Enova International Inc (ENVA) Q4 2018 Earnings Conference Call Transcript

ENVA earnings call for the period ending December 31, 2018.

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Jan 31, 2019 at 8:37PM
Financials

Enova International Inc  (NYSE:ENVA)
Q4 2018 Earnings Conference Call

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Jan. 31, 2019, 5:00 p.m. ET

Contents:

Prepared Remarks:

Operator

Hello, everyone, and welcome to the Enova International Fourth Quarter and Full Year 2018 Earnings Conference Call. All participants today will be in a listen-only mode. (Operator Instructions) After today's presentation there will be an opportunity to ask questions. (Operator Instructions) Please note that today's event is being recorded.

I would now like to turn the conference over to Monica Gould, Investor Relations for Enova. Please go ahead.

Monica Gould -- Investor Relations

Thank you, Brian, and good afternoon everyone. Enova released results for the fourth quarter and full year 2018 ended December 31, 2018 this afternoon after the market close. If you did not receive a copy of 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 based on the business environment as we currently see it, and as such does include certain risks and uncertainties. Please refer to our press release and our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's discussion. Any forward-looking statements that we make 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 US GAAP reporting, we report 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 A. Fisher -- Chairman, President and Chief Executive Officer

Thanks, Monica. Good afternoon, everyone. Thanks for joining our call today. We're going to start by giving a brief overview of the quarter, then I'll update you on our strategy and outlook for 2019. After my remarks, I'll turn the call over to Steve Cunningham, our CFO to discuss our financial results and guidance in more detail.

A strong fourth quarter capped off with terrific year for Enova. Robust new customer growth, drove our top line out performance, which again exceeded the high-end of our guidance range. And stable credit combined with efficient marketing enabled us to deliver solid profitability even with a high mix of new customers.

Fourth quarter revenue was a record of $313 million, an increase of 28% over last year, as we saw healthy demand across all of our products. Adjusted EBITDA in the fourth quarter rose 27% to $48 million and adjusted EPS doubled year-over-year to $0.52. These results reflect our strong execution and solid operating leverage inherent in our online model.

The solid demand we've seen all year continued in the fourth quarter. Clearly our diverse product offerings are resonating with new and returning customers. During the fourth quarter, loans to new customers represented 29% of total originations. As we've mentioned in the past, these new customers ultimately expand our returning customer base and our revenue potential going forward.

Also contributing to our strong fourth quarter results with stable credit across our portfolio. While our net charge-offs were higher than last year, this is largely a result of the higher mix of new customers over the last several quarters. We feel very confident in the quality of our analytics to manage credit quality changes in customer mix, product mix and importantly through economic cycles. We performed very well through the great recession and our credit analytics are much more sophisticated today than they were then.

Total companywide originations in the fourth quarter increased 12% year-over-year and declined 1% sequentially. During the fourth quarter, we could have grown much faster with profitable unit economics, given the strong demand for our broad product offerings, combined with the efficiency of our marketing. However, we've pulled back on our marketing spend in the back half of the quarter to maintain strong companywide profitability. Steve will provide more detail, but this moderation in growth allowed us to achieve our EBITDA and EPS guidance, while still delivering very strong revenue growth.

Managing growth can be challenging, but our sophisticated analytics models can respond rapidly to demand by adjusting our marketing spend and credit card offs up or down. Our ability to manage growth versus profitability is a significant strength we have developed and a key reason we've been able to repeatedly meet or exceed our guidance. Additionally, we believe this balanced growth approach is prudent given how late we are in the current economic cycle.

As we've discussed, credit quality still looks excellent. The lateness (ph) cycle is definitely the time to ensure you have very strong unit economics across your products. Our success and positive results across our short-term line of credit and installment and receivable purchase agreement segments is attributable to our focus on our six growth businesses. Namely, our US subprime business, our US near-prime offering, our UK consumer brands, US small business financing, our installment loan business in Brazil; and Enova Decisions, our Analytics-as-a-Service business. We remain focused and actively building out each of these businesses and adding additional products within them to drive further growth.

Our large US subprime consumer business generated another strong quarter profitability, as we remain committed to helping hard working people get access to fast trustworthy credit. Originations in this business increased 20% year-over-year and the portfolio remains well diversified, consisting of 48% line of credit products, 35% installment products and only 17% single-pay products.

For the year, our US subprime originations grew 19%, showing our ability to drive growth in this business even with its large size. Our NetCredit product continues to take share from brick and mortar lenders. Net credit loan balances increased 27% year-over-year to $470 million and originations increased 2% year-over-year.

Our US near-prime product represented 45% of our total portfolio at the end of Q4, up from 43% in Q4 of last year. With 26% originations growth in 2018, net credit has become a substantial business for us in a fairly short period of time.

In the UK, we are also seeing solid growth. Our fourth quarter UK revenue increased 9%, compared to the fourth quarter of last year, primarily driven by strong growth in our installment loan product there. As we've discussed in the past, we've been cautious with growth of our small business products over the last couple of years, as we waited for pricing in the market to rationalize. Over the last couple of quarters, we've seen a strengthening of demand at attractive unit economics. As a result, we become moderately more sort of an expanding in this space. The result was good growth in our small business financing products during Q4. Originations increased 32% year-over-year, and represented 8% of our total book at the end of Q4.

Turning to Brazil, on a constant currency basis fourth quarter originations rose 76% year-over-year. This contributed to our Brazilian loan portfolio, increasing 31% year-over-year to $22 million at the end of the fourth quarter. We continue to see a large opportunity in Brazil with the huge population growing middle class and stable regulatory environment.

Lastly, Enova Decisions, a real time Analytics-as-a-Service business, continues to gain momentum. Our technology platform is highly sophisticated, and we've been able to leverage this technology to expand into different industries. As (ph) business remains in the early stages, we are active in building out the pipeline and believe there is ample opportunity to do so.

Before wrapping up my remarks, I want to provide a brief comment on federal rule-making. There hasn't been an update from the CFPB since back in October when they announced their intention to reconsider the Small Dollar Rule. At that time, they expected to issue a notice of proposed rule-making in early 2019. That would address reconsideration specifically the ability to pay provisions, as well as changes to the compliance date. And the CFPB has not officially changed that guidance.

Shortly, after that announcement in November at Texas Federal District Court granted a stay of the rules previously scheduled August 2019 compliance date. As a result of these two actions, it remains unclear what the final rule will consist of and when it may become effective. But the flexibility of our online platform, our expensive experience in adapting to new regulations. And our proprietary analytics provides us with a significant advantage in adapting to any changes, as compared to storefront lenders.

In addition, since the initial role was released over 2.5 years ago, we have significantly diversified our product offerings resulting reduced regulatory exposure under the rule. Overall, we are very pleased with our financial performance in 2018, and the considerable momentum we have entering 2019. The strong new customer growth we have been generating combined with a solid base of loyal returning customers and stable credit across the portfolio, creates significant tailwinds for us.

As I mentioned earlier, we will continue to balance growth and profitability as we've built Enova for long-term success. Our product offerings are resonating very well within the market and believe our focused growth strategy, ongoing diversification, and scalable online model, coupled with prudent management of the business once with long-term, sustainable and profitable growth.

Now, I will turn the call over to Steve, who will provide more details on our financials and guidance. And following his remarks, we'll be happy to answer any questions that you may have. Steve?

Steven E. Cunningham -- Chief Financial Officer

Thank you, David. And good afternoon, everyone. I'll start by reviewing our financial and operating performance for the fourth quarter of 2018, and then provide our outlook for the first quarter and the full year 2019.

As David mentioned, we closed 2018 with another quarter of strong financial results with revenue above our expectations and adjusted EBITDA and adjusted earnings per share at the midpoint of our guidance. Our performance this quarter and for the year reflects our continued ability to deliver meaningful growth with efficient marketing, while leveraging our superior analytics, flexible online operating model and balance sheet to deliver strong bottom line results.

Total fourth quarter 2018 revenue increased 28% to $313 million, exceeding our guidance range of $290 million to $310 million, and rose 6% sequentially. On a constant currency basis, revenue increased 29% year-over-year. Revenue growth was driven by a 22% year-over-year increase in total company combined loan and finance receivables balances, which grew to $1.05 billion from $862 million at the end of the fourth quarter of 2017.

Installment loan and line of credit products continue to drive the growth in total loans and finance receivables balances. Quarterly originations in our installment and RPA and line of credit products increased 12% and 41% respectively from the prior year, and drove the 12% year-over-year increase in total company originations during the quarter. Installment loans and lines of credit now comprise more than 80% of our total revenue, and 90% of our total portfolio, demonstrating our customers' preference for these products.

The ongoing diversification of our receivables portfolio continues to generate faster receivables growth in our line of credit and installment loan products. These products have longer durations and higher average loan amounts. As a result, we are able to drive higher total company receivables and revenue growth with fewer originations, which generally should result in less effort and lower cost to grow over time. This is a leading factor of the ongoing trend of lower operating expense as a percentage of revenue.

Domestically, revenue increased 31% on a year-over-year basis, and rose 7% sequentially to $269 million in the fourth quarter of 2018. Domestic revenue accounted for 86% of our total revenue in the quarter. Revenue growth in our domestic operations was driven by a 41% year-over-year increase in line of credit revenue, and a 28% increase in installment loan and finance receivable revenue. Continued strong demand for these products drove our domestic combined loan and finance receivables balances up 24% year-over-year.

Driven by the strong growth of NetCredit, domestic near-prime installment loans grew 27% year-over-year and comprised 45% of total company combined loan and finance receivables balances at the end of the quarter.

International revenue increased 14% from the year ago quarter to $44 million, and accounted for 14% of total revenue in the fourth quarter. On a constant currency basis, international revenue rose 20% on a year-over-year basis. Year-over-year installment -- I'm sorry, year-over-year international revenue growth was driven by a 33% increase in international installment loan revenue, partially offset by a 6% decrease in short-term loan revenue, reflecting our ongoing diversification strategy and expansion of installment lending in our international markets.

Total international loans increased 9%, compared to a year ago, as international installment loan balances rose 27% year-over-year. International installment originations rose 49%, compared to the year ago quarter. On a constant currency basis, international loan balances increased 17% year-over-year.

Turning to gross profit margins, our fourth quarter gross profit margin for the total company was 43%, which compares to 48% in the year ago quarter and 44% in the third quarter of 2018. As we've highlighted for some time, we typically see a decline in gross profit margin during the second half of the year, as we move into our seasonally higher growth periods. This can be especially pronounced during periods of accelerating growth, as we saw for most of 2018, and if a higher proportion of growth is coming from new customers, which was again the case in the fourth quarter.

A higher mix of new customers and originations requires higher loss provisions upfront as new customers default at a higher rate than returning customers with a successful history of payment performance. Originations from new customers across all of our businesses were 29% of the total during the fourth quarter. And new customer originations accounted for 22% of the quarterly year-over-year change in total company originations.

On a full year basis, new customer originations totaled 29% of total company originations in 2018, compared to 27% in 2017, and 24% in 2016. New customer originations accounted for 39% of the full year 2018 year-over-year increase in total company originations.

Net charge-offs as a percentage of average combined loan and finance receivables, increased in the fourth quarter to 15.9% from 13.4% in the prior year quarter. This increase was expected, given the rising proportion of new customers in our portfolio over the past two years.

Similarly, at the end of the fourth quarter, the allowance and liability for losses for the consolidated company as a percentage of combined gross loan and financing receivables was 15.7%, compared to the year ago quarter of 14.5%.

As you can see in our supplemental earnings release tables, the increase in the consolidated net charge-off ratio is driven primarily by increases in the line of credit segment. That segment has been experiencing the fastest growth in highest proportion of new customer volume and originations.

Overall, the credit performance of the portfolio continues to be stable and in line with our expectations, given the increase in new customer volume and portfolio mix shifts this year. We continually monitor unit economics across products and across vintages and remain comfortable with the returns we are generating on our originations.

For 2019, we expect our consolidated gross profit margin to be in the range of 45% to 55%, a slight decline from our prior year's gross margin guidance is driven primarily by the expectation of continued growth in originations coming from new customers.

Quarter-to-quarter, our gross profit margin will be influenced by seasonality and growth characteristics including the pace of growth in originations, the mix of new versus returning customers and originations, and the mix of loans and financing's in the portfolio. We expect the gross profit margin during the first quarter of 2019 to be somewhat lower than prior years, a significant new customer growth from recent quarters continues to season and as a result of our ongoing portfolio mix shift to installment and line of credit products.

Our domestic gross profit margin was 43% in the fourth quarter, compared to 47% in the fourth quarter of 2017, and was flat when compared to the third quarter of 2018.

Our international gross profit margin was 43% in the fourth quarter, compared to 52% in the prior year quarter. The decrease in international gross profit margin from the year ago quarter was driven primarily by the growth in new customers, in the portfolio mix shift toward installment loans. We expect our international gross profit margin in 2019 to be in the range of 47% to 57%.

Quarter-to-quarter, the international gross profit margin will be influenced by seasonality and growth characteristics including the pace of growth in originations, the mix of new versus returning customers and originations and the mix of loans and financings in the international portfolio.

Turning to expenses, strong operating leverage this year from our scalable online model has allowed us to continue to maintain attractive levels of EBITDA even while fulfilling strong customer demand. While we typically experienced meaningful variations from quarter-to-quarter, total non-marketing expenses for the full year 2018 grew 12%, compared to revenue growth for the full year of 32%.

During the fourth quarter of 2018, total non-marketing operating expenses of $59 million increased 25% from the year ago quarter, and our total operating expenses including marketing were $91 million or 29% of revenue in the fourth quarter, compared to $79 million or 32% of revenue in the fourth quarter of 2017.

We continue to see efficiency in our marketing spend as well. Marketing expenses in the fourth quarter grew just 2%, compared to the year ago quarter to $32 million or 10% of revenue, compared to $31 million or 13% of revenue in the fourth quarter of 2017. We expect marketing spend will range in the low to mid-teens percentage of revenue in 2019 with the highest spend during our seasonal growth periods in the second half of the year.

Operations and technology expenses totaled $31 million or 10% of revenue in the fourth quarter, compared to $23 million or 9% of revenue in the fourth quarter of 2017, and were higher primarily from volume-related variable expenses, ongoing expenses associated with complaints in the UK

and a one-time $1.7 million decrease in the prior year quarter related to an expense reclassification.

General and administrative expenses were $27 million or 9% of revenue in the fourth quarter, compared to $25 million or 10% of revenue in the fourth quarter of the prior year, and were higher primarily from modestly higher personnel related expenses to support the strong growth in the business.

Adjusted EBITDA and non-GAAP measure of $48 million increased 27% year-over-year in the fourth quarter. Our adjusted EBITDA margin was 15.5%, compared to 15.6% in the fourth quarter of the prior year.

Our stock-based compensation expense was $3.5 million in the fourth quarter, which compares to $3 million in the fourth quarter of 2017. Our effective tax rate was 30.8% in the fourth quarter, compared to a tax benefit of 70.1% recorded in the fourth quarter of 2017. Our full year 2018 effective tax rate was 8.3%, compared to 22.8% in 2017. We expect our ongoing normalized effective tax rate will be in the mid 20%.

Net income was $8.7 million in the fourth quarter or $0.25 per diluted share, which compares to net income of $6.9 million or $0.20 per diluted share in the fourth quarter of 2017. Net income has benefited from rising EBITDA and the drop in the company's cost of financing. Net income includes a loss on the early extinguishment of debt during the quarter of $7.8 million as a result of retiring the remaining $117 million of our 9.75% 2021 notes during the quarter, using unrestricted cash and cash equivalents.

Adjusted earnings and non-GAAP measure, more than doubled to $18.2 million or $0.52 per diluted share from $8.9 million or $0.26 per diluted share in the fourth quarter of the prior year. On the heels of a number of successful financing transactions during 2018, we finished the year with strong liquidity and a falling cost of funds.

During the fourth quarter, cash flows from operations totaled $217 million and we ended the quarter with unrestricted cash and cash equivalents of $53 million and total debt of $858 million. Our debt balance at the end of the quarter includes a $116 million outstanding under our $575 million of combined installment loans securitization facilities and $24 million outstanding under our $125 million corporate revolver.

Our cost of funds for the fourth quarter was 8.9%, a 90 basis point decrease from the same quarter a year ago and 190 basis point decrease from the fourth quarter of 2016. We expect our cost of funds to continue to improve into 2019, as we've recognized the cost benefits of recent transactions.

Also today, we announced that our Board of Directors has authorized a share repurchase program for up to $50 million of Enova's outstanding common stock through December 31, 2020. This new program follows on the prior $25 million program, which has been fully executed. The share repurchase plan gives us additional flexibility to deliver on our commitment to creating value for our shareholders, while reserving adequate liquidity for our primary focus of investing in our six growth businesses.

Now I'd like to turn to our outlook for the first quarter and full year 2019. Our outlook reflects continued strong growth in each of our businesses, continued faster relative growth and installment and line of credit products, stable credit, accelerated growth in the mix of new customers and originations. And no significant impact to our businesses from regulatory changes. Any significant volatility in the British pound from current levels could impact our results. We expect to see our typical quarterly seasonality during 2019.

As a reminder, the first quarter is typically our strongest financially as combined loan and financing receivables decline or grow more slowly as originations fall from lower seasonal demand. This leads to a lower level of provision for loan losses and an expanded gross margins. These trends reverse themselves as we move into the second half of the year when seasonal demand and originations increase.

As noted in our earnings release, in the first quarter of 2019, we expect total revenue to be between $280 million and $300 million, diluted earnings per share to be between $0.78 and $0.99 per share, adjusted EBITDA to be between $63 million and $73 million and adjusted earnings per share to be between $0.85 and $1.06 per share.

For the full year 2019, we expect total revenue to be between $1.25 billion and $1.31 billion, diluted earnings per share to be between $2.49 and $3.13 per share. Adjusted EBITDA to be between $230 million and $260 million and adjusted earnings per share to be between $2.76 and $3.40 per share. As David mentioned, we remain very optimistic about 2019 and our ability to generate growth and increased profitability.

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

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instruction) And today's First question will be David Scharf with JMP Securities. Please go ahead.

David Scharf -- JMP Securities -- Analyst

Hi, good afternoon. Thanks for taking the questions. You know, wanted to maybe drill down a little bit more on how we are to be thinking about modeling the credit outlook. Clearly, the increase in new customers is impacting the profile of the portfolio near-term. Steve, what I look at the first half of the year of 2018, the loss rate was basically flat versus 2017, then it was up 200 basis points year-over-year in Q3, now it was up 250 basis points year-over-year in Q4.

And just based on your expectation of how long it takes for these sort of new customers to normalize within the portfolio. Is 200 -- is a 250 basis point increase sort of the ceiling in your mind, trying to sort of drill down ultimately, what kind of loss profile you're thinking about that gets to your gross margin guidance?

Steven E. Cunningham -- Chief Financial Officer

Hi, David. How are you doing? So listen, it's going to depend on a few things and probably most importantly is growth rate overall. So if you obviously are sustaining a level number of new customer originations, while you're accelerating your growth that's going to contribute obviously to some of those increases. I would say, also the mix, so if you just take a look at our segments, you can see the loss rates vary and in particular they can vary fairly significantly, so the mix of that is going to matter. And then they also climb, there is seasonal -- I'm sorry their curves if they seasonal little differently as well. So you may find some of our businesses that will hit half or more of their lifetime losses for advantage in the first several months and maybe, you know, almost all of them in the first six to nine months, whereas a longer duration loan might take a little bit longer.

So it's not that, you know, I'm not necessarily giving you any easy answer, but it depends on all of those various things. What we can tell you is, we do expect the continued trend toward installment and the line of credit as we mentioned and we do expect that new customers as a percent of origination is going to increase from what we saw in 2018.

David Scharf -- JMP Securities -- Analyst

Okay. Within those kind of just staying on that topic within the installment versus line of credit. It seemed like the loss rate actually within installment, I mean, it did tick up sequentially, but it's been a lot more stable over the last few quarters even with this Q4 performance. It was a pretty dramatic spike in the loss rate in LOC. And is there anything unique about, that you can design about that borrower it's a little different, or is it tend to be defaults on people that are drawing a secular third time. I'm just curious, if there's anything about that borrower that's distinguishable and whether that might impact -- (Multiple Speakers) Hello?

Steven E. Cunningham -- Chief Financial Officer

So, David, yes. So, David, so I think as you look across, I mean, we've definitely seen as I mentioned line of credit has been growing fast and it's probably had the highest proportion of new customers in that year-over-year growth. And you can just look at on a relative basis, that's kind of how it's been showing up and a lot of that is centered in the US cash net businesses. I would also point you back to the installment segment, which has got a little bit more going on and you've got some international businesses in the UK and Brazil, as well as our near-prime product. And you can see those have ticked up year-over-year. There has been new customer growth, but I think there's a little bit more going on in that segment. I think the line of credit one of the reasons I gave you the example last quarter using line of credit is probably a little bit more of the pure view of how that new customer growth can play out.

As those loans in a vintage season overtime. So even some of the third quarter loans that we put on we had rapid growth in the third quarter, great new customer growth you're still seeing those vintages -- those monthly vintages move up their loss curve. So I think that's kind of the dynamic you're seeing between the two segments, and as David mentioned, we moderated growth somewhat in the fourth quarter from where we could have landed which obviously it will take a little bit of time to play out as we move through 2019.

David Scharf -- JMP Securities -- Analyst

Got it. That's helpful. And then just one last question, I'll get back in queue. The sort of the reengagement on the small business side. I'm wondering if, number one, you can just refresh my memory about the profile of that loan like what the typical sort of loan size in APR is. And then secondly is there an expectation that the mix 8% of total AR might reach the double-digits by the end of this year?

David A. Fisher -- Chairman, President and Chief Executive Officer

Sure, David so there's two product, we have two products in the small business space. One, is the line of credit, kind of, in the $30,000 to $50,000 range, it's kind of like a MX small business card replacement. And the other is the slightly larger installment loan like product that it can go as larg as $250,000 or $300,000, but average loan sizes tend to be much smaller like well under $100,000 and APRs for both products are kind of in the -- kind of 50% to 60% range.

Yes, the growth rate of that business currently is exceeding the growth rate of our overall business. But the overall business is still growing very quickly. So it really depends on how the year plays out, but right now the growth of that product looks good, we're not going to become overly bullish, because we've seen silly stuff in that space over the last few years. And so we're going to -- what make sure we don't get overly aggressive too soon. But right now we're seeing pretty attractive unit economics and good demand, and that's allowed to -- us to show stronger growth.

David Scharf -- JMP Securities -- Analyst

Okay. Thanks very much.

Operator

Next question will be from Vincent Caintic with Stephens Incorporated. Please go ahead.

Vincent Caintic -- Stephens Inc -- Analyst

Hey, thanks. Good evening guys. It's nice to see the growth that you've been able to achieve. And importantly, the profitability that you got. So you made the comment that you had a lot of growth available to you and you could have grown more and so you pull back on the marketing on the second half of the quarter. So, appreciate that as a public company. When you get these -- I guess customers coming in and applying and you kind of maybe, push back away from marketing from booking them, because what happens to the customer, are they still available to you in the first quarter of 2019 or how do you kind of handle that. And is there -- is that the growth still available to you or does it go to another lender?

David A. Fisher -- Chairman, President and Chief Executive Officer

Yes, we definitely lose some kind of -- we lose some market share in the short-term, now these products as, you know, mostly are across the industry are fairly short-term in nature. So they come back into the market, so we get another bite at the apple over time. But certainly we gave up a tiny bit of market share in the fourth quarter. As proportion of our total kind of loans and total customers that we've engage with over 14-year history it's tiny, but yes, it is -- we -- all things equal, you'd rather not have to do that, but we realize the importance of managing profitability and so certainly believe it's worth the trade-off.

Vincent Caintic -- Stephens Inc -- Analyst

Right. That makes sense. Appreciate that. The separately on the share repurchase program, so it's nice to see that, you're reupping that and also to see that you're growing a lot organically without share repurchases. I'm just wondering what your thoughts are on how you plan to use your capital. And how much capital you need to maintain your growth rates versus what you think of maybe excess capital to return to shareholders?

Steven E. Cunningham -- Chief Financial Officer

Yes, Vince. And I think our intention with the buyback program. As I said, was to be -- to really be opportunistic as you would expect, it's not intended to be sort of a regular return to our shareholders outside of that. We think that, you know, as we talked about, there's plenty of demand for us and for our capital to be ploughed back into the business and that's what we intend to do.

Vincent Caintic -- Stephens Inc -- Analyst

Okay, that makes sense. Just last one I have, so appreciate your 2019 guidance. Any trends that you built into 2019 guidance that's different from the trends of 2018, and kind of us -- when you think about the low, high-end of the low-end, if the range is other than usual dependency on growth. Is there any other drivers between the ranges? Thanks very much.

Steven E. Cunningham -- Chief Financial Officer

Yes, I think, I tried to highlight in my comments, sort of the key things that underpin, you know, our guidance outlook. So I think what you're going to see is a continuation of a largely what you saw in 2018, the mix shift in diversification, increasing growth from new customers stable credit. And I don't think there's anything extraordinary to talk about with the ranges. Just a reminder that depending on our growth and our mix in the proportion of the growth you can end up in the high-end of revenue in the lower side of the EBITDA. So they're not necessarily linked as we move quarter-to-quarter, particularly as you move through the seasonality of the year.

Vincent Caintic -- Stephens Inc -- Analyst

Okay. Make sense. Thanks very much.

Operator

Next question will be from John Hecht with Jefferies. Please go ahead.

John Hecht -- Jefferies -- Analyst

Thanks, guys. Good afternoon. Real quick Steven at the -- for the modeling purposes, what should we think about for stock costs and tax rate?

Steven E. Cunningham -- Chief Financial Officer

Yes. So the -- are you talking about the repurchase shares?

John Hecht -- Jefferies -- Analyst

No, just the equity compensation.

Steven E. Cunningham -- Chief Financial Officer

I see. Yes, that's going to run what it typically has been around $3 million to $3.5 million a quarter. Tax rate is mid '20s. You'll be pretty safe with a 25% tax rate, and I say mid '20s, because there are some variations from quarter-to-quarter under the tax rules that can add point or two or take away a point or two, but that's probably the best advice I could give you.

John Hecht -- Jefferies -- Analyst

Okay. Another question, I don't completely understand the mix between new and call it recurring or established customers and how that can fluctuate credit. Maybe can you give a sense of what's the balance right that you enter in 2018 of new versus your recurring customers. And do you think that balance will be consist at 2019, and I just say -- it helps kind of me give context about how we think about modeling for credit?

David A. Fisher -- Chairman, President and Chief Executive Officer

Yeah, we continue to see very strong new customer demand. And subject to us again making sure we're delivering good profitability, we'd like to take as much of that new customer demand, as we can. And so we saw 2018 higher than 2017, 2017 higher than 2016, given the strength of demand 2019 could very easily have a higher mix of new customers than 2018 dip.

John Hecht -- Jefferies -- Analyst

Okay. And then final question. Steve, you mentioned the -- what kind of left the year in terms of cost of funds and you did some constructive balance sheet in liability management through the end of the year. Do you, I mean, can you give us a sense where is cost of funds this year going to be on average 50 basis points lower than last year, or could you give us a sense through maybe how you see interest expense striking throughout the year just so we get that line item a little bit more accurate?

Steven E. Cunningham -- Chief Financial Officer

Yes, I think it's got a little bit of room to go in terms of down just given some of the new deals that we did. Obviously there is some dependency on one month LIBOR, but you should expect probably another on a quarterly basis down at least another 50 basis points, as we move through the year.

John Hecht -- Jefferies -- Analyst

Okay, perfect. Thanks very much.

Operator

(Operator Instructions) The next question will be from John Rowan with Janney. Please go ahead.

John Rowan -- Janney -- Analyst

Good afternoon guys.

David A. Fisher -- Chairman, President and Chief Executive Officer

Hello?

Steven E. Cunningham -- Chief Financial Officer

Hey, John.

John Rowan -- Janney -- Analyst

Thought your phones are frozen. So just to be clear, so for 2019, David, I know -- I think as you said, stable credit. We're talking about stable credit on a statistical basis, but that the actual credit loss might not be stable on a consolidated basis, correct?

David A. Fisher -- Chairman, President and Chief Executive Officer

Actual credit loss will also be increasing on a consolidated basis both in dollars and percentage and dollars obviously just because of the larger portfolio on a percentage because of the increasing mix of new customers. We saw in 2018 versus 2017 actually saw accelerate throughout the year. So if that trend continues into 2019 and like I said, we have continued to see very strong new customer demand, that trend could continue. But as we've said a couple of times now at some point, we will keep it in check to make sure that it doesn't overly impact profitability.

That being said, we have the wide guidance ranges that we give every year to give ourselves some flexibility to take as much of that new customer demand, as we can, because that provides great long-term growth. And as Steve has said many times, he just mentioned a minute ago, it's why frequently when we do see that strong growth and strong new customer demand, we can end up the new scenario where we have very strong revenue growth and good, but maybe not as strong profitability growth.

John Rowan -- Janney -- Analyst

Okay, and then just kind of -- sort of adjacent to that point. Steve you gave guidance for the full-year marketing standard as a percent of revenue, I didn't quite get that down. Can you just repeat what you said?

Steven E. Cunningham -- Chief Financial Officer

Yes, we said low-to mid-teens as a percent of revenue is good guidance for marketing.

John Rowan -- Janney -- Analyst

For the full year?

Steven E. Cunningham -- Chief Financial Officer

Yes, well, for the full year. And I mean obviously there is a quarterly variation we don't spend nearly as much in the first quarter as we do in the fourth quarter for example, if you just look at our historical trends. But for the year that's a good -- it's going to be a good number.

John Rowan -- Janney -- Analyst

Okay. And then looks like you lost a little bit of money in the foreign category for the quarter. Is that in the UK, I know one of your peers is out tonight discussing proposing a settlement for the compensation claims any update you can provide there and if that is, what's driving the loss?

David A. Fisher -- Chairman, President and Chief Executive Officer

So I think it's a couple of things, I mean there are -- is UK can expense complaints in there. As you can see operational technology expenses year-over-year, didn't grow significantly as a percentage of revenue, so that today is very manageable expense, but it is in there. The other thing we saw in Q4 was pretty strong Brazil -- growth in Brazil. I think we saw 76% growth in Brazil, which obviously led to a lot of additional marketing expense and provisioning expense in Brazil, which impacted international profitability to a pretty meaningful extent.

John Rowan -- Janney -- Analyst

Okay. Any -- was there a change in trend line as far as complaints from the third to the fourth quarter or is it still not a material impact?

Steven E. Cunningham -- Chief Financial Officer

I mean, we do see some increases quarter-over-quarter or year-over-year, but as we've highlighted, it's in these numbers, it's in our guidance and it's not on a consolidated basis, it's really not moving the needle on the category. And frankly it's not we have both variable expenses related to the growth in the International segment obviously complaints are in there as well. So that year-over-year growth is there as well and you can see there has been some pressure because, as David mentioned, the growth, but it's not dramatically moving the results in that segment either.

John Rowan -- Janney -- Analyst

Okay, thank you.

Operator

At this time, this will conclude today's question-and-answer session. I'd like to turn the conference back over to David Fisher for any closing remarks.

David A. Fisher -- Chairman, President and Chief Executive Officer

Appreciate everyone joining our call to get today. We look forward to speaking with you again next quarter.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 46 minutes

Call participants:

Monica Gould -- Investor Relations

David A. Fisher -- Chairman, President and Chief Executive Officer

Steven E. Cunningham -- Chief Financial Officer

David Scharf -- JMP Securities -- Analyst

Vincent Caintic -- Stephens Inc -- Analyst

John Hecht -- Jefferies -- Analyst

John Rowan -- Janney -- Analyst

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