Cash America 3Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“the general trends for our business have not changed much from the trends that we’ve been discussing for the past several quarters. Mainly, the retail services segment continue to work its way through the transition of our U.S. pawnshop business, precipitated by significantly lower volumes and margins on the commercial sale of scrap gold, coupled with ongoing soft demand for both pawn loans and the consumer loan offered through our storefronts, which have kept our same-store loan growth in check.”

“I got to admit that at this point that the transition the U.S. pawnshop business has been a bit more abrupt and dramatic than I anticipated when I first began discussing this topic around this time last year. And, for me, that’s both good news and bad news. It’s obviously bad news from the substantial impact that it’s had on our year-over-year profitability comparisons. But good news in that it has seriously motivated us to make some operational changes that will better equip our field personnel to succeed in what I refer to as a new normal of a post gold rush period.”

“In addition to soft demand we are experiencing for our secured pawn loans, which continues to be an issue throughout the country, you also notice continued soft demand for our unsecured consumer loan products in retail services segment.”

“we’re being very cautious with our outlook on the business. Quite frankly, until we begin to see strengthening loan demands segment we have shifted to consumer behavior, we will not be forecasting our traditional growth rates for our retail services segment.”

“these acquisitions reflect our absolute confidence in the long-term prospects of the pawnshop business in the U.S. In our view, the transition is underway in the industry today is a momentary blip in what otherwise has been a stable and positive trends of the U.S. pawnshop business since starting with our first shop in 1984.”

“Increasing healthcare cost, higher payroll taxes and potential entitlement reform could bring well add to the basic consumers, seeking help from non-bank financial institutions in the future periods.”

“t’s pretty clear today that our — with our unsecured lending products regardless of what form they take will likely always be subject to regulatory scrutiny whether be here in the U.S. or international markets.

Enforcing I finally found the wisdom to quit lamenting that reality and embrace it as an aid in helping us create more attractive products for our consumers than as a gateway for claiming competitive advantage. Also, I recognize that the new regulatory scrutiny has consistently and equitably enforced will ultimately eliminate many of the French competitors that remain a nuisance for both us and the consumers.

From day 1, we’ve always been committed to playing by the rules in an honorable fashion. While that approach has consistently cost us market share, we always believe it would pay off for us in the long run. It’s a rewarding to now see some of the noncompliant lenders in both the U.S. and U.K. fall out under a more intense regulatory regime. I want to downplay the degree of difficulty we and our customers must face in adjusting to periodic changes introduced by the regulatory agencies, but I do continue to believe we are better equipped to absorb those changes and leverage them as a competitive advantage than most other lenders in the market”

“quite frankly, I’m not seeing a lot of available alternatives that work for our secured customer, secured loan customers out there. So I’m not aware of any new bank products that would compete with our secured loan products. And clearly, I guess, there is some movement in the subprime auto space. But basically, our demographic profile in our surveys with customers, I don’t really believe that’s having an impact on this consumer. ”

“we believe that the consumer just very cautious right now.”

“the customers that we talk to, they were out in the field, in our shops and surveys just indicate there, they’re very cautious about getting extended right now, they’re very cautious about letting go of any collateral, letting go of money to purchase items as well.”

“I hear more from our store managers than I’ve ever heard about, when we talk about loan balances and some of the challenges that they have, how customers are not taking the full collateral value of the merchandise. So obviously, when someone comes in and we’ve got the update loan amount. Say $150 on a piece of jewelry, they’ll — in many instances, they won’t take it. They’re going to take something less than that. And we obviously let them know that their collateral can cover more than that, than the amount that they ask for, in the extent that they are going to come for it, but I’m hearing that more and more that it’s all the customer really wants, they’re being cautious about how much their borrowing against our collateral. Again, I think that’s also reflected in our redemption rates. The jewelry the people have left, they want to hold on to it. And they’re not borrowing quite as heavily on it, and are not forfeiting it at the same rates that historically we’ve seen over last 4 or 5 years.”

“in some regions of the country, we’ve seen some of those independent gold buying stores begin to close. I think it was the new reality of where we are in the gold business today. It’s going to be very, very difficult, I think, for those people to continue to be in business. So that’s my personal view. And again, I think the key aspects, that I think many people miss in this analysis, is it’s not so much what happens with price of gold, quite frankly, my belief is that there has been a significant amount of gold volume that has been scrapped over the last 5 or 6 years and people don’t have excess stuff to bring in. So even if gold went $2,000 an ounce, I would expect a margin of profitability will be aided by that. I don’t expect to see significant jump in overall gross profit associated with the big jump in the price of gold, just because I don’t believe in volume of gold people would be willing to dispose of is anywhere near the level than it was in 2006 and ’07 when this process began.”