Cash America 1Q14 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Still haven’t quite anniversaried the drop in gold prices

“We are not yet through the anniversary of the prior year’s higher gold prices, which combined with the preceding factors lead us to expect that the second quarter results for the retail lending services business will also be down year-over-year.”

EPS expectations of 4.20 to 4.40

“we have not changed our full year expectations for earnings per share of between $4.20 and $4.40 per share.”

Still no sign that the low end consumer is getting any healthier

“While I’m still not prepared to declare a turnaround in consumer behavior, I do believe that growth in pawn loan balances and retail sales in this first quarter has encouraging signs. Our guidances aren’t reflecting any significant change in trends but we do remain optimistic.”

US still not clear what final regulations will be, more clarity in UK

“There is no clarity at this point regarding any potential rule making about the CFPB in the U.S. whereas the FCA has been more definitive with the February publication of the consumer credit source book that contains the final regulations that will cover the conduct requirements for letters of unsecured credit in the U.K. such as our wholly own subsidiary Enova.”

Going to have to be some changes in UK

“Enova had previously made changes in its business practices in contemplation of these new rules and the company will be making additional changes going forward to address the FCA’s requirements including changes related to debt forbearance, affordability assessments and potentially establishing our physical presence in the U.K.”

Reason for spinning off ENOVA

“Our reasoning is founded in our belief that the strategic focus and operational flexibility of the two businesses will be enhanced with the separation. As I have said at many times, the management focus, culture, operation metrics, risk profile, strategic opportunities of our own line of business differ greatly from that of our storefront business.”

The Cash America business left behind would deemphasize unsecured lending business

“we would expect Cash America to pursue its strategic goals of expanding its U.S. pawn shop business through future acquisition at Enova unit expansion, while limiting any international expansion and deemphasizing its unsecured consumer loan business.”

boring details of a tax free spinoff

“the way the tax free distribution rule would provide in that case that we’re going to separate some of the spin, we would probably have to dispose that 20% over no longer than five years out and more likely in 18 to 24 months.”