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CURO Group Holdings Corp.  (NYSE:CURO)
Q4 2018 Earnings Conference Call
Feb. 01, 2019, 8:15 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning, and welcome to the CURO Group Holdings Fourth Quarter 2018 Conference Call. All participants 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, this event is being recorded.

I would now like to turn the conference over to Gar Jackson, Investor Relations for CURO. Please go ahead.

Gar Jackson -- Investor Relations

Great. Thank you, and good morning, everyone.

After the market closed yesterday evening, CURO released results for the fourth quarter and full year 2018. You may obtain a copy of our earnings release from the Investor Relations section of our website at ir.curo.com.

With me on today's call are CURO's President and Chief Executive Officer, Don Gayhardt; Chief Operating Officer, Bill Baker; Chief Financial Officer, Roger Dean; and Chief Accounting Officer, Dave Strano.

This call is being webcast and it will be archived on the Investor Relations section of our website.

Before I turn the call over to Don, I would like to note that today's discussion contains forward-looking statements based on the business environment as we currently see it and, as such, includes certain risks and uncertainties. These statements include our expectations regarding growth of gross margins and total cost of providing services, earnings for our Canadian operations, performance in certain US markets, the financial health of our customers and macro conditions in our market, levels and timing of earnings contribution from our relationship with MetaBank, the results of our recent reduction in force, the impact of recent US government shutdown, timing of transition of certain markets to installment and LOC, our liquidity and sources of capital and our ability to finance our growth plan, our financial guidance for 2019 and its underlying assumptions and our change in methodology for recognizing net charge-offs and delinquencies and its impact on our net earnings.

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, February 1st, 2019, 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 our earnings release. As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website.

With that, I would like to turn the call over to Don.

Donald F. Gayhardt -- President & Chief Executive Officer

Great. Thanks, Gar. Good morning, everyone, and thanks for joining us today.

In general, this call follow the usual format. I'll offer some high-level thoughts on the quarter and the year, a few strategy notes and a few brief comments on the regulatory environment. Roger will then give you much more detail on the numbers and we'll take some questions.

Overall, we are really pleased with our fourth quarter and the momentum that it gives us going into 2019. We saw very earnings progress in the US and the UK and, while, as expected, Canada earnings for the quarter were down year-over-year, our Canadian business did make substantial progress on a sequential basis and exits the year in a very strong position both operationally and from an earnings perspective. We also included in our release an update on our ongoing efforts to resolve redress claims in the UK.

Few more detailed comments on highlights. First, our US business had a really solid quarter, growing revenue and adjusted EBITDA by 14.3% and 10.6% respectively and loan balances grew 14% over year-end 2017 balances to $441.9 million. And particularly good growth in open-end and unsecured installment products, with revenue in these products lines growing quarter-over-quarter by 41.1% and 23.4% respectively. Both ad spend and loan loss provision grew at a higher rate than revenue, which reduced gross margin growth but these relationships are now closer to growing at the same rate, which will help revenues flow to gross margin as we move through 2019.

Just a quick word on our cost of providing services in the US. As we discussed on our October call, we did moderate ad spend in the US in the fourth quarter, with total spend declining from $17.6 million, $13.6 million sequentially, which helped keep ad spend growth at 18% year-over-year and closer to the revenue growth of 14.3%. But most of this year-over-year growth is channel mix shift as online revenue grows faster than store revenue and online requires more ad spend as a percentage of revenue.

Conversely, our non-advertising costs of providing services -- we just call it COPS as an acronym, grew only 3.8% quarter-over-quarter. So the total cost of providing services which is ad spend plus COPS grew 6.9% versus 14.3% revenue growth for the quarter. Looking ahead to 2019, with the cost reduction measures that we've recently taken in our North American operations, which I'll discuss more in a minute, we expect to see very little growth in total cost of providing services as some ad spend increase will be offset by flat to down COPS.

I mentioned Canada earnings were down year-over-year, but the results were in line with our expectations and we made a strong return to profitability in the fourth quarter, following our Q2 and Q3 product transition. And quarterly revenue for the fourth quarter and adjusted EBITDA were $52.4 million and $8.8 million respectively.

Roger will talk a little more about currency, but we did see the Canadian dollar fall versus the US dollar in the fourth quarter and the spot ended the year 5.7% lower at 12/31 than the rate as of September 30th, so the headwind for 4Q results in Canada. Nonetheless, we did see solid earnings improvement on a sequential basis, driven by a $6.2 million revenue increase and a $2.7 million reduction in loan loss provision. Reduction in loan loss provision is the result of a 280 basis point sequential improvement in net charge-offs on our open-end book and lower allowance build as the open-end portfolio season and move to a more steady growth rate following our Q3 product transition. Sequential open-end loan growth for the fourth quarter was $19.4 million versus $87.4 million of asset growth in the third quarter.

So we're very proud of the work that our store and contact center and corporate support people are doing to make such a big change work for our customers and we would expect to see steady sequential quarterly earnings improvement in Canada as we move through 2019.

In the UK, we had a very solid quarter and adjusted EBITDA for the quarter was $2.2 million, an improvement of $2 million versus same quarter a year ago. Gross margin expanded 30.7% as a 31.8% increase in advertising costs was offset by lower costs in other areas.

Turning to credit quality. Overall credit quality was in line with expectations, and total Company charge-offs were down modestly, about 60 basis points, from the fourth quarter of 2017. Our Canadian charge-offs were lower year-over-year, while UK and US was slightly higher. In the US, we saw higher net charge-offs in the unsecured installment and line of credit portfolios. The unsecured installment portfolio was impacted by selective availability of higher credit limits in certain states. While the line of credit book in Virginia experienced strong growth but came at higher charge-offs as we are building this business. We expect Virginia will continue to grow nicely in 2019, but contribution should be strong as charge-offs and loan loss provisions moderate with seasoning.

Overall, we continue to believe our customer is in good shape financially as evidenced by both macro indicators such as wage growth and employment levels and our own microcredit factors such as our customers' debt to income ratios and FICO scores. While we see some signs of weakness in forward-looking consumer confidence level, overall, we feel good about the outlook for our environment.

We continue to work hard with our partners at MetaBank to launch our VERGE (ph) credit card by MetaBank product. As we said in October, we're very happy with the product development, IT and credit score work that our teams have done. We're still running a bit behind on our roll-out schedule and for probably looking at a 2Q 2019 launch right now.

We don't have any more updates in terms of financial impact other than to say we don't expect any meaningful contribution from this relationship until 2020. As we noted in our release, we did take some steps early in this -- early this year -- sorry, this was late in 2018, to eliminate approximately 120 positions in our North American operations, about two-thirds of which were in our US branch operations.

Most of these reductions were related to aligning branch staffing with customer accounts and traffic and I should point out here that while more customers are choosing to do business with us through and online channels, a significant part of the foot traffic reduction at the branch level comes from customers who no longer use a store to make a cash payment and have since signed up for auto pay by their debit card or ACH authorization or use our mobile app. The remaining eliminated corporate positions come from a variety of departments and related efficiency initiatives, which give us the flexibility to continue to invest to support our growing product set and brands. Even if these were some really tough decisions that involved some people who've worked really hard for us, we think these were the right steps to take right now.

We discussed our UK operational results, and as we described in the release, we continue to work to find a solution to cap -- a solution to cap the potential exposure for historical redress claims. These are important and complex discussions and I would refer you to the 8-K that we filed concurrently with our earnings release for more detail, and Roger will outline some of the related charges in his commentary.

A final note on our operational highlights but related to government shutdown. On the shutdown itself, we've not really seen any meaningful change in demand in part because we don't have operations concentrated in the areas with large segments of federal government employees. We do have a good -- as I mentioned, good and growing online business in Virginia, that's not enough to move the overall needle.

Second, our existing loan book, we do have a small segment but it's less than 2%, who are federal government employees, and we did allow these employees to waive -- not defer, but to waive, payments, similar to what we did in Hurricane Harvey 2017. We'll see a few more charge-off dollars from this in Q1 2019, but nothing material.

We've got a bunch of questions on tax refunds on that front. We are, like most people in our sector, waiting for final confirmation and we continue to monitor the situation. We currently expect the IRS to issue refund checks close to normal schedule, and it should have little or no impact on our 2019 first half expectations and results in the US.

A few regulatory comments and I'll wrap up. Canada, we completed the transition to installment line of credit in Ontario and Alberta, and they transition British Columbia, which has 26 locations during 2019. We do -- convert British Columbia, this will cover 174 of 190 Cash Money brand locations in Canada, so have limited exposure to any further changes in provincial regulation of single-pay lending.

In the US, a couple of developments we're watching. CFPB isn't widely reported and discussed, we are expecting the CFPB to put out sometime in the near future. There are (inaudible) running further public comment. Some of the stories we've seen speculate about what may or may not emerge from this process, but we won't add anything further to that speculation. We're working hard with individually as a company and through our trade associations to add our thoughts and comments on the most important components of the rule making.

Now, as a reminder, the CPB -- CFPB proposed rules focus mostly on the single-play product and we continue to reduce our reliance on single-pay, with US single-pay accounting for 9.6% of our Q4 total revenue.

Finally on state level, as we always do at this time of the year, we're beginning to see some bill activity and some of that bill activity is in key states of Texas and California. But the sessions are just getting started, so expect to have more to discuss in our second quarter call.

So I'll close by thanking our employees for their dedication and for helping us through 2018 by making substantial progress to grow and strengthen our Company -- your Company. Among other achievements from 2018, we continued to diversify our product offerings; we strengthened our information technology, risk analytics and payments platforms; we almost completely refinanced and remade the right side of our balance sheet to extend maturities and reduce interest expense; and we reduced operating expenses in key areas to continue to allow ongoing investments in growth initiatives. We're still making great progress in a number of areas and look forward to reporting on that progress when we talk again in April.

And with that, I will hand it over to Roger.

Roger W. Dean -- Executive Vice President & Chief Financial Officer

Thanks, Don, and good morning.

Consolidated revenue for the quarter was $300.6 million, which was up 12.6% and near the high end of the range implied in the revised -- in the revised guidance that we provided in our October 24th Q3 earnings release. Adjusted EBITDA came in at $55.6 million, also at the high end of the revised guidance, but it was down 5.7% versus the same quarter a year ago. The decrease was driven by Canada, which Don already mentioned and I'll discuss more in a minute.

Adjusted net income was up 26.2% year-over-year, but we incurred a GAAP net loss of $40 million, primarily because of $10 million of debt extinguishment cost for our previously announced October repayment of the US SPV facility and $57.4 million of UK redress and related cost for our proposed scheme of arrangement. Don mentioned as an -- and the related -- and we also filed an 8-K on this scheme of arrangement last night as well.

The UK charges comprised of -- the UK charges comprised of a $22.5 (ph) million non-cash goodwill impairment charge, that's the full remaining balance of goodwill related to the UK; a $4.6 million fourth quarter run rate redress claims that we incurred; a $23.6 million fund to settle historical redress claims under the proposed scheme of arrangement; and $6.7 million in advisory and other costs and some accrued fees for the Financial Ombudsman Service that will be required to execute the SOA.

We also had a lot going on from a transaction cost perspective in both fourth quarters. Rather than go in all the detail here, I'll just point you to the related pages of last night's earnings release.

Next, I'll comment on advertising, customer counts and cost per funded loan before moving on to loan portfolio performance. We added about 210,000 new customers globally this quarter. That's pretty much flat to Q4 of last year. Breaking it down along with the related advertising spend by country: US advertising rose 18% year-over-year, driven entirely by online. (inaudible) was flat. Part of the online increase related to continued support of our relatively new Avio installment loans and for the Avio product. US new customer counts were down 4.8% year-over-year, split evenly between store and online.

Site to store -- our site to store initiatives added 38,000 new customers for the stores this quarter compared to 25,000 in the same quarter last year. Because of Internet mix shift and the effect of Avio application to funded conversion rates, US cost per funded was 84 -- $84.76 this quarter and that was up almost $17 over the fourth quarter of 2017.

Canadian advertising decreased by 60% year-over-year. That's because of the fourth quarter -- probably because in the fourth quarter of '17, we'd increased our store marketing significantly exiting the quarter versus -- versus prior quarter run rates in anticipation of the market impact of regulatory changes in Ontario. Because we have more normalized spend in this fourth quarter and better customer conversion rates, Canada cost per funded was just $50 for the quarter.

UK advertising rose $0.5 million and new customer counts were up 40 -- almost 43%. The cost per funded in the UK was $80 and that's down $7 compared to the fourth quarter of 2017 and it was actually down $6 sequentially from the third quarter of '18.

Next, I'll spend a little time covering overall loan growth and portfolio performance. First, I'll cover a few highlights at the product level. Company-owned unsecured installment loans grew to $214.1 million, up 9.1% versus the same quarter in the prior year. Like last quarter, loan growth and portfolio metrics were affected by mix shift from installment to open-end in Canada where unsecured installment balances were actually down $29.3 million year-over-year. US unsecured installment balances grew $38 million or 27.9% year-over-year and UK unsecured installment was up 61%, which was $9 million.

Open-end loan balances finished the quarter at $207.3 million, an increase of $159.4 million year-over-year and $23.3 million sequentially from third quarter. Open-end balances comprised 30.6% (ph) of our managed loan balances at the end of 2018 -- 30.6% of our managed loan balances at the end of 2018 compared to just 9.4% at the end of 2017. US open-end balances grew $8.5 million or 20.9% year-over-year, fueled primarily by growth in Virginia where we launched the product in Q3 of last year, if you recall.

Canadian open-end balances grew $150.9 million year-over-year and $19.4 million sequentially from third quarter. The -- that sequential growth was in line with the expectations that we expressed to you during the fourth -- during the fourth quarter.

CSO balance grew 2% year-over-year, but that growth was affected negatively by Ohio. Texas -- Texas CSO balance grew 6.1%. But with the pending law change in Ohio effective at the end of April, the Ohio portfolio is down from the end of last year or the end of 2017 because we've reduced advertising support there. We had $5.2 million of loan balances outstanding in Ohio at quarter-end. We expect those balances to remain fairly flat through April and then they'll run off -- those CSO balances will run off over the 60 to 90 days from the law change.

Single-pay loan balances declined 17.1% versus the same quarter a year ago, concentrated in Canada, where the balances declined $16 million or 30.5%. US single-pay loans grew $2.3 million or 5.6% versus the same quarter a year ago.

Moving on to loan loss reserves and credit quality. Loan growth boosted loan provisioning this quarter. We had $30.7 million of sequential loan growth from the third quarter. And loan loss provision exceeded net charge-offs at the consolidated level by $9.9 million. Looking at the underlying net charge-off rates, as Don mentioned, at the consolidated level, CURO's net charge-off rate improved 60 basis points year-over-year.

As a general or overriding comment to start, I'll just remind, we have about 73 loan products in 28 states in the US and three loan products in Canada and the UK. Payments are due -- payments are due on the customers' pay dates, so differences in the calendar, for example, the number of Fridays in a month year-over-year or sequentially can affect net charge-off comparisons, along with the fact that we have -- along with that -- the fact that we have a lot of very small loan portfolios making up our total portfolio with widely varying loan characteristics. These characteristics and factors can cause our net charge-off rates to fluctuate more than in the case of, for example, a very large homogenous portfolio.

For Company-owned unsecured installment, the quarterly net charge-off rate rose 340 basis points year-over-year. This was driven by three factors. First, mix shift from Canada where the -- where the net charge-off rate is lower, the same phenomenon we talked about in the third quarter. Second, broader eligibility for credit line increases, which initially increases net charge-off -- the net charge-off rate. And third, because of a statistical quirk in the prior year's quarter, the costs -- the NCO rate contributed (ph) to be a little unusually low. I'll be happy to elaborate on any of these in the Q&A.

For CSO loans, the net charge-off rate increased 394 basis points year-over-year, in part due to the same statistical quirk in Q4 '17, but the NCO rate for CSO improved 319 basis points sequentially, which we are pleased with. The CSO past due rate improved -- the CSO past due rate improved 150 basis points year-over-year and 90 basis points sequentially. So again, we were pleased with the -- the overall trends we see for the CSO product.

For secured installment, net charge-off rates increased during the fourth quarter as a result of mix shift in Arizona, where both our yields and the loss rates are higher than, say, California.

For the open-end portfolio, the NCO rate, the net charge-off rate improved 379 basis points year-over-year and 399 basis points sequentially. US open-end net charge-off rates improved sequentially by 316 basis points, a bit more than we expected, but are still up year-over-year primarily because Virginia is a relatively new and unseasoned market. The net charge-off rates in Canada for open-end improved 280 basis points sequentially. Don already mentioned that, and we are pleased with that sequential improvement after the major transition in Ontario during the third quarter.

Moving on to capital structure. We mentioned in our last call, the US SPV facility was extinguished completely in October 2018. Coupled with our successful debt refinancing, this temporarily used all of our excess cash and caused our US revolver to be drawn $29 million at the end of Q3. We paid down $9 million of the revolver in December and would expect it to be paid down completely by the end of this first quarter. With the capacity of our Canadian SPV facility to finance loan growth in Canada, our $50 million senior revolver in the US and implied 2019 free cash flow, we believe we have more than adequate liquidity and sources of capital to finance our growth plans.

Finally, I'll close with our full year outlook for 2019. We expect meaningful growth in all key measures. We anticipate revenue in the range of $1.215 billion to $1.240 billion; that's 11.1% to 13.3% growth. Adjusted EBITDA in the range of $250 million to $270 million; that's 14.8% to 24% growth. Adjusted net income in the range of $120 million to $135 million; that's a range of growth from 34.1% to 50.8%. And adjusted diluted earnings per share in the range of $2.50 to $2.80; again, that's a growth range of 34.4% to 50.5%.

We expect -- we expect our effective tax rate to continue to be in the range of 25% to 27%. In addition, I want to preview an accounting methodology change that we've made with respect to recognizing net charge-offs and delinquencies for open-end loans. Effective January 1, 2019, open-end loans charge-off on past due for 91 consecutive days instead of -- instead of upon payment default. We believe the change better measures when an open-end loan has deemed uncollectible and we also believe it will improve comparability in the -- and the related past due aging buckets will provide additional insight into portfolio performance trends.

The change has the effect of increasing open-end loan balances as well as related allowance, revenue, net charge-off dollars and provision expense. We expect -- we expect that the net impact on our earnings should be minimal in 2019 because of this change. Our guidance -- our revenue guidance incorporates our expectations of the impact of the change on revenue as about -- as approximately $45 million of additional open-end revenue for 2019.

With that -- that concludes our prepared remarks. We will now ask the operator to begin the Q&A.

Questions and Answers:

Operator

We'll now begin the question-and-answer session. (Operator Instructions) We will now take our first question from John Hecht from Jefferies. Please go ahead.

John Hecht -- Jefferies -- Analyst

Good morning, guys. Thanks for taking my questions. The first one, you had pretty strong growth in the US. Roger, you gave a lot of details about new customers and your online versus store base changes. I wonder if you can -- you also talked about credit line increases and new versus recurring customers. I wonder if you kind of break down the growth, how much of it is tied to credit line increases versus new customers and what kind of trend should we think about that through 2019.

William Baker -- Executive Vice President & Chief Operating Officer

John, it's Bill Baker, good morning.

John Hecht -- Jefferies -- Analyst

Good morning.

William Baker -- Executive Vice President & Chief Operating Officer

So looking at the -- issuing of the incremental assets in the US that we put on, in the fourth quarter there was an additional $2.8 million of incremental assets that we were going to put to work with credit line increases. That number is about $14.6 million for the entire year, for 2018. So it is -- again, we think about that as -- if an existing customer has an $800 loan, the incremental cash moving into bad loans (ph) is $200. So in relation to our overall assets, it may not seem like a lot but the number of customers impacted are. It's also something we look at -- we've talked a lot about net charge-off increases. We just did the entitlements (ph) a few weeks to ago. Although we do see net charge-off rates slightly elevated with credit line increased customers, the actual cash that come out (inaudible) of the incremental cash that we make...

Donald F. Gayhardt -- President & Chief Executive Officer

It was the risk adjusted revenue.

William Baker -- Executive Vice President & Chief Operating Officer

It 's risk adjusted revenue increases. But certainly we made a good decision for us. It is going to be continue to -- as we think about migrate customers into the CLI, we look at conversion rates, we look at the health of the customer, I think overall we continue to be very comfortable with the program not just in the US but also as the Canada portfolio seasons, it will become increasingly important that we manage CLIs properly in that -- in that geography.

John Hecht -- Jefferies -- Analyst

Okay, thanks very much. And then second question. UK, you obviously are working to address the redress issue. Assuming everything gets solved there, how do you perceive kind of the long-term opportunity there, maybe in terms of -- you've been growing nicely there, but what do you see as kind of steady state EBITDA and revenue contribution, assuming all the issues are resolved?

Donald F. Gayhardt -- President & Chief Executive Officer

Yeah, John, honestly, I just make -- we don't yet have a resolution. We sort of have outlined -- we sort of think we have at least outlined sort of what potential steps are available to us. And obviously we've highlighted some of the charges involved with that. So -- but in terms of the business, if you look at the full year, we did, in US dollars, which is just a shade under $50 million. We did a $2.2 million -- before redress claims, made about $2.2 million in adjusted EBITDA in the fourth quarter. I think we talked about that business in kind of the near-term being a $10 million adjusted EBTDA business for us. It's been growing at the top line in the low 20s. We should have a little bit currency impact from that as well, Brexit has kind of driven the pound down, although it's come back a little bit in the last few weeks. So there is some impact from that as well. But I think growing that business -- maybe if you just take a 36-month kind of time frame, growing that business at a -- in the low 20s, and it's just a 20% -- roughly 20% adjusted EBITDA margin business, I think we see that business, that could be an $80 million to $100 million business at a 20% adjusted EBITDA margin. I think some of that is -- there are no secret that people to follow -- what I mean is that probably the two largest companies in the space from, maybe even three years ago are both out of the market now. And I think there are -- there are a handful of players who could have had some scale. I think we're probably in the lower end of that handful of companies in terms the size of our business. Now, we see the competitor (ph) now being really good. And we're hopeful that we can figure out a way to set to resolve the -- and the redress claims and move on and continue to grow that -- grow that business. We love our team over there, who worked hard on the technology, on the credit, on the -- getting, working hard at the call center, contract level to get good outcomes from consumers and we really hope that we can sort of stay in the market and continue to build that business.

John Hecht -- Jefferies -- Analyst

Okay. And then a final question is -- the open-end product at the consolidated level, has been growing nicely, and yeah, as it's been growing, you've seen migration in the yield, anyhow, and that obviously lower charge-offs as in before. What do we -- how do we think about kind of intermediate and long-term, yields and loss rates on that product mix?

Roger W. Dean -- Executive Vice President & Chief Financial Officer

Yeah. So -- we -- if you look at the open-end yield on a quarterly basis, just for perspective, first quarter of '18, it was the mid 50s and the fourth quarter is right -- just under 25% expressed as a quarterly yield. I think that -- I think that that run rate is probably the right way to think about it. Canada is going to grow a little bit -- should grow a little faster than the US, but it wouldn't be -- and I don't think it would be enough to take that 25% quarterly yield down to 18% or anything like that. But I think -- I think that that 25% by fourth quarter of 2019 could be 22%. Hope that makes sense?

John Hecht -- Jefferies -- Analyst

Yeah. And what about loss rates?

Roger W. Dean -- Executive Vice President & Chief Financial Officer

Yeah -- so we think that similarly -- we expect -- we would expect that the loss rate on the Canadian product, I think we've said a number of times, and as we took -- and the more we look at it, it's probably by late next year, by the fourth quarter, it's in the high 20s, it's in the 30 -- the low 30s.

Donald F. Gayhardt -- President & Chief Executive Officer

For annualized charge-off...

Roger W. Dean -- Executive Vice President & Chief Financial Officer

Yeah, I'm sorry, that's an annualized number, forgive me. So it's stabilizing at that level and kind of -- kind of notching down to that level over the course of 2019. And we do -- I would expect the US NCO rates for the open-end product to improve year-over-year because of the seasoning of -- entirely because of the seasoning of Virginia -- of the Virginia market.

Donald F. Gayhardt -- President & Chief Executive Officer

I mean, if you try to -- because if you look at it in terms of the P&L, Canada probably in '19, we think that comes -- loan loss provisions, including, allowance growth -- loan (inaudible) revenue probably comes down by 200 basis points to 300 basis points. The US number probably goes up a little bit. And then -- but in the aggregate, loan loss percentage as a percentage of revenue should be relatively stable full year '19 on full year '18.

John Hecht -- Jefferies -- Analyst

Perfect, guys. Thanks very much.

Operator

We will now take our next question from Moshe Orenbuch from Credit Suisse. Please go ahead.

Moshe Orenbuch -- Credit Suisse -- Analyst

Great. Just a follow-up on the open-end. Maybe just -- can you just talk a little bit about the reserving needs? How that reserve will be reflected in the next couple of quarters?

Roger W. Dean -- Executive Vice President & Chief Financial Officer

I feel, I think the reserving and allowance levels will be pretty stable. Our charge-offs -- the charge-offs are starting to come down, but not -- they'll come down over the course of the year and the allowance level for the Canadian open-end coverage is about 10 -- right around 10% right now. So I don't expect -- I surely don't expect that to go down any further.

William Baker -- Executive Vice President & Chief Operating Officer

Yeah, this is Bill. I think for the Canada -- one of the things we talked about their quarter is just the -- the stability of the portfolio. If you look at the number of new customers, certainly put into the line of credit throughout the quarter and then the number that we converted, so existing customers we converted, that number was incredibly stable through the entire quarter. So I think from an operational perspective, we feel good about that mix, how they're converting it and how they're performing.

Moshe Orenbuch -- Credit Suisse -- Analyst

And maybe just to follow up on the change -- on the accounting change, how should we think about how that's going to be impacting -- you said it's going to add to revenue because I guess you're going to be billing more. Is that -- is that -- you're saying it's going to add to revenue and to charge-offs and are comfortable (ph) now on how should we...

Roger W. Dean -- Executive Vice President & Chief Financial Officer

Exactly. So now we've got -- we've got loans that previously charged off (inaudible) the balance sheet for 90 days and accruing interest. And so the loan balances -- so we've got the revenue from accrued interest on aged, on delinquent loans, but also the charge-off dollars go up too because you're charging -- for the loans that charge off, you're charging off the loan balance plus accrued interest. And as we model this -- and we'll be able to give you guys very clear transparency on this when we release quarter because it will be in the numbers. But as we look at January so far and we look at -- and the way we've modeled it, we expect that that increase in revenue to be offset by the increase in net charge-off dollars and thus the risk adjusted revenue impact should be minimal for the year.

Moshe Orenbuch -- Credit Suisse -- Analyst

Got it, OK. Your comments with respect to MetaBank, in terms of the small delay in the start time, can you just talk a little bit about the time to ramp and has that changed or like it's just pushed further out -- I mean, is it just pushed a couple of quarters out or is there also a change in time? Maybe talk about a little bit about what the underlying cause of that might have been?

Donald F. Gayhardt -- President & Chief Executive Officer

Yeah, Moshe, it's Don. I think it's really just a -- I think it's just a timing. At this point, we see the development of the program -- we are still very optimistic about what it's going to do for us and obviously it's a -- we think it works well for the bank as well. So I think it's really just -- we are just kind of pushing out the launch date a little bit. And I think that we try to be really putting is -- it's a bit of a new product for us and it is a bit of a -- certainly a new product for them. Even though we have done credit lines before, sort of the pricing structure on this product, it's more of a fee-based product and kind of a straight rate product than a lot of our products. So I just -- I think we've been pretty clear that we are -- that there is going to be a little bit of a learning curve for both of us to see how customers use the product and see if the usage patterns and payment patterns are different than what we have experienced in our -- in our other line of credit products. And long-term, I don't -- our long-term expectations have not -- have not changed. It's just -- it's just the starting point.

Moshe Orenbuch -- Credit Suisse -- Analyst

Do you have an expectation as to what you would expect -- you know, think would be on the balance sheet or on their balance sheet by the end of '19?

Donald F. Gayhardt -- President & Chief Executive Officer

I just -- I think once we get going, I think it will be easier to forecast that. I mean, we continue to have the -- upside of $350 million of total earning assets there -- the funds that are -- so we've been -- we've been -- we hadn't given any guidance on balances and probably prefer not to do that until we kind of get going and have really -- again, just a little better sense of how customers use the product.

Moshe Orenbuch -- Credit Suisse -- Analyst

Okay. That's fair. And the last thing for me is just in terms of the UK redress settlements, if you will, what are the stress points from here? Like how do we watch and see what -- what's likely to happen from this point forward?

Donald F. Gayhardt -- President & Chief Executive Officer

Yeah, it was in fact -- because we've really -- we've been talking about this for a while. We have been working really hard with the regulators there who have given us a ton of time and attention on this. As I said in my remarks, it's really complex set of discussions here with them. Going on, I think we would expect to have a strictly, very clear resolution on this before the end of February, so really over the next few weeks. And we've simply outlined there is a path to us to be able to settle the claims by contributing some additional capital to the UK and there is a path where we aren't able to do that and that leads to our not having an operation over there anymore. But we should have clarity on that kind of the fork in the road in -- over the next couple of weeks.

Moshe Orenbuch -- Credit Suisse -- Analyst

Got it. Thank you.

Operator

We'll now take our next question from Vincent Caintic from Stephens. Please go ahead.

Vincent Caintic -- Stephens -- Analyst

Hey, thanks. Good morning, guys. Just wanted to focus back on the guidance range. So appreciate you giving us a range of the $2.50 to $2.80. And even at the low end of the range, so at $2.50, your stock's trading at five times that earnings number. So I'm kind of wondering if you can give us some sense of the safety around that $2.50 number. How readily achievable is that and sort of what's the -- what's built into the range, when you think about the $2.50 to $2.80? What moves you to the high end and the low end? Thank you.

Donald F. Gayhardt -- President & Chief Executive Officer

This is Don. I guess just -- first of all, we've -- incorporated in our guidance is that we have a UK business and that that business generates circa $10 million of adjusted EBITDA. That's about $0.15 a share, so just to make sure it was clear on that point. We'll have more clarity on where that's going when probably this month is out. In terms of sort of the -- high end, low end, I mean, I think we feel really good about the business that if you look at the -- at more of kind of the moving parts of things this year, '19 versus '18, I think we talked about we expect loan loss provision as a percentage of revenue to be relatively flat; a little bit lower in Canada, maybe a touch higher in the US just given kind of the mix shift. Ad spend dollars, for '18, were about 6.2% of revenue. We expect it to be just right in that range for '19. The other costs -- I think like other store operating costs, which are both stores and contact centers. Given some of the expense reduction measures we're taking in North America, we expect that number to be pretty, pretty flat in dollars and maybe down a little bit in '19 over '18. And then corporate expenses, likewise, we don't expect to see -- we had some step-up in corporate expenses as we went public, D&O, insurance, reporting, all that kind of stuff, so sort of SOX compliance stuff. But those are -- we're now sort of lapping a year where we had that step-up in corp from that level and we are -- we think we'll be making some reductions in corp to allow us to continue -- so particularly in risk analytic product -- risk and analytics, IT, product development, et cetera. So there is, from an operating leverage standpoint, I think we have done a lot of stuff to sort of keep expenses very, very -- very, very controlled. And if we see revenue growth that we are talking about, which -- just to put in context, I think Roger talked about the impact of the -- we're certainly -- some of the revenue growth -- we'll see revenue growth from the change in the accounting policy around the open-end, but absent that we're expecting kind of total revenue to grow in the high single digits, consolidated across the Company. If that stays the same, we should be able to get to the low end of that earnings guidance. I think that's a very, very achievable number. And I think in terms of sort of what can be better, we talked particularly about sort of some of the newer stuff, Avio credit, which is a larger, longer-term sort of like credit line revenue to align, and we sort of dial back to growth on that as we wanted to see -- we wanted to make sure credit on that was -- we saw the curves kind of mature in a way we want it to and not to take sort of a risk that charge-offs would get elevated there beyond what our expectations were. So I think that was just a way -- we have I think a much more sort of I think controlled sort of product growth and product development pipeline as we get into '19. It's maybe a little above the total revenue growth, but in terms of the clarity of it and the achievability, we feel really good about that.

Vincent Caintic -- Stephens -- Analyst

Okay, thanks. That's really helpful. So yeah, I guess if I take out the $45 million from the accounting change from your revenue guidance, it's 7% to 9% year-over-year growth. And so that revenue growth is just kind of your existing product set organically growing. There isn't anything particularly new or a big ramp-up in growth that you have assumed with your loan growth there, right?

Donald F. Gayhardt -- President & Chief Executive Officer

Exactly, yeah.

Vincent Caintic -- Stephens -- Analyst

Okay, perfect. What's your -- anything changes in the cost of your funding in 2019 that you've built in there? So I know you've done a lot of great actions over the course of 2018. Anything more that you might have built into 2019?

Donald F. Gayhardt -- President & Chief Executive Officer

No. We haven't modeled in any changes in capital structure for 2019. I mentioned we certainly got plenty of free cash flow to support what we need to do. And so I think -- Vincent, I think I get you interest -- total interest cost for the year in the low 70s, kind of just under -- in a range of -- low-70 million range.

Vincent Caintic -- Stephens -- Analyst

Okay, perfect. That's helpful. And then finally just on the guidance again. So the Ohio CSO roll-off -- so assuming the revenue guide you have -- and the EPS guide you have, that is completely coming off? Or is there any replacement where you are trying to look for another product that might fit the -- those Ohio customers?

Donald F. Gayhardt -- President & Chief Executive Officer

Yeah, it's a really good question. So we have not built into our guidance any revenue from a new product. We are working hard on some options and we are hopeful we will have something that will work for customers and work for us. But it's just -- it's too early to sort of talk about exactly what the specifics are on that and we still feel too early to sort of put it into the guidance for '19.

Vincent Caintic -- Stephens -- Analyst

Okay. That's very helpful. Thanks very much, guys.

Donald F. Gayhardt -- President & Chief Executive Officer

Thanks.

Operator

We will now take our next question from Bob Napoli from William Blair. Please go ahead.

Robert Napoli -- William Blair -- Analyst

Thank you. Good morning.

Donald F. Gayhardt -- President & Chief Executive Officer

Good morning.

Robert Napoli -- William Blair -- Analyst

Just on the guidance, just to follow up. Most of my questions have been -- have been asked. But I mean, the really important part of next year obviously is Canada and you saw good improvement in Canada this year. And I think you probably have -- and I'm guessing, you have around $50 million of EBITDA, something like that modeled for Canada for next year. And I mean, you've made dramatic changes. It's still relatively early. I mean, good signs in the fourth quarter, but what gives you the confidence in that business that it's going to be a stable, predictive business going forward? And is the amount of EBITDA that I mentioned around what you have modeled?

Donald F. Gayhardt -- President & Chief Executive Officer

Yeah. So without being specific, we're not going to argue with the number you threw around.

Robert Napoli -- William Blair -- Analyst

All right.

Donald F. Gayhardt -- President & Chief Executive Officer

I think just in general, having -- running business up there with CURO since 2011, and in my prior life having, running business up there for close to 20 years as well -- 15 years, I think the -- overall, our customer in Canada tends to be generally, bit higher income and the stability metrics, time you -- in your job, the time you live in the same residence, those metrics tend to be a little bit higher. And the customer tends to be much closer to median income customer than our customer in the US, which just lend -- it lends itself to just a much more stable credit charge-off kind of pattern in credit performance. And I think that -- I think just kind of less sort of volatility than what we'll see and fluidity than what we see for customers in the State. So I think just as a baseline, we sort of feel like we are -- and we're not -- while we're -- Roger talked about it, we are expecting the kind of quarterly charge-off rates on that, the Canadian product to come down by 150 basis points or something as we get through 2019. So while that's improvement, it's not sort of -- we're not expecting a sea change improvement there. So we have a lot of operating history up there. We have a really good team on the ground, the confidence in our systems, both the sort of loan management staff and all the mobile crews are kind of working really well for customers. So while we're expecting improvement, again just to -- and remember, Canada doesn't have sort of the seasonal patterns that the US has that are -- you have some holiday borrowing. But if we're (inaudible) running almost $9 million of US EBITDA in the fourth quarter and we're -- again, I'm not forecasting this, but if I just use your number, the $50 million number, from an exit rate to that number for the full year. It's certainly improvement, but it's not sort of wholesale, sea change improvement. We're not really throwing a long ball in Canada from a planning standpoint in '19.

Robert Napoli -- William Blair -- Analyst

All right. Thank you. That's helpful. Also, a follow-up question on the adjustments you are making to the US in-store employment based on customers paying in-store versus online. What has been the mix and what kind of changes are you seeing between in-store and online payments?

William Baker -- Executive Vice President & Chief Operating Officer

Yeah, this is Bill. Good morning.

Robert Napoli -- William Blair -- Analyst

Hi, Bill.

William Baker -- Executive Vice President & Chief Operating Officer

I think if you look at just new customers, about 52% of new customers are actually Internet customers in the US. I think what we see the shift or the increase that Roger mentioned around the site to store programs. So actually the number of customers originated online continues to increase. Like so many things we talk about, it depends on the state. Some of our products lend themselves to -- are convenient to pay -- online payments more than others. So for example, on single-pay products, you still see about 80% of the customers make a cash payment in the store. I mean, that's sort of a flip for the multi-pay products. I mean, we get only rough numbers, but I think it's also state specific as well. And I think that's really what we look to make a decision. Maybe we did take a very analytical approach despite the fact that it was very visibly difficult to go through. We really did look at the transaction by store and make decisions. And I also think it was one or two people. In some cases, we saw our stores continue to grow transactions, again, lending itself to the state product. But I think it's still -- say, if we, see a migration happening and made the adjustments appropriate. But on the new customers side, it's still pretty consistent at 52%.

Donald F. Gayhardt -- President & Chief Executive Officer

Yeah. And I think if you look at sort of debit card capture rates, well, I think we're in the mid-80s now, high-80s in terms of the number of customers that are giving us a debit card and ultimately signing up for a loan (ph). And that's not dissimilar from what you see, broadly speaking, in terms of bill pay for near-prime and prime customers. And I think our customers, and particularly who are tied to the mobile tools really give some way to sort of see that and control that on a regular basis.

Robert Napoli -- William Blair -- Analyst

Thanks. And just last question, beat the UK to death if you would. I mean, was that agreement, has that been -- what you have put out there? Has there been discussions? I mean, what are the odds that -- I mean, what do you feel like the odds are that you're going to get an agreement on this? Is this something that the UK regulators have suggested or is this like, hey, here's our best offer, if you don't do this, we're out?

Donald F. Gayhardt -- President & Chief Executive Officer

Yeah, but I'm really not going to go there on that other than to say we've been in discussions with them for a while now and they -- it's pretty complex and we appreciate all the time and the back and forth that we've had had with them. And we're just, we're hopeful we'll get a resolution that allows us to continue there. I'm not going to sort of handicap it right now. But remember, we still believe that we're going to have a resolution that we can disclose and talk to people about in the month of February.

Robert Napoli -- William Blair -- Analyst

Right. Thank you. Appreciate it.

Operator

(Operator Instructions) We will now take our next question from John Rowan from Janney. Please go ahead.

John Rowan -- Janney Montgomery -- Analyst

Good morning, guys.

Donald F. Gayhardt -- President & Chief Executive Officer

Hey, John.

John Rowan -- Janney Montgomery -- Analyst

I fear I'm going to beat a dead horse here, but on the UK. So it ends one (ph). So you have to get the regulators to approve the deal and your bondholders have to approve the deal for you to keep that -- for that portion of the $0.15 of guidance to stay in the guidance range for '19. Correct?

Donald F. Gayhardt -- President & Chief Executive Officer

Correct, yeah.

John Rowan -- Janney Montgomery -- Analyst

Okay. So if any one of those parties says no to this deal, you leave the UK market, you just shuttle out, switch off and leave as your wind-down period -- I mean, I'm just trying to handicap how it would happen throughout the year if and when we get -- if there is an announcement later in the month that one or two of these parties are not agreeing to the terms outlined.

Donald F. Gayhardt -- President & Chief Executive Officer

John, I guess it would happen fairly quickly. And -- I'm not getting -- it doesn't make sense for me to sit and go through sort of -- insolvency laws in the UK are very complex and practice is very complex, to sort of make sense, to go through everything. But all I want to say, if we're not able to find a solution to address the redress claims, our exit from the business would be relatively quickly -- relatively quick and not entail very much in the way of additional costs for us, or almost nothing.

John Rowan -- Janney Montgomery -- Analyst

Okay. And the permission for the bondholders is just a permission, right? There would be no other change to the bond economics as -- because of this issue? Correct?

Donald F. Gayhardt -- President & Chief Executive Officer

Correct, yeah (inaudible).

John Rowan -- Janney Montgomery -- Analyst

Okay. And then two housekeeping questions. Roger, you gave the number of the CSO loans in Ohio that we're going to roll off. Can you just repeat that? I didn't quite get that down.

Roger W. Dean -- Executive Vice President & Chief Financial Officer

Yeah, $5.2 million at the end of the year, at the end of December, on the books, and we think that stays fairly constant, stable through April and then it takes about -- it's a short book, so it takes 60, 90 days for it to wind down.

John Rowan -- Janney Montgomery -- Analyst

Okay. And then also the diluted share count that you reported for the quarter, 47.8 million. Is that basic because of the GAAP loss in the quarter? Or is that the actual diluted count?

Roger W. Dean -- Executive Vice President & Chief Financial Officer

The share count?

John Rowan -- Janney Montgomery -- Analyst

Correct.

Roger W. Dean -- Executive Vice President & Chief Financial Officer

(inaudible) for the adjusted EPS.

John Rowan -- Janney Montgomery -- Analyst

What was the number for the -- so the -- can you repeat that (multiple speakers).

Roger W. Dean -- Executive Vice President & Chief Financial Officer

48 million, sorry.

John Rowan -- Janney Montgomery -- Analyst

48 million is correct or...

Roger W. Dean -- Executive Vice President & Chief Financial Officer

Yes, it is. 48 million is correct.

John Rowan -- Janney Montgomery -- Analyst

Okay. Thank you.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back to Mr. Don Gayhardt for closing remarks.

Donald F. Gayhardt -- President & Chief Executive Officer

So, again, thanks everyone for joining us. I appreciate your time and we look forward to talking to you again in April.

Operator

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

Duration: 57 minutes

Call participants:

Gar Jackson -- Investor Relations

Donald F. Gayhardt -- President & Chief Executive Officer

Roger W. Dean -- Executive Vice President & Chief Financial Officer

John Hecht -- Jefferies -- Analyst

William Baker -- Executive Vice President & Chief Operating Officer

Moshe Orenbuch -- Credit Suisse -- Analyst

Vincent Caintic -- Stephens -- Analyst

Robert Napoli -- William Blair -- Analyst

John Rowan -- Janney Montgomery -- Analyst

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