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CURO Group Holdings Corp. (NYSE:CURO)
Q3 2019 Earnings Call
Oct 25, 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 Third 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 -- Investor Relations

Thank you, and good morning, everyone. After the market closed yesterday evening, CURO released results for the third quarter 2019. You may obtain a copy of our earnings release from the Investors section of our website at ir.curo.com.

With me on the 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 and how those factors impact our customers; the timing and pace of transitioning customers to Open-End loans in British Columbia; our belief that Zibby has a competitive advantage over its competitors; our revised financial guidance for the full year and fourth quarter 2019 and underlying assumptions; California state level EBITDA contribution for 2020 and related expectations of total company earnings growth for 2020; the impact to our customers, and mobile app availability on Android platform in mobile devices and the resulting impact on our business; 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 conform to generally accepted accounting principles. We believe that 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 on 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 & Chief Executive Officer

Great. Thanks, Gar, thanks everyone for joining us today to discuss what was an excellent third quarter and the continuation of good results and momentum. Our adjusted net income nearly tripled year-over-year on strong loan portfolio growth and performance and operating expense discipline. For the first three quarters of 2019, we have produced 10.8% revenue growth, 37.2% adjusted net income growth, and 40% -- and a 40% increase in adjusted diluted earnings per share.

For the quarter, our Canadian business delivered 30.3% revenue growth and $15.3 million of non-GAAP adjusted EBITDA versus a $3.4 million dollar adjusted EBITDA loss in the prior year quarter. Suffice to say that a year later, we are incredibly pleased with how the product transition has worked out in Canada. Our team in Canada has been extraordinary. We 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 to our customers.

Our U.S. business also continued to perform well with 6.2% revenue growth, 11.7% net revenue growth and 23.3% growth in adjusted EBITDA over the prior year quarter. To get to these results, we executed well in a number of key areas and saw good growth in earning assets, revenue and net earnings.

Overall, credit quality was very solid with quarterly net charge-off rate at 16.4% versus 20% in the third quarter of 2018. The most notable improvement year-over-year was for Canadian Open-Ended -- charge-offs in Canadian Open-Ended loans, where the quarterly rate was just under 25%, which continues to be better than our expectations.

Last month, we started to optimize our California Installment loan portfolios to be well positioned for the January 1, 2020 law change and this optimization is impacting our Unsecured and Secured Installment loan growth.

We continue to believe that macroeconomic trends are positive for our customers in both Canada and the U.S. In addition to the net charge-off rates that I just spoke about, another important indicator is the rate at which our customers clear delinquent loans and these rates were essentially unchanged from the third quarter of 2018.

We remain very disciplined as we work to keep our cost per funded loan and loan vintage credit results performing well and meeting or exceeding our expectations. In Canada, we remain very focused on portfolio performance and growing -- and are growing share with our market leading Open-Ended loan product.

Q3 of 2019 revenue was $60.2 million, unlike in the U.S. was the highest third quarter in our history. Open-Ended balances stood at $237.3 million at September 30, 2019 and represented 82.8% of our total receivables in Canada, up from 71.6% at September 30, 2018. Based on the success we've had in Ontario, we began to solely introduce the Open-Ended loan product in British Columbia last month, and would expect to have qualifying Single-Pay customers transition to Open-End by the middle of 2020. British Columbia represents 8.5% of total Canadian revenue in the third quarter of 2019. And because of its different competitive dynamics versus Ontario, we can be more measured in the BC transition with no material revisions to the earnings -- our earnings trajectory.

Two new opportunities where we continue to invest and pleased with the progress of are Revolve Finance and Zibby. Revolve is our demand deposit or DDA account, sponsored by Republic Bank of Chicago that we introduced in March of 2019. This product provides our customers the full functionality of a bank account, direct deposit of the customer's paycheck, debit card, bill pay, and even optional overdraft protection in addition to FDIC insured account for their deposits. We earn fees on account and card use, and for those customers who qualify overdraft protection. So far we loaded almost $50 million on over 30,000 unique cards. So really good growth for new product.

As we discussed last quarter, we recently participated in another follow-on investment on Zibby, an on-line virtual lease-to-own platform, which brought our fully diluted ownership in this private company to approximately 42%. Zibby continues to perform well, particularly with key accounts such as Wayfair, Lenovo and Affirm. While Zibby is still a small player, but growing almost double the leasing volume in a growing category and we believe their online integration underwriting and service capabilities give them a durable competitive advantage over competitors who focus on brick and mortar retailers.

So overall we think that we will have a very strong final quarter to the year and deliver great results for the full year. You can see in the release that we are once again raising our earnings guidance for full year 2019. We'll announce 2020 guidance along with our fourth quarter earnings early next year.

I'll note a couple of other key topics before turning it over to Roger. In terms of regulation, at the state level in California, we're preparing for the effective date of Jan 20 -- Jan 1, 2020 for AB-539 and our instalment portfolios will run off over the course of 2020 and 2021. During the quarter, we saw a small decline in our California Unsecured and Secured Installment loan balances as we began to change the credit composition of the portfolio to reduce risk in 2020 and to optimize portfolio cash flows and earnings. For the trailing 12 months ended September 30, 2019, these products represented 13% of our consolidated revenue.

Our current portfolio positioning for this change is included in our 2019 updated guidance. We've said in a number of occasions, but it bears repeating. For 2020 given the composition of installment -- the combination of installment portfolio runoff, growth in our Single-Pay product and the elimination of variable costs associated with installment originations, we expect the California state level EBITDA contribution of 2020 and be essentially on point with 2019.

Of course, at this point with the continuation of current macroeconomic trends, we expect that the rest of the U.S. and Canada will post healthy earnings growth next year. So we think overall, we're very well positioned for earnings growth in 2020.

A quick word on MetaBank and bank relationships in general. After almost 18 months of hard work by a lot of people in our team, we decided to direct our efforts elsewhere during the quarter, so we mutually agreed to terminate our partnership agreement with MetaBank. But during the quarter, we did enter into a new agreement to offer analytics, marketing and servicing support to another bank and look forward to discussing this arrangement more in the near future.

So in summary, the first nine months of 2019 has been very positive, and I think this quarter has once again demonstrated the strength of our company and our operating model. We're strong and growing company with strong cash generation capabilities. We have the strongest omni-channel model in the consumer finance industry. 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, processes and technologies to remain at the forefront of innovation, and we use this innovation as well as our scale to benefit of our underbanked consumers.

And with that, I'll turn it over to Roger.

Roger Dean -- Executive Vice President & Chief Financial Officer

Thanks, Don. Good morning. Consolidated revenue for the quarter was $297.3 million, up 10.3% compared with last year's third quarter. For the quarter, revenue in the U.S. was $237.1 million, the highest in -- the higher third quarter in the company's history for the U.S. U.S. loan balances grew 5% to $444 million led by good growth in our Open-End portfolios in Virginia and Tennessee offset somewhat by California -- California portfolio repositioning.

Adjusted EBITDA came in at $67.1 million, which was up 73.8% year-over-year, but most of us recall that Q3 last year was affected by what we expected to be and has turned out to be a very successful product transition and market share expansion in Ontario, Canada.

Consolidated adjusted net income and adjusted EPS rose dramatically year-over-year. That was a result of: one, Canada's year-over-year success; two, healthy U.S. asset earning -- U.S. earning asset growth and credit quality improvement; three, carefully managed expense growth for interest savings from last year's refinancing and manage utilization of our Canadian ABL facility; and five, opportunistic repurchases of our common shares.

As an update on our share repurchase program that was announced in April, during the third quarter, we repurchased 1.9 million shares on the open market, with an additional 700,000 shares of open market repurchases in October through the end of the day yesterday. In addition, we also purchased -- repurchased 2 million shares from FFL a related party in a private transaction at a 3% discount to the market price at the time.

In total, we have repurchased 4.9 million shares through yesterday that what we believe to be very attractive valuations. At this point, we have $14.5 million remaining and available for repurchases under the plan, which is continuing.

Next, I'll comment on advertising customer counts and cost per funded loan or CPF before moving to loan portfolio performance. As a backdrop, it's important to note that there is a fundamental shift in the composition of our portfolio year-over-year that drives a meaningful change in advertising patterns and new customer accounts, especially in Canada. So our metrics on new customer accounts are lower, they're generally in line with our expectations, and we're pleased with the new customer accounts.

Looking at new customer advertising stats, we added 168,000 new customers this quarter, that is down about 16.8% from last year. For the nine months ended September 30, we acquired 438,000 new customers and our site store capability added 31,000 new customers in Q3.

Consolidated cost-per-funded loan was $96. That's down $7 or 6.7% year-over-year. Breaking it down by country, U.S. advertising was down $3.4 million and new customer accounts were down 16% year-over-year for three reasons. First, we had to manage decrease in Avio customer acquisition as we allow our new machine learning models to mature. Second, we selectively reduced installment loan customer acquisition in California in advance of regulatory changes. And third, we had a regulatory change in Ohio earlier this year that affected our customer acquisition in that state year-over-year. With the U.S. reduction in new customer volumes especially from Avio, U.S. cost per funded loan was down $3 year-over-year to $98.

Moving on to Canada, Canada advertising was down $1.5 million year-over-year, almost entirely because Q3 of 2018 was elevated for the Ontario market transition and this year's bit more normalized. Canadian new customer accounts were down, but that's really -- that's not really apples-to-apples year-over-year. As a better comp, our Canadian new customer accounts were up sequentially versus Q2 of this year by 6.4%. And cost per funded loan in Canada was $84, which was down $28 from the same quarter a year ago.

Next, I'll spend a little time covering overall loan growth and portfolio performance. First, a few highlights at the product level. U.S. company-owned Unsecured Installment loan balances declined $6.1 million or 3.7% year-over-year. This was entirely due to California portfolio optimization. The rest of the U.S. grew 6% year-over-year.

Canadian installment balances shrank because of the expected mix shift to Open-End, so consolidated company-owned Unsecured Installment balances decreased 5.7%.

Similarly, U.S. Secured Installment loan balances declined 1.8% versus the same quarter a year ago, and again that's entirely due to California portfolio optimization. Excluding California, the total portfolio grew 10%, 10.5% year-over-year.

CSO loan balances were down slightly, but you'll recall that the law change in Ohio eliminating the CSO model became effective April 27 of this year. So good growth in Texas to replace those Ohio balances. As expected Single-Pay loan balances were affected by Canadian regulatory change in transition of multi-pay products. Canadian Single-Pay balances declined 2.8%, but similar to the last couple of quarters, there was -- we had solid growth in U.S. Single-Pay loan balances, which grew 4.1% year-over-year.

Moving on to loan loss reserves and credit quality, our consolidated net charge-off rate improved over 350 basis points versus the third quarter of 2018 with all products -- with all products improving except Unsecured Installment and Single-Pay. The company-owned Unsecured Installment net charge-off rate rose year-over-year, but that's as we've discussed for the past several quarters, those rate comparisons continue to be affected by mix shift away from Canada and the effect of credit line increases and our unseasoned Avio portfolio.

Single-Pay net charge-off rates rose year-over-year in Canada, and that's pretty much fully phased-in impact of Ontario extended repayment plan rules [Phonetic] that went into effect July 1 of 2018. U.S. Single-Pay net charge-off rates were flat year-over-year.

Next, a few comments on CECL. As you may know, last week the Financial Accounting Standards Board voted to defer to January 1, 2023, the CECL effective dates for companies to qualify under SEC rules as small reporting companies or SRCs. CURO qualifies as an SRC for this purpose, and at this point, we will elect to defer CECL adoption past January 1, 2020.

Turning to our capital structure and liquidity, our total available liquidity position at the end of the quarter was approximately $105 million. This is comprised of one excess unrestricted cash of approximately $14 million, U.S. revolver capacity of $25 million and Canadian revolver capacity of over $7 million, and undrawn borrowing base availability in our Canadian SPV Facility of $58 million.

Finally, I'll close with our outlook for the remainder of 2019. Our revised guidance is revenue in the range of $1.145 billion to $1.150 billion, a decrease from prior guidance of $1.154 billion to $1.170 billion because of California Installment loan repositioning, Don mentioned earlier; adjusted net income in the range of $125 million to $135 million, that's narrowing our prior guidance of $120 million to $135 million; adjusted EBITDA in the range of $260 million to $270 million, an increase from prior guidance of $250 million to $265 million; adjusted diluted earnings per share in a range of $2.75 to $2.85, an increase from prior guidance of $2.55 to $2.80; and our adjusted effective income tax rate, we still expect to be in the range of 26% to 27%.

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

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Bob Napoli with William Blair. Please go ahead.

Robert Napoli -- William Blair -- Analyst

Hi. Thank you, and good morning.

Don Gayhardt -- President & Chief Executive Officer

Good morning, Bob.

Robert Napoli -- William Blair -- Analyst

Just a question on the -- so what is the share count today, Roger, as we had set out a fully diluted share count with the -- the purchases you made? It looks like 43 million shares.

Roger Dean -- Executive Vice President & Chief Financial Officer

Correct.

Robert Napoli -- William Blair -- Analyst

Okay. And then just your thoughts, I mean on returning capital. It's pretty aggressive, but do you expect to continue to return capital next year, I guess, I mean, maybe not at the same level, but is that kind of a long-term strategy with your stock at this price?

Roger Dean -- Executive Vice President & Chief Financial Officer

Yes, I mean, Bob, obviously we've been buying a bunch back, and I don't think we've made an -- we have a good bit remaining in the current authorization. I'll probably pass on predicting much beyond the existing program until we sort of get through our budgeting and capital planning for 2020. But I would expect when we give you guidance for 2020 early next year we will give you some more thoughts about that.

Robert Napoli -- William Blair -- Analyst

Thank you. And then, neither of you, Don, Roger, I know, you're going to give full outlook on 2020 next quarter, but just with the growth you're seeing in Canada, I mean do you still -- what inning are you are in, in the growth and you would expect to see that growth decelerate a lot into next year. And can you grow the U.S. revenue? I know you said you'd grow earnings, would you be able to grow revenue in the U.S. next year with the changes in California?

Roger Dean -- Executive Vice President & Chief Financial Officer

Yes. I mean, obviously, California is, for example -- answer the end of the question first. And California is a big -- second biggest state after Texas. So we'll -- I would -- we would expect that that as we said the earnings contribution in California should be pretty solid and kind of right on top of what we are going to deliver in 2019.

The top line will soften a little bit there as our portfolio runs off. The rest of the business in this stage should be -- is healthy and should remain pretty healthy. But if you look at U.S. sort of third quarter earnings growth over the full year, you can see some of that deceleration. So, again it's a little early to be -- to predict all the way out to the end of 2020, but the rest of the -- the underlying trends in the business in the states are really, really healthy.

For Canada, certainly it's going to -- from a top line standpoint, we think we'll continue to see good numbers. And we're going to -- we talked earlier in the year, we were hoping to get our adjusted EBITDA in Canada, this is in U.S. dollars, to bounce back from $26 million last year, and we thought if we had a good year, we could get close to $50 million. It looks like we're going to be in the mid to high 50s for Canada. So really, really good year.

We would expect earnings growth to be good in Canada next year, but again it's just not going to -- where it's not going to double -- it's not going to double again next year, but it should be pretty solid seafood. Non-California U.S. plus Canada together, and I think that makes pretty good -- plus Canada together makes pretty good year. And then, California is depending on the exact timing of the -- what happens with the portfolio there, and potential new products there, that's what we're kind of working on planning for right now.

Robert Napoli -- William Blair -- Analyst

And just last question, what else on a regulatory front are you watching today? Where do you see things that need attention?

Don Gayhardt -- President & Chief Executive Officer

I mean, I think from a -- I think as we go through the bigger states that we're in now, I think that will -- I think Arizona will be -- will see some legislative and potency ballot initiative action or next or guess probably the biggest thing we're -- that we're looking at right now in terms of a big contribution is from U.S. states. And Canada, I think for the most part, the product transition there, the regulatory picture looks pretty good. In fact, on the kind of legacy Single-Pay we may see some movements back in places like Alberta from -- that put in place more restrictive laws over the past couple of years.

Robert Napoli -- William Blair -- Analyst

All right. Thank you. Appreciate it.

Operator

The next question today comes from Moshe Orenbuch of Credit Suisse. Please go ahead.

Moshe Orenbuch -- Credit Suisse -- Analyst

Great. Thanks. I guess, for starters, you -- Don, you alluded to this new bank relationship. It sounded like it was more advisory than balance sheet oriented? Could you just maybe flesh that out a little bit?

Don Gayhardt -- President & Chief Executive Officer

Yes, you know, Moshe, it is -- I think, you just have to sort of take it for what we said. It's in a range what we provide. Obviously, the bank makes a loan and we provide underwriting and marketing and servicing work to the bank as to help them make that loan. As I said, we are -- I guess, we're just probably -- we'd rather sort of leave it at that and once we sort of have something that's out in the marketplace we will -- both in terms of what the agreement says and what the product structure is, we can be a little more, little more definitive about it.

Moshe Orenbuch -- Credit Suisse -- Analyst

Okay. And does that preclude you from any other types of relationships or is it just something that's still open?

Don Gayhardt -- President & Chief Executive Officer

No, it does not preclude us from other relationships. Yes.

Moshe Orenbuch -- Credit Suisse -- Analyst

And we have -- I should -- we do have a lot of bank relationships right already in terms of debit processing or the merchant processing side of things, and ACH that obviously have bank partners that are behind the card products, both our Opt+ reloadable card and the revolve product, the DDA product we talked about with Republic Bank of Chicago. So we've got a number of current bank relationships. And we're always looking in those areas for growth and good partners as well.

Right. And it looked like a lot of the yields on quite a number of your products were up. Is that something that's just a lag because of the rise of rates in the past or is there a pricing action, and how should we think about that as we go into 2020?

Don Gayhardt -- President & Chief Executive Officer

It would all be mix. The California portfolio with repositioning hasn't -- didn't grow. And it's the lowest yielding -- it's the lowest yielding of the Unsecured Installment products. So that would have some impact on -- that mix shift would have some impact on Unsecured Installment yields. And we didn't make any pricing decision there. [Speech Overlap] It's all mix and timing.

Moshe Orenbuch -- Credit Suisse -- Analyst

Got it. Okay. Thanks very much.

Operator

The next question today comes from John Hecht of Jefferies. Please go ahead.

John Hecht -- Jefferies -- Analyst

Good morning, guys. Thanks very much for taking my questions, and congratulations on a good quarter. First one is just thinking, I know, you're not going to give specific guidance next year until next quarter, but just thinking about some of the developments and migrations in some of the big states like California, plus kind of the product emphasis that you're going through, how do we think about -- and it's a little bit of a follow-up from the last question from Moshe, how do we think about how the mix shift will affect product margins and yields and so forth on a consolidated basis next year?

Don Gayhardt -- President & Chief Executive Officer

So, I guess, it's -- look obviously the California installment portfolio is a big part of the overall unsecured portfolio. So you'll see that -- again absent any new products in California, you'll see the balance just come down and the overall yields on our installment portfolio will go up, just because of the way that transition is done. And then some of that will also go into the Secured Installment.

Roger Dean -- Executive Vice President & Chief Financial Officer

You'll see the same effect on the title book because California's yield is much -- is quite a bit lower than -- our title was basically Arizona and California, and the title in California yields quite a bit less than Arizona.

Don Gayhardt -- President & Chief Executive Officer

But I think otherwise now this is just the beginning you should see, there's not a lot of -- we don't have any sort of meaningful new states. We continue to see really solid growth in states where we have gone into in the past couple of years. We've seen a good growth this year and we expect that to continue. But at the end, with the California stuff aside, I don't think the yields -- we're not expecting the yields and the earnings -- the earnings contribution and yields in this portfolio, the yield to be about the same, portfolio should grow and we should see good earnings contribution growth from those states as well.

Roger Dean -- Executive Vice President & Chief Financial Officer

And as I mentioned, Canada -- yes, but we're going to finish the year from an adjusted EBITDA standpoint in the mid 50s at least and may be higher. We should continue to see really solid margins and earnings growth in Canada as well.

John Hecht -- Jefferies -- Analyst

Okay, thanks. And then turning to credit, obviously good year-over-year credit trends. Don, you mentioned in your remarks something about the improvement of curing delinquent loans. I'm wondering if you could just give us an update on kind of the overall credit environment, and what you guys are doing from a strategic or execution perspective to improve the, I guess, curing and manage delinquency trends?

Don Gayhardt -- President & Chief Executive Officer

Yes, I think -- we looked at -- if you look at the -- obviously the delinquency rates were good, the charge -- the net charge-off rates were really good for the quarter. But if you sort of unpack that and you look at what goes delinquent and the rate at which those not only loans ultimately cure, but the rate at which those cure is really important.

And the collection folks will say, what are the roll [Phonetic] rates. When something goes from the 0 to 15 and rolls into the 16 to 30 bucket or to 31 to 60 bucket, how does that -- what are those trends look like? And that -- those are -- that's really good. That's as good a kind of a live data as you can get on the health of our consumers we think. And as I said, those numbers, both in the U.S. and Canada, those rates, secure rates, the roll rates are sort of spot on where they were in the third quarter of last year. So we think that's a really healthy sign.

If you look at our -- the rate, our approval rates, they're actually kind of down a little bit year-over-year, and that's the U.S., Canada kind of across the board. But if you -- again, if you unpack that, then is the question to you is it the customers is it the credit quality of the new customers degrading or is it something we're doing, and it's very much the latter. We're -- again there was a bill [Phonetic] and the marketing folks, we have discussion every month, and a lot of that discussion is they're talking to us about business that we may be kind of left on the table. But that's where we're trying to be really disciplined about the credit of the new -- quality of the new customers, but also the acquisition cost there.

So net-net, I think, we are still a bit more -- if you look at our internal credit metrics, we're a bit tighter than we were a year ago, but I think that's showing up in the overall results.

John Hecht -- Jefferies -- Analyst

Okay. And then final question, turning a little bit to expenses. I mean, you guys talked about, I guess, more productive in marketing and then less marketing demand in certain geographies. How do we think about your goals and targets for marketing expenses next year, given that you've grown fairly aggressively in certain markets with the less marketing you had a year ago. And what are your -- what are kind of demands and strategic objectives next year in that regard?

Bill Baker -- Executive Vice President & Chief Operating Officer

Yes, John, it's Bill. I think, we look at it monthly. So I mean it really does depend on what the market looks like, what the cost of fund looks like, what the credit looks like. And I think that's going to continue to be the case. I think we'll continue to be disciplined, we're testing a lot of things. I think like-for-like, we could have a lower cost of fund, but we continue to test different channels and try to expand things. So I think it will be pretty similar to this year on -- as a percent of revenue. But again, I think if we see opportunities, we will spend more, and I think if we see efficiencies, we're disciplined enough to leave a little bit on the table as well. So I think that's going to be a very similar strategy.

Don Gayhardt -- President & Chief Executive Officer

But I would say, just I think the overall ad market in our little corner of the world is really healthy. We're just not seeing -- the competitive side of things is really good. We're not seeing large companies or new companies that are raising lots and lots of money that go out and embark on big brand building and an advertising campaign to sort of scale their business up. It just isn't -- that's more in sort of payments and prime credit and bank account products and that kind of stuff. We're just not -- in our end of the world, the subprime lending part of the world, the ad market is really rational and healthy, and we are -- I think this is how we probably, you know net-net, if you talk to our marketing people, they're saying we are -- there are opportunities that are -- that there are more opportunities that we can probably get after in a way that keeps cost per funded and vintage credit performance in line.

John Hecht -- Jefferies -- Analyst

Great, guys. Thanks very much.

Operator

The next question today comes from Vincent Caintic with Stephens. Please go ahead.

Vincent Caintic -- Stephens -- Analyst

Hey, thanks. Good morning, guys. So first just I guess another follow-up on California, but on the -- so I appreciate the comment about the California EBITDA contribution, the expectation that it should be unchanged in 2020 versus 2019. I'm just wondering what sort of assumptions are in there? So let's say, if you're shrinking maybe you have a provision benefit but -- or if you have say you're able to transition those customers and you have growth there where in sense it's better unchanged. Just kind of wondering maybe what you have baked in there or maybe both scenarios kind of get you to the same situation?

Roger Dean -- Executive Vice President & Chief Financial Officer

Yes. I think our base case that we've been referring to -- it's Roger. Good morning. Our base case that we've been referring to basically has a roll off of a big installment book with allowance release to your point, that book rolls off, if the contribution to net revenue -- if there is still some of that book left by the end of the year, but most of it, 85% of it will amortize over the course of 2020 with an outside contribution because we really -- you don't have any losses on new loans or new customers.

And then we're going to pick up some Single-Pay volume. In our base case thinking of this, we're not -- the Single-Pay customer pickup is not a moon shot, but you're going to pick some up and it doesn't take much Single-Pay to make -- to replace a lot of installment. So -- and then there is a lot of cost to go -- I mean, we've -- there's a lot of variable costs associated with especially unsecured book in California, whether it's obviously marketing. That's where most of the marketing spend is -- was. There is data cost. It's the most expensive product to underwrite from a data cost perspective. There is debit, finance merchant processing fees, because the customers predominantly pay with cards, debit cards for that product. So once you take out all these variable costs...

Don Gayhardt -- President & Chief Executive Officer

And there is collection and servicing too. It is another -- it's a big component, that's a longer term loan, so it's a more complex servicing operation to support that as well. So...

Roger Dean -- Executive Vice President & Chief Financial Officer

Once you've -- if we end up the replacement products there on the Unsecured Installment side, apart from the Single-Pay side, you'll see some of those costs come back in, but you'll also see the top line, and I don't -- it's not our -- to the extent we're able to the find replacements there. I think those products from a credit standpoint will perform in line. It's not like starting, it wouldn't be like we're starting up a greenfield state where you're going to see very high ad spend and very high credit costs early on as we build a book and wait for that book to kind of squeeze in. I think it will be a little different dynamic in California, but that's not -- that's the last part of what I just -- that is not included in the comments we're making about EBITDA being flat year-over-year.

Vincent Caintic -- Stephens -- Analyst

Okay. Got you. So, kind of, when we think about 2020 there is going to be some adjustments, but it kind of sets up for -- that should be a good run rate into 2021. So it's kind of like an even precipitation. Yes.

Don Gayhardt -- President & Chief Executive Officer

Yes. And we've said again 2021 the volume is dependent upon in some replacement products, and quite frankly, speculation of what California market is going to look like by the time it gets to 2021.

Vincent Caintic -- Stephens -- Analyst

Right. That makes sense. Okay. Perfect.

Don Gayhardt -- President & Chief Executive Officer

We think history would suggest there will be a lot less competition.

Vincent Caintic -- Stephens -- Analyst

Right. So that makes a lot of sense. Thank you. I guess broadly just the bank partnerships, just kind of wanted to get an update on the progress, the enthusiasm on that when we can expect more -- how much appetite there is for that and also kind of relatedly, but has the, I guess, regulatory environment or political environment had been a determinant in appetite from your discussions with bank partners? Thanks.

Don Gayhardt -- President & Chief Executive Officer

Yes. I will answer the last part of it. I mean, there are a lot of -- just we have a lot of bank partnerships for a lot of products and services now. There are a lot of folks across our industry and across the marketplace lending in general that have a lot of bank relationship. So I think that it's not in the discussions we've had. I don't believe there is a big impact from political regulatory environment on those conversations. I think we're -- it's early in the morning here, so maybe our enthusiasm doesn't come all the way through the phone here. I mean another -- no more captive, but we are across all our businesses, and I think we're enthusiastic about what we're seeing.

And regulatory change is always up. It's always been a part of this business for -- and I've been in it. I'm going on dating myself, but going on 30 years and it's always part of what is in the landscape and then what you're planning for and kind of building your business around. So everybody, every business has -- different businesses that this different risk. Some people have product obsolescence and international issues to worry about, etc., and trade, etc. We don't have those events. We have regulatory issues that we have always had to deal with, but I think we've positioned our business, instructions business to be responsive to that kind of stuff and that includes some of the bank stuff. And so we're -- we love the bank partners. We have now across a bunch of different things, not just lending stuff and we're looking forward to continuing those and hopefully expanding those relationships next year.

Vincent Caintic -- Stephens -- Analyst

Perfect. Very helpful. Thanks so much, guys.

Operator

The next question today comes from John Rowan with Janney Montgomery Scott. Please go ahead.

John Rowan -- Janney Montgomery Scott -- Analyst

Good morning, guys.

Bill Baker -- Executive Vice President & Chief Operating Officer

Good morning.

John Rowan -- Janney Montgomery Scott -- Analyst

I think Bill is the most enthusiastic of all you guys on the phone. I just have to say that upfront.

Don Gayhardt -- President & Chief Executive Officer

We had a plenty. So and he is feeling the same.

John Rowan -- Janney Montgomery Scott -- Analyst

Okay. I just want to think about something very broadly as we go into next year. Am I right your float share is around 15 million today. That sounds about right?

Roger Dean -- Executive Vice President & Chief Financial Officer

More in the 14 million range.

John Rowan -- Janney Montgomery Scott -- Analyst

Okay. So you have 14 million inflow, which is I don't know, a little over $200 million worth of public float, right. And how much money are you going to -- you said you're going to -- 80-some-odd-percent of the California book is going to amortize next year, right. I mean can you remind me again what cash flow you're expecting to come in just in 2020 off of the California book?

Roger Dean -- Executive Vice President & Chief Financial Officer

I think it's between -- if you look at that book, obviously a lot of it's going to pay off. We're going to get, and we will continue to get interest on the good -- the stuff that's current. So we'll get interest on the current book. We will get payoffs, and then you net out sort of the charge-offs. We do all that math together next year. It looks like on that book, it's roughly $130 million of cash flow between fees and interest and payoffs and principal pay downs.

John Rowan -- Janney Montgomery Scott -- Analyst

Okay. So, I mean, that's a lot...

Don Gayhardt -- President & Chief Executive Officer

And you will get a little bit 2020 -- you will get a little bit more in 2021 as well but...

John Rowan -- Janney Montgomery Scott -- Analyst

No, I know. You were in 85% of the total pay off in 2020 to 15%.

Roger Dean -- Executive Vice President & Chief Financial Officer

I think that's probably not right. Yes.

John Rowan -- Janney Montgomery Scott -- Analyst

But the issue I'm having is just kind of fundamentally understanding what you're going to do with the cash, right. I mean you can't buy back stock because you basically will buy back almost the entire float, right. I mean you just don't have the float to buy it back. I mean, sure you could buy back blocks from your private equity investors if you wanted to continue down that route. But what are the uses of cash do you have other than squeezing the float, what's a relatively thin float to begin with, wide opportunities you have to repay debt, are there any call provisions and some of the bonds that are out? I just want to understand sort of the money just sitting here on the balance sheet what you're going to do with it?

Roger Dean -- Executive Vice President & Chief Financial Officer

Well, I mean, we -- so to start we have asset-backed debt, we have our Canadian ABL facility that we could pay down doesn't have any sort of prepayments, etc. We can only do open market repurchases. The bonds are not callable until 2021 maybe. And then we could call them at half the -- one plus half coupon, which would be 104 something. But we can do over the marginal purchases of those before that. And then there are -- we've got our existing business, which is really healthy and Canada is a really healthy business. We're evaluating, potentially maybe opening more and get our LendDirect brand up there, which has been -- we have 12 of those stores open which will just offer the line of credit product in kind of a [Indecipherable] sit down environment, it's a loan office environment. It's not a service counter environment like our Cash Money brand or our Speedy Cash and Rapid Cash brands in the States. We've actually opened, we're piloting some kind of pop up stores in shopping malls in that brand. So the Canadian business is really healthy and retail expansion there looks really attractive.

And then we haven't been very active in the M&A markets. A lot of it has just been the valuations of -- we think have been sort of not for private sellers haven't been all that great. Maybe that will start to change. We're going to be really disciplined and try to be really opportunistic there.

And then Zibby is a great platform. We've continued to invest in that platform. And again we don't have any sort of special rights to buy that business. So -- but it is -- it continues to grow and each capital. We love the management team and we love the path they are on and that's another place where we could deploy some investment capital. So it's -- so we want to be -- I think, the last thing we want to do is get really rigid about, and say this is exactly what we're going to do because we just don't know what opportunities are going to be out there.

It is great, and we do a lot of discussions internally with our team about, you know, we've got -- California is disappointing. We don't -- the outcome there, I don't think is good for consumers, but this is -- we got to -- it's not that we don't have -- we got good people, good products, good technologies, and we have a lot of capital. So we'll go out and figure out great ways to keep growing the business with that capital.

John Rowan -- Janney Montgomery Scott -- Analyst

Okay. And you mentioned repurchased bonds in the open market. I just -- the bonds are below par if I'm not mistaken. Wouldn't that be -- and one of your -- one of the private guys had some trouble with this. I mean, within the rating agencies consider that a strategic default?

Don Gayhardt -- President & Chief Executive Officer

Not at the levels that we're talking about, as we understand it. I mean, they do -- yes, there were times when they did. But that's when -- but people bought bonds back in the 40s and 50s -- I mean our bonds are trading in the high 80s. So, again, it doesn't trade a lot. So I'm not saying that's like a super liquid active market, but it's not the levels we're talking about.

John Rowan -- Janney Montgomery Scott -- Analyst

And then last, just with the termination of the Meta deal. I mean is there -- do you have any rights that you have to pay -- I mean they would just pay termination fee or do you have any rights to even litigate to try to get back some of the fees that you put into that product? I mean, is it really just them not upholding their end of the bargain to get that product up and roll out and rolling. I mean, I know there was a management change there which seem to stop everything. I was just curious if you had evaluated any of those options on your end?

Don Gayhardt -- President & Chief Executive Officer

No. It was -- the discussions no matter we were always amicable. I mean it's disappointing that it ended up where it is, and I think we did everything on our end both contractually and just from a business standpoint.

But, you know, again things change and people change and manager and leadership changes and I think we could sit here and cry over spilt milk and break a bunch of stuff or we can go out and keep looking for ways to grow the business. And I think we -- and continue to find good partners. So I think we've chosen to put our energies in the latter, and not worried about what Meta did or didn't do, and that's a good bank and good with people I just -- it didn't work out, but we'll -- we're [Indecipherable] ballot check here but now we're moving on and we feel good about where we are.

John Rowan -- Janney Montgomery Scott -- Analyst

Okay, just last question. Roger, I think you had some comment about 2020 earnings being higher than 2019. I wasn't sure about that. I didn't really get it written down quite fast enough. Can you just repeat what you said in that vein?

Roger Dean -- Executive Vice President & Chief Financial Officer

I'm sorry, 2020?

John Rowan -- Janney Montgomery Scott -- Analyst

I think your comment about 2020 earnings outlook.

Roger Dean -- Executive Vice President & Chief Financial Officer

No. I mean, I think we -- we talked about -- obviously on earlier question, we talked a lot about California, the rest of the business, we expect everything other than California to grow next year. It's all healthy. We're going to see outsized growth in Canada. The asset balances, the average at the loan balances are already there as we exit this year.

So, yes, so I think -- we think, we feel good about the prospects for healthy earnings growth in 2020, but as Don said earlier, we're working through all of our plans and our budgets and everything right now, and you've got -- operating leverage continues to be healthy across the business. You've seen that in the results in this quarter and actually continue.

And then you're going to get the benefit of a full year of all the -- from an EPS standpoint, you get the benefit of all the repurchases, both the open market repurchase and the one-off deal we did with FFL. That will factor into the share count calculations are as well next year. So, but you're going to see -- I think, forgetting the EPS, the weighted share count calculations, you will see good earnings growth in dollars, which will translate again into a little bit better, better EPS growth given the share count reduction.

John Rowan -- Janney Montgomery Scott -- Analyst

Okay. All right. Thanks, guys. The next question is a follow-up from Bob Napoli from William Blair. Please go ahead.

Robert Napoli -- William Blair -- Analyst

Just wanted to ask about the revolve product and what the potential is for that over the next several years. It seems like it has some good traction.

Bill Baker -- Executive Vice President & Chief Operating Officer

Yes. Hi, Bob, it's Bill. I mean, I think we agree. We think there is a lot of opportunity. We currently only offer the product within our branches. And I think we want to continue to optimize it and get a little bit more data, but we think expanding the channels is the big opportunity. The uptake has been more impressive than we had thought. The product features are strong. So as we think about finding a retail partner with a couple of thousand four walls, I think that could be -- I think that could be really, really impressive.

I think the bigger thing with Revolve is getting customers on direct deposit. When you think about the benefit of the customer and also the profitability, it just -- it really extends the life of the account, and that's what we're really focused on which takes some time to do, but it really does expand the feature and functionality of the cards. So it's certainly something we're going to talk about next year expanding beyond, and whether that's direct to consumer or different channels with retail partners, and I think we're going to look at all of that?

Robert Napoli -- William Blair -- Analyst

How many of those, I guess, 31,000 cards or whatever -- do you have a percentage? Or when you're adding customers, how many do you get on -- what percent do you get on direct deposit? You offering that in how many states right now?

Don Gayhardt -- President & Chief Executive Officer

We offer in all of the locations that we operator in. So it's 14 states in the U.S., we don't offer in Canada just yet, but I think it's probably a little early to give the exact percentage, because we're still -- it's still growing. I mean, think about a customer who signs up for direct deposit oftentimes can take a couple of paychecks so that to come through just depending on the company's policy.

So I think it's probably a little early to give you a number there, but I think we're happy with it, and I think customers feel they would benefit. And it is different than prepaid. They do see it as a checkless checking account, and I think they utilize it a bit different as well. So we can probably give you better stats, you just give us a quarter or two to mature a little bit.

Robert Napoli -- William Blair -- Analyst

And then just on Zibby, is that business, I mean is the outlook for that business to become profitable in the next year or two or where does that business stand from a profitability perspective?

Don Gayhardt -- President & Chief Executive Officer

Yes, I mean you could see -- this is Don, obviously we started counting for that in the equity method. This quarter you can see the operating loss within our numbers. I think the management's plans and expectations, and obviously our belief as Board members of that company or that that business is going to keep growing, but -- and it should be a business that is -- that sometime in 2020 [Indecipherable].

It's got a fairly expensive debt capital structure, and as a company continues to grow, you know it's that balance where, how quickly can you internally form capital? Do you guys get more capital to support the growth and to bring down the cost of the -- on the liability side of the balance sheet. But it's a small growing company with a fairly expensive right side of the balance sheet, and I think they are very focused on -- we're only helping them focus on bringing down the cost of the liabilities and -- but there are various ways to kind of go about that. But we would expect that business would make some money overall next year, and really turn really, really solidly profitable in 2021.

Robert Napoli -- William Blair -- Analyst

And you compare that business to the progressive business is that...

Don Gayhardt -- President & Chief Executive Officer

Well, I mean, that's what make very much after -- I don't know, I'm not going to get into football analogies. I'm not going to compare myself with Tom Brady here, but it's that, I mean, progressive is -- that it is in this. We are in the same industry, very, very successful, very, very large company, really successful company. I think everybody in that industry at some level aspires to be progressive.

So right now we're a fraction of their size. I do think the thing we have that we focused a lot that there is a bit of land community and focus on a lot is that it is a -- almost an entirely online platform and that's a very different animal than managing a large storefront and a bunch of storefront relationship because the customer online is essentially coming directly to us as opposed to having sales person somebody in the store that's kind of in the middle of the transaction.

So -- and that adds an element of operational complexity, and there is risk, there is -- and Frank, there could be issues, whether the salesperson is motivated to kind of close the sale, and maybe you're not getting 100% great customer provided information and your models may have to sort of adjust for that kind of stuff. So I think Zibby again is very focused on the online side of things only and that's kind of somewhat unique in that end of the world.

Robert Napoli -- William Blair -- Analyst

Okay. Thank you. Appreciate it.

Operator

This concludes our question-and-answer session. Pardon me, there is another question that did come in. The next question today comes from Hugh Miller of Buckingham. Please go ahead.

Hugh Miller -- Buckingham -- Analyst

All right. Thanks for taking my questions.

Don Gayhardt -- President & Chief Executive Officer

Good morning.

Hugh Miller -- Buckingham -- Analyst

Good morning. So I guess assuming that you are successful at some point in potentially creating a substitute product with the bank in California, can you just give us a sense of kind of how we should think about the start-up process for that type of initiative? How long is the testing phase? How long does it take to kind of start to originate product and really ramp that portfolio? If you can just give us a feel of kind of how that process might go there would be very helpful?

Don Gayhardt -- President & Chief Executive Officer

Yes. Hugh, this is Don. We're just -- it's -- I think we're going to leave our comments as we kind of read them out there. It's just too early in the -- we do have a signed agreement. We're working hard. We're really pleased with the conversations we're having, but just sort of be -- just sort of be in any way kind of definitive about when, where, how that's going to rollout. I think it's just too early. So give us a little time to keep working on it a little more. When we have something that when we feel like we can give you a better outlook, we'll give it, but it's just -- we're not giving it today.

Hugh Miller -- Buckingham -- Analyst

Sure. Completely understand. Thank you very much for the time.

Operator

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

Don Gayhardt -- President & Chief Executive Officer

Great. Thanks everybody for joining us today and we will look forward to talking to you again sometime in the end of January. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Gar Jackson -- Investor Relations

Don Gayhardt -- President & Chief Executive Officer

Roger Dean -- Executive Vice President & Chief Financial Officer

Bill Baker -- Executive Vice President & Chief Operating Officer

Robert Napoli -- William Blair -- Analyst

Moshe Orenbuch -- Credit Suisse -- Analyst

John Hecht -- Jefferies -- Analyst

Vincent Caintic -- Stephens -- Analyst

John Rowan -- Janney Montgomery Scott -- Analyst

Hugh Miller -- Buckingham -- Analyst

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