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Cash America International (NYSE:CSH)

Q3 2012 Earnings Call

October 25, 2012 8:00 am ET

Executives

Daniel R. Feehan - Chief Executive Officer, President and Director

Thomas A. Bessant - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

John J. Rowan - Sidoti & Company, LLC

John Hecht - Stephens Inc., Research Division

William R. Armstrong - CL King & Associates, Inc., Research Division

Daniel Furtado - Jefferies & Company, Inc., Research Division

Bob Ramsey - FBR Capital Markets & Co., Research Division

Bill Carcache - Nomura Securities Co. Ltd., Research Division

David M. Scharf - JMP Securities LLC, Research Division

Gregg Hillman

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Q3 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Thursday, October 25, 2012. I would now like to turn the conference over to Mr. Dan Feehan, President and CEO of Cash America International. Please go ahead, sir.

Daniel R. Feehan

Thank you. Good morning, ladies and gentlemen, and welcome to our earnings call for the third quarter of 2012. Chief Financial Officer, Tom Bessant, is joining me this morning, and we will be discussing our third quarter results and a few other topics with you this morning. I will provide some very brief overview remarks to begin the call and then Tom will provide the second quarter financial report. We'll then open the line for questions.

Before proceeding 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 and in the cautionary statement on our website under Investor Relations. 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 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.

Now with that out of the way, we can proceed with our prepared remarks. And I'll begin my remarks with an acknowledgment that dissecting the financial results of this quarter will be a bit more difficult than normal, primarily due to the reorganization charges, the impairment charges and deferred tax asset valuation allowances, all relating to the reorganization of our Mexico-based pawn operation, which was previously announced in the press release issued on September 27. The financial components of the reorganization appear in multiple line items in our consolidated statement of income, and Tom will walk you through those details during his quarterly financial report. However, in summary, I will refer you to the third quarter earnings release issued earlier this morning, which highlights that all the financial components of that reorganization, aggregate to reduced consolidated earnings per share by $0.59 in the third quarter. We also expect to incur additional charges in the fourth quarter related to the reorganization, and Tom will cover those numbers with you in a moment as well. In addition to the reorganization cost recorded in this quarter, our press release this morning also discloses an additional $0.06 of cost incurred in the quarter related to the write-off of deferred costs and transition expenses associated with the previously announced withdrawal of the registration statement on form S-1, for the proposed initial public offering of our wholly-owned subsidiary, Enova International, Inc. Our registration statement was withdrawn on July 25 of this year. So with the pro forma exclusions of these 2 unusual line items, our non-GAAP adjusted EPS, for the third quarter would have been $1.02, which was within our guidance range of $0.95 to $1.05, which we first initiated and disclosed in our July earnings press release.

Before commenting on current business trends that produced that $1.02 per share, let me first take a moment to provide a little more color on the reorganization plan for our Mexico-based operation.

We began the second half of 2012, operating 195 pawn lending locations in Mexico, at which approximately 75% were jewelry-only lending locations. The balance of the store portfolio was comprised of full-service locations, which offered pawn loans on not only jewelry collateral but also a wide range of other collateral much like we do in our shops in the U.S. Our reorganization plan, which has just been launched during the third quarter, provides that we will discontinue operating jewelry-only lending locations in Mexico and focus all of our energy and resources in managing our full service operations. With a goal of first, achieving profitability with our current stable of full service stores, and then moving forward with the expansion of that format in both existing and new markets in Mexico. We will be discontinuing and liquidating the assets of approximately 147 jewelry-only locations and we will be left with approximately 47 full-service locations. Our goal is to complete liquidation of assets by the yearend and we may have some activity leak over to the first quarter of next year.

As we indicated in the September 27 release, we believe this reorganization strategy will significantly reduce the loss from operations related to our foreign pawn lending business in 2013, while preserving the opportunity for us to serve customers in Mexico with a format that better aligns with the core competencies of our management team and the legacy pawnshop business that we operate here in United States. And Tom will provide additional financials on that on the reorganization during his comments.

Now setting unusual items aside for a moment, let's take a look at the ongoing operational aspects of our business trends in Q3. And I will begin with the domestic component of our retail services segment, which now includes 815 lending locations in 23 states in the U.S. The business trends of our U.S. bricks and mortar business have not changed much from the trends we discussed with you in July as part of our second quarter earnings report. The challenging year-over-year comparisons for asset growth and margins that we had unexpectedly experienced in Q2 of this year have continued into the third quarter. On a positive note, the average pawn loan balance outstanding in this third quarter was up on a year-over-year basis, which helped generate an increase in pawn service charge revenue. But our transactional volume of both pawn loans and consumer loans written, in the retail services segment during this quarter, reflect the same sluggish trends that we experienced in the second quarter. Admittedly, we had a very difficult year-over-year comp due to third quarter of 2011, when pawn loans written and renewed were up 32% over third quarter 2010 and consumer loan loans written were up over 6%. We had expected the year-over-year growth in loans written to moderate and then later half of 2012, but we have not forecasted, early in the year, that our volume will be down here in the third quarter. The competitive shopping analysis that we're routinely perform on our field operation for pawn lending, indicates that we're being very competitive with loan-to-valuation ratios. But I've heard consistently, from store managers over the past several months that customers were frequently electing to take a lower loan amount than their collateral will support. And I view this as an anecdotal data point that our customers are currently very cautious about getting too extended with credit. Our customers have also curbed their appetite for selling jewelry and general merchandise from the elevated levels that we saw in 2011. Purchases were up dramatically, last year at this time, and up a respectable amount in Q1 of this year. But we saw them begin to contract significantly in Q2 and were actually down here in the third quarter when compared to the third quarter last year.

Now one might credibly argue that our customers have far less jewelry they're willing to sell or pawn today, following the significant run-up in gold prices over the past few years, although I do not personally subscribe to that theory. Even if that was the case, customers certainly have other household items available they can use for personal liquidity when needed, and we have not seen a significant crossover from jewelry to other merchandise which one would expect to see, if customers were simply running out of gold to pawn. It just seems to me that we're in a temporary low, with challenging year-over-year comps of asset growth, following an unusually strong run-up in assets last year. And I certainly don't view our recent trends as the new norm. Consumer credit remains tight in the U.S., and our customers still face a market with limited alternatives for affordable credit. I do suspect we'll face challenging comps again in the next few quarters, but I would expect to see more normalized year-over-year cyclical growth beginning in Q2 of next year.

The most significant financial impact of current customer behavior is reflected in our disposition activity. Retail sales are down slightly this quarter when compared with the same period last year, and I believe this is a reflection of the same customer caution that is affecting asset growth. Year-over-year, commercial sales are down a larger percentage than retail sales, which is primarily a result of lower purposes of scrap gold in the quarter, and slightly lower forfeitures out of our pawn collateral base. The disposition revenue challenge this quarter is compounded by lower margins on retail sales, reflecting certain discounting to spur sales in the shops, and contracting margins on commercial sales as our cost per ounce of gold sold has outpaced the settlement price per ounce over the past few quarters. Obviously, year-over-year disposition margin will continue to be a focal point for our field management team. But it's important to note then, and it's important for our business, that we maintain a steady pace of inventory liquidation in order to maintain a healthy balance of earning assets to support pawn loan growth in future periods. So, consequently, I'm pleased our inventory turns have remained level with prior year and have reached our targeted amounts.

On a very positive note, for our domestic retail services business, we're all pleased with our recent acquisition activity, which was a subject of a press release issued on October 9. We are acquiring 34 new pawn shops in 2 separate transactions, that will add to our store base in Tennessee, North Carolina, Kentucky and Arizona. The first transaction was substantially completed at the end of September, and the second should be completed by the end of October. These additional shops, along with other recent store additions, will provide some positive momentum into 2013.

Now, moving on to the most encouraging aspects of our enterprise results. I'd like to spend a moment discussing the trended of our e-commerce segment, which continues to generate attractive asset and earnings growth. Gross combined consumer loans outstanding for the e-commerce segment at the end of the quarter were up approximately 46% compared to the end of September of last year, with the growth of our domestic balances keeping pace with the strong growth we continue to see in our foreign markets. It looks like the phenomenon we have seen -- we have all seen, with certain customers migrating to shopping online, with the likes of Amazon and eBay, I believe, on a much a smaller scale day, today, we are seeing customers express a growing preference for the speed and convenience of managing their unsecured credit needs through an online platform. This is a trend we believe we developed when we first acquired the nascent CashNetUSA in 2006. And that company, which has evolved into our wholly-owned subsidiary, Enova International, Inc., now operates one of the largest and most successful non-bank online lending platform in the U.S. and U.K.

I believe one of the most important recent developments for the e-commerce segment has been the ongoing innovation of our product offering, which serves to diversify our asset portfolio and deemphasizes the significance of the single-pay, traditional payday loan product. In the U.S., we've seen a significant growth with a line of credit product that we now offer in 4 states, and many -- we've seen many customers demonstrate a preference for an established line of credit that they can draw down and repay as their personal situation dictates.

Enova has also made great progress in expanding their installment loan business, both in the U.S. and in the U.K. The installment loan portfolio at the Enova now represents 1/3 of the combined gross consumer loan balances of our e-commerce segment, up from only 1/5 of the portfolio last year at this time. The profitability in the installment loan portfolio will lag the profitability of our single-pay short-term product in the near-term, due to a larger mix of new customers and the immaturities installment underwriting models, when compared to the very mature models underpinning our short-term portfolio. As we gain more experience, and refine our underwriting models with loan performance data, we believe the installment product will provide long-term profit margins that will rival those of our short-term products.

Now our strategy for moving aggressively in installment lending is driven by multiple objectives. First, we have recognized for some time that we had existing payday customers, who might prefer a larger loan than a longer-term payment schedule that provide additional flexibility for managing their credit. Second, we have always recognized that the lion's share of regulatory scrutiny of consumer credit products is directed at the single-pay product, and any successful diversification of our product mix would help mitigate that risk. And finally, we believe a significant market gap exists for customers who feel trapped in a vacuum between banks and non-bank financial institutions. Customers with credit profiles that don't quite qualify for bank loans but may qualify for loans with characteristics that fall somewhere between a traditional bank loan and a traditional payday loan.

Toward this final objective, Enova has just recently launched a new product offering and website branded netcredit.com, which is designed to gradually move upstream from our traditional CashNetUSA customer, with an installment offering that is priced and designed to fit the customers’ needs and credit profile. The offering is currently available in 7 states, and while it is still very early in the process to draw any conclusions, we are quite optimistic about the potential for the NetCredit great offering.

Enova is also working on a few other innovative initiatives, including the development of mobile apps in both the U.K. and the U.S., and the potential expansion of our online platform into other international territories, where we are actually conducting due diligence in a couple of specific countries. Opening a new international territory will be one of Enova's most important objectives in 2013.

Finally, let me move on to the regulatory front, and I'm sure that many of you like me have seen some recent analyst reports discussing risks associated with the examination of non-bank financial institutions by the Consumer Financial Protection Bureau in the U.S., and pending rule-making by the Office of Fair Trading in the U.K.

On the first topic, the CFPB, here in the U.S., has indicated that non-bank financial institutions are not at liberty to publicly disclose any aspects of the examination process, and we obviously intend to comply with those instructions. Accordingly, we will not be able to answer any questions on that topic.

On the second topic, we are aware, in the U.K., that the OFT intends to issue principle-based guidelines in the near term, regarding the use of continuous payment authority for the collection of loans. And for those of you who may not be familiar with that term, a continuous payment authority is a process by which a merchant, or a lender in our case, can electronically debit the customer's bank account for payment. The Office of Fair Trading in the U.K. has been reviewing the application of this process by short-term lenders, and has sought the input of both consumer groups and industry associations. The industry is expecting the OFT to clarify rules regarding the principles of using continuous payment authority sometime before the end of this year. We do not know what the guideline will be so we cannot assess the impact, if any, on our collection processes. However, based upon our knowledge of competitor practices, we believe our current process for utilizing continuous payment authority is more customer-friendly than many of our competitors, and we are currently not expecting any material impact to the profitability of our U.K. product set as a result of any new guidance or continuous payment authority that the OFT may issue.

And before getting into the Q&A session, I'd like to alert you that I will not be entertaining any questions regarding the details of Enova's specific use of continuous payment authority. Our particular process is both complicated and proprietary, with multiple variants based upon an array of different algorithms, and is handled in the same sense of customer care and fairness that governs all of our activities. And that's all I got on the regulatory front, and that concludes my comments, so I will turn it over to Tom for the third quarter financial report.

Thomas A. Bessant

Yes, thanks, Dan. Good morning, everyone. Before I get in to the details and specifics related to the unusual items in the third quarter of 2012, I'd like to acknowledge that we expected a challenging financial comparison in Q3, and we're pleased to report that, due primarily to the strong performance of our online lending activities, we successfully came in at the top end of our previously announced guidance of between $0.95 and $1.05 per share, after adding back the unusual charges.

Enova International, our online lending subsidiary posted the sixth consecutive quarter of year-over-year 20%-plus growth in income from operations. As Dan discussed, Enova continues to leverage its distribution platform, and expand both its products and market reach to customers. So I'll spend more time than normal in the e-commerce business metrics in just a few minutes.

On a consolidated basis, Cash America reported 10% increase in total revenue, to $439.7 million for the 3 months ended September 30, 2012, and posted after-tax net income attributable to the company at $11.7 million, equivalent to $0.37 per share for the quarter. However, as Dan mentioned, included in the net income are expenses which totaled $20.4 million after taxes, or $0.65 per share, resulting in an adjusted after-tax net income of $32.1 million or $1.02 per share, which is near the top of our estimated range for EPS, but down approximately 5% from the $1.08 per share produced in the third quarter of 2011.

Comparing results to the third quarter to the prior year is challenging not only because of the onetime items, but also due to the exceptionally strong performance of all lending operations in the third quarter last year. As we mentioned in the second quarter conference call comments, pawn loan balance growth was robust throughout 2011, and gold prices were near all-time highs during the third quarter of 2011. This set up a difficult comparison for Cash America, as reflected in our guidance for the Q3 2012 period, so I'm pleased that we're able to achieve earnings that are solidly in the upper end of our guidance.

While Dan covered the elements of the unusual items incurred in this quarter, in his comments, the specifics include $3.1 million related to deferred costs associated with the potential IPO of Enova, which equates to $0.06 per share after taxes, and approximately $18.5 million after taxes and minority interests associated with the initial realignment and reorganization activities for Prenda Fácil, our Mexico-based pawn operation. The $18.5 million equals $0.59 per share and is comprised of charges related severance, store closures, write-down of assets to fair market value, plus the recognition of a valuation allowance of $7.2 million related to deferred tax assets associated with pretax losses in prior periods for Prenda Fácil, which are deemed impaired for accounting purposes.

We provided specific details of these charges on our website, to assist you in the reconciliation and financial statement geography, and the EPS reconciliation will also be detailed in our Q3 Form 10-Q, which will be -- we expect to file before Monday.

In addition to charges in Q3, we expect to incur between $6 million and $10 million of comps during Q4, for completions of the realignment activities, which will equate to $0.19 to $0.32 per share. These figures, in aggregate, are consistent with our press release discussing the anticipated total cost to reorganize our Mexico business. The amount of cash cost of the reorganization is expected to be between $5 million and $6 million out of that total expected cost of $28 million to $32 million, with very little of this cash consumed in Q3.

Now, moving on to specific segments and their quarterly results.

The E-commerce segment posted a 33% increase in total revenue, which reached $174 million for the 3-month period ended September 30, 2012, and reported an 11% increase in operating income, including a onetime charge of $3.1 million related to expensing of with deferred IPO cost. So adding back the $3.1 million would result in an increase in operating income for third quarter of 22% related to our e-commerce business. As the e-commerce business continues to successfully access customers in both its foreign markets and U.S. markets throughout the first 9 months of 2012, asset growth within the e-commerce business has been exceptional as the gross balance of consumer loans have increased from $218 million in the third quarter of 2011 to $319 million in third quarter of 2012, and, as Dan mentioned, a 46% increase. With this consumer loan balance as the engine for growth, the e-commerce business accounted for 57% of consolidated operating income after adjusting out onetime items for Cash America.

The healthy diversification between international and U.S. revenue in assets, in the e-commerce business, continued in Q3 2012 as net revenue mix was 52% international and 48% U.S. in 2012, compared to 46% international and 54% U.S. in the third quarter of 2011. In addition, the marginal profitability for foreign lending activities continues to expand as the portfolio continues a lesser mix of new customers. Total revenue for foreign e-commerce was up 33% to $84.3 million, and loss rates declined, leading to a 43% increase in net revenue to $50.7 million for the third quarter of 2012 compared to the prior year.

As I've talked about in the past, following the substantial growth in late 2011, of our foreign e-commerce assets which led to a significant increase in losses as a percentage of fees in the fourth quarter 2011, of 54.9%, the foreign e-commerce business has leveraged its revenue growth to enhance marginal profitability. This is evidenced by the fact that the foreign e-commerce loan loss provision, as a percentage of fees, has trended down sequentially throughout 2012, and came in at 39.6% for the third quarter of 2012, compared to 43.8% in the third quarter of 2011, and well off the peak that I mentioned in the fourth quarter of 2011 of 54.9%. This increase in marginal profitability from the foreign e-commerce business led to a 64% increase in income from operations, which finished the third quarter at $19.6 million compared to $12 million in the prior year.

Moving to the domestic size of the e-commerce business, we're continuing to see a promising trend that we've introduced in the second quarter, which is a significant amount of new customer traffic. However, while these leads to a large increase in asset balances, these balances are highly inefficient from a profitability perspective for two reasons: first, losses, as a percentage of fees, are higher; and second, marketing cost to acquire these customers take a bigger bite out of the profitability. Similar to the trend noted in the second quarter, losses as a percentage of fees, are up in the domestic e-commerce business year-over-year and came in at 48% compared to 38% in the prior year of Q3 period, and were up sequentially from 41.5% from the second quarter of 2012. This is consistent with our expectations as U.S. business has seen a significant ramp in total revenue and customers.

Total domestic e-commerce revenue for the third quarter was up 33%, which is a significant improvement from the low growth rate trends in 2011 when total revenue for domestic e-commerce business was actually down 14% in the third quarter, compared to the third quarter of 2010, although profitability was only down 8% due to a significantly lower loss rates as a percentage of fees.

Much like the success of the foreign e-commerce business, I would expect losses as a percentage of fees to remain high in the domestic e-commerce business until new customer growth moderates, which will create efficiencies in both loss rates and marketing costs, and marginal profitability should expand. Notwithstanding the high level of loss rates for the domestic e-commerce business in Q3 of 2012, net revenue increased 12% compared to the prior year, reaching $46.8 million. Likewise, you'll see in the attachments to the press release that the gross consumer loan balance for the domestic e-commerce business increased 44% to $152.4 million compared to $105.2 million at prior year. Therefore, the decrease in operating income from the domestic e-commerce business, which fell from $15 million to $10 million, was not unexpected and is not concerning to me at this point, as prospects for the future in the United States for the online lending opportunities are positive, given the expansion in the short-term consumer loan business. And more particularly, the doubling of the multi-payment installment loan business in the United States, which increased from just under $20 million in Q3 of 2011, to almost $40 million in balances as of the end of the third quarter of 2012.

Expanding on that last point regarding the installment loan balances, aggregate installment loans for all of Cash America International, now equate to approximately $122 million, about 31% of gross consumer loan balance, which is more than twice the balance of $57.5 million in installment loans on the books of Q3 of 2011. This product remains inefficient from a profit contribution perspective, as losses associated with the establishment of these loans is high as I've discussed in previous quarters, causing near-term profitability to be reduced in exchange for longer term profitability as these loans produce revenue in the out-period following their initial provision for potential losses. Of the $122 million in installment loans, $105 million is in our e-commerce business, and $66 million of that figure is in the foreign e-commerce business.

Notwithstanding the inefficiency of the immature installment loan portfolio, net revenue, which is total revenue less loan losses for the consolidated installment loan portfolio, was a positive $16 million in the third quarter compared to a negative net revenue in the fourth quarter of 2011. The growth in the consolidated short-term consumer loan portfolio increased from $233 million to $270 million during that same year-over-year period, ended Q3 2012, up 16%, while the e-commerce short-term consumer loan portfolio out of e-commerce increased 21% year-over-year.

Since I've touched on loss rates and net fees, let me add an additional detail, which is relevant to the installment loan portfolio, as well as the short-term single-payment portfolio, which is the allowance for loan losses as a percentage of combined gross consumer loan balances. This metric gained attention in recent quarters when it began to increase, particularly in the fourth quarter of 2011, due to the significant expansion of the installment loan portfolio. In recent quarters, this number has remained relatively high by historical standards, due to the increase in the installment loan base, which is a higher average loan amount and requires full loss provisioning of the outset of the loan. You will note in the attachment to the press release, that the allowance for losses associated with all consumer loans was $82.7 million on a $391.3 million gross portfolio of consumer loans, representing 21.1% of that balance. This number is up 0.2%, from 20.9% in second quarter of 2012, representing a fairly moderate increase compared to the 0.9% increase, sequentially, from the first quarter of 2012 to the second quarter of 2012.

I mentioned this also, because during the third and fourth quarters, the company incurred its seasonally highest percentage of losses, and it would have been appropriate to expect that number to grow at or at least above the Q2 sequential increase, which should provide some degree of comfort that the performance of this portfolio is trending in the right direction.

So I'll conclude my discussion on the e-commerce business by repeating the highlights, which include another solid quarter of significant revenue growth, at 33%, and the sixth consecutive quarter of 20% plus year-over-year growth in income from operations, which was up 22% after adding back the unusual items. On a trailing 12-month basis, the e-commerce subsidiaries posted a total revenue increase of 41% and a 30% increase in income from operations, excluding unusual items, while increasing its loan portfolio by $100 million to $319 million, up 46%.

Moving over to the retail lending services segment of the business, which is comprised of our U.S. and Mexico based secured lending operations, operating in a four-walled environment. The challenging quarter expected the outset in Q3 was indeed realized, driving the quarter results was lower overall gross profit margins as the market price of gold in Q3 of 2012 was lower, overall, than prices in 2011, contributing to a significant drop in gross profit margin on commercial sales, which ended the quarter at 23.1%. In addition, retail sales of over-the-counter merchandise remained challenged by a stubborn consumer market, and gross profit margins continue to be under pressure, coming in at 36.6% for the 3-month period ended September 30, 2012. I would point out to our listeners that both of these figures are consolidated and include both the U.S. operations, as well as the Mexico-based operations.

Isolating the U.S. retail services business, the drop in gross profit dollars was about $8.2 million, which includes both the liquidations on commercial, as well as retail sales. And was large, alone, to account for the down quarter, which saw operating income fall, $6.5 million to $50.6 million, down 11%. The difficult comparison with the prior year, notwithstanding, retail sales were almost flat, at $75.2 million, although gross profit margin on those sales was 37.8% compared to 39.3% last year, and sequentially down slightly from 38.9% in the second quarter of 2012.

The lower levels of gross profit obscured the solid performance from the domestic pawn loan portfolio, which showed service charges increasing 6% during Q3 2012, at $73.2 million, as the portfolio continues to perform well from a fundamental lending perspective. Which is to say that forfeiture activity continues to fall and loan yields continue to improve. However, the improvement of pawn service charges was not enough to offset the drop in gross profit lending, which led to a net revenue decrease of 4% for domestic retail lending services, and same-store decrease in net revenue, as over 6% for Q3 of 2012.

While pawn loan balances continued to perform well, demand for pawn loan balances continues to be soft, as same-store pawn loan balances finished the quarter down 0.5% compared to the Q2 2012 figure, up 2%. Although aggregate pawn loan balances finished the quarter at $241.3 million, which is up 7% year-over-year, and provides the opportunity for net revenue growth in future periods.

Merchandise available for disposition finished Q3 2012 at $160.1 million, up 2% in domestic operations, and was down 0.5% on a same-store basis, which provides an opportunity for lift in margins in future periods, assuming consumer appetite for retail goods increases. So domestic pawn lending activities were consistent to slightly better than expected in the third quarter, as we were challenged by the most difficult comparison of the year due to the significant run-up in pawn loan balances in 2011.

Mexico-based pawn operations review is complicated by the significant charges associated with the realignment of that business. I would, however, point out that the sequential trends, which I think are important, which shows net revenue in U.S. dollars up slightly, sequentially from Q2 and Q1, at $5.35 million compared to $4.7 million in Q1 and $5.25 million in Q2. And I'd point out that the fundamental lending model of general merchandise is well-positioned, with the targeted remaining store growth of approximately 47 locations to produce marginal profitability in the back half of 2013. In the meantime, the primary emphasis will be on the U.S. pawn lending activities, as Dan been mentioned in his comments.

As we look to the remainder of 2012 and 2013, I think the business will see similar trends as posted in the third quarter of 2012, which means that growth will be largely reliant on the continued success of our online lending activities, driven by a combination of both higher installment loan profitability and continued earnings expansion from the short-term loan portfolio. The 2 recently completed pawn acquisitions will support net revenue growth in retail services, however, I expect gross profit margins to remain under pressure in near current levels. These translate us to initiate Q4 2012 guidance of between $1.15 and $1.25, excluding cost related to the completion of reorganizing our Mexico pawn operations, compared to $1.18 in the fourth quarter of 2012. This will place our full year 2012 EPS range at between $4.42 and $4.52 per share, excluding the $0.65 of unusual items in Q3, and the additional cost expected to be incurred in Q4 related to Mexico reorganization. In addition, we initiate guidance, for 2013, of between $4.75 and $5.15 per share, which is expected to start the year with challenging comps to the prior year in Q1 and Q2, before finishing on a favorable uptrend.

And with that, I'll turn the call back over to Dan.

Daniel R. Feehan

Thanks, Tom. Operator, we'll now open the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of John Rowan from Sidoti & Company.

John J. Rowan - Sidoti & Company, LLC

As far as U.S. goes, did you guys have to stop issuing loans in Dallas and Austin? And if so, was there any material impact on the consumer loan balances?

Daniel R. Feehan

So, yes. So there are mentions [ph] in Dallas and Austin, in our retail services segment, our bricks and mortar business. We're not currently issuing within the city limits, we're not currently issuing short-term consumer loans. Obviously, does [ph] impact our pawn lending activity in those markets. But it only impacts the retail services group and it has not had a material impact on any of our numbers.

John J. Rowan - Sidoti & Company, LLC

Okay. And as far as the growth in U.S. installment lending goes, how is that weighted in the quarter? Was that back-end loaded or is it evenly distributed?

Daniel R. Feehan

Pretty evenly distributed throughout the quarter.

John J. Rowan - Sidoti & Company, LLC

Okay. And then just a couple of housekeeping questions, you guys combined some of the operating expense lines. I'm having a hard time, basically, getting the model on a net comparable basis. Is there any way you could give me the operational administration and depreciation expenses on an operating basis, and then also post the unusual charges?

Thomas A. Bessant

Yes. As I mentioned, we've got a reconciliation posted on the website. It should be up this morning, which will literally breakdown the charges by the relative geography. So that should help you out. And then on the other specifics, John, just follow up with me and we can walk through it.

Operator

Our next question comes from the line of John Hecht from Stephens Inc.

John Hecht - Stephens Inc., Research Division

First, talk about Enova. This good growth both domestically, internationally, but it looks like domestic growth is accelerating, and I'm wondering if you can just talk about how you're sourcing the new customers, what's going on with the customer acquisition trends?

Daniel R. Feehan

So the sourcing activity, in terms of mix between the lead generation channel and our own SEO and PPC activities at Enova has -- that mix hasn't changed significantly in this quarter. I do think, what you're seeing is the impact of some of the additional product offerings that we have, we're expanding the line of credit that I mentioned to you earlier that's currently in 4 states and I saw some really strong growth over the last couple of quarters and particularly here in the third quarter and some of the installment lending we're doing that we're seeing growth there as well. And on the single pay Payday product, there seem to be some additional renewed activity from customers in the U.S. As you know, John, you follow the numbers, the foreign growth have been sort of outstripping the domestic growth rates for a while until here in the third quarter, where they're pretty comparable, which I was happy to see. So I think the team in Chicago has done a good job with innovative offerings and giving the customers different options that I think, again, help facilitate the management of their individual credit needs and so I think if we continue to expand our product set, hopefully we'll continue to see good growth here in the U.S.

John Hecht - Stephens Inc., Research Division

Okay. And on the new products, the installment loans are approximately 1/3 of the portfolio and you get -- I know you've got the new line of credit products. Over the long term, kind of how would you expect the composition of loan balance to orders? Is there any goals at this point or thoughts on that matter?

Daniel R. Feehan

I'll give you a high-level thought, and that's simply, they're not -- I think our view, strategically, is that, there's bigger long-term opportunity in installment business. I mean, even with our existing Payday customers today, when we survey customers, there's a clear indication we've got folks who have been traditional Payday customers who would like to have the opportunity to borrow larger amounts of money and pay out over longer periods of time. So I think the customer demand is there, stronger on the installment side long term. I also think there's a -- and I mentioned in my prepared comments is, there's really a gap that exists in the market today, there are a lot of customers who do our survey that would love to have $2,000 to $3,000 that they don't have access to today. Banks aren't doing it, and it doesn't fit the model of the traditional payday lender either in the bricks-and-mortar space or online today and they'd really like the opportunity to be able to borrow $2,000 to $3,000 and I think that again, it figures that credit offering, that we're targeting, get out, move up stream a little bit in our credit profile of our customers. So I think long term, when we don't have a specific percentage mix in mind but it's clear to me that I think there will be a greater long-term opportunity to build a greater scale in the installment space than the single pay space.

John Hecht - Stephens Inc., Research Division

Okay. And you mentioned that you're doing serious diligence in some new countries, and that you don't need to give us the countries, but can you tell us what the zone of the world that...

Daniel R. Feehan

I'll tell you, John, the -- in this business, figuring in the online space, I think one of the things that we've seen with the company we acquired CashNet, that's now Enova, there's a significant first-mover or early mover advantage in this space, and we're very protective of what we're looking at in order to protect any advantage that we may have in any new part of the world. So I'm going to resist doing that, I mean, I'd love to give you some more details on that, but if, from a competitive standpoint, it makes a lot of sense for us to keep that confidential until we're ready to launch.

John Hecht - Stephens Inc., Research Division

Okay. Understood. And then final question, moving to the pawn, the commentary was that, it seemed like along the lines of the last quarter where there's -- the customer is generally just hunkering down, taking a lower loan against the collateral, the retail activity is a little soft, in your mind, what kind of shakes the -- what shakes the customers back to a more normal level of activity and maybe where, historically, you've seen this kind of trend and what happened then to bring the customer back in?

Daniel R. Feehan

John, it's a great question. I mean we've been asking ourselves that question pretty regularly over the last couple of quarters. I think that we've got to be careful here when we look at this and we talk about it because if you have -- which and we've done a lot of work on it, if you take a historical perspective in all the movement of our domestic pawn business. And again, I go back to the transactional levels of loans written and renewed, and purchases which really reflect the customer need, customer demand, and it's a fundamental of what drives our business. You look back over a 3 or 4 year period and really, to some degree, the aberration was last year and I hate to harp on that because it sounds like we were making excuses. But fact of the matter is, if you look at where we are today, through the first 9 months of 2012 on a comparable store basis, they can have the acquisition activity that we had there in -- particularly 2010, when we added Maxit deal. Our numbers from 2009, 2010, 2011, 2012, if you drew a linear line there, looks pretty good, we just had a big increase, a pretty significant jump in activity in the middle part of last year, particularly in the second and third quarter on a year-over-year basis that we're comping to today. So I think we've got to be careful though, that we don't draw any conclusions. Again, as I said in my prepared comments, that we're dealing with a new norm because I don't think that's the case. I do think people are continuing to be, and again, it's stuff I hear around our system in talking to the store managers who's talking to customers all the time. People are cautious. I mean they're concerned about the economy, they're concerned about unemployment, it hasn't improved dramatically over the last 4 years as promised, and people just, they just don't seem ready to step out there with a great deal of confidence that everything is going to be okay for them. Therefore, they are borrowing a little more money, they're spending a little bit more money, et cetera. So I think we're going to have to see, I think we're going to have to see economic improvement in the U.S., we're going to have to see some real progress with unemployment rates and to get that, sort of that confidence level back and you've probably got as good as an idea as I do of when that might happen.

Operator

And our next question comes from the line of Bill Armstrong from CL King and Associates.

William R. Armstrong - CL King & Associates, Inc., Research Division

In the U.K., assuming that, let's take the assumption that continuous payment authority gets severely restricted. What sort of collections capability do you guys have in the absence of a continuous payment authority? One of your competitors, for example, has opened up some additional collection centers with people on the phones, kind of pounding the pavement for collections. What do you guys -- how are you prepared for that?

Daniel R. Feehan

We also -- we operate collections center ourselves, Bill, so we have people, I mean, and I've always had, supplementing the continuous payment authority activity. Same exists in the U.S. I mean, we have that in the U.K., we have it for our U.S. business. We debit people's accounts here in our U.S. online business and the ACH System in the U.S. So we have that, we, certainly, I feel like we're properly staffed at this point, it's not particularly challenging to increase that staff if necessary. Although that's not my expectation. I'll tell you today that it's not my expectation that there is going to be some dramatic movement that will require us to do something dramatically different than we're doing today. If we had to staff up on that side of the equation, it's not that big a challenge, quite frankly. I mean, when you say boots on the ground, I'm assuming you just mean call centers, you're not talking about people going out...

William R. Armstrong - CL King & Associates, Inc., Research Division

Yes, yes.

Daniel R. Feehan

Yes, yes, yes. I mean, that's not something we have planned.

William R. Armstrong - CL King & Associates, Inc., Research Division

Okay. And then broadly, your 2013 guidance, what are some broad assumption underlying that earnings guidance, and if you could share that with us?

Thomas A. Bessant

Well, as I said, Bill, in my comments, right now, my expectation is gross profit margins don't see a significant move upwards. So I think there's room for expansion if we see gross profit dollars improved either through volume or margin. That could be impacted by retail sales becoming more robust, obviously, it can, if gold prices start to move up, it would help. And then the second component is the -- really the manifestation of these big increases in assets with our online business. When you put this level of asset on the books, really over the last 18 months, you're going to push revenue higher initially, and then you're going to get efficiencies on loss rates and those are very powerful metrics. But we've been, I'd say we've been very conservative with our initial outlook here because I think as you know, asset trends in the fourth quarter are very important to position us for 2013.

William R. Armstrong - CL King & Associates, Inc., Research Division

Got it. And then just one housekeeping question. The domestic pawn balance on September 30 -- you had a late September acquisition. How much of that increase in the pawn balance came from those acquired stores, if you have that handy?

Thomas A. Bessant

Yes, domestic loan balances $241.3 million, $7 million of that was related to the acquisition. So on a same-store basis year-over-year, we were down 0.5%.

Operator

Our next question comes from the line of Dan Furtado from Jefferies & Company.

Daniel Furtado - Jefferies & Company, Inc., Research Division

The first is just kind of, if you wouldn't mind contrasting or comparing to the level you feel comfortable, the single competition and the single pay versus the installment business? Because I think you're spot on from the standpoint that a product makes a lot of sense moving forward from both comparability and regulatory aspects.

Daniel R. Feehan

I'm sorry, Dan, your question, what's the competitive environment look like?

Daniel Furtado - Jefferies & Company, Inc., Research Division

Yes, like how would you compare and contrast kind of that single-pay product versus the installment, the competitive environment for those two, or is it really can you disaggregate the two?

Daniel R. Feehan

Yes, I think again. Obviously, my view is the single pay product is much more competitive, both in the U.S. and in the U.K. So if you take, let's put our bricks and mortar equation aside for the second, and if you just look at the online space, I think there's significant competition in the U.S. and in the U.K. and for the single pay short-term product and much less so in the installment basis. I think quite frankly, the installment lending component is, more complicated, it's more difficult, quite frankly, to underwrite. You've got to have, I think, enough capital -- working capital to support it, you've got to be able to sustain some early losses associated with that business that, if you're not well-positioned from a capital perspective, it would be very difficult to do, unlike the payday business, which is a higher velocity product. So we have today, we have less competition in the installment space. Again, I feel like we're strategically taking a position of trying to be a very early mover in that arena as with respect to this vacuum that I continue to talk about that exist between traditional banks and traditional payday lenders. So it's encouraging. I mean, I think there's a big opportunity there. We don't see as much competition as many people trying to fill that space today. Again, I think it's more difficult. It's more challenging to take on and one of the advantages, the competitive advantages that we have is a very strong analytics group and very strong underwriting capabilities that we've proven that we can make work over a long period of time. So again, I think it's a big opportunity.

Daniel Furtado - Jefferies & Company, Inc., Research Division

Great. And then my second question is simply, when we look at the single pay product in the foreign e-commerce business, it looks like loans written year-over-year were relatively flat, but the volume was higher and provision was lower. Is it really the simple way to look at this is that, as that business matures and grows, you have a growing comfort level with customers that you've done business with in the past and therefore, can take balances up and provisions lower?

Thomas A. Bessant

Well, I think it's -- our provisioning is based on performance. So basically, the performance is improved as the mix of new customers relative to total customers has declined. I got a consumer loan, short-term consumer loan balances written in the quarter, up about 9% to $269 million from $247 million last year. So a pretty significant base of business there and that 9% is pretty strong. Of course, not at the exceptionally high volume of year-over-year we've seen in the earlier part of that year, but it's still pretty healthy. But it's pure performance space, not -- we don't assess what we think the portfolio is going to do, it's pretty mechanical.

Operator

And our next question comes from line of Bob Ramsey from FBR Capital Markets.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Just to touch a little bit more on the installment product. I think you guys said in the intro that you expect over time the profitability in installment to rival payday. I was just wondering if you could talk a little bit about the yield differential between installment and payday products, and then what needs to be done to sort of bring that profitably up on the installment product? Is it just getting the credit right or are there other pieces of the puzzle?

Daniel R. Feehan

I think that is the total. I mean, the total was getting your underwriting models oriented to where you can get profitability and return on assets at the same level, on this payday. Today, when you look at, let's just talk about yields in general, in our installment product versus the short-term product. And I've got to bifurcate somewhat what we're doing today, particularly in the U.S, let's leave the U.K. for a second, but in the U.S. where we're currently, at CashNet is operating in 7 states in accordance with available installment lending statutes and states. The yields on those products are approaching short-term yields. So today, there's not a significant yield differential as it relates to CashNet and what it's doing in the installment loan business. What you've got is a much higher mix, obviously in new customers. And as I said in my prepared comments, we don't have the same maturity of an underwriting model yet, so I think as we gain experience, we refine those models, we'll get profitability certainly comparable. More importantly, I think if you look at what I think the bigger opportunity is with what I referenced as the netcredit.com approach, that is really designed to offer loans at lower rates and to bring rates down to appeal to a higher credit profile customers over time. Again, not moving way upstream but gradually moving upstream from where we are today with our payday customers. So I think again over time, you'll see us operating products with lower costs. And that's again, a big part of our long-term strategy is to design products that we can offer at lower cost to customers from a competitive standpoint. But again, it's a matter of refining our underwriting models at whatever yields that we have that we've got the right customer mix to generate the profitability, the return assets that we have targeted. So again, I think over time, you're going to see that, but it will be a matter of us being smart about the underwriting, which is actually the difficult part of this equation. I won't say it's secret sauce by any stretch of the imagination because I'm sure other people can at some point master it, but it is difficult and you've got to have the patience in the process of working your way through this and our long-term vision if that's where the market is, and that's the safest place for us to be in the market.

Bob Ramsey - FBR Capital Markets & Co., Research Division

And is the real difference between cash net and net credit, which are also, I would say, net credits are a little bit higher credit quality borrower that you can offer a little bit lower rate? And are they lending in the same states or was there any difference in the footprint?

Daniel R. Feehan

There is difference, and as I said, just coincidentally, they're both currently in 7 states. I think they're only, as I recall, I think there are 3 states where we're crossed over today between CashNet and NetCredit out of the 7. But the CashNet model today, and installment lending that we're doing out of that platform, is really oriented more around taking the top tier of what we currently serve in the payday space. And given the people in certain states where we can an opportunity to either have the short-term single pay product over the longer-term installment product, and given the opportunity to be able to pick and choose in that. NetCredit's really oriented around more of a customized approach to providing a loan product that's -- with payment terms, that are customized, for the particular credit profile of the individual. So it's designed to be a much more flexible product and appeal to a much higher segment of the population, I think.

Bob Ramsey - FBR Capital Markets & Co., Research Division

And so, NetCredit has risk-based pricing, the pricing of the loan is unique to the customer, based on their credit?

Daniel R. Feehan

Yes, that is the intent. That's what we designed, obviously, we have to refine that as we get more data and see loan performance data, customer behavior. But yes, it operates on a separate platform with separate underwriting models that are designed to do just that, to be more custom.

Bob Ramsey - FBR Capital Markets & Co., Research Division

And could you talk, too about sort of the appetite in installment for retail versus online? I know you guys do offer it in some instances in your retail stores, but I think that's more of regulatory adapting, I don't know if that's accurate or not, but do you have a lot of appetite to grow this on a retail business as well, or is it primarily an online strategy?

Daniel R. Feehan

I think we're doing some of the installment lending in our stores today. It's not a dramatic component of our business. We're doing both unsecured and secured, we're doing auto equity product in our retail stores today. But I think, and I do think there's an opportunity to expand that in our retail footprint. But the big opportunity is online. I mean, I think again, when you look at the kind of customer that we think that we can serve with installment loan product, our belief is that the real scale opportunity is going to be online there.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Okay, great. And then just shifting a little bit. I know you gave the U.S. same-store pawn loan growth. Did you give the same-store net revenue growth in U.S. retail or consumer loan growth?

Thomas A. Bessant

Yes. The same-store domestic net revenue was down 6% in the quarter.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Okay. And the domestic consumer loan growth and the retail franchise?

Thomas A. Bessant

Balance-wise, I didn't give that. Let me take a quick look, while we're sitting here.

Bob Ramsey - FBR Capital Markets & Co., Research Division

And then I know you mentioned that generally, you don't think this is the new normal, but it also seemed that you feel like we need economic and employment improvement to sort of pull up, if you will. How much of sort of the weakness in U.S. pawn and payday do you think is better just when you lap the second quarter next year and there is a comp this year because the last year, it was so strong, and how much of it do you really think is, you need a better economic backdrop?

Daniel R. Feehan

Great question. I mean, I do think, again, if you go back and look at multiple years and trend the business, a bigger issue that we're dealing with today in terms of the year-over-year comparisons relates to the big run up we have in, particularly in the second and third quarters and somewhat in the fourth quarter of last year relative to what we're seeing this year. So I think that's a significant component of that. Also, again, thanks to consumer attitudes are a component as well. So out of 100%, how do I segregate those, it's hard for me to say, but I think both play a pretty significant role. But to your earlier point, I would expect us, coming in to the second quarter next year and third quarters particularly, to see a better opportunity for year-over-year comps than we're experiencing right now.

Thomas A. Bessant

And then just to finish your other question, the active balance of cash advances and retail lending, same-store basis is up 2% for the quarter.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Great. And then last question, did you all repurchase any stock this quarter? It looks like the share count came down just a touch, but I wasn't sure.

Thomas A. Bessant

We did. I just gave you our year-to-date numbers. We bought about $15 million worth of stock and most of that, I mean, is heavily weighted in the third quarter.

Bob Ramsey - FBR Capital Markets & Co., Research Division

And how many shares was that?

Thomas A. Bessant

About 380,000 total for the year.

Operator

And our next question comes from the line of Bill Carcache from Nomura Securities.

Bill Carcache - Nomura Securities Co. Ltd., Research Division

So, Dan, you've talked in the past about how you've seen -- it seems like there's this tailwind that the industry has benefited from as some customers have become disenfranchised and maybe lost access to mainstream credit and that seems like it's potentially been a benefit for the industry. Can you relate that to kind of the divergent growth characteristics that we're seeing in your businesses now and it seems like that notion, that principle, is something that should kind of service a tailwind for your business overall. But clearly, that has -- it still seems to be a tailwind in the consumer lending business, particularly e-commerce online, but not so much in pawn, can you just relate that, that observation for us to the trend?

Daniel R. Feehan

Yes. I think it's -- I mean it's a great question. And I think historically, until, quite frankly, the last couple of quarters, I think historically, what we have been experiencing were similar dynamics between the online and the bricks and mortar space, and that seems to have been a little bit divergent here in the second and third quarter activity because clearly, we're seeing online demand remain pretty strong. Again, I do believe consumer credit remains tight and there are fewer alternatives than ever for customers out there, which should provide a great opportunity for both our businesses. It's hard for me to explain, Bill, why things are a little bit softer in the bricks-and-mortar space today. Again, I think it's a relative issue. If you look at loans written, our total loans written, pawn loans, in the secured lending, which is what drives our retail business predominantly, but pawn loans written and renewed for our business on a year-to-date basis, were up pretty substantially over 2009, 2010, were just not up substantial -- over 2011, which was up dramatically. So again, I think the aberration, to some degree, was in our pawn business. And it's hard for me to go back and explain to you what was going on necessarily in the second, third quarter, in the last year that drove such an increase in the same-store demand component there. So it is a little bit baffling, I don't have a great explanation for why the online space -- it isn't stronger than the bricks-and-mortar space, it is a little bit of a different customer. I think we continue to see some migration, we felt like it will be a long-term migration of people out of bricks and mortars online to the online space, much like we've seen in other aspects of e-commerce. I don't think those are dramatic from one quarter to the next but the long-term trend, certainly, I think people will be moving more online and we're positioned to capture that. I wish I had a better explanation but I'm not...

Bill Carcache - Nomura Securities Co. Ltd., Research Division

No, that's a helpful perspective and I appreciate that. And finally, can you -- you mentioned that, I believe there was no significant crossover from jewelry to general merchandise. To the extent that, that does happen, that's something that, you brought it up and it seems like it’s under your radar screen, but what does that do to your storage cost? Kind of are you prepared for potential for a greater shift to general merchandise, representing a greater percentage of collateral of, in your pawn lending business? And, I guess, can you kind of help us understand a little bit on the table on Page 8 of your release? It shows that jewelry as a percentage of merchandise held for disposition actually decreased by over 300 basis points. This is on a year-over-year basis and then I understand that's inventory and not collateral, used for pawn loans, but shouldn't that be kind of fairly representative, at least directionally?

Thomas A. Bessant

Well, as it relates to the collateral, no. Again, it's loan balances are down coming in to the year, you're not going to get as much as collateral. So we're not particularly concerned about the mix between inventory, between jewelry and general merchandise. As Dan said, the lending activity is basically flat year-over-year on a same-store basis, kind of cleaning up the acquisitions so that you're looking at an apples to apples. So I'm still seeing in abundance of jewelry come in. The real reality is, you're not seeing as much forfeiture on any of the collateral but particularly, on jewelry. So I think overall, the pawn business is performing very well, same mix of jewelry and less forfeiture activity. As it relates to accessing square footage per storage of general merchandise, that's certainly the way we plan our stores to manage the significant sized backroom. Unlike a situation that we had in Mexico, where it was a jewelry-only location, and it's very difficult in that same footprint to begin taking general merchandise in that same size. So customers have all sorts of collateral to their disposal, this is a needs-based business and when the need is there, they'll whatever collateral they have to support that need.

Daniel R. Feehan

Yes, I think when you look at the inventory number versus the collateral numbers, we don't, obviously, publicly release all our collateral mix issue but when you look at inventory numbers between jewelry and jewelry merchandise, you've got to keep in mind that, yes, you've got 2 disposition channels on the jewelry side, so you've got over-the-counter sales that we're making and you've got the commercial market where we scrap items. So that gives more flexibility to move, obviously, gold out to -- we only have one channel where we actually have the online space that we're expanding as well for the retail. But we're selling to the customers, we don't have that same disposition opportunity of having a highly liquid disposition market available to us on our general merchandise. So you're going to see inventory numbers a little different mix than you're going to see in our collateral base.

Operator

Our next question comes from the line of David Scharf from JMP Securities.

David M. Scharf - JMP Securities LLC, Research Division

Dan, actually, I wanted to return to just the macro topic and environment. The commentary about a more cautious consumer. Is there any anecdotes regarding whether in addition to maybe caution is also alternative liquidity? And in particular, whether more aggressive title lending, we've got a red-hot, sub-prime auto market, which, conceivably a better loans putting another $75 in somebody's pocket every month. Is there anything your store managers are hearing about, perhaps title and auto that might be helping out that consumer and decreasing pawn demand?

Daniel R. Feehan

Yes, I do think, I mean, if you look at the growth in the title lending locations in some of our big markets, and it would be disingenuous for me to suggest that, that has not had an impact on our particular loan demand. It is an alternative for customers and it gives them an opportunity to borrow lower -- potentially borrow lower or higher loan amount; maybe than some of their own collateral may create. So you've seen that in some of our big markets, particularly here in Texas. But also, when you look at, I mean, unfortunately, when we're spread out over 23 states and we've got a lot of data to look at and in places that we don't have significant competition from title lenders, yes, we're seeing our customers being cautious as well and I'm hearing the same things across most of our markets. The title lending, particularly here in Texas and in other states, is a competitive situation for us. We are, in Texas, offering a little different product. And in terms of our auto equity offering, which is the lower rate, longer-term loan than in the title lending, and we think is more attractive from a customer perspective. We haven't gained as much traction with that as I would've liked at this point, and we're focused on our marketing efforts associated with that. But I do think there is some impact again from that, particularly here in Texas and some other southeastern states, particularly.

David M. Scharf - JMP Securities LLC, Research Division

Okay. And then just one follow-up question on the e-commerce side. I think I'm reading this correctly, but when I look at the number, the amount of consumer loans, short-term loans written, both domestic and foreign, it looked like the year-over-year growth has kind of slipped in to the single digits, 8% domestic, 9% foreign, which obviously puts more of a burden of growth on installment. Is there any kind of guideline you can provide us for what percentage of the e-commerce business in next year's guidance is presumed to be installment? Where -- the mix is about 1/3 now, where you might see it ending next year at?

Daniel R. Feehan

We're at 1/3 today, I do think I don't have a specific number for you in terms of at the end of 2013 and where that mix might be, other than to say it will be higher. We're at 1/3 today and it wouldn't surprise me to get to be at the 40% or in the low 40%. I don't -- it really depends upon, quite frankly, to some degree, of what sort of adoption we get, relative to the new NetCredit platform again, and as I said I was just launched, it's relatively new, and it's going to take us some time to refine our models to ramp that up. But again, I wouldn't be surprised to be in the low 40s in terms of a mix percentage, relative to installment lending on a combined basis between the U.S., U.K.

Operator

And our final question comes from the line of Gregg Hillman from First Wilshire Securities.

Gregg Hillman

Dan, for NetCredit, is that unique in terms of an online line of credit for that customer group in the United States, or are there other products in that same space, and can you name one of them?

Daniel R. Feehan

You've got people like, I think it's CashCall out there, I don't think the product's quite the same. What we're trying to do is design ours to be more custom-oriented for folks. And I can't remember, there are a handful of offerings out there today, Gregg, I don't recall the specific offerings. But again, there's not much competition, as I said earlier in my comments. I think getting to these customers, providing a customized opportunity for pricing in terms perspective is a big opportunity. And again, it's going to be reliant upon our ability to have it running properly.

Operator

And we have no further questions at this time.

Daniel R. Feehan

All right. We appreciate everybody being on the call today and we look forward to catching up with you after the fourth quarter in January. Thank you.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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