What happened

Online subprime lending company Elevate Credit Inc. (NYSE:ELVT) reported third-quarter earnings on Monday afternoon, and to say that the market was disappointed would be a major understatement. As of 11:30 a.m. EDT on Tuesday, the stock had plunged by about 39%. This comes on the heels of an already-rough October for the company and Elevate is now down by about two-thirds from its July high.

So what

At first glance, Elevate Credit's earnings look somewhat disappointing but not awful. The company's $0.10-per-share loss missed expectations for a $0.13 profit, but revenue of $201.5 million beat estimates by $1.3 million.

Businessman watching red arrow crash through the floor.

Image source: Getty Images.

Instead, the real issue was what the company said. CEO Ken Rees laid out a list of concerns about the business environment and company's performance, such as delays in new product rollouts, flat margins, lack of growth in new customer acquisitions, and higher-than-expected costs in the U.K. market.

As a result of the concerns and what Rees referred to as an "unexpectedly challenging" quarter, Elevate Credit slashed its guidance, which is likely the main reason for the post-earnings sell-off. The company is now forecasting annual earnings of $0.23-$0.32, a significant reduction from the prior guidance of $0.55-$0.90. Elevate also said that revenue will come in toward the low end of the previous full-year guidance.

Now what

There are few things a CEO could say to investors that will send them heading for the exits quicker than "unexpectedly challenging." This implies that not only was the environment not great for the company's business, but that management was caught off guard by it. This is the real reason Elevate Credit's investors are reacting so negatively and aren't too optimistic about the future.

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