Correspondence 0000950170-23-024407 from Enova International, Inc. (ENVA) (CIK 0001529864) (ENVA)
Enova International, Inc. (ENVA) (CIK 0001529864)
Date: May 26, 2023 · CIK: 0001529864 · Accession: 0000950170-23-024407
AI Filing Summary & Sentiment
File numbers found in text: 001-35503
Referenced dates: April 28, 2023
Letter
Division of Corporation Finance Office of Finance Enova International, Inc. Form 10-K for Fiscal Year Ended December 31, 2022 Filed February 24, 2023 File No. 001-35503
Dear Mr. Schroder and Mr. Volley:
This correspondence is being furnished by Enova International, Inc. (“Enova” or the “Company”) in response to comments contained in the letter dated April 28, 2023 (the “Letter”) from the Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) with respect to the Company’s Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Form 10-K”).
The responses set forth below have been organized in the same manner in which the Commission’s comments were organized and all page references in the Company’s response are to those referenced in any headings or Staff comments. Set forth in italicized print below are the Staff’s comments followed by the Company’s responses.
Form 10-K filed February 24, 2023
Bank Programs, page 2
1. Please tell us and revise future filings, here or in MD&A, to discuss the number of and any significant reliance on a particular bank partner and quantify the amount of revenue earned and loans purchased through your bank partner program for each period presented and discuss any trends. Please refer to Item 303(a) of Regulation S-K and SEC Release No. 33-8350 for guidance.
Enova response: We currently have programs with three separate banks in the United States. In aggregate, purchases under these programs represented 22% of our consolidated originations and purchases for the year ended December 31, 2022, with no individual partner representing more than 12%. In aggregate, revenue earned on loans under these programs represented 23% of our consolidated revenue for the year ended December 31, 2022, with no individual partner representing more than 17%. We do not believe that we have significant reliance on any of our bank partners. Additionally, if there were to be an issue with any one of our current banking partners that disrupted purchases, there would be multiple alternatives to replace any potential reduction in purchases, such as seeking a different banking partner, as there are numerous other banks that have similar relationships with other non-bank lenders. In addition, each of the written agreements with our existing partners requires, in most cases outside of
United States Securities and Exchange Commission
Division of Corporation Finance
May 26, 2023
Page 2
bankruptcy or regulatory demand, significant advance notice of intention to terminate and wind down the respective program, which would allow ample time for us to identify and secure alternatives. Another option would be to refocus our capital and marketing efforts on other products and services that do not involve the banking partner. We believe our existing loan portfolio represents less than 1% of what we have identified as the total addressable market in the U.S., and so the bank partnerships are only one way that we can offer diversified products.
In response to the Staff’s comment, we will supplement our disclosures in our future 10-K filings to disclose the percentage of purchases from our bank partner programs and will note any material known trends to the extent relevant. For example, the following indented section represents the original text included in Part I, Item 1. Business, Overview, Bank Programs in our 2022 Form 10-K with marked changes (underlines) to address the Staff’s comment.
Bank programs. Certain subsidiaries operate programs with certain banks to provide marketing services and loan servicing for near-prime unsecured consumer installment loans and, beginning in January 2021, line of credit accounts. Under the programs, those subsidiaries receive marketing and servicing fees. The bank has the ability to sell, and the participating subsidiaries have the option, but not the requirement, to purchase the loans or a participating interest in receivables the bank originates. We do not guarantee the performance of the loans and line of credit accounts originated by the bank. As part of the OnDeck business both prior and subsequent to Enova’s acquisition, OnDeck operates a program with a separate bank to provide marketing services and loan servicing for small business installment loans and line of credit accounts. Under the OnDeck program, we receive marketing fees while the bank receives origination fees and certain program fees. The bank has the ability to sell and we have the option, but not the requirement, to purchase the installment loans the bank originates and, in the case of line of credit accounts, extensions under those line of credit accounts. We do not guarantee the performance of the loans or line of credit accounts originated by the bank.
As of December 31, 2022, we operate programs with three separate bank partners. Purchases under these programs represented 22% of our consolidated originations and purchases for the year ended December 31, 2022. Management does not deem there to be significant reliance on any of our banking partners.
The Company respectfully advises the Staff that it will revise its disclosures to include the above information in future 10-K filings.
Our Markets, page 2
2. Please tell us and revise future filings, here or in MD&A, to disclose any concentration of originations by state.
Enova response: We have reviewed the Staff’s disclosure guidance as well as relevant accounting guidance, which includes, but is not limited to, ASC 275-10-50-16, the Financial Reporting Manual of the Division of Corporation Finance, and 825-10-50-22. We do not deem state concentration risk or
United States Securities and Exchange Commission
Division of Corporation Finance
May 26, 2023
Page 3
disclosure of originations by state to be material to an understanding of our business or financial results. From a credit perspective, the borrower’s state is not a substantial variable in the underwriting process. From a regulatory perspective, as we note in Item 1A, Risk Factors, in our 2022 Form 10-K, state governments may seek to impose new laws, regulatory restrictions or licensing requirements that affect the products or services we offer. We are a diversified company with multiple products and jurisdictions in which we operate. As we have demonstrated in the past, if a particular state in which we currently provide products and services were to impose new laws, regulatory restrictions or licensing requirements that would have an adverse impact on the products or services that we offer in that state, we would shift our efforts, resources, and marketing spend to other jurisdictions to serve our customers, which based on our historical experience would ultimately be expected to have an immaterial net impact to our financial results. For the year ended December 31, 2022, the largest concentration of originations of a product in a single state was 7%. As we do not deem state origination concentration or state concentration risk to be material to the users of our financial statements, we believe omission of state origination disclosure to be consistent with U.S. GAAP as well as the Commission’s principles-based disclosure approach.
Products and Services, page 2
3. Please tell us and revise future filings to provide additional information for each significant loan product to allow an investor to understand the nature of your loan products. At a minimum, discuss the estimated average contractual term, the typical payment structure (e.g. - regular payments that amortize the loan to zero at maturity, interest-only payments, a single payment at maturity, etc.), the typical of fees or interest charged (e.g. – fixed interest rates, variable interest rates, one-time fee based on the principal amount, etc.), and the estimated annual percentage rate, average yield earned or average interest rate charged per loan. Please clarify if any significant loan product includes a single-pay structure and provide the key terms of this loan product. Please refer to Item 303(a) of Regulation S-K and SEC Release No. 33-8350 for guidance.
Enova response: In response to the Staff’s comment, the Company will include additional information for each significant loan product to allow investors to better understand the nature of such loan products. For example, the following represents the original text included in Part I, Item 1. Business, Overview, Products and Services in our 2022 Form 10-K with marked changes (strikethroughs and underlines) to address the Staff’s comment. Note that the description of receivables purchase agreements (“RPA”) section will be removed as we have redirected applicants to our other small business offerings and ceased originations of RPAs.
Installment loans. Certain subsidiaries (i) directly offer installment loans, (ii) as part of our Bank Programs, purchase or purchase a participating interest in, installment loans or (iii) as part of our CSO program, arrange and guarantee installment loans, as discussed below. Certain subsidiaries offer, or arrange through our Bank Programs and CSO program, unsecured consumer installment loan products in 37 states in the United States and small business installment loans in 47 states and in Washington D.C. Internationally, we also offer or arrange unsecured consumer installment loan products in Brazil. Effective in the third quarter of 2022, Enova no longer offers any single-pay products. Terms for our consumer installment loan products range between threetwo and 60 months with regular payments that amortize principal. Loan sizes for these products range
United States Securities and Exchange Commission
Division of Corporation Finance
May 26, 2023
Page 4
between $300 and $10,500. The majority of these loans accrue interest daily at a fixed rate for the life of the loan and have no fees. The average annualized yield for these loans was 72% for the year ended December 31, 2022. Loans may be repaid early at any time with no additional prepayment charges.
Certain subsidiaries offer, or arrange through our Bank Programs, small business installment loans in 47 states and in Washington D.C. Terms for these products range between three and 24 months with regular payments that amortize principal. Loan sizes for these products range between $5,000 and $250,000. There is generally a fee paid upon origination, and total interest is typically calculated at a fixed rate for the life of the loan. A portion of the interest is forgivable if prepaid early, although we also offer a full prepayment forgiveness option at a higher interest rate. The average annualized yield for these products was 46% for the year ended December 31, 2022.
Line of credit accounts. Certain subsidiaries directly offer, or purchase a participation interest in receivables through our Bank Programs, new consumer line of credit accounts in 31 states (and continue to service existing line of credit accounts in two additional states) in the United States. and business line of credit accounts in 47 states and in Washington D.C. in the United States, which Line of credit accounts allow customers to draw on their unsecured line of credit in increments of their choosing up to their credit limit, which ranges between $100 and $7,000. Customers may pay off their account balance in full at any time or make required minimum payments in accordance with the terms of the line of credit account. The repayment period varies depending upon certain factors, which may include outstanding principal and differences in minimum payment calculations by product. As long as the customer’s account is in good standing and has credit available, customers may continue to borrow on their line of credit. Customers are charged a fee when funds are drawn and subsequently incur fee- or interest-based charges at a fixed rate, depending upon the product and the state in which the customer resides. The average annualized yield for these products was 212% for the year ended December 31, 2022.
Certain subsidiaries offer, or arrange through our Bank Programs, new small business line of credit accounts in 47 states and in Washington D.C. in the United States. Terms for these products range between 12 and 24 months with regular payments that amortize principal. Loan sizes for these products range between $5,000 and $100,000. Interest is calculated at a fixed rate based on the outstanding balance. There is generally no fee paid upon origination with the exception of one of our small business line of credit products, which has an origination fee when allowed by state law. Certain small business line of credit accounts also charge a monthly maintenance fee. The average annualized yield for these products was 48% for the year ended December 31, 2022.
The Company respectfully advises the Staff that it will enhance its disclosures along the lines of the above in future 10-K and 10-Q filings.
Marketing, page 8
United States Securities and Exchange Commission
Division of Corporation Finance
May 26, 2023
Page 5
4. We note your disclosure that you have increased the percentage of loans sourced through direct marketing to 41% in 2022 and your disclosure on page 22 that the success of your business depends substantially on the willingness and ability of lead providers or marketing affiliates to provide you with customer leads at acceptable prices. Please tell us and revise future filings, here or in MD&A, to:
• disclose the percentage of loans sourced through each of your marketing channels for each period presented and discuss any trends, and
• discuss the number of and any significant reliance on a particular marketing partner. Please refer to Item 303(a) of Regulation S-K and SEC Release No. 33-8350 for guidance.
Enova response: Enova views its utilization of various marketing channels as a competitive advantage in a highly competitive environment. We believe that more granular disclosure on the channels we are using, specifically the percentage of loans sourced through each channel for each fiscal period, could be analyzed and used by our competitors to influence the manner in which they market. This could cause competitive harm to us, which would likely have a negative impact on our financial results. Further, we have reviewed the financial fillings of our competitors, noting that most do not disclose this level of detail. Moreover, we do not believe that disclosure of the percentage of loans sourced through each of our marketing channels would be material information for investors or measurably enhance an understanding of our business and financial results.
In regards to the second bullet in the Staff’s comment, we interact with hundreds of different vendors as it relates to our marketing spend. For the year ended December 31, 2022, we made payments to over 600 vendors. Due to the large number of vendors (and other potential vendors that we do not currently partner with, but could do so in the future) as well as the versatility of our marketing approach and various channels we can use, we do not have a significant reliance on any particular marketing partner and do not believe discussion of the number of and other information about specific marketing vendors would be material information for investors or measurably enhance an understanding of our business and financial results.
CFPB, page 13
5. We note your disclosure that you remain subject to restrictions and obligations, including a prohibition from engaging in certain conduct, related to a January 25, 2019 Consent Order with the CFPB. Please tell us and revise future filings to disclose each significant
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CORRESP
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CORRESP
May 26, 2023
William Schroder
Michael Volley
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Finance
100 F Street, N.E.
Washington, D.C. 20549
Re:
Enova International, Inc.
Form 10-K for Fiscal Year Ended December 31, 2022
Filed February 24, 2023
File No. 001-35503
Dear Mr. Schroder and Mr. Volley:
This correspondence is being furnished by Enova International, Inc. (“Enova” or the “Company”) in response to comments contained in the letter dated April 28, 2023 (the “Letter”) from the Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) with respect to the Company’s Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Form 10-K”).
The responses set forth below have been organized in the same manner in which the Commission’s comments were organized and all page references in the Company’s response are to those referenced in any headings or Staff comments. Set forth in italicized print below are the Staff’s comments followed by the Company’s responses.
Form 10-K filed February 24, 2023
Bank Programs, page 2
1. Please tell us and revise future filings, here or in MD&A, to discuss the number of and any significant reliance on a particular bank partner and quantify the amount of revenue earned and loans purchased through your bank partner program for each period presented and discuss any trends. Please refer to Item 303(a) of Regulation S-K and SEC Release No. 33-8350 for guidance.
Enova response: We currently have programs with three separate banks in the United States. In aggregate, purchases under these programs represented 22% of our consolidated originations and purchases for the year ended December 31, 2022, with no individual partner representing more than 12%. In aggregate, revenue earned on loans under these programs represented 23% of our consolidated revenue for the year ended December 31, 2022, with no individual partner representing more than 17%. We do not believe that we have significant reliance on any of our bank partners. Additionally, if there were to be an issue with any one of our current banking partners that disrupted purchases, there would be multiple alternatives to replace any potential reduction in purchases, such as seeking a different banking partner, as there are numerous other banks that have similar relationships with other non-bank lenders. In addition, each of the written agreements with our existing partners requires, in most cases outside of
United States Securities and Exchange Commission
Division of Corporation Finance
May 26, 2023
Page 2
bankruptcy or regulatory demand, significant advance notice of intention to terminate and wind down the respective program, which would allow ample time for us to identify and secure alternatives. Another option would be to refocus our capital and marketing efforts on other products and services that do not involve the banking partner. We believe our existing loan portfolio represents less than 1% of what we have identified as the total addressable market in the U.S., and so the bank partnerships are only one way that we can offer diversified products.
In response to the Staff’s comment, we will supplement our disclosures in our future 10-K filings to disclose the percentage of purchases from our bank partner programs and will note any material known trends to the extent relevant. For example, the following indented section represents the original text included in Part I, Item 1. Business, Overview, Bank Programs in our 2022 Form 10-K with marked changes (underlines) to address the Staff’s comment.
Bank programs. Certain subsidiaries operate programs with certain banks to provide marketing services and loan servicing for near-prime unsecured consumer installment loans and, beginning in January 2021, line of credit accounts. Under the programs, those subsidiaries receive marketing and servicing fees. The bank has the ability to sell, and the participating subsidiaries have the option, but not the requirement, to purchase the loans or a participating interest in receivables the bank originates. We do not guarantee the performance of the loans and line of credit accounts originated by the bank. As part of the OnDeck business both prior and subsequent to Enova’s acquisition, OnDeck operates a program with a separate bank to provide marketing services and loan servicing for small business installment loans and line of credit accounts. Under the OnDeck program, we receive marketing fees while the bank receives origination fees and certain program fees. The bank has the ability to sell and we have the option, but not the requirement, to purchase the installment loans the bank originates and, in the case of line of credit accounts, extensions under those line of credit accounts. We do not guarantee the performance of the loans or line of credit accounts originated by the bank.
As of December 31, 2022, we operate programs with three separate bank partners. Purchases under these programs represented 22% of our consolidated originations and purchases for the year ended December 31, 2022. Management does not deem there to be significant reliance on any of our banking partners.
The Company respectfully advises the Staff that it will revise its disclosures to include the above information in future 10-K filings.
Our Markets, page 2
2. Please tell us and revise future filings, here or in MD&A, to disclose any concentration of originations by state.
Enova response: We have reviewed the Staff’s disclosure guidance as well as relevant accounting guidance, which includes, but is not limited to, ASC 275-10-50-16, the Financial Reporting Manual of the Division of Corporation Finance, and 825-10-50-22. We do not deem state concentration risk or
United States Securities and Exchange Commission
Division of Corporation Finance
May 26, 2023
Page 3
disclosure of originations by state to be material to an understanding of our business or financial results. From a credit perspective, the borrower’s state is not a substantial variable in the underwriting process. From a regulatory perspective, as we note in Item 1A, Risk Factors, in our 2022 Form 10-K, state governments may seek to impose new laws, regulatory restrictions or licensing requirements that affect the products or services we offer. We are a diversified company with multiple products and jurisdictions in which we operate. As we have demonstrated in the past, if a particular state in which we currently provide products and services were to impose new laws, regulatory restrictions or licensing requirements that would have an adverse impact on the products or services that we offer in that state, we would shift our efforts, resources, and marketing spend to other jurisdictions to serve our customers, which based on our historical experience would ultimately be expected to have an immaterial net impact to our financial results. For the year ended December 31, 2022, the largest concentration of originations of a product in a single state was 7%. As we do not deem state origination concentration or state concentration risk to be material to the users of our financial statements, we believe omission of state origination disclosure to be consistent with U.S. GAAP as well as the Commission’s principles-based disclosure approach.
Products and Services, page 2
3. Please tell us and revise future filings to provide additional information for each significant loan product to allow an investor to understand the nature of your loan products. At a minimum, discuss the estimated average contractual term, the typical payment structure (e.g. - regular payments that amortize the loan to zero at maturity, interest-only payments, a single payment at maturity, etc.), the typical of fees or interest charged (e.g. – fixed interest rates, variable interest rates, one-time fee based on the principal amount, etc.), and the estimated annual percentage rate, average yield earned or average interest rate charged per loan. Please clarify if any significant loan product includes a single-pay structure and provide the key terms of this loan product. Please refer to Item 303(a) of Regulation S-K and SEC Release No. 33-8350 for guidance.
Enova response: In response to the Staff’s comment, the Company will include additional information for each significant loan product to allow investors to better understand the nature of such loan products. For example, the following represents the original text included in Part I, Item 1. Business, Overview, Products and Services in our 2022 Form 10-K with marked changes (strikethroughs and underlines) to address the Staff’s comment. Note that the description of receivables purchase agreements (“RPA”) section will be removed as we have redirected applicants to our other small business offerings and ceased originations of RPAs.
Installment loans. Certain subsidiaries (i) directly offer installment loans, (ii) as part of our Bank Programs, purchase or purchase a participating interest in, installment loans or (iii) as part of our CSO program, arrange and guarantee installment loans, as discussed below. Certain subsidiaries offer, or arrange through our Bank Programs and CSO program, unsecured consumer installment loan products in 37 states in the United States and small business installment loans in 47 states and in Washington D.C. Internationally, we also offer or arrange unsecured consumer installment loan products in Brazil. Effective in the third quarter of 2022, Enova no longer offers any single-pay products. Terms for our consumer installment loan products range between threetwo and 60 months with regular payments that amortize principal. Loan sizes for these products range
United States Securities and Exchange Commission
Division of Corporation Finance
May 26, 2023
Page 4
between $300 and $10,500. The majority of these loans accrue interest daily at a fixed rate for the life of the loan and have no fees. The average annualized yield for these loans was 72% for the year ended December 31, 2022. Loans may be repaid early at any time with no additional prepayment charges.
Certain subsidiaries offer, or arrange through our Bank Programs, small business installment loans in 47 states and in Washington D.C. Terms for these products range between three and 24 months with regular payments that amortize principal. Loan sizes for these products range between $5,000 and $250,000. There is generally a fee paid upon origination, and total interest is typically calculated at a fixed rate for the life of the loan. A portion of the interest is forgivable if prepaid early, although we also offer a full prepayment forgiveness option at a higher interest rate. The average annualized yield for these products was 46% for the year ended December 31, 2022.
Line of credit accounts. Certain subsidiaries directly offer, or purchase a participation interest in receivables through our Bank Programs, new consumer line of credit accounts in 31 states (and continue to service existing line of credit accounts in two additional states) in the United States. and business line of credit accounts in 47 states and in Washington D.C. in the United States, which Line of credit accounts allow customers to draw on their unsecured line of credit in increments of their choosing up to their credit limit, which ranges between $100 and $7,000. Customers may pay off their account balance in full at any time or make required minimum payments in accordance with the terms of the line of credit account. The repayment period varies depending upon certain factors, which may include outstanding principal and differences in minimum payment calculations by product. As long as the customer’s account is in good standing and has credit available, customers may continue to borrow on their line of credit. Customers are charged a fee when funds are drawn and subsequently incur fee- or interest-based charges at a fixed rate, depending upon the product and the state in which the customer resides. The average annualized yield for these products was 212% for the year ended December 31, 2022.
Certain subsidiaries offer, or arrange through our Bank Programs, new small business line of credit accounts in 47 states and in Washington D.C. in the United States. Terms for these products range between 12 and 24 months with regular payments that amortize principal. Loan sizes for these products range between $5,000 and $100,000. Interest is calculated at a fixed rate based on the outstanding balance. There is generally no fee paid upon origination with the exception of one of our small business line of credit products, which has an origination fee when allowed by state law. Certain small business line of credit accounts also charge a monthly maintenance fee. The average annualized yield for these products was 48% for the year ended December 31, 2022.
The Company respectfully advises the Staff that it will enhance its disclosures along the lines of the above in future 10-K and 10-Q filings.
Marketing, page 8
United States Securities and Exchange Commission
Division of Corporation Finance
May 26, 2023
Page 5
4. We note your disclosure that you have increased the percentage of loans sourced through direct marketing to 41% in 2022 and your disclosure on page 22 that the success of your business depends substantially on the willingness and ability of lead providers or marketing affiliates to provide you with customer leads at acceptable prices. Please tell us and revise future filings, here or in MD&A, to:
• disclose the percentage of loans sourced through each of your marketing channels for each period presented and discuss any trends, and
• discuss the number of and any significant reliance on a particular marketing partner. Please refer to Item 303(a) of Regulation S-K and SEC Release No. 33-8350 for guidance.
Enova response: Enova views its utilization of various marketing channels as a competitive advantage in a highly competitive environment. We believe that more granular disclosure on the channels we are using, specifically the percentage of loans sourced through each channel for each fiscal period, could be analyzed and used by our competitors to influence the manner in which they market. This could cause competitive harm to us, which would likely have a negative impact on our financial results. Further, we have reviewed the financial fillings of our competitors, noting that most do not disclose this level of detail. Moreover, we do not believe that disclosure of the percentage of loans sourced through each of our marketing channels would be material information for investors or measurably enhance an understanding of our business and financial results.
In regards to the second bullet in the Staff’s comment, we interact with hundreds of different vendors as it relates to our marketing spend. For the year ended December 31, 2022, we made payments to over 600 vendors. Due to the large number of vendors (and other potential vendors that we do not currently partner with, but could do so in the future) as well as the versatility of our marketing approach and various channels we can use, we do not have a significant reliance on any particular marketing partner and do not believe discussion of the number of and other information about specific marketing vendors would be material information for investors or measurably enhance an understanding of our business and financial results.
CFPB, page 13
5. We note your disclosure that you remain subject to restrictions and obligations, including a prohibition from engaging in certain conduct, related to a January 25, 2019 Consent Order with the CFPB. Please tell us and revise future filings to disclose each significant