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Enova International Inc (NYSE:ENVA)
Q1 2021 Earnings Call
Apr 29, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Enova International First Quarter 2021 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Lindsay Savarese, Investor Relations for Enova International. Please go ahead.

Lindsay Savarese -- Investor Relations

Thank you, operator, and good afternoon, everyone. Enova released results for the first quarter of 2021 ended March 31, 2021, this afternoon after the market closed. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at ir.enova.com. With me on today's call are David Fisher, Chief Executive Officer; and Steve Cunningham, Chief Financial Officer.

This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to David, I'd like to note that today's discussion will contain forward-looking statements, and as such, is subject to risks and uncertainties. Actual results may differ materially as a result from various important risk factors, including those discussed in our earnings press release and in our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Please note that any forward-looking statements that are made on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, Enova reports certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release. As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website.

And with that, I'd like to turn the call over to David.

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Thanks, and good afternoon, everyone, and thank you for joining our call today. I'll provide an overview of our first quarter results and then I will discuss our strategy and outlook for the remainder of 2021. After that, I'll turn the call over to Steve Cunningham, our CFO, who will discuss our financial results and outlook in more detail. We started the year with a solid first quarter despite the ongoing pandemic.

Our top line results were in line with our expectations and we delivered record first quarter profitability driven by solid credit performance, improving originations, and disciplined expense management. Revenue in the first quarter decreased 2% sequentially, reflecting typical Q1 seasonality and 28% year-over-year. Adjusted EBITDA rose 278% year-over-year to $137 million and adjusted EPS increased more than 8 times to $2.20, both first quarter records. Following a reacceleration during Q4, originations were down 5% sequentially, mostly due to typical first quarter seasonality, but they increased 7% year-over-year in Q1 as we ramped up marketing activities late in the quarter in response to improving macroeconomic factors, including the aggressive rollout of the COVID vaccines.

As a result, originations from new customers increased to 33% of total originations, up from 28% in Q4 of 2020. Notably, we are seeing continued strong payment performance for new customers. While Q1 is typically a seasonally slow quarter for originations, as I just mentioned, we did see some additional softness on the consumer side of our business from the combination of stimulus payments and tax returns. And on the small business side, we saw similar impacts from PPP. However, despite these headwinds, we were able to maintain consistent originations from our strong growth in Q4. And importantly, based on what we are seeing today, we do not believe that stimulus will be an impediment to our future growth. As we have mentioned, our analysis of prior stimulus showed a marked improvement in credit and collections performance, followed by a quick rebound in demand when the stimulus ended. And we're seeing similar dynamics now as stimulus payments, tax returns, and PPP are winding down in Q2, we've seen an encouraging acceleration in originations recently.

We believe this demonstrates that consumers will continue to need access to credit and that these needs should increase as the pandemic eases. As the economy opens back up, we believe that consumers will raise their spending potentially to elevated levels due to increased activity and pent-up demand. And as they do, they will need access to credit to support any temporary dislocations between their income and their expenses. Since those consumers have been paying down debt during COVID, their personal balance sheet should be in a position where we can successfully lend to them. We saw the same dynamics following the financial crisis, which led to strong origination growth in 2010 and 2011. And on the small business side, as the economy emerges from the pandemic, we believe small businesses will be a huge beneficiary of the pent-up consumer demand I just mentioned. Today, much of consumer spending is at large businesses such as grocery and big-box stores, utilities, streaming entertainment, and Amazon. But as the economy reopens, consumers will likely increase their spending at small businesses like hair salons, gyms, local retailers, and restaurants. Many of these businesses have used up their savings, trying to survive the pandemic and will need to access credit to rebuild inventory, rehire employees, and other reopening activities. This can lead to a large surge in demand that we are ready to fill.

As a result, we continue to believe that it is in an excellent time to be increasing our focus on SMB lending. Looking ahead, while there remains uncertainty related to COVID, based on what we are seeing today, we expect growth in our originations to continue for the foreseeable future. For example, recent economic data appears very positive for our business. U.S. retail sales jumped 9.8% in March from the prior month as stimulus vaccinations and reopening spurred a burst of shopping. And another sign of economic recovery, jobless claims dropped sharply last week to 576,000, a new low since the onset of the pandemic. In the first quarter, small business products represented 55% of our portfolio, while consumers accounted for 45%. Within consumer, line of credit products represented 27% of our consumer portfolio, installment products accounted for 71%, and short-term loans represented just 2%.

With small business now over 50% of our portfolio, we are pleased with our small business offerings as originations continue to be strong. Our SMB originations increased 11% sequentially to $322 million, and total revenue from our SMB products increased 17% sequentially and more than tripled year-over-year to $76 million. We believe we are continuing to take share in the SMB market with a diversified portfolio across a wide range of industries, states, product types, loan sizes, and prices. From an operational perspective, the integration of OnDeck is largely complete. Our three SMB products are working together as a single business, and we are on track to deliver more than the forecasted $50 million of annual cost synergies, primarily from eliminated duplicative resources as well as $15 million in run rate net revenue synergies. We will achieve all of these synergies this year with upside in future years from longer-dated projects like data center consolidation, real estate, cross-selling, and further integration of our advanced analytics and machine learning into OnDeck.

We also continue to expect that the transaction will be accretive in 2021 and generate EPS accretion of more than 40% in 2022. And as we discussed last quarter, while we originally thought that OnDeck's legacy portfolio would have very little value, we now expect to receive over $200 million of total cash from the acquired portfolio, net of securitization repayments. Before I wrap up, I want to spend a few minutes on our recent acquisition of Pangea Universal Holdings. For those of you that are not familiar with Pangea, they are a Chicago-based payments platform, offering mobile international money transfer services. They've helped the underbanked seamlessly complete millions of transfers over the last 10 years. Pangea's mission is to make money transfer secure, simple, and affordable. They have revolutionized the customer experience in this growing market as consumers increasingly choose online money transfer solutions instead of relying on brick-and-mortar storefronts. Pangea's mobile app allows users to transfer money quickly and seamlessly from the U.S. to 40 countries.

The focus has primarily been on Latin America and Asia, which the World Bank estimates to be a combined $71 billion per year market in outflows from the U.S. With the acquisition of Pangea, we gain a product in a segment of the market we know well, underbanked Americans. And we now have another high-growth business in our portfolio. Pangea will leverage Enova's online business expertise as well as our analytics, technology, marketing, regulatory compliance, and capital markets capabilities. Given our extensive experience managing online businesses, we believe there's a significant opportunity to bring a world-class technology, machine learning and artificial intelligence capabilities to Pangea's operations. While Pangea's financial results are not material right now to the overall Enova business, we are excited about the opportunity to rapidly grow this business given the large addressable market.

In summary, I'm pleased with our solid start to the year and believe it sets us up well for the remainder of 2021 and beyond. Our world-class analytics have enabled us to successfully navigate challenging market conditions, and we remain focused on accelerating growth. We continue to see very good credit in our portfolio, which gives us flexibility to lean into demand as the economy continues to improve. We remain committed to helping hardworking people get access to fast, trustworthy credit. COVID has created uncertainty in the near term. However, our experienced management team, solid financial position, and diverse product offerings position us well to continue to produce sustainable and profitable growth and drive shareholder value. Now I'd like to turn the call over to Steve Cunningham, our CFO, who will discuss the financial results and outlook in more detail.

And following Steve's remarks, we'll be happy to answer any questions that you may have. Steve?

Steven E. Cunningham -- Executive Vice President and Chief Financial Officer

Thank you, David, and good afternoon, everyone. As David mentioned in his remarks, we continue to be encouraged by our historically strong credit quality, indications that the economic recovery is gaining momentum and recent signs that demand is improving. Our resilient direct online-only business model, nimble machine learning powered credit risk management capabilities and solid balance sheet have us well positioned to profitably accelerate growth as the economy recovers and originations return to pre-COVID levels. Now turning to Enova's first quarter results. As you will note in my comments, our consolidated results when compared sequentially are as usual, heavily influenced by the typical first quarter seasonality of our consumer businesses. In addition, when compared to the year ago quarter, our consolidated results are heavily influenced by our acquisition of OnDeck last October. As expected, first quarter total company revenue from continuing operations of $259 million was down slightly from the fourth quarter of 2020 and declined 28% from the first quarter a year ago. Small business revenue increased 17% sequentially and more than tripled from the same quarter a year ago, while revenue from our consumer businesses decreased 8% sequentially following typical first quarter seasonality and declined 46% from the first quarter of 2020.

Total company combined loan and finance receivables balances on an amortized basis were $1.3 billion at the end of the first quarter, down 4% sequentially and up 10% from the first quarter of 2020. Total company originations were $506 million, a 7% increase from the first quarter of 2020, and originations from new customers were 33% of total originations as our marketing continues to attract new customers. As David noted in his remarks, we are seeing positive signs across our businesses as the effects of the recent government stimulus programs and the tax refund season are behind us and as the economic recovery seems well positioned to accelerate. Small business receivables on an amortized basis totaled $701 million at March 31, a 1% sequential increase and nearly 4 times higher than the end of the first quarter of 2020 as small business originations for the first quarter of $322 million rose 11% sequentially and more than quadrupled from the first quarter a year ago. Consumer receivables on an amortized basis ended the quarter at $572 million, down 9% sequentially and is typical for the first quarter of the year due to seasonality and down 41% from the year ago quarter, reflecting our pullback in originations with the onset of the COVID pandemic.

Consumer originations for the quarter totaled $184 million, 25% lower sequentially, largely due to seasonality and 53% lower than the first quarter of 2020 for the reasons David and I have previously discussed. Through April 23, we have seen weekly originations increase meaningfully across our consumer businesses from the lows of the first quarter when the distribution of government stimulus payments and tax refunds were peaking. We expect total revenue for the second quarter of 2021 to increase sequentially and continue to accelerate through the remainder of the year, but the level of increases and degree of acceleration will depend upon the timing, level, and mix of originations as we move through 2021. The net revenue margin for the first quarter was 92%, flat with the fourth quarter of 2020 and remains elevated as we continue to see strong credit quality, which increases the fair value of the portfolio.

As you'll recall, the change in the fair value line item includes two main components during the reporting period. First, net charge-offs; and second, changes to the portfolio's fair value resulting from updates to key valuation inputs, including future credit loss expectations, prepayment assumptions, and the discount rate. I'll discuss both items in more detail. First, for the first quarter, the total company ratio of net charge-offs as a percentage of average combined loan and finance receivables was 4.2%, down from 4.7% in the fourth quarter of 2020 and significantly below the 16.8% ratio for the first quarter of 2020. Net charge-off ratios for both consumer and small business receivables were well below year ago levels and continue to demonstrate the ability of our sophisticated machine learning credit models to focus on lending to customers who can repay their obligations through economic cycles. Second, the fair value of the consolidated portfolio as a percentage of principal increased to 101% at March 31 from 98% at December 31 as the outlook for portfolio credit quality remains strong. Both the consumer and small business portfolio saw an increase in the fair value premium as a percentage of principal this quarter. The decline in delinquent receivables as a percentage of loan and finance receivables balances at the end of the quarter, also reflects strong customer payment rates and the continued solid credit profile of the portfolio.

The percentage of total portfolio receivables past due 30 days or more, was 7.6% at March 31 compared to 9.3% at the end of the fourth quarter of 2020 and 7.5% at the end of the first quarter a year ago. The percentage of small business receivables past due 30 days or more declined during the quarter from 14.2% at December 31 to 10.2% at March 31. The decline was driven by continued improvement in delinquency levels across all of our small business brands. The percentage of consumer receivables past due 30 days or more, was 4.3% at March 31 compared to 3.9% at December 31 and 8.4% at the end of the first quarter a year ago. Consumer receivables delinquency levels, including early stage delinquencies remain at historically low levels. With the noted improvement in the economic environment, we lowered the discount rates used in our fair value calculations by 100 basis points this quarter or about 20% of the increase in the discount rates that we initiated in the first quarter of 2020 to capture the uncertainty of the operating environment.

As the economic recovery continues to gain momentum, we expect continued reductions in the discount rates used in our fair value calculations over the coming quarters as well as reversals of downward adjustments that we've maintained in our fair value calculations over the past year to reflect the impact of near-term economic uncertainty on the risk of higher-than-expected customer defaults. To summarize, the change in fair value line item is benefiting from low levels of net charge-offs and an increase to the fair value of the portfolio as credit metrics and modeling at the end of the first quarter reflect a solid outlook for expected future credit performance. Looking ahead, we expect the net revenue margin for the second quarter of 2021 to range between 60% and 70%. As the economy recovers and demand and originations continue to rise, the net revenue margin should normalize over several quarters at around 50% to 60% as newer and less seasoned loans become an increasingly larger proportion of the portfolio.

Our second quarter net revenue margin expectation and the degree and timing of future normalization in the ratio will depend upon the timing, speed, and mix of originations growth. Now turning to expenses. Total operating expenses for the first quarter, including marketing of $108 million or 42% of revenue compared to $115 million or 44% of revenue last quarter and $94 million or 26% of revenue in the first quarter of 2020. Excluding $3 million of onetime nonrecurring expenses related to the OnDeck acquisition, total operating expenses for the first quarter, including marketing, were $105 million or 40% of revenue. As David mentioned, the OnDeck integration is going well, we now expect to recognize all of the planned deal cost synergies by year-end 2021, well ahead of schedule, resulting in achieving at least the full run rate of planned cost synergies in the second year post the closing of the deal. Marketing expenses increased to $29 million or 11% of revenue in the first quarter from $28 million or 10% of revenue last quarter, but down from $35 million or 10% of revenue in the first quarter of 2020. We expect marketing spend to increase the rest of this year and going forward, will likely range in the mid to upper teens as a percentage of revenue, depending on the level of originations.

Operations and technology expenses for the first quarter totaled $36 million or 14% of revenue compared to $31 million or 12% of revenue last quarter and $31 million or 9% of revenue in the first quarter of 2020. The sequential increase in O&T expenses was driven primarily by having a full quarter of OnDeck O&T related expenses as well as increases in software and underwriting expenses. The year-over-year increase in O&T expenses was driven primarily by the addition of OnDeck O&T related expenses. Given the significant variable component of this expense category, sequential increases in O&T costs should be expected in an environment where originations are accelerating and receivables are growing.

We expect that this will be offset to some degree as we continue to realize expense synergies from the integration of the OnDeck acquisition. General and administrative expenses for the fourth quarter totaled $44 million or 17% of revenue compared to $57 million or 21% of revenue last quarter and $28 million or 8% of revenue in the first quarter of 2020. Excluding onetime nonrecurring expenses related to the OnDeck acquisition, G&A expenses declined sequentially to $41 million or 16% of revenue versus $43 million or 16% of revenue last quarter. Year-over-year increases in G&A costs were driven by the addition of OnDeck G&A related expenses. Looking ahead, excluding any onetime items, we expect G&A to decline during 2021 as we recognize synergies of the OnDeck transaction and as we continue our focus on operating cost discipline.

We expect our G&A cost and the fixed cost components of O&T expenses to remain slightly elevated as a percentage of revenue, but these costs should scale quickly as originations and receivables begin to return to historical levels. Adjusted EBITDA, a non-GAAP measure, decreased 8% sequentially and more than tripled from a year ago to $137 million in the first quarter for the reasons I previously discussed. Our adjusted EBITDA margin for the quarter was 53% compared to 56% last quarter and 10% in the first quarter of 2020. Adjusted EBITDA margin should normalize through 2021 as a result of continued marketing investments and the aforementioned growth related normalization in net revenue margins and volume related expenses. As previously noted, the degree and timing of any normalization will depend upon the timing, speed, and mix of originations growth and will likely occur over several quarters as originations return to historical levels.

Our stock-based compensation expense was $5.8 million in the first quarter, which compares to $3.5 million in the first quarter of 2020. The increase is related to the OnDeck acquisition, and as I described last quarter, the expense associated with the 2017 increase in the vesting period for restricted stock units, that's now fully reflected in the year-over-year comparison. Normalized stock-based compensation expense should approximate $5 million per quarter going forward. Our effective tax rate was 27% in the first quarter, which declined from 34% from the first quarter of 2020. The decline from a year ago was driven primarily from the increase in operating income relative to typical nondeductible expenses. We expect our normalized effective tax rate to remain in the mid to upper 20% range. We recognized net income from continuing operations of $76 million or $2.03 per diluted share in the first quarter compared to $6 million or $0.18 per diluted share in the first quarter of 2020.

Adjusted earnings, a non-GAAP measure, increased to $82 million or $2.20 per diluted share from $9 million or $0.26 per diluted share in the first quarter of the prior year. The trailing 12-month return on average shareholder equity, using adjusted earnings increased to 45% during the quarter from 25% a year ago. We ended the quarter with $392 million of cash and marketable securities, including $324 million in unrestricted cash and had an additional $412 million of available capacity available on $550 million of domestic committed facilities. Our debt balance at the end of the quarter includes $138 million outstanding under committed facilities. Our cost of funds for the quarter was 8.6% versus 8.3% for the fourth quarter of 2020, after excluding costs from accelerated discount amortization as a result of prepayments of the OnDeck facilities last quarter. The increase in our cost of funds reflects the impact of relatively higher cost senior notes, representing a larger proportion of our outstanding debt as lower cost securitization debt continues to amortize. Based on current market rates, our domestic marginal cost of funds ranges from 2.1% to 4.25% depending on the facility utilized. Our marginal cost of funds has improved with the new small business financing transaction we announced this week. On Tuesday, we priced a $300 million securitization debt facility, backed by OnDeck term loans and lines of credit.

The rated for tranche structure has a 95% advance rate, a 2.07% blended fixed rate coupon and a 3-year revolving period followed by an amortization period. Our solid balance sheet and ample liquidity have us well positioned to support rising demand, originations, and receivables growth as the economy recovers. Due to the ongoing uncertainty in the economy, we are not providing detailed financial guidance at this time. However, as we return to meaningful growth in originations and receivables, we expect to invest more in marketing by leveraging our machine learning driven analytics to capture increased demand at attractive unit economics. As I've mentioned in my remarks today, this should lead to some normalization in the net revenue margin, growth related variable expenses, and the adjusted EBITDA margin from recent levels. The degree and timing of any normalization will depend upon the timing, speed, and mix of originations growth and will likely occur over several quarters as originations begin to return to or exceed pre-COVID levels. We remain confident, the return to pre-COVID originations growth will allow us to deliver meaningful and consistent top and bottom line growth as we leverage the benefits of the scale and efficiency of our direct online-only operating model, our broad and diversified consumer and small business product offerings, our powerful credit risk management capabilities, and our solid balance sheet.

And with that, we'd be happy to take your questions. Operator?

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions]. And our first question will come from David Scharf of JMP.

David Michael Scharf -- JMP Securities -- Analyst

Thanks for taking my questions. Two things. First, obviously, we're all trying to kind of gauge the trajectory of a recovery. There are a lot of unknowns. But I'm wondering, as it relates to the small business side, obviously, for consumer, it seems like demand snaps back fairly quickly when stimulus runs out. Can you give a little more color on the PPP loans? And maybe what percentage of the existing borrowers, if any, have taken any out? And sort of how long of a bridge maybe it provides to those borrowers? And just, I guess, put it into context relative to consumer stimulus. Is it a little longer dampening effect on demand? Or do you expect the small business to bounce back as quickly as consumer?

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Yes, Dave, good question. From the prior round of PPP, we saw demand bounce back actually very quickly. I think a lot of these small businesses are deep in the hole, and PPP certainly helps. But it's mostly for payroll and doesn't go much beyond that in terms of rent or building up inventory and those kinds of things. So I think the key for small businesses, as I mentioned in my comments, is the economy continue to open up, which there's a lot of encouraging signs as I also mentioned, states continue to open up more and more and allowing retail businesses or small businesses to open up further. And I think that's going to be the biggest driver, especially now that PPP is largely wound down. These businesses have not been operating at full capacity. They've not been fully stocked up. They've deferred maintenance. They've deferred rent. And as the economy improves and consumers begin shopping at the small businesses, again, they're going to need to ramp up quickly, and we think is going to kind of spur a pretty strong demand for credit.

David Michael Scharf -- JMP Securities -- Analyst

Got it. It's certainly probably the best asset class to be tethered to right now. And then just as a follow-up, shifting to consumer. I know Steven commented about marketing spend eventually or, I guess, working its way back to sort of that mid to upper teen ratio to revenue. I'm just wondering, as you think about customer acquisition strategies emerging from the pandemic as the economy opens. I know pre-pandemic, Dave, when it was a very benign credit environment, you seem to have a strike while the iron's hot mentality in terms of, there was a big percentage of loans coming to new customers. You felt like that was the time to go out and meet that demand. Is there any chance or is there any reason to perhaps spend an above trend amount on marketing as we emerge from the pandemic since there is going to be just such a rush of demand and you're still in a pretty good environment credit wise?

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Yes. I think you -- that's almost -- that's exactly our sentiment, actually, David. We think there is going to be a rush for demand. We think it's a great time for us to be able to fill that demand and actually take share. And so we're not going to be afraid to spend maybe a teeny bit more heavily than we have in the past a little bit earlier. Now you know us super well that we are very disciplined with respect to all of our spend, including marketing spend. And that's not changing. We're not going to go out and do anything crazy. But if there's a range of spend we could get comfortable with, we'll probably be on the higher end. And look, if it's not working, we can pull back very quickly. The spent isn't long dated. It's something we can adjust day-to-day, week-to-week. But I think all in, will be a little bit more on the higher end of our comfortable range because we do think demand is going to bounce back, we want to take share. And once such a good credit environment, and you've seen how strong credit continues to be, that unit economics are really strong, which allows us to spend a little bit more. I mean, we had incredibly high net revenue margins this quarter even with 33% -- getting up to 33% new customers. So that certainly gives us the ability to lean in a little bit more heavily and a little bit earlier on the marketing spend.

Operator

Your next question comes from John Hecht of Jefferies.

John Hecht -- Jefferies LLC -- Analyst

Some of this is, I guess, you talked about the difference in kind of the recovery demand between small business to consumer. But where do you guys see the portfolio in terms of mix over the next few quarters? And any meaningful changes there based on either kind of where you see opportunity and/or where the momentum is?

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Yes. So I think we see opportunity in both. And we expect them both to rebound over the next months and quarters. And as I mentioned in my comments, we think they could go somewhat hand-in-hand as the consumer gets out there and start spending. And, again, small businesses, we think, is a place that's likely to be an outsized beneficiary of that kind of new consumer spending. They've been doing their spending at large businesses that hasn't waned that much during the last 12 months of the pandemic. But the small business spending is what's been hit. So again, we think that -- we think it largely goes hand-in-hand. We don't -- so we don't expect any huge change in mix over the next couple of quarters. Obviously, it can fluctuate from month-to-month and quarter-to-quarter. Small business has been a little bit steadier over the last quarter or so. So maybe there's an opportunity for consumer to come back a little bit faster, but we're talking around the margins now. We actually expect to see good momentum in both sides of the business.

John Hecht -- Jefferies LLC -- Analyst

And then there was just a discussion about the marketing spend as a percentage of revenues. I'm wondering at the CAC level, any -- are you changing kind of the mix of marketing, any changes that you expect with customer acquisition cost, given the fact that your other lenders are kind of trying to build their book as well?

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Yes. So I think in terms of mix, I think we're leaning a little bit more heavily on direct marketing as opposed to partners. And I think -- we think this is a nice opportunity. It's something we've been working out for the last 5-plus years, is taking more control of our own destiny. And we've been successful at it. We think this is a nice opportunity to go even deeper there. So you'll see, I think, the mix will kind of skew a little bit more toward the direct versus partner channels, which will benefit us long term. So it's something we're excited about. And then in terms of CAC, like I said, maybe slightly on the higher end, but again, nothing outrageous. Unit economics are higher now. So we do have the ability to lean in on the CAC without getting outside of our return threshold. So again, maybe a little bit higher and a little bit earlier. But again, as I said before, we've always been very disciplined on the expense side and that's not going to change.

Operator

[Operator Instructions]. And the next question will come from John Rowan of Janney.

John J. Rowan -- Janney Montgomery -- Analyst

I just want to make sure I understand. The guidance for G&A expenses, that it's lower in 2021 versus the $141 million you spent in 2020, is that correct?

Steven E. Cunningham -- Executive Vice President and Chief Financial Officer

Yes. Well, I'm really talking about how to think about the absolute dollars as we move forward from here, right? So with the combination of synergies, recognition, and our own cost discipline, you should expect those absolute dollars to tick down through the rest of this year. And as we expect some return of growth as we move through the year, you'll see those come down as a percent of revenue from where they are today.

John J. Rowan -- Janney Montgomery -- Analyst

So they come down in absolute dollars and as a percent of revenue throughout the year?

Steven E. Cunningham -- Executive Vice President and Chief Financial Officer

Right. With, again, expecting that that growth is going to start to return as we move through the year.

John J. Rowan -- Janney Montgomery -- Analyst

And then all of that, the OnDeck synergies, that all -- that run rate is fully recognized by the end of the year. We shouldn't expect any more decreases in G&A into 2022. Does that sound about right?

Steven E. Cunningham -- Executive Vice President and Chief Financial Officer

There could be sort of beyond our -- remember, we talked about $50 million of synergies from OnDeck's 2019 expense base. And as David and I both mentioned, we expect to overachieve on that. And then we expect there will be some longer tailed type items like real estate and data center rationalization that could spill into the second year, but we think we'll be at, at least the $50 million run rate by the time we enter into 2022.

John J. Rowan -- Janney Montgomery -- Analyst

And then I'm not sure if you guys have ever disclosed this, but if you haven't, just say so. Have you given any -- have you framed up exactly how much exposure you guys have to the bank partner model?

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Steve, do you want to?

Steven E. Cunningham -- Executive Vice President and Chief Financial Officer

When you say exposure, from what, with respect to what?

John J. Rowan -- Janney Montgomery -- Analyst

Meaning what percent of your loans are issued through banks or percent of revenue? I'm just -- if you haven't disclosed it, that's fine. I just wanted to ask, in case, you have -- you are disclosing it.

Steven E. Cunningham -- Executive Vice President and Chief Financial Officer

We have not disclosed that level of detail around the bank partnership.

Operator

Our next question comes from Vincent Caintic of Stephens.

Vincent Albert Caintic -- Stephens Inc -- Analyst

First question is on the competitive environment. I know it's still the tough to generate receivables here. But in some of the consumer asset classes that we cover, it seems like even with some limited growth potential that some people are chasing receivables in limited growth areas. But I was wondering, maybe if the competition in your space is -- do you see much competition? Is it disciplined? And as we come out of this, do you see the environment to be more or less competitive?

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Yes, sure. Good question. On the consumer side, the competition seem normalish. I think some of the online guys are trying to lean in harder to reaccelerate their lending. But the storefronts have just been decimated. A lot of them are in central business districts. People aren't traveling there. Now a lot of them have shut down, especially the mom-and-pop storefronts. So that segment of the competition is largely gone and will probably never come back at any meaningful level. So that certainly helped on the consumer side and will likely continue to help going forward. On the small business side, early in the pandemic, many of the small business lenders suffered from very bad losses, at least 10 or 12 have gone out of business, including a couple of large ones. One of our largest competitors, Kabbage, got bought by American Express, and it's no longer lending in the kind of same type of interest rates we're lending at the same customer base. So I would say competition on the small business side is probably even later today than on the consumer side. It's been -- had a more meaningful drop in competition on the small business side than on the consumer side.

Vincent Albert Caintic -- Stephens Inc -- Analyst

And you're one of a few that have good insights into both the consumer behavior and the small business, your competitor who bought Kabbage was talking about, so their consumers are maybe some recovery, it's spending, but -- and the small business maybe is even better at. So I was just kind of wondering, from your sense, are you seeing, I guess, relative between consumer and small business, just one area seem to be closer to a recovery than the other or is it sort of the same?

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Sure. Yes. Like I said before, I think they largely go hand-in-hand as the consumer starts spending, the small businesses are going to be the beneficiary. I think the spending on the consumer side is starting. We just haven't seen as much of the benefit because of the last round of stimulus and tax return season. And so I think the small businesses are beginning to respond to that spending by doing some spending, to spending on their own. And so as we move into the next months and quarters, largely going hand-in-hand. If I had a guess, which was going to accelerate faster, I might say small business. But again, we're on the margins here. I think they largely move together as the economy opens up.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to David Fisher for any closing remarks.

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Thanks, everyone, for joining our call today. We appreciate your time, and we look forward to talking to you again next quarter. Have a good evening.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Lindsay Savarese -- Investor Relations

David Fisher -- Chairman of the Board, President and Chief Executive Officer

Steven E. Cunningham -- Executive Vice President and Chief Financial Officer

David Michael Scharf -- JMP Securities -- Analyst

John Hecht -- Jefferies LLC -- Analyst

John J. Rowan -- Janney Montgomery -- Analyst

Vincent Albert Caintic -- Stephens Inc -- Analyst

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