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Enova International (ENVA) Q3 2019 Earnings Call Transcript

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ENVA earnings call for the period ending September 30, 2019.

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Enova International (ENVA 1.20%)
Q3 2019 Earnings Call
Oct 24, 2019, 5:00 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good day, and welcome to do Enova International third-quarter 2019 earnings conference call and webcast. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lindsay Savarese, investor relations. Please go ahead.

Lindsay Savarese -- Investor Relations

Thank you, operator, and good afternoon, everyone. Enova released results for the third quarter ended September 30, 2019, this afternoon after the market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at With me on today's call are David Fisher, chief executive officer; and Steve Cunningham, chief financial officer.

This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to David, I'd like to note that today's discussion will contain forward-looking statements based on the business environment as we currently see it and, as such, does include certain risks and uncertainties. Please refer to our press release and our SEC filings for more information on the specific risk factors that could cause our results to differ materially from the projections described in today's discussion. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release.

As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website. And with that, I'd like to turn the call over to David.

David Fisher -- Chief Executive Officer

Thanks, Lindsay, and good afternoon, everyone. Thanks for joining our call today. I'm going to start by giving you a brief overview of the third quarter, and then I'll update you on our strategy. After that, I'll turn the call over to Steve Cunningham, our CFO, who will discuss our financial results and guidance in more detail.

We're pleased to deliver another quarter of strong top and bottom-line growth. Our third-quarter results demonstrate our ability to effectively manage growth with profitability. Compared to Q3 of last year, we delivered 12% year-over-year revenue growth. Third-quarter revenue of $330 million was primarily driven by growth in our U.S.

businesses. Third-quarter adjusted EBITDA increased 39%, and adjusted EPS rose 87%. While strong revenue growth particularly from new customers can lead to more muted earnings growth in the short term, we continue to demonstrate our ability to manage the business for both growth and profitability through rational new customer growth, efficient marketing spend, stable credit and our ability to leverage our fixed costs with our online model. As has been the case for the last couple of years, our Q3 financial performance was buoyed by robust new customer acquisition, which we're able to achieve with only a 3% increase in marketing expense year over year.

During the quarter, loans to new customers represented 38% of total originations, the highest quarterly proportion we have seen since 2004 and up from 31% in Q3 of last year. As we mentioned in the past, these new customers become profitable over time and expand our revenue potential going forward. Even with the high percentage of new customers this year, gross margins are essentially in line with last year and up 400 basis points over Q3 of last year. This clearly evidences the strong credit performance we are seeing as credit quality remains good across our entire portfolio with charge-offs well in line with our expectations.

While we have been in an upward economic cycle for 10 years now, we are not seeing any signs of credit deterioration and no indications that this is likely to change soon. Total AR was up 17% year over year and 12% sequentially, while total companywide originations increased in the quarter 11% sequentially but declined 2% compared to Q3 of last year. During the quarter, we dramatically slowed originations in the U.K. given the regulatory headwinds there.

Excluding the U.K., total originations increased a healthier 12% over Q3 of last year. We also announced today our intention to exit the U.K. market. Since we started offering loans in the U.K.

in 2007, we've helped millions of hardworking people get access to fast, trustworthy credit. We're one of the first high-cost, short-term lenders to be authorized by the Financial Conduct Authority, our industry regulator in the U.K. Following that authorization and an independent review of our business, we become the largest the U.K. lender in our sector due to our superior products, excellent customer service and talented team.

However, over the past one and a half years, we have experienced a challenging and uncertain regulatory environment in the U.K. Despite the fact that the FCA reviewed and approved our business practices and affordability criteria in 2015, FAS, the Financial Ombudsman, has continued to move the goalpost with its complaint handling decisions, in effect, setting ever-changing de facto policy that in many instances was inconsistent with FCA guidelines. We've been in continued conversations with the FCA and FAS regarding our concerns, and over the past several months, we sought clarity from them around the future state of complaints handling. Despite our best efforts to come to a resolution, we are unable to find a path forward that provides us a see clarity we need to continue investing in our U.K.

business. This result is disappointing, but the decision to exit the U.K. market is the right one for Enova and our shareholders. Steve will discuss the financial impact in more detail, but in the long term, we believe this will be a positive for Enova, freeing up resources to continue achieving our focused growth strategy and to pursue new potential opportunities.

I want to say a special thanks to our U.K. team for all the hard work they put in to continue serving our customers while adjusting to the ever-changing regulatory environment there. While the outcome in the U.K. is not what we hoped, we remain encouraged about our ongoing businesses, namely our U.S.

subprime business, our U.S. near-prime offering, our U.S. small business financing, our installment loan business in Brazil and Enova Decisions, our Analytics-as-a-Service business. Our domestic lending businesses, which include our large U.S.

subprime business, NetCredit, and our small business financing products continue to drive our growth and profitability. Revenue for those three businesses was up 20% year over year in Q3, led by a 48% year-over-year increase in line of credit revenue and 11% increase in installment loan and finance receivables revenue. Net credit loan balances increased 23% year over year to $556 million, and originations increased 39%. Our U.S.

near-prime products represented 46% of our total portfolio at the end of Q3, compared to 44% in Q3 of last year. NetCredit remains the fastest-growing products in our portfolio. And to support the growth of this business, we recently completed our second term asset base securitization. This transaction, which saw high investor demand and was significantly oversubscribed, demonstrate strong validation of our net credit portfolio and the underlying analytics.

Turning to small business. As we discussed in our last few calls, we're seeing good demand for our small business products at attractive unit economics. We successfully capitalized on this opportunity, which enabled us to grow originations 123% year over year, and small business now represents 12% of our book as of the end of Q3. As with our consumer products, credit quality remains stable in our small business portfolio.

We feel like we have good momentum in the SMB space right now and expect we'll be able to generate further growth at attractive unit economics. In Brazil, third quarter originations declined 35% year over year on a constant-currency basis and increased 2% sequentially. As we discussed previously, we intentionally slowed originations in Brazil, while we reconfigured our operations to handle new debiting practices implemented by the banks there. We continue to believe that Brazil represents a large opportunity with a huge population, growing middle-class and stable regulatory environment, and we are hopeful that the changes we are making position us well to capitalize on that large opportunity.

Lastly, Enova Decisions, our real-time Analytics-as-a-Service business, continues to gain traction, provides a unique avenue for growth for Enova. Before I wrap up, I want to provide a brief regulatory update. As you're probably aware, California passed a law that caps interest rates at roughly 39% on personal loans between $2,500 and $10,000. While we believe this law unfairly and unnecessarily restricts access to credit for Californians, we do not believe that will have a material impact on our business.

We currently offer three products in California: a single pay product, a subprime installment product and a near-prime installment product. We will continue to offer a single pay product, which is not impacted by the new law. And instead of originating near-prime loans, we plan to market and provide underwriting services for national banks originating in California. With the new law, we will need to wind down our subprime installment product in California.

This product only accounted for approximately 3% of originations and a similar percentage of gross profit in Q3. But we believe we'll be able to recapture much if not all of this volume given the strong demand we expect from the elimination of all the subprime installment lendings in the state. I'd also like to briefly touch on Google's recent decision to remove apps that offer loans with an APR over 36% from the Play Store. While we strongly disagree with Google's decision, it should have very little effect on us our.

Our websites are designed so that all of the functionality is easy to use on nearly all devices and operating systems. As a result, our customers have always primarily used mobile web or desktop sites as opposed to apps to access our products and services. In sum, overall Q3 was another great quarter, and we are on track to achieve record revenue and strong bottom line growth this year. We have consistently executed on our focused growth strategy and our diversification efforts have positioned us well to produce sustainable and profitable growth.

Looking forward, we are optimistic about Q4 and expect the momentum we are seeing to translate to healthy growth and profitability in 2020 given the strong credit and demand environment, combined with our track record of efficient execution and significant operating leverage. With that, I'll turn the call over to Steve, who'll provide more details on our financials and guidance, and following his remarks, we'll be happy to answer any questions that you may have. Steve?

Steve Cunningham -- Chief Financial Officer

Thank you, David, and good afternoon, everyone. I'll start by reviewing our financial and operating performance for the third quarter of 2019 and then provide our outlook and guidance for the fourth quarter and the full-year 2019. As David mentioned, we are pleased to report another quarter of financial performance with top and bottom-line results once again either meeting or exceeding our expectations. Third-quarter results demonstrate our continued ability to deliver meaningful receivables, revenue and profit growth.

Our breadth of product offerings, operational execution, best-in-class analytics and solid balance sheet have been key to our ability to meet or exceed our investor guidance for 16 consecutive quarters. As David mentioned in his remarks, we intend to exit the U.K. market and wind down our operations there. In conjunction with the exit, we anticipate recording a one-time after-tax charge of approximately $74 million in the fourth quarter, which is comprised of one-time cash charges of approximately $43 million and noncash charges of approximately $31 million that are primarily related to the write-off of the remaining net assets associated with the operations of the U.K.

business. In the quarterly supplemental financial information posted on our Investor Relations website today, we've provided selected historical financial results for Enova, excluding the operations of our U.K. business. In my remarks today, historical information includes the U.K.

operations, but any guidance on future results exclude the U.K. and any one-time charges related to the exit, unless otherwise noted. Total company third-quarter 2019 revenue increased 12% to $330 million at the midpoint of our guidance range of $320 million to $340 million. On a constant-currency basis, revenue increased 13% year over year.

Revenue growth was driven by a 17% year-over-year increase in total company combined loan and finance receivables balances, which grew to $1.2 billion. Installment loans and line-of-credit products continue to drive the growth in total company loans and finance receivables balances, which grew 15% and 55% year over year, respectively. Installment loans, receivables purchase agreements and line-of-credit products now comprise more than 95% of our total portfolio and 89% of our total revenue. The domestic revenue increased 20% on a year-over-year basis and 18% sequentially to $301 million in the third quarter.

Domestic revenue accounted for 91% of our total revenue in the quarter. Revenue growth in our domestic operations was driven by strong demand in a 25% year-over-year increase in domestic combined loan and finance receivables balances. As David mentioned, our international results for the third quarter were driven by our focus on reaching resolution on the future of our U.K. business and the continued adjustment of our Brazilian operation to address the new debiting practices in that market.

As a result of these actions compared to the year-ago quarter, international revenue decreased 33% or 29% on a constant-currency basis to $29 million, and total international loans decreased 37% or 33% on a constant-currency basis to $78 million. Our third-quarter gross profit margin for the total company increased to 48%, compared to 44% in the third quarter of last year. Solid credit quality and portfolio mix were the main drivers of our gross margin improvement as net charge-offs as a percentage of average combined loan and finance receivables decrease in the third quarter to 13.4% from 13.8% in the prior-year quarter. At the end of the third quarter, the allowance and liability for losses for the consolidated company as a percentage of combined gross loan and financing receivables was 14.5%, compared to 15.1% in the third quarter of last year as we expect the continuation of recent solid credit trends.

Our strong analytics are driving stable and predictable credit performance, allowing us to deliver strong growth from both new and existing customers with attractive unit economics. As David mentioned, originations from new customers across all of our businesses were 38% of the total during the quarter, the highest quarterly proportion we've seen since our first year of operation and up from 31% a year ago and 35% last quarter. For the full year, we continue to expect our consolidated gross profit margin to be in the range of 45% to 55%. As we've mentioned in the past, we typically see gross profit margin in the upper end of our guidance range during the first half of the year as we experience seasonally lower growth followed by sequential declines during the second half of the year as we move into our seasonally higher growth period.

In addition to the seasonality, our gross profit margin will also be influenced by credit performance, the mix of new versus returning customers in originations and the mix of loans and financings in the portfolio. Our domestic gross profit margin was 46% in the third quarter, up from 43% in the third quarter of last year and sequentially lower due to our normal seasonality from 52% in the second quarter of this year. Our international gross profit margin was 65% in the third quarter, up from 51% in the prior-year quarter and up from 46% in the second quarter of 2019 as the aforementioned actions in the U.K. and Brazil reduced international originations sequentially and from the prior-year quarter.

During the third quarter of 2019, total operating expenses, including marketing, were $100 million or 30% of revenue, compared to $89 million or 30% of revenue in the third quarter of 2018. We continue to see efficiency in our marketing spend. Marketing expenses in the third quarter were $37 million or 11% of revenue, compared to $36 million or 12% of revenue in the third quarter of 2018. As is typical of our seasonality, we expect marketing spend will increase in absolute terms sequentially and year over year in the fourth quarter and will range in the low to mid-teens as a percent of revenue.

Operations and technology expenses totaled $34 million or 10% of revenue in the third quarter, compared to $28 million or 10% of revenue in the third quarter of 2018 and were higher primarily from ongoing expenses associated with complaints in the U.K., as well as volume-related variable expenses. We expect operations and technology cost to moderate for the remainder of 2019 and range between 7% and 8% of revenue. General and administrative expenses were $29 million or 9% of revenue in the third quarter, compared to $24 million or 8% of revenue in the third quarter of the prior year and were higher primarily from personnel-related expenses, legal costs and consulting fees. We expect absolute G&A cost to remain relatively flat for the remainder of 2019 and range between 8% and 9% of revenue.

Adjusted EBITDA, a non-GAAP measure, rose 39% year over year to $62 million in the third quarter, driven by strong growth and stable credit. Our adjusted EBITDA margin increased to 19% from 15% in the third quarter of the prior year. Our stock-based compensation expense was $3.4 million in the third quarter, which compares to $2.9 million in the third quarter of 2018. Our effective tax rate was 25% in the third quarter compared to a tax benefit in the third quarter of 2018.

The prior-year quarter included deductions associated with the timing of certain federal income tax elections. We continue to expect our ongoing normalized effective tax rate to be in the mid-20% range. Net income increased 77% to $27 million or $0.78 per diluted share in the third quarter from net income of $15 million or $0.43 per diluted share in the third quarter of 2018. Adjusted earnings, a non-GAAP measure, increased 83% to $30 million or $0.86 per diluted share from $16 million or $0.46 per diluted share in the third quarter of the prior year.

The trailing 12-month return on average shareholder equity using adjusted earnings increased to 30% during the third quarter from 26% a year ago. We continue to generate strong operational cash flow and ended the quarter with a solid liquidity position. During the quarter, cash flows from operations totaled $191 million, and we ended the quarter with unrestricted cash and cash equivalents of $70 million and total debt of $874 million. Our debt balance at the end of the quarter includes $184 million outstanding under our $350 million of combined installment loan securitization facilities and $25 million outstanding under our $125 million corporate revolver.

As we announced earlier this month, we completed our second net credit term asset-backed securitization, a $200 million transaction, which enhances our cost of funds, liquidity and capacity to fund net credit loan originations, and further demonstrates our ability to successfully access the capital markets and diversify our funding sources. The three class transaction saw a significant investor demand and high levels of oversubscription, improved our advance rates, priced with a weighted average fixed cost of 5.61% and was allocated to 17 investors. Our cost of funds for the third quarter declined to 8.5%, a 135-basis-point decline from the same quarter a year ago as we continue to recognize the cost benefits of transactions completed over the past two years. The cost of funds improvement contributed approximately $3 million of pre-tax operating income this quarter.

Today, we also announced that our board of directors has authorized a new share repurchase program totaling $75 million that expires December 31, 2020. The new program replaces the prior authorization of $50 million. Year to date through October 22, we had acquired 310,000 shares at a cost of $6.4 million under the previous share repurchase program. The new share repurchase plan will give us additional flexibility for continuing to deliver on our commitment to creating value for our shareholders.

Looking forward, our outlook for the fourth quarter and the full-year 2019 for revenue, adjusted EBITDA and adjusted EPS exclude our U.K. operations and any related onetime charges. In addition, our outlook reflects an expectation of stable credit, continued recent growth trends for domestic receivables, including faster, relative growth in consumer and small business installment, RPA and line of credit products, as well as continued growth in the mix of new customers and originations. We also expect operating leverage and lower funding cost to increase year-over-year EBITDA margins and earnings per share for the remainder of the year.

Finally, our guidance assumes no significant impact to our businesses from regulatory changes. As noted in our earnings release, for the fourth quarter of 2019, excluding U.K. operations and related one-time charges as a result of the planned exit, we expect total revenue of $329 million to $344 million, adjusted EBITDA of $68 million to $78 million and adjusted earnings per share of $0.94 to $1.15. GAAP diluted loss per share for the fourth quarter of 2019, which includes the U.K.

operations and related one-time exit charges, is expected to be negative $0.70 to negative $0.49. Our outlook for the full year also excludes U.K. operations and related one-time charges for the full year as a result of the planned exit. For comparability, we're also providing the previous outlook for the full-year 2019 total revenue, adjusted EBITDA and adjusted earnings per share, excluding U.K.

operations. For the full-year 2019, we expect total revenue of $1.158 billion to $1.173 billion versus previous guidance of $1.145 billion to $1.185 billion, adjusted EBITDA of $278 million to $288 million versus previous guidance of $273 million to $293 million, and adjusted earnings per share of $4.13 to $4.34 versus previous guidance of $4 to $4.44 per share. GAAP diluted earnings per share for the full-year 2019, which includes the U.K. operations and related one-time exit charges, is expected to be $1.82 to $2.03 versus previous guidance of $3.13 to $3.57 per share.

As we look forward to 2020, we believe our diversified product offerings will provide meaningful growth as we allocate our resources to where we see the greatest opportunities. We expect our trajectory of top-line growth to continue into next year, and we will continue to leverage our analytics, scale and flexible financing to drive growth in EBITDA and EPS faster than revenue growth. We look forward to updating you with more details on our outlook for 2020 during our fourth-quarter conference call early next year. And with that, we'd be happy to take your questions.


Questions & Answers:


[Operator instructions] Your first question comes from John Rowan, Janney. Go ahead, please.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

Good afternoon, guys. I just want to make sure I understood some of the guidance points and just understand kind of how we take out the U.K. business. So the way I'm kind of reading it is just roughly $60-some-odd million of earnings assets, does that sound about right? I'm looking at the financial supplement to generate that figure.

Steve Cunningham -- Chief Financial Officer

Yeah. I mean I think, John, if you look at financial supplement, you can see the historical selected information for Enova with and without the U.K. So obviously, the delta of that is the --

John Rowan -- Janney Montgomery Scott LLC -- Analyst

That's what I was looking at. OK. And then there is $20 million of operating expense during the quarter for international. How much of that is U.K.? And how much of that do we strip out from each of the consolidated income statement lines?

Steve Cunningham -- Chief Financial Officer

Yeah. So I think what -- the guidance I gave you for each of the lines, marketing, operations and technology and G&A, has the percent of revenue range, excluding the U.K. The biggest change -- you'll see the biggest changes in the operations and technology line.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

OK. So you said marketing mid-teens and operation and technology if I'm not -- I'm not sure if I had it right, but written down correctly, 7% to 8% of revenue and then G&A was 8% to 9%, correct?

Steve Cunningham -- Chief Financial Officer

That's right.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

OK. And can you discuss -- just moving on from the U.K., can you discuss a little bit how you're going to be providing underwriting services to banks that are going to continue providing installment loans in California? Just what does that product look like?

David Fisher -- Chief Executive Officer

Yeah. So banks that operate nationally and originate in California, we'll provide marketing and underwriting for the banks who then originate the loans.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

OK. But we're still talking about loans that are in excess of 36% in California, correct, with -- for that underwriting product that you're going to providing?

David Fisher -- Chief Executive Officer

Yeah. Kind of right around 30% -- 35%, 36% and above.

John Rowan -- Janney Montgomery Scott LLC -- Analyst

OK. All right. Thank you. I'll hop back in the queue if I have any further questions.


Thank you. Your next question comes from Vincent Caintic, Stephens. Go ahead, please.

Vincent Caintic -- Stephens Inc. -- Analyst

Hey, thanks, and good afternoon. I guess two broad questions. So first, on exiting the U.K. So now you have five cylinders instead of six cylinders.

Is there going to be another six cylinder? Or should we expect other like actions like more buybacks?

David Fisher -- Chief Executive Officer

I think likely both. So if you -- as Steve mentioned, our board authorized a significant increase to our buyback up to $75 million, which is great, gives us flexibility to be proactive going out into the market, where we see opportunities in the stock. But there's always been plenty of great ideas floating around Enova that we purposely camp down because we thought our plate was full with six businesses. Now that we're down to five, I do think that provides us an opportunity and resources to potentially explore one or more of those other opportunities that have bubbled up over the years.

Vincent Caintic -- Stephens Inc. -- Analyst

OK. Great. And then second question, so on the bank partnerships, I'm wondering if you could update us on the appetite on the discussions you've had and maybe when we can expect to maybe hear about one or more of partnerships.

David Fisher -- Chief Executive Officer

I mean, the appetite sounds great. We have one contract signed and working on others. So we think it's going to be a good opportunity for us going forward.

Vincent Caintic -- Stephens Inc. -- Analyst

OK. Great. Thank you.


Thank you. Your next question comes from John Hecht, Jefferies. Go ahead, please.

John Hecht -- Jefferies -- Analyst

Thanks, guys. And it sounds like John Rowan's name is now Johnny, if I heard that right.

David Fisher -- Chief Executive Officer

But you're still John.

John Hecht -- Jefferies -- Analyst

OK, that's good. Anyway, so a couple of things, is new customers at the highest percent yet? I know you're guiding marketing consistent with prior guides, but marketing has taken a step down relative to last year in terms of percentage to revenue. So is this just -- are you working certain channels more productively? Is this a reflection of the competitive markets? The question being, how are you still attracting a lot of new customers while that marketing level is going down?

David Fisher -- Chief Executive Officer

We try to be conservative with how aggressively we ramp up marketing spend, but what we've seen really over the last two years is every time we lean into marketing and spend more dollars, it in some ways becomes more efficient, not less, which is a great problem to have, probably won't continue forever, but we still have room to spend meaningfully more as a percentage of revenue and still have attractive unit economics. So we don't want to be silly and go out and spend it all at once, potentially not only spend too much as a percentage of revenue, but maybe attract unprofitable loans or the wrong types of loans. So we're going to continue to increase that cautiously, but we do think there's the opportunity to continue to spend more over time across a variety of channels, direct mail continues to do well, TV has been a strong channel for us this year, as well as our online and direct channels.

John Hecht -- Jefferies -- Analyst

OK. And then with respect to credit, clearly, it's stable and results came in well in line with what we expected in your guidance. But the installment portfolio, we saw credit improving pretty markedly, the line of credit, there was a slight migration. Is that more of a function of kind of the seasoning of those total portfolios or different standards of underwriting? Or how do I think about the different trajectories there?

David Fisher -- Chief Executive Officer

We saw something, I can't exact remember exact number, about 45% or 46% increase in line of credit originations. I mean that's what's leading to that -- that's what's leading to the little tick up there, it's just the strong, strong growth. I mean it's completely natural. And as that portfolio seasons we expect really good credit performance for it.

I mean we're fine with the credit performance where it is, but expected to continue to improve over time, certainly, as the growth rate comes down from that very high level.

John Hecht -- Jefferies -- Analyst

OK. That makes a ton of sense. And the last question, Steve, any commentary on CECL or anyway we should be thinking about that as we kind of head toward that implementation?

Steve Cunningham -- Chief Financial Officer

Yeah, John. So we're making great progress toward our adoption of the new life-of-loan loss accounting requirements that become effective January 1. I think you guys know that FASB is selling both CECL as well as fair value as options for compliance. And given that this adoption has no impact on cash flow or how we make marginal investment decisions, I think you should expect that we'll be adopting an accounting policy for compliance that best captures the economics of our business.

But I would just say, regardless, we expect implementation impacts to be manageable for both the balance sheet and the P&L.

John Hecht -- Jefferies -- Analyst

OK. So I assume we'll get good guidance on that next quarter then in terms of that total effect?

Steve Cunningham -- Chief Financial Officer

That's correct.

John Hecht -- Jefferies -- Analyst

OK. All right, guys. Thanks very much.


Thank you. [Operator instructions] Your next question comes from David Scharf, JMP Securities. Go ahead, please.

David Scharf -- JMP Securities -- Analyst

Great. Thank you. Thanks for taking my questions. A lot to unpack this quarter.

David, and/or Steve, just as it relates to the U.K. exit, I want to make sure I interpret the guidance correctly because obviously -- I mean, it seems like you're raising the full year earnings outlook when excluding the U.K.. And roughly speaking, even ignoring kind of the drilling down and what the earning assets are and the like, if I just look at the year-to-date operating loss internationally, it was like $16.5 million, I realize there is some Brazil in there. But if I annualize it, it's $22 million, maybe there's some more coming out of the corporate services segment.

But that seems to be the amount by which your EBITDA guidance went up. Is that a way to frame things that pulling it -- that we're effectively pulling out $20 million, $25 million of operating loss pre-tax to net the remaining core guidance for the year is pretty much unchanged from last quarter?

Steve Cunningham -- Chief Financial Officer

Yeah. That's right. I mean I think what we were trying to do given it was going to be a little bit of apples and oranges if we just gave our guidance without the U.K. is to give you a bit of that bit of pro forma implied guidance from last quarter, right? So it would have had our actual performance as well as what we expected for the remainder of the year, and I think the takeaways, if you just look at the midpoints of the guidance, we're basically affirming maybe just slightly increasing, but very close to where we expected, which is consistent with the performance of the third quarter overall.

David Scharf -- JMP Securities -- Analyst

Got it, got it. Yes, that's what it seemed like. I just want to make sure. And then switching gears, maybe echoing to John Hecht's question, there was such dramatic growth in the line of credit product.

And -- obviously, just based on the allowance levels and losses, it seems it's a little different credit profile than installment, which has so much near-prime. I'm just wondering is that something that's specifically baked into your marketing strategy? Is it just consumer choice? It seems to be pretty big concentration and rebalancing, if you will, of the type of loan and, I'm wondering, if you have any thoughts on what's driving the demand for that type of product to this extent?

David Fisher -- Chief Executive Officer

Yeah. I think there is a couple of things. I mean we learned a couple years ago that customers really prefer the line of credit product over either a single-pay product or even in most cases, a subprime installment loan product. And so we continue look for opportunities to roll out those products in various states, including getting some states authorize specific line of credit products really weren't previously available.

And so that's been a great success story for us over the past two, two and a half years. In that number also for total companywide originations and line of credit, is also small -- one of our two small business products, which has had -- is a line of credit product and that's had over 100% year-over-year growth as well. So small businesses, like consumers also seem to really appreciate the small business product, it's been very successful for us this year.

David Scharf -- JMP Securities -- Analyst

Got it. And I know it's something we don't see with just the end-of-period balances you disclosed. But can you give us a sense for -- I guess, what the open to borrow is? I mean like how much -- at any point in time like at September 30, just curious how much has actually been drawn in aggregate on those lines versus what your borrowers have been approved for and whether that's a pretty stable figure each quarter?

David Fisher -- Chief Executive Officer

It is pretty stable. It's actually very stable. It's something we track. We don't disclose that exactly, but I would not -- it's really more like a line, it's more -- it's not really like a credit card or more like a -- or like a corporate revolver.

Customers tend to take a draw upfront, that's usually less than the total amount that they're authorized for. And then start making repayments and maybe take some additional draws over time. So we don't tend to see very low utilization like you would see on like the corporate line of credit, like our line of credit facility where we tend to have very low utilization. But it's also not like a subprime credit card where people tend to get up to 100% and then just stay there forever.

So it tends to be in between those two, which really the initial draws being the large proportion of that.

David Scharf -- JMP Securities -- Analyst

Got it. Got it. Just last question more strategically, maybe a different counterintuitive twist on the questions regarding California. Just given all of your analytical capabilities and you've been lending online pretty much longer than anyone.

Is there anything in the sub-36% market that may start to look appealing to you or the risk-adjusted returns and competition just not as attractive?

David Fisher -- Chief Executive Officer

Yeah. I would say two things. One, in terms of direct lending in the sub-36% market, no, a clear no. Things have too big of a cost of capital advantage for us, sub-36% and it's not -- and there's a lot of competition down there, so it's not where we want to be.

In terms of analytics, I think, our analytics are good and work really well there, but we have nowhere near the advantage we do in the subprime space where we have a near-prime space where we have very deep experience. Underwriting near-prime and subprime customers is much harder, and so our better analytics capabilities provide a much bigger advantage than in prime customers where underwriting is, frankly, much easier.

David Scharf -- JMP Securities -- Analyst

No, no. It makes sense. If I can sneak one more in and I know you are not giving 2020 guidance yet, but you called out a few times how the level of new customer acquisition has been rising despite keeping marketing spend pretty level or not increasing at the same rate. I mean that mid -- low to mid-teens a percentage of revenue, I mean, Steve, is that something -- I know that's the guidance, but is that something that you specifically sort of target as a goal in your operating model? I'm trying to get a sense more looking out a year, where incremental operating leverage surfaces the most and whether marketing is one of those areas?

Steve Cunningham -- Chief Financial Officer

No. Marketing, we really are focused on getting that level of marketing into that range and solidly into that range. The operating leverage is really going to rise from G&A and the fixed pieces of operations and technology, not marketing.

David Scharf -- JMP Securities -- Analyst

Got it. Well, I saw my first net credit commercial on television yesterday, so I assume I'll be seeing more. Great. Thanks, guys.


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

David Fisher -- Chief Executive Officer

Thanks, everybody, for joining our call today. We very much appreciate it and look forward to speaking with you again next quarter.


[Operator signoff]

Duration: 46 minutes

Call participants:

Lindsay Savarese -- Investor Relations

David Fisher -- Chief Executive Officer

Steve Cunningham -- Chief Financial Officer

John Rowan -- Janney Montgomery Scott LLC -- Analyst

Vincent Caintic -- Stephens Inc. -- Analyst

John Hecht -- Jefferies -- Analyst

David Scharf -- JMP Securities -- Analyst

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