Good afternoon and welcome to the Enova International Third Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference call over to Monica Gould, Investor Relations for Enova. Please go ahead..

Thank you, operator, and good afternoon, everyone. Enova released results for the third quarter of 2020, ended September 30, 2020, this afternoon after the market closed. 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 ir.enova.com.

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 filing for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today’s discussion.

Any forward-looking statements that we will 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 the 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..

Thanks and good afternoon, everyone and thanks for joining our call today. First, I will provide an overview of our third quarter results and will give an update on our recent actuations of OnDeck which closed on October 15. And finally, I’ll discuss our strategy and outlook for 2020.

After that, I'll turn the call over to Steve Cunningham, our CFO, who will discuss our financial results and outlook in more detail. Starting in March the entire Enova team orchestrated a quick and exceptional response to the COVID crisis.

We began seeing the benefits of this effort in Q3 as our business showed strong signs of recovery from the industry-wide impacts from COVID. Our improving performance can be seen and the stability of our portfolio are strong credit metrics and a re-acceleration in our originations.

As a result, we delivered record profitability in Q3 primarily as a result of high net revenue margins driven by the strong credit performance, but also due to efficient expense management. Third quarter revenue of $205 million declined 33% year-over-year, but adjusted EBITDA rose 112% to a record $136 million and adjusted EPS of $2.97 grew 223%.

Third quarter revenue decreased sequentially due to our intentional pullback and originations in response to COVID. We expect that trend to reverse given the substantial increase in our lending activities during the quarter. The confidence that drove our decision to increase our originations in Q3 was a result of a number of factors.

Our successful efforts to help our customers manage through the crisis resulted in much stronger than expected portfolio performance.

In addition, we saw continued strong credit performance from new loans at the end of Q2 and into Q3 and importantly both the strong portfolio performance and credit metrics continued even after government stimulus wound down in July.

We've taken a measured approach to re-accelerating our lending running hundreds of tests to gauge demand, credit quality of customers and competition. We are currently testing the re-acceleration of originations at nearly every State in our lending footprint and in all of our marketing channels.

The data we collect from these tests give us deep insights into consumer and small business borrowers. With these insights we are able to adjust our products, our marketing and our models to address current economic conditions.

Our testing will of course be ongoing, but we believe we already have a strong hand on how the pandemic has impacted customer behavior. As a result, we have been rapidly adjusting our sophisticated analytics model to steadily increase lending volume at attractive unit economics.

While still at levels below last year the week-over-week and month-over-month growth rates and originations have been strong across all of our products and this has continued into Q4. It is obviously difficult to make forward-looking predictions giving the ongoing impacts from COVID.

But based on what we are seeing today we would expect growth in our originations to continue for the foreseeable future even as portions of the country are experiencing high COVID levels. Despite elevated unemployment rates, we are seeing signs of strength in the non-prime customer base.

Clearly, the consumer and the economy have proved more resilient than most people would have guessed back in the spring. The restrictions caused by COVID have greatly reduced spending and those lower spending levels combined with the earlier government stimulus has freed up capital for many consumers.

And in many cases these consumers have used this extra capital to pay down debt. As the economy opens back up, our belief is that consumers will start spending again potentially at elevated levels due to pent-up demand. And as they do they will need access to credit to temporarily support dislocations between their income and their expenses.

Since those customers have been paying down debt during COVID, their personal balance sheet should be in a position where we can successfully lend to them. We saw the same dynamic following the financial crisis which led to strong origination growth in 2010 and 2011 at Enova.

While third quarter originations declined 77% from a year ago, they increased 56% sequentially and originations from new customers increased to approximately 11% of total origination up from around 7% in Q2.

This is down from 39% in Q3 of last year as expected and as we continue to accelerate originations, we expect that the proportion of new customers will increase over the next several quarters given the good demand we are currently seeing.

Due to our prudent approach to originations during the pandemic, our loan portfolio contracted 36% on a year-over-year basis from the third quarter of last year. But this rate is slowing and the portfolio is down only 14% from the second quarter. In the third quarter of this year installment products represented 72% of our portfolio.

Line of credit products accounted for 28% and short-term loans accounted for under 2%. Small business represented 12% and our U.S. near prime products represented 59% of our portfolio. Before wrapping up, I'd like to spend a couple minutes discussing a recent acquisition of OnDeck.

As we said when we announced the deal, this transaction brings together two complementary market-leading businesses. OnDeck's proven products further enhance our product differentiation by combining our world-class capabilities in consumer lending with theirs in small business.

And we believe now is a great time to be increasing our presence in small business lending. The pandemic has devastated many small businesses across the country. Their revenues are down and small business owners are digging into their savings to survive until the pandemic subsides and the economy reopens.

But when it does I believe consumers will have a significant amount of pent-up demand that small businesses can serve, but these businesses will need capital to restock their shelves, buy new equipment, bring employees back and many other critical expenses.

And we intend to be there to supply that capital through our broad range of SMB financing products. For now Enova will add the OnDeck brand products and services to its SMB portfolio to create a combined business with significant scale and diverse product offerings.

Over the next several quarters, we will be finalizing our strategy on the optimal number of products and brands to best serve the needs of SMB borrowers. These decisions will be made by running numerous tests in the marketplace to gauge the true needs of customers.

It is also encouraging that OnDeck financial performance during the third quarter exceeded our expectations. Steve will discuss the results in more detail. In addition the integration is going well so far and we believe we are on track to deliver that $50 million of expense synergies and $15 million in run rate revenue synergies.

And we continue to believe that the transaction will be accretive in the first year and generate non-GAAP earnings per share accretion of more than 40% when the synergies are fully realized. In summary, we are pleased with our third quarter performance. Our portfolio reflects stable and solid credit.

We ended the quarter with a very strong balance sheet and liquidity position. This gives us the flexibility to increase lending value as we continue to see attractive unit economics. As we look forward, we remain committed to helping hard working people get access to fast trustworthy credit.

We have proven that our online-only business model can rapidly adapt to changes and that we have the ability to successfully manage the business in any market condition.

While COVID has created uncertainty in the near term, our secure financial position and broad product offerings position us well to continue to produce sustainable and profitable growth as well as drive shareholder value.

And together Enova and OnDeck will be well positioned to further support small businesses and consumers in the wake of the pandemic. For over 16 years, we've had a history of profitable lending through various cycles and as a combined company we are even better positioned due to our larger scale and more diverse offering.

Leveraging our strong financial and operational position we will continue to look for diversification opportunities both internally and through acquisition.

With that I'll turn the call over to Steve to provide more details on our financial performance and outlook and following Steve's remarks we will be happy to answer any questions that you may have.

Steve?.

Thank you, David and good afternoon everyone. As David mentioned in his remarks our record profitability this quarter reflects the strength and adaptability of our direct online business model, the depth and preparedness of our team and the powerful credit risk management capabilities of our world-class analytics and technology.

In this challenging operating environment, we are encouraged by the strong credit performance of the portfolio, steady improvement in originations growth from the low points of the second quarter and our ability to effectively manage costs.

In addition, we are excited by the closing of the OnDeck transaction and the better than expected results we are seeing as we combine our organizations. At the end of my remarks today, I will provide a summary of OnDeck's third quarter performance. Now turning to Enova's third quarter results.

Total company revenue from continuing operations decreased 19% sequentially to $205 million.

The decline in revenue was driven by a 14% sequential decrease in total company combined loan and finance receivables balances which ended the quarter at $707 million on an amortized cost basis as a result of our purposeful pullback and originations following the onset of the COVID crisis.

That being said, the sequential rate of decline in receivables balances and revenue slowed significantly as originations increased 56% since the second quarter to $140 million. As David mentioned we entered the third quarter facing uncertainty with the expiration of enhanced unemployment benefits in July.

We saw credit performance continue to improve even with reduced government stimulus. We steadily ramped up originations through the quarter with total originations during September 43% higher than July. Early in the fourth quarter we've seen originations continue to increase across all brands.

Recent levels of total company weekly originations are the highest we've seen since mid-March and are more than four times the level of the weekly low in April.

We expect total revenue for the fourth quarter of 2020 excluding OnDeck to be flat to slightly lower than third quarter levels and will depend upon the timing and level of originations as we move through the quarter. The net revenue margin for the third quarter was 89%.

The improvement in the net revenue margin was driven by the impact of strong credit quality on the fair value of the portfolio as third quarter consolidated company net charge-off and delinquency rates were among the lowest in the company's history.

You'll recall the change in the fair value line item is driven mostly by changes to key valuation assumptions including credit loss expectations, prepayment assumptions and the discount rate. Reduced future credit loss expectations were the primary driver evaluation assumption changes for the portfolio at September 30.

Significant improvements in the credit profile of the portfolio drove sequential increases in both the fair value of the portfolio and the net revenue margin.

For the third quarter, the total company ratio of net charge-offs as a percentage of average combined loan and finance receivables was 4.7% compared to 15.9% in the second quarter of this year and 13.4% in the third quarter of 2019. We have seen sequential improvement in the net charge-off ratio across every branch.

Percentage of total portfolio receivables past due 30 days or more declined to 3.7% at the end of the third quarter from 4.5% at the end of the second quarter and from 7% at the end of the third quarter a year ago. We also continue to see low levels of early stage delinquencies at the end of the quarter.

Customer requests for modifications remain at pre-COVID levels. Percentage of the consolidated portfolio tied to customers who have been granted modifications has been steady. Those loans are performing better than expected.

September 30, modified receivables totaled 8.5% of total consolidated company receivables just 3% of those loans are past due 30 days or more.

Even with the significant improvement in credit quality we recognized that the economic environment and outlook remain uncertain could present increased risk of customer defaults than currently reflected in our credit metrics result to reflect this risk we've maintained downward adjustments to the fair value of the portfolio at levels similar to the previous two quarters.

In addition the discount rate used in the fair value calculation was unchanged from the prior quarter and remains at the high end of our range to reflect the uncertainty in the current economic environment.

To summarize the change in fair value, the fair value of the portfolio increased, strong portfolio of credit quality at the end of the third quarter improve the outlook for expected future credit performance.

This improvement was offset to some degree by downward adjustments in fair value to address future credit uncertainties arising from the current economic environment may not be fully reflected in our current portfolio of credit metrics. Result; the fair value of the portfolio increased to 106% of principal at September 30 from 104% at June 30.

This was the primary reason for the meaningful improvement in our net revenue margin for the third quarter. Looking ahead, the net revenue margin should normalize at around 50% as originations accelerate and newer less seasoned loans become an increasingly larger proportion of the portfolio.

Turning to expenses, total operating expenses for the third quarter including marketing were $56 million or 27% of revenue compared to $82 million or 27% of revenue in the third quarter of 2019. I'll discuss in a moment third quarter operating expenses include $11 million of one-time non-recurring expenses.

Marketing expenses in the third quarter were $5 million or 2% of revenue compared to $35 million or 11% of revenue in the third quarter of 2019. Consistent with the steady increase in originations through the quarter, we saw marketing spend increase in each month as we reopened marketing channels and expanded testing across our virtual footprint.

We expect this trend to continue into the fourth quarter and marketing expenses including OnDeck will likely approach 10% of revenue will be dependent upon demand and the level of originations.

Operations and technology expenses declined 15% from the year ago quarter to $18 million or 9% of revenue compared to $21 million or 7% of revenue in the third quarter of 2019. ONT expenses this quarter included nearly $1 million of one-time costs mainly related to certain software and vendor expenses.

Given the significant variable component of this expense category sequential increases in ONT costs should be expected in an environment where originations accelerate, receivables return to growth.

General and administrative expenses for the third quarter increased 23% from the year ago quarter to $34 million, 16% of revenue compared to $27 million dollars or 9% of revenue in the third quarter of the prior year.

Third quarter G&A expenses included approximately $10 million of one-time expenses largely driven by deal costs associated with the OnDeck acquisition. Including these one-time items G&A would have declined 12% from the year ago quarter to 12% of revenue in the third quarter of 2020.

We continue to see run rate reductions in nearly every category of G&A expense both year-over-year and sequentially. Their flexible operating model has allowed us to rapidly adjust expenses in line with changes in revenue while keeping intact our capability that will allow us to return to growth quickly.

We expect total non-marketing operating expenses to be temporarily elevated during the fourth quarter as a result of the OnDeck acquisition.

There will be additional one-time costs associated with the OnDeck integration and temporarily higher operating costs for the combined companies before we begin to recognize cost synergies transactional later this year.

Adjusted EBITDA, a non-GAAP measure increased 44% sequentially and more than doubled from a year ago to $136 million in the third quarter for the reasons I previously discussed. Our adjusted EBITDA margin increased to 66% from 21% in the third quarter of the prior year from 37% in the prior quarter.

Our stock-based compensation expense was $3.8 million in the third quarter which compares to $3.4 million in the third quarter of 2019. As I mentioned last quarter 2020 is the first year where expense associated with a 2017 increase in the vesting period for restricted stock units fully reflected resulting in the year-over-year increase.

Our effective tax rate was 9% in the third quarter which declined from 26% for the third quarter of 2019. Decrease was driven by a reduction in reserves for uncertain tax positions as a result of a positive resolution of a recent IRS audit. We expect our normalized effective tax rate to remain in the mid to upper 20% range.

We recognized net income from continuing operations of $94 million or $3.09 per diluted share in the third quarter compared to $29 million or $0.83 per diluted share in the third quarter of 2019.

Adjusted earnings and non-GAAP measure increased to $90 million dollars or $2.97 per diluted share from $32 million or $0.92 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 36% during the third quarter from 33% a year ago.

We ended the third quarter with $552 million of cash and marketable securities including $490 million of unrestricted cash and had an additional $124 million of available capacity on our corporate revolver, $208 million of available capacity on other committed facilities.

Net cash flow from operations for the third quarter totaled $140 million as we continue to see strong customer payment rates. Our debt balance at the end of the quarter includes $142 million outstanding under our $350 million of combined installment loan securitization facilities.

We had no borrowings outstanding under our $125 million corporate revolver. Our cost of funds for the third quarter was 8.4%, a 16 basis point decreased from the same quarter a year ago.

We continue to believe our cash position, available facility capacity and operating cash flow will provide us with a long runway of available liquidity before needing to raise new external funding even when we return to levels of originations experienced in recent years.

As has been the case for the past few quarters, we are not providing financial guidance at this time given the ongoing economic uncertainty. Before I wrap up, let me provide a quick update on the OnDeck business.

Similar to Enova's performance OnDeck experienced a steady upward trend in origination through the quarter along with improving credit quality and solid profitability. Total originations for the quarter were $148 million up from $66 million during the second quarter.

The total gross consolidated loans and finance receivables at September 30, totaled $666 million. OnDeck's annualized quarterly net charge-off rate for the third quarter was 23% and the 15 day plus delinquency rate improved to 27% at September 30 compared to 40% at June 30.

Improving credit quality and lower G&A expenses drove an increase in OnDeck adjusted net income to $30 million for the third quarter.

In conclusion, we remain confident that we have the right team, operating model, products and liquidity to quickly re-accelerate our business and generate long-term profitable growth the economy stabilizes, loan demand recovers and we recognize the meaningful opportunities from our acquisition to OnDeck.

And with that we'd be happy to take your questions.

Operator?.

We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from David Scharf with JMP Securities..

Good afternoon and thanks for taking my questions. Just to start with I guess, obviously digging into the credit outlook a little more. We've obviously been seeing early on in this reporting season a lot of consumer lenders delivering better than expected credit.

But never to the tune of losses coming in and maybe just 25% of what we have been looking for. Steve, I'm wondering as we think about the fair value mark in the quarter as you noted the bulk of the positive variance was related to the forward credit outlook.

Is there some rough or ballpark consolidated loss rate that's embedded in that fair value, hire our calculation that we can hone in on as we think about modeling or just forecasting the next year?.

So David, I would just tell you to take a look at really delinquencies are sort of a good indicator going forward and we don't have a necessarily a specific rate that we would share with you.

But we do consider the fact that there could be more volatility in the macro environment than what our credit metrics show today and I think we have to take that into consideration.

So the answer to your question is no, we don't have a specific charge-off rate in mind, but we do have a number of things that we look at very consistent with the way we've looked at the past couple of quarters to make sure that we're considering the macro environment along with what our credit metrics are saying about future losses at the end of the quarter..

Yes, I think that's right. Just say that another way this even with the good credit that we've seen really since April, we still have some conservatism built into our fair value calculation because of the macroeconomic uncertainty.

So, we didn't go kind of as far as maybe we could have gone in a normalized environment given the credit levels we've seen. There is still a level of conservatism built into that mark..

Okay.

That helps put things into context and then maybe as a follow-up reflecting on OnDeck as well as your origination activity or for I guess headway capital and in the quarter where were you, what was re-acceleration albeit modest in volumes for OnDeck and your own small business lending was there a lot of overlap I mean were they coming mostly from the same verticals? Was there any geographic concentration just trying to get a sense for once again how positive we want to be in that trend?.

Yes. No. It's a good question I think both on in small business but also on the consumer side, the re-acceleration is pretty broad-based both in terms of States, but also in terms of marketing channels as I mentioned in my prepared remarks.

We have basically all of our marketing channels turned on across consumer and small business and all the States turned where we lined, all the States turned back on. On the small business side obviously we're being much more cautious in industries that are impacted greater by COVID.

So retail, restaurants, etcetera, I'm being much more conservative there kind of compared to pre-COVID levels, but that's really it. It's a broad-based free acceleration across States and across marketing channels. I would say OnDeck is probably a little bit ahead of where we are on the Enova side.

We were a little bit more cautious in our re-acceleration of our lending kind of going into the third quarter but we are totally comfortable with that decision. It's the biggest mistake we make during all of COVID is waiting an extra 60 days to re-accelerate lending.

We think that's a great position to be in, we think that extra conservatism makes sense and with the rate that we're re-accelerating lending won't hurt us much in the long term at all..

Got it. Okay, thank you very much..

Yes. Thanks David. .

Our next question will come from John Hecht with Jefferies..

Thanks very much guys and thanks for the update and all the color.

Steve, I'm wondering can you tell us, just give us a sense for -- as you see the share not like asking for guidance but what's the proper way to think about the share count in 4Q, 20?.

Yes. So post transaction we have just under 36 million shares if you just do the math on all where we ended the quarter and then the deal itself. So that should be where you should start. .

Okay and then I think you said 40% of the synergies recognized in year one. So I assume that's over the course of to simplify it over the course of 2021.

What do you think that came to that? Is it going to be front loader should we just think about that over the course of the year?.

Well, so I think over the first part of the year you're going to recognize in the first year. So you're going to recognize quite a bit of it.

The timing will vary depending on the integration plans along the way but there will be some things early like for example, some of the public company related costs will go away pretty quickly and then there will be other things that sort of track along as we start to integrate not just the business, but the corporate service groups and determine what we need for the long run.

But yes, you should see a significant amount of the cost energy over the first 12 to 15 months..

Okay and then you guys spoke about flat to slightly down revenues this quarter although you're seeing month to month acceleration loan demand.

Not asking for guidance, but just thinking of the math of this if that's the case where you've nearly flattened out a quarter to quarter revenue is it fair to think if you continue to increase into Q1 of next year again not asking for guidance but just thinking of the math should that be the trend then is it fair to think you would start comping positive quarter-to-quarter on a revenue basis in the core Enova business next year?.

Yes, I mean we can't like you said we're not going to give that kind of Q1 guidance which giving that answer would kind of imply. But clearly with the rate of re-acceleration we're seeing which is very, very strong right now yes we're not going to have negative revenue quarters for long.

Exactly what that turns around again is not kind of giving because we can't predict the future. But the rate of acceleration has been really, really good again across consumer and small business and across Enova and OnDeck.

So the trend is looking positive even though Q4 is going to be flat, but the fact that it's flat and not down certainly gives you the indication that if we continue that re-acceleration the next step is up..

Yes.

And then Steve you did, I got the originations for OnDeck but I think I missed the revenues, did you give Q3 revenues for OnDeck?.

I did not give the revenue number. I just wanted to give you the update on AR originally, I think you can you can generate the revenue numbers. There is pretty stable revenue yield quarter-over-quarter..

Yes and it sounded like they more than doubled originations from Q2 to Q3 approximately?.

Roughly. Yes..

Okay. All right. Thanks guys..

Yes. Thank you..

Our next question will come from Vincent Caintic with Stephens..

Hi thanks. Good afternoon. First question on, so the insights and the learnings you're getting from the testing of at the re-acceleration of the marketing.

I'm just sort of wondering if there is maybe some consumer behaviors you're seeing change on both the consumer side and the small business side and then particularly if I think about the different products you have, so like are you seeing different trends between say for example NetCredit and CashNet or anything else?.

Yes. I mean there are some small differences. They are not major. We're seeing subprime come back a little bit faster than near-prime which I think is what you would expect. I think near-prime has a more more ability to save up and they have greater income so as people stop spending money in COVID.

It's easier to kind of build savings quicker, but that actually for us is terrific because I know there is kind of a misconception that subprime is riskier than near-prime because of the higher rates and higher defaults.

But from a return perspective and a lending perspective for us in re-acceleration it's actually less risky because you're making smaller shorter loans allows you to test faster. So that kind of slight change in demand and again slight it's not huge but that slight change in demand is actually really helpful for us as we continue with re-acceleration.

On the small business side, the demand is surprisingly, the makeup of the demand is surprisingly similar to a year ago. You would expect so many differences given what the economy has been through but there is actually very, very few. It's pretty broad based.

Credit quality looks really, really strong, if anything stronger I think it's the stronger businesses that are trying to borrow at this point to kind of lean into COVID not the ones that are just trying to survive. So if anything I think on the demand side there is a probably a slight improvement in credit quality and small business..

Okay. Great. Thank you.

Next is maybe if you could talk about your current portfolio and how it kind of, sort of curious how much of the current portfolio on the balance sheet has been underwritten post-COVID, so let's say post April and then maybe the economics of what your newly originated versus the back book on your portfolio?.

Yes. I'll get the second part and I'll hand it over to Steve for the first part. So the economics of newly originated loans is looking very strong. Cost per funded loan is right in-line with where it was pre-COVID and credit quality is better. So that drives really, really strong unit economics.

Steve do you want to kind of tackle the percent of the portfolio that's post-COVID?.

Yes. I mean, if you just look at we've done about 200 plus, 230 of originations in the second and third quarters. So you could probably make a case maybe 25% or 30% of the book is sort of since COVID is on set or so roughly..

Okay. Got you. Thank you and maybe just follow up to that one last one for me. But when I think about some of the more prime names in my coverage they're talking about, so their credit and delinquencies were good this quarter, but they're calling for 2021 or 2022 is when loss emerges will happen because we still have forbearance and all that stuff.

But your case is it similar there or does or are we kind of in the belly of when you expect loss emergence to happen so sort of 2021 doesn't look like we shouldn't expect a spike there?.

Sure. I think unless there is a major change to the macroeconomic environment most of that is behind us. Again, we've had very low levels of forbearance over the last couple of months. Our loan duration is much more shorter than a lot of the prime borrowers.

So a lot of our pre-COVID loans will or prime lenders sorry, so a lot of our pre-COVID loans will have rolled off, kind of as we get into mid to late 2020/2021. So we're feeling really good about the portfolio heading into next year.

Now as I mentioned my earlier comments we do have a level of conservatism built into our fair value levels just because of the uncertainty on the macroeconomic level more than not really because of uncertainty and what we're seeing or expect in our current portfolio really across every credit metric we watch from kind of pre-default to post-default, it's looking very, very good..

Okay. Great. Thanks very much..

[Operator Instructions] Our next question will come from John Rowan with Janney..

Good afternoon guys.

Just to be clear here when you say that revenue is going to be flat to down you're talking about Enova only revenue we're not because obviously in 4Q you're going to report OnDeck revenue?.

Yes. That's correct..

Okay.

I just want to make sure and then also same thing with the G&A because you said if I am not, you said run rate G&A revenue is down, but I would assume and that would exclude all the one-time expenses and also the G&A revenue just coming over from OnDeck as well correct?.

That's right John. I mean I was referring to run rate reduction sequentially and year-over-year through September 30 which doesn't include OnDeck and then I gave you just a bit of color on Q4 just because of the timing of when we start to recognize synergies and the one-time deal costs that are coming through that. Correct..

Okay. Obviously I appreciate the guidance on marketing revenue. You say that you're going to go back down to like a 50% gross profit margin.

How does that look post OnDeck right? I mean you used to be in the high 40s you'd be above that in the low 50s the first half of the year below that in the 40% range, high 40%, mid 40% range in the back half of the year.

Is there a similar seasonality or is it, should we just look 50% straight line going forward?.

Yes.

I mean I think when we came into the year we gave a range of 45 to 55 there will be some seasonality but not nearly as much seasonality as we had under the incurred method of accounting and that's why roughly when you get back to sort of a normalized level and when we get to that really obviously depends on how quickly we can get back up the originations curve.

But you should expect that that will normalize somewhere around 50%. That's really the point..

All right. Thank you very much. .

This concludes our question-and-answer session. And I would like to turn the call back over to David Fisher for any closing remarks..

Great. Thank you everyone for joining our call today. we appreciate taking your questions. We appreciate you listening in and we look forward to talking to you again next quarter. Have a good rest of your evenings..

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