Home North Pole Economy ENOVA INTERNATIONAL, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

ENOVA INTERNATIONAL, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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The following discussion of financial condition, results of operations,
liquidity and capital resources and certain factors that may affect future
results, including economic and industry-wide factors, of Enova International,
Inc. and its subsidiaries should be read in conjunction with our consolidated
financial statements and accompanying notes included under Part I, Item 1 of
this Quarterly Report on Form 10-Q, as well as with Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our Annual
Report on Form 10-K for the year ended December 31, 2021. This Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements. The matters discussed in these
forward-looking statements are subject to risk, uncertainties, and other factors
that could cause actual results to differ materially from those made, projected
or implied in the forward-looking statements. Please see "Risk Factors" and
"Cautionary Statement Concerning Forward-Looking Statements" for a discussion of
the uncertainties, risks and assumptions associated with these statements.

COMPANY OVERVIEW

We are a leading technology and analytics company focused on providing online
financial services. In 2021, we extended approximately $3.1 billion in credit or
financing to borrowers and for the nine months ended September 30, 2022, we
extended approximately $3.3 billion in credit or financing to borrowers. As of
September 30, 2022, we offered or arranged loans or draws on lines of credit to
consumers in 37 states in the United States and Brazil. We also offered
financing to small businesses in all 50 states and Washington D.C. in the United
States. We use our proprietary technology, analytics and customer service
capabilities to quickly evaluate, underwrite and fund loans or provide
financing, allowing us to offer consumers and small businesses credit or
financing when and how they want it. Our customers include the large and growing
number of consumers who and small businesses which have bank accounts but use
alternative financial services because of their limited access to more
traditional credit from banks, credit card companies and other lenders. We were
an early entrant into online lending, launching our online business in 2004, and
through September 30, 2022, we have completed approximately 57.2 million
customer transactions and collected more than 61 terabytes of currently
accessible customer behavior data since launch, allowing us to better analyze
and underwrite our specific customer base. We have significantly diversified our
business over the past several years having expanded the markets we serve and
the financing products we offer. These financing products include installment
loans and receivables purchase agreements ("RPAs") and line of credit accounts.

We believe our customers highly value our products and services as an important
component of their personal or business finances because our products are
convenient, quick and often less expensive than other available alternatives. We
attribute the success of our business to our advanced and innovative technology
systems, the proprietary analytical models we use to predict the performance of
loans and finance receivables, our sophisticated customer acquisition programs,
our dedication to customer service and our talented employees.

We have developed proprietary underwriting systems based on data we have
collected over our more than 18 years of experience. These systems employ
advanced risk analytics, including machine learning and artificial intelligence,
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 their funds quickly and efficiently. Our systems
closely monitor collection and portfolio performance data that we use to
continually refine machine learning-enabled analytical models and statistical
measures used in making our credit, purchase, marketing and collection
decisions. Approximately 90% of models used in our analytical environment are
machine learning-enabled.

Our flexible and scalable technology platform allows us to process and complete
customers' transactions quickly and efficiently. In 2021, we processed
approximately 2.2 million transactions, and we continue to grow our loans and
finance receivable portfolios and increase the number of customers we serve
through desktop, tablet and mobile platforms. Our highly customizable technology
platform allows us to efficiently develop and deploy new products to adapt to
evolving regulatory requirements and consumer preference, and to enter new
markets quickly. In 2012, we launched a new product in the United States
designed to serve near-prime customers. In June 2014, we launched our business
in Brazil, where we arrange financing for borrowers through a third-party
lender. In addition, in July 2014, we introduced a new line of credit product in
the United States to serve the needs of small businesses. In June 2015, we
further expanded our product offering by acquiring certain assets of a company
that provides financing and installment loans to small businesses by offering
RPAs. In October 2020, we acquired, through a merger, On Deck Capital Inc.
("OnDeck"), a small business lending company offering lending and funding
solutions to small businesses primarily in the U.S. to expand our small business
offerings. In March 2021, we acquired Pangea Universal Holdings ("Pangea"),
which provides mobile international money transfer services to customers in the
U.S with a focus on Latin America and Asia. These new products have allowed us
to further diversify our product offerings and customer base.

We have been able to consistently acquire new customers and successfully
generate repeat business from returning customers when they need financing. We
believe our customers are loyal to us because they are satisfied with our
products and services. We acquire new customers from a variety of sources,
including visits to our own websites, mobile sites or applications, and through
direct marketing,
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affiliate marketing, lead providers and relationships with other lenders. We
believe that the online convenience of our products and our 24/7 availability to
accept applications with quick approval decisions are important to our
customers.

Once a potential customer submits an application, we quickly provide a credit or
purchase decision. If a loan or financing is approved, we or our lending partner
typically fund the loan or financing the next business day or, in some cases,
the same day. During the entire process, from application through payment, we
provide access to our well-trained customer service team. All of our operations,
from customer acquisition through collections, are structured to build customer
satisfaction and loyalty, in the event that a customer has a need for our
products in the future. We have developed a series of sophisticated proprietary
scoring models to support our various products. We believe that these models are
an integral component of our operations and allow us to complete a high volume
of customer transactions while actively managing risk and the related credit
quality of our loan and finance receivable portfolios. We believe our successful
application of these technological innovations differentiates our capabilities
relative to competing platforms as evidenced by our history of strong growth and
stable credit quality.

PRODUCTS AND SERVICES

Our online financing products and services provide customers with a deposit of
funds to their bank account in exchange for a commitment to repay the amount
deposited plus fees, interest and/or revenue on the receivables purchased. We
originate, arrange, guarantee or purchase installment loans, line of credit
accounts and receivables purchase agreements ("RPAs") to consumers and small
businesses. We have one reportable segment that includes all of our online
financial services.

Installment loans. Our installment loans are either written directly by us,
purchased as part of our Bank Programs as discussed below, or are those that we
arrange and guarantee as part of our CSO program as discussed below. We offer,
or arrange through our CSO program, unsecured consumer installment loan products
in 37 states in the United States and small business installment loans in 47
states and in Washington D.C. Internationally, we also offer or arrange
unsecured consumer installment loan products in Brazil. Terms for our
installment loan products range between two and 60 months. Loans may be repaid
early at any time with no additional prepayment charges.

Line of credit accounts. We directly offer, or purchase a participation interest
in receivables through our Bank Programs, new consumer line of credit accounts
in 31 states (and continue to service existing line of credit accounts in two
additional states) in the United States and business line of credit accounts in
47 states and in Washington D.C. in the United States, which allow customers to
draw on their unsecured line of credit in increments of their choosing up to
their credit limit. Customers may pay off their account balance in full at any
time or make required minimum payments in accordance with the terms of the line
of credit account. As long as the customer's account is in good standing and has
credit available, customers may continue to borrow on their line of credit.

Receivables purchase agreements. Under RPAs, small businesses receive funds in
exchange for a portion of the business's future receivables at an agreed upon
discount. In contrast, lending is a commitment to repay principal and interest
and/or fees. A small business customer who enters into an RPA commits to
delivering a percentage of its receivables through ACH or wire debits or by
splitting credit card receipts until all purchased receivables are delivered. We
offer RPAs in all 50 states and in Washington D.C. in the United States.

CSO programs. We currently operate a credit services organization or credit
access business ("CSO") program in Texas. Through our CSO program, we provide
services related to third-party lenders' installment consumer loan products by
acting as a credit services organization or credit access business on behalf of
consumers in accordance with applicable state laws. Services offered under our
CSO program include credit-related services such as arranging loans with
independent third-party lenders and assisting in the preparation of loan
applications and loan documents ("CSO loans"). When a consumer executes an
agreement with us under our CSO program, we agree, for a fee payable to us by
the consumer, to provide certain services, one of which is to guarantee the
consumer's obligation to repay the loan received by the consumer from the
third-party lender if the consumer fails to do so. For CSO loans, each lender is
responsible for providing the criteria by which the consumer's application is
underwritten and, if approved, determining the amount of the consumer loan. We,
in turn, are responsible for assessing whether or not we will guarantee such
loan. The guarantee represents an obligation to purchase the loan, which has
terms of up to six months, if it goes into default.

Bank program. We operate programs with certain banks to provide marketing
services and loan servicing for near-prime unsecured consumer installment loans
and, beginning in January 2021, line of credit accounts. Under the programs, we
receive marketing and servicing fees while the bank receives an origination fee.
The bank has the ability to sell and we have the option, but not the
requirement, to purchase the loans the bank originates and, in the case of line
of credit accounts, a participation interest in the receivables from draws on
those accounts. We do not guarantee the performance of the loans and line of
credit accounts originated by the bank. As part of the OnDeck business both
prior and subsequent to Enova's acquisition, OnDeck operates a program with a
separate bank to provide marketing services and loan servicing for small
business installment loans and line of credit accounts. Under the OnDeck
program, we receive marketing fees while the bank receives origination fees and
certain program fees. The bank has the ability to sell and we have the option,
but not the requirement, to purchase the installment loans
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the bank creates and, in the case of line of credit accounts, extensions under such line of credit accounts. We do not guarantee the performance of loans or lines of credit issued by the bank.

Money transfer business. Through the acquisition of Pangea, we operate a money
transfer platform that allows customers to send money from the United States to
Mexico, other Latin American countries and Asia. The customer pays us in U.S.
dollars, and we then make local currency available to the intended recipient of
the transfer in one of many termination countries. Our revenue model includes a
fee per transfer and an exchange rate spread. Our customers can access our
proprietary platform via the website, Android app, or iOS (Apple) app.

OUR MARKETS

We currently offer our services in the following countries:

United States. We began our online business in the United States in May 2004. As
of September 30, 2022, we provided services in all 50 states and Washington D.C.
We market our financing products under the names CashNetUSA at
www.cashnetusa.com, NetCredit at www.netcredit.com, OnDeck at www.ondeck.com,
Headway Capital at www.headwaycapital.com, The Business Backer at
www.businessbacker.com, and Pangea at www.pangeamoneytransfer.com.

Brazil. In June 2014we started our business in Brazil under the Simplic name on www.simplic.com.br, where we arrange installment loans for a third-party lender. We plan to continue to invest in our financial services program and expand it by Brazil.

Our internet websites and the information contained therein or connected thereto
are not intended to be incorporated by reference into this Quarterly Report on
Form 10-Q.

RECENT REGULATORY DEVELOPMENTS

Consumer Financial Protection Bureau (“CFPB”)

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
self­disclosed 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, but remain stayed indefinitely by the United States Court of Appeals
for the Fifth Circuit, which is hearing an appeal from the plaintiff on a
constitutional challenge to the Small Dollar Rule. On October 14, 2021, the
Fifth Circuit ruled that the Small Dollar Rule will not take effect until 286
days after the Fifth Circuit rules on the appeal. 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. The CFPB may appeal the decision. 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.

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 will take effect on January 1, 2023.
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RESULTS OF OPERATIONS

Highlights

Our financial results for the three-month period ended September 30, 2022or the current quarter, are summarized below.

Consolidated total revenue increased $136.0 million, or 42.5%, to $456.2 million
in the current quarter compared to $320.2 million for the three months ended
September 30, 2021, or the prior year quarter.

Consolidated net sales were $294.2 million compared to $246.4 million during the quarter of the previous year.

Consolidated operating profit increases $12.3 millioni.e. 14.3%, to $98.5 million in the current quarter, compared to $86.2 million during the quarter of the previous year.

Consolidated net income was $51.7 million in the current quarter compared to
$51.5 million in the prior year quarter. Consolidated diluted income per share
was $1.57 in the current quarter compared to $1.36 in the prior year quarter.
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Insight

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

                                           Three Months Ended September 30,          Nine Months Ended September 30,
                                              2022                2021                 2022                   2021
Revenue
Loans and finance receivables revenue      $   449,817       $       316,042     $       1,233,910       $       833,412
Other                                            6,383                 4,118                16,011                10,912
Total Revenue                                  456,200               320,160             1,249,921               844,324
Change in Fair Value                          (162,005 )             (73,778 )            (422,465 )            (100,443 )
Net Revenue                                    294,195               246,382               827,456               743,881
Operating Expenses
Marketing                                      101,278                79,726               286,000               163,548
Operations and technology                       45,953                37,966               128,945               108,628
General and administrative                      37,182                33,557               105,400               116,321
Depreciation and amortization                   11,270                 8,914                28,368                23,001
Total Operating Expenses                       195,683               160,163               548,713               411,498
Income from Operations                          98,512                86,219               278,743               332,383
Interest expense, net                          (30,924 )             (18,163 )             (78,357 )             (57,493 )
Foreign currency transaction gain (loss)           363                  (109 )                  70                  (383 )
Equity method investment (loss) income            (129 )                 529                 6,522                 2,558
Other nonoperating expenses                       (230 )                   -                (1,321 )              (1,128 )
Income before Income Taxes                      67,592                68,476               205,657               275,937
Provision for income taxes                      15,884                16,667                49,105                67,607
Net income before noncontrolling
interest                                        51,708                51,809               156,552               208,330
Less: Net income attributable to
noncontrolling interest                              -                   261                     -                   685
Net income attributable to Enova
International, Inc.                        $    51,708       $        

$51,548,156,552 $207,645
Earnings per common share – diluted $1.57 $$1.36

            4.64       $          5.48

Revenue

Loans and finance receivables revenue             98.6 %                98.7 %                98.7 %                98.7 %
Other                                              1.4                   1.3                   1.3                   1.3
Total Revenue                                    100.0                 100.0                 100.0                 100.0
Change in Fair Value                             (35.5 )               (23.0 )               (33.8 )               (11.9 )
Net Revenue                                       64.5                  77.0                  66.2                  88.1
Operating Expenses
Marketing                                         22.2                  24.9                  22.9                  19.4
Operations and technology                         10.1                  11.9                  10.3                  12.8
General and administrative                         8.1                  10.5                   8.4                  13.8
Depreciation and amortization                      2.5                   2.8                   2.3                   2.7
Total Operating Expenses                          42.9                  50.1                  43.9                  48.7
Income from Operations                            21.6                  26.9                  22.3                  39.4
Interest expense, net                             (6.8 )                (5.7 )                (6.3 )                (6.8 )
Foreign currency transaction loss                  0.1                     -                     -                     -
Equity method investment income                      -                   0.2                   0.5                   0.3
Other nonoperating expenses                       (0.1 )                   -                  (0.1 )                (0.2 )
Income before Income Taxes                        14.8                  21.4                  16.4                  32.7
Provision for income taxes                         3.5                   5.2                   3.9                   8.0
Net income before noncontrolling
interest                                          11.3                  16.2                  12.5                  24.7
Less: Net income attributable to
noncontrolling interest                              -                   0.1                     -                   0.1
Net income attributable to Enova
International, Inc.                               11.3 %                16.1 %                12.5 %                24.6 %


Valuation of loans and financial 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 have imposed to
control its spread. We actively worked with our customers to understand their
financial situations, waive late fees, offer a variety of repayment options to
increase flexibility and reduce or defer 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.
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From a loan valuation perspective, at the onset of the COVID-19 pandemic, 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. As of March 31, 2022, June 30, 2022 and September 30, 2022, we
increased our discount rates based primarily on movements in the market during
each period. 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 in the
U.S. generally decreased across the first half of 2021 although have spiked at
numerous times in the past year 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 September 30, 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. 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.
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The following table provides reconciliations of net earnings and diluted earnings per share calculated in accordance with GAAP to adjusted earnings measures (in thousands, except per share data):

                                               Three Months Ended           Nine Months Ended
                                                 September 30,                September 30,
                                               2022          2021          2022          2021
Net income                                  $   51,708     $  51,548     $ 156,552     $ 207,645
Adjustments:
Transaction-related costs(a)                         -             -             -         1,424
Lease termination and cease-use gain(b)              -          (113 )           -          (113 )
Equity method investment loss (income)(c)          129             -        (6,194 )           -
Other nonoperating expenses(d)                     230             -         1,321         1,128
Intangible asset amortization                    2,014         2,013         6,041         4,848
Stock-based compensation expense                 5,457         5,018        15,957        16,072
Foreign currency transaction (gain) loss          (363 )         102           (70 )         373
Cumulative tax effect of adjustments            (1,871 )      (1,581 )      (3,174 )      (5,843 )
Adjusted earnings                           $   57,304     $  56,987     $ 170,433     $ 225,534

Diluted earnings per share                  $     1.57     $    1.36     $    4.64     $    5.48
Adjustments:
Transaction-related costs                            -             -             -          0.04
Lease termination and cease-use gain                 -             -             -             -
Equity method investment income                      -             -         (0.18 )           -
Other nonoperating expenses                       0.01             -          0.04          0.03
Intangible asset amortization                     0.06          0.05          0.18          0.13
Stock-based compensation expense                  0.17          0.13          0.47          0.42
Foreign currency transaction (gain) loss         (0.01 )           -             -          0.01
Cumulative tax effect of adjustments             (0.06 )       (0.04 )       (0.10 )       (0.16 )
Adjusted earnings per share                 $     1.74     $    1.50     $    5.05     $    5.95




(a) In the first quarter of 2021, we incurred expenses totaling $1.4 million
($1.1 million net of tax) related to acquisitions and a divestiture of a
subsidiary.
(b) In the third quarter of 2021, we recorded a gain of $0.1 million ($0.1
million net of tax) related to the exit of leased office space.
(c) In the second quarter of 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 Linear's sale of its operating company,
partially offset by a $4.4 million loss on the sale of OnDeck Canada.
(d) In the third quarter of 2022, second quarter of 2022 and second quarter of
2021, we recorded other nonoperating expenses of $0.2 million ($0.2 million net
of tax), $1.1 million ($0.8 million net of tax) and $0.8 million ($0.6 million
net of tax), respectively, related to incomplete transactions. In the first
quarter of 2021, we recorded other nonoperating expenses of $0.4 million ($0.3
million net of tax) related to the repurchase of securitization notes.

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 loss
(gain), equity method investment income and other nonoperating expenses shown
below are useful to investors in order to allow them to compare our financial
results during the
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periods indicated without the effect of income or expense items. The calculation of Adjusted EBITDA, as presented below, may differ from the calculation of similarly titled measures provided by other companies (in thousands):

                                             Three Months Ended            Nine Months Ended
                                                September 30,                September 30,
                                             2022          2021           2022           2021
Net income                                 $  51,708     $  51,548     $   156,552     $ 207,645
Depreciation and amortization
expenses(e)                                   11,270         8,912          28,368        22,990
Interest expense, net(e)                      30,924        17,966          78,357        57,013
Foreign currency transaction (gain)
loss(e)                                         (363 )         102             (70 )         373
Provision for income taxes                    15,884        16,667          49,105        67,607
Stock-based compensation expense               5,457         5,018          15,957        16,072
Adjustment:
Transaction-related costs(a)                       -             -               -         1,424
Lease termination and cease-use gain(b)            -          (113 )             -          (113 )
Equity method investment loss
(income)(c)                                      129          (529 )        (6,522 )      (2,558 )
Other nonoperating expenses(d)                   230             -           1,321         1,128
Adjusted EBITDA                            $ 115,239     $  99,571     $   

323,068 $371,581

Adjusted EBITDA margin calculated as
follows:
Total Revenue                              $ 456,200     $ 320,160     $ 1,249,921     $ 844,324
Adjusted EBITDA                              115,239        99,571         323,068       371,581
Adjusted EBITDA as a percentage of total
revenue                                         25.3 %        31.1 %          25.8 %        44.0 %




(a) In the first quarter of 2021, we incurred expenses totaling $1.4 million
related to acquisitions and a divestiture of a subsidiary.
(b) In the third quarter of 2021, we recorded a gain of $0.1 million related to
the exit of leased office space.
(c) In the second quarter of 2022, we recorded equity method investment income
of $6.3 million that was comprised primarily of an $11.0 million gain generated
on Linear's sale of its operating company, partially offset by a $4.4 million
loss on the sale of OnDeck Canada.
(d) In the third quarter of 2022, second quarter of 2022 and second quarter of
2021, we recorded other nonoperating expenses of $0.2 million, $1.1 million and
$0.8 million, respectively, related to incomplete transactions. In the first
quarter of 2021, we recorded other nonoperating expenses of $0.4 million related
to the repurchase of securitization notes.
(e) Excludes amounts attributable to noncontrolling interests.

Combined measures of loans and financial claims

In addition to reporting loans and finance receivables balance information in
accordance with GAAP (see Note 3 in the Notes to Consolidated Financial
Statements included in this report), we have provided metrics on a combined
basis. The Combined Loans and Finance Receivables Measures are non-GAAP measures
that include both loans and RPAs we own or have purchased and loans we
guarantee, which are either GAAP items or disclosures required by GAAP. See
"-Loan and Finance Receivable Balances" and "-Credit Performance of Loans and
Finance Receivables" below for reconciliations between Company owned and
purchased loans and finance receivables, gross, change in fair value and
charge-offs (net of recoveries) calculated in accordance with GAAP to the
Combined Loans and Finance Receivables Measures.

We believe these non-GAAP measures provide investors with important information
needed to evaluate the magnitude of potential receivable losses and the
opportunity for revenue performance of the loans and finance receivable
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 sheet 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.

THREE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2021

Revenue and Net Revenue

Revenue increased $136.0 million, or 42.5%, to $456.2 million for the current
quarter as compared to $320.2 million for the prior year quarter. The increase
was driven by a 71.7% increase in revenue from our small business portfolio and
a 28.6% increase in revenue from our consumer portfolio as higher levels of
originations in 2021 and into 2022 have led to higher loan balances for both
portfolios.

Net revenue for the current quarter was $294.2 million compared to $246.4
million for the prior year quarter. Our consolidated net revenue margin was
64.5% for the current quarter compared to 77.0% for the prior year quarter. The
net revenue margin in the prior year quarter was elevated due primarily to lower
delinquency rates and lower than expected charge-offs as a result of portfolio
seasoning
                                       29
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and lower origins. With creations increasing in the second half of 2021 and across September 30, 2022the current quarter net revenue margin was in a more normalized range.

The following table sets forth the components of revenue and net revenue,
separated by product for the current quarter and the prior year quarter (in
thousands):

                                           Three Months Ended September 30,
                                              2022                2021           $ Change       % Change
Revenue by product:
Consumer loans and finance receivables
revenue                                    $   277,096       $       215,432     $  61,664           28.6 %
Small business loans and finance
receivables revenue                            172,721               100,610        72,111           71.7
Total loans and finance receivables
revenue                                        449,817               316,042       133,775           42.3
Other                                            6,383                 4,118         2,265           55.0
Total revenue                                  456,200               320,160       136,040           42.5
Change in fair value                          (162,005 )             (73,778 )     (88,227 )        119.6
Net revenue                                $   294,195       $       246,382     $  47,813           19.4 %

Revenue by product (% to total):
Consumer loans and finance receivables
revenue                                           60.7 %                67.3 %
Small business loans and finance
receivables revenue                               37.9                  

31.4

Total loans and finance receivables
revenue                                           98.6                  98.7
Other                                              1.4                   1.3
Total revenue                                    100.0                 100.0
Change in fair value                             (35.5 )               (23.0 )
Net revenue                                       64.5 %                77.0 %

Loan and financing balances receivable

The fair value of our loan and finance receivable portfolio in our consolidated
financial statements was $2,765.1 million and $1,635.3 million as of September
30, 2022 and 2021, respectively. The outstanding principal balance of our loan
and finance receivables portfolio was $2,552.6 million and $1,586.4 million as
of September 30, 2022 and 2021, respectively. The fair value of the combined
loan and finance receivables portfolio includes $16.1 million and $16.9 million
with an outstanding principal balance of $11.8 million and $11.4 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 September 30, 2022
and 2021, respectively.

Our small business portfolio of loans and finance receivables increased to 61.4%
of our combined loan and finance receivable portfolio at fair value as of
September 30, 2022, compared to 55.2% as of September 30, 2021 due primarily to
more accelerated growth in the small business portfolio. The consumer portfolio
balance decreased to 38.6% of our combined loan and finance receivable portfolio
balance at fair value as of September 30, 2022, compared to 44.8% as of
September 30, 2021. See "-Non-GAAP Disclosure-Combined Loans and Finance
Receivables Measures" above for additional information related to combined loans
and finance receivables.

The following tables summarize the outstanding balances of loans and financial receivables as of September 30, 2022 and 2021 (in thousands):

                                              As of September 30, 2022                         As of September 30, 2021
                                                     Guaranteed                                       Guaranteed
                                      Company          by the                          Company          by the
                                     Owned(a)        Company(a)       Combined        Owned(a)        Company(a)      Combined(b)
Consumer loans and finance
receivables
Principal                           $   972,320     $     11,843     $   984,163     $   709,781     $     11,354     $    721,135
Fair value                            1,056,205           16,144       1,072,349         723,553           16,921          740,474
Fair value as a % of principal            108.6 %          136.3 %         109.0 %         101.9 %          149.0 %          102.7 %
Small business loans and finance
receivables
Principal                           $ 1,580,289     $          -     $ 1,580,289     $   876,668     $          -     $    876,668
Fair value                            1,708,918                -       1,708,918         911,729                -          911,729
Fair value as a % of principal            108.1 %              - %         108.1 %         104.0 %              - %          104.0 %
Total loans and finance
receivables
Principal                           $ 2,552,609     $     11,843     $ 2,564,452     $ 1,586,449     $     11,354     $  1,597,803
Fair value                            2,765,123           16,144       2,781,267       1,635,282           16,921        1,652,203
Fair value as a % of principal            108.3 %          136.3 %         108.5 %         103.1 %          149.0 %          103.4 %




(a) GAAP measure. The loans and finance receivables balances guaranteed by us
relate to loans originated by third-party lenders through the CSO programs that
we have not yet purchased and, therefore, are not included in our consolidated
financial statements.
                                       30
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To September 30, 2022 and 2021, the ratio of fair value as a percentage of principal was 108.3% and 103.1%, respectively, on loans and financial receivables held by the company and 108.5% and 103.4%, respectively , on loans and financial receivables combined. These ratios increased from the prior year primarily due to an improved credit outlook on most products and improved delinquency rates for certain consumer products, partially offset by higher delinquency rates for certain consumer and small business products.

Average amount outstanding per loan and financing 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 September 30,
2022 and 2021:

                                                             As of September 30,
                                                            2022              2021
Average amount outstanding per loan and finance
receivable(a)
Consumer loans and finance receivables(b)               $       2,156     $ 

1,812

Small business loans and finance receivables                   37,670       

33,581

Total loans and finance receivables(b)                  $       4,980     $      3,633




(a) The disclosure regarding the average amount per loan and finance receivable
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 that we have not yet purchased and,
therefore, are not included in our consolidated financial statements.

The average outstanding amount per loan and financial receivable rose to
$4,980 of $3,633 in the current quarter compared to the prior year quarter, primarily due to an increase in the mix of loans and financial receivables held by small businesses in our portfolio, which are on average larger than our portfolio of consumers.

Average amount of loans and financing receivable

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 the current quarter compared to the prior year quarter:

                                                              Three Months Ended
                                                                 September 30,
                                                               2022          2021

Average amount at origin of loans and financial receivables(a) Consumer loans and financial receivables(b)(c)

                $      717     $    664
Small business loans and finance receivables(c)                 17,849      

15,610

Total loans and finance receivables(b)                      $    2,014     $  1,372




(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 that we have not yet purchased and,
therefore, are not included in our consolidated financial statements.
(c) For line of credit accounts the average represents the average amount of
each incremental draw.

The average loan and finance receivable origination amount increased to $2,014
from $1,372 during the current quarter compared to the prior year quarter, due
primarily to an increase in the mix of higher dollar amount loans and finance
receivables to small businesses.

Credit performance of financial loans and 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 the portfolio. External factors such as macroeconomic
trends, financial market liquidity expectations, competitive landscape and
legal/regulatory requirements are also reviewed on a regular basis.
                                       31
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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 five
quarters (in thousands):

                                                 2021                                    2022
                                         Third          Fourth           First          Second           Third
                                        Quarter         Quarter         Quarter         Quarter         Quarter
Ending combined loans and finance
receivables, including principal
and accrued fees/interest
outstanding:
Company owned                         $ 1,650,771     $ 1,944,263     $ 2,169,140     $ 2,377,514     $ 2,630,537
Guaranteed by the Company(a)               13,239          13,750          11,858          13,997          14,330
Ending combined loan and finance
receivables balance(b)                $ 1,664,010     $ 1,958,013     $ 2,180,998     $ 2,391,511     $ 2,644,867
> 30 days delinquent                       90,782         103,213         113,798         121,459         147,688
> 30 days delinquency rate                    5.5 %           5.3 %           5.2 %           5.1 %           5.6 %




(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.

Consumer loans and financial 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 (in thousands):

                                                2021                                  2022
                                        Third         Fourth         First          Second           Third
                                       Quarter       Quarter        Quarter         Quarter         Quarter
Consumer loans and finance
receivables:
Consumer combined loan and finance
receivable principal balance:
Company owned                         $ 709,781     $  867,751     $  888,657     $   936,601     $   972,320
Guaranteed by the Company(a)             11,354         11,790         10,027          11,873          11,843
Total combined loan and finance
receivable principal balance(b)       $ 721,135     $  879,541     $  898,684     $   948,474     $   984,163
Consumer combined loan and finance
receivable fair value balance:
Company owned                         $ 723,553     $  890,144     $  934,351     $   989,128     $ 1,056,205
Guaranteed by the Company(a)             16,921         18,813         14,433          17,860          16,144
Ending combined loan and finance
receivable fair value balance(b)      $ 740,474     $  908,957     $  948,784     $ 1,006,988     $ 1,072,349
Fair value as a % of
principal(b)(c)                           102.7 %        103.3 %        105.6 %         106.2 %         109.0 %
Consumer combined loan and finance
receivable balance, including
principal and accrued fees/interest
outstanding:
Company owned                         $ 768,964     $  927,673     $  951,560     $ 1,004,847     $ 1,039,792
Guaranteed by the Company(a)             13,239         13,750         11,858          13,997          14,330
Ending combined loan and finance
receivable balance(b)                 $ 782,203     $  941,423     $  963,418     $ 1,018,844     $ 1,054,122
Average consumer combined loan and
finance receivable balance,
including principal and accrued
fees/interest outstanding:
Company owned(d)                      $ 702,818     $  836,147     $  953,108     $   966,816     $ 1,027,100
Guaranteed by the Company(a)(d)          11,366         13,212         12,960          12,591          14,421
Average combined loan and finance
receivable balance(b)(d)              $ 714,184     $  849,359     $  

966 068 $979,407 $1,041,521

Revenue                               $ 215,432     $  243,570     $  248,547     $   253,043     $   277,096
Change in fair value                    (97,061 )     (104,715 )     (116,767 )      (133,078 )      (135,646 )
Net revenue                             118,371        138,855        131,780         119,965         141,450
Net revenue margin                         54.9 %         57.0 %         

53.0% 47.4% 51.0%

Delinquencies:

> 30 days delinquent                  $  45,804     $   59,312     $   70,480     $    72,300     $    77,258
> 30 days delinquent as a % of
combined loan and finance
receivable balance(b)(c)                    5.9 %          6.3 %          7.3 %           7.1 %           7.3 %

Charge-offs:
Charge-offs (net of recoveries)       $  57,836     $  112,582     $  137,224     $   134,524     $   167,762
Charge-offs (net of recoveries) as
a % of average combined loan and
finance receivable balance(b)(d)            8.1 %         13.3 %         14.2 %          13.7 %          16.1 %




(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.
                                       32
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The ending balance, including principal and accrued fees/interest outstanding,
of combined consumer loans and finance receivables at September 30, 2022
increased 34.8% to $1,054.1 million compared to $782.2 million at September 30,
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 to mitigate risks associated with the pandemic.

The percentage of loans greater than 30 days delinquent increased to 7.3% at
September 30, 2022, compared to 5.9% at September 30, 2021. The increase was
driven primarily by growth in originations in the current year, particularly to
new customers, which typically default at a higher percentage than returning
customers.

Charge-offs (net of recoveries) as a percentage of average combined loan balance
increased to 16.1% for the current quarter, compared to 8.1% for the prior year
quarter, driven primarily by growth in originations, particularly to new
customers, which typically default at a higher percentage than returning
customers. In the prior year quarter, this charge-off rate was lower due
primarily to our having a more seasoned and lower risk portfolio remaining as
originations since the onset of the COVID-19 pandemic had been significantly
lower and the majority of higher risk loans to new customers originated in prior
quarters had been charged off. The charge-off rate in the current quarter is
more consistent with rates experienced prior to the COVID-19 pandemic.

The ratio of fair value as a percentage of principal on consumer loans and
finance receivables was 109.0% at September 30, 2022, compared to 102.7% at
September 30, 2021 and 106.2% at June 30, 2022. The increase from June 30, 2022
was primarily driven by an improvement in early-stage delinquencies. Refer also
to "Results of Operations-COVID-19" in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for additional discussion on loan
valuation.

Small Business Loans and Financial Claims

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 (in thousands):

                                                2021                                   2022
                                        Third         Fourth           First          Second           Third
                                       Quarter        Quarter         Quarter         Quarter         Quarter
Small business loans and finance
receivables:
Total loan and finance receivable
principal balance                     $ 876,668     $ 1,010,675     $ 1,210,389     $ 1,364,055     $ 1,580,289
Ending loan and finance receivable
fair value balance                      911,729       1,074,546       

1,297,533 1,471,723 1,708,918 Fair value as % of principal(a) 104.0% 106.3% 107.2% 107.9% 108.1%

Ending loan and finance receivable
balance, including principal and
accrued fees/interest outstanding     $ 881,807     $ 1,016,590     $ 1,217,580     $ 1,372,667     $ 1,590,745

Average loan and finance receivable
balance(b)                            $ 837,606     $   956,110     $ 1,122,609     $ 1,288,384     $ 1,488,029

Revenue                               $ 100,610     $   115,063     $   132,594     $   149,909     $   172,721
Change in fair value                     24,515          22,804           1,138          (8,764 )       (24,662 )
Net revenue                             125,125         137,867         133,732         141,145         148,059
Net revenue margin                        124.4 %         119.8 %         

100.9% 94.2% 85.7%

Delinquencies:

> 30 days delinquent                  $  44,978     $    43,901     $    43,318     $    49,159     $    70,430
> 30 days delinquent as a % of loan
balance(a)                                  5.1 %           4.3 %           3.6 %           3.6 %           4.4 %

Dump :

Charge-offs (net of recoveries)       $   7,060     $     7,677     $    20,860     $    27,867     $    43,778
Charge-offs (net of recoveries) as
a % of average loan and finance
receivable balance(b)                       0.8 %           0.8 %           1.9 %           2.2 %           2.9 %



(a) Determined from end of period balances. (b) The average balance of loans and financial receivables corresponds to the average of month-end balances during the period.

The ending balance, including principal and accrued fees/interest outstanding,
of small business loans and finance receivables at September 30, 2022 increased
80.4% to $1,590.7 million compared to $881.8 million at September 30, 2021, due
primarily to the continued impact of strong originations.

The percentage of loans greater than 30 days delinquent was 4.4% at September
30, 2022, compared to 5.1% at September 30, 2021. Delinquency has improved in
all of our small business portfolios, as we have actively worked with our
customers to understand their
                                       33
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financial situations, offering a variety of repayment options to increase flexibility, and reducing or deferring payments for affected customers.

Charge-offs (net of recoveries) as a percentage of average loan balance
increased to 2.9% for the current quarter, compared to 0.8% in the prior year
quarter, due primarily to growth in originations, particularly to new customers,
which typically default at a higher percentage than returning customers. In the
prior year quarter, this charge-off rate was lower due primarily to our having a
more seasoned portfolio remaining as originations since the onset of the
COVID-19 pandemic had been significantly lower and the majority of higher risk
loans to new customers originated in prior quarters had been charged off.

The ratio of fair value as a percentage of principal on small business loans and
finance receivables was 108.1% at September 30, 2022, compared to 104.0% at
September 30, 2021 and 107.9% at June 30, 2022. The increase from June 30, 2022
was nominal as credit metrics remained fairly consistent.

Total operating expenses

Total expenses increased $35.5 millioni.e. 22.2%, at $195.7 million in the current quarter, compared to $160.2 million during the quarter of the previous year.

Marketing expense increased to $101.3 million in the current quarter compared to
$79.7 million in the prior year quarter due primarily to our efforts to capture
increasing market demand for loan products in the current quarter. Certain
marketing costs, such as commissions paid to third-party lead providers, are
variable and increase as originations increase.

Operating and technology expenses increased to $45.9 million in the current quarter compared to $38.0 million in the prior year quarter, primarily due to higher variable costs, particularly personnel and underwriting, due to increased loan originations and loan book size.

General and administrative expense increased to $37.2 million in the current
quarter compared to $33.6 million in the prior year quarter, due primarily to
higher personnel costs.

Depreciation and amortization expense increased $2.4 million or 26.4% compared
to the prior year quarter driven primarily by $3.6 million in impairment charges
recorded in the current quarter on internal-use software that was retired.

Non-operating items

Interest expense, net increased $12.8 million, or 70.3%, to $30.9 million in the
current quarter compared to $18.1 million in the prior year quarter. The
increase was due primarily to an increase in the average amount of debt
outstanding, which increased $867.6 million to $1,933.0 million during the
current quarter from $1,065.4 million during the prior year quarter, partially
offset by a decrease in the weighted average interest rate on our outstanding
debt to 6.46% during the current quarter from 6.65% during the prior year
quarter.

Provision for income taxes

The effective tax rate of 23.5% in the current quarter was lower than the 24.3%
rate recorded in the prior year quarter due primarily to the revaluation of the
deferred tax liability related to reductions in in state apportionment in
separate company filing states, partially offset by higher nondeductible
executive compensation.

As of September 30, 2022, the balance of unrecognized tax benefits was $73.0
million which is included in "Accounts payable and accrued expenses" on the
consolidated balance sheet, $11.1 million of which, if recognized, would
favorably affect the effective tax rate in the period of recognition. We had
$35.3 million and $44.1 million of unrecognized tax benefits as of September 30,
2021 and December 31, 2021, respectively. 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 2017.
However, the 2014 tax year is still open to the extent of the net operating loss
that was 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.
                                       34
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Net revenue

Net income increased $0.2 million, or 0.3%, to $51.7 million during the current
quarter compared to $51.5 million during the prior year quarter. The increase
was due primarily to higher net revenue resulting from growth in the size of the
business, which was mostly offset by higher associated costs, particularly
marketing and interest.

NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Revenue and Net Revenue

Revenue increased $405.6 million, or 48.0%, to $1,249.9 million for the
nine-month period ended September 30, 2022, or current nine-month period, as
compared to $844.3 million for the nine-month period ended September 30, 2021,
or prior year nine-month period. The increase was driven by a 73.9% increase in
revenue from our small business portfolio and a 36.2% increase in revenue from
our consumer portfolio as higher levels of originations in 2021 and into 2022
have led to higher loan balances for both portfolios.

Net revenue for the current nine-month period was $827.4 million compared to
$743.9 million for the prior year nine-month period. Our consolidated net
revenue margin was 66.2% for the current nine-month period compared to 88.1% for
the prior year nine-month period. The net revenue margin in the prior year
nine-month period was elevated due primarily to lower delinquency rates and
lower than expected charge-offs as a result of portfolio seasoning and lower
originations. With originations having increased across the second half of 2021
and through September 30, 2022, the net revenue margin in the current nine-month
period was in a more normalized range.

The following table shows the components of revenue and net revenue, separated by product for the current nine-month period and the prior year nine-month period (in thousands):

                                               Nine Months Ended September 30,
                                                 2022                   2021            $ Change       % Change
Revenue by product:
Consumer loans and finance receivables
revenue                                    $         778,686       $       571,681     $  207,005           36.2 %
Small business loans and finance
receivables revenue                                  455,224               261,731        193,493           73.9
Total loans and finance receivables
revenue                                            1,233,910               833,412        400,498           48.1
Other                                                 16,011                10,912          5,099           46.7
Total revenue                                      1,249,921               844,324        405,597           48.0
Change in fair value                                (422,465 )            (100,443 )     (322,022 )        320.6
Net revenue                                $         827,456       $       743,881     $   83,575           11.2 %

Revenue by product (% to total):
Consumer loans and finance receivables
revenue                                                 62.3 %                67.7 %
Small business loans and finance
receivables revenue                                     36.4                

31.0

Total loans and finance receivables
revenue                                                 98.7                  98.7
Other                                                    1.3                   1.3
Total revenue                                          100.0                 100.0
Change in fair value                                   (33.8 )               (11.9 )
Net revenue                                             66.2 %                88.1 %


Average Loan 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 the current nine-month period compared to the prior year
nine-month period:

                                                              Nine Months Ended
                                                                September 30,
                                                              2022          2021

Average amount at origin of loans and financial receivables(a) Consumer loans and financial receivables(b)(c)

                $     677     $ 

602

Small business loans and finance receivables(c)                16,983       

15,236

Total loans and finance receivables(b)                      $   1,773     $  1,358




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(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 that we have not yet purchased and,
therefore, are not included in our consolidated financial statements.
(c) Represents the average amount of each incremental draw on line of credit
accounts.

The average loan origination amount increased to $1,773 from $1,358 during the
current nine-month period compared to the prior year nine-month period, due
primarily to the gradual easing of restrictions on loan amounts as risks from
the COVID-19 pandemic abated as well as an increase in the mix of higher dollar
amount loans and finance receivables to small businesses.

Total expenses

Total expenses increased $137.2 millioni.e. 33.3%, at $548.7 million in the current nine-month period, compared to $411.5 million during the nine-month period of the previous year.

Marketing expense increased to $286.0 million in the current nine-month period
compared to $163.6 million in the prior year nine-month period. The increase was
due primarily to our efforts to capture increasing market demand for loan
products in the current nine-month period. The prior year nine-month period 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.

Operating and technology expenses increased to $128.9 million in the current nine-month period compared to $108.6 million in the nine-month period of the prior year, mainly due to higher variable costs, in particular personnel and underwriting, due to the increase in originations and the size of the loan portfolio.

General and administrative expense decreased $10.9 million, or 9.4%, to $105.4
million in the current nine-month period compared to $116.3 million in the prior
year nine-month period, due primarily to synergies achieved following the
October 2020 acquisition of OnDeck.

Depreciation and amortization expense increased $5.4 million or 23.3% compared
to the prior year nine-month period driven primarily by $3.6 million in
impairment charges recorded in the current nine-month period on internal-use
software that was retired as well as additional internal-use software placed
into service and fixed assets and intangible assets acquired with Pangea.

Non-operating items

Interest expense, net increased $20.8 million, or 36.3%, to $78.3 million in the
current nine-month period compared to $57.5 million in the prior year nine-month
period. The increase was due primarily to an increase of $756.2 million in the
average amount of debt outstanding to $1,755.5 million during the current
nine-month period from $999.3 million during the prior year nine-month period,
partially offset by a decrease in the weighted average interest rate on our
outstanding debt to 6.07% during the current nine-month period from 7.65% during
the prior year nine-month period.

Equity method investment income increased $4.0 million, or 155.0%, to $6.5
million in the current nine-month period compared to $2.5 million in the prior
year nine-month period. In the current nine-month period, Linear sold its
operating company, resulting in a gain of $11.0 million, which was partially
offset by a $4.4 million loss on the sale of OnDeck Canada.

Provision for income taxes

The effective tax rate of 23.9% in the current nine-month period was lower than
the effective tax rate of 24.5% in the prior year nine-month period due
primarily to the revaluation of the deferred tax liability related to reductions
in state apportionment in separate company filing states.

Net revenue

Net income decreased $51.0 million, or 24.6%, to $156.6 million during the
current nine-month period compared to $207.6 million during the prior year
nine-month period. The decrease was due primarily to higher costs attributable
to growth in the size of the business coupled with a lower but more normalized
net revenue margin in the current nine-month period.

CASH AND CAPITAL RESOURCES

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Capital funding strategy

Since the start of the COVID-19 pandemic, we have taken various actions to
maintain a stable and flexible balance sheet that ensures liquidity and funding
available to meet our business obligations. As of September 30, 2022, we had
cash, cash equivalents, and restricted cash of $172.1 million, of which $84.4
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. As of September 30, 2022, we had funding
capacity of $579.9 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.

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 May 30, 2014, we issued and sold $500.0 million in
aggregate principal amount of 9.75% senior notes due 2021 (the "2021 Senior
Notes"). 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 2021 Senior Notes.
On January 21, 2018, we redeemed an additional $50.0 million in principal amount
of the outstanding 2021 Senior Notes. 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 the remaining
$295.0 million in principal amount of the outstanding 2021 Senior Notes.

On June 30, 2017, we entered into a secured revolving credit agreement (as
amended, the "Credit Agreement"). On April 13, 2018, October 5, 2018, July 1,
2019 and May 10, 2021, we and certain of our operating subsidiaries entered into
amendments to our Credit Agreement. On June 23, 2022, we entered into an
additional amendment to 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 October 26, 2022, 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. On October 21, 2022, we entered into a
receivables funding agreement that provides additional funding capacity of
$125.0 million. As of October 26, 2022, we had funding capacity of $506.2
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 September 30, 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 $53.2 million to $1,146.2 million at
September 30, 2022 from $1,093.1 million at December 31, 2021. The increase of
stockholders' equity was driven primarily by net income for the nine months
ended September 30, 2022 and, to a lesser extent, stock-based compensation
expense, partially offset by repurchases of our outstanding common stock. Our
book value per share outstanding increased to $36.24 at September 30, 2022 from
$32.01 at December 31, 2021, which was primarily driven by the decrease in
shares outstanding as a result of share repurchases, which is discussed in more
detail below.

On November 5, 2020, we announced the Board of Directors had authorized a share
repurchase program for up to $50.0 million of our outstanding common stock
through December 31, 2021 (the "2020 Authorization"). On November 4, 2021, we
announced the Board of Directors authorized a new share repurchase program
totaling $150.0 million through December 31, 2022 (the "2021 Authorization").
The 2021 Authorization replaced the 2020 Authorization. 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 "2022 Authorization"). The
2022 Authorization replaced the 2021 Authorization. Repurchases under our share
repurchase programs are made in accordance with applicable securities laws from
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time to time in the open market, through privately negotiated transactions or
otherwise. Our share repurchase programs do not obligate us to purchase any
shares of our common stock. Similar to our previous share repurchase programs,
the 2022 Authorization may be terminated, increased or decreased by the Board of
Directors in its discretion at any time. During the nine months ended September
30, 2022, we had $118.8 million in repurchases of common stock under our share
repurchase programs.

Cash

Our cash and cash equivalents are held primarily for working capital purposes
and are used to fund a portion of 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 represents 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.

Current borrowing facilities

The following table summarizes our debt facilities as of September 30, 2022
(dollars in thousands).

                                                         Weighted
                                                         average
                                                         interest     Borrowing           Principal
                                     Maturity date       rate(a)       capacity          outstanding
Funding Debt:
2018-1 Securitization Facility         March 2027   (b)   6.54%           200,000   (h)       175,000
2018-2 Securitization Facility         July 2025    (c)   6.74%           225,000   (i)       189,327
2019-A Securitization Notes            June 2026          7.62%               276                 276

ODR 2021-1 Securitization facility November 2024 (d) 4.33% 200,000 (j) 169,000 ODR 2022-1 Securitization facility June 2025 (e) 5.73% 420,000

              62,000

RAOD securitization facility December 2023 (f) 5.10% 236,842 (k) 236,842 ODAST III Securitization Bonds May 2027 (g) 2.07% 300,000

             300,000
Total funding debt                                        4.71%      $  1,582,118       $   1,132,445
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          6.51%           440,000   (l)       309,000
Total corporate debt                                      7.84%      $  1,065,000       $     934,000



(a) The weighted average interest rate is determined based on the rates and
principal balances on September 30, 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 November 2023.
(e) The period during which new borrowings may be made under this facility
expires in June 2024.
(f) The period during which new borrowings may be made under this facility
expires in December 2022.
(g) The period during which new borrowings may be made under this facility
expires in April 2024.
(h) During the current nine-month period, we amended this facility to increase
the maximum borrowing capacity from $150.0 million to $200.0 million.
(i) During the current nine-month period, we amended this facility to increase
the maximum borrowing capacity from $150.0 million to $225.0 million.
(j) During the current nine-month period, we amended this facility to increase
the maximum borrowing capacity from $150.0 million to $200.0 million.
(k) During the current nine-month period, we amended this facility to increase
the maximum borrowing capacity from $177.6 million to $236.8 million.
(l) During the current nine-month period, we amended the Revolving line of
credit to increase the borrowing capacity from $310.0 million to $440.0 million.
Additionally, we had an outstanding letter of credit under the Revolving line of
credit of $0.8 million as of September 30, 2022.
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Our ability to fully utilize the available capacity of our credit facilities may also be affected by provisions that limit concentration risk and eligibility.

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