Cash America International, Inc. Alternative Financial Services

Transcription

1 Cash America International, Inc. Alternative Financial Services 1

2 Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Results This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about the business, financial condition and prospects of Cash America International, Inc. (the Company ). These forward-looking statements give current expectations or forecasts of future events and reflect the views and assumptions of the Company s senior management with respect to the business, financial condition and prospects of the Company as of the date of this presentation and are not guarantees of future performance. The actual results of the Company could differ materially from those indicated by such forwardlooking statements because of various risks and uncertainties applicable to the Company s business, including, without limitation, those risks and uncertainties indicated in the Company s filings with the Securities and Exchange Commission, especially on Forms 10-K, 10-Q and 8-K. These risks and uncertainties are beyond the ability of the Company to control, and, in many cases, the Company cannot predict all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this presentation, the words believes, estimates, plans, expects, anticipates and similar expressions or variations as they relate to the Company or its management are intended to identify forward-looking statements. The Company cautions you not to put undue reliance on these statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements after the date of this presentation. 2

3 Discussion Highlights Expanding Need for Small Short-Term Consumer Loans Diversified Revenue Sources Consistent History of Earnings Growth Two Well Established Platforms to Reach Customers Largest and Oldest Publicly-Owned Storefront Pawn Operator Large and Profitable Internet Services Platform High Growth in Foreign E-Commerce Services 3

4 Performance Drivers Customer Needs Real wage growth weak Low savings rate Traditional credit contracting Jobs market remains tight Product Mix Secured loans (pawn) Unsecured single payment Installment loans Auto equity Line of credit Organic growth Marketing programs Customer service Unit Expansion De Novo Acquisitions New Markets International 4

5 FICO Score Shift Change in Population Percentages by Score 25% 20% Less Bankable 15% More Unbankable 10% 5% 0% Source: FICO Banking Analytic Blog 2011 Fair Isaac Corporation Pre-Recession April

6 Attractive Industry Fundamentals Growing need for consumer credit Many traditional consumer lenders have exited market 25% of U.S. households used Alternative Financial Services products in the last 12 months * Cash America serves a growing market segment of the underbanked: Estimated 60 million in U.S. Estimated 80 million in Mexico 20% of U.S. households are underbanked (~24 million households) * 8% of U.S. households are unbanked (~10 million households) * 29% of U.S. households do not have a savings account * * Source: 2011 FDIC National Survey of Unbanked and Underbanked Households published September

7 Millions Gross Lending Assets for the Periods Ended ($ in millions) $700 $600 Total Pawn Loans Storefront* Other Online* $598.7 $675.2 $500 $445.5 $265.7 $350.7 $400 $300 $200 $305.4 $78.7 $58.0 $375.6 $110.8 $63.7 $165.3 $65.6 $79.5 $79.9 $100 $168.7 $188.3 $218.4 $253.5 $244.6 $0 FYE 2008 FYE 2009 FYE 2010 FYE 2011 FYE 2012 * Gross cash advances include amounts extended by third parties. 7

8 Historical Consolidated Financial Performance ($/millions) Total Revenue EBITDA $2,000 $1,500 $1,000 $500 $0 $1,800 $1,583 $1,337 $1,031 $1, $325 $300 $275 $250 $225 $200 $175 $150 $125 $100 $75 $50 $318 * $298 $251 $217 $ % 30% 20% 10% Operating Income EPS $275 $250 $225 $200 $175 $150 $149 $176 $207 $244 $262 * $125 $2.00 $100 $1.50 $75 $1.00 $50 $0.50 $25 $0 $ Does not include $46.2 mm pre-tax expenses ($33.6 mm without non-cash items; $36.2 mm after tax) in unusual items related to Mexico reorganization, the voluntary refund to certain OH customers and the withdrawal of the Enova International, Inc. proposed IPO, during 2012 ($1.15 per share). $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.70 $3.17 $3.67 $4.25 $4.57 * 8

9 LTM Q Net Revenue Distribution $1.0 billion Up 6% ($ in millions) $15.8 $216.1 E-Commerce Net Revenue $421.9 million, up 30% Retail Services Only U.S. = 97% Foreign = 3% $504.2 $205.8 E-Commerce Only U.S. = 51% Foreign = 49% Percent of Consolidated Net Revenue Domestic Retail Services 57% Foreign Retail Services 2% Domestic E-Commerce 21% 59% 41% Foreign E-Commerce 20% 9

10 E-Commerce Platforms International Online Financial Services United States United Kingdom Canada Australia 10

11 E-Commerce Consumer Loan Operation LTM 06/30/13 Total Revenue = $723 million LTM 06/30/13 Operating Income = $145 million Well Established Internet Platform E Commerce Business LTM growth Op Inc up 55% 3.5 year CAGR Op Inc 45% More than 50% International Installment product established addresses key niche U.S. short-term loan product less significant 89% in % EOP 2012 Ability to rapidly deploy platform to new markets 06/30/13 Earning Assets 46% U.S. 54% Foreign 11

12 Enova is a Pioneer in Online Lending Scalable and flexible technology platform Proprietary analytics and data Focus on customer experience Customer loyalty and brand recognition Strong emphasis on regulatory and compliance structure Licensed in and/or in compliance with the laws in 32 U.S. states & 5 countries FY12 Total Headcount 993 versus 872 in FY11 Highlights $2,501,280,000 Credit Extended In ,000,000+ Web Page Views Since ,613,905 # Loan Transactions Originated In ,734,300* # of Customers Served Since 2006 Vision: Closing the World s Credit Gap * Count excludes MLOC 12

13 Innovative Online Solution for Credit Needs Go Online Submit Application Approved or Not Approved Sign Electronic Contract Receive Funds Most customers approved online in less than five minutes 13

14 Proprietary Technology Platform Enables Scale Customer Relationship Management Integrated platform Performance Data Over 7.99 terabytes 2 Funding $2.5 billion 1 TECHNOLOGY PLATFORM Processing 4.6 million transactions 1 Decisioning 50 algorithms, 500 variables 1 For the year ended 12/31/12 2 As of 12/31/12; aggregate data collected since inception; used for credit risk score modeling 14

15 Current Industry Dynamics Dynamics Creating an Even Larger Opportunity Borrower Trends E-Commerce Trends Limited Rainy Day Funds ~50% in the U.S. and U.K. can t access funds for an emergency Growing Internet Usage 75% usage between ; 40% by 2015 Substantial Declines in Available Credit ~$1.3T reduction since 2008 in the U.S Increasing E-Commerce Activity 30% usage in % in 2011 Deteriorating Median Household Income 2011 income ~10% below 2001 levels in the U.S. Customers Moving Finances Online Online banking, bill pay, investing, etc. Sources: National Bureau of Economic Research, Federal Reserve Bank of New York, New York Times, FICO Inc., Frost & Sullivan, Pew Research 15

16 E-Commerce Business Segment $450 $400 $350 $300 $250 $200 $150 $100 $50 $- Net Revenue (in millions) Total revenue less loan loss provision $145.8 $21 $125 $213.4 $53 $278.7 $114 $160 $164 $373.9 $183 $191 $160 $421.9 $144.5 $140 $126.3 $206 $ LTM Q2 '13 U.S. Foreign $120 $100 $80 $60 $40 $20 $0 $39.8 $2.9 $36.9 Operating Income (in millions) $68.6 $10.8 $57.8 $29.1 $63.4 $65.2 $62.9 $70.6 $ LTM Q2 '13 Domestic $94.3 International 49% 16

17 Total Revenue and Net Revenue Trend ($ in millions) Domestic E-Commerce Foreign E-Commerce $400 $350 $334.1 $369.7 $375 $326.9 $353.8 $300 $250 $214.5 $276.3 $254.7 $191.1 $216.1 $300 $225 $225.6 $182.8 $205.8 $200 $150 $124.9 $160.1 $164.2 $150 $102.0 $114.4 $100 $50 $0 $ % $ % 42% $ % $89.6 $ % LTM Q2 '13 Loan Loss Provision Net Revenue $75 $0 $ % $144.1 $ % $ % $111.2 $20.9 $ % $ % LTM Q2 '13 Loan Loss Provision Net Revenue 17

18 Quarterly Trends in E-Commerce Revenue and Net Revenue ($/millions) Domestic E-Commerce % Growth YoY Foreign E-Commerce % Growth YoY $120 $100 $80 $60 $40 $20 2% - 18% 30% - 14% 8% - 8% 13% 43% 18% 34% 13% 12% 42% 33% 12% 38% 28% 47% 31% 29% 19% 38% 25% $120 $100 $80 $60 $40 $20 130% 48% 131% 127% 115% 91% 56% 55% 152% 93% 95% 45% 65% 33% 23% 23% 13% 44% 43% 54% 38% 19% 42% $0 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 $0 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Total Revenue Net Revenue Total Revenue Net Revenue * Figures in red represent Loss Provision % of Fees 18

19 Installment Loan Balances ($ in millions) $160 $140 Quarter over Quarter Growth in Installment Loan Business $150.9 $120 $100 $80 $60 $40 $20 $0 $38.0 $16.2 $100.6 $54.6 $30.6 $86.4 $44.5 $10.1 $11.7 $15.4 $20.0 Q Q Q Foreign E-commerce Domestic E-commerce Retail Services 16% 27% 36% Consumer Loan Mix Installment Loans Single Pay Loans $244.8mm 06/30/11 $350.9mm 06/30/12 *Balances include loans funded by third parties. $417.9mm 06/30/13 19

20 $ thousands, excludes MLOC Consistent Growth in Customer Loans Solid Momentum in Both New & Existing Customers $2,600 $2,501 $2,096 $1,725 $1,177 $1,279 $1,862 $2,200 $1,556 $1,074 $1,161 $0 $103 $118 $169 $234 $ New Customers Existing Customers * Existing customer defined as a customer with at least one previous loan or has made at least one payment on an installment loan. 20

21 U.S. Payday Revenue Less Significant Diversified Product Offerings & Geographies Minimizes Payday Exposure 100% 90% 80% 70% 90% 84% 70% 60% 53% 50% 45% 40% 30% 33% 30% 29% 20% 10% 22% 21% 0% % U.S. Payday of Enova Revenue % U.S. Payday of Total Company Revenue 21

22 Just the Facts Consumer s Choice A Comparison of the Alternatives: Cash Advance cost less. The Consumer Gravitates to the Best Deal. $58 Fee $60 Comparative Data Average Insufficient Funds/Overdraft Protection Paid Per Banked Household $407 $50 $40 $30 $20 $15-$20 Fee $29 Fee $37 Fee $376 $361 $10 $0 $100 Payday Advance Overdraft Protection Fee on $100 Transaction Credit Card Late Fee on $100 Bill Bounced Check + NSF Merchant Fee on $100 Transaction Source: Community Financial Services Association of America. Rollovers >3x = 3% Source: Bretton Woods, Inc.; 2009 Fee Analysis of Bank and Credit Union NSF/ODP Programs, published February Unbanked & Underbanked households stated use of Payday Loans 39% 61% 61% - Once or Twice per year 39% - A few times per year University of Bristol United Kingdom March Impact on business and consumers of a cap on the total cost of credit 2011 FDIC National Survey September

23 During 2012 the Federal Trade Commission received 2.1 million complaints overall, only.02% related to Payday Loans Below are the top 10: Identity Theft Debt Collection Banks and Lenders Shop at Home & Catalog Sales Prizes, Sweepstakes & Lotteries Impostor Scams Internet Services Auto-Related Telephone & Mobile Services Credit Cards Number 369, , , ,184 98,479 82,896 81,438 78,062 76,783 51,550 Percent 18% 10% 6% 6% 5% 4% 4% 4% 4% 3% Within the Banks and Lenders Category: 132,340 complaints: Lending: Mortgage Bank: National/Commercial Lending: Other Institutions Lending: Finance Company Lending: Student Loans Lending: Banks & Credit Unions Bank: Savings & Loan Thrift Bank: State Charter Federal Reserve Member Lending: Payday Loans Bank: State Charter Non Federal Reserve Member ATM-Electronic Banking Procedures Number 62,315 34,157 18,693 8,013 4,507 3, % of All Complaints 3.02% 1.66%.91%.39%.22%.17%.03%.03%.02%.01% 0% Source: Federal Trade Commission February 2013 Consumer Sentinel Network Data Book January-December

24 U.S. and International Retail Services - Lending Platform United States Mexico 24

25 Recently Announced Acquisition Top Dollar Pawn Announced signed asset purchase agreement Well established and operating since 1994 $14.6 million pawn loan balance as of $102.5 million estimated price to be paid in cash Transaction expected to close during Q Immediately accretive upon closing 41-Store chain 15 locations Houston 13 locations Dallas/Ft. Worth 5 locations in San Antonio 5 locations Waco 3 locations Bryan San Antonio DFW Waco Bryan Houston 25

26 Business Overview Serving the short-term cash needs of the under-banked consumer Business Overview Operates 827 lending locations in 22 states in the U.S. and 47 pawnshops in Mexico Largest pawn lender in the world High quality loan portfolio 66% of pawn loan portfolio is secured by jewelry Yield on merchandise sold of 150.3% in 2012 Approximately 67% Redemption Rate U.S. Only Pawn Loans as of 06/30/13 3% 7% 4% 20% 66% Jewelry Electronics Tools Musical Instruments Other 26

27 Domestic Retail Services Lending Locations (as of June 30, 2013) $300 U.S. Pawn Loan Balances ($mm s) $250 $238 $240 WA= locations in 8 States $200 $150 $164 $197 IL=25 OH=120 $100 $50 NV=28 $ Number U.S. Locations TN= AZ=37 TX=252 FL= Q2 '13 27

28 U.S. Pawn Domestic Retail Services Industry leader in pawn services Company began in 1984 with one location First to the public markets in 1987 New York Stock Exchange in 1990 Regulated on a state-by-state basis and extremely stable Rates 10%-20% per month Loans days and avg. 45 days $1,200 $1,000 $800 $600 $400 $200 $0 $835 U.S. Total Revenue (in millions) $883 $1,030 $1, U.S. Operating Income (in millions) Pawn loans fully collateralized (66% by jewelry) $250 $200 $178 $199 $234 $223 * Approximately 7 out of 10 loans repaid $150 $100 Sales of forfeited merchandise generate approximately 150.3% yield on bad debt (32.1% GP margin) $50 $ * excluding unusual items of $13.4 mm in

29 29 U.S. Pawn Lending Locations

30 30 U.S. Pawn Lending Locations

31 Retail Lending Services Recent Events Historically 10%-15% growth in Total Revenue and Operating Income 2012 Significant Events Decided to transition from Jewelry Lending only, to Jewelry and General Merchandise Lending in Mexico Closed 151 Mexico jewelry lending locations in Q3 and Q4 Reorganization costs of $28.9 million ($0.82 per share) Voluntary customer refund of $13.4 million ($0.27 per share) Total unique items for retail services in 2012 = $42.3 million ($1.08 per share) 31

32 Mexico Business Evolution Transitioned Management to Cash America January 2011 Gold only lending struggles operating losses build Reorganized Business Re-Branded 47 Full-format Discontinue most gold only stores Prove-out full-format model for future growth driver Acquired 112 gold only lending locations in Mexico Ended the year 12/31/10 with 180 locations High store growth reduces profits in 2010 New POS Training Department Management Development Tested & Refined full-format model Dec 08 Dec 10 Fiscal 11 Q1 & Q2 12 Dec

33 (Households in mm) International Storefront Market Opportunity Location Counts by Market 80 Million Mexico Has a Large Unbanked Population 16,000 14,000 ~ 14,000 Pawn Locations 60 Million 12,000 10,000 Unbanked 8,000 6,000 4,000 2,000 0 U.S. - Developed Market ~ 5,000 Pawn Locations Mexico - Emerging Market Serving ~ 60 million underbanked customers Serving ~ 80 million underbanked customers 33

34 Cash America casa de empeño Updated Business Model Differentiation strategy for Central Mexico Competition = jewelry loans only General merchandise alternative attracts customers = jewelry loans New store openings will be full format Cash America advantage = full format expertise 34

35 Mexico Pawn Lending Locations

36 Mexico June 2013 Veracruz (7 locations) Guanajuato (1 location) 47 Total Locations Jalisco (5 location) Queretaro (1 location) 18 Greater Mexico City Estado de Mexico (8 locations) Distrito Federal (6 locations) Morelos (2 locations) Puebla (2 locations) Guerrero (5 locations) Mexico City Area 18 Locations Chiapas (3 locations) Tabasco (2 locations) Quitana Roo (4 locations) Nayarit (1 location) 36

37 37 Business Initiatives

38 Growth Strategy E-Commerce leverage platform, expand marginal profitability Domestic Attract disenfranchised bank and credit card customers Promote new products Installment / LOC and Net Credit International UK / Australia / Canada Markets Expand to additional countries Promote new products UK installment Retail Services build on stable business model Domestic Adding pawnshop units de novo and acquisition Promoting new products Installment / Auto Equity Aggressive marketing campaigns International Conversion of Mexico model to full format Prove-out full format concept and long-term growth vehicle Explore other Latin American Countries 38

39 Summary Investment Highlights Success and Momentum of E-Commerce International Business Consistently Performing Retail Services Business with well Positioned E-Commerce Services Business Growth Strategy Focused on Domestic Storefront Expansion and Product Diversification High Quality Loan Portfolio Strong Historical Financial Performance Demonstrated Access to Multiple Sources of Financing Attractive Industry Fundamentals Diligent Focus on Regulatory Compliance 39

40 Cash America International, Inc. Alternative Financial Services Investor Contact Information: (800)

41 41 Appendix

42 Non-GAAP Financial Information In addition to the financial information prepared in conformity with generally accepted accounting principles in the United States ( GAAP ), the Company provides earnings before interest, taxes, depreciation and amortization ( EBITDA ), which is a historical non-gaap financial calculation. Management uses the non-gaap financial measure for internal managerial purposes and believes that its presentation is meaningful and useful in understanding the activities and business metrics of the Company s operations. Management believes that this non-gaap financial measure reflects an additional way of viewing aspects of the Company s business that, when viewed with the Company s GAAP results, provides a more complete understanding of factors and trends affecting the Company s business. Management provides such non-gaap financial information for informational purposes and to enhance understanding of the Company s GAAP consolidated financial statements. Readers should consider the information in addition to, but not instead of, the Company s financial statements prepared in accordance with GAAP. This non- GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes. 42

43 EBITDA ($ in millions) Twelve Months Ended December 31 Net Income attributable to Cash America International, Inc. Adjustments: 2012 $ 107, $ 135, $ 115,538 Charges related to withdrawn proposed Enova IPO Charges related to Mexico Reorganization Charges related to Ohio Reimbursements Provision for income taxes Depreciation and amortization Interest expense, net Foreign currency transaction loss Equity in loss of unconsolidated subsidiary Net loss attributable to the non-controlling interest $ 3,879 $ 28,873 $ 13,400 $ 77,495 $ 62,864 $ 28,987 $ 313 $ 295 $ (5,806) $ 82,360 $ 54,149 $ 25,447 $ 1,265 $ 104 $ (797) $ 69,269 $ 43,923 $ 22,020 $ 463 $ 136 $ (294) Adjusted EBITDA $ 317,770 $ 298,491 $ 251,055 EBITDA margin calculated as follows: Total revenue from continuing operations Adjusted EBITDA EBITDA as a percent of total revenue $1,800,430 $ 317, % $1,583,064 $ 298, % $1,337,050 $ 251, % 43

44 Earnings Per Share Growth $5.00 $4.50 $4.25 $4.57 * $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $2.48 $3.17 $2.70 $1.09 $0.54 $3.67 $1.10 $0.88 $0.90 $0.63 $0.73 $0.55 $0.66 $0.67 $0.54 $0.43 $1.18 $1.08 $0.84 $0.86 $1.01 $1.13 $0.63 $0.79 $1.29 * $1.02 * $0.94 $ Q1 Q2 Q3 Q4 Does not include $36.2 mm after tax in unusual items expensed related to Mexico reorganization, the voluntary refund to certain OH customers and the withdrawal of the Enova International, Inc. proposed IPO, during 2012 ($1.15 per share). 44

45 45 $ thousands, excludes MLOC Domestic & Foreign Customer Loans New Versus Existing Customers Rapid Growth in UK Existing Customer Loans Total Domestic Volume Steady with New Customer Growth in 2012 Domestic Only UK Only $1,300 $1,080 $1,105 $1,266 $1,157 $1,285 $1,300 $1,216 $939 $995 $1,010 $1,146 $1,059 $1,127 $459 $803 $1,073 $0 $85 $95 $120 $98 $ $0 $174 $410 $97 $151 $79 $18 $23 $49 $136 $ New Customers Existing Customers * New Customers Existing Customers * Existing customer defined as a customer with at least one previous loan or has made at least one payment on an installment loan.

46 Average Customer Characteristics Growing need for consumer credit Americans with no personal savings increased from 22% in May 2009 to 27% in November Harris Interactive Poll #13, February 2011 U.S. Pawnshops: 13,000+ U.S. Customers: 30 Million (12% of U.S. population over 18 years old) Avg. Age: 36 HH Income: $29,000 Employed: 80% Homeownership: 33% HS Diploma/GED: 82% Average Loan: $100 Typical Term: 30 days, plus 30-day grace period Typical Fee: $20 (20% of loan amount) % Redeemed: 67% Typical Pawn Loan Typical Payday Loan Lending Locations: ~20,000+ Avg. Age: Under 45 HH Income: $41,994 Percent Female: 60% Homeownership: 32% HS Diploma/GED: 91% Loan Amount: $400 Fee Range: 11% to 25% Typical Term: 14 days Source: DeYoung & Phillips, 2009 Kansas City Fed Payday Loan Pricing; Advance America; company documents; and FBR Research Source: National Pawnbrokers Association: Pawnbrokering Industry Overview 46

47 47 * FBR Capital Markets & Co. Research report dated

48 Integration of New Disposition Channels Increases profitability on unique items Opens opportunity to attract different collateral forms Drives customer traffic into stores $2.1 million in sales during stores on ebay at year-end 128 stores to be added in 2013 (NV, WA, TN, IL) ~ 80,000 items sold during 2012 $11.2 million in a 41% margin Average sale $140 48