Enova International, Inc. (ENVA) Earnings

Management highlights

### Overall Business Performance - Q2 2026 results exceeded management expectations, marking the 11th consecutive quarter of 20%+ YoY originations growth, and the 8th consecutive quarter of 30%+ YoY adjusted EPS growth. - Strong credit performance was a key driver of profitability: the consolidated net charge-off rate improved sequentially and YoY to its best level in recent years, driven by improving consumer credit and stable small business credit. - Management highlighted the strength and resiliency of Inova's business model, powered by a talented team, diversified product offerings, scalable operations, and machine learning-powered real-time risk management that enables quick responses to market risks and opportunities. ### Market Environment - U.S. consumer conditions remain resilient, supported by a stable labor market (4.2% unemployment in June 2026), steady 3.5% average hourly wage growth, low unemployment claims, improving consumer sentiment, and solid consumer spending. - Small business conditions are constructive: small business optimism is at its highest level so far in 2026, with two-thirds of small business owners rating their business health as excellent or good, and 93% expect moderate to significant growth over the next year. 75% of small businesses bypass traditional banks for capital needs, creating opportunity for alternative providers like Inova. ### Pending Grasshopper Bank Acquisition - The acquisition is expected to close in the second half of 2026, with integration planning largely complete. Management is in ongoing constructive regulatory review dialogue with the OCC and Federal Reserve. - Once approved, Inova expects immediate closing and delivery of synergies, including geographic expansion of existing products and lower funding costs from Grasshopper's deposit business. Fully realized net synergies are expected to drive more than 25% adjusted EPS accretion within two years post-closing. - Inova's balance sheet and liquidity position remains strong, supporting organic growth, opportunistic share repurchases, and the pending acquisition: the company ended the quarter with $929 million in total liquidity, and its cost of funds decreased to 8.1% from 8.8% YoY.

Guidance

- Management raised full-year 2026 guidance after stronger-than-expected Q2 results: full-year 2026 revenue growth is now expected to be 20% to 25% YoY, with adjusted EPS growth of 30% to 35% YoY. - For Q3 2026, Inova expects consolidated revenue to be approximately 25% higher YoY, with a consolidated net revenue margin in the 55% to 60% range. - Q3 2026 expense guidance: marketing expenses are expected to be around 20% of revenue, operations and technology costs are expected to be 8% to 8.5% of revenue, and G&A expenses are expected to be around 5% of revenue (excluding one-time acquisition costs). This guidance points to Q3 2026 adjusted EPS approximately 30% higher YoY. - 2026 guidance does not include any expected contribution from the pending Grasshopper Bank acquisition, which is still expected to close in the second half of 2026. All full-year guidance is contingent on macroeconomic conditions, consumer payment performance, and the level/timing/mix of originations growth.

Segment performance

In Q2 2026, Inova reported total consolidated revenue of $929 million, a 22% year-over-year increase. Total originations grew 27% YoY to $2.3 billion, and total portfolio size grew 28% YoY to $5.5 billion. - Small Business (SMB) Segment: Originations grew 29% YoY to $1.6 billion. Segment revenue grew 35% YoY to $439 million. SMB receivables ended the quarter at $3.8 billion (36% YoY growth), accounting for 69% of the total portfolio. The SMB net charge-off ratio was 4.8%, relatively stable from 4.7% YoY. - Consumer Segment: Originations grew 23% YoY to $691 million. Segment revenue grew 11% YoY to $477 million. Consumer receivables ended the quarter at $1.7 billion (14% YoY growth), accounting for 31% of the total portfolio. The consumer net charge-off ratio improved 170 basis points YoY to 12.8%. Consolidated results: Total operating expenses were 35% of revenue, with marketing expenses at 22% of revenue ($204 million), operations and technology expenses at 8.1% of revenue ($75 million), and G&A expenses at 4.7% of revenue ($44 million, including $1.5 million in Grasshopper acquisition-related costs). The consolidated net charge-off ratio was 7.3%, down 80 basis points YoY and 30 basis points sequentially. Adjusted diluted EPS grew 33% YoY to $4.31.

Risks & headwinds

- Forward-looking performance depends on the path of the macroeconomic environment, which impacts consumer and small business demand, customer payment rates, originations growth, and credit quality. - The pending Grasshopper Bank acquisition remains subject to regulatory approval, with uncertain timing and no guarantee of approval on expected terms. - Energy price volatility and ongoing geopolitical uncertainty represent external risks that could impact consumer and small business performance. - Net revenue margins may fluctuate quarter-to-quarter based on originations mix, growth acceleration, and credit performance, with current elevated consumer margins expected to revert to historical ranges.

Analyst Q&A

• Q: What drove the recent acceleration in consumer originations growth, which has lagged SMB growth over the past year? Did Inova change its credit box or risk appetite? /

  A: Inova’s overall risk appetite and unit economic requirements for new loans have not changed. The acceleration came from stronger-than-expected broad consumer demand, partially driven by a easier year-over-year comparison from last year, when Inova slowed growth in the consumer line of credit (LOC) product due to underperformance concerns. Growth has been concentrated in the consumer LOC product, which has now stabilized and performs well consistent with Inova’s risk requirements. A: Our marketing spend is an output of observed market demand, not a deliberate strategic shift to outgrow underlying opportunity.

• Q: What is the status of the regulatory review process for the Grasshopper Bank acquisition, and can you share any incremental update on timing? /

  A: Inova remains in an iterative, constructive dialogue with both the OCC and the Federal Reserve as the agencies review the application. Management continues to expect the acquisition to close in the second half of 2026, is confident in the strength of the application, and is prepared to close quickly once approval is received.

• Q: Consumer credit outperformed expectations this quarter, while small business delinquency rose slightly. What is driving this trend, and what credit ranges should we expect going forward? /

  A: Consumer credit improvement reflects broad-based strength in the U.S. consumer labor market, and matches the steady improvement Inova has observed since late 2025. Current low net charge-off levels are expected to revert to Inova’s historical typical ranges over coming quarters. For small business, net charge-off has remained stable in the 4% to 5% expected range for multiple quarters. Quarter-to-quarter delinquency movement reflects normal variation from differing origination growth levels, and the underlying credit profile remains stable, consistent with Inova’s risk targets.

• Q: What additional strategic opportunities will the Grasshopper acquisition open up beyond lower funding costs and geographic expansion? /

  A: Grasshopper’s team has already built innovative new capabilities including instant stablecoin payments, treasury management, and small business expense management. These new products give Inova a preview of future innovation opportunities as banking and payments converge, and will complement Inova’s existing small business lending products. Inova’s immediate priority is closing the transaction and delivering the already-identified core synergies, before pivoting to these new innovation roadmaps.