EZCORP Inc (EZPW) 2007 Q3 法說會逐字稿

Good afternoon, and welcome to the EZCORP third quarter conference call. At this time, I would like to introduce your host, Joe Rotunda. Thank you, and have a good conference. Go ahead, Mr. Rotunda.

Thank you, Steven. Good afternoon, everyone. Welcome and thank you for joining us today. I'm going to begin with an overview of the quarter, talk about two new products in our EZMONEY stores, and give you an update on our store development program. Dan Tonissen, our CFO, will follow and take you through our financial statements. We'll conclude with an updated forecast and an opportunity for questions.

Quarter three was a good quarter for EZCORP. It was also the twentieth consecutive quarter of year-on-year earnings improvement for the company. During the quarter we grew our net income to $6.8 million, an improvement of 21%. This is particularly gratifying because it's compounded on top of an exceptional performance last year. Net income in 2006 for this quarter was an increase of $3.5 million over 2005, much more than twice the 2005 net income dollars.

On a diluted EPS basis this quarter grew to $0.16 from last year's $0.13, and additionally beat our guidance by $0.01. We're also pleased to report, once again, that our growth in earnings reflected a solid contribution from all business lines.

I'll begin with domestic pawn, where we have two primary components. The first one is fees on our loan portfolio, and the second is gross profit on the liquidation of forfeited collateral. Net revenues in pawn grew by 7% over the same period a year ago. The 7% reflects a continuation of the steady compounded growth rate that we've generated in this segment over the past five years. The composition by component, however, is somewhat different this quarter. Particularly notable are pawn service charges, which are the fees on the loan portfolio. Each grew by 13% or nearly $2 million for the quarter. This reflects strong same-store loan growth without any compromise in redemption rate. It speaks quite well for the health of our pawn portfolio as we head into the fourth quarter.

The other primary component is sales gross profit, including scrap. It also improved for the quarter but by a smaller rate. It increased $300,000. The slower growth rate this quarter is reflective of lower inventory levels in our stores, and you're going to hear more about this with Dan's remarks.

Because they were acquired late in the quarter, the Jumping Jack Cash stores contributed only a nominal amount of our pawn growth, but all in all it was a good quarter for pawn, with 7% growth in net revenues and 11% growth in operating income.

Our second business line, signature loans, and we often refer to it as payday loans. Net revenues after bad debt grew by $4.6 million or 37% over last year for the quarter. The fee component was very strong with growth of 52%. Early in the quarter we modified our underwriting criteria to maximize our payday loan volume during this peak period of [natural] demand. The result was stronger than normal loan growth, however, coupled with that revenue growth was a higher level of bad debt. Our bad debt was 38% of fees, approximately 7 points higher than last year. This was more than we expected when we made those underwriting changes. So, subsequently, in May we tightened our underwriting specifically for new customers. As a result, we saw our bad debt levels return to expected levels in the month of June, with net bad debt less than 30% of fees.

Now, in conjunction with our EZMONEY business, I want to touch on our two new products. Last quarter I announced the introduction of our installment loan. This is a five-month term product with loans between $1,500 and $3,000. We've now had this product in 13 stores for about 90 days and have seen significant consumer demand with no marketing other than in-store signage. With its controlled environment we began to test with more liberal underwriting to understand the consumers' payment behavior. Subsequently, we made further underwriting modifications, including the inclusion of a scoring model and income continuity requirements.

Next week we'll expand this model, as well as a parallel underwriting model, into 22 additional stores. We'll also support all of these stores now with a direct mail campaign to attract new customers. Our rollout plan is to have all 243 EZMONEY stores in Texas complete before Christmas. We're also exploring the potential of this product in several other states.

Now, we expect our second new product to rollout on the same timetable to our EZMONEY stores. We're even more excited about this other product, which I believe will be cutting edge in our industry. Most of our competitors offer debit cards, and we will, too. But ours will be unique and innovative. Similar to most, it's a reloadable prepaid debit card. Ours is a Gold MasterCard, and it can be used wherever MasterCard debit cards are accepted.

What's different from others in our industry is that ours has an overdraft protection feature. This allows the customer access to protection from overdrafting their account up to $300. There's a $20, $40, or a $60 fee associated with each overdraft, depending on the amount of that overdraft. These overdrafts and the associated fees are collected from the next direct deposit or by additional deposits made by the customer.

Now, this card was developed in collaboration with NetSpend Corporation. They're a leading marketer and processor of prepaid cards, and they're based here in Austin, Texas. We were really fortunate to find such a progressive company to work with. We've already introduced this product in 15 stores earlier this month, and we plan to add 50 more stores in August. We expect a full rollout to all of our EZMONEY stores well before the Christmas holiday season.

Now, these new products are a great complement to our expansion program. During the third quarter we substantially grew our store count. In EZMONEY we added 21 new stores, bringing our total EZMONEY store count to 390 locations. With the addition of the State of Kansas this quarter, our EZMONEY stores now operate in 11 states. That count includes 102 more stores than this time last year in the EZMONEY segment.

A key point here is that over one-fourth of our payday loan stores had been open less than a year, all with substantial growth opportunity as they continue to ramp-up. Now, that's one significant growth opportunity, but there's more.

The store growth doesn't stop at two years. We now have well over 100 stores that are more than two years old, so here's another data point for you. This YTD through three quarters those stores, those ones that are over two years old, collectively have grown their fees by more than 20% over the same period last year.

Shifting now to the EZPAWN side, we completed the purchase of the Jumping Jack Cash stores in Colorado during the latter half of June. This added an additional 15 pawnshops. At quarter end we now have 295 domestic pawnshops. And in Mexico we opened our third pawnshop during the month of May. Well, if you add all this up, we ended June with 688 locations. That's an increase of 37 stores during the quarter and an increase of 120 stores during the past 12 months.

Now, store development is a good segway to Albermarle and Bond, who just added a number of stores themselves in July. Albermarle and Bond is a UK based operator of jewelry only pawn, payday loans, and check cashing stores. At quarter end we owned 28% of that public company. For this quarter we recorded $720,000 in income associated with Albermarle and Bond. That's an improvement of $160,000 for last year. Albermarle and Bond has consistently delivered solid earnings growth, dividends, and a strong financial performance.

In addition to the income contribution that I just talked about that's recorded, there's another value that's unrecorded. The public market value of our investment at this quarter end was approximately $59 million, that's almost $38 million in unrecorded appreciation over our book value.

Subsequent to our quarter end, Albemarle and Bond acquired UK based pawn operator, Herbert Brown & Son Limited, for the equivalent of about $56 million. Herbert Brown was the third largest pawn operator in the UK with 26 northern England stores. This transaction has broadened Albermarle and Bond's geographical reach and now with their 112 stores they are unquestioned the industry leader in the United Kingdom.

The transaction was financed with debt and the issuance of 7.3 million shares of A&B stock. We bought just over 3 million of those shares for about $13.4 million. This maintains our position as their largest shareholder and will increase our ownership to just under 30%. Our share ownership has proven itself to be an excellent strategic investment over the years.

Our newest business line is our pawn operation in Mexico. We opened our first store in Matamoras in November. This provided a platform to build an infrastructure in Mexico and to develop an understanding of the country's culture. Our second store followed in Reynosa during February and the third one in Matamoras in May. Although it's still early, here's an initial report on the performances. One store turned profitable in month four. A second store will cross-over to profitability as early as month four, but no later than month five. And the third store, which just so happens to be the first one we opened, is progressing a little slower. This site and this store has validated the real estate [maxum] on the importance of location, location, and location. The overall result for these stores thus far, however, have fueled our confidence in the potential that Mexico affords us in the pawn industry.

So, with that, I'll turn the call over to Dan for a look at the financials, themselves.

Thanks, Joe. Joe gave you an overview of some of the numbers, and I'll give you a little more detail, starting with our statement of operations, on page 3 of our earnings announcement.

For the quarter our pawn net revenues, as Joe mentioned, which is comprised of sales gross profit, pawn service charges, and other revenues, which are on line 6, increased $2.3 million or 7% to $34.5 million. Merchandise sales, on line 2, increased $995,000 or just over 3% to $30.6 million. Same-store sales growth for the quarter was approximately 2% on top of 13% in the prior year period. Last year's June quarter had a lagging benefit of the higher inventory levels, resulting from the doubling of loan forfeitures in the December and March quarters as we converted most of our stores to a 60-day duration pawn loan.

After a 1 percentage point margin decrease, merchandise gross profit, line 2 minus line 9, increased $118,000 or 1% to $12.9 million. Scrap gross profit, line 3 less line 10, increased $195,000 or roughly 5%, $4.4 million. During the quarter we scrapped approximately $1.1 million grams of gold jewelry, a decrease of roughly 3% from the prior year quarter. Our proceeds per gram increased 6% to $10.02, while our cost per gram increased 15% to $6.64. Included in jewelry scrapping sales is approximately $700,000 from the sale of loose diamonds. For the quarter we turned our inventory 3.4 times compared to 3 times in the prior year quarter.

On service charge revenues, on line 4, increased approximately $2 million or 13% to just under $17 million. Annualized yields on our pawn loan balance were unchanged for the quarter at 136%, while our average pawn lawn balance increased 13%. Yields on our pawn portfolio are now matching up with a prior year portfolio comparably comprised of 60-day duration loans.

For the quarter our signature loan contribution, line 5 less line 15, improved 37% to $16.9 million. The benefit of a 52% increase in signature loan fee revenue, line 5, was partially reduced by higher levels of signature loan bad debt relative to fees.

Signature loan bad debt expense, line 38, measured as a percent of signature loan fee revenues, line 5, increased to 38%, compared to 31% for the prior year quarter.

Looking at bad debt levels relative to the loans originated in the quarter, our net defaulted principal as a percent of loans originated came in at approximately 6.1% compared to 5% for the prior year quarter. Loan originations for the quarter were up approximately 55% to $141 million.

After higher levels of operations expense, line 14, administrative expense, line 16, and depreciation and amortization on line 17, operating income increased 16% to $9.3 million. Increases in operations expense and depreciation and amortization are primarily due to the new stores. The increase in administrative expense is primarily due to stock compensation.

Operating income margins as a percent of net revenues decreased 1 percentage point to 15% due to the higher levels of signature loan bad debt.

Now, if you'd turn to page 6 of our earnings announcement for a couple of comments on our EZPAWN and EZMONEY operation segments. After a 7% increase in our pawn net revenues, a modest decrease in our EZPAWN store signature loan contribution, and a 4% increase in EZPAWN operations expense, EZPAWN store operating income, line 15, increased 10% to $13.2 million. Operating income margins for EZPAWN operations improved just over 1 percentage point to 37% of net revenues.

After a 40% increase in the EZMONEY signature loan contribution, line 4 minus line 13, and increases in EZMONEY operations' expense, on line 12, our EZMONEY operating income, line 35, improved 32% to $6.7 million. The primary reason for the increase in EZMONEY's operations expense is the 102 net new locations. These EZMONEY results include an approximate $900,000 drag for new stores, compared to an approximate $800,000 in the prior year.

Operating income margins for our EZMONEY operations decreased to just over -- decreased just over 4 percentage points to 25% of EZMONEY net revenues, line 9, primarily due to the higher levels of bad debt. For the quarter our EZPAWN segment made-up approximately 66% of our store level operating income.

Now, a few comments on the balance sheet, which is page 5 of the earnings announcement. You can see that we had approximately $31.7 million of cash, line 3, on our balance sheet, at the end of the quarter. Approximately $26.1 million of this amount is non-operating. A significant cash usage during the quarter was the completion of the Jumping Jack acquisition, using just over $23 million.

Let me point out a couple of key elements in the Jumping Jack purchase price allocation. Acquired pawn loans included in line 4 were approximately $4.1 million. Acquired net inventory included in line 8, was approximately $1.7 million. And property and equipment included in line 14 was valued at just over $400,000. The balance was allocated to some other asset categories in intangible assets. More detail on this purchase price allocation will be provided in our 10-Q.

You can see that our payday loan balance, which is on line 5, more than doubled in the last 12 months to $4.5 million. Not included on our balance sheet is $21.5 million of loans brokered with our unaffiliated lenders. These brokered loans increased 35% in the last 12 months.

Our investment in Albemarle and Bond, or A&B, is carried on our June 30th balance sheet at just under $21.3 million, and you see that on line 13. This does not include our additional investments of approximately $13.4 million, announced on July 11. Using Monday's closing price on A&B of 2 pounds and 54 pence, and an exchange rate of $2.05 per pound, our 16.3 million shares including the shares acquired in July would have a market value of just under $85 million. This compares to a book value of approximately $35 million after the July investment.

A&B's acquisition of Herbert Brown would have a benefit to EZCORP of approximately $0.01 a share assuming conservatively no growth in post-acquisition earnings of the Herbert Brown locations and no synergy from the acquisition. EZCORP should also benefit from approximately a $300,000 increase in dividends, assuming the dividend rate paid in the last 12 months is unchanged. In the last 12 months, EZCORP has received approximately $1.3 million in dividends from A&B.

Finally, you'll see on lines 34 and 5 that we ended the quarter with 298 pawn locations and 390 signature loan locations.

Now, let me turn the call back over to Joe.

Before I provide the forecast, one comment. Just as a reminder, we expect the Jumping Jack Cash acquisition to contribute between $0.04 and $0.05 in EPS during the next 12-month period. Last quarter we revised our earnings guidance to $0.86 for the year and announced $0.25 for quarter four. The Jumping Jack Cash acquisition, the impact of that was embedded in that forecast we provided.

So, now, we're providing a revised quarter forecast with guidance of $0.26 compared to last year's $0.21, and that's an improvement of $0.24. During the quarter last year we also had some non-recurring items, collectively were more than $0.01 impact on our earnings. Exclude that, our quarter four guidance is in the range of just about 30% over last year in diluted EPS.

For fiscal year 2007 we're raising our guidance to $0.88, which is $0.02 higher than our previous forecast, and it reflects a 28% improvement for fiscal year 2007 over 2006.

Now, to wrap-up the call, here's our forecast on store development. We're forecasting 46 Greenfield stores in quarter four. There'll be at least 45 more EZMONEY stores and one additional pawnshop in Mexico. This will result [in well over] 730 locations for EZCORP by yearend.

That concludes our prepared remarks, and I'll pause now for Dan to cover the Safe Harbor, and then we'll open it up for questions.

This conference call and earnings announcement contains certain forward-looking statements regarding EZCORP's expected performance for future periods and including, but not limited to, new store expansion, expected future benefits of acquisitions and investments, and expected future earnings. Actual results for these periods may materially differ from these statements. Such forward-looking statements involve risks and uncertainties, such as changing market conditions and the overall economy and the industry, consumer demand for the Company's products and services, actions of third parties who offer services and products in the Company's locations, changes in the regulatory environment, and other factors which are periodically discussed in the Company's annual, quarterly, and other reports filed with the Securities & Exchange Commission.

Steven will now open up the call to questions.

(OPERATOR INSTRUCTIONS.)

Our first question comes from the line of Jeff Schollaert from Wachovia. Please proceed.

Thank you. I was hoping you could just give us a little bit of color on the credit performance of your signature loans versus the new installment loan product?

Well, on a continuing basis, not specifically this quarter, we generally expect our net bad debt as a percent of fees on our signature loan group to be in the neighborhood of 25% to 30% on an annual basis, understanding there's seasonal fluctuation with that. We're just starting with the installment loan and it's been a short period of time. We haven't even been through a full loan cycle on the first loan yet, but we'll soon be there.

The experience thus far has been a higher level of bad debt on the installment loan, but as we began the product we did do it with a more liberal -- with more liberal underwriting criteria for the consumer, although we did require a substantial amount of income in order to support that level of loan. So what we're doing is now tweaking it, and we're making some adjustments on the underwriting criteria going now to actually a scoring model, which is our first use of a scoring model on a loan, in addition to the other underwriting criteria we've had. We would expect our bad debt performance as we finalize this underwriting criteria to be in the same neighborhood as the signature loan segment, itself.

Okay. Thank you. And then could you provide a little bit of color on some of the underwriting changes that you made during the quarter? I'm just wondering what, you know, is really driving a big spike in losses versus a big reduction in losses?

We made two primary underwriting adjustments that impacted the bad debt. The most significant, the greatest impact was on first time customers. We had capped first time customers in the past with an arbitrary limit so that they had to gain experience with us before we would give them access to larger loans even though their underwriting, normal underwriting criteria may qualify them for something more.

What we did in the quarter, as we were coming out of income tax season was took that cap off all together, and we saw that as the biggest factor that impacted our bad debt, so what we did was we brought back a cap for first time loan customers regardless of their amount of income or any other factor, and we made it just a little bit higher than what the cap was before, and we were able then to see as we got towards the end of the quarter, we made that adjustment in May, mid-May, and as we got to the end of the quarter we saw our bad debt go back into line.

There's was one other adjustment we made and it was a small adjustment with the loan-to-income ratio, which we occasionally change within whatever guidelines or regulatory caps we have on it. But those were the adjustments.

Okay. Great. Thank you. And then just a quick housekeeping item. What was the gross payday and signature loan balance at the end of the quarter?

Right around --

$26 million.

$26 million?

Yes.

Okay. And how much of that was the installment?

Roughly $200,000.

Okay. Thank you.

Thank you, Mr. Schollaert.

Our next question comes from the line of Dennis Telzrow. Please proceed with your question. Please proceed.

Can you hear me?

Yes, Dennis.

Okay. I think you mentioned this last time, but could you elaborate a little bit more about under what law are you doing the installment loan and what the rates are? Is it basically a CSO structure or are you using the Small Loan Act in Texas?

We're using the CSO structure in the State of Texas, and the rate is more difficult to be able to quantify on installment loan because it's a different terminology than you use on the 17-day average payday loan. But it works out to approximately a 250% APR for the loan that is three months.

Okay. And you mentioned the new product, the debit card with the overdraft protection?

That's correct.

I guess the implication and the way you've discussed it was that you're the only ones right now that has that card; is that correct?

To my knowledge, I believe there was a debit card that was out there at one time that had some type of overdraft feature, but I'm not sure that it's out there any longer, and as I review our major competitors in the industry I'm not aware of anybody, any of our direct competitors that have the overdraft protection. I think it is -- it is quite unique in the industry.

And those fees you mentioned obviously depend on how much the person "borrows or overdrafts?"

Yes. It's not actually a loan, it's a fee for an overdraft, so they're -- on their prepaid credit card, and an overdraft transaction up to $100 triggers a $20 fee and that's honored for the customer. And between $101 and $200 is $40, and between $201 and $300 is a $60 fee. There aren't any daily charges until it's paid back or any other fees associated with it.

Is the forfeiture rate -- I guess by now we've lapped 60 over 60, but your inventory position is, you know, almost to a degree too low, will that come back in line or what are your thoughts there?

Yes, Dennis, I think it's, you know, as you're saying, it's largely timing. You know, with our loan balance, the average loan balance in the current quarter 13% up and 11% above the prior year at the end of the quarter. As we get into the summer months the forfeitures will grow, so we expect that to pick-up over the next several months.

And last question, any change in your sort of preliminary thoughts on how you incorporate Jumping Jack? I think you talked about last time possibly merging some stores and other corporate overhead, should we anticipate that? Is that sort of built into your $0.04 or $0.05?

It is, and I think as I mentioned last quarter there are roughly three stores that we could consolidate over the next two years. One would probably happen fairly quickly. Right now, the focus is on integrating the 15 stores and converting the systems and rebranding, which should occur later in August.

Okay. Thank you.

Thank you, Mr. Telzrow.

Our next question comes from the line of Isabelle Sterk of Roth Capital Partners. Go ahead.

The average loan portfolio for payday loan stores 6 months old or less, then 6 to 12 months, and those over 24 months?

I'm sorry, we lost the first part of your question?

Oh, just asking if you could provide the average loan portfolio for payday loan stores over 6 months old or less, and those 6 to 12 months, and then those over 24 months?

We normally provide this once a year because of the seasonality of the business and the danger of making comparisons of average portfolios at different times of the year if they're not comparable, directly comparable with that same period of time. And what we've been doing is during our fourth quarter, providing that information.

During the December quarter.

December quarter, I'm sorry.

Okay.

Providing that information. We'd like to continue to do it in that manner. But I tried to give a little different feel for you with some -- an additional data point on the growth of these stores as they age. We really didn't have a lot of experience in the past because we just opened our first store four years ago this month, actually, in July of 2003.

Okay.

And we're just getting to the point now that we have some older stores that we can talk about the continuation of the growth beyond the numbers that we've provided in the past, and the stores now that are more than two years old have had this YTD through three quarters a 22% increase.

Okay.

Over the prior year. And I'll give you one other data point, because once you get past three years, and this is very limited in number of stores, we're still growing at almost, almost 20% in those stores. But keep in mind, it's a very limited sample.

Okay.

Of stores beyond the 36 months.

Okay. Thanks.

You're welcome.

(OPERATOR INSTRUCTIONS.)

Our next question comes from the line of Dennis Telzrow of Stephens Inc. Please proceed.

Dennis?

Yes. Can you hear me?

Yes.

Could you -- the one new store in Mexico, is that in the same geographic area as the rest of the others?

The fourth one we're going to open, it's in Rio Bravo, and it's in the -- it's between Matamoras and Reynosa, so it's very convenient to the others. A good cluster.

Thank you.

Each of -- by the way, each of the stores that we've opened thus far has a different type of [siting] strategy with it, and that's, again, a continuation of trying to learn what's happening with the business, and we now have and with this fourth store, we'll have a store that's located in a high vehicle traffic area. We'll have one that's in a street bazaar with the vehicle and pedestrian traffic. We'll have another one that's adjacent to a walking type bazaar that has an intersection of a street through it. And a fourth one in a neighborhood environment. And, again, we're trying to understand as we do this what generates the best traffic and trial into our stores.

And last question, I guess you would have commented about the Texas AG's issue, if there was anything new? So I presume there's nothing really new?

That's right. We continue to take this issue very seriously. We take data security very seriously. We've been working with the attorney general, the attorney general's office, in a very cooperative and open manner, and we anticipate having a resolution to this in the very near future. It does take time. We're still working through the issues, but fully understand them. And this next week we'll be able to see the type of information that's been involved.

Thank you.

Thank you, Mr. Telzrow.

Our next question comes from the line of Daniel O'Sullivan of Utendahl. Please proceed.

Afternoon, Joe and Dan. Thanks for taking my questions.

Yes. How are you doing, Dan?

Great, great. Hey, Dan, I don't know if you gave it out or not, can you give us the redemption rate for the pawn loans during the quarter?

Yes, it's going to be -- hang on a second -- yes, we -- for the quarter we averaged about 77.6. A year ago it was at 76.8.

Okay. And just taking the look at service charges and finance fees there, you know, obviously, some nice growth there year-over-year. Can you give us some more color of what's going on there? Is that just loan-to-value ratio or the redemption rate is up about 100 basis points, too, I guess, or so, maybe some more information on those two items?

If you look at the growth in the pawn service charge revenues it's up 13%. The growth in the average pawn loan balance is up 13% and the yield is flat.

Got it.

It's basically growth in the portfolio.

Okay.

Even with that, Dan, we have been adjusting our loan values, because as our portfolio has grown we've been able to reap the benefit of the pawn service charges but our inventory hasn't been growing, in fact, it's lower than it's been. And what we need to do is generate additional merchandise that we can use, as well, with the customer, and then to fuel scrap.

Okay. And just taking a look at the consumer installment loan products, do you -- do you guys have a -- I know it's still kind of early, I think you said it's in 13 stores right now?

Yes.

Do you have a sense of if that customer segment is a little bit different than the payday customer or is there a lot -- overlap there?

The primary factor that we've seen that is different demographically is the level of income.

Okay.

Because it requires almost over $45,000, almost $50,000 in annualized income in order to qualify for the loan, itself.

Okay. Thank you. It's helpful. Can you give us the average payday loan size in Texas?

Yes, it's going to be right around in the high 400s.

I think just over 500.

It's over 500, yes.

Okay.

In Texas.

Yes.

And do you guys have a sense of what the average consumer installment loan size is?

Oh, it's just over $2,000.

Okay.

Just over $2,000. I should point out that probably the vast majority of those loans were done to -- were done with prior EZMONEY customers.

Okay.

We did have some new customers but it was a small portion of it, and it's because we haven't really marketed outside the store. As we do this next phase of rollout we will begin with direct mail to non EZMONEY customers, prior customers, to bring them in.

Okay. Just curious, I mean at the counter I mean with score model is it a little bit longer period to okay the loan? How is that working out, you know, having the separate products and actually having -- it's the same associate working with two different customers, or how is that working out?

The same associate. We have it fully integrated into our store operating system.

Okay.

We use the same operating system and hardware and software, and as I think you know in our stores we've gone to e-signature in EZMONEY and everything is on the system, we don't maintain paper files any longer there, and we've integrated the installment loan into that, as well.

Okay. Are you guys able to, say, for a higher payday loan customer able to roll that into one of these consumer loans? Have you guys looked at doing that, at all?

We haven't marketed it to them, if that's what you're asking, Dan? But it -- we certainly, we certainly could.

Well, saying --

The (inaudible).

Theoretically, if you have a customer that has, say, like an $800 or $1,000, say, it's a $1,500 payday loan, and they're having all the trouble paying it back, are you able to roll it into this five-month consumer installment loan to give them more time to pay that off and reduce the default rate?

That would be an alternative for the customer if they so desired.

Okay. A lot of my stuff was already answered. Oh, I know you guys don't break it out, but can you give us a sense maybe of gross recoveries, I mean your debt sales for the quarter? I mean were they pretty comparable year-over-year? I know the net default rate is up about 100 basis points or so, I think, Dan?

Yes. Really no change from the prior year in terms of debt sales.

Okay. And will you guys show bad debt in the consumer and installment loan, as well, too?

We will if it ages beyond the default period.

Okay. And I guess you guys are still looking for I think it was around 650 or so for gold for the year, is that still correct?

That would still apply for the fourth quarter.

Okay. All right. So thanks a lot, guys. Have a good night.

Thank you.

(OPERATOR INSTRUCTIONS.)

There are no further questions on the phone.

Okay. Steven, thank you. And I thank everybody for your participation today and your continued interest and support.