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CURO Group Holdings Corp. (NYSE:CURO)
Q2 2019 Earnings Call
Jul 30, 2019, 8:15 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the CURO Group Holdings Second Quarter 2019 Conference call [Operator Instructions].

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

Gar Jackson -- Chief Financial Officer

Thank you, and good morning everyone. After the market closed yesterday evening, CURO released results for the second quarter 2019. You may obtain a copy of our earnings release from the Investor 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 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, which include but are not limited to our expectations regarding macro factors impacting the U.S. economy, the timing and pace of the roll out of our line of credit product in British Columbia, our belief that Zibby has a competitive advantage over its competitors, our revised financial guidance for 2019 and our underlying assumptions, scope, timing and operational and financial impact of regulatory activity in California and our expectations regarding new products and partnership opportunities in the state and the strengths of our company and operational model.

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 statements made in today's call. 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 U.S. GAAP reporting, we report certain financial measures that do not conformed 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 investor portion of our website.

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

Don Gayhardt -- President & CEO

Great. Thanks, Gar, and thanks everyone for joining us today to discuss what was a very good second quarter and the continuation of good momentum coming out of our first quarter.

We executed well on a number of key areas and saw good growth and earning assets, revenue and net earnings. Overall, credit quality was very solid with quarterly and CSOs at 16.1% versus 18.8% in the second quarter 2018 and with the most notable improvement in our Canadian line of credit product, where performance is running well ahead of our expectations. Our new customer accounts were strong, even though we invested a bit less in advertising spend versus the second quarter 2018. Some of that is due to timing in the U.S. between the quarters as year-to-date advertising spend in the U.S. is consistent with last year, with all of the overall reduction coming to Canada.

In general, as we've been noting over the past couple of quarters, we're focused on growing our top line, disciplined fashion to ensure that credit quality, operating costs and margins, all deliver in line with our expectations. Our revenue grew 11.4%, a bit faster than in Q1, with the U.S. growing at 10.5% and Canada growing 15.3% in U.S. dollars. I should point out that Canada actually grew 19.5% in constant currency. So really terrific quarter turned in barricading colleagues. Why don't we give you more detail? But there is credibly pleased with how our product transition has worked out in Canada. The work is never really done, but I think this quarter in Canada once again, demonstrated our ability to tackle product change on a large scale and do it in a way that works for us in terms of loan volume and credit while delivering great value and service or rendered bank customers.

CURO turns 22 years old next month and our history shows countless examples of how we've navigated product and channel ships, whether driven by consumer preference and demand, competitive dynamics or regulatory changes. We consider managing these changes to be one of our key competitive strengths. For the quarter, revenue in the U.S. was $210 million, which is a record for the second quarter. Loan balances grew 11% to $408.3 million, led by good loan growth in our open-end portfolios in Virginia and Tennessee. While most provisions increased as a percentage of revenue versus the second quarter 2018, in part due to the change in our loss recognition policy of open ended loans, which Roger will review in more detail later, as well as ongoing mix shift to longer term products and channel shift online originations. In Canada, we remain very focused on product transition, as well as increasing awareness around the benefits and flexibility of our open and credit offer.

Offer and balances $219.2 million at June 30, 2019 and represent 81.6% of our total receivables in Canada, up from 42.1% at June 30, 2018. Based on the success we've had in Ontario, we plan to introduce a line of credit product in British Columbia later in 2019. British Columbia representing only 9% of total Canadian revenue for the second quarter of 2019. And we intend to undertake a more measured rollout than we had an Ontario so any negative short-term earnings impact should be minimal. Overall, we believe the U.S. economy continues to expand and fundamentals for consumers remain strong. While consumer confidence numbers have bounced around lately, key measures such as consumer debt income remain at cyclical lows. Canadian consumer confidence numbers remain their historic highs, while the rebound in oil and commodity prices has helped to stabilize key markets in the Western provinces.

Two more opportunities where we continue to invest and we're pleased with the progress. Our Revolve Finance and Zibby. Revolvers are demand deposit or DDA accounts sponsored by the public bank based in Chicago that we introduced in March of 2019. This product provides our customers the full functionality of a bank account, direct deposit of a customer's paycheck, debit card, bill payment and even an optional overdraft protection in FDIC insured account for their deposits. We offer fees on account and card use as well for those customers who qualify overdraft protection. With regard to Zibby, we recently participated in another follow-on investment round in Zibby, which is our leased own -- online installment platform, which brought our four diluted ownership in this private company to approximately 43%. As a reminder, we count for Zibby as a non-controlling equity investment. This round is completed at a very compelling valuation, but as you can see in our add-backs, it did necessitate a non-cash impairment charge or an overall investment.

Zibby continues to perform very well, particularly with key accounts such as Wayfair, Lenovo and Fern [Phonetic]. Although we saw a small player in this $48 billion addressable market, we believe that their online integration service capabilities give them a durable competitive advantage over competitors who focus on brick and mortar retailers.

You've seen our release that we're raising our guidance for the full year of 2019. We're a bit ahead of these targets after Q1 with a very strong second quarter and feel good about our earnings level in the back half of the year. The good part of that is we don't believe that there are any major gating elements in terms of product or process development that would prevent us from meeting or potential exceeding our increased guidance. However, we are mindful that we could -- we need to continue to stay very disciplined on creating collections, allocate ad spend dollars correctly, execute on the operating plan and most of all, continue to deliver great value and serve as store under bank consumers. Overall, we think we'll have a very strong second half and deliver great results for the full year.

A couple of more topics before turning it over to Roger. In terms of regulation at the state level in California, we expect a new law to pass in September, capping the APR on $25,10,000 installment loans at about 38.5%, making our current installment products no longer viable. Although this law does not impact our single pay loan offerings in California. For the record, we think that enactment of this new law would be a bad outcome for under bank consumers, as they will simply not qualify for options available at the lower rates. And we know this because those options are available now and many of these consumers may result to borrow from unlicensed lenders who offer higher rates and limited consumer protections. So preparing for effective dated January 1, 2020, at this time any new origination would be subject to this cap. Outstanding installment loans would not be impacted and the related portfolios would run off over the course of 2020 and 2021. But the trailing twelve months, the affected products represented approximately 13% of our consolidated revenue. We anticipate minimal impact to 2019 as we position our existing portfolio as such a run off over a 12 month to 18 month period into 2021. For 2020, given the combination of installment portfolio runoff, single pay growth, new products and elimination of variable costs associated with installment originations. We expect that state level EBITDA contribution from California for 2020 will be similar to 2019.

We also continue to work on a number of new product and partnership opportunities that could give us the ability to serve our California customers with larger, longer term loan products. As noted earlier, we have a lot of practice and long-term success adapting to state and provincial regulatory changes, as the most recently demonstrated in Ontario over the last year. But even after any meaningful contribution from new product, the partnership opportunities in California, the relative stability in 2020, California earnings contribution combined with non-California earnings growth positions as well as for overall earnings growth in 2020. And overtime, if we aren't able to transition the California summit book [Phonetic] into alternative products, there's significant cash from liquidation of the legacy portfolio, along with our strong operating cash flow could be applied toward other new product opportunities in different markets, or at the very least, we think upwards of $180 million of cash in 2020 would be available for substantial debt reduction or additional share repurchases with a corresponding impact on our earnings per share.

So in summary, the first half of 2019 has been very positive and I think this quarter once again has demonstrated the strength of our company and our operating model. We're a strong and growing company with strong cash generation capabilities with the strongest omnichannel model on the consumer finance industry and we continue to prove our ability to successfully navigate and rapidly adapt to regulatory competitive changes across the markets we serve and we continue to invest in our people, our processes and technologies to remain at the forefront of innovation. And we use this innovation as well as our scale, for the benefit of our underpaid consumers.

Just a final note before I turn over to Roger. You may have seen our release from last week where we announced the addition of two board members, Gillian Van Schaick and Beth Webster. Jillian and Beth have long careers in financial services and banking. While Jillian's experience concentrated compliance, most recently where she was Executive Vice President and Head of U.S. Regulatory Compliance at HBSC, previously, she's been at JP Morgan and Goldman Sachs. Beth's background is in human resources. Most recently, in EVP and head of Human Resources at TD Bank, she had long stints at Fidelity and Citigroup before moving to TD. [Indecipherable] but terrific backgrounds to complement the strong operational, financial and digital marketing backgrounds of other directors. And while we've only had the benefit of their participation at one meeting, we're very happy to have them on board and look forward to their help and guidance going forward.

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

Roger Dean -- CFO

Thanks, Don. Good morning, everyone. Consolidated revenue for the quarter was $264.3 million, which was up 11.4% compared with last year's second quarter. Adjusted EBITDA came in at $53.7 million and as we expect, it was down a bit year-over-year, mostly because of the U.S. provision comps. Last year, our allowance coverage was lowered from Q1 to Q2 of 2018, which had the corresponding impact of reducing loss provision expense in the second quarter of 2018.

As Don mentioned earlier, our net charge operate improved meaningfully versus the same quarter a year ago. I'll talk more on that in a minute. Canadian adjusted EBITDA was up 19.1%. That's great progress from a transition to growth of our opening months in that market. Adjusted net income was up slightly year-over-year on lower interest expense following last summer's refinancings and adjusted EPS rose 20.9%. An actual comment on advertising customer accounts and cost per funded loan before moving on to portfolio performance. We added almost 147,00 new customers in the U.S. and Canada this quarter. That's down slightly versus the same period last year. I'll break it down a little by country, but starting with consolidated cost per funded loan was lower than the same quarter a year ago at $75 compared to $81 dollars in Q2 of 2018. Breaking it down my country, U.S. cost per funded loan was $77. That's down $2 versus Q2 of last year. U.S. new customer accounts were down 3.6% and 50.7% of U.S. new customers were required online this second quarter.

Internet new customers were down 2.7% year-over-year as we pulled back a bit on customer acquisition for a VO while new machine learning decision models are implemented. Store new customers were down 4.4% very similar trends to what we've seen for the past several quarters and our site store capability added 27,000 new customers to the stores this quarter, compared to 22,000 in Q2 of 2018. Canadian cost per funded was $62. That's down $25 from second quarter of 2018. But admittedly, advertising in Canada was elevated in the second quarter of 2018, primarily because we increased spend ahead of the July 1, 2018 single pay regulatory changes in Ontario and the product transition open-end.

Next, I'll spend a little time covering overall loan portfolio growth and performance. First, I'll cover a few highlights. Product level U.S. Company own unsecured installment loans grew 9.9% versus the same quarter last year. Canadian installment balances shrank because of the expected mix shift to open-end products, so consolidated company owned unsecured installment balances grew 2.8%.

Our CSO loan balances were down slightly year-over-year, but you'll recall that the law change in Ohio, eliminating that CSO model, became effective April 27 of this year and the balances in Ohio had run off. So it's good growth in Texas to replace that run off at this point. As expected, single-pay loan balances were affected by Canadian regulatory change and transition of multipay loan products. A Canadian single-pay balances declined $12.2 million or 25.8% versus the same quarter a year ago. Because of that transition in the third quarter of last year, Ontario -- U.S. single-pay loan balances actually grew 9.9% year-over-year, which accelerated over what we've been seeing.

Moving on to loan loss reserves and credit quality. Our consolidated net charges operate improved over 270 basis points versus the second quarter of 2018. With all products improving, except unsecured installment. The company on unsecured installment net charge off rate rose year-over-year. And as we've discussed for the past several quarters, the unsecured installment net charge off rate comparisons are affected by mix shift away from Canada, the effective credit line increase initiatives and our unseasoned AVEO [Phonetic] portfolio.

CSO unsecured installment. Our CSO unsecured installment, that charge off rate was also up a bit year-over-year from credit line increase initiatives in Texas, but delinquency rates for CSO improved year-over-year.

Don mentioned earlier the better than expected performance of the Canadian Open-End portfolio. The annualized net charge off rate for Canadian Open-End this quarter was just under 25%. If you recall from our previous calls and disclosures, we didn't expect to reach annualized net charge-off rates in the mid-20% range for this product until Q4 of this year. So we're really pleased with the performance in Canada. The portfolio is seasoning well and our customers are just paying us back very long on that product.

As you'll see, the delinquency rates were open and have also improved even sequentially from first quarter. Because of the relative moves in net charge-off rates and delinquency trends, we made some adjustments to allow its coverage by product, most notably an increase in company-owned unsecured installment allowance coverage and a reduction for open-end loans.

I'll close by recapping capital structure and liquidity. Our total available liquidity position at the end of the quarter was nearly $165 million. This is comprised of excess unrestricted cash of about $38 million, U.S. revolver capacity of $50 million, Canadian revolver capacity of over $7 million and undrawn borrowing base availability on our Canadian SPV Facility of $67 million.

Finally, under the terms of our $50 million share repurchase program that was announced in April, the company purchased in the open market 1,038,500 common shares through last Friday, and $39.1 million remains available under the program for future repurchases.

This concludes our prepared remarks, and we'll now ask the operator to begin Q&A.

Questions and Answers:

Operator

[Operator Instructions]

Roger Dean -- CFO

Operator, could you repeat that? You broke up.

Operator

[Operator Instructions]

Roger Dean -- CFO

Yes. Operator, we couldn't hear. [Operator Instructions]. I think we're ready to take our first question.

Operator

We will take our first question from John Hecht from Jefferies.

John Hecht -- Jefferies -- Analyst

Can you guys hear me?

Roger Dean -- CFO

Yes. We can hear you. I apologize. The operator is unintelligible. Sorry for that, but go ahead, John.

John Hecht -- Jefferies -- Analyst

No worries, thanks. So first question is the head of the accounting change for the open-end product to conform the allowance in provision to the other products. Is that accounting change now kind of fully baked in where the run rate is, where it should be?

Roger Dean -- CFO

Yes, good question. Q2 was much better around the run rate because, you're obviously moving to 90 days, we didn't. But John, if you look at the pro forma table in our MD&A portfolio -- pretty open in loans, we kind of showed you what the pro forma would look like and the short answer is the pro forma is basically aging all loans as if we didn't do this prospectively and so it really gives you a good illustration of where we came out. And we did see improvement in Q2 but that's a long answer to a short question. Yes, we saw much more normalized net charge offs in Q2.

John Hecht -- Jefferies -- Analyst

Okay. Thank you. And second is, Canada. And I think you had much better EBITDA performance on operating and performance than expected. And I know, Roger, you cited some proved credit characteristics there. I'm wondering if you just give us an overall update with respect to volume and demand and so forth there as well.

Bill Baker -- COO

Hi John. Good morning, it's Bill. Yes, I think Don and Roger said we're pleased with what we're seeing. It really is a combination of things. We continue to see very strong demand. I think we really have the acquisition model honed in, from an underwriting perspective. And then, we continue for customers that will be turned down. We put them in the single-pay product. And then after they prove credit performance and credit worthiness, we then offer them the open line. And I think that strategy has worked very well. From a scale perspective on the advertising side, I think we've got that in a good spot. And we just see good performance. Our collective numbers continue to sequentially improve. And I think that's the combination of the customer really getting a feel for the product, how to properly use it. Utilization continues to be in the range that we're very comfortable with. And from a collections perspective, I think our people become more adapted at working with the customer servicing; it's something Don talked about a lot. You're financing these loans, servicing them and being able to offer to the customer in a competitive fashion. So, we're really pleased with what we're seeing. And I think that gives us the confidence to in a very measured fashion move into British Columbia.

Don Gayhardt -- President & CEO

Yes, John. Just for perspective, we saw -- we saw $35 million of sequential loan growth Q1 to Q2 in the Canadian opening book.

John Hecht -- Jefferies -- Analyst

Okay, thank you. And the final question is just it looked like a few positive things going on in the business but I'm wondering if maybe you can just characterize, what are the key drivers that allowed you to increase -- from your perspective what's the key drivers that allowed you to increase guidance?

Don Gayhardt -- President & CEO

John, I think Canada is really been -- I think we tried to be pretty measured in how we talked about that and forecasted it. But we feel like in that business -- so last year, we did look at our -- we break out the -- if you look at last year we did 20 -- in adjusted EBITDA we did $25.9 million dollars in Canada and I think at this point, our belief -- I think we have talked about maybe we could get into the high 40s there. I think for 2019, I think adjusted EBITDA for Canada is going to come in -- I believe it's going to come in in the low 50s now. And depending on credit performance it might even do better than that for the full year. So that's a doubling of adjusted EBITDA out of that market. I think domestically, I think we just -- we feel good about credit, we feel good about where our customers are.

Newer portfolios, as we talk about Virginia are open in the line of credit book in [Indecipherable]. The credit has been pretty solid. And, from our -- from our demand stand, demand continues to be really good. And as you know, it's good quality demand and I think for us to -- the key is just to sort of make sure we spend the right amount of advertising dollars in the right places and not -- we're not really kind of chasing new customers that much. I think we probably have a bit more demand and we think we can sort of take on right now in terms of new customers. So we could take on more new customers that might -- so that might get the ad spend and the credit numbers will be a little out of whack. So we're really focused on the ad spend numbers and the credit that -- that gross margin. So risk adjusted revenue minus the ad spend is really kind of the key focus for us right now. So the business is in a -- it's in a good spot and I think our people are working well. Our store base is really delivering great results. A lot of the talk about leads to stores where customers come online and then are placing a loan so that continues to perform very, very well. So I think it's a lot of little things adding up to a good first 6 months and a good outlook for the rest of the year.

John Hecht -- Jefferies -- Analyst

Great guys. Thanks very much and congratulations on a good quarter.

Don Gayhardt -- President & CEO

Thanks, John.

Operator

We'll take our next question from John Rowan with Janney.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

Good morning guys.

Don Gayhardt -- President & CEO

Hi, John.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

Don, I was wondering if you could drill down a little bit further into California. I know you gave a 13% revenue number and I appreciate that. But is there any reason to believe that the bottom line contribution from that product in Canada is significantly different than the revenue contribution or EBITDA contribution, whatever you want to say? I mean, is there a very asymmetrical or abnormal loss rate relative to other products? Just help us frame up more of the potential bottom line impact as you look at more to 2021 after the portfolio has matured off.

Don Gayhardt -- President & CEO

Yes, John, so just as a kind of a high-level view. I mean, that -- those -- the Canadian -- the California installment book is -- domestically it's, you know, at the low end of the curve from a yield perspective. So again, it's our somehow lowest yielding top-line yield products. And if you look at over -- internally the way we account for it the loan losses are about 52% of total revenue. So it's -- which is -- if you look at our overall numbers, have a lot higher than the weighted average across the whole business. And you can look at -- you can look just for that. If you look at our unsecured installment loan loss rates in our -- the tape -- the detailed table breakouts, you can see that. I think, Roger, that California represents about 90% of that unsecured installment portfolio. You can see those loss rates there. So it is while -- we like the business. We like the product. The customers are -- it's California so people make -- you know, it's a higher income state. The average customer in that portfolio, their average annual income is just shy of $50,000 so it's a -- on balance. It's a better customer from a household income perspective. A little bit higher psycho's score than our average portfolio. But it's a lower yielding product. And when you kind of do all the math out, just the loss rates alone eat up about, you know, a little more than half of the total revenue. So I think, you know what you know, we're focused on is some of those customers may end up kind of dropping down and not borrowing from us in our single pay book. And we're focused on finding and continue to look at other product opportunities and partnership opportunities to serve that customer base.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

Okay. And just to be -- Let me make sure I got this correct. So California is 90% of the U.S. unsecured installment when I look through these breakup tables?

Roger Dean -- CFO

John, it's -- John it's actually lower than that. It's about 70%. If you consider this the title and the -- if you consider the title plus -- plus the unsecured.

Don Gayhardt -- President & CEO

So the unsecured plus the secured book. You've got to add both these together.

Roger Dean -- CFO

It's closer to 70% on the combined book of those two.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

Okay. And then what's the status with Meta? Okay, And lastly Roger, what's your thinking on Cecil implementation and the new rules governing companies with low floats?

Roger Dean -- CFO

So, you know, as it stands right now, obviously there's still -- it's still moving. It's not final this delay. But, you know, as it stands right now, technically we would qualify for a delay to 2023. And so then it could -- but we were still evaluating that. That doesn't -- obviously, that doesn't necessarily mean that we won't early adopt. You know, as you know, John, this stuff's hot off the process and it's still -- it's actually still moving a little bit in terms of what happens if we qualify the SRC, small reporting company, which we did at June 30, which is the measurement date, which means we qualify for the delay. And then I think there still -- it's still settling around what happens to that when that changes in the future because 2023 is a long. Got -- God forbid the stock price goes up. You know, things like that. You know. So you know -- So we're still evaluating it, John. And again, I think the other thing that just I would emphasize again is, you know, just because we can delay doesn't necessarily mean we're going to.

Okay, all right. That's all I have. Thank you, guys, very much. Great. Okay. Thanks, John.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

Okay, all right. That's all I have. Thank you, guys, very much.

Operator

We'll take our next question from Brian Probyn with William Blair.

Brian Probyn -- William Blair -- Analyst

Yes. Good morning. First question I appreciate the California update and an outlook, but I just, you know, looking long term and you know, with California and potential moving to different products, the customers there doing that. I guess what are your thoughts on longer term revenue growth and with that, the margin outlook? I think you've been consistent with that margin around 22%. I mean, do you anticipate that margin moving longer term? And what's the driver of that as long as the revenue growth there?

Roger Dean -- CFO

So let me make sure I understand the question. So you're -- is this specific to California or you're just talking about overall margin growth?

Brian Probyn -- William Blair -- Analyst

Just overall, longer term. The impact of California, what are your thoughts? Is it a high single-digit type growth business with a 22% margin? What are your kind of thoughts on the overall business?

Roger Dean -- CFO

Yes. I mean, I think that you know, it's hard to -- you know we talk about next year, we think we'll get -- I think we'll probably see as -- a lot of this is, you know, dependent upon what we do in terms of replacing. I think we feel very good about being able to find products and partnerships that will serve our -- the customer base in California that wants this longer -- longer term, larger installment loan or possibly as a line of credit product. So I don't -- I think if we can -- if those products and partnerships work out into 2020 and 2021, you know, being able to grow the business at a low double-digit number, I think we can -- we can do that. And I think from a margin standpoint, you know, it's -- the bank partnerships are great.

You know, you have to sacrifice a little bit of the economics there because you have a, you know -- you have a bank partner there that's going to need a -- you know, a good rev share. But I think, you know, probably if you look at our overall you know -- our adjusted EBITDA margin this year for the full year is going to come in somewhere probably in the, you know, 22%, 23% range. And I think that the way the operating model works, because, you know, around 50% of your -- 53% of your total cost structure is loan loss provision ad spend, that's pretty variable with revenue. And beyond that, it's store costs, call center costs and corporate cost. And you get a decent amount of operating leverage there.

I think this year we expect our adjusted EBITDA margin to go up about 200 basis points, maybe a little bit more over the course of the year. So I think if the red rug stays in the low, call it 10% to 12% range you should continue to see a modest expansion of the adjusted EBITDA margin. And I think, you know, the big as you -- a lot of that is dependent on filling the demand in California with bank partnership opportunities and we feel like that, you know -- that we've got a good, you know, -- a really good opportunity to do that.

Brian Probyn -- William Blair -- Analyst

I appreciate, that's helpful information. And Canada obviously you expanded quickly into Ontario last year and rolling out into the British Columbia later this year and more -- maybe a more measured pace. I'll just roll up to the maybe the rest of Canada and obviously, it's my vast majority is in Ontario. I understand that but I mean, what is the overall Canada opportunity for that line of credit product?

Roger Dean -- CFO

So we have a product in Ontario and Alberta now. So just big picture. Ontario is 60% to maybe 65% of our total business there. So and then Ontario -- B.C. is about 9%. Alberta is about the same amount. So between Ontario, B.C., Alberta, you're talking about 85% -- roughly 85% of the total business. So, you know, with the completion of B.C. we'll be -- the overwhelming part of the business is going to be in the -- we'll have a line of credit in the overwhelming majority of stores and online in these different provinces. So, you know, we -- and Canada is 24% or something of our total business. So to make the point again, that B.C. is 9% of 24% so it's a really small part of our total revenue. And we'll do it at a more measured pace. So the impact we saw in Ontario, where we had adjusted EBITDA, we made $9.8 million in the second quarter of 2018 and we lost $3.4 million in the third quarter. And that was -- so that had a little impact on the overall results. We're not going to see anything like that as we go into B.C. You know, I think longer term, the business -- the credit is really good there. The customers really love the product. We're really starting to get some traction offering it online as well. And, you know, it's worth noting again that for, you know, I think a whole lot of reasons which, you know, we will try to unpack here, the online financial services market in Canada is kind of way behind where it is in the States. So as customers in Canada, just -- not just, you know, other bank customers and our specific customers in this product but in general online financial services become a bigger part of the overall market there. I think we've got a great product and a lot of competitors of ours went up to Canada and tried to start an online business and couldn't get any traction there. So we've been at it for a long time. We love where we are online there. And I think as a channel shift starts to take place, as it has in the US, as it has in the UK and a lot of other markets, I think we're in a great position in Canada.

Brian Probyn -- William Blair -- Analyst

All right. And then last question for me is kind of long lines of, you know, maybe MN&A and investment activity. You mentioned Zibby upfront and your additional investments there and a pretty nice color around that. But you can talk a little bit more around Zibby and maybe other -- maybe additional products that you're looking at to maybe add on. And would you eventually bring us to the in-house, if you will or any thoughts on that?

Roger Dean -- CFO

So, yes, you know, I'm going to -- I'm going to intentionally not answer that part of that question. We've got some great partners in that business. Some really good B.C. firms and, you know kind of growth equity firms that are investing in that business alongside of us. I mean, obviously, we continue to invest in it for our dollars. So we're kind of -- then we voted with our feet in support of the management team there and what they're doing. It makes a lot of sense for us. It is a very similar customer. It's a -- kind of when we boil it down, we're essentially making a $700 to $1,000 credit decision for a low $600 psycho borrower. I think we've been able to help a lot of that and help that business grow. But at the end of the day, it's that management team there that's really going out and landing big national accounts like Wayfair and Lenovo laptops and working with partners like a firm.

So, well, if the opportunity comes up to invest more money in the business and the terms make sense, whether it's just another round or a controlled investment, we'll take a hard look at that and we'd like that team a lot. And I think that product as a part of our business makes a lot of sense. So in terms of other stuff, you know, our core -- we like our core businesses a lot. We've got our plus debit card platform that continues to perform really well and be a great additional sort of service to our customers where they can take money, draw the other, take the proceeds of an installment loan or just kind of take a draw on a line of credit and put that money on their plus card. Kind of a check out the revolver finance product, which is a real bank account replacement product is working great.

And that has an overdraft feature on it as well for customers of direct deposit with us so I think the card business is something we're going to continue to work at and potentially even look at ways of partnering with other retailers to offer our cards through -- Right now, we only offer our cards to our locations and to our online customers, but we're looking hard at potentially partnering with other retailers both online. The brick and mortar retailers and online retailers offer our cards through those retailers. So we -- I think we'll continue to invest in the card side of business as well.

Brian Probyn -- William Blair -- Analyst

Thank you.

Operator

And we will take our next question from Moshe Orenbuch with Credit Suisse. Please go ahead.

Moshe Orenbuch -- Credit Suisse

Great. Thanks. Actually, most of my questions have been asked and answered. Maybe you could just kind of talk a little bit about what you're seeing in terms of the competitive environment. You know, kind of putting together the last couple of questions and how that's kind of, you know directing you as to where you're, you know, -- you should be putting efforts and marketing dollars?

Roger Dean -- CFO

Yes. I'll start maybe buy some thoughts as well but, you know, I think it -- the competition continues to be I think, pretty sensible. We don't see anybody doing anything that is, you know, -- I call it kind of a rational or, you know, uneconomic where people are just trying to come in and like buy share. You always worry when there's lots of big dollars raised in some of these investment rounds that you hear about and a lot of those dollars immediately get plowed into advertising to build brand and gain share and gain scale. But I still think that we see very little of that is in the called the under bank space. Most of that is in other payment products or in prime or near-prime product. So the numbers we see, whether it's and obviously got published at direct mail piece which we read avidly. But whether it's direct mail, some of the online channels, you know, the affiliate relationships and how that trickles down into our online business and our leads, the store programs. And we still see, you know, -- as I said, honestly, and we probably see a bit more, you know, looking back at the second quarter I think probably, you know, you could maybe argue that we left a little bit on the table in terms of new customers and top line and loan volume, because we wanted to make sure from a from an ad spend and a credit quality standpoint, we were kind of really dialed in there. So I don't think we're the only additional stocks there.

Don Gayhardt -- President & CEO

No, I think I would echo those comments and I guess I would just highlight the online demand that we're seeing strongly in the US, but also growing in Canada. I think that obviously gives us a real opportunity to service the customers online but keep in mind, we have that leads to stores like the store program, which helps us sort of further take advantage of that. So I think we're really pleased with what we thought through the quarter and that, you know -- I think we're bullish on that demand through the end of the year. Again, in a very controlled fashion, both from a marketing cost and underwriting perspective.

Moshe Orenbuch -- Credit Suisse

Got you. And we were quite impressed with the expense control in the quarters. Any thoughts as we go forward? Like, is there more to come? Is that stuff that you'll be investing in and how should we think about that as seen in the second half?

Roger Dean -- CFO

Yes, I think -- Moshe, it's Roger. Yes, I mean, I think we've kind of settled into a kind of a run rate from a quarterly perspective at this point sequentially. Certainly, in the corporate side, there's nothing that's going to cause that to change over the course of this year in either direction significantly. You saw costs; the non-advertising costs of providing services are pretty -- very stable as well kind of sequentially. And, you know, we didn't make -- if you recall, you know, as we headed into the year, we did a raft and we did some other things. And we're seeing that -- we're seeing the payback on that at this point. And, you know, we've got a kind of right-sized, for lack of a better word, reright size. And then on the advertising, you know, obviously third quarter is our biggest quarter from an -- seasonally from an advertising perspective. So you'll see a little bit of -- you'll see an increase in Q3 versus Q2 on a percentage of revenue basis and in kind of coming back down a little bit in Q4. But, you know, other than -- again, another long answer to a short question. But I think we've got a really stable cost base right now.

Moshe Orenbuch -- Credit Suisse

Got you. Thanks, Roger.

Operator

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

Don Gayhardt -- President & CEO

Great. Thanks, everybody, for joining us. I will look forward to talking to you again after our third quarter release toward the end of October. Thank you.

Duration: 45 minutes

Call participants:

Gar Jackson -- Chief Financial Officer

Don Gayhardt -- President & CEO

Roger Dean -- CFO

Bill Baker -- COO

John Hecht -- Jefferies -- Analyst

John Rowan -- Janney Montgomery Scott LLC -- Analyst

Brian Probyn -- William Blair -- Analyst

Moshe Orenbuch -- Credit Suisse

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