Cash America International, Inc. (NYSE:CSH)
Q4 2015 Results Earnings Conference Call
January 28, 2015, 08:00 AM ET
Brent Stuart - President & CEO
Thomas Bessant - EVP & CFO
John Rowan - Janney Capital Markets
John Hecht - Jefferies & Co.
Henry Coffey - Sterne Agee CRT
Bill Armstrong - C.L. King & Associates
Gregg Hillman - First Wilshire
Gene Fox - Cardinal Capital
Ladies and gentleman, thank you for standing by. Welcome to the Earnings Conference Call.
During the presentation, all participants will be in a listen-only mode. Afterwards we'll conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, January 28, 2016.
I would now like to turn the call over to Brent Stuart, President and CEO. Please go ahead Sir.
Thank you and good morning, ladies and gentlemen. I am pleased to welcome you to our earnings call for the fourth quarter of 2015.
Joining me this morning is our Chief Financial Officer, Tom Bessant. Following my introductory remarks, Tom will provide a standard financial report including our operating results for the quarter, after which we'll open the call up for questions and answer.
Before we begin with our prepared remarks, I'd like to remind you that all statements made during this call that relate to future results and events are forward-looking statements that are based on current expectations. Actual results and events could differ materially from those projected in the forward-looking statements because of a number of risks and uncertainties, which are discussed in our SEC filings including Forms 10-K, 10-Q and other reports and statements and the cautionary statement on our website under Investor Relations. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. We assume no obligation to update our forward-looking statements.
I also want to mention before we proceed that a reconciliation of any non-GAAP information provided on this call to the most directly comparable GAAP information is available in the press release or on the Investor Relations section of our website at www.cashamerica.com. Non-GAAP financial information is not meant as a substitute for GAAP results, but is included solely for informational and comparative purposes.
Prior to turning the call over to Tom, I'll take this opportunity to give you my perspective on the quarter, update you on trends and market conditions that continue to influence our performance and provide color around our organizational focus for 2016.
Overall, I am pleased with our fourth quarter performance, which ended in line with the expectations that we had shared with you coming out of Q3. Tom will give you a more detailed report on our financial performance for the quarter, but I feel we continue to make progress with our key areas of focus, specifically same-store pawn loan balances, over the over the counter retail dispositions and margins as well as expense controls.
We ended the quarter at the top end of our guidance as we continue to focus on improving in-store execution, which I'll discuss in more detail in a few moments.
We also executed well on our initiatives of controlling cost, improving margins profitability and returning excess cash to our shareholders through our share repurchase program.
While we continue to see the cautious consumer behaviors that have been present over the past several quarters, I am somewhat encouraged by the progress we're seeing with our key areas of focus.
Consumer confidence notwithstanding, we continue to see more consistent and aligned execution of our key business strategies, which provides us great leverage in our ability to sustain our progress around the pawn fundamentals of lending, selling, customer service and talent development.
These four key business fundamentals have been the foundation of our success and our continued execution in these areas will play a critical role in our ability to sustain progress and growth in our four wall business going forward.
Lower gasoline prices continue to provide headwinds for pawn loan demand and although we did not completely close the gap to prior year with same-store balances, we did show sequential improvement in the third quarter, while continuing to sustain improved pawn loan yields.
Our headway during the quarter in reducing the year-over-year gap and same-store pawn loan balances in addition to improving yields provides us with guarded optimism as we head into 2016.
Regardless of macroeconomic conditions or consumer sentiment, we continue to focus our end-store execution efforts around pawn lending fundamentals and driving behaviors to effectively and proactively grow our pawn loan balance.
The key revenue driver of this business is pawn loan growth, so we will continue to fight for greater market share while also positioning ourselves to fill the potential void created by further expected contraction in the unsecured space.
By most accounts, Q4 was an anemic retail quarter with several brick and mortar operators reporting negative year-over-year same-store sales. Some economists are reporting that 2015 was the worst retail year that we've seen since 2009.
Despite those conditions, we did see a year-over-year improvement with both over-the-counter retail sales and margins in the quarter. I believe those results are a direct reflection of our continued focus on over-the-counter dispositions and while I feel we have opportunity for further improvement, I am encouraged by our progress as we enter the important Q1 tax refund selling season.
Finally, I would like to report continued progress in improving the marginal profitability of our stores through a continuation of tighter expense controls. We saw significant savings in our field and corporate expense levels in 2015. We've done a good job of making the necessary cuts and we will remain diligent in our efforts to control cost, while in a somewhat slower revenue growth environment.
As we head into 2016, I remain cautiously optimistic about our prospects even though there is a prevailing sentiment of uncertainty around the economy and consumer confidence remains influx.
Those conditions notwithstanding, we will remain internally focused on continuing to improve the execution and marginal profitability of our stores and returning excess cash to our shareholders through share repurchases and dividends.
And while we expect to maintain a conservative approach to adding store count, we will remain vigilant in assessing strategic opportunities when presented. I believe investing in our own business model by continuing with our internal focus will continue to serve us well in 2016.
I will now turn the call over to Tom.
Thank you, Brent, and good morning and welcome to the fourth quarter and fiscal yearend 2015 financial highlights for the conference call.
As many of you have seen in our press release and financial results this morning, Cash America reported a 68% increase in net income from continuing operations, which reached $12.6 million in Q4 of 2015 compared to $7.5 million in Q4 of 2014 generating $0.49 per share and net income from continuing operations in the fourth quarter of 2015.
2015 Q4 EPS of $0.49 represents an 89% increase from the reported $0.26 per share in the fourth quarter of 2014. The financial results for the quarter were in line with our expectations. In fact they're really stronger than the look on the surface due to a number of additional expense items that we incurred during the quarter, which I'll explain little later on the call.
The comparison is also impacted by the fact that the prior year fourth quarter of 2014 included $879,000 after-tax or equivalent to $0.03 per share in severance expenses related to our corporate reorganization efforts last year.
Adding the $0.03 back to the reported $0.26 in the fourth quarter of 2014 creates $0.29 in the prior year earnings per share, which would adjust the Q4 2015 year-over-year increase to 69%.
For the full year of 2015, Cash America generated $1.01 per share on $27.6 million and reported net income from continuing operations representing a 91% and 79% increase from the full year 2014 adjusted earnings per share of $0.53 and adjusted net earnings of $15.4 million respectively.
Rather than review all the multiple adjustment items impacting 2014, please refer to the attachment in the press release for details and a reconciliation of these amounts in the nearest GAAP measure in 2014.
As noted above in addition to solid increases in net earnings, EPS performance benefited from lower fully diluted shares outstanding as a result of the company's repurchase of shares during fiscal 2015.
During the fourth quarter, the company repurchased 757,700 shares, which combined with repurchases throughout the year to reduce fully diluted shares year-over-year by approximately 12% in the fourth quarter and 7% for the full year of 2015.
During the fourth quarter, we completed the $4 million share up and market repurchase authorization approved by our Board of Directors in January and consistent with our public disclosure in October of this year, again purchasing shares under the $3 million share authorization approved by the Board of Directors in its October 2015 meeting.
I’m pleased to report that the company's strategy to return excess cash flow to shareholders thorough share repurchases was successfully executed during 2015 as we repurchased a total of 4,015,866 shares of stock representing almost 14% of the fully diluted share count at the beginning of 2015 at an average price of about $26 per share representing an investment of almost $104 million.
It’s important to note that this investment has occurred without a meaningful change to our balance sheet as leverage ratios remain low.
Moving on to the financial highlights from operating results for the fourth quarter of 2015, we all know that its important quarter for retail sales and a disposition and merchandise of stock there.
Our reported retail sales rose 1% on higher retail margins, which increased 80 basis points to 33.2% compared to 32.4% in the prior year, more importantly same-store retail sales increased 4% and same-store gross profit from retail activities increased 6%.
I also like the sequential trends in retail gross profit margin, which has been gradually improving and was up sequentially 100 basis points from the third quarter of 2015.
As expected gross profit from commercial sales of gold and diamonds continues to be negligible and was less than 1% of overall gross profit in Q4, 2015. However it does impact consolidated gross profit margin, which finished the quarter of 2015, the fourth quarter of 2015 at 29.3% up 130 basis points from 28.0% in the fourth quarter of 2014 and up 170 basis points sequentially from the third quarter of 2015 its gross profit margin in that quarter of 27.6%.
As I mentioned before the improvement in gross profit margin is a gradual process and is impacted significantly by the competitive activities in our store front operations. As Brent has commented, we continue to pursue the transition of effective retail sales in our stores and we made good progress in 2015.
Revenue during the fourth quarter related to pawn loans was down slightly due to lower average pawn loan balances experienced during the quarter as we ended Q3 with a 1.8% year-over-year decrease in same-store pawn loan balances.
However, I’m pleased to report that same-store pawn loan balances finished the year within a half percentage point to the prior year. Given the prevailing low fuel prices for our customers, we're encouraged that our efforts to maintain and potentially gain market share have been successful.
In addition, the almost flat year-over-year same-store pawn loan balances as I said, which are down about 50 basis points year-over-year as of December 31 is a significant improvement from the down 1.8% same-store pawn loan balance reported at the end of the third quarter 2015.
Depreciating results led to positive same-store net revenue growth of 0.3% for the fourth quarter of 2015, which is the first year-over-year quarterly increase in same-store net revenue during 2015 although it is in line with our expectations as we are facing significant headwinds at the beginning of the year and lower pawn loan balances at the beginning of the year and the elimination of the unsecured lending product in many of our locations in 2014, which carried over into 2015.
The potentially more meaningful metric is that same-store net revenue excluding our non-strategic activities of net fees from unsecured consumer lending and commercial sales of gold and diamonds was up 2.1% in the fourth quarter of 2015 compared to the prior year and up sequentially from down 0.4% reported in Q3 of 2015.
I’m also pleased to report that our initiatives to improve marginal profitability, which Brent mentioned in his comments continue to successful as operating income increased 36% to $22.2 million for the fourth quarter of 2015 compared to the prior year.
You'll note that administrative expenses deviated from the downward year-over-year trend experienced in prior quarters as we incurred a variety of unusual items during the fourth quarter including additional reorganization and severance cost, higher health insurance expenses to write offs some internally developed software and cost related to a legal settlement, which totaled almost $3 million in impact.
Going forward I would expect administrative cost to return to levels at or below our third quarter 2015 results as our Management Team has continued to focus on efficiencies in our expense structure to continue to improve marginal profitability.
Income from operations generated marginal profitability measured as a percentage in net revenue in the fourth quarter of 2015 of 14.7% compared to 10.8% in 2014.
This continues the trend of improved marginal profitability throughout each quarter of 2015 when compared to the corresponding prior year and we expect this to continue as we move into 2016.
So as we look at the upcoming fiscal year, we seem to be have not modified our expected earnings per share guidance for fiscal year 2016, which remains between $1.25 and $1.45 per share compared to the $1.01 per share reported for fiscal year 2015.
We expect the first quarter of 2016 results to be between $0.35 and $0.41 per share compared to $0.27 per share reported in the first quarter of 2015. Contained within our guidance for 2016 is the continuation of a challenging retail market for consumer goods and lukewarm pawn loan demand due to lower overall fuel prices.
Therefore we have continued to emphasize efficiency and operating expenses to be complemented by a slight improvement in year-over-year pawn loan balances and overall retail gross profit margin.
Net revenue results will continue to be negatively impacted by our strategic decision to deemphasize the unsecured lending products in our locations.
During 2015, we removed the product, closed or sold 37 locations offering unsecured loans. In 2016 it is our expectation to eliminate the product in 47 more locations.
As I discussed at the outset of the call, we expect to continue to repurchase shares in the open market under the three million share authorization established in October of 2015.
In addition as noted in our press release this morning, the Board of Directors has also increased our quarterly dividend 60% to $0.08 per share, which will be equivalent of $0.32 per share on annualized basis compared to our current annualized quarterly dividend of $0.20 per share.
These actions evidenced the strength of the company’s internally generated cash flow inherent in this business and our opportunity to pursue our strategic objectives while returning cash to shareholders without a meaningful change to our leverage or balance sheet.
You'll also see in the attachments to our press release this morning that our upcoming 2016 full year guidance implies our free cash flow per share after capital expenditures of between $2.43 and $2.63 per share for fiscal 2016 at an approximate current market price of $28.75 per share for Cash America. This represents a free cash flow yield of about 9%.
This concludes my prepared remarks of the financial aspects of Q4 2015. So operator would you open the call up for questions now please.
Thank you. Sir my apology. My mic was on mute. [Operator Instructions] And our first question comes from the line of John Rowan with Janney Capital Markets. Please go ahead with your question.
Good morning, guys.
Just to kind of tie up some of your comments about driving pawn loan -- same-store pawn loan growth and taking market share, I just wanted to see if that kind of puts with the fact that inventories were up about 13.5% year-over-year.
Your pawn loans at the end of the quarter were down slightly and your same-store pawn loan balances were pretty modestly down in the quarter. When you talk about taking share, was there -- you guys -- were you more aggressive with loan-to-value rates that would generate the fault and possibly more inventory? I’m trying to understand how those comments tie back into the rights in inventory and if they do at all?
John, this is Brent. In regards to the inventory shift year-over-year the increase in inventories really related to the mix shift between general merchandize and jewelry.
If you remember we discussed about this time last year coming out of Q4 of 2014 that we were sitting on aged general merchandise goods to which we flushed a pretty good portion of those in Q1 of 2015.
That inventory mix has shifted more to jewelry and with our shift from commercial dispositions to over-the-counter retail sales we made a conscious decision to hold more of those goods in our stores for over-the-counter dispositions.
That’s why you see that increase in inventory level year-over-year. It’s not necessarily a degradation of our portfolio performance. As a matter of fact we continue to realize good performance especially on our jewelry portfolio where our redemption rates remain at all time high.
And also hey John, real quick I’ll mention also that if you look at pawn loan balances per store, they're about 311,000 compared to last year they were 308,000, so on a per store basis, pawn loans are up. Loan to value is not really materially different year-over-year.
What I was really trying to get at, if you look at your peer who also reported this morning, it looks like you’ve a pretty, a better same-store pawn loan balance result than they did domestically and I’m trying to get at why that was? That’s why -- that prompted the question on the inventory, any explanation?
John we’ve been as you know, we’ve been talking about this now for several quarters. We’ve been very focused on in-store execution and getting back to the basic fundamentals of focusing on pawn loan growth and doing that the right way.
And so I will tell you that we’re starting to see some fruits of our labor and even though we don’t break out individual state performance, we’re starting to see recoveries in some of the states that have been anchors for us for a while.
So based on that recovery, based on what I’m seeing as far as the loans written activity and the performance of the portfolio, I’m optimistic that we'll finally turn the corner with same-store pawn loan balances to the positive in 2016.
But it’s taking us a while to get there and I think it’s just the progress that we made with the focus that we’ve had the last year and half regarding growing our pawn loan balance.
Okay. And just one last question, any updates on your plans to dispose of the 6.5 million Enova shares?
Yeah, John I’m glad you mentioned that. So I think as we’ve told folks in the past percentage of the private letter ruling that we received prior to the execution of the distribution of the shares of the eCommerce segment, we had mandated a two-year deadline, which would have put us at November of 2016.
As you may remember, the registration of those shares was delayed with a technical review from the Securities and Exchange Commission and we didn’t actually get those shares registered until September of 2015.
So we decided to recently file a supplemental request to the Internal Revenue Service given the hardship of that unexpected delay to the extent the deadline to November of 2017, which basically give us another year of flexibility.
We’ve not received any indication of the IRS’s response although we have to hear of one here at least shortly after the end of the first quarter and at that point, we will disclose that publicly.
Our consultations with our advisors indicate that there is a favorable opportunity, but of course there is no assurances on that, but good question. Thanks for bringing it up.
All right. Thank you.
Thank you. Our next question comes from the line of John Hecht with Jefferies & Co. Please go ahead with your question.
Thanks very much. I guess just focusing a little bit on the same-store sales in the -- I guess driving and executing, can you guys talk about I guess measures you're taking? Is this -- is there more advertising? Are you marketing to new customers? Is this recurring customer spending more at the store? How do you kind of diffuse that?
John I’d say yes to all those. Q4 is our typical biggest retail season of the year as you know and we always do significant amount of promotional activity, in-store promotional activity in Q4 around our retail activities.
I will tell you that we made a change with our approach last year in regards to how we’re marketing where we’ve been more in-store traditional four wall marketing and promotions. We’ve expanded that out into other mediums outside our four walls to as you said attract new customers into our establishments and introduce them to the pawn business.
And that really has been our focus understanding that we need to continue to drive additional foot traffic in our four walls in addition to developing alternative disposition strategies outside of our four walls to sustain continued retail growth with improving margins.
And we feel that we're well positioned to do that especially with the inventory mix being more heavily weighted to jewelry that general merchandise which continues to be a drag on margins especially on electronics category.
We continue to see margin improvements in jewelry throughout the year. We ended the year with upper trends in our jewelry margins. So we feel that we're really well positioned and we'll continue the see cadence from marketing perspective that we took in Q4 throughout 2016 and continue to pulse our retail sales as best we can especially now that we're in our second most important selling season, which is the Q1 tax selling season so…
Okay. That’s helpful. And then look regarding the margin, I think you referred to it as the margin lift, there’s a bigger mix of jewelry and your focus more on improving jewelry margin or is there a general merchandise margin also improving? How do we kind of think about that?
I think it’s a mix of both john, but I think again that jewelry carry the day for us, but we didn’t see the degradation that we saw in a lot of our general merchandise categories in Q4 of last year as those general merchandise inventory levels were building.
I think we'll also see that favorable trend continue as that mix holds more jewelry than general headed into 2016 so.
Okay. And then just one quick question on the quarter and I'll get back in the queue, you had couple million dollar uplift in the consumer loan fees and I think last year Q3 and Q4 had the reverse and I think last year it was because of some changes you made in Texas, but I'm wondering if you can talk about the trends you saw in that and the you’re installment lending portfolio.
Yes it's a great question John. We're seeing the installment loan portfolio stabilize. There were a couple of things going on last year. As you mentioned we eliminated a variety of the product and a variety f store front locations.
We had also discontinued our auto related product. So that business was falling off pretty significantly and continued to fall off throughout the year. At the same time our installment loan portfolio, which has been lifting after we did a full roll out of that product following Q1, has begun to really perform better for us.
Today about 80% of our consumer loan balances are concentrated in the State of Ohio and again that is the State where we offer both the single pay and multi pay installment product. So we had a couple of things happening there that are beneficial to that net free line.
On the other hand, again we did discontinue another pair of stores in 2015 and -- I'm sorry discontinued the product in a number of stores in 2015 and we also in 2016. So we're expecting net fee number to be marginally down throughout the year and that will continue to create some net revenue headwind for us that again we saw that in 2015 and we're able to overcome it.
At some point it will stabilize. Today consumer loan fees are still about little more than 7% of total revenue and I don’t expect that increase significantly.
Wonderful. Thanks very much for the color guys.
Thank you. Our next question comes from the line of Henry Coffey with Sterne Agee CRT. Please go ahead with your question.
Good morning everyone and thanks for taking my questions.
Good morning, Henry.
In terms of thinking through the buyback rather than just guessing how much buybacks are going to go on every quarter, what metrics should we use to benchmark how many shares you’re going to be buying back every quarter?
Well we can’t give you a hard metric, but let me repeat what I’ve said before, which is our Board of Directors goal in 2015 in January when the four million shares authorization was set out was to get through that authorization aggressively.
And so our cadence was 900,000 over a million shares a quarter depending on the numbers you're -- or the quarter you're looking at. As we look at 2016, we've worked into the three million share authorization, but we expect that cadence to come down offsetting that obviously with enhanced dividends to our shareholders. So we think it will be a meaningful number in 2016, but will be at a lower cadence than you saw in 2015.
Look when you think about dividends and buybacks, what percentage of your earnings or free cash flow do you think the Board is comfortable in returning and how much do you need to return for growth?
The dividend payout ratio with the increase is about 20% of net income obviously a significantly smaller percentage of free cash flow. This business doesn't require a great deal of capital expenditures or investment working capital unless you're growing your store base significantly.
And as Brent alluded to our focus right now is internally emphasizing marginal profitability and returning earnings to shareholders and cash flow to shareholders.
And then with the closing out if I heard it correctly the loan product is what, 47 stores?
And then what's -- where are you still making unsecured loans?
It's a handful of states, but about 80% of that fee number is coming out of the State of Ohio and where there is a long time legacy product up there and is well established now.
We've also introduced the pawn product in Ohio beginning in 2009, which is beginning to have some nice traction for us as well, but it is still predominantly an unsecured lending revenue stream coming out of that market.
Now, we've positioned that market again with uncertainty related to the CFPB pending rules announcements whenever that is published to offer installment loan product, which we believe complies with the conceptual outline in those rules and we continue to offer single-pay product allowing the customers of choice.
Single-pay product continues to be popular. Loss rates in that product continue to come down. I don't talk about it quite as much, because again it's a non-strategic product for us but it does produce some cash flow, which is meaningful and there is a piece of cash flow we return to shareholders.
Thank you. Our next question comes from the line of Bill Armstrong with C.L. King & Associates. Please go ahead with your question.
Good morning, Brent and Tom. We know that lower gas prices continues to be headwind to pawn loan demand. Are you seeing any evidence that on the -- with the CFPB pressure on payday lending throughout the industry, are you seeing any evidence of some of that demand maybe shifting over to pawn loans either have you seen any of that or is there any reason to think that that may start to manifest itself in the near feature?
Yes. Bill, this is Brent. I've actually addressed that in my comment as well. We haven't seen anything as of yet, because the rules aren't final right. Once the rules are finalized and we know exactly what the impact will be and we see what the brick and mortars operators choose to do in the unsecured space and the title space with all honestly, then we'll have a better idea of what we can anticipate as far as potential market share pick up there and that's at times a $4 billion a year industry.
So if we get a fraction of that its material for us going forward. So I will tell you that what we're taking market share today is probably more from your mom and pop operators than it is unsecured lenders, but we have a great opportunity in my opinion that when, when, not if, but when the final rules go into place, we can capture a percentage of that unsecured market as well.
Got it. And then shifting to retail margins you're benefiting from the mix shift to jewelry away from general merchandise? Within the general merchandise category, what kind of margin trends are you seeing up, down or flat?
A marginal improvement Bill, not down. Like I said we've -- we're better positioned today than we were at this time last year coming out of the year and out of Q4. We saw some stabilization in our inventory levels and anytime you see that, there is less immediacy for heavier discounting.
Now I would say that tongue in cheek knowing that most of our general merchandize inventory lies in electronics and as you know electronics tends to be a highly volatile category for all retailers based on price point pressures that are out there in the marketplace.
But I’m pleased to -- I’m pleased with the progress that we’ve made in marginal improvements in our general merchandize while our jewelry margins have come up pretty nicely over the last few quarters.
Okay. That’s great. And then finally your pawn loan yields has been showing some small year-over-year increases not just this quarter, but pretty much throughout the year. Anything to call out there in terms of how that yield is increasing or is there anything either in the mix or in the way that you’re making these loans?
Yeah, thanks Bill. It's a good observation. What we're seeing is a couple things impacting that. We're seeing as Brent said there is some nice growth out of some key markets particularly Texas that are higher yielding markets which is positive.
The performance of the portfolio is staying in line or better and then we had a adjustment late in the year in the State of Washington, which created a little modification to that yield that we expect to flow through more in 2016 and 2015.
But it’s a combination of things and mix is an important component of it and as Brent said earlier it's again blocking and tackling and growing pawn loan balance, taking business away from competitors.
Got it. Thanks very much.
Thank you. [Operator Instructions] Our next question comes from the line of Gregg Hillman with First Wilshire. Please go ahead with your question.
Yeah. Good morning, gentlemen.
Brent, following up on the point about potential market for payday loans being curtailed by the Consumer Financial Protection Bureau just your -- in terms of I just wanted to get your take in terms of how the customer -- the pawn loan customer overlaps with the payday loan customer in terms of percentage that have checking accounts, demographics and things like that, for example what percentage of your pawn customers have checking accounts for starters?
Well, we don’t capture that information at the point of sale, but I will tell you from a product opportunity perspective, we feel there is immediate penetration capabilities with more so on the title side than there is immediacy on the unsecured single pace side because those customers are oriented around a secured transaction and providing some type of collateral for that security on that transaction.
But we don’t capture that specific information as far as checking account on our pawn customer. So it’s hard to ascertain. But I would tell you there is there is a higher percentage than you would think who do have checking accounts that we could tap into.
So at the end of the day we’re optimistic that when those customers have less options, pawn creates a nice opportunity for them where they don’t have provided checking account, they don’t have to have their account [ACH] and based on the collateral that they have, they can achieve a loan and unless [ours] was fashioned and sometimes the unsecured product can put up.
Okay, but right now, is there an overlap between your pawn loan customers that have also taken payday loans out right now or is that rare for a pawn loan customer to go and take a payday loan out?
Yeah, we track that over time but especially with the shift in some of our states like Texas where local ordinances have come into effect the last two or three years and it’s a very small portion of the single pay customers who overlap with the pawn customers right now.
But I would tell you that’s more because they have other options whether its online or tribal models or title lending or the magnitude of options they have today versus ten years ago is enormous and when those options go away with whatever comes out of the CFPB, they're simply going to have fewer options.
So we think there is an opportunity for us to pick up a broader slot than we might have already picked up in some of these locations for those unsecured products went away.
Okay. And then Brent just one other thing about the installment loans in Ohio that you're going to keep I take that those are loans with APRs of like 36% or less.
No they’re not structured that way currently. They're slightly less than what our single pay unsecured products are, but they are longer term. Our average term on those loans right now are about seven months. The average loan amount is about $657.
So we feel that based on the structure of that and based on our revenue structure of those stores that we'll be able to modify the product in some way shape or form to conform to whatever the final rules may be without knowing what those final rules are in the form.
What's the implicit APR on those loans right now?
Gregg one of the things that I'll point out is the APR is not a focus of CFPB guidelines. I think the key is the underwriting criteria. So these loans are pre-payable at any time, but are structured with a multiple payments -- repayment opportunity for the customer, which is the primary focus at least on the preliminary guidelines from the CFPB.
So they're compliant based on our interpretation. I think underwriting is going to be the key. As Brent said APRs vary because these are obviously pre-payable and it's structured to be a slightly less expensive alternative to single pay product, but at the same time, I think the key is that there is a structured repayment opportunity for the customer.
We’re not emphasizing refinancing those loans or changing the structure to the customer. We're not adding any ancillary products to those loans like credit life insurance things of that nature and not included.
This is a straight amortizing loan structure and again right has not been the focus. It's been the cycle of debt in the underwriting criteria. So we feel like the product is supportable and one that again based on the final guidelines we'll assess.
Okay. Thanks for your comments.
Thank you. Our next question comes from the line of Gene Fox with Cardinal Capital. Please go ahead with your question.
Sure. So Tom can you give me inventory turns in the quarter?
Yes Gene, inventory turnover in the quarter was about two times, that's up from 1.8 times in Q3. For the full year, which is kind of the way I like to look at this, it was just a little more than two times for the full year down slightly from the 2.3 times in the prior year very much in line with my expectations given the heavier rating of gold jewelry in our inventory and the fact that jewelry inventory turns over basically twice a year in first quarter. So tracking for the time being and we'll continue to keep close eye on that.
Tom should I assume it stays at approximately that level going forward or would you expect it to bring it back to where it has been little higher?
Yes I doubt it will get back to those higher levels Gene. Again when we had a routine scrapping activity, we were pushing jewelry out monthly literally that was being scrapped and that's just not part of our go-forward model.
We're keeping that jewelry in our stores and marketing it to customers. As Brent said exploring other opportunities to think outside the box for liquidation in that merchandize.
So you're going to really revert back to many, many, many years ago when it was predominantly a jewelry business. Returns will run anywhere from a lower 1.75 to 1.8 and would be what I would call smoking it to 2.1 and 2.2 times.
Good. Thanks Tom. I appreciate it.
Thank you. And there are no further questions at this time. And I'll now turn the call back to you.
Thank you, ladies and gentlemen and we appreciate your time and we will talk to you again in April.
Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.
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