Alternative Financial Services:
Innovating to Meet Customer Needs in an
Evolving Regulatory Framework
John Hecht
(415) 548-6901; john.hecht@stephens.com
Research Analyst, Stephens Inc.
February 27, 2014
The analyst primarily responsible for the preparation of the content of this presentation certifies that (i) all views expressed in this presentation accurately reflect the analyst’s personal views about the subject company and securities, and (ii) no part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the analyst in this presentation. See required disclosures beginning on page 25 of this presentation. For additional required
disclosures, visit our Web site at www.stephens.com/research or request such information by writing to us at the address provided at the end of this presentation. c 2014 Stephens Inc.
Agenda
•
Industry in Review
–
Payday Lending
–
Installment Lending
•
Capital Markets Update
•
Regulatory Review
•
Payday Lending
•
Installment Lending
2013 In Review – Payday Lending
Volumes and revenues in 2013 were negatively impacted by external (primarily regulatory) disruptions:
Small operators shut stores
‘Operation Choke Point’ severely disrupts Internet channel & processing relationships
Migration to other products
Federal regulatory activity increases, while state level regulatory activity remains relatively stable
State activity relatively quiet in CY13, likely as states await Federal actions
CFPB continues to study industry and issues white paper; considering rule proposal in 2014
Product development & innovation remains a key theme / trend
Trend towards multi-payment products (such as installment lending) is prevalent in reaction to customer demands and regulatory trends
New product innovation and channel development continues to be important for business differentiation and growth
Good operators continue to attract capital
Institutional investors are willing to provide capital to large players with strong cash flows
These market participants have been able to deploy this capital opportunistically, enhancing their market position along the way
Store Count and % Change – Payday Lending
Sources: Public Company SEC filings and interviews with private lenders Assumptions: Small lenders (<20 stores) shut 10% of their stores down in 2013. 18,697 20,647 22,553 24,043 23,682 22,735 20,916 19,000 18,484 17,862 10.4% 9.2% 6.6% -1.5% -4.0% -8.0% -9.2% -4.3% -2.7% -3.4% 0 5,000 10,000 15,000 20,000 25,000 30,000 -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Est. Store Count Unit Growth
Large Players Store Count
Company 12/31/11 12/31/12 12/31/13
Advance America 2,584 2,396 2,500
ACE Cash Express 1,700 1,682 1,623
Check Into Cash 1,100 1,050 1,100
CNG Financial 1,031 1,100 1,042
Cash America (CSH) 658 660 622
EZCORP, Inc. (EZPW) 487 486 483
QC Holdings (QCCO) 482 466 443
Community Choice Financial 435 492 498
PLS Financial Services 300 300 400
PDL Volume and Revenue Trends – Online, Storefront & Total
Total Industry volumes:
$30.0 bil. storefront + $15.9 bil. internet = $45.9 bil. total, or (5.8%) contraction from 2012
Total Industry Revenues:
$4.9 bil. storefront + $4.1 bil. internet = $9.0 bil. total, or (3.3% ) contraction from 2012
Dom Storefront Rev – weighted average growth rate Internet Rev – CSH Enova growth rate
Online growth rates use public data where available. Assumes 90% contraction in offshore lenders and 15% contraction in tribal lenders. $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 2006 2007 2008 2009 2010 2011 2012 2013
Loan Volume ($ bil.)
Storefront Internet Total
$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 2006 2007 2008 2009 2010 2011 2012 2013 Revenues ($ bil.)
Credit - Provisions as a % of Revenues (2011 – 2013)
Company Average Provision Average Revenue Ave. Provision as a % of Revenue Cash America (CSH) $28.9 mil. $118.1 mil. 24.4% DFC Global (DLLR) $9.4 mil. $66.2 mil. 14.2% Community Choice Financial
EZCORP, Inc. (EZPW) $44.6 mil. $210 mil. 21.2% First Cash Financial (FCFS) $12.5 mil. $49.8 mil. 25.1% QC Holdings, Inc. (QCCO)
Springleaf Holdings (LEAF) $110.9 mil. $612.4 mil. 18.1% Regional Management (RM) $18.4 mil. $102.4 mil. 17.9% World Acceptance Corp. (WRLD) $115 mil. $572.2 mil. 20.1% Update after extrapolating ’13 for remaining companies
Update qcco Totals 2011 2012 2013 Provisions $ 79,352.00 $ 90,962.33 $ 105,162.00 Revenues $ 369,473.00 $ 407,457.00 $ 405,546.00 20.1% 12.3% 23.5% 24.0% 18.3% 24.9% 24.0% 13.9% 22.8% 25.5% 17.0% 25.9% 29.5% 17.1% 26.7% 25.7% **19.0% N/A 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%
CSH DLLR EZPW FCFS QCCO CCFI
Provisions as % of Payday Lending Revenues
2011 2012 2013
Credit information includes all public companies including CSH, DLLR, EZPW & FCFS.
Sources: Public Company SEC Filings, Stephens, Inc. 8
Totals (in $ mil.) 2011 2012 2013
Provisions $79,352.00 $90,962.33 $105,162.00 Revenues $378,594.00 $407,457.00 $405,546.00 TP as % of TR 21.0% 22.3% 25.9%
Summary Trends/Statistics – Payday Lending
Unit growth:
Some large operators added for the first time in several years and continue to consolidate, but this was more than offset by small lender store closures as small lenders struggle to survive
Credit:
Credit trends deteriorated due to (i) product migration to installment lending, (ii) ACH processing disruptions, (iii) spike in new customer activity related to Operation Choke Point
Volume and Revenue Growth:
We believe volume growth was negative, due to ‘Operation Choke Point’ and cannibalization / migration to installment / multi-payment products
Evolution to a multi payment product is key trend:
This trend is in reaction to customer demand and regulatory changes
This is pursuant to continued industry innovation and may change the face of the industry over time
Installment Lending – Industry Overview
One of the most highly fragmented sectors of the consumer finance industry
There are approximately 8,000 – 10,000 individually licensed installment loan
company branches in the United States
Has not received as much regulatory scrutiny as other AFS providers due to
typical terms and structure of product
End market trends appear positive
Growing customer demand with improving job markets and economic activity Stable credit trends
Consumers willing to lever up, but can get increased limits on credit cards
This is an important product for incumbent payday lenders
Customer demand is high for multi-payment products
We believe many, if not most, of the large payday lenders have developed installment products We believe installment loan growth represented well over half of the total growth for industry
Installment Lending – Primary Products
List of key players w/ branch data and region
Large Loan Segment Small Loan Segment
• Caters to sub-prime and deep sub-prime
borrowers
• 3 – 6 month loans in the $500 – $900 range
at 50% – 90% APR with little to no collateral required
• Competition among small loan installment lenders exists mainly from small,
independent branch operators, typically with less than 20 locations
• There are several large operators that
compete in the small installment loan arena including World Acceptance Corporation
(WRLD), Regional Management (RM) and Security Finance Corporation
• Caters to near-prime and sub-prime
borrowers
• 9 – 36 month loans in the $2,000 – $10,000 range at 24% – 36% APRs, usually
demanding increased collateral coverage in the form of automobiles or other household items
• Historically, the “4-digit” consumer loan market has consisted of commercial banks and other large consumer finance providers
• Today, the large installment loan segment is increasingly fragmented, consisting of companies such as Lendmark, Springleaf
Installment Lending – Key Players
Company Stores Region Company Stores Region
Large Installment Loans Small Installment Loans
OneMain Financial 1,300+ National Security Finance Personal Loans 1,150 South/Southwest/Midwest Springleaf 834 National World Acceptance Corp. 1,120 South/Midwest 1st Franklin Financial 258 Southeast Regional Management 264 South/Southeast Tower Loan 147 Southeast Western Shamrock 256 South/Southeast Personal Finance Company 133 Midwest Sun Loan Company 249 South/Midwest Heights Finance Corp. 121 Midwest Southern Management Corp. 244 South/Southeast Pioneer Credit Company 103 Southeast Walters Management (ServiceLoan South) 101 South/Southeast Lendmark Fiancial Services 96 Southeast Credit Central, Inc. 99 Southeast Republic Finance 94 Southeast Toledo Financial Corp. 50 Texas Regency Finance Company 68 Midwest Bell Financial Services 43 Oklahoma 1st Heritage Credit 60 Southeast United Finance Co. 25 Northwest Mariner Finance 58 Northeast
Northwest Consumer Discount Company 52 Pennsylvania Pioneer Services 15 National
Installment Lending – Volume and Revenue Trends
Get approval for layout$235.40 $2,258.24 $2,762.64 $484.31 $2,465.09 $2,976.61 $696.10 $3,388.89 $3,025.10 $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 $3,000.00 $3,500.00 $4,000.00 RM LEAF WRLD in m il.
Installment Lending Volume
2011 2012 2013 $75.32 $534.86 $528.18 $109.14 $585.04 $570.80 $122.68 $717.43 $617.57 $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $800.00 RM LEAF WRLD in m il.
Installment Lending Revenues
2011 2012 2013
Total public company volumes:
Increased from $5.3 bil. in 2011 to $ 7.1 bil. in 2013; 11% CAGR
Total public company revenues:
Installment Lending – Credit Trends
15.2% 19.8% 20.1% 17.1% 19.5% 19.3% 20.4% 15.7% 20.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% RM LEAF WRLDProvisions as % of Installment Lending Revenues
2011 2012 2013
Totals (in $ mil.) 2011 2012 2013
Provision $223.23 $243.03 $266.52 Revenue $1,138.36 $1,264.98 $1,457.68 TP as a % of TR 19.6% 19.2% 18.3%
Summary Trends/Statistics – Installment Lending
Volume and Revenue Growth:
Volume and revenue growth appear strong, due to growing customer demand and migration / cannibalization of payday loan borrowers
Demand trends are reflective of a typical consumer’s interest in re-levering, but not having increased access to credit card lines
Credit:
Credit is stable, if not improving, due to improving employment markets and increased economic activity
More operators offering installment loans:
Primarily due to consumer demand
•
Public valuations
•
Transactions
Public Operators Comparative Valuations
Notes: EPS estimates for DLLR, EZPW and LEAF reflect adj. EPS. CY14 for DLLR, EZPW and WRLD are FY 14 estimates.
Shares Market
Price Out. Cap. CY EPS P/CYE EBITDA (mil.) EV/EBITDA LTM Price Company Ticker 2/21/2014 (mil.) (mil.) 2013E 2014E 2013E 2014E C14E CY13E Change
Cash America International Inc. CSH $41.76 28.1 1,173.5 $4.02 $4.25 10.4x 9.8x $296.4 6.1x -18% DFC Global Corp. DLLR $7.58 38.6 292.2 $0.82 $1.01 9.2x 7.5x $204.0 5.2x -60% Ezcorp Inc. EZPW $13.10 51.4 673.4 $1.35 $1.16 9.7x 11.3x $158.9 5.5x -39% First Cash Financial FCFS $51.89 28.9 1,499.8 $2.74 $3.05 18.9x 17.0x $139.0 11.6x -5% Regional Management RM $32.13 12.7 406.5 $2.39 $2.87 13.4x 11.2x $63.3 11.8x 84% Springleaf Holdings, Inc. LEAF $28.50 114.8 3,272.5 $2.00 $1.80 14.2x 15.8x $321.8 N/A N/A World Acceptance Corp. WRLD $102.14 10.9 1,116.9 $8.66 $10.13 11.8x 10.1x $189.7 8.9x 31% QC Holdings, Inc. QCCO $2.65 17.4 46.1 N/A N/A N/A N/A N/A N/A -21%
Mean 1,060.1 12.5x 11.8x 8.2x -4%
EV/EBITDA CHART
11.4x 9.0x 6.6x 5.5x 4.9x 5.3x 5.2x 5.3x 6.2x 8.7x 7.5x 7.2x 7.5x6.8x7.4x 7.5x8.0x 7.8x 8.7x 8.1x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0xEV / EBITDA
DATE ACQUIROR TARGET SECTOR VALUATION
Nov. 13 Pawn Lending $30.0mm
Oct. 13 Payday / Title Lending N/A
Aug. 13 Pawn Lending $61.0mm
Jun. 13 Installment Lending N/A
Jun. 13 Pawn Lending $103.7mm
Key M&A Transactions
Date Acquirer Target Sector Valuation
Nov. 13 First Cash Money Mart Pawn Pawn Lending $ 30.0 mil. Oct. 13 Check Into Cash Great American Loans Payday/ Title lending N/A
Aug. 13 Cash America Pawn Mart Pawn Lending $61.0 mil.
Jun. 13 Blackstone Lendmark Financial Services Installment Lending N/A Jun. 13 Cash America Top Dollar Pawn Pawn Lending $108.7 mil. May 13 Warburg Pincus Mariner Finance Installment Lending N/A Feb. 13 Speedy Cash WageDayAdvance.co.uk Online Lending $78.0 mil. Jan. 13 Prospect Capital Credit Central, Inc. Installment Lending $138.9 mil. Dec. 12 Western Shamrock Corporation National Finance Company Installment Lending N/A
Nov. 12 EZCORP gocash Online Lending $50.7 mil.
Oct. 12 Cash America 34 Pawn Stores in AZ, KY, NC & TN Pawn Lending $70.5 mil.
Key Industry Capital Raises
DATE COMPANY TRANSACTION USE OF PROCEEDS
Refinance existing debt
Provide capital to expand its existing business
Dec. 13 $73 million
Follow-on Offering
Sep. 13
$160 million
Senior Secured Term Loan B due 2018 LIBOR + 975bps
Oct. 13 $411 million
Initial Public Offering
Sep. 13 $110 million
Follow-on Offering Feb. 14
$160 million Senior Credit Facility
LIBOR + 250bps
Pay-down existing indebtedness, general corporate purposes
Partially secondary, Company proceeds used to pay-down existing indebtedness
100% secondary; no Company proceeds
Jan. 14 $2 billion
Initial Public Offering 100% secondary; no Company proceeds
100% secondary; no Company proceeds
Date Company Transaction Use of Proceeds
Feb. 14 First Cash Financial Services $160 mil Senior Credit Facility LIBOR + 250bps Pay down existing indebtedness, general corporate purposes
Jan. 14 Santander Consumer USA $2 bil. Initial Public Offering 100% secondary; no Company proceeds Dec. 13 Regional Management $73 mil. Follow-on Offering 100% secondary; no Company proceeds Oct. 13 Springleaf $411 mil. Initial Public Offering Partially secondary, pay-down existing indebtedness Sep. 13 Regional Management $110 mil. Follow-on Offering 100% secondary; no Company proceeds Sep. 13 NCP Finance $160 mil. Sr. Secured Term Loan B due 2018
LIBOR + 975bps
Refinance existing debt, provided capital to expand its existing business
Aug. 13 Genesis Financial Solutions $40 mil. Subordinated Debt due 2018 Used to fund growth
Jul. 13 Check Into Cash $165 mil. 12.00% Sr. Secured Notes due 2018 Repay borrowings outstanding under an existing senior credit facility, to fund a dividend payment and for
general corporate purposes
Jul. 13 TMX Finance $525 mil. 8.50% Notes due 2018 Tender for existing debt, general corporate purposes Jun. 13 Zebit $30 mil. Sr. Secured Credit Facility due 2016 Tender for existing debt, general corporate purposes May 13 Cash America $300 mil. 5.75% Sr. Secured Notes due 2018
Amends Existing Credit Facility
Use net proceeds to repay existing indebtedness, including outstanding balances under domestic and multi-currency LOC, and general corporate purposes Feb. 13 Speedy Cash $125 mil. 12.00% Sr. Cash Pay Notes due 2017 Pay dividend to shareholders
Public company valuation trends:
Public company performance was dependent upon product composition Pawn was challenging, payday lending was neutral, installment lending was positive
Current valuation levels are near the middle of traditional historical ranges
Regulatory clarity and ongoing product innovation should support valuation increases
M&A activity:
The pace of M&A activity was consistent over the past 12 months
Key industry participants who have access to capital are pursuing acquisitions to enhance product, channel and geographic diversification
Capital raising activity:
Investors, predominantly debt, remain attracted to the cash flow characteristics of the industry
Venture capital and private equity remain active in the industry
•
Operation Choke Point
•
State Activity
•
CFPB
•
Other
Operation Choke Point
In June, in a coordinated move, the CFPB, DOJ and OCC/FDIC caused many banks to terminate processing relationships with non-state licensed lenders
As a result, many offshore and sovereign nation (Tribal) lenders experienced massive disruptions to their businesses
Other vendors, such as lead generators, were also negatively impacted by this development
In our opinion, this was the most important development since the inception of Dodd Frank as this will result in changes to business models, will cause some market participants to leave, will support product innovation, and will result in greater alignment of regulatory models
In June, in a coordinated move, the CFPB, DOJ and other regulatory agencies,
through varied mechanisms, influenced banks and 3
rdparty processors to
terminate their relationships with (primarily) online lenders
As a result, many offshore and sovereign nation (Tribal) lenders experienced
massive disruptions to their businesses
Other venders, such as lead generators, were also negatively impacted
In our opinion, this was the most important development since the inception
of Dodd-Frank as this will result in changes to business models, will cause some
market participants to leave, will support / enforce product innovation and will
result in greater alignment of regulatory models
Operation Choke Point
This represents a potential major juncture for Internet lenders
Will this require a brief retrenchment and some model changes?...or will this result in one regulatory model going forward (the state compliant lenders)? It is too early to tell
What has happened thus far?
We believe offshore and single state lenders have seen a material retrenchment, if not shutdown Tribal lenders have either closed or continue to operate in limited fashion
Lenders are experimenting with alternatives to ACH or are moving to state-level licensing Lead generators have been ‘squeezed’
Licensed lenders have observed a material pick-up in new customer activity Credit metrics have deteriorated as access to credit has been less fluid
Near-term considerations Monitor the court battles
Lead generation costs are on the decline
State level lenders have the opportunity to grow and increase market share
This development should support product innovation and the setting of a more level regulatory playing field
CFPB – Takes Action in the Payday Space
U.S. CFPB
•On 4/23/2013 the CFPB issued an in-depth review of short-term dollar loans, with a distinct focus on both payday loans and their bank-offered counterparts, known as direct deposit advances. The white paper was critical of repeat
usage.
•Recent speeches / reports also suggest that the CFPB is focused on the less regulated and more aggressive components of the market, such as lead generation, offshore lending (Internet), tribal lending (Internet), collections and repeat usage.
•We believe the Bureau may eventually take oversight of installment lending as well.
•Expect rule-making proposal sometime this year – akin to Washington state (or OCC to banks)
U.S. CFPB in 2013
4/23 – Issues a White Paper
Engages in enforcement actions
Begins accepting payday lending complaints
Studying effects of binding arbitration clauses
For 2014
We may see a White Paper focused on Online Lending
We may see an Adanced Notice of Proposed Rulemaking proposal sometime this year
State Level Regulatory Activity
Not a lot happened last year
Not a lot going on – Utah and Missouri
Many states have addressed PDL, and some might be watching the Fed
to determine what to do
2013 – Somewhat ‘status quo’ at the state level
Thus far in 2014, we are watching activity in:
TX (municipal laws) ID MO AL UT SD
Many states have addressed payday lending laws over past several years, and
Other Regulatory Considerations
Federal Charter continues to gain momentum
U.K
.•In March, the OFT released a report which focused on widespread lack of compliance in the industry – the report provided 50 operators (90% of industry) with 12 weeks to gain compliance.
•The Competition Commission is studying industry given potential competitive dysfunction in the markets.
•The FCA recently put out proposals for consumer lenders, which included a rollover cap of 2x and a use of CPA cap at 2x.
•Rate caps implemented CY15
Federal Charter continues to gain momentum
U.K.
In March, the OFT released a report which focused on widespread lack of compliance in the industry
Began to actively monitor and enforce against egregious lenders
The Competition Commission is studying the industry given potential competitive dysfunction in the markets.
The FCA recently put out proposals for consumer lenders, which included a rollover cap of 2x and a use of CPA cap at 2x
FCA to implement, monitor and enforce rules beginning in April
Thoughts for the Future
The next phase – maturing and homogeneous regulatory framework
will support the following trends
•
Installment lending / product innovation / risk adjusted pricing and
product terms
•
Further consolidation – with large players getting larger
•
More emphasis on brand creation and organic customer acquisition
The next phase – a maturing and relatively homogeneous regulatory
framework should support the following trends
Product innovation – emphasis on multi payment products in the near /
intermediate term
Risk adjusted pricing and product terms
Further consolidation – large players getting larger
Thoughts for the Future
Trend towards larger loan balances, multiple payment products
•Payday lenders now offering installment loans, auto title loans, bill pay services, money orders, prepaid card services etc.
Varying business models and new products are a driver of
differentiation and growth
•More than half of same-store sales growth for large lenders came from new products in 2012
Diversified product offerings are important for customer
acquisition and retention
Additionally, we believe regulators are more favorable to
business models which can offer products with terms and prices
that adjust for credit risk and/or a customer’s ability to repay
Trend towards larger loan balances, multiple payment products
Payday lenders now offering installment loans, auto title loans, bill pay services, money orders, prepaid card services, etc.
Varying business models and new products are a driver of differentiation and
growth
Significantly, more than half of same-store sales growth for large lenders came from new products in 2013
Diversified product offerings are more important for customer acquisition
and retention
Additionally, we believe regulators are more favorable to business models
that can offer products with terms and prices that adjust for credit risk
and/or a customer’s ability to repay
Example of Product Development
As shown by the above Figures, CSH has experienced strong loan growth from its
installment product and LOC products, which now comprise ~ 56% of its domestic loan balance as of 12/31/13 (including storefront and online balances)
$17.5 $41.3 $66.6 $99.2 $21.6 $42.7 $66.2 $148.2 $141.4 $141.8 $129.7 0% 20% 40% 60% 80% 100% 4Q10 4Q11 4Q12 4Q13
Domestic Consumer Loan Mix at CSH
Installment Loans Line of Credit Single Pay Loans
$6.5 $16.7 $20.6 $22.4 $11.0 $24.6 $46.0 $76.8 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 4Q10 4Q11 4Q12 4Q13 in m il.
CSH Installment Loan Balances
Enova Case Study
Revenue and EBITDA ($ millions)
$185.0 $223.0 $255.0 $378.0 $480.0 $661.0 $765.0 $27.0 $47.0 $47.0 $63.0 $106.0 $140.0 $169.8 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 $900.0 2007 2008 2009 2010 2011 2012 2013 Revenue EBITDA
Closing Thoughts
The next phase – maturing and homogeneous regulatory framework
will support the following trends
•
Installment lending / product innovation / risk adjusted pricing and
product terms
•
Further consolidation – with large players getting larger
•
More emphasis on brand creation and organic customer acquisition
Consistent end-market conditions support demand for financial services for the underbanked
Traditional sources of credit continue to restrict access to middle and low income consumers
Increasing taxes, low wage growth, rising food costs, etc. support ongoing demand for credit for consumers
Current growth patterns are unusual and represent a ‘cross current’ of influences
Operation Choke Point
Migration to multi-payment products
Ongoing, but slowing contraction of national store count
Product innovation and channel expansion is increasingly a strategic directive
Product development is a driver of growth and differentiation
This focus is helpful to regulatory messaging and customer acquisition / retention
We expect a greater emphasis on brand development and organic customer acquisition
Closing Thoughts
The next phase – maturing and homogeneous regulatory framework
will support the following trends
•
Installment lending / product innovation / risk adjusted pricing and
product terms
•
Further consolidation – with large players getting larger
•
More emphasis on brand creation and organic customer acquisition
Recent activities by the DOJ, CFPB and FDIC represent the biggest disruption in several years and results in high uncertainty for the near term
We anticipate more activity out of the CFPB
Over time, we expect a more homogenous regulatory environment
Industry ownership will influence the landscape over the next few years
Private equity firms, well capitalized owners and key market participants have access to capital to further consolidate and shape the industry
Strategic focus of private equity firms, well capitalized owners and VCs may vary from traditional store operators
Industry consolidation will continue
Large operators will continue to opportunistically consolidate
More onerous and costly compliance serves as impetus to consider selling for smaller operators
Market valuations are reasonable in the context of historical multiples, while good companies can access the capital markets with reasonable fluidity
Disclosures
Public Companies Mentioned Other Than Those in the Comparative Valuation Table on Slide 17:
The research analyst principally responsible for preparation of this presentation has received compensation that is based on the firm’s overall revenue which includes investment banking revenue.
Rating Definitions:
Company Stock Ratings: OVERWEIGHT (O) – The stock’s total return is expected to be greater than the total return of the company’s industry sector, on a risk-adjusted basis, over the next 12 months. EQUAL-WEIGHT (E) – The stock’s total return is expected to be equivalent to the total return of the company’s industry sector, on a risk-adjusted basis, over the next 12 months. UNDERWEIGHT (U) – The stock’s total return is expected to be less than the total return of the company’s industry sector, on a risk-adjusted basis, over the next 12 months. VOLATILE (V) – The stock’s price volatility is potentially higher than that of the company’s industry sector. The company stock ratings may reflect the analyst’s subjective assessment of risk factors that could impact the company’s business.
Distribution of Stephens Inc.'s Ratings (as of 12/31/13)
% Investment Banking Clients Rating % (Past 12 Months)
BUY 57 20
HOLD 42 8
SELL 1 0
OTHER DISCLOSURES
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