March 2019, the FASB issued ASU 2019‑01,
Leases (Topic 842): Codification Improvements
(“ASU 2019‑01”), which clarifies transition disclosures related to ASC 250,
Accounting Changes and Error Corrections
. ASU 2016‑02 and ASU 2019‑01 became effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018.
The Company adopted ASU 2016‑02 and ASU 2019‑01 on January 1, 2019 and elected the optional transition method permitted by ASU 2018‑11. The Company elected the package of transition practical expedients, which allows it to not reassess whether any expired or existing contracts are or contain leases and to not reassess the lease classification for existing or expired leases. The Company also elected the practical expedient to not separate lease and associated non-lease components and the short-term lease exception. The following table sets forth the impact of adoption as of January 1, 2019 (in thousands):
|
|
Increase
|
|
|
|
(decrease)
|
|
Assets
|
|
|
|
|
Other receivables and prepaid expenses
|
|
$
|
(35
|
)
|
Operating lease right-of-use assets
|
|
|
22,332
|
|
Total assets
|
|
$
|
22,297
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
(16,860
|
)
|
Operating lease liabilities
|
|
|
39,605
|
|
Deferred tax liabilities, net
|
|
|
(102
|
)
|
Total liabilities
|
|
|
22,643
|
|
Stockholders' equity:
|
|
|
|
|
Retained earnings
|
|
|
(346
|
)
|
Total stockholders' equity
|
|
|
(346
|
)
|
Total liabilities and stockholders' equity
|
|
$
|
22,297
|
|
Accounting Standards to be Adopted in Future Periods
In August 2018, the FASB issued ASU 2018‑15,
Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract
(“ASU 2018‑15”). ASU 2018‑15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancellable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The effective date of this pronouncement is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. The standard can be adopted either using the prospective or retrospective transition approach. The Company does not expect that the adoption of ASU 2018‑15 will have a material effect on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017‑04,
Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment
(“ASU 2017‑04”) to simplify the accounting for goodwill impairment. ASU 2017‑04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017‑04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company does not expect that the adoption of ASU 2017‑04 will have a material effect on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016‑13,
Measurement of Credit Losses on Financial Instruments
(“ASU 2016‑13”). The amendments in ASU 2016‑13 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects lifetime expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016‑13 is effective for annual periods beginning after December 15, 2019, and interim periods within
8
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
those annual periods. Early adopt
ion is permitted for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. The Company is assessing the impact of ASU 2016
‑
13, which at the date of adoption will increase the allowance for credit losses with a res
ulting negative adjustment to retained earnings.
2.
|
Loans and Finance Receivables, Credit Quality Information and Allowances and Liabilities for Estimated Losses on Loans and Finance Receivables
|
Revenue generated from the Company’s loans and finance receivables for the three months ended March 31, 2019 and 2018 was as follows (dollars in thousands):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Short-term loans
|
|
$
|
46,325
|
|
|
$
|
53,375
|
|
Line of credit accounts
|
|
|
104,483
|
|
|
|
78,309
|
|
Installment loans and RPAs
|
|
|
142,062
|
|
|
|
122,108
|
|
Total loans and finance receivables revenue
|
|
|
292,870
|
|
|
|
253,792
|
|
Other
|
|
|
313
|
|
|
|
506
|
|
Total revenue
|
|
$
|
293,183
|
|
|
$
|
254,298
|
|
Current and Delinquent Loans and Finance Receivables
The Company classifies its loans and finance receivables as either current or delinquent. Short-term loans are considered delinquent when payment of an amount due is not made as of the due date. If a line of credit account or installment loan customer misses one payment, that payment is considered delinquent and the balance of the loan is considered current. If a line of credit account or installment loan customer does not make two consecutive payments, the entire account or loan is classified as delinquent and placed on a non-accrual status. The Company allows for normal payment processing time before considering a loan delinquent but does not provide for any additional grace period.
The Company does not accrue interest on delinquent loans and does not resume accrual of interest on a delinquent loan unless it is returned to current status. In addition, delinquent loans generally may not be renewed, and if, during its attempt to collect on a delinquent loan, the Company allows additional time for payment through a payment plan or a promise to pay, it is still considered delinquent. Generally, all payments received are first applied against accrued but unpaid interest and fees and then against the principal balance of the loan.
Allowance and Liability for Estimated Losses on Loans and Finance Receivables
The Company monitors the performance of its loan and finance receivable portfolios and maintains either an allowance or liability for estimated losses on loans and finance receivables (including revenue, fees and/or interest) at a level estimated to be adequate to absorb losses inherent in the portfolio. The allowance for losses on the Company’s owned loans and finance receivables reduces the outstanding loans and finance receivables balance in the consolidated balance sheets. Through its CSO programs, the Company provides services related to third-party lenders’ short-term and installment consumer loan products by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws. The liability for estimated losses related to loans guaranteed under its CSO programs is initially recorded at fair value and is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
In determining the allowance or liability for estimated losses on loans and finance receivables, the Company applies a documented systematic methodology. In calculating the allowance or liability for receivable losses, outstanding loans and finance receivables are divided into discrete groups of short-term loans, line of credit accounts, installment loans and RPAs and are analyzed as current or delinquent. Increases in either the allowance or the liability, net of charge-offs and recoveries, are recorded as a “Cost of revenue” in the consolidated statements of income.
The allowance or liability for short-term loans classified as current is based on historical loss rates adjusted for recent default trends for current loans. For delinquent short-term loans, the allowance or liability is based on a six-month rolling average of loss rates by stage of collection. For line of credit account, installment loan and RPA portfolios, the Company generally uses either a migration analysis or roll-rate based methodology to estimate losses inherent in the portfolio. The allowance or liability calculation under the migration analysis and roll-rate methodology is based on historical charge-off experience and the loss emergence period, which represents the average amount of time between the first occurrence of a loss event and the charge-off of a loan or RPA. The factors the
9
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Company considers to assess the adequacy of the allowance or liability include past due performance, historical behavior of monthly vintages, underw
riting changes and recent trends in delinquency in the migration analysis. The roll-rate methodology is based on delinquency status, payment history and recency factors to estimate future charge-offs.
The Company fully reserves for loans and finance receivables once the receivable or a portion of the receivable has been classified as delinquent for 60 consecutive days and generally charges off loans and finance receivables between 60 and 65 days delinquent. If a loan or finance receivable is deemed uncollectible before it is fully reserved, it is charged off at that point. Loans and finance receivables classified as delinquent generally have an age of one to 64 days from the date any portion of the receivable became delinquent, as defined above. Recoveries on loans and finance receivables previously charged to the allowance are credited to the allowance when collected.
The components of Company-owned loans and finance receivables at March 31, 2019 and 2018 and December 31, 2018 were as follows (dollars in thousands):
|
|
As of March 31, 2019
|
|
|
|
Short-term
|
|
|
Line of Credit
|
|
|
Installment Loans and
|
|
|
|
|
|
|
|
Loans
|
|
|
Accounts
|
|
|
RPAs
|
|
|
Total
|
|
Current receivables
|
|
$
|
27,872
|
|
|
$
|
207,395
|
|
|
$
|
636,278
|
|
|
$
|
871,545
|
|
Delinquent receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent payment amounts
(1)
|
|
|
—
|
|
|
|
8,500
|
|
|
|
2,600
|
|
|
|
11,100
|
|
Receivables on non-accrual status
|
|
|
21,276
|
|
|
|
3,084
|
|
|
|
50,252
|
|
|
|
74,612
|
|
Total delinquent receivables
|
|
|
21,276
|
|
|
|
11,584
|
|
|
|
52,852
|
|
|
|
85,712
|
|
Total loans and finance receivables, gross
|
|
|
49,148
|
|
|
|
218,979
|
|
|
|
689,130
|
|
|
|
957,257
|
|
Less: Allowance for losses
|
|
|
(15,418
|
)
|
|
|
(41,362
|
)
|
|
|
(84,621
|
)
|
|
|
(141,401
|
)
|
Loans and finance receivables, net
|
|
$
|
33,730
|
|
|
$
|
177,617
|
|
|
$
|
604,509
|
|
|
$
|
815,856
|
|
|
|
As of March 31, 2018
|
|
|
|
Short-term
|
|
|
Line of Credit
|
|
|
Installment Loans and
|
|
|
|
|
|
|
|
Loans
|
|
|
Accounts
|
|
|
RPAs
|
|
|
Total
|
|
Current receivables
|
|
$
|
39,339
|
|
|
$
|
152,114
|
|
|
$
|
543,435
|
|
|
$
|
734,888
|
|
Delinquent receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent payment amounts
(1)
|
|
|
—
|
|
|
|
6,624
|
|
|
|
2,143
|
|
|
|
8,767
|
|
Receivables on non-accrual status
|
|
|
26,519
|
|
|
|
2,185
|
|
|
|
45,000
|
|
|
|
73,704
|
|
Total delinquent receivables
|
|
|
26,519
|
|
|
|
8,809
|
|
|
|
47,143
|
|
|
|
82,471
|
|
Total loans and finance receivables, gross
|
|
|
65,858
|
|
|
|
160,923
|
|
|
|
590,578
|
|
|
|
817,359
|
|
Less: Allowance for losses
|
|
|
(19,136
|
)
|
|
|
(27,120
|
)
|
|
|
(68,027
|
)
|
|
|
(114,283
|
)
|
Loans and finance receivables, net
|
|
$
|
46,722
|
|
|
$
|
133,803
|
|
|
$
|
522,551
|
|
|
$
|
703,076
|
|
|
|
As of December 31, 2018
|
|
|
|
Short-term
|
|
|
Line of Credit
|
|
|
Installment Loans and
|
|
|
|
|
|
|
|
Loans
|
|
|
Accounts
|
|
|
RPAs
|
|
|
Total
|
|
Current receivables
|
|
$
|
37,558
|
|
|
$
|
213,896
|
|
|
$
|
672,538
|
|
|
$
|
923,992
|
|
Delinquent receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent payment amounts
(1)
|
|
|
—
|
|
|
|
10,783
|
|
|
|
2,696
|
|
|
|
13,479
|
|
Receivables on non-accrual status
|
|
|
30,167
|
|
|
|
2,884
|
|
|
|
52,732
|
|
|
|
85,783
|
|
Total delinquent receivables
|
|
|
30,167
|
|
|
|
13,667
|
|
|
|
55,428
|
|
|
|
99,262
|
|
Total loans and finance receivables, gross
|
|
|
67,725
|
|
|
|
227,563
|
|
|
|
727,966
|
|
|
|
1,023,254
|
|
Less: Allowance for losses
|
|
|
(21,420
|
)
|
|
|
(51,008
|
)
|
|
|
(90,880
|
)
|
|
|
(163,308
|
)
|
Loans and finance receivables, net
|
|
$
|
46,305
|
|
|
$
|
176,555
|
|
|
$
|
637,086
|
|
|
$
|
859,946
|
|
(1)
|
Represents the delinquent portion of installment loans and line of credit account balances for customers that have only missed one payment and RPA customers who have not delivered agreed upon receivables. See “Current and Delinquent Loans and Finance Receivables” above for additional information.
|
10
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Changes in the allowance for losses for the Company-owned loans and finance receivables and the liability
for losses on the Company’s guarantees of third-party lender-owned loans during the three months ended March 31, 2019 and 2018 were as follows (dollars in thousands):
|
|
Three Months Ended March 31, 2019
|
|
|
|
Short-term
|
|
|
Line of Credit
|
|
|
Installment Loans and
|
|
|
|
|
|
|
|
Loans
|
|
|
Accounts
|
|
|
RPAs
|
|
|
Total
|
|
Allowance for losses for Company-owned loans and finance receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
21,420
|
|
|
$
|
51,008
|
|
|
$
|
90,880
|
|
|
$
|
163,308
|
|
Cost of revenue
|
|
|
17,948
|
|
|
|
37,739
|
|
|
|
84,260
|
|
|
|
139,947
|
|
Charge-offs
|
|
|
(29,476
|
)
|
|
|
(51,222
|
)
|
|
|
(111,840
|
)
|
|
|
(192,538
|
)
|
Recoveries
|
|
|
5,375
|
|
|
|
3,837
|
|
|
|
21,076
|
|
|
|
30,288
|
|
Effect of foreign currency translation
|
|
|
151
|
|
|
|
—
|
|
|
|
245
|
|
|
|
396
|
|
Balance at end of period
|
|
$
|
15,418
|
|
|
$
|
41,362
|
|
|
$
|
84,621
|
|
|
$
|
141,401
|
|
Liability for third-party lender-owned loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
1,964
|
|
|
$
|
—
|
|
|
$
|
202
|
|
|
$
|
2,166
|
|
Decrease in liability
|
|
|
(858
|
)
|
|
|
—
|
|
|
|
(44
|
)
|
|
|
(902
|
)
|
Balance at end of period
|
|
$
|
1,106
|
|
|
$
|
—
|
|
|
$
|
158
|
|
|
$
|
1,264
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
|
Short-term
|
|
|
Line of Credit
|
|
|
Installment Loans and
|
|
|
|
|
|
|
|
Loans
|
|
|
Accounts
|
|
|
RPAs
|
|
|
Total
|
|
Allowance for losses for Company-owned loans and finance receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
19,917
|
|
|
$
|
31,148
|
|
|
$
|
71,979
|
|
|
$
|
123,044
|
|
Cost of revenue
|
|
|
21,167
|
|
|
|
25,383
|
|
|
|
62,851
|
|
|
|
109,401
|
|
Charge-offs
|
|
|
(28,485
|
)
|
|
|
(32,807
|
)
|
|
|
(81,206
|
)
|
|
|
(142,498
|
)
|
Recoveries
|
|
|
6,272
|
|
|
|
3,396
|
|
|
|
14,125
|
|
|
|
23,793
|
|
Effect of foreign currency translation
|
|
|
265
|
|
|
|
—
|
|
|
|
278
|
|
|
|
543
|
|
Balance at end of period
|
|
$
|
19,136
|
|
|
$
|
27,120
|
|
|
$
|
68,027
|
|
|
$
|
114,283
|
|
Liability for third-party lender-owned loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
2,105
|
|
|
$
|
—
|
|
|
$
|
153
|
|
|
$
|
2,258
|
|
Increase in liability
|
|
|
(844
|
)
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
(848
|
)
|
Balance at end of period
|
|
$
|
1,261
|
|
|
$
|
—
|
|
|
$
|
149
|
|
|
$
|
1,410
|
|
Guarantees of Consumer Loans
In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term and installment loans and is required to purchase any defaulted loans it has guaranteed. The guarantee represents an obligation to purchase specific loans that go into default. As of March 31, 2019 and 2018 and December 31, 2018, the amount of consumer loans guaranteed by the Company was $22.3 million, $26.6 million and $29.7 million, respectively, representing amounts due under consumer loans originated by third-party lenders under the CSO programs. The estimated fair value of the liability for estimated losses on consumer loans guaranteed by the Company of $1.3 million, $1.4 million and $2.2 million, as of March 31, 2019 and 2018 and December 31, 2018, respectively, is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
Bank Program Loans
In order to leverage its online lending platform, the Company launched a program with a bank in 2016 to provide technology, marketing services, and loan servicing for near-prime unsecured consumer installment loans. Under the program, the Company received marketing and servicing fees while the bank received an origination fee. The bank had the ability to sell the loans it originated to the Company. In May 2018, as a result of a change in the law in Ohio, our bank partner suspended lending and the
11
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Company suspended purchasing loans through this program. The Company plans to continue and grow this program in the future by adding new partners and expanding into additional states.
The Company has operating leases primarily for its corporate headquarters, other offices located in the U.S. and the U.K. and certain equipment. The Company’s leases have remaining lease terms of less than one year to nine years. Certain leases include options to extend the leases for up to five years, while others include options to terminate the leases within one year. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. All other operating leases are recorded on the consolidated balance sheet with right-of-use assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities
are recognized at the commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. If a lease does not provide an implicit rate, the Company uses its incremental secured borrowing rate, adjusted for the maturity date, based on information available at the commencement date in determining the present value of lease payments.
Lease agreements with lease and non-lease components are accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in general and administrative expense.
Lease expenses for the three months ended March 31, 2019 were as follows (in thousands):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
Operating lease cost
|
|
$
|
1,574
|
|
Operating lease impairment charge
|
|
|
370
|
|
Variable lease cost
|
|
|
58
|
|
Short-term lease cost
|
|
|
15
|
|
Total lease cost
|
|
$
|
2,017
|
|
Future minimum lease payments as of March 31, 2019 are as follows (in thousands):
Year
|
|
Amount
|
|
2019
|
|
$
|
5,779
|
|
2020
|
|
|
7,438
|
|
2021
|
|
|
7,361
|
|
2022
|
|
|
7,019
|
|
2023
|
|
|
7,119
|
|
Thereafter
|
|
|
23,464
|
|
Total lease payments
|
|
$
|
58,180
|
|
Less: interest
|
|
|
19,449
|
|
Present value of lease liabilities
|
|
$
|
38,731
|
|
The weighted-average remaining lease term and discount rate as of March 31, 2019 were as follows:
|
|
March 31,
|
|
|
|
2019
|
|
|
|
|
|
|
Weighted-average remaining lease term (years)
|
|
|
|
|
Operating leases
|
|
|
7.8
|
|
Weighted-average discount rate
|
|
|
|
|
Operating leases
|
|
|
10.76
|
%
|
12
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Supplemental cash flow disclosures related to leases for the three months ended March 31, 2019 were as follows (in thousands):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
1,938
|
|
The Company’s long-term debt instruments and balances outstanding as of March 31, 2019 and 2018 and December 31, 2018 were as follows (dollars in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization notes
|
|
$
|
181,000
|
|
|
$
|
217,125
|
|
|
$
|
227,288
|
|
Revolving line of credit
|
|
|
—
|
|
|
|
8,000
|
|
|
|
22,000
|
|
9.75% senior notes due 2021
|
|
|
—
|
|
|
|
293,044
|
|
|
|
—
|
|
8.50% senior notes due 2024
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
250,000
|
|
8.50% senior notes due 2025
|
|
|
375,000
|
|
|
|
—
|
|
|
|
375,000
|
|
Subtotal
|
|
|
806,000
|
|
|
|
768,169
|
|
|
|
874,288
|
|
Less: Long-term debt issuance costs
|
|
|
(14,092
|
)
|
|
|
(13,519
|
)
|
|
|
(16,359
|
)
|
Total long-term debt
|
|
$
|
791,908
|
|
|
$
|
754,650
|
|
|
$
|
857,929
|
|
Weighted-average interest rates on long-term debt were 9.03% and 9.79% during the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019 and 2018 and December 31, 2018, the Company was in compliance with all covenants and other requirements set forth in the prevailing long-term debt agreements.
8.50% Senior Unsecured Notes Due 2025
On September 19, 2018, the Company issued and sold $375.0 million in aggregate principal amount of 8.50% Senior Notes due 2025 (the “2025 Senior Notes”). The 2025 Senior Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and outside the United States pursuant to Regulation S under the Securities Act. The 2025 Senior Notes bear interest at a rate of 8.50% annually on the principal amount payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2019. The 2025 Senior Notes were sold at a price of 100%. The 2025 Senior Notes will mature on September 15, 2025. The 2025 Senior Notes are unsecured debt obligations of the Company, and are unconditionally guaranteed by certain of the Company’s domestic subsidiaries.
The 2025 Senior Notes are redeemable at the Company’s option, in whole or in part, (i) at any time prior to September 15, 2021 at 100% of the aggregate principal amount of 2025 Senior Notes redeemed plus the applicable “make whole” premium specified in the indenture that governs the Company’s 2025 Notes (the “2025 Senior Notes Indenture”), plus accrued and unpaid interest, if any, to the redemption date and (ii) at any time on or after September 15, 2021 at the premium, if any, specified in the 2025 Senior Notes Indenture that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. In addition, prior to September 15, 2021, at its option, the Company may redeem up to 40% of the aggregate principal amount of the 2025 Senior Notes at a redemption price of 108.5% of the aggregate principal amount of 2025 Senior Notes redeemed, plus accrued and unpaid interest, if any, to the redemption date, with the proceeds of certain equity offerings as described in the 2025 Senior Notes Indenture.
The 2025 Senior Notes and the related guarantees have not been and will not be registered under the Securities Act, or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities or blue sky laws and foreign securities laws.
The Company used a portion of the net proceeds of the 2025 Senior Notes offering to retire $295.0 million of the remaining outstanding 9.75% senior notes due 2021 (the “2021 Senior Notes) and pay the related accrued interest, premiums, fees and expenses
13
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
associated therewith. The remaining amount was intended to be used for general corporate purposes, poten
tially including working capital and future repurchases of its outstanding debt securities.
8.50% Senior Unsecured Notes Due 2024
On September 1, 2017, the Company issued and sold $250.0 million in aggregate principal amount of 8.50% Senior Notes due 2024 (the “2024 Senior Notes”). The 2024 Senior Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act and outside the United States pursuant to Regulation S under the Securities Act. The 2024 Senior Notes bear interest at a rate of 8.50% annually on the principal amount payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2018. The 2024 Senior Notes were sold at a price of 100%. The 2024 Senior Notes will mature on September 1, 2024. The 2024 Senior Notes are unsecured debt obligations of the Company, and are unconditionally guaranteed by certain of its domestic subsidiaries.
The 2024 Senior Notes are redeemable at the Company’s option, in whole or in part, (i) at any time prior to September 1, 2020 at 100% of the aggregate principal amount of 2024 Senior Notes redeemed plus the applicable “make whole” premium specified in the indenture that governs the Company’s 2024 Notes (the “2024 Senior Notes Indenture”), plus accrued and unpaid interest, if any, to the redemption date and (ii) at any time on or after September 1, 2020 at the premium, if any, specified in the 2024 Senior Notes Indenture that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. In addition, prior to September 1, 2020, at its option, the Company may redeem up to 40% of the aggregate principal amount of the 2024 Senior Notes at a redemption price of 108.5% of the aggregate principal amount of 2024 Senior Notes redeemed, plus accrued and unpaid interest, if any, to the redemption date, with the proceeds of certain equity offerings as described in the 2024 Senior Notes Indenture.
The 2024 Senior Notes and the related guarantees have not been and will not be registered under the Securities Act, or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities or blue sky laws and foreign securities laws.
The Company used the net proceeds of the 2024 Senior Notes offering to retire a portion of the 2021 Senior Notes, to pay the related accrued interest, premiums, fees and expenses associated therewith and for general corporate purposes.
Consumer Loan Securitizations
2019‑1 Facility
On February 25, 2019 (the “2019‑1 Closing Date”), the Company and several of its subsidiaries entered into a receivables securitization (the “2019‑1 Facility”) with PCAM Credit II, LLC, as lender (the “2019‑1 Lender”). The 2019‑1 Lender is an affiliate of Park Cities Asset Management, LLC. The 2019‑1 Facility finances Securitization Receivables that have been and will be originated or acquired under the Company’s NetCredit and CashNetUSA brands by several of the Company’s subsidiaries and that meet specified eligibility criteria. Under the 2019‑1 Facility, eligible Securitization Receivables are sold to a wholly-owned subsidiary of the Company (the “2019‑1 Debtor”) and serviced by another subsidiary of the Company.
The
2019‑1
Debtor has issued a delayed draw term note with an initial maximum principal balance of $30.0 million and a revolving note with an initial maximum principal balance of $20.0 million for an aggregate initial maximum principal balance of $50.0 million, which is required to be secured by eligible Securitization Receivables. The
2019‑1
Facility has an accordion feature that, with the consent of the
2019‑1
Lender, allows for the maximum principal balance of the delayed draw term note to increase to $50.0 million and the maximum principal balance of the revolving note to increase to $25.0 million, for an aggregate maximum principal balance of $75.0 million. The
2019‑1
Facility is non-recourse to the Company and matures three years after the
2019‑1
Closing Date.
As of March 31, 2019, the total outstanding amount of the 2019‑1 Facility was $12.8 million.
The
2019‑1
Facility is governed by a loan and security agreement, dated as of the
2019‑1
Closing Date, between the
2019‑1
Lender and the
2019‑1
Debtor. The
2019‑1
Facility bears interest at a rate per annum equal to LIBOR (subject to a floor) plus an applicable margin, which applicable margin is initially 9.75%. In addition, the
2019‑1
Debtor is required to pay certain customary upfront closing fees to the
2019‑1
Lender. Interest payments on the
2019‑1
Facility will be made monthly. Subject to certain exceptions, the
2019‑1
Debtor is not permitted to prepay the delayed draw term note prior to two years after the
2019‑1
Closing Date. Following such date, the
2019‑1
Debtor is permitted to voluntarily prepay the
2019‑1
Facility without penalty. The revolving note may be paid in whole or in part at any time after the delayed draw term note has been fully drawn.
14
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
All amounts due under the
2019
‑1
Facility are secured by all of the
2019
‑1
Debtor’s assets, which include the eligible Securitization Receivables transferred to the
2019
‑1
Debtor, related rights under the eligible Securitization Receivables, a bank account and certain other related collateral. The Company has issued a limited indemnity to the
2019
‑1
Lender for certain “bad acts,” and the Company has agreed for the ben
efit of the
2019
‑1
Lender to meet certain ongoing financial performance covenants.
The
2019‑1
Facility documents contain customary provisions for securitizations, including representations and warranties as to the eligibility of the eligible Securitization Receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay their loans; covenants regarding special purpose entity matters; and default and termination provisions which provide for the acceleration of the
2019‑1
Facility in circumstances including, but not limited to, failure to make payments when due, certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the eligible Securitization Receivables, defaults under other material indebtedness of the
2019‑1
Debtor and a default by the Company under its financial performance covenants.
2018‑A Notes
On October 31, 2018 (the “2018‑A Closing Date”), the Company issued $95,000,000 Class A Asset Backed Notes (the “Class A Notes”) and $30,400,000 Class B Asset Backed Notes (the “Class B Notes” and, collectively with the Class A Notes, the “2018‑A Notes”), through an indirect subsidiary. The Class A Notes bear interest at 4.20% and the Class B Notes bear interest at 7.37%. The 2018‑A Notes are backed by a pool of unsecured consumer installment loans (“Securitization Receivables”) and represent obligations of the issuer only. The 2018‑A Notes are not guaranteed by the Company. Under the 2018‑A Notes, Securitization Receivables are sold to a wholly-owned subsidiary of the Company and serviced by another subsidiary of the Company. As of March 31, 2019 and December 31, 2018, the total outstanding amount of the 2018‑A Notes was $80.0 million and $111.4 million, respectively.
The net proceeds of the offering of the 2018‑A Notes on the 2018‑A Closing Date were used to acquire the Securitization Receivables from the Company, fund a reserve account and pay fees and expenses incurred in connection with the transaction.
The 2018
‑
A Notes were offered only to “qualified institutional buyers” pursuant to Rule 144A under the Securities Act and to certain persons outside of the United States in compliance with Regulation S under the Securities Act. The 2018
‑
A Notes have not been registered under the Securities Act, or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States without registration or an applicable exemption from the Securities Act and applicable state securities or blue sky laws and foreign securities laws.
2018‑2 Facility
On October 23, 2018, the Company and several of its subsidiaries entered into a receivables funding agreement (the “2018
‑
2 Facility”) with Credit Suisse AG, New York Branch, as agent (the “2018
‑
2 Agent”). The 2018
‑
2 Facility collateralizes Securitization Receivables that have been and will be originated or acquired under the Company’s NetCredit brand by several of its subsidiaries and that meet specified eligibility criteria in exchange for a revolving note. Under the 2018
‑
2 Facility, Securitization Receivables are sold to a wholly-owned subsidiary of the Company (the “2018
‑
2 Debtor”) and serviced by another subsidiary of the Company.
The 2018
‑
2 Debtor has issued a revolving note with an initial maximum principal balance of $150.0 million, which is required to be secured by 1.25 times the drawn amount in eligible Securitization Receivables. The 2018
‑
2 Facility is non-recourse to the Company and matures on October 23, 2022.
As of March 31, 2019 and December 31, 2018, the total outstanding amount of the 2018‑2 Facility was $50.0 million and $25.0 million, respectively
.
The 2018
‑
2 Facility is governed by a loan and security agreement, dated as of October 23, 2018, between the 2018
‑
2 Agent, the 2018
‑
2 Debtor and certain other lenders and agent parties thereto. The 2018
‑
2 Facility bears interest at a rate per annum equal to one-month LIBOR (subject to a floor) plus an applicable margin, which rate per annum is 3.75%. In addition, the 2018
‑
2 Debtor paid certain customary upfront closing fees to the 2018
‑
2 Agent. Interest payments on the 2018
‑
2 Facility will be made monthly. The 2018
‑
2 Debtor shall be permitted to prepay the 2018
‑
2 Facility, subject to certain fees and conditions. Any remaining amounts outstanding will be payable no later than October 23, 2022, the final maturity date.
All amounts due under the 2018
‑
2 Facility are secured by all of the 2018
‑
2 Debtor’s assets, which include the Securitization Receivables transferred to the 2018
‑
2 Debtor, related rights under the Securitization Receivables, a bank account and certain other related collateral.
The 2018
‑
2 Facility documents contain customary provisions for securitizations, including: representations and warranties as to the eligibility of the Securitization Receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay their loans; covenants regarding special purpose entity matters; and default and termination provisions
15
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
that provide for the acceleration of the 2018
‑
2 Facility in circumstances including, but not limited to, failure to make payments when due, servicer defaults, certain insolvency events, breaches o
f representations, warranties or covenants, failure to maintain the security interest in the Securitization Receivables and defaults under other material indebtedness of the 2018
‑
2 Debtor.
2018‑1 Facility
On July 23, 2018, the Company and several of its subsidiaries entered into a receivables funding agreement (the “2018‑1 Facility”) with Pacific Western Bank, as lender (the “2018‑1 Lender”). The 2018‑1 Facility collateralizes Securitization Receivables that have been and will be originated or acquired under the Company’s NetCredit brand by several of its subsidiaries and that meet specified eligibility criteria in exchange for a revolving note. Under the 2018‑1 Facility, Securitization Receivables are sold to a wholly-owned subsidiary of the Company (the “2018‑1 Debtor”) and serviced by another subsidiary of the Company.
The 2018‑1 Debtor has issued a revolving note with an initial maximum principal balance of $150.0 million, which is required to be secured by 1.25 times the drawn amount in eligible Securitization Receivables. The 2018‑1 Facility is non-recourse to the Company and matures on July 22, 2023. As of March 31, 2019 and December 31, 2018, the total outstanding amount of the 2018‑1 Facility was $36.0 million at both dates.
The 2018
‑
1 Facility is governed by a loan and security agreement, dated as of July 23, 2018, between the 2018
‑
1 Lender and the 2018
‑
1 Debtor. The 2018
‑
1 Facility bears interest at a rate per annum equal to LIBOR (subject to a floor) plus an applicable margin, which rate per annum is initially 4.00%. In addition, the 2018
‑
1 Debtor paid certain customary upfront closing fees to the 2018
‑
1 Lender. Interest payments on the 2018‑1 Facility will be made monthly. The 2018‑1 Debtor shall be permitted to prepay the 2018
‑
1 Facility, subject to certain fees and conditions. In the event of prepayment for the purposes of securitizations, no fees shall apply. Any remaining amounts outstanding will be payable no later than July 22, 2023, the final maturity date.
All amounts due under the 2018
‑
1 Facility are secured by all of the 2018
‑
1 Debtor’s assets, which include the Securitization Receivables transferred to the 2018
‑
1 Debtor, related rights under the Securitization Receivables, a bank account and certain other related collateral.
The 2018
‑
1 Facility documents contain customary provisions for securitizations, including: representations and warranties as to the eligibility of the Securitization Receivables and other matters; indemnification for specified losses not including losses due to the inability of consumers to repay their loans; covenants regarding special purpose entity matters; and default and termination provisions which provide for the acceleration of the 2018
‑
1 Facility in circumstances including, but not limited to, failure to make payments when due, servicer defaults, certain insolvency events, breaches of representations, warranties or covenants, failure to maintain the security interest in the receivables and defaults under other material indebtedness of the 2018
‑
1 Debtor.
2016‑1 Facility
On January 15, 2016, the Company and certain of its subsidiaries entered into a receivables securitization (as amended, the “2016
‑
1 Facility”) with certain purchasers, Jefferies Funding LLC, as administrative agent (the “2016
‑
1 Agent”) and Bankers Trust Company, as indenture trustee and securities intermediary (the “Indenture Trustee”). The 2016
‑
1 Facility securitized Securitization Receivables that were originated or acquired under the Company’s NetCredit brand and that met specified eligibility criteria. Under the 2016
‑
1 Facility, Securitization Receivables were sold to a wholly-owned special purpose subsidiary (the “2016
‑
1 Issuer”) and serviced by another subsidiary. The 2016
‑
1 Facility, as amended on October 20, 2017, provided for a maximum principal amount of $275 million, an initial term note with an initial principal amount of $181.1 million and the ability to subsequently issue term notes thereafter, variable funding notes with an aggregate committed availability of $75 million per quarter with an option to increase the commitment to $90 million and a revolving period of the facility ending in April 2019.
Subject to certain exceptions, the 2016
‑
1 Issuer was not permitted to prepay or redeem the 2016-1 Facility prior to April 15, 2019, but the 2016-1 Agent, the Indenture Trustee, and the holders of the notes agreed to permit an early repayment. On March 29, 2019, the 2016-1 Facility was repaid in full.
As of March 31, 2018 and December 31, 2018, the carrying amount of the 2016-1 Facility was $199.3 million and $54.9 million, respectively.
2016‑2 Facility
On December 1, 2016, the Company and certain of its subsidiaries entered into a receivables securitization (the “2016‑2 Facility”) with Redpoint Capital Asset Funding, LLC, as lender. The 2016‑2 Facility securitized Securitization Receivables that were originated or acquired under the Company’s NetCredit brand by several of the Company’s subsidiaries and that met specified eligibility criteria,
16
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
including that the annual percentage rate for eac
h securitized consumer loan was greater than or equal to 90%. Under the 2016
‑
2 Facility, Securitization Receivables are sold to a wholly-owned subsidiary of the Company and serviced by another subsidiary of the Company.
In October 2018, the 2016
‑
2 Facility
was repaid in full and there is no remaining amount available to be borrowed. As of
March 31, 2018
, the carrying amount of the 2016
‑
2 Facility was $15.1 million.
Revolving Credit Facility
On June 30, 2017, the Company and certain of its operating subsidiaries entered into a secured revolving credit agreement with a syndicate of banks including TBK Bank, SSB (“TBK”), as administrative agent and collateral agent, Jefferies Finance LLC and TBK as Joint Lead Arrangers and joint lead bookrunners, and Green Bank, N.A., as lender (as amended the “Credit Agreement”). On April 13, 2018 and October 5, 2018, the Credit Agreement was amended to include Pacific Western Bank and Axos Bank, respectively, as lenders in the syndicate of lenders.
The Credit Agreement is secured by domestic receivables and matures on May 1, 2020. The borrowing limit in the Credit Agreement is $125 million. There were no outstanding borrowings under the Credit Agreement as of March 31, 2019. The Company had outstanding borrowings under the Credit Agreement of $8.0 million and $22.0 million as of March 31, 2018 and December 31, 2018, respectively.
The Credit Agreement provides for a revolving credit line with interest on borrowings under the facility at prime rate plus 1.00%. In addition, the Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the line, and ranges from 0.30% per annum to 0.50% per annum depending on usage. A portion of the revolving credit facility, up to a maximum of $20 million, is available for the issuance of letters of credit. The Company had outstanding letters of credit under the Credit Agreement of $1.2 million, $8.0 million and $1.6 million as of March 31, 2019 and 2018 and December 31, 2018, respectively. The Credit Agreement provides for certain prepayment penalties if it is terminated on or before its first and second anniversary date, subject to certain exceptions.
The Credit Agreement contains certain limitations on the incurrence of additional indebtedness, investments, the attachment of liens to the Company’s property, the amount of dividends and other distributions, fundamental changes to the Company or its business and certain other activities of the Company. The Credit Agreement contains standard financial covenants for a facility of this type based on a leverage ratio and a fixed charge coverage ratio. The Credit Agreement also provides for customary affirmative covenants, including financial reporting requirements, and certain events of default, including payment defaults, covenant defaults and other customary defaults.
9.75% Senior Unsecured Notes Due 2021
On May 30, 2014, the Company issued and sold $500.0 million in aggregate principal amount of 9.75% Senior Notes due 2021. The 2021 Senior Notes bore interest at a rate of 9.75% annually on the principal amount payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2014. The 2021 Senior Notes were sold at a discount of the principal amount to yield 10.0% to maturity and would have matured on June 1, 2021.
During the year ended December 31, 2018 the Company repurchased the remaining $345.0 million of principal amount of the 2021 Senior Notes, which included $50.0 million principal amount of the 2021 Senior Notes for aggregate cash consideration of $53.7 million plus accrued interest during the three months ended March 31, 2018. During the three months ended March 31, 2018 the Company recorded a loss on extinguishment of debt of approximately $4.7 million ($3.7 million net of tax), which is included in “Loss on early extinguishment of debt” in the consolidated statements of income.
The Company’s effective tax rate for the three months ended March 31, 2019, increased to 22.5% from 20.8% for the three months ended March 31, 2018. The increase was attributable to higher nondeductible executive compensation and state taxes.
As of March 31, 2019, the balance of unrecognized tax benefits was $
41.3
million
($40.7 million net of the federal benefit of state matters), which is included in “accounts payable and accrued expenses” on the consolidated balance sheet
, of which $14.1 million if recognized, would favorably affect the effective tax rate in the period of recognition.
The Company had $0.1 million of unrecognized tax benefits as of March 31, 2018. The Company
believes it is reasonably possible that, within the next twelve months, unrecognized domestic tax benefits could change by a significant amount. The principal uncertainties are related to the timing of recognition of income and losses related to the Company’s loan portfolio. The Company anticipates a Joint Committee on Taxation review of certain
17
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
tax returns that were filed during 2018 in conjunction with the refunds claimed on those returns. Duri
ng the quarter ended March 31, 2019, the Company received an expected refund from the Internal Revenue Service of $45.7 million. Depending upon the outcome of the review and any related agreements or settlements with the relevant taxing authorities, the am
ount of the uncertainty, including amounts that would be recognized as a component of the effective tax rate, could change significantly. While the total amount of uncertainty to be resolved is not clear, it is reasonably possible that the uncertainties pe
rtaining to this matter will be resolved in the next twelve months.
The Company’s U.S. tax returns are subject to examination by federal and state taxing authorities. The statute of limitations related to the Company’s consolidated Federal income tax returns is closed for all tax years up to and including 2013. The years open to examination by state, local and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three years from the date the tax return is filed. For jurisdictions that have generated net operating losses, carryovers may be subject to the statute of limitations applicable for the year those carryovers are utilized. In these cases, the period for which the losses may be adjusted will extend to conform with the statute of limitations for the year in which the losses are utilized. In most circumstances, this is expected to increase the length of time that the applicable taxing authority may examine the carryovers by one year or longer, in limited cases.
6.
|
Accumulated Other Comprehensive Loss
|
The following table sets forth the components of accumulated other comprehensive loss, net of tax for the three months ended March 31, 2019 and 2018 (in thousands):
|
|
Foreign
|
|
|
|
|
|
|
|
currency
|
|
|
|
|
|
|
|
translation
|
|
|
|
|
|
|
|
gain (loss)
|
|
|
Total
|
|
Balance at December 31, 2017
|
|
$
|
(7,086
|
)
|
|
$
|
(7,086
|
)
|
Other comprehensive income, before reclassifications and tax
|
|
|
3,644
|
|
|
|
3,644
|
|
Tax impact
|
|
|
(820
|
)
|
|
|
(820
|
)
|
Australia and Canada liquidation
(1)
|
|
|
2,343
|
|
|
|
2,343
|
|
Tax impact
|
|
|
(781
|
)
|
|
|
(781
|
)
|
Reclassification of certain deferred tax effects
(2)
|
|
|
(1,622
|
)
|
|
|
(1,622
|
)
|
Balance at March 31, 2018
|
|
$
|
(4,322
|
)
|
|
$
|
(4,322
|
)
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
|
$
|
(13,805
|
)
|
|
$
|
(13,805
|
)
|
Other comprehensive loss, before reclassifications and tax
|
|
|
2,054
|
|
|
|
2,054
|
|
Tax impact
|
|
|
(500
|
)
|
|
|
(500
|
)
|
Balance at March 31, 2019
|
|
$
|
(12,251
|
)
|
|
$
|
(12,251
|
)
|
(1)
|
Amount reclassified from accumulated other comprehensive loss represents the realization of foreign currency translation losses on the Company’s Australia and Canada businesses for the three months ended March 31, 2018. These amounts were recorded in “Foreign currency transaction loss” on the consolidated statements of income. See Note 1 for additional information.
|
(2)
|
Amount reclassified from accumulated other comprehensive loss represents stranded tax effects resulting from the newly enacted federal corporate income tax rate under the Tax Cuts and Jobs Act. The amount of the reclassification is the difference between the historical corporate income tax rate and the newly enacted 21 percent corporate income tax rate. These amounts were recorded to retained earnings on the consolidated balance sheets.
|
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the period. Restricted stock units issued under the Company’s stock-based employee compensation plans are included in diluted shares upon the granting of the awards even though the vesting of shares will occur over time.
18
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The following table sets forth the reconciliation of numerators and denominators of basic and diluted earnings per share compu
tations for the
three months ended March 31, 2019 and 2018
(in thousands, except per share amounts):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
35,017
|
|
|
$
|
27,898
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Total weighted average basic shares
|
|
|
33,481
|
|
|
|
33,669
|
|
Shares applicable to stock-based compensation
|
|
|
940
|
|
|
|
903
|
|
Total weighted average diluted shares
|
|
|
34,421
|
|
|
|
34,572
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Net income per share – basic
|
|
$
|
1.05
|
|
|
$
|
0.83
|
|
Net income per share – diluted
|
|
$
|
1.02
|
|
|
$
|
0.81
|
|
For the three months ended
March 31, 2019, 720,429 shares
of common stock underlying stock options
and
6,187 shares of common stock underlying restricted stock units were excluded from the calculation of diluted net income per share because their effect would have been antidilutive.
For the three months ended
March 31, 2018
, 1,191,744 shares of common stock underlying stock options and 296,058 shares of common stock underlying restricted stock units were excluded from the calculation of diluted net income per share because their effect would have been antidilutive.
8.
|
Operating Segment Information
|
The Company provides online financial services to non-prime credit consumers and small businesses in the United States, United Kingdom, and Brazil and has one reportable segment, which is composed of the Company’s domestic and international operations and corporate services. The Company has aggregated all components of its business into a single operating segment based on the similarities of the economic characteristics, the nature of the products and services, the nature of the production and distribution methods, the shared technology platforms, the type of customer and the nature of the regulatory environment.
19
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The following tables present information on the Company’s domestic, international operations and corporate services as of and for the three months
ended March 31, 2019 and 2018 (dollars in thousands):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
257,988
|
|
|
$
|
212,966
|
|
International
|
|
|
35,195
|
|
|
|
41,332
|
|
Total revenue
|
|
$
|
293,183
|
|
|
$
|
254,298
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
105,106
|
|
|
$
|
87,759
|
|
International
|
|
|
(7,156
|
)
|
|
|
1,718
|
|
Corporate services
|
|
|
(30,831
|
)
|
|
|
(27,765
|
)
|
Total income from operations
|
|
$
|
67,119
|
|
|
$
|
61,712
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
2,208
|
|
|
$
|
1,858
|
|
International
|
|
|
398
|
|
|
|
372
|
|
Corporate services
|
|
|
1,578
|
|
|
|
1,608
|
|
Total depreciation and amortization
|
|
$
|
4,184
|
|
|
$
|
3,838
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property and equipment
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
2,385
|
|
|
$
|
1,990
|
|
International
|
|
|
912
|
|
|
|
1,068
|
|
Corporate services
|
|
|
1,587
|
|
|
|
291
|
|
Total expenditures for property and equipment
|
|
$
|
4,884
|
|
|
$
|
3,349
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
20,538
|
|
|
$
|
27,787
|
|
International
|
|
|
10,070
|
|
|
|
8,093
|
|
Corporate services
|
|
|
19,914
|
|
|
|
11,818
|
|
Total property and equipment, net
|
|
$
|
50,522
|
|
|
$
|
47,698
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
1,098,687
|
|
|
$
|
960,386
|
|
International
|
|
|
133,278
|
|
|
|
137,422
|
|
Corporate services
|
|
|
106,454
|
|
|
|
60,392
|
|
Total assets
|
|
$
|
1,338,419
|
|
|
$
|
1,158,200
|
|
Geographic Information
The following table presents the Company’s revenue by geographic region for the three months ended March 31, 2019 and 2018 (dollars in thousands):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
257,988
|
|
|
$
|
212,966
|
|
United Kingdom
|
|
|
28,745
|
|
|
|
34,989
|
|
Other international countries
|
|
|
6,450
|
|
|
|
6,343
|
|
Total revenue
|
|
$
|
293,183
|
|
|
$
|
254,298
|
|
20
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The Company’s long-lived assets, which consist of the Company’s property and
equipment, were $50.5 million and $47.7 million at March 31, 2019 and 2018, respectively. The operations for the Company’s domestic and international businesses are primarily located within the United States, and the value of any long-lived assets located
outside of the United States is immaterial.
9.
|
Commitments and Contingencies
|
Litigation
On April 23, 2018, the Commonwealth of Virginia, through Attorney General Mark R. Herring, filed a lawsuit in the Circuit Court for the County of Fairfax, Virginia against NC Financial Solutions of Utah, LLC (“NC Utah”), a subsidiary of the Company. The lawsuit alleges violations of the Virginia Consumer Protection Act (“VCPA”) relating to NC Utah’s communications with customers, collections of certain payments, its loan agreements, and the rates it charged to Virginia borrowers. The plaintiff is seeking to enjoin NC Utah from continuing its current lending practices in Virginia, restitution, civil penalties, and costs and expenses in connection with the same. Neither the likelihood of an unfavorable decision nor the ultimate liability, if any, with respect to this matter can be determined at this time, and the Company is currently unable to estimate a range of reasonably possible losses, as defined by ASC 450-20-20,
Contingencies–Loss Contingencies–Glossary,
for this litigation. The Company carefully considered applicable Virginia law before NC Utah began lending in Virginia and, as a result, believes that the Plaintiff’s claims in the complaint are without merit and intends to vigorously defend this lawsuit.
The Company is also involved in certain routine legal proceedings, claims and litigation matters encountered in the ordinary course of its business. Certain of these matters may be covered to an extent by insurance or by indemnification agreements with third parties. The Company has recorded accruals in its consolidated financial statements for those matters in which it is probable that it has incurred a loss and the amount of the loss, or range of loss, can be reasonably estimated. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.
10
.
|
Derivative Instruments
|
The Company periodically uses derivative instruments to manage risk from changes in market conditions that may affect the Company’s financial performance. The Company has primarily used derivative instruments to manage its primary market risks, which are interest rate risk and foreign currency exchange rate risk.
The Company has periodically used forward currency exchange contracts to minimize the effects of foreign currency risk in the United Kingdom and Brazil. The forward currency exchange contracts are non-designated derivatives. Any gain or loss resulting from these contracts is recorded as income or loss and is included in “Foreign currency transaction loss” in the Company’s consolidated statements of income. As of March 31, 2019, the Company did not manage its exposure to risk from foreign currency exchange rate fluctuations through the use of forward currency exchange contracts in the United Kingdom or Brazil.
The Company had no outstanding derivative instruments as of March 31, 2019 and 2018 and December 31, 2018.
The following table presents information on the effect of derivative instruments on the consolidated results of operations and accumulated other comprehensive income (“AOCI”) for the three months ended March 31, 2019 and 2018 (dollars in thousands):
|
|
Gains (Losses)
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses)
|
|
|
|
Recognized in
|
|
|
Gains (Losses)
|
|
|
Reclassified From
|
|
|
|
Income
|
|
|
Recognized in AOCI
|
|
|
AOCI into Income
|
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Non-designated derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency exchange contracts
(1)
|
|
$
|
—
|
|
|
$
|
243
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
243
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
The gains (losses) on these derivatives substantially offset the (losses) gains on the economically hedged portion of the foreign intercompany balances.
|
21
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
11.
|
Related Party Transactions
|
The Company has an agreement for direct mail production and fulfillment services with a marketing services company where David Fisher, the Company’s Chief Executive Officer and Chairman of the Board, also serves as a member of the marketing services company’s board of directors. During the three months ended March 31, 2019 and 2018, the Company incurred $2.6 million and $2.8 million, respectively, in expenses related to these services. As of March 31, 2019 and 2018, the Company owed the agency $2.4 million and $0.7 million, respectively, related to services provided.
The Company believes that the transaction described above has been provided on terms no less favorable to the Company than could have been negotiated with non-affiliated third parties.
12.
|
Variable Interest Entities
|
As part of the Company’s overall funding strategy and as part of its efforts to support its liquidity from sources other than its traditional capital market sources, the Company has established a securitization program through several securitization facilities. The Company transferred certain consumer loan receivables to VIEs which issue notes backed by the underlying consumer loan receivables and are serviced by another wholly owned subsidiary of the Company. The cash flows from the loans held by the VIEs are used to repay obligations under the notes.
The Company is required to evaluate the VIEs for consolidation. The Company has the ability to direct the activities of the VIEs that most significantly impact the economic performance of the entities as the servicer of the securitized loan receivables. Additionally, the Company has the right to receive residual payments, which expose it to potentially significant losses and returns. Accordingly, the Company determined it is the primary beneficiary of the VIEs and is required to consolidate them. The assets and liabilities related to the VIEs are included in the Company’s consolidated financial statements and are accounted for as secured borrowings.
13.
|
Fair Value Measurements
|
Recurring Fair Value Measurements
In accordance with ASC 820, Fair Value Measurements and Disclosures, certain of the Company’s assets and liabilities, which are carried at fair value, are classified in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
During the three months ended March 31, 2019 and 2018, there were no transfers of assets or liabilities in or out of Level 1, Level 2 or Level 3 fair value measurements.
It is the Company’s policy to value any transfers between levels of the fair value hierarchy based on end of period fair values.
22
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2019 and 2018 and December 31, 2018 are as follows (dollars in thousands):
|
|
March 31,
|
|
|
Fair Value Measurements Using
|
|
|
|
2019
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified savings plan assets
(1)
|
|
$
|
2,683
|
|
|
$
|
2,683
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total
|
|
$
|
2,683
|
|
|
$
|
2,683
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Fair Value Measurements Using
|
|
|
|
2018
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified savings plan assets
(1)
|
|
$
|
2,079
|
|
|
$
|
2,079
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total
|
|
$
|
2,079
|
|
|
$
|
2,079
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Fair Value Measurements Using
|
|
|
|
2018
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified savings plan assets
(1)
|
|
|
2,052
|
|
|
|
2,052
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
2,052
|
|
|
$
|
2,052
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
The non-qualified savings plan assets are included in “Other receivables and prepaid expenses” in the Company’s consolidated balance sheets and have an offsetting liability of equal amount, which is included in “Accounts payable and accrued expenses” in the Company’s consolidated balance sheets.
|
Fair Value Measurements on a Non-Recurring Basis
The Company measures non-financial assets and liabilities such as property and equipment and intangible assets at fair value on a non-recurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired. At
March 31, 2019 and 2018 and December 31, 2018
, there were no assets or liabilities recorded at fair value on a non-recurring basis.
23
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Financial Assets and Liabilities Not Measured at Fair Value
The Company’s financial assets and liabilities as of March 31, 2019 and 2018 and December 31, 2018 that are not measured at fair value in the consolidated balance sheets are as follows (dollars in thousands):
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Fair Value Measurements Using
|
|
|
|
2019
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
92,829
|
|
|
$
|
92,829
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term loans and line of credit accounts, net
(1)
|
|
|
211,347
|
|
|
|
—
|
|
|
|
—
|
|
|
|
211,347
|
|
Installment loans and RPAs, net
(1)(3)
|
|
|
604,509
|
|
|
|
—
|
|
|
|
—
|
|
|
|
636,932
|
|
Restricted cash
(4)
|
|
|
25,391
|
|
|
|
25,391
|
|
|
|
—
|
|
|
|
—
|
|
Investment in unconsolidated investee
(2)
|
|
|
6,703
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,703
|
|
Total
|
|
$
|
940,779
|
|
|
$
|
118,220
|
|
|
$
|
—
|
|
|
$
|
854,982
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for estimated losses on consumer loans guaranteed by the Company
|
|
$
|
1,264
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,264
|
|
Securitization notes
|
|
|
181,000
|
|
|
|
—
|
|
|
|
181,365
|
|
|
|
—
|
|
8.50% senior notes due 2024
|
|
|
250,000
|
|
|
|
—
|
|
|
|
235,915
|
|
|
|
—
|
|
8.50% senior notes due 2025
|
|
|
375,000
|
|
|
|
—
|
|
|
|
350,593
|
|
|
|
—
|
|
Total
|
|
$
|
807,264
|
|
|
$
|
—
|
|
|
$
|
767,873
|
|
|
$
|
1,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Fair Value Measurements Using
|
|
|
|
2018
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
69,900
|
|
|
$
|
69,900
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term loans and line of credit accounts, net
(1)
|
|
|
180,525
|
|
|
|
—
|
|
|
|
—
|
|
|
|
180,525
|
|
Installment loans and RPAs, net
(1)(3)
|
|
|
522,551
|
|
|
|
—
|
|
|
|
—
|
|
|
|
551,001
|
|
Restricted cash
(4)
|
|
|
34,765
|
|
|
|
34,765
|
|
|
|
—
|
|
|
|
—
|
|
Investment in unconsolidated investee
(2)
|
|
|
6,703
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,703
|
|
Total
|
|
$
|
814,444
|
|
|
$
|
104,665
|
|
|
$
|
—
|
|
|
$
|
738,229
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for estimated losses on consumer loans guaranteed by the Company
|
|
$
|
1,410
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,410
|
|
Promissory note
|
|
|
3,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,327
|
|
Revolving line of credit
|
|
|
8,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,000
|
|
Securitization notes
|
|
|
217,125
|
|
|
|
—
|
|
|
|
220,066
|
|
|
|
—
|
|
9.75% senior notes due 2021
|
|
|
293,044
|
|
|
|
—
|
|
|
|
306,260
|
|
|
|
—
|
|
8.50% senior notes due 2024
|
|
|
250,000
|
|
|
|
—
|
|
|
|
261,250
|
|
|
|
—
|
|
Total
|
|
$
|
772,579
|
|
|
$
|
—
|
|
|
$
|
787,576
|
|
|
$
|
12,737
|
|
24
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Fair Value Measurements Using
|
|
|
|
2018
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
52,917
|
|
|
$
|
52,917
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term loans and line of credit accounts, net
(1)
|
|
|
222,860
|
|
|
|
—
|
|
|
|
—
|
|
|
|
222,860
|
|
Installment loans and RPAs, net
(1)(3)
|
|
|
637,086
|
|
|
|
—
|
|
|
|
—
|
|
|
|
670,888
|
|
Restricted cash
(4)
|
|
|
24,342
|
|
|
|
24,342
|
|
|
|
—
|
|
|
|
—
|
|
Investment in unconsolidated investee
(2)
|
|
|
6,703
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,703
|
|
Total
|
|
$
|
943,908
|
|
|
$
|
77,259
|
|
|
$
|
—
|
|
|
$
|
900,451
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for estimated losses on consumer loans guaranteed by the Company
|
|
$
|
2,166
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,166
|
|
Revolving line of credit
|
|
|
22,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,000
|
|
Securitization notes
|
|
|
227,288
|
|
|
|
—
|
|
|
|
225,474
|
|
|
|
—
|
|
8.50% senior notes due 2024
|
|
|
250,000
|
|
|
|
—
|
|
|
|
212,500
|
|
|
|
—
|
|
8.50% senior notes due 2025
|
|
|
375,000
|
|
|
|
—
|
|
|
|
306,563
|
|
|
|
—
|
|
Total
|
|
$
|
876,454
|
|
|
$
|
—
|
|
|
$
|
744,537
|
|
|
$
|
24,166
|
|
(1)
|
Short-term loans, line of credit accounts, installment loans and RPAs are included in “Loans and finance receivables, net” in the consolidated balance sheets.
|
(2)
|
Investment in unconsolidated investee is included in “Other assets” in the consolidated balance sheets.
|
(3)
|
Installment loan and RPAs, net include $280.7 million, $278.3 million and $319.0 million in net assets of consolidated VIEs as of March 31, 2019 and 2018 and December 31, 2018, respectively.
|
(4)
|
Restricted cash includes $23.2 million, $26.7 million and $22.2 million in assets of consolidated VIEs as of March 31, 2019 and 2018 and December 31, 2018, respectively.
|
Cash and cash equivalents and restricted cash bear interest at market rates and have maturities of less than 90 days. The carrying amount of restricted cash and cash equivalents approximates fair value.
Short-term loans, line of credit accounts, installment loans and RPAs are carried in the consolidated balance sheet net of the allowance for estimated losses, which is calculated by applying historical loss rates combined with recent default trends to the gross receivable balance. Short-term loans and line of credit accounts have relatively short maturity periods that are generally 12 months or less. The unobservable inputs used to calculate the fair value of these receivables include historical loss rates, recent default trends and estimated remaining loan term; therefore, the carrying value approximates the fair value. The fair value of installment loans and RPAs is estimated using discounted cash flow analyses, which consider interest rates on loans and discounts offered for receivables with similar terms to customers with similar credit quality, the timing of expected payments, estimated customer default rates and/or valuations of comparable portfolios. Unsecured installment loans typically have terms between two and 60 months. RPAs typically have estimated delivery terms between six and 18 months.
The Company measures the fair value of its investment in unconsolidated investee using Level 3 inputs. Because the unconsolidated investee is a private company and financial information is limited, the Company estimates the fair value based on the best available information at the measurement date.
In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term and installment loans the Company arranges for consumers on the third-party lenders’ behalf and is required to purchase any defaulted loans it has guaranteed. The Company measures the fair value of its liability for third-party lender-owned consumer loans under Level 3 inputs. The fair value of these liabilities is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value of these liabilities approximates the fair value.
The Company measures the fair value of its revolving line of credit using Level 3 inputs. The Company considered the fair value of its other long-term debt and the timing of expected payment(s).
The fair values of the Company’s Securitization Notes and senior notes are estimated based on quoted prices in markets that are not active, which are deemed Level 2 inputs.
25
ENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The fair value of the Promisso
ry Note was estimated using a discounted cash flow analysis, which is deemed Level 3.
Subsequent events have been reviewed through the date these financial statements were available to be issued.
26