Investment Research Presentation

Month Day, 20XX

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I

M

Enova International (NYSE: ENVA)

Sector: FinancialsSenior Analyst: Benjamin Smith Junior Analysts: Alejandro Mendez, Eric Rivera, GiaSun, Zack Zhang

Spring 2018

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Valuation Summary

Company (Ticker) ENVA

Current Trading Price (04-15-2018) $22.65

Recommendation

Target Price $26.55

Upside Potential 17.2%

Recommendation Summary

Recommendation BUY

3

Agenda

Industry Overview

Company Overview

Competitive Advantage

Trend Analysis

Risk Analysis

Valuation

Summary/Recommendation

4

Specialty Finance Industry Overview

Specialty finance is any financing activity that takes place outside of the traditional banking system. Specialty finance firms are usually non-bank lenders that make loans to consumers and businesses that cannot otherwise obtain financing.

William Blair, Bloomberg Markets, MSCI, S&P Global

FirstCash

NYSE: FCFS

Market Cap: 3.75B

Regional Management

NYSE: RM

Market Cap: 366.96M

Blackhawk Network Holdings

NASDAQ: HAWK

Market Cap: 1.95B

Elevate Credit

NYSE: ELVT

Market Cap: 313.93M

EZCORP

NASDAQ: EZPW

Market Cap: 542.97M

LendingClub

NYSE: LC

Market Cap: 1.59B

Financials

Diversified Financials

Consumer Finance

SpecializedFinance

5

Industry Trends

● Aggregate household debt balances have risen to a new peak and are predicted to rise further

○ Aggregate household debt is forecasted to grow 3.0% from 2018 to 2023. Economists predict household debt will reach $16.6 trillion from $14.3 in just five years

○ The average personal loan debt has increased by a 8 year CAGR of 146% from 2011 to 2017

Economic trends point to a stable growth environment for consumer lending and have led to the return of consumer leverage

Technology will continue to attract subprime borrowers and allow firms to reduce risk

● Lending through mobile devices allows lenders to accumulate vital information that is used to reduce risk of default

○ This can range from information gathered through the borrower’s Facebook account to their contact information in their phone

Pew Research Center, Lending Times, Center for American Progress

6

Industry Trends

Changing U.S. demographics will create more demand for subprime non-traditional lenders

● Certain racial, ethnic, and income groups are less likely to participate in the traditional consumer finance system

○ Approximately 28% of American households either lack bank accounts or are not fully integrated into the financial system

○ Those who do not have access to bank accounts are predominantly non-white

○ The high cost of maintaining a bank account and an overall lack of trust in banks has discouraged many lower-income households from opening an account

● These racial and ethnic groups will become a larger percentage of the U.S. population

○ The U.S. population is projected to become majority minority by 2044

○ The Hispanic population will than double by 2060 at a growth rate of 129%

The Brookings Institution, U.S. Census Bureau, FDIC, Fortune, Center for American Progress

7

Company Overview

Enova International is a Chicago-based specialty finance company that utilizes technology to develop innovative financial products for individuals and businesses

• Formed in 2014 as a spinoff of Cash America • Online lending platform targeting subprime

borrowers• Uses advanced proprietary analytics to make real-

time lending decisions • Conducts business in the US, UK, and Brazil• Focused on growth and product diversification • Recently entered the commercial lending business• Share repurchase program signals confidence

Enova International, Chicago Tribune, The Wall Street Journal

3.25.7

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22.5

27.4

31.9

35.5

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Cu

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45% Increase in Cumulative Originations Over Last Decade

Six growth business proving various credit products to consumers and businesses drive revenue

Enova International (ENVA)

Market Cap $759 million

2017 Revenue $844 million

Debt-to-Capital 51%

ROA 2.7%

ROE 11.2%

Credit Rating (Moody’s) Caa1/Speculative

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Business Model

Subprime Profile

$41,000 Annual Income

30% Homeowners

560 - 600 FICO Score Range

● Attracting subprime borrowers○ No need to travel to a physical location ○ Lax requirements: 18+ years old, US

citizen, driver’s license, etc.○ Fast approval process and immediate

financing

Enova International 10-K, Elevate UBS Investor Conference Presentation, Regional Management Corp.

Potential customer submits an application

Credit decision is quickly provided

Loan is funded the same or next day

Proprietary technology is used to assess risk and provide financing as quickly as possible

Scoring models decide whether to approve financing transactions and structure the amount and terms of the financing in accordance with jurisdiction specific regulations

License agreements give lenders access to personal data including contact information, phone and text records, and smartphone application data used in the approval process

9

Competitive Advantage

First-Mover Advantage

Superior Data Analytics

Strong Management

• Started providing payday loans to subprime borrowers through the internet in 2004• Established “technological leadership” in the form of a real-time lending decision model• More than a decade of data and experience within subprime lending

• 50+ person analytics group continuously refines underwriting system • 13% charge-off rate vs Elevate Credit’s 52% exemplifies Enova’s superior data analytics • New analytics service “Enova Decisions” being used to further diversify revenue streams

• CFO joined the firm in 2016 and was previously CRO of Discover Financial Services • CEO was head of optionsXpress when it was sold to Charles Schwab for $1.4B• Management has laid out a clear growth plan for the future

Enova International, Elevate Credit

10

Trend 1: Product diversification reduces risk and paves the way for future growth

Enova has moved away from payday loans as a way of reducing risk associated with regulatory changes and gaining new market share

All domestic growth in 2017 was driven by installment loans and line of credit accounts

Enova International

Product Description Size Term Interest (APR)

Short-term loansSmall-principal loan usually repaid upon customer’s

next payday$150 - $3,500 7 - 90 Days 200% - 650%

Line of credit accounts

Allows customers to draw on a line of credit in increments

$2,000 2 - 10 Months 300%

Installment loansLonger term loans that require the outstanding principal balance to be paid down in multiple

installments$1,000 - $12,000 2 - 60 Months 150% - 200%

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Trend 2: Securitization reduces risk and increases liquidity

Enova pools a group of receivables that it has originated

Enova sells this group of receivables in exchange for cash

Loan

Loan

Loan

Loan

Loan Loan

Loan

Securitization Facility 2016-1

Securitization Facility 2016-2

First spoke about securitization as a way to increase liquidity in 2015

Enova International, GM Financial

$275m

$20m

Jefferies

Redpoint Capital

Securitization is the practice of pooling various types of contractual debt such as mortgages, auto loans or credit card debt obligations and selling their related cash flows to third party investors as securities.

Securitization increase liquidity and decreases risk by selling receivables in exchange for cash

• Enova can use cash earned from securitization to originate new loans

• Allows Enova to put more focus on origination and less focus on future receivables

• May decrease the cost of raising capital due to the offloading risk

12

Risk Analysis

Enova is exposed to a variety of risks ranging from the constant development of new regulation to adverse market conditions. However, the firm’s utilization of securitization and its initiatives to diversify revenue streams address these risks head-on.

● The use of personal data for credit underwriting is highly regulated● New regulations could increase compliance costs, restrict lending

capabilities, and eliminate the ability to offer certain products● Consumer advocacy groups consistently pressure legislators

Restrictive Regulation

Security Breaches

● Originating longer-term loans reduces liquidity● Lower liquidity makes it more difficult to raise capital ● In the event of a financial crisis or credit freeze like in 2008, Enova

would be at high risk of bankruptcy

Liquidity

● SEC stated that cyber security is largest threat to financial system in 2016

● Security breaches are detrimental to consumer trust and brand name

● Protection against cyber attacks result in increased costs

Enova International Form 10-K, Enova International Form 10-Q, Reuters

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Comparable Companies Analysis

P/TBV

Tangible Book Value $10.2m

Implied Price Target $1.07

Upside (Downside) % -95%

P/S

LTM Sales $844m

Implied Price Target $42.94

Upside (Downside) % 90%

P/BV

Book Value $286m

Implied Price Target $18.10

Upside (Downside) % -20%

Comparable Companies Analysis

LTM data (12-31-2018)

Company Ticker EV Market Cap Sales Book Value TBV P/BV P/TBV P/S

Enova International ENVA 1,491 759 844 286 10 2.7 x 74.4x 0.9x

Elevate Credit ELVT 725 314 673 96 79 3.3 x 4.0x 0.5x

Regional Management RM 939 386 249 245 230 1.6 x 1.7x 1.5x

World Acceptance WRLD 1,184 904 532 482 464 1.9 x 1.9x 1.7x

FirstCash FCFS 4,222 3,934 1,051 1,479 551 2.7 x 7.1x 3.7x

OneMain Holdings OMF 18,086 4,023 3,756 3,287 1,387 1.2 x 2.9x 1.1x

High 3.3x 7.1x 3.7x

Mean 2.1x 3.5x 1.7x

Median 1.9x 2.9x 1.5x

Low 1.2x 1.7x 0.5x

P/BV = Price/Book ValueP/TBV = Price/Tangible Book ValueP/S = Price/Sales

14

DCF Valuation

Exit Multiple Method

EBITDA Multiple 7.00x

Undiscounted TEV 2,354.70$

Discounted TEV 1,581.65$

DCF Value $1,828.75

Equity Value $1,097.44

Share Price 32.74$

Implied Growth Rate 2.76%

Perpetuity Growth Method

Growth Rate 2.20%

Undiscounted TEV 2,124.64$

Discounted TEV 1,427.12$

DCF Value $1,674.22

Equity Value $942.91

Share Price 28.13$

Implied Exit Multple 6.32x

Key Assumptions

• Revenue from payday loans decrease steadily

• Revenue from LOC accounts and installment loans/RPAs continue to increase

• Securitizations decrease AR and changes in NWC

• $20m stock repurchase will take place from 2018 to 2020

• SG&A as a % of sales will continue to decrease as originations increase

Cost of Debt: 5.79%

Cost of Equity: 10.91%

WACC: 8.28%

Terminal Growth Rate: 2.20%

Exit Multiple: 7.00x

Forecasted

2018 2019 2020 2021 2022

EBIT 153.88$ 177.08$ 215.37$ 260.54$ 317.79$

- Taxes (35.16) (40.46) (49.21) (59.53) (72.61)

118.72$ 136.62$ 166.16$ 201.01$ 245.17$

+ D&A 14.87 15.52 16.39 17.42 18.44

- CAPEX (18.47) (19.18) (20.56) (21.83) (23.46)

- Δ in NWC (79.75) (97.55) (110.95) (115.38) (113.67)

Unlevered FCF 35.36$ 35.42$ 51.04$ 81.22$ 126.48$

Net Present Value $247.10

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Recommendation SummaryRecommendation Summary

Company (Ticker) ENVA

Current Trading Price (04-15-2018) 22.65$

Recommendation BUY

Target Price 26.55$

Upside Potential 17.2%

Valuation Summary

Method Price Weight

Discounted Cash Flow

Perpetuity Growth Method 28.13$ 35%

Exit Multiple Method 32.74$ 35%

Comparable Company Analysis

P/BV 18.10$ 5%

P/TBV 1.07$ 5%

P/S 42.94$ 10%

Target Price 26.55$

Recommendation BUY

Growth industry with favorable trends

Strong track record of product innovation and increased originations

Experienced management with clear plans for further diversification and utilization of favorable financing methods

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Thank You

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Appendix

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Appendix: Income Statement Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Revenue 765.3 809.8 652.6 745.6 843.7 976.3 1,115.4 1,274.1 1,442.1 1,633.3

% growth 5.8% -19.4% 14.2% 13.2% 15.7% 14.3% 14.2% 13.2% 13.3%

COGS (excl. D&A) (315.1) (266.8) (216.9) (328.0) (396.6) (462.2) (536.2) (600.7) (659.2) (722.3)

% of Revenue 41.17% 32.94% 33.23% 43.99% 47.01% 47.34% 48.07% 47.15% 45.71% 44.23%

Gross Profit 450.3 543.1 435.7 417.6 447.1 514.1 579.2 673.4 782.9 910.9

% Margin 58.8% 67.1% 66.8% 56.0% 53.0% 52.7% 51.9% 52.9% 54.3% 55.8%

SG&A (290.5) (309.3) (293.0) (280.6) (298.3) (345.2) (386.5) (441.5) (504.7) (574.6)

% of Revenue 37.96% 38.19% 44.89% 37.63% 35.36% 35.36% 34.65% 34.65% 35.00% 35.18%

EBITDA 159.7 233.7 142.8 137.0 148.8 168.9 192.8 231.9 278.1 336.4

% Margin 20.9% 28.9% 21.9% 18.4% 17.6% 17.3% 17.3% 18.2% 19.3% 20.6%

Depreciation (17.1) (18.7) (18.4) (15.6) (14.4) (14.9) (15.5) (16.4) (17.4) (18.4)

Amort. of Intangibles - - - - - - - - - -

Total D&A (17.1) (18.7) (18.4) (15.6) (14.4) (14.9) (15.5) (16.4) (17.4) (18.4)

Other Operating Expenses (1.2) (0.0) (1.0) 1.6 (22.5) (0.2) (0.2) (0.2) (0.2) (0.2)

Total Operating Expenses (308.9) (328.1) (312.3) (294.6) (335.2) (360.2) (402.2) (458.0) (522.3) (593.2)

Operating Income (EBIT) 141.4 215.0 123.4 123.0 111.9 153.9 177.1 215.4 260.5 317.8

% Margin 18.5% 26.5% 18.9% 16.5% 13.3% 15.8% 15.9% 16.9% 18.1% 19.5%

Interest Expense (19.8) (38.5) (52.9) (65.6) (74.0) (60.1) (60.1) (60.1) (60.1) (60.1)

Interest Income - - - - - - - - - -

Net Interest Inc. (Exp) (19.8) (38.5) (52.9) (65.6) (74.0) (60.1) (60.1) (60.1) (60.1) (60.1)

Other Non-Operating Income - - - - - - - - - -

EBT Excl. Unusual Items 121.6 176.5 70.5 57.4 37.9 93.8 117.0 155.3 200.5 257.7

% Margin 15.9% 21.8% 10.8% 7.7% 4.5% 9.6% 10.5% 12.2% 13.9% 15.8%

Unusual Items - - - - - - - - - -

EBT Incl. Unusual Items 121.6 176.5 70.5 57.4 37.9 93.8 117.0 155.3 200.5 257.7

Income Tax Expense (43.6) (64.8) (26.5) (22.8) (8.7) (21.44) (26.7) (35.5) (45.8) (58.9)

Earnings from Cont. Ops 78.0 111.7 44.0 34.6 29.2 72.4 90.3 119.8 154.7 198.8

Earnings from Discounted Ops. - - - - - - - - - -

Extraord Item & Acct. Change - - - - - - - - - -

Net Income to Company 78.0 111.7 44.0 34.6 29.2 72.4 90.3 119.8 154.7 198.8

Minority Int. in Earnings - - - - - 0 0 0 0 0

Net Income 78.0 111.7 44.0 34.6 29.2 72.4 90.3 119.8 154.7 198.8

% Margin 10.2% 13.8% 6.7% 4.6% 3.5% 7.4% 8.1% 9.4% 10.7% 12.2%

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Appendix: Balance SheetHistorical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Cash And Equivalents 47.5 75.1 42.1 39.9 68.7 116.6 169.6 238.3 337.1 486.3

Accounts Receivable 303.5 323.6 434.6 561.6 704.7 810.3 914.7 1,032.0 1,153.6 1,273.9

Other Recievables - 16.6 25.6 19.5 27.9 23.2 26.5 30.3 34.3 38.9

Total Receivables 303.5 340.2 460.2 581.1 732.6 833.5 941.2 1,062.4 1,188.0 1,312.8

Restricted Cash - 7.8 7.4 26.3 29.5 25.2 29.2 32.7 35.9 39.3

Prepaid Exp. - - - - - - - - - -

Other Current Assets 8.7 - - - - - - - - -

Total Current Assets 359.6 423.1 509.6 647.3 830.8 975.3 1,140.0 1,333.3 1,561.0 1,838.4

Gross Property, Plant & Equipment 39.4 41.3 49.8 55.2 59.0 77.5 96.7 117.2 139.1 162.5

Accumulated Depreciation (21.5) (30.1) (26.0) (31.7) (37.0) (51.9) (67.4) (83.8) (101.2) (119.6)

Net Property, Plant & Equipment 17.9 11.2 23.8 23.5 22.0 25.6 29.3 33.5 37.9 42.9

Long-term Investments - 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7 6.7

Goodwill 255.9 255.9 267.0 267.0 267.0 267.0 267.0 267.0 267.0 267.0

Other Intangibles 21.5 22.9 30.8 29.0 30.8 30.8 30.8 30.8 30.8 30.8

Deferred Tax Assets, Current & LT 30.9 25.4 - - - - - - - -

Deferred Charges, LT - - - - - - - - - -

Other Long-Term Assets 6.3 15.1 2.6 4.3 2.1 7.2 7.2 7.2 7.2 7.2

Total Assets 692.1 760.2 840.5 977.9 1,159.4 1,312.7 1,481.0 1,678.6 1,910.6 2,193.0

Accounts Payable 18.7 25.5 25.7 25.4 25.6 38.4 44.5 49.9 54.7 60.0

Accrued Exp. 19.3 22.5 12.7 19.4 26.1 23.4 26.2 30.0 34.3 39.0

Curr. Income Taxes Payable 0.0 6.8 - 0.3 - 0.5 0.6 0.8 1.1 1.4

ST Debt - - 3.0 3.0 3.0

Other Current Liabilities 11.6 9.3 30.7 23.8 22.4 31.7 36.7 41.1 45.2 49.5

Total Current Liabilities 49.6 64.1 72.1 72.0 77.1 94.0 108.1 121.8 135.2 149.9

Long Term Debt 424.1 494.2 541.9 649.9 788.5 788.5 788.5 788.5 788.5 788.5

Capital Leases & Current Portion - - - - - - - - - -

Unearned Revenue, Non-Current - - - - - - - - - -

Def. Tax Liability, Non-Curr. 45.3 48.0 20.5 14.3 12.1 12.1 12.1 12.1 12.1 12.1

Other Non-Current Liabilities 0.1 - - - - - - - - -

Total Liabilities 519.1 606.2 634.6 736.2 877.8 894.6 908.8 922.5 935.9 950.5

Common Stock - - - - - - - - - -

Additional Paid In Capital - 0.3 9.9 18.4 29.8 29.8 29.8 29.8 29.8 29.8

Retained Earnings 169.9 156.9 200.9 235.5 264.7 401.0 555.3 739.1 957.7 1,225.5

Treasury Stock - - (0.2) (0.6) (5.7) (5.7) (5.7) (5.7) (5.7) (5.7)

Comprehensive Inc. and Other 3.1 (3.2) (4.6) (11.6) (7.1) (7.1) (7.1) (7.1) (7.1) (7.1)

Total Common Equity 173.0 154.0 206.0 241.7 281.7 418.0 572.3 756.1 974.7 1,242.5

Minority Interest - - - - - - - - - -

Total Equity 173.0 154.0 206.0 241.7 281.7 418.0 572.3 756.1 974.7 1,242.5

Total Liabilities and Equity 692.2 760.2 840.5 977.9 1,159.4 1,312.7 1,481.1 1,678.6 1,910.6 2,193.0

Balance Check OK OK OK OK OK OK OK OK OK OK

20

Appendix: Projected Revenue by ProductShort-term loans

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Volume 389.7 257.2 204.9 196.3 197.4 187.5 178.2 165.7 167.3 167.3

Price 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Total 389.7 257.2 204.9 196.3 197.4 187.5 178.2 165.7 167.3 167.3

% Growth -34.0% -20.3% -4.2% 0.6% -5.0% -5.0% -7.0% 1.0% 0.0%

Volume Growth -34.0% -20.3% -4.2% 0.6% -5.0% -5.0% -7.0% 1.0% 0.0%

Price Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Line of credit accounts

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Volume 170.5 305.1 185.5 220.5 262.8 328.5 394.1 473.0 543.9 625.5

Price 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Total 170.5 305.1 185.5 220.5 262.8 328.5 394.1 473.0 543.9 625.5

% Growth 79.0% -39.2% 18.8% 19.2% 25.0% 20.0% 20.0% 15.0% 15.0%

Volume Growth 79.0% -39.2% 18.8% 19.2% 25.0% 20.0% 20.0% 15.0% 15.0%

Price Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Installment loans, RPAs and Other

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Volume 205.1 247.6 262.2 328.9 383.6 460.3 543.1 635.5 730.8 840.4

Price 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Total 205.1 247.6 262.2 328.9 383.6 460.3 543.1 635.5 730.8 840.4

% Growth 20.7% 5.9% 25.4% 16.6% 20.0% 18.0% 17.0% 15.0% 15.0%

Volume Growth 20.7% 5.9% 25.4% 16.6% 20.0% 18.0% 17.0% 15.0% 15.0%

Price Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Revenues

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Short-term loans 389.7 257.2 204.9 196.3 197.4 187.5 178.2 165.7 167.3 167.3

Line of credit accounts 170.5 305.1 185.5 220.5 262.8 328.5 394.1 473.0 543.9 625.5

Installment loans, RPAs and Other 205.1 247.6 262.2 328.9 383.6 460.3 543.1 635.5 730.8 840.4

Total 765.3 809.8 652.6 745.6 843.7 976.3 1,115.4 1,274.1 1,442.1 1,633.3

21

Appendix: Diversification Charts

31%

47%

22%

Revenue by Product Type 2017

Line of credit Installment and RPAs Short-term

0%2%

98%

Revenue by Product Type 2009

Line of credit Installment and RPAs Short-term

0% 3%

97%

Gross AR by Product Type 2009

Line of credit Installment and RPAs Short-term

15%

9%

12%

45%

19%

Gross AR by Product Type 2017

Line of credit Small BusinessShort-term Near-Prime installment loansOther installment loans

Enova International

22

Appendix: How Enova accesses personal data End User License AgreementExample: CashNetUSA (Enova International) iPhone Application

● You agree that Licensor may

collect, and use technical data and

related information, including but

not limited to non-personally

identifiable usage data and

technical information about your

device, system and application

software, and peripherals, that is

gathered periodically to facilitate

the provision of software updates,

product support and other services

to you related to the Licensed

Application

● Licensor may use this

information, as long as it is in a

form that does not personally

identify you, to improve its

products or to provide services or

technologies to you