# Enova International, Inc. (ENVA) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Enova International, Inc.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1529864/000095017023004381/enva-20221231.htm
Accession: 0000950170-23-004381
Filing date: 2023-02-24
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/ENVA/
All MD&A years: /company/ENVA/mda/
Previous year: /company/ENVA/mda/fy2021/ (FY 2021)
Next year: /company/ENVA/mda/fy2023/ (FY 2023)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

RECENT REGULATORY DEVELOPMENTS

Consumer Financial Protection Bureau (“CFPB”)

On May 24, 2021, we received a Civil Investigative Demand (“CID”) from the CFPB concerning certain loan processing issues. We cooperated fully with the CFPB and provided all requested data and information in response to the CID. We anticipate being able to expeditiously complete the investigation as several of the issues were self‐disclosed and we have provided restitution to customers who may have been negatively impacted. We received a second CID in April 2022 requesting additional information. We have provided all requested information in response to the CID.

On October 6, 2017, the CFPB issued its final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the “Small Dollar Rule”), which covers certain consumer loans that we offer. The Small Dollar Rule requires that lenders who make short-term loans and longer-term loans with balloon payments reasonably determine consumers’ ability to repay the loans according to their terms before issuing the loans. The Small Dollar Rule also introduces new limitations on repayment processes for those lenders as well as lenders of other longer-term loans with an annual percentage rate greater than 36 percent that include an ACH authorization or similar payment provision. If a consumer has two consecutive failed payment attempts, the lender must obtain the consumer’s new and specific authorization to make further withdrawals from the consumer’s bank account. For loans covered by the Small Dollar Rule, lenders must provide certain notices to consumers before attempting a first payment withdrawal or an unusual withdrawal and after two consecutive failed withdrawal attempts. On June 7, 2019, the CFPB issued a final rule to set the compliance date for the mandatory underwriting provisions of the Small Dollar Rule to November 19, 2020. On July 7, 2020, the CFPB issued a final rule rescinding the ability to repay (“ATR”) provisions of the Small Dollar Rule along with related provisions, such as the establishment of registered information systems for checking ATR and reporting loan activity. The payment provisions of the Small Dollar Rule remain in place. In April 2018, an action was filed against the CFPB making a constitutional challenge to the Small Dollar Rule. On October 19, 2022, a three-judge panel of the Fifth Circuit U.S. Circuit Court of Appeals ruled that the funding structure of the CFPB is unconstitutional and vacated the Small Dollar Rule. On November 14, 2022, the CFPB filed a Petition for Writ of Certiorari with the U.S. Supreme Court to review the Fifth Circuit ruling. On January 13, 2023, the Brief in Opposition to the Petition for writ was filed. If the Small Dollar Rule does become effective in its current proposed form, we will need to make certain changes to our payment processes and customer notifications in our U.S. consumer lending business.

Illinois SB 1792

On March 23, 2021, the Economic Equity Act (“EEA”) became effective in Illinois. The EEA implements a 36% rate cap on all consumer lending, with the APR calculated consistent with the Military Lending Act’s Military Annual Percentage Rate. The EEA applies to consumer loans originated on or after the effective date. In addition, the EEA provides for the application of a predominant economic interest test for bank service arrangements. Pursuant to the predominant economic interest test, a broker or service with a predominant economic interest in a loan is considered to be the “true lender” for purposes of applying the EEA and the 36% rate cap.

New Mexico HB 132

On February 15, 2022, the New Mexico Legislature passed HB 132. The bill imposes a 36% rate cap on loans up to $10,000. Additionally, HB 132 provides for the application of a predominant economic interest test for bank service arrangements whereby a broker or servicer with a predominant economic interest in a loan is considered to be the “true lender” for purposes of applying the 36% rate cap. The New Mexico Governor signed the bill into law on March 1, 2022. The law took effect on January 1, 2023.

Brazil General Data Privacy Law

On August 14, 2018, Brazil adopted the General Data Privacy Law (Lei Geral de Proteção de Dados Pessoais or “LGPD”). The key provisions of LGPD are quite similar to the European Union’s General Data Protection Regulation (“GDPR”) in that it grants certain rights to data subjects, imposes obligations on companies with regard to the processing of data, and allows authorities to impose substantial fines on companies that violate the law. LGPD was originally anticipated to go into effect on February 15, 2020; however, several amendments to LGPD delayed the effective date. LGPD took effect on September 18, 2020, and enforcement of the penalties and sanctions for non-compliance began August 1, 2021. Compliance with LGPD may increase the cost of conducting business in Brazil, and we could see regulatory compliance costs and enforcement activity now that the law is in effect.

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RESULTS OF OPERATIONS

Highlights

Our financial results for the year ended December 31, 2022 (“2022”) are summarized below.

•
Revenue increased $528.2 million, or 43.7%, to $1,736.1 million in 2022 compared to $1,207.9 million in the year ended December 31, 2021 (“2021”).

•
Net revenue increased $93.3 million, or 9.1%, to $1,117.6 million in 2022 compared to $1,024.3 million in 2021.

•
Income from Operations decreased $29.1 million, or 7.0%, to $384.0 million in 2022, compared to $413.1 million in 2021.

•
Net income was $207.4 million in 2022, compared to $256.3 million in 2021. Diluted earnings per share were $6.19 in 2022 compared to $6.79 in 2021.

43

Overview

The following tables reflect our results of operations for the periods indicated, both in dollars and as a percentage of total revenue (dollars in thousands, except per share data):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021","","","2020"],["Revenue"],["Loans and finance receivables revenue","","$","1,712,855","","","$","1,192,043","","","$","1,076,204"],["Other","","","23,230","","","","15,889","","","","7,506"],["Total Revenue","","","1,736,085","","","","1,207,932","","","","1,083,710"],["Change in Fair Value","","","(618,521",")","","","(183,672",")","","","(399,517",")"],["Net Revenue","","","1,117,564","","","","1,024,260","","","","684,193"],["Operating Expenses"],["Marketing","","","382,573","","","","271,160","","","","69,780"],["Operations and technology","","","173,668","","","","147,700","","","","96,284"],["General and administrative","","","140,464","","","","156,962","","","","140,600"],["Depreciation and amortization","","","36,867","","","","35,375","","","","19,732"],["Total Operating Expenses","","","733,572","","","","611,197","","","","326,396"],["Income from Operations","","","383,992","","","","413,063","","","","357,797"],["Interest expense, net","","","(115,887",")","","","(76,509",")","","","(86,691",")"],["Foreign currency transaction (loss) gain, net","","","(645",")","","","(382",")","","","514"],["Gain on bargain purchase","","","\u2014","","","","\u2014","","","","163,999"],["Equity method investment income","","","6,435","","","","2,953","","","","628"],["Other nonoperating expenses","","","(1,321",")","","","(1,970",")","","","(827",")"],["Income before Income Taxes","","","272,574","","","","337,155","","","","435,420"],["Provision for income taxes","","","65,150","","","","80,087","","","","57,191"],["Net income from continuing operations before noncontrolling interest","","","207,424","","","","257,068","","","","378,229"],["Less: Net income attributable to noncontrolling interest","","","\u2014","","","","773","","","","85"],["Net income from continuing operations","","","207,424","","","","256,295","","","","378,144"],["Net loss from discontinued operations","","","\u2014","","","","\u2014","","","","(300",")"],["Net income attributable to Enova International, Inc.","","","207,424","","","","256,295","","","","377,844"],["Diluted earnings per share \u2013 continuing operations","","$","6.19","","","$","6.79","","","$","11.71"],["Diluted loss per share \u2013 discontinued operations","","","\u2014","","","","\u2014","","","","(0.01",")"],["Diluted earnings per share","","$","6.19","","","$","6.79","","","$","11.70"],["Revenue"],["Loans and finance receivables revenue","","","98.7","%","","","98.7","%","","","99.3","%"],["Other","","","1.3","","","","1.3","","","","0.7"],["Total Revenue","","","100.0","","","","100.0","","","","100.0"],["Change in Fair Value","","","(35.6",")","","","(15.2",")","","","(36.9",")"],["Net Revenue","","","64.4","","","","84.8","","","","63.1"],["Operating Expenses"],["Marketing","","","22.1","","","","22.5","","","","6.4"],["Operations and technology","","","10.0","","","","12.2","","","","8.9"],["General and administrative","","","8.1","","","","13.0","","","","13.0"],["Depreciation and amortization","","","2.1","","","","2.9","","","","1.8"],["Total Operating Expenses","","","42.3","","","","50.6","","","","30.1"],["Income from Operations","","","22.1","","","","34.2","","","","33.0"],["Interest expense, net","","","(6.7",")","","","(6.3",")","","","(8.0",")"],["Foreign currency transaction (loss) gain, net","","","\u2014","","","","\u2014","","","","0.1"],["Gain on bargain purchase","","","\u2014","","","","\u2014","","","","15.1"],["Equity method investment income","","","0.4","","","","0.2","","","","0.1"],["Other nonoperating expenses","","","(0.1",")","","","(0.2",")","","","(0.1",")"],["Income before Income Taxes","","","15.7","","","","27.9","","","","40.2"],["Provision for income taxes","","","3.8","","","","6.6","","","","5.3"],["Net income from continuing operations before noncontrolling interest","","","11.9","","","","21.3","","","","34.9"],["Less: Net income attributable to noncontrolling interest","","","\u2014","","","","0.1","","","","\u2014"],["Net income from continuing operations","","","11.9","","","","21.2","","","","34.9"],["Net loss from discontinued operations","","","\u2014","","","","\u2014","","","","\u2014"],["Net income attributable to Enova International, Inc.","","","11.9","%","","","21.2","%","","","34.9","%"]]
[[/GREPCENT_TABLE]]

44

Valuation of Loans and Finance Receivables

The COVID-19 pandemic severely impacted global economic conditions, resulting in substantial volatility in the financial markets, increased unemployment, and operational challenges resulting from measures that governments imposed to control its spread. We actively worked with our customers to understand their financial situations, waived late fees, offered a variety of repayment options to increase flexibility and reduced or deferred payments for impacted customers. We took measures to adjust our underwriting procedures, which reduced exposure to more heavily impacted consumers and businesses. Certain of these measures eased since the height of the pandemic, with improvement of economic conditions and our outlook.

From a loan valuation perspective, at the onset of the COVID-19 pandemic in the first quarter of 2020, we deemed it appropriate to increase the discount rates used in our internally-developed valuation models, thereby lowering loan fair values, to capture the increase in potential volatility in expected cash flows due to the unprecedented nature of the pandemic and governmental response. These rates remained consistent for the remainder of 2020. Over the course of 2021, we noted a tightening of credit spreads in observable pricing in the market; as such, we reduced the discount rates used in our valuations. As of December 31, 2021, our discount rates had generally returned to the levels utilized immediately prior to the pandemic. Over the course of 2022, we increased our discount rates based primarily on movements in the market. We believe the adjustments to our discount rates to be responsive to changes in the market and representative of what a market participant would use.

After seeing increases in delinquency and charge-offs early in the pandemic, we experienced significant improvements to these metrics over the remainder of 2020 and into 2021. The U.S. government provided multiple rounds of stimulus assistance to taxpayers and businesses. Positive COVID-19 test counts as well as the severity of related symptoms have generally decreased across 2021 and 2022, although there have been spikes as different variants escalate and abate. In 2022, views in the marketplace on the economy and its near-term prospects remain mixed with concerns on employment, inflation, and other macroeconomic trends. In certain situations, management concluded that the probability of future charge-offs was higher than what we had experienced in the past and, therefore, increased anticipated charge-offs in our fair value models. We continue to utilize this approach and have adjusted charge-off expectations where appropriate. As of December 31, 2022, we deemed the resulting fair value to be an appropriate market-based exit price that considers current market conditions.

NON-GAAP FINANCIAL MEASURES

In addition to the financial information prepared in conformity with generally accepted accounting principles (“GAAP”), we provide historical non-GAAP financial information. We believe that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of our operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

We provide non-GAAP financial information for informational purposes and to enhance understanding of our GAAP consolidated financial statements. Readers should consider the information in addition to, but not instead of or superior to, our consolidated financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Adjusted Earnings Measures

In addition to reporting financial results in accordance with GAAP, we have provided adjusted earnings and adjusted earnings per share, or, collectively, the Adjusted Earnings Measures, which are non-GAAP measures. We believe that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments and amortization methods, which provides a more complete understanding of our financial performance, competitive position and prospects for the future. We also believe that investors regularly rely on non-GAAP financial measures, such as the Adjusted Earnings Measures, to assess operating performance and that such measures may highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. In addition, we believe that the adjustments shown below are useful to investors in order to allow them to compare our financial results during the periods shown without the effect of each of these income or expense items.

45

The following table provides reconciliations between net income and diluted earnings per share calculated in accordance with GAAP to the Adjusted Earnings Measures (in thousands, except per share data):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021","","","2020"],["Net income from continuing operations","","$","207,424","","","$","256,295","","","$","378,144"],["Adjustments:"],["Gain on bargain purchase","","","\u2014","","","","\u2014","","","","(163,999",")"],["Transaction-related costs(a)","","","\u2014","","","","1,424","","","","20,023"],["Lease termination and cease use loss(b)","","","\u2014","","","","7,535","","","","\u2014"],["Equity method investment income(c)","","","(6,107",")","","","\u2014","","","","\u2014"],["Other nonoperating expenses(d)","","","1,321","","","","1,970","","","","827"],["Intangible asset amortization","","","8,055","","","","6,862","","","","1,777"],["Stock-based compensation expense","","","21,950","","","","21,179","","","","18,041"],["Foreign currency transaction loss (gain), net(e)","","","645","","","","372","","","","(499",")"],["Cumulative tax effect of adjustments","","","(5,365",")","","","(9,855",")","","","(8,038",")"],["Discrete tax adjustments(f)","","","\u2014","","","","\u2014","","","","(11,604",")"],["Adjusted earnings","","$","227,923","","","$","285,782","","","$","234,672"],["Diluted earnings per share from continuing operations","","$","6.19","","","$","6.79","","","$","11.71"],["Adjustments:"],["Gain on bargain purchase","","","\u2014","","","","\u2014","","","","(5.08",")"],["Transaction-related costs(a)","","","\u2014","","","","0.04","","","","0.62"],["Lease termination and cease use loss(b)","","","\u2014","","","","0.20","","","","\u2014"],["Equity method investment income(c)","","","(0.18",")","","","\u2014","","","","\u2014"],["Other nonoperating expenses(d)","","","0.04","","","","0.05","","","","0.03"],["Intangible asset amortization","","","0.24","","","","0.18","","","","0.05"],["Stock-based compensation expense","","","0.66","","","","0.56","","","","0.56"],["Foreign currency transaction loss (gain), net(e)","","","0.02","","","","0.01","","","","(0.02",")"],["Cumulative tax effect of adjustments","","","(0.16",")","","","(0.26",")","","","(0.25",")"],["Discrete tax adjustments(f)","","","\u2014","","","","\u2014","","","","(0.36",")"],["Adjusted earnings per share","","$","6.81","","","$","7.57","","","$","7.26"]]
[[/GREPCENT_TABLE]]

(a)
For the years ended December 31, 2021 and 2020, we recorded expenses of $1.4 million ($1.1 million net of tax) and $20.0 million ($19.5 million net of tax), respectively, related to acquisitions and a divestiture of a subsidiary.

(b)
For the year ended December 31, 2021, we recorded losses of $7.5 million ($5.6 million net of tax), including a net write-off of leasehold improvements of $4.2 million).

(c)
For the year ended 2022, we recorded equity method investment income of $6.3 million ($3.6 million net of tax) that was comprised primarily of an $11.0 million gain generated on the sale by Linear, in which we hold an ownership interest, of its operating company, partially offset by a $4.4 million loss on the sale of OnDeck Canada.

(d)
For the years ended December 31, 2022 and December 31, 2021, we recorded a loss of $1.3 million ($1.0 million net of tax) and $0.8 million ($0.6 million net of tax), respectively, related to incomplete capital markets transactions. For the year ended December 31, 2021, we recorded a loss of $0.8 million ($0.6 million net of tax) related to the partial divestiture of a subsidiary. For the years ended December 31, 2021 and 2020, we recorded losses on early extinguishment of debt of $0.4 million ($0.3 million net of tax) and $0.8 million ($0.6 million net of tax), respectively.

(e)
Excludes amounts attributable to noncontrolling interests.

(f)
For the year ended December 31, 2020, we recorded income tax benefits of $11.6 million resulting from the remeasurement of our liability for certain previously unrecognized tax benefits.

Adjusted EBITDA

The table below shows Adjusted EBITDA, which is a non-GAAP measure that we define as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, taxes and stock-based compensation expense. We believe Adjusted EBITDA is used by investors to analyze operating performance and evaluate our ability to incur and service debt and our capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess our estimated enterprise value. In addition, we believe that the adjustments for transaction-related costs, lease termination and cease use (gain) loss, gain on bargain purchase, equity method investment income, and other nonoperating expenses shown below are useful to investors in order to allow them to compare our

46

financial results during the periods shown without the effect of the income or expense items. The computation of Adjusted EBITDA as presented below may differ from the computation of similarly-titled measures provided by other companies (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021","","","2020"],["Net income from continuing operations","","$","207,424","","","$","256,295","","","$","378,144"],["Depreciation and amortization expenses(e)","","","36,867","","","","35,362","","","","19,726"],["Interest expense, net(e)","","","115,887","","","","75,929","","","","86,507"],["Foreign currency transaction loss (gain), net(e)","","","645","","","","372","","","","(499",")"],["Provision for income taxes","","","65,150","","","","80,087","","","","57,191"],["Stock-based compensation expense","","","21,950","","","","21,179","","","","18,041"],["Adjustments:"],["Transaction-related costs(a)","","","\u2014","","","","1,424","","","","20,023"],["Lease termination and cease use loss(b)","","","\u2014","","","","3,336","","","","\u2014"],["Gain on bargain purchase","","","\u2014","","","","\u2014","","","","(163,999",")"],["Equity method investment income","","","(6,435",")","","","(2,953",")","","","(628",")"],["Other nonoperating expenses(d)","","","1,321","","","","1,970","","","","827"],["Adjusted EBITDA","","$","442,809","","","$","473,001","","","$","415,333"],["Adjusted EBITDA margin calculated as follows:"],["Total Revenue","","$","1,736,085","","","$","1,207,932","","","$","1,083,710"],["Adjusted EBITDA","","$","442,809","","","$","473,001","","","$","415,333"],["Adjusted EBITDA as a percentage of total revenue","","","25.5","%","","","39.2","%","","","38.3","%"]]
[[/GREPCENT_TABLE]]

Refer to footnotes in previous table for explanation of (a), (b), (d) and (e).

Combined Loans and Finance Receivables

Combined loans and finance receivables is a non-GAAP measure that includes both loans and RPAs we own and loans we guarantee, which are either GAAP items or disclosures required by GAAP. We believe this non-GAAP measure provides investors with important information needed to evaluate the magnitude of potential receivable losses and the opportunity for revenue performance of the loans and finance receivables portfolio on an aggregate basis. We also believe that the comparison of the aggregate amounts from period to period is more meaningful than comparing only the amounts reflected on our consolidated balance sheets since both revenue and cost of revenue are impacted by the aggregate amount of receivables we own and those we guarantee as reflected in our consolidated financial statements.

YEAR ENDED 2022 COMPARED TO YEAR ENDED 2021

Revenue and Net Revenue

Revenue increased $528.2 million, or 43.7%, to $1,736.1 million for 2022 as compared to $1,207.9 million for 2021. The change in revenue was driven primarily by a 71.9% increase in revenue from our small business portfolio and a 30.6% increase in revenue from our consumer portfolio as higher levels of originations in 2021 and 2022 led to higher loan balances for both portfolios.

Our net revenue was $1,117.6 million for 2022 compared to $1,024.3 million for 2021. Our net revenue as a percentage of revenue (“net revenue margin”) was 64.4% in 2022 compared to 84.8% in 2021. The net revenue margin in the prior year was elevated due primarily to lower delinquency rates and lower than expected charge-offs as a result of portfolio seasoning and lower originations. As originations increased across the second half of 2021 and through 2022, the delinquency rates and charge-offs increased, resulting in net revenue margin for 2022 being within a more normal range.

47

The following table sets forth the components of revenue and net revenue, separated by product for 2022 and 2021 (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021","","","$ Change","","","% Change"],["Revenue by product:"],["Consumer loans and finance receivables revenue","","$","1,065,033","","","$","815,251","","","$","249,782","","","","30.6","%"],["Small business loans and finance receivables revenue","","","647,822","","","","376,792","","","","271,030","","","","71.9"],["Total loan and finance receivable revenue","","","1,712,855","","","","1,192,043","","","","520,812","","","","43.7"],["Other","","","23,230","","","","15,889","","","","7,341","","","","46.2"],["Total revenue","","","1,736,085","","","","1,207,932","","","","528,153","","","","43.7"],["Change in fair value","","","(618,521",")","","","(183,672",")","","","(434,849",")","","","236.8"],["Net revenue","","$","1,117,564","","","$","1,024,260","","","$","93,304","","","","9.1","%"],["Revenue by product (% to total):"],["Consumer loans and finance receivables revenue","","","61.4","%","","","67.5","%"],["Small business loans and finance receivables revenue","","","37.3","","","","31.2"],["Total loan and finance receivable revenue","","","98.7","","","","98.7"],["Other","","","1.3","","","","1.3"],["Total revenue","","","100.0","","","","100.0"],["Change in fair value","","","(35.6",")","","","(15.2",")"],["Net revenue","","","64.4","%","","","84.8","%"]]
[[/GREPCENT_TABLE]]

The percentage of revenue from our small business loans and finance receivables increased in 2022 as we placed more emphasis on this portion of our overall portfolio based on strength in demand, credit metrics and outlook.

Loan and Finance Receivable Balances

The fair value of our loan and finance receivable portfolio in our consolidated financial statements at December 31, 2022 and 2021 was $3,018.5 million and $1,964.7 million, respectively, with an outstanding principal balance of $2,739.2 million and $1,878.4 million, respectively. The fair value of the combined loan and finance receivables portfolio includes $16.3 million with an outstanding principal balance of $12.9 million and $18.8 million with an outstanding principal balance of $11.8 million of consumer loan balances that are guaranteed by us but not owned by us, which are not included in our consolidated financial statements as of December 31, 2022 and 2021, respectively. See “—Non-GAAP Financial Measures—Combined Loans and Finance Receivables” above for additional information related to combined loans and finance receivables.

The following table summarizes loan and finance receivable balances outstanding as of December 31, 2022 and 2021 (in thousands):

[[GREPCENT_TABLE]]
[["","","As of December 31,"],["","","2022","","","2021"],["","","","","","Guaranteed","","","","","","","","","Guaranteed"],["","","Company","","","by the","","","","","","Company","","","by the"],["","","Owned(a)","","","Company(a)","","","Combined(b)","","","Owned(a)","","","Company(a)","","","Combined(b)"],["Consumer loans and finance receivables"],["Principal","","$","965,753","","","$","12,937","","","$","978,690","","","$","867,751","","","$","11,789","","","$","879,540"],["Fair value","","","1,083,062","","","","16,257","","","","1,099,319","","","","890,144","","","","18,813","","","","908,957"],["Fair value as a % of principal","","","112.1","%","","","125.7","%","","","112.3","%","","","102.6","%","","","159.6","%","","","103.3","%"],["Small business loans and finance receivables"],["Principal","","$","1,773,411","","","$","\u2014","","","$","1,773,411","","","$","1,010,675","","","$","\u2014","","","$","1,010,675"],["Fair value","","","1,935,466","","","","\u2014","","","","1,935,466","","","","1,074,546","","","","\u2014","","","","1,074,546"],["Fair value as a % of principal","","","109.1","%","","","\u2014","%","","","109.1","%","","","106.3","%","","","\u2014","%","","","106.3","%"],["Total loans and finance receivables"],["Principal","","$","2,739,164","","","$","12,937","","","$","2,752,101","","","$","1,878,426","","","$","11,789","","","$","1,890,215"],["Fair value","","","3,018,528","","","","16,257","","","","3,034,785","","","","1,964,690","","","","18,813","","","","1,983,503"],["Fair value as a % of principal","","","110.2","%","","","125.7","%","","","110.3","%","","","104.6","%","","","159.6","%","","","104.9","%"]]
[[/GREPCENT_TABLE]]

(a)
GAAP measure. The loan and finance receivable balances guaranteed by us relate to loans originated by third-party lenders through the CSO programs and are not included in our consolidated balance sheets.

(b)
Amounts represent non-GAAP measures.

At December 31, 2022, the ratio of fair value as a percentage of principal was 110.2% on company owned loans and finance receivables and 110.3% on combined loans and finance receivables compared to 104.6% on company owned loans and finance receivables and 104.9% on combined loans and finance receivables at December 31, 2021. These ratios increased during the year due primarily to a mix

48

shift towards line of credit products, which generally have a higher fair value as a percentage of principal compared to installment loans, as well as an improvement in credit outlook on certain products, partially offset by higher delinquency rates on certain products.

Average Amount Outstanding per Loan and Finance Receivable

The average amount outstanding per loan and finance receivable is calculated as the total combined loans and finance receivables, gross balance at the end of the period divided by the total number of combined loans and finance receivables outstanding at the end of the period. The following table shows the average amount outstanding per loan and finance receivable by product at December 31, 2022 and 2021:

[[GREPCENT_TABLE]]
[["","","As of December 31,"],["","","2022","","","2021"],["Average amount outstanding per loan and finance receivable (in ones)(a)"],["Consumer loans and finance receivables(b)","","$","2,089","","","$","1,953"],["Small business loans and finance receivables","","","39,021","","","","38,125"],["Total loans(b)","","$","5,172","","","$","3,849"]]
[[/GREPCENT_TABLE]]

(a)
The disclosure regarding the average amount per loan is statistical data that is not included in our consolidated financial statements.

(b)
Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs and are not included in our consolidated balance sheets.

The average amount outstanding per loan increased to $5,172 as of December 31, 2022 compared to $3,849 from prior year, mainly due to an increase in the mix of loans and finance receivables held by small businesses in our portfolio, which are larger on average than our consumer portfolio.

Average Loan and Finance Receivable Origination

The average loan and finance receivable origination amount is calculated as the total amount of combined loans and finance receivables originated, renewed and purchased for the period divided by the total number of combined loans and finance receivables originated, renewed and purchased for the period. The following table shows the average loan and finance receivable origination amount by product for 2022 compared to 2021:

[[GREPCENT_TABLE]]
[["","","Year Ended"],["","","December 31,"],["","","2022","","","2021"],["Average loan and finance receivable origination amount (in ones)(a)"],["Consumer loans and finance receivables(b)(c)","","$","665","","","$","648"],["Small business loans and finance receivables(c)","","","17,193","","","","15,703"],["Total loans(b)","","$","1,823","","","$","1,419"]]
[[/GREPCENT_TABLE]]

(a)
The disclosure regarding the average loan origination amount is statistical data that is not included in our consolidated financial statements.

(b)
Includes loans guaranteed by us, which represent loans originated by third-party lenders through the CSO programs and are not included in our consolidated balance sheets.

(c)
For line of credit accounts the average represents the average amount of each incremental draw.

The average loan origination amount increased to $1,823 from $1,419 during 2022 compared to 2021, due primarily to an increase in the mix of higher dollar amount loans and finance receivables to small businesses and, to a lesser extent, the gradual easing of restrictions on loan amounts as risks from the COVID-19 pandemic abated.

Credit Performance of Loans and Finance Receivables

We monitor the performance of our loans and finance receivables. Internal factors such as portfolio composition (e.g., interest rate, loan term, geography information, customer mix, credit quality) and performance (e.g., delinquency, loss trends, prepayment rates) are reviewed on a regular basis at various levels (e.g., product, vintage). We also weigh the impact of relevant, internal business decisions on portfolio. External factors such as macroeconomic trends, financial market liquidity expectations, competitive landscape and legal/regulatory requirements are also reviewed on a regular basis.

49

The payment status of a customer, including the degree of any delinquency, is a significant factor in determining estimated charge-offs in the cash flow models that we use to determine fair value. The following table shows payment status on outstanding principal, interest and fees as of the end of each of the last eight quarters (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","2022"],["","","First","","","Second","","","Third","","","Fourth"],["","","Quarter","","","Quarter","","","Quarter","","","Quarter"],["Ending combined loans and finance receivables, including principal and accrued fees/interest outstanding:"],["Company owned","","$","2,169,140","","","$","2,377,514","","","$","2,630,537","","","$","2,837,799"],["Guaranteed by the Company(a)","","","11,858","","","","13,997","","","","14,330","","","","15,644"],["Ending combined loan and finance receivables balance(b)","","$","2,180,998","","","$","2,391,511","","","$","2,644,867","","","$","2,853,443"],[" 30 days delinquent","","","113,798","","","","121,459","","","","147,688","","","","190,119"],[" 30 days delinquency rate","","","5.2","%","","","5.1","%","","","5.6","%","","","6.7","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","2021"],["","","First","","","Second","","","Third","","","Fourth"],["","","Quarter","","","Quarter","","","Quarter","","","Quarter"],["Ending combined loans and finance receivables, including principal and accrued fees/interest outstanding:"],["Company owned","","$","1,265,987","","","$","1,416,533","","","$","1,650,771","","","$","1,944,263"],["Guaranteed by the Company(a)","","","6,792","","","","9,655","","","","13,239","","","","13,750"],["Ending combined loan and finance receivables balance(b)","","$","1,272,779","","","$","1,426,188","","","$","1,664,010","","","$","1,958,013"],[" 30 days delinquent","","","96,228","","","","81,883","","","","90,782","","","","103,213"],[" 30 days delinquency rate","","","7.6","%","","","5.7","%","","","5.5","%","","","5.3","%"]]
[[/GREPCENT_TABLE]]

(a)
Represents loans originated by third-party lenders through the CSO programs, which are not included in our consolidated financial statements.

(b)
Non-GAAP measure.

50

Refer to the following sections for discussion of receivable balances and credit metrics at the consumer and small business levels.

Consumer Loans and Finance Receivables

The following table includes financial information for our consumer loans and finance receivables. Delinquency metrics include principal, interest and fees, and only amounts that are past due (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","2022"],["","","First","","","Second","","","Third","","","Fourth"],["","","Quarter","","","Quarter","","","Quarter","","","Quarter"],["Consumer loans and finance receivables:"],["Consumer combined loan and finance receivable principal balance:"],["Company owned","","$","888,657","","","$","936,601","","","$","972,320","","","$","965,753"],["Guaranteed by the Company(a)","","","10,027","","","","11,873","","","","11,843","","","","12,937"],["Total combined loan and finance receivable principal balance(b)","","$","898,684","","","$","948,474","","","$","984,163","","","$","978,690"],["Consumer combined loan and finance receivable fair value balance:"],["Company owned","","$","934,351","","","$","989,128","","","$","1,056,205","","","$","1,083,062"],["Guaranteed by the Company(a)","","","14,433","","","","17,860","","","","16,144","","","","16,257"],["Ending combined loan and finance receivable fair value balance(b)","","$","948,784","","","$","1,006,988","","","$","1,072,349","","","$","1,099,319"],["Fair value as a % of principal(b)(c)","","","105.6","%","","","106.2","%","","","109.0","%","","","112.3","%"],["Consumer combined loan and finance receivable balance, including principal and accrued fees/interest outstanding:"],["Company owned","","$","951,560","","","$","1,004,847","","","$","1,039,792","","","$","1,040,517"],["Guaranteed by the Company(a)","","","11,858","","","","13,997","","","","14,330","","","","15,644"],["Ending combined loan and finance receivable balance(b)","","$","963,418","","","$","1,018,844","","","$","1,054,122","","","$","1,056,161"],["Average consumer combined loan and finance receivable balance, including principal and accrued fees/interest outstanding:"],["Company owned(d)","","$","953,108","","","$","966,816","","","$","1,027,100","","","$","1,038,389"],["Guaranteed by the Company(a)(d)","","","12,960","","","","12,591","","","","14,421","","","","15,050"],["Average combined loan and finance receivable balance(b)(d)","","$","966,068","","","$","979,407","","","$","1,041,521","","","$","1,053,439"],["Revenue","","$","248,547","","","$","253,043","","","$","277,096","","","$","286,347"],["Change in fair value","","","(116,767",")","","","(133,078",")","","","(135,646",")","","","(145,276",")"],["Net revenue","","","131,780","","","","119,965","","","","141,450","","","","141,071"],["Net revenue margin","","","53.0","%","","","47.4","%","","","51.0","%","","","49.3","%"],["Delinquencies:"],[" 30 days delinquent","","$","70,480","","","$","72,300","","","$","77,258","","","$","86,884"],[" 30 days delinquent as a % of combined loan and finance receivable balance(b)(c)","","","7.3","%","","","7.1","%","","","7.3","%","","","8.2","%"],["Charge-offs:"],["Charge-offs (net of recoveries)","","$","137,224","","","$","134,524","","","$","167,762","","","$","171,421"],["Charge-offs (net of recoveries) as a % of average combined loan and finance receivable balance(b)(d)","","","14.2","%","","","13.7","%","","","16.1","%","","","16.3","%"]]
[[/GREPCENT_TABLE]]

51

[[GREPCENT_TABLE]]
[["","","2021"],["","","First","","","Second","","","Third","","","Fourth"],["","","Quarter","","","Quarter","","","Quarter","","","Quarter"],["Consumer loans and finance receivables:"],["Consumer combined loan and finance receivable principal balance:"],["Company owned","","$","523,170","","","$","585,087","","","$","709,781","","","$","867,751"],["Guaranteed by the Company(a)","","","5,691","","","","8,284","","","","11,354","","","","11,790"],["Total combined loan and finance receivable principal balance(b)","","$","528,861","","","$","593,371","","","$","721,135","","","$","879,541"],["Consumer combined loan and finance receivable fair value balance:"],["Company owned","","$","581,398","","","$","623,975","","","$","723,553","","","$","890,144"],["Guaranteed by the Company(a)","","","7,246","","","","10,824","","","","16,921","","","","18,813"],["Ending combined loan and finance receivable fair value balance(b)","","$","588,644","","","$","634,799","","","$","740,474","","","$","908,957"],["Fair value as a % of principal(b)(c)","","","111.3","%","","","107.0","%","","","102.7","%","","","103.3","%"],["Consumer combined loan and finance receivable balance, including principal and accrued fees/interest outstanding:"],["Company owned","","$","564,934","","","$","630,203","","","$","768,964","","","$","927,673"],["Guaranteed by the Company(a)","","","6,792","","","","9,655","","","","13,239","","","","13,750"],["Ending combined loan and finance receivable balance(b)","","$","571,726","","","$","639,858","","","$","782,203","","","$","941,423"],["Average consumer combined loan and finance receivable balance, including principal and accrued fees/interest outstanding:"],["Company owned(d)","","$","598,900","","","$","580,704","","","$","702,818","","","$","836,147"],["Guaranteed by the Company(a)(d)","","","8,670","","","","7,585","","","","11,366","","","","13,212"],["Average combined loan and finance receivable balance(b)(d)","","$","607,570","","","$","588,289","","","$","714,184","","","$","849,359"],["Revenue","","$","181,737","","","$","174,512","","","$","215,432","","","$","243,570"],["Change in fair value","","","(26,073",")","","","(49,708",")","","","(97,061",")","","","(104,715",")"],["Net revenue","","","155,664","","","","124,804","","","","118,371","","","","138,855"],["Net revenue margin","","","85.7","%","","","71.5","%","","","54.9","%","","","57.0","%"],["Delinquencies:"],[" 30 days delinquent","","$","24,589","","","$","26,201","","","$","45,804","","","$","59,312"],[" 30 days delinquent as a % of combined loan and finance receivable balance(b)(c)","","","4.3","%","","","4.1","%","","","5.9","%","","","6.3","%"],["Charge-offs:"],["Charge-offs (net of recoveries)","","$","36,408","","","$","27,050","","","$","57,836","","","$","112,582"],["Charge-offs (net of recoveries) as a % of average combined loan and finance receivable balance(b)(d)","","","6.0","%","","","4.6","%","","","8.1","%","","","13.3","%"]]
[[/GREPCENT_TABLE]]

(a)
Represents loans originated by third-party lenders through the CSO programs that we have not yet purchased, which are not included in our consolidated balance sheets.

(b)
Non-GAAP measure.

(c)
Determined using period-end balances.

(d)
The average combined loan and finance receivable balance is the average of the month-end balances during the period.

The combined ending loan balance, including principal and accrued fees/interest outstanding, of consumer loans and finance receivables at December 31, 2022 increased 12.2% to $1,056.2 million compared to $941.4 million at December 31, 2021, due primarily to the acceleration in originations beginning approximately mid-2021, following the strategic reduction in originations at the onset of the COVID-19 pandemic in early 2020 to mitigate risks associated with the pandemic.

The percentage of loans greater than 30 days delinquent increased to 8.2% at December 31, 2022, compared to 6.3% at December 31, 2021. The increase was driven primarily by a mix shift towards line of credit products, which generally have higher interest rates and fees due to the higher risk of default.

52

Charge-offs (net of recoveries) as a percentage of average combined loan balance increased to 16.3% for the three months ended December 31, 2022 (the “2022 fourth quarter”), compared to 13.3% for the three months ended December 31, 2021 (the “2021 fourth quarter”), driven primarily by growth in originations on line of credit products, particularly to new customers, which typically default at a higher percentage than returning customers.

The ratio of fair value as a percentage of principal on consumer loans and finance receivables increased to 112.3% at December 31, 2022, compared to 103.3% at December 31, 2021, due primarily to a mix shift towards line of credit products, which generally have a higher fair value as a percentage of principal compared to installment loans.

Refer to “Results of Operations—Valuation of Loans and Finance Receivables” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion on loan valuation, including the discount rate assumption.

Small Business Loans and Finance Receivables

The following table includes financial information for our small business loans and finance receivables. Delinquency metrics include principal, interest and fees, and only amounts that are past due (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","2022"],["","","First","","","Second","","","Third","","","Fourth"],["","","Quarter","","","Quarter","","","Quarter","","","Quarter"],["Small business loans and finance receivables:"],["Total loan and finance receivable principal balance","","$","1,210,389","","","$","1,364,055","","","$","1,580,289","","","$","1,773,411"],["Ending loan and finance receivable fair value balance","","","1,297,533","","","","1,471,723","","","","1,708,918","","","","1,935,466"],["Fair value as a % of principal(a)","","","107.2","%","","","107.9","%","","","108.1","%","","","109.1","%"],["Ending loan and finance receivable balance, including principal and accrued fees/interest outstanding","","$","1,217,580","","","$","1,372,667","","","$","1,590,745","","","$","1,797,282"],["Average loan and finance receivable balance(b)","","$","1,122,609","","","$","1,288,384","","","$","1,488,029","","","$","1,684,617"],["Revenue","","$","132,594","","","$","149,909","","","$","172,721","","","$","192,598"],["Change in fair value","","","1,138","","","","(8,764",")","","","(24,662",")","","","(49,099",")"],["Net revenue","","","133,732","","","","141,145","","","","148,059","","","","143,499"],["Net revenue margin","","","100.9","%","","","94.2","%","","","85.7","%","","","74.5","%"],["Delinquencies:"],[" 30 days delinquent","","$","43,318","","","$","49,159","","","$","70,430","","","$","103,235"],[" 30 days delinquent as a % of loan balance(a)","","","3.6","%","","","3.6","%","","","4.4","%","","","5.7","%"],["Charge-offs:"],["Charge-offs (net of recoveries)","","$","20,860","","","$","27,867","","","$","43,778","","","$","69,110"],["Charge-offs (net of recoveries) as a % of average loan and finance receivable balance(b)","","","1.9","%","","","2.2","%","","","2.9","%","","","4.1","%"]]
[[/GREPCENT_TABLE]]

53

[[GREPCENT_TABLE]]
[["","","2021"],["","","First","","","Second","","","Third","","","Fourth"],["","","Quarter","","","Quarter","","","Quarter","","","Quarter"],["Small business loans and finance receivables:"],["Total loan and finance receivable principal balance","","$","696,678","","","$","781,793","","","$","876,668","","","$","1,010,675"],["Ending loan and finance receivable fair value balance","","","649,313","","","","784,728","","","","911,729","","","","1,074,546"],["Fair value as a % of principal(a)","","","93.2","%","","","100.4","%","","","104.0","%","","","106.3","%"],["Ending loan and finance receivable balance, including principal and accrued fees/interest outstanding","","$","701,053","","","$","786,330","","","$","881,807","","","$","1,016,590"],["Average loan and finance receivable balance(b)","","$","700,348","","","$","739,378","","","$","837,606","","","$","956,110"],["Revenue","","$","75,560","","","$","85,561","","","$","100,610","","","$","115,063"],["Change in fair value","","","4,995","","","","45,078","","","","24,515","","","","22,804"],["Net revenue","","","80,555","","","","130,639","","","","125,125","","","","137,867"],["Net revenue margin","","","106.6","%","","","152.7","%","","","124.4","%","","","119.8","%"],["Delinquencies:"],[" 30 days delinquent","","$","71,639","","","$","55,682","","","$","44,978","","","$","43,901"],[" 30 days delinquent as a % of loan balance(a)","","","10.2","%","","","7.1","%","","","5.1","%","","","4.3","%"],["Charge-offs:"],["Charge-offs (net of recoveries)","","$","18,042","","","$","5,102","","","$","7,060","","","$","7,677"],["Charge-offs (net of recoveries) as a % of average loan and finance receivable balance(b)","","","2.6","%","","","0.7","%","","","0.8","%","","","0.8","%"]]
[[/GREPCENT_TABLE]]

(a)
Determined using period-end balances.

(b)
The average loan and finance receivable balance is the average of the month-end balances during the period.

The combined ending loan balance, including principal and accrued fees/interest outstanding, of small business loans and finance receivables at December 31, 2022 increased 76.8% to $1,797.3 million compared to $1,016.6 million at December 31, 2021, due primarily to strong originations in the year.

The percentage of loans and finance receivables greater than 30 days delinquent increased to 5.7% at December 31, 2022, compared to 4.3% at December 31, 2021. Charge-offs (net of recoveries) as a percentage of average loan balance increased to 4.1% for the 2022 fourth quarter, compared to 0.8% in the 2021 fourth quarter. The credit performance of our small business portfolio was stronger in 2021 when compared to the pre-COVID-19 period as the portfolio was more seasoned due to reductions in originations in response to the pandemic. Delinquency and charge-offs have risen across 2022 to more normal levels due to the acceleration in originations and macroeconomic pressures on our customers and their businesses.

The ratio of fair value as a percentage of principal on small business loans and finance receivables increased to 109.1% at December 31, 2022, compared to 106.3% at December 31, 2021, due primarily to the strong credit performance of our line of credit products.

Refer to “Results of Operations—Valuation of Loans and Finance Receivables” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion on loan valuation, including the discount rate assumption.

Total Expenses

Total operating expenses increased $122.4 million, or 20.0%, to $733.6 million in 2022, compared to $611.2 million in 2021.

Marketing expense increased $111.4 million, or 41.1%, to $382.5 million in 2022 compared to $271.1 million in 2021, due primarily to our efforts to capture increasing market demand for loan products in the current year. The prior year, particularly the first half, was abnormally low due to our strategic actions to mitigate risks associated with the COVID-19 pandemic. Certain marketing costs, such as commissions paid to third-party lead providers, are variable and increase as originations increase.

Operations and technology expense increased $26.0 million, or 17.6%, to $173.7 million in 2022 from $147.7 million in 2021, due primarily to higher variable costs, particularly personnel and underwriting, due to the increase in originations and the size of the loan portfolio. As a percentage of revenue, operations and technology expense decreased to 10.0% in 2022 from 12.2% in 2021, as increased originations and revenues outpaced fixed costs.

54

General and administrative expense decreased $16.5 million, or 10.5%, to $140.5 million in 2022 compared to $157.0 million in 2021, due primarily to synergies achieved following the October 2020 acquisition of OnDeck. As a percentage of revenue, general and administrative expense decreased to 8.1% in 2022 from 13.0% in 2021, as increased originations and revenues outpaced fixed costs.

Depreciation and amortization expense increased $1.5 million, or 4.2%, to $36.9 million in 2022 compared to $35.4 million in 2021 driven primarily by additional internally-developed software placed into service and fixed assets and intangible assets acquired with Pangea.

Nonoperating Items

Interest expense, net increased $39.4 million, or 51.5%, to $115.9 million in 2022 compared to $76.5 million in 2021, due primarily to an increase in the average amount of debt outstanding to $1,856.1 million during 2022 from $1,036.2 million during 2021, partially offset by a decrease in the weighted average interest rate on our outstanding debt to 6.35% in 2022 from 7.34% in 2021. See “—Liquidity and Capital Resources—Current Debt Facilities” below for further information.

Provision for Income Taxes

The effective tax rate from continuing operations of 23.9% in 2022 was consistent with the 23.8% rate in 2021. The 2022 rate was primarily driven by an increase in state tax rates, which was offset by excess tax benefits from stock-based compensation.

As of December 31, 2022, the balance of unrecognized tax benefits was $87.7 million which is included in “Accounts payable and accrued expenses” on the consolidated balance sheet, $11.6 million of which, if recognized, would favorably affect the effective tax rate in the period of recognition. We had $44.1 million of unrecognized tax benefits as of December 31, 2021. We believe that we have adequately accounted for any material tax uncertainties in our existing reserves for all open tax years.

Our U.S. tax returns are subject to examination by federal and state taxing authorities. The statute of limitations related to our consolidated Federal income tax returns is closed for all tax years up to and including 2018. However, the 2014 tax year is still open to the extent of the net operating loss which we carried back from the 2019 tax return. 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.

LIQUIDITY AND CAPITAL RESOURCES

Capital Funding Strategy

We seek to maintain a stable and flexible balance sheet to ensure that liquidity and funding are available to meet our business obligations. As of December 31, 2022, we had cash, cash equivalents, and restricted cash of $178.4 million, of which $78.2 million was restricted, compared to $225.9 million, of which $60.4 million was restricted, as of December 31, 2021. During the three months ended March 31, 2022, we increased the borrowing capacity on four of our loan securitization facilities without having to increase any of the respective borrowing rates. In June 2022, we entered into a new $420.0 million loan securitization facility and increased the aggregate principal on our existing secured revolving credit agreement while extending its term. In October 2022, we entered into a new $125 million loan securitization facility. In November 2022, we amended two securitization facilities which resulted in a net increase to our funding capacity of $26.0 million and expanded the eligibility requirements to include more of our loans. As of December 31, 2022, we had funding capacity of $533.1 million. Based on numerous stressed-case modeling scenarios, we believe we have sufficient liquidity to run our operations for the foreseeable future. Further, we have no recourse debt obligations due until September 2024. As part of our capital and liquidity management, we may from time to time acquire our outstanding debt securities, including through redemptions, tender offers, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws and in compliance with the indentures governing our outstanding debt securities, upon such terms and at such prices as we may determine.

Historically, we have generated significant cash flow through normal operating activities for funding both long-term and short-term needs. Our near-term liquidity is managed to ensure that adequate resources are available to fund our seasonal working capital growth, which is driven by demand for our loan and financing products. On September 1, 2017, we issued and sold $250.0 million in aggregate principal amount of 8.50% Senior Notes due 2024 (the “2024 Senior Notes”) and used the net proceeds, in part, to retire $155.0 million in existing indebtedness. On September 19, 2018, we issued and sold $375.0 million in aggregate principal amount of 8.50% Senior Notes due 2025 (the “2025 Senior Notes”) and used the net proceeds, in part, to retire existing indebtedness.

55

On June 30, 2017, we entered into a secured revolving credit agreement (as amended, the “Credit Agreement”). On June 23, 2022, we entered into an amendment and restatement of our Credit Agreement that, among other things, increased the borrowing capacity to $440.0 million, with a $20.0 million letter of credit sublimit and $10.0 million swingline loan sublimit. The Credit Agreement bears interest, at our option, at the base rate plus 0.75% or the Secured Overnight Financing Rate plus 3.50%. In addition to customary fees for a credit facility of this size and type, the Credit Agreement provides for payment of a commitment fee calculated with respect to the unused portion of the commitment, and ranges from 0.15% per annum to 0.50% per annum depending on usage. The Credit Agreement contains certain prepayment penalties if it is terminated on or before the first and second anniversary dates, subject to certain exceptions. The Credit Agreement matures on June 30, 2026. As of February 22, 2023, our available borrowings under the Credit Agreement were $130.3 million. Since 2016, we have entered into several loan securitization facilities and offered asset-backed notes to fund our growth, primarily in our near-prime consumer installment loan and small business loan businesses. As of February 22, 2023, we had funding capacity of $363.8 million. We expect that our operating needs, including satisfying our obligations under our debt agreements and funding our working capital growth, will be satisfied by a combination of cash flows from operations, borrowings under the Credit Agreement, or any refinancing, replacement thereof or increase in borrowings thereunder, and securitization or sale of loans and finance receivables under our consumer and small business loan securitization facilities.

As of December 31, 2022, we were in compliance with all financial ratios, covenants and other requirements set forth in our debt agreements. Unexpected changes in our financial condition or other unforeseen factors may result in our inability to obtain third-party financing or could increase our borrowing costs in the future. To the extent we experience short-term or long-term funding disruptions, we have the ability to adjust our volume of lending and financing to consumers and small businesses that would reduce cash outflow requirements while increasing cash inflows through repayments. Additional alternatives may include the securitization or sale of assets, increased borrowings under the Credit Agreement, or any refinancing or replacement thereof, and reductions in capital spending which could be expected to generate additional liquidity.

Capital

Our Total stockholders' equity increased by $93.0 million to $1,186.1 million at December 31, 2022 from $1,093.1 million at December 31, 2021. The increase of stockholders' equity was driven primarily by net income for the year ended December 31, 2022, partially offset by $143.1 million in repurchases of our common stock. Our book value per share outstanding increased to $37.99 at December 31, 2022 from $32.01 at December 31, 2021, which was primarily driven by net income and share repurchases in 2022 .

On February 9, 2022, we announced the Board of Directors authorized a new share repurchase program totaling $100.0 million through June 30, 2023 (the "February 2022 Authorization"). On November 7, 2022, we announced the Board of Directors authorized an increase to our share repurchase program of up to $150.0 million through December 31, 2023 (the "November 2022 Authorization"). The November 2022 Authorization will go into effect when the February 2022 Authorization is exhausted. Repurchases under our repurchase programs will be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions or otherwise. The share repurchase program does not obligate us to purchase any shares of our common stock. The authorization for the share repurchase programs may be terminated, increased or decreased by the Board of Directors in its discretion at any time. During 2022, we paid $137.6 million to repurchase common stock under the share repurchase programs.

Cash

At December 31, 2022, we had $100.2 million of available unrestricted cash to fund our future operations compared to approximately $165.5 million at December 31, 2021.

Our cash and cash equivalents at December 31, 2022 were held primarily for working capital purposes and were used to fund a portion of our lending activities. From time to time, we use excess cash and cash equivalents to fund our lending activities. We do not enter into investments for trading or speculative purposes. Our policy is to invest cash in excess of our immediate working capital requirements in short-term investments, deposit accounts or other arrangements designed to preserve the principal balance and maintain adequate liquidity. Our excess cash may be invested primarily in overnight sweep accounts, money market instruments or similar arrangements that provide competitive returns consistent with our polices and market conditions.

Our restricted cash primarily consists of funds held in accounts as reserves on certain debt facilities and as collateral for issuing bank partner transactions. We have no ability to draw on such funds as long as they remain restricted under the applicable arrangements but have the ability to use these funds to finance loan originations, subject to meeting borrowing base requirements. Our policy is to invest restricted cash held in debt facility related accounts, to the extent permitted by such debt facility, in investments designed to preserve the principal balance and provide liquidity. Accordingly, such cash is invested primarily in money market instruments that offer daily purchase and redemption and provide competitive returns consistent with our policies and market conditions.

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Current Debt Facilities

The following table summarizes our debt facilities as of December 31, 2022.

[[GREPCENT_TABLE]]
[["","","Maturity date","","Weighted average interest rate(a)","","Borrowing capacity","","","Principal outstanding"],["Funding Debt:"],["2018-1 Securitization Facility","","March 2027","(b)","7.95%","","","200,000","","","","192,717"],["2018-2 Securitization Facility","","July 2025","(c)","8.34%","","","225,000","","","","179,654"],["NCR 2022 Securitization Facility","","October 2026","(d)","9.07%","","","125,000","","","","43,958"],["ODR 2021-1 Securitization Facility","","November 2024","(e)","7.22%","","","233,333","","","","197,167"],["ODR 2022-1 Securitization Facility","","June 2025","(f)","7.27%","","","420,000","","","","187,000"],["RAOD Securitization Facility","","November 2025","(g)","6.93%","","","230,263","","","","230,263"],["ODAST III Securitization Notes","","May 2027","(h)","2.07%","","","300,000","","","","300,000"],["Total funding debt","","","","6.33%","","$","1,733,596","","","$","1,330,759"],["Corporate Debt:"],["8.50% Senior Notes Due 2024","","September 2024","","8.50%","","","250,000","","","","250,000"],["8.50% Senior Notes Due 2025","","September 2025","","8.50%","","","375,000","","","","375,000"],["Revolving line of credit","","June 2026","","7.50%","","","440,000","","(i)","","309,000"],["Total corporate debt","","","","8.17%","","$","1,065,000","","","$","934,000"]]
[[/GREPCENT_TABLE]]

(a)
The weighted average interest rate is determined based on the rates and principal balances on December 31, 2022. It does not include the impact of the amortization of deferred loan origination costs or debt discounts.

(b)
The period during which new borrowings may be made under this facility expires in March 2025.

(c)
The period during which new borrowings may be made under this facility expires in July 2023.

(d)
The period during which new borrowings may be made under this facility expires in October 2024.

(e)
The period during which new borrowings may be made under this facility expires in November 2023.

(f)
The period during which new borrowings may be made under this facility expires in June 2024.

(g)
The period during which new borrowings may be made under this facility expires in November 2024.

(h)
The period during which new borrowings may be made under this facility expires in April 2024.

(i)
We had outstanding letters of credit under the Revolving line of credit of $0.8 million as of December 31, 2022.

Our ability to fully utilize the available capacity of our debt facilities may also be impacted by provisions that limit concentration risk and eligibility.

Cash Flows

Our cash flows and other key indicators of liquidity are summarized as follows (dollars in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021","","","2020"],["Cash flows provided by (used in) operating activities"],["Cash flows from operating activities - continuing operations","","$","893,998","","","$","471,868","","","$","741,171"],["Cash flows from operating activities - discontinued operations","","","\u2014","","","","\u2014","","","","(300",")"],["Cash flows provided by operating activities","","","893,998","","","","471,868","","","","740,871"],["Cash flows (used in) provided by investing activities"],["Loans and finance receivables","","","(1,631,354",")","","","(923,494",")","","","2,986"],["Acquisitions, net of cash acquired","","","\u2014","","","","(29,153",")","","","109,920"],["Purchases of property and equipment","","","(43,629",")","","","(29,674",")","","","(29,491",")"],["Disposal of a subsidiary","","","8,713","","","","1,928","","","","\u2014"],["Other investing activities","","","\u2014","","","","25","","","","168"],["Total cash flows (used in) provided by investing activities","","","(1,666,270",")","","","(980,368",")","","","83,583"],["Cash flows provided by (used in) financing activities","","$","724,866","","","$","365,149","","","$","(535,974",")"],["Total debt to Adjusted EBITDA (a)","","","5.1","x","","","2.9","x","","","2.3","x"]]
[[/GREPCENT_TABLE]]

(a)
Total debt to Adjusted EBITDA, a non-GAAP measure, is calculated using Adjusted EBITDA for the twelve months ended for the respective period indicated. See “—Non-GAAP Financial Measures—Adjusted EBITDA.”

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Cash Flows from Operating Activities

Net cash provided by operating activities increased $422.1 million, or 89.5%, to $894.0 million for 2022 from $471.9 million for 2021. The increase was driven primarily by additional interest and fee income from growth in the loan portfolio, particularly since mid-2021. Net cash provided by operating activities for 2021 was abnormally low due to the strategic reduction in originations implemented at the onset of the COVID-19 pandemic.

We believe cash flows from operations and available cash balances and borrowings under our securitization facilities and Credit Agreement, which may include increased borrowings under our Credit Agreement, any refinancing or replacement thereof, and additional securitization of consumer and small business loans, will be sufficient to fund our future operating liquidity needs, including to fund our working capital growth.

Cash Flows from Investing Activities

Net cash flows used in investing activities increased $685.9 million, or 70.0%, for 2022 compared to 2021, due primarily to a $707.9 million increase in net cash used in loans and finance receivables, due to a 46.0% increase in loans and finance receivables originated or purchased and a 31.0% increase in loans and finance receivables repaid.

Cash Flows from Financing Activities

Net cash provided by financing activities in 2022 was $724.9 million compared to $365.1 million used in financing activities in 2021. Cash flows provided by financing activities for 2022 primarily reflects net borrowings of $109.0 million under the Credit Agreement and $762.2 million under our securitization facilities, partially offset by $143.1 million of cash used in treasury shares purchased, primarily under the share repurchase programs discussed above under “Capital”. Cash flows used in financing activities for 2021 primarily reflects $200 million of net borrowing under our Credit Agreement, $272.6 million of net borrowing under our securitization facilities, partially offset by $116.7 million of cash used in treasury shares purchased, primarily under the share repurchase programs.

CRITICAL ACCOUNTING ESTIMATES

Loans and Finance Receivables

Beginning January 1, 2020, we have elected the fair value option for our loans and finance receivables. We estimate the fair value of our loans and finance receivables primarily using discounted cash flow analyses at an individual loan level to more accurately predict future payments. We adjust contractual cash flows for estimated losses, prepayments and servicing costs over the estimated duration of the underlying assets and discount the future cash flows using a rate of return that we believe a market participant would require. Model results may be adjusted by management if we do not believe the output reflects the fair value of the portfolio, as defined under U.S. GAAP. The models are updated at each measurement date to capture any changes in internal factors such as nature, term, volume, payment trends, remaining time to maturity, and portfolio mix, as well as changes in underwriting or observed trends expected to impact future performance. We have validated model performance by comparing past valuations with actual performance noted after each valuation.

The following describes the primary inputs to the discounted cash flow analyses that require significant judgment:

•
Net losses – Net losses are estimates of the principal payments that will not be repaid over the life of our portfolio, net of the expected principal recoveries on charged-off receivables. We have developed proprietary underwriting systems based on data we have collected since the Company’s inception. These systems employ advanced risk analytics to decide whether to approve financing transactions, to structure the amount and terms of the financings we offer pursuant to jurisdiction-specific regulations, and to provide customers with funds quickly and efficiently. Our systems closely monitor collection and portfolio performance data that we use to continually refine the analytical models and statistical measures used in making our credit, purchase, marketing, and collection decisions. Leveraging the data at the core of our business, we utilize our models to estimate lifetime credit losses for loans and finance receivables. Inputs to the models include contractual cash flows, customer application information, historical and current performance, and behavioral information. Management may also incorporate discretionary adjustments based on our expectations of future credit performance.

•
Prepayments – Prepayments are estimates of the amount of principal payments that will occur earlier than contractually required during the life of a loan and finance receivable. Prepayments accelerate the timing of principal repayment and reduce interest payments. Prepayment rates in our discounted cash flow models are developed using historical results as the basis. Model inputs are similar to those utilized to estimate net losses and may also incorporate discretionary adjustments based on our expectations of future performance.

•
Utilization – Utilization is the rate that a line of credit is utilized in proportion to the borrowing limit. Utilization rates in our discounted cash flow model for the OnDeck line of credit product are developed using historical results as the basis and are

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used to estimate future draws on the line. Model inputs are similar to those utilized to estimate net losses and may also incorporate discretionary adjustments based on our expectations of future activity.

•
Servicing costs – Servicing costs applied to the expected cash flows of our portfolio reflect our estimate of the amount investors would incur to service the underlying assets for the remainder of their lives. Servicing costs are derived from our internal analysis of our cost structure considering the characteristics of our receivables and have been benchmarked against observable information on comparable assets in the marketplace.

•
Discount rates – Determined at a product level, the discount rates utilized in our cash flow analyses reflect our estimates of the rates of return that investors would require when investing in financial instruments with similar risk and return characteristics.

Management continuously monitors factors that may impact the fair values of its products. Internal factors such as portfolio composition (for example, interest rate, loan term, geography information, customer mix, credit quality) and performance (e.g., delinquency, loss trends, prepayment rates) are reviewed on a regular basis at various levels, including product and vintage. The Company also weighs the impact of relevant, internal business decisions on estimated fair value. External factors such as macroeconomic trends, financial market liquidity expectations, competitive landscape and legal or regulatory requirements are also reviewed on a regular basis. Management also reviews the results of its fair value model output compared to prior periods for unusual trends, potential model over- or under-reaction, outlier results and other distorting factors. Based on these analyses, management may deem it appropriate to adjust model output to derive management’s best estimate of fair value.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with Accounting Standards Codification (“ASC”) 350, Goodwill, we test goodwill for potential impairment annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount.

We have historically performed our annual goodwill impairment test as of June 30 each year. During the year ended December 31, 2021, we voluntarily changed our annual impairment assessment date from June 30 to October 1 to better align with our budgeting process and year end as well as to include nearly a full year of results after our October 2020 acquisition of OnDeck, which was a material change to our financial position and results of operations. We believe the change in goodwill impairment testing date does not represent a material change to our method of applying an accounting principle in light of our internal controls and requirements to assess goodwill impairment upon certain triggering events.

We first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In assessing the qualitative factors, we consider relevant events and circumstances including but not limited to macroeconomic conditions, industry and market environment, our overall financial performance, cash flow from operating activities, market capitalization and stock price. If we determine that the quantitative impairment test is required, we use the income approach to complete our annual goodwill assessment. The income approach uses future cash flows and estimated terminal values that are discounted using a market participant perspective to determine the fair value, which is then compared to the carrying value to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar from an operational and economic standpoint. See Note 5, Goodwill and Other Intangible Assets, to the Consolidated Financial Statements.

Income Taxes

We account for income taxes under ASC 740, Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax expense together with assessing temporary differences in recognition of income for tax and accounting purposes. These differences result in deferred tax assets and liabilities and are included within the consolidated balance sheets. We must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not more likely than not, we must establish a valuation allowance. An expense or benefit is included within the tax provision in the consolidated statement of income for any increase or decrease in the valuation allowance for a given period.

We report our loans and finance receivables in the Company’s tax returns at fair market value, as determined for U.S. federal income tax purposes, which differs from how we report them in the consolidated financial statements due in part to statutory tax and judicial principles that may lead to different interpretations of expected credit losses and discount rate assumptions. Changes in the fair market value of our loans and finance receivables as determined for tax purposes may have a significant impact on the timing and amount of how income taxes are recognized in the consolidated financial statements. The estimates of fair market value are dependent on multiple assumptions, including expected credit losses and discount rates.

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We perform an evaluation of the recoverability of our deferred tax assets on a quarterly basis. We establish a valuation allowance if it is more-likely-than-not (greater than 50 percent) that all or some portion of the deferred tax asset will not be realized. We analyze several factors, including the nature and frequency of operating losses, our carryforward period for any losses, the reversal of future taxable temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning strategies to protect against the loss of deferred tax assets.

We account for uncertainty in income taxes in accordance with ASC 740, which requires that a more-likely-than-not threshold be met before the benefit of a tax position may be recognized in the consolidated financial statements and prescribes how such benefit should be measured. We must evaluate tax positions taken on our tax returns for all periods that are open to examination by taxing authorities and make a judgment as to whether and to what extent such positions are more likely than not to be sustained based on the technical merits. We record interest and penalties related to tax matters as income tax expense in the consolidated statement of income.

Our judgment is required in determining the provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. Our judgment is also required in evaluating whether tax benefits meet the more-likely-than-not threshold for recognition under ASC 740.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 in the Notes to the Consolidated Financial Statements in Part II, Item 8 “Financial Statements and Supplementary Data” in this report for a discussion of recently issued accounting pronouncements that may be significant to Enova.