CRMT - Earnings call transcript Q2 2018 | America's Car-Mart, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, everyone. Thank you for holding and welcome to the America’s Car-Mart Second Quarter 2018 Conference Call. The topic of this call will be the earnings and operating results for the company’s fiscal second quarter 2018.

Before we begin, I would like to remind everyone that this call is being recorded and will be available for replay for the next 30 days. The dial-in number and access information are included in last night’s press release, which can be found on America’s Car-Mart’s website at www.car-mart.com.

materially some inherently comments that involve actual to know, forward-looking may could all view. results which present statements, risks differ you of today management’s include cause As management’s from and uncertainties These statements Safe of XXXX. Private the of to Litigation Act Harbor Reform provisions Securities made are pursuant the any accuracy such update forward-looking guarantee The forecast estimates to company the cannot nor obligation or any of does it undertake statements.

XX-K Annual for information, please fiscal see on X turn Report information Executive Officer, on Hank And XX, to more company��s Williams, X-K this President. Form furnished Chief to XX-Q. company’s the call April the current regarding forward-looking I ended the company’s and or the morning Henderson, For its filed Commission and the like Exchange reports of would call Jeff Forms now year Part are over and with to Participating Chief and the XXXX Hank and Securities on the Executive Henderson. Officer quarterly

Hank Henderson

the Good share, you all slightly quarter, positive up us. the We length working last is to our was average critical, on basis closures, the of are without of our on Revenue that pleased but provide reduction price a million with success, will joining or a morning is term and quarter a with and that are our per with $X help keep revenue per customer bit moment. customer’s Sales a some having a in but $X fit affordable our our as budget a year, to transaction also equate was vehicles our keep as per results that from the we that details $X.XX consider will was unrealistic. always for earnings customers. net time compared we assure volume $X.XX. we will that with saw on Jeff store share. just expectations imperative as $X.XX store for that relatively it’s be thank flat, are effective range the down for Overall, with the impractical vehicle a for also same down actually we million which sales To to decrease payment quality in retail for payment

are which seeing We from more in quality, to reflected XX.X% parts in through efficient and practices up inventory for is that efforts improvement good better repair purchasing was of success of XX%, management repair reduce in our overall levels an gross last margins, improved year. and and our inventory expenses

saw also from right at direction shape We our some we a ended percentage last of receivable year down movement X.X% were XX-day delinquencies to compared well over in in at on as losses X.X%. X.X% as and accounts the the quarter as collections better with X.X%,

increases have with sales in to we we other bit our with line. saw and our our While overall, those solid we would quarter areas the contributing of each seeing key liked are in business the our a improvements of as of results an bottom with increase for pleased

over and results. So, going on our it ahead I to to details recent to go am more some now give turn Jeff

Jeff Williams

Hank. you, Thank

sales offset in income. slightly overall see the $XX was in X-year The quarter. X% up XX for million category, was plus year the less X%. resulted $XX effect X.X% about the increase stores was revenues up million decrease X% the age For revenues, X.X% Revenues X.X% a in the interest X.X%. dealerships than X X-year year. have related age by been from in was sales overall revenues, closed stores did, the of a in for same-store Stores the to up down category decrease about to to We XX-year quarter, decrease since from that however, which in last in age to category and

continuing continue going push with forward a revenue good good side. on improvements, dealerships. the inventory good prices, us initiatives, display these cars, especially efforts We with several help believe We will to at our

also from X the XX% old, the XX years end quarter, dealerships X from through at training are continue dealerships of and traffic our to XX% older. sales the old social improve execution and were and old, to XX increase our being to to dealership. XX media with or in also lot closure will support, remaining We level prospecting all effort are of XX% continue an X XX website years improve efforts years better and our rates quality or our At to

Our XX-year plus the compared per lots to prior year. quarter the for lot produced for month XX.X units sold per XX.X

do to and category the productivity our between X-year year. XX-year contributing XX.X our XX.X We for we are XX.X We than the in XX.X Our room improvement, lots some compared second lots produced have inconsistencies have produced and progress. to the some some category which to to discrepancies compared dealerships, dealerships. X between related making as inventory in quarter last is for especially of do to but less processes,

or We higher The prices less us Our and our some prior of flat have to hopeful put soften very prior for are hard customers but a the sales been for has same flattening price did not which and an $XX on to to and weeks, the year, minor for sales hurricanes on for are currently compared customers had slightly years impact we of average price find effect decreased supply prices. continue to prices much quality increased have give near-term will selling good or we to few minor may cars a our really compared increasing position but prices anticipate X.X% our vehicles us. The expected out to $XX better some in overall or XX,XXX, will money. that X.X% at sequentially. to the working

be temporarily decreasing and overpaying not a necessarily mean cars. thing the prices down. doesn’t Our of that our good go and would again Once for market us actually guys a prices job good out overall selling can of did for staying car

percentage as average was compared a Our compared percentage X.X%. to receivables XX.X%. of down payment to was finance Collections X.X% XX.X%

initial originating XX.X quarter months first average contract down XX.X year and from compared Our quarter. was from months for the to prior the months XX.X term

a the sequentially. portfolio year. including months contract Our for XX.X modifications last term from entire months, average at months, was year up weighted at weighted was this time up portfolio, months flat time this average which of X.X XX.X age and was basically from X.X last quite bit the The

For beginning that to $XX was a contracts, XX% the and XX.X% always quarter our end that’s from Interest more the finance on we due XXXX. average which at and compared the XX.X%, must to May can future, was of year. last at average all do competitive length The into about but just time demand customers to $X.X half approximately XX.X% up receivables in increase increase lower, went prior for payments. the interest continue increase receivables was weighted to of increase rate of up interest and reasons, our the in the this in rate from to on little affordability million income affordable finance our term quarter the better may million year focus

quarter. For year from that’s the from the for XX% of quarter, up profit XX.X% percentage the sales, prior up XX.X% second margin our first and was gross for

gross percentages. margin focus resulted in solid has improved inventory Our in the continuing management

are the and of improve having efforts forward. effect inventory inventory we with benefit efficiencies continuing move continue to these and to We quality a improve and efforts our are pleased positive and our as will turns us

management. aggressive remain expense our inventory with will We

$X.X as a SG&A was was million up quarter, SG&A up year as X.X%. about was percentage compared percentage finance SG&A quarter. the flat For Overall, to prior from and XX.X% a of to million of a SG&A of from as million about at the XX%. prior dollars with year $XX.X percentage the receivables basically were sales $XX.X revenues

of beginning X,XXX have customers We added the year. since the

make we areas. in GM discussed, investments As collection advancement, and we marketing to and to our sales relates SG&A recruitment, training these support continue and increased and have additional

the top lot over grow near-term, these from and plan is as to existing to leverage new talent over strategic some with time of increased openings market advantage we Our dealerships productivity opportunities. investments take the and line

we costs an will highest have frugal, the customers our We to value and will at we but levels. that ensure support watch our to always we will infrastructure very be

current quarter severity a and year the receivables of a finance to charge-offs sequentially resulted up as prior lower percentage average with net X.X%, from seasonality. the For from due of decrease quarter, were losses flat. being X.X% X.X% for from down The frequency

percentage winding net current down, that the a have as would average charge-offs for X the been Excluding finance of X.X% quarter. receivables closed are and dealerships

So, net charge-offs. we a for in XX improvement the basically point basis saw quarter

for in quarter the a resulted reserve were for the XX.X% off percentage would points the interest a XX under quarters, XX.X% for Our of collections closed and once losses have of as Principle as prior but reasons from several average losses wholesale for again uncollected in for rates average the on by statement The longer income rates to age range. increase XX% leveled we about value dealerships term higher the average mostly come our XX% collections increase from was pressure, been mentioned, and lower longer recovery rate the lower the receivables. compared last slightly in effect finance contract credit to basis a in credit of lower the term to quarter. about year. provision of our offset decrease receivable. XX% the receivables The the percentage recovery Between continue collections the the basis the for resulted have XX that point

us our quality We better our to to continue higher continuing customer. credit had with with vehicles, the vehicle, under we availability and improve. age total $XX credit combined and to improve success At customer risk providing $XXX million rates selling of in service expect dependable debt improvements believe facility. we that mileage believe We are to our levels our when revolving October, we additional customers losses a slight end customer almost are that was and a affordable million and

equity our is is XX%. finance Our debt and to XX.X% receivables current debt to

have and about have XX% at amended quarter the reduction managers improve we for company agreement rate. XX. $XX our since serve. demand to higher million additional we and future slight are in about results repurchased and to a a at markets $XX we consistencies at We average training shares our of we repurchases general price and there lot X.X% now In price level. and share $XXX at of an XXX,XXX much right repurchased room the we company existing know about is significant our a XXXX dealerships interest million can We with of grow available debt We or average our for and supporting October, for our of in reset an our recruiting, of

exciting very our a an Additionally, our reauthorized to manner shares grow in to healthy business repurchase for additional shares is repurchase. is at the has opportunistically. Car-Mart a continue million time and Board to X It efficient and plan

it Now, I Hank. turn back to will over

Hank Henderson

as Well, the said, grow Jeff. to in continue to a our manner. plan is Jeff healthy Thanks, efficient business

We grow the have to our lot increase capacity lot a execution. bottom sales simple stores line and also within opportunity with a better store of base many of existing to of

also we are continue as confident will we is this this the another and And in growing say been at we of will based will the Monday in Arkansas, people a of actually, the store the we location of a have we one open to example, with other here success. opportunities, area. the the put must additional fastest in the right and we continue basis to Arkansas, We on better can stores area. general backyard And our opening opportunity store for in in that and these us for serve strongest, opening provide needed out possible oversight prime is on similar XXX a country selective we new stores. state areas, and which X.X the million corner Centerton, to And to our support has are best help as where look help Northwest support experienced particularly in over managers area assure were proper that

are all the of managers in here have. had an we great the Bentonville and and past been with assure for us same the to Vickie folks opportunities effective release, on you impressive. and very for focus of fortunate right reminder area most and for associates, our importantly retraining, passion the Accounting serving team named us as here, saw X. very, has building group the together group this with has Officer. X that has as have press to incredibly and our things. commitment new company some the regional VPs customers years, for enthusiastic days has Also such training, is our and And our dedication, of operations in together X our future been everyone Principal is great as of shared The ahead team very operations the for to the everyone we So, most what’s have The past a pull lie excellent recently we time Vickie people. about January whole CFO, team Judy our our we have

a respect transition. our of and already smooth, understanding has will the of for she thorough very And very obviously make So, everyone business a here. certainly seamless this

are company her she new as We Vickie on excited role. the takes for for and

on questions. So, to that like concludes remarks. And our to your move now, prepared we would Operator?

Operator

remarks forward-looking prepared am statements the and like the have anything callers. a [Operator to time, we from I during the question reiterate would from the that my the regarding come earlier may that to both And Stephens. questions this Q&A. answer showing now participants’ Instructions] of I comments apply up Vincent line to At participants Caintic from will

open. is line Your

Vincent Caintic

Hey, guys. thanks. Thanks Good morning.

So, two questions.

First, the so And store bench you in about filled. have spent and up training curious now time Centerton. your you new just getting general talking managers

would have what’s the up, had general stores to of here? growth the opportunity you you growth managers that you that how If what’s trained to from maybe like need trajectory have amount and the many

Hank Henderson

single talent a the spot. the that factor just from us Well adding It’s of is dealerships. GM whole prevents that bunch at the

need some with now to were So, are take the have make a and the for kind working year growth them plans of where growing and opportunities general we existing we we of and look to decided another up, at good but years, some see them to at to we them manager industry the time at back bring of we a areas. seasoning that are XX do our several same XX managers, locations pull we and lot of that’s in are the leverage still train some a some group change adding and dealerships got talent is up in hard

a somebody answer I get get hard So, working that’s very quite but and the for that guess we bench keys the filled dealership. bench to know point we when to to the yet, ready to we where up have don’t on are your a question we

trained own. their up, dealerships, in We when we will somebody be dealership about all winning have shy a opening at experienced of ready

Jeff Williams

out I would add there there is no shortage for us. of talents

if when look there presentation more you we look we is at our we So, show on have investor actually, – what what to then have now identified.

could for XXX We are at XXX and really we our without at of now outside be stepping footprint.

So, us. a people thing it’s all for

Hank Henderson

not on progress. their But that’s we what and making so hard and good front quality opening some we without are dealerships be with looking name right door at are really that will folks now we

Vincent Caintic

Okay, great. That’s Thank you. very helpful.

environment about The your car could have second if the generally, question on maybe I improvement there, competitive but used you had have talk so here. you the sales just sales environment some

least I sales be for so, if industry of over of I or the generally any reports calling there? some increased that used now think there next are out seeing kind the the year competition car industry see or Thanks. is is you declining but at

Hank Henderson

basic if really affordable if for on anything we it’s looking transportation demand we is for it of executing sales folks the Not fun. a our product out more for just be competition front will any and just out you little that plenty increased side, see sales just maybe good the there friendly there bit right get and like us keep

Vincent Caintic

very much. Thanks Okay, great.

Operator

the And Janney. line John from Rowan question our of next comes from

open. now is line Your

John Rowan

Good morning guys.

Hank Henderson

morning. Good

Jeff Williams

Good morning.

John Rowan

have to in to said general am of to I needs range. back a to if effectively XX% change mean like of mean, it’s you move that, the market XX% I kind flat. get environment? not levers more revert to of in what Jeff, kind the been what raised historically mistaken company your I XX% normalized to big

Jeff Williams

much a at fact Taurus is just there, the there a the XX-year-old many or Well, is that out the just the is the not cars recovery main – driver cars of worth life, Taurus XX-year-old at end reduction really so point. just of Ford are

I buying mechanically offsets So good for car would a and think good really in sound a price the are sure of chance solid that to increasing we be at and putting success. our that making us car customers the

is how So, the at our of much a can’t so life them be main or start we that customer have of much through car better outside driver are the the of to handle after situations of putting value don’t many in into control. going have with. that customers and We that to in a sale influence car on factors go end that, effect

have We plough of to right adjust business and kind through issue. been that our able

addressing been now. year for a this have We of couple

percentages on not as are going certainly that but are anything far we that, are as counting not So, go plans hopeful that recovery into building we up, we our forward.

John Rowan

remind So, you the of was is I I again the in the there duration, it’s or rates or a bases on competition mean kind me influence whether overall not can if permanent maybe given if metal mean also – there sticks on changes? recovery that rate pricing any increased as around recovery impairment

Jeff Williams

Yes.

repos the could I but in scrap a be cars set of the the do argument and flood XXs car, an out we on maybe to the terms low your just basic floor old and longer for in permanently think recovery. the the that prices market, point, trades the there

John Rowan

as to issue. that in question, a your computer processes Can as in far off the dealerships? remarks. just think or your you just Okay. improvements earlier you a understood And about sounded like about you maybe comment Jeff it review go something prepared I sure are point-of-sale I the I problem and last maybe mentioned talking having what wasn’t

Jeff Williams

displayed hard and to cars level. front the at track working street have good the at properly to good customer are prices out We

hard are support We also training with our prospecting. in sales field, better working on associates and the

customers with in lot more database more customer a social prospecting the and an past, our heavily and hundred efficiently media and increase the in attract working and got effort on are we have several than we better We customers still or past effort all webpage on are have to that same then in working traffic. thousand that we at time,

John Rowan

Okay.

check. I just just was I make system of was that, sure outage. want but heard to thought to I technical I – So no type double there just I wanted

me. you thank from much. Okay, all That’s very

Operator

And our Jefferies. next question comes from from of Hecht line John the

line now Your is open.

John Hecht

very Thanks much. guys. morning, Good

Hank Henderson

Good morning.

John Hecht

morning. Good

is know what’s guys guess a is I change for oriented you question there in forward income, of kind you rate proper going I First for in? accounting guys to model cash non tax the

Hank Henderson

stock accounting forward, Got this is about far to impossible option but just absent have is that XX.X still it. something that run benefits effect on effect in going from almost excess it’s really Those change. on the balance It’s to exercises. calculate to benefits used any through as as us the This from it’s excess going based some sheet. tax rate,

are they running through income Now, statement. the

are So, would rate when it’s exercised get and for they XX.X. out all starting there based but effective is still at what the be point there, us options on

John Hecht

price margin, inventory your consistent but your lower Should average as that your lower Okay. gross the inventory even wholesale And then sales outlook maybe prices Jeff lower lower. avoided and on continue drift would costs you or overall to talked a about gross little inventory with respect we costs think you think given costs? to how about sales issues your and about hurricane inventory we should – average margins, guys costs,

JeffWilliams

would same costs Well, in color opportunity an put down, would we the inventory customer do costs to go to a in our use money. as when when like we our business, to that for what better like decrease,

strengths. the keep but put but sound really did quarter where a slight forward, the take to customer even a would bit mechanically is a sales in we we it So, price, going to that or sales about like for of advantage price in little see reduction our our much purchasing better cohort up,

John Hecht

in opportunity guess your like maybe speaking at relatively sounds cars even to And prices? to good relatively and the continue – you are so decrease it positive I on position generally low buy is

JeffWilliams

and we and year flat, models model the stay past improved but prices – bit it a As average was this relatively through our we mentioned saw little actually average year.

instead able at this cost So, a we are better same provide bit of to going little dollar. car the point, for curve down

John Hecht

kind us And thing in there bit then in is X year anything a anything with X or sales in or sort you X the vintage group? the that it you vintage different the year trends an that gave Okay. of geographical around or just to of a there that to the of to idiosyncratic where tax gets X seems is statistics are vintages, is Jeff kind reverse it that there order issue is like focused

JeffWilliams

as kind just been spotty dealerships. of consistency of far it’s a bit as the some little Yes, older between

on We of out what inventory management a are entire was working little bit. on getting has it kind down category really anything a jumped the little was better just

for going forward We are pretty volumes positive for outlook on sales the dealerships. of that group

We do had that road. see inconsistencies inventory and down we some working we and improvements on have expect some are with the to

John Hecht

you Great, Thank much. very guys.

JeffWilliams

John. you, Thank

Operator

our And from Sidoti. line question Instructions] Hollenden the [Operator of Brian comes from next

Your open. now line is

Brian Hollenden

thanks call. dividend your any Thanks. strategy share in debt your in you my the quarter, of taking Hi, for then down? more broadly pay can and significant and terms continued allocation just possible talk repurchases capital backs about With

JeffWilliams

our sense. we Yes, again the once flows. wise, leverage basically, put these out growth for cash be are Brian, would long-term, significant with grow through sheet for capital us good there it’s shares are where cash money XXXX, our the in a first for that it long-term industry – and happy be are our a we if bought we like value on would with that the very with balance out And we for little paid. business – the just have there the shares flow makes worked and and aggressive to prices allocation opportunities been we base comfortable feel very We where been feel are and we have comfortable changes more we that since have comfortable and we at we the priority

account, first receivables, priority customer and grow our grow from the business base grow is that’s a profits to grow business. healthy So,

we to to us able taking more little eat way of share it and advantage business and we are leverage of ratios business, And comfortable comfortable that market will the just have too cake a a think with opportunities feel forward. Secondarily, and and get been don’t and the we we look leverage as with repurchases. in have our go

Brian Hollenden

Thank you. deter rate customer higher Does the potential interest sales?

JeffWilliams

we any not gets competitive the that offerings so tighter looked now, We that. a ended But being but payment at a on credit were market that a No, $X and losses – in that side, change ‘XX. on make not was bucks I at at at risk think hard I we an on for make little of us month missing side. us now it’s back of know didn’t time, we am And the didn’t and really to creep a maybe competitive it not higher $XX negative higher We lightly change $XX are $X month. losses really to higher to May about don’t even that offset and all. as the all average trying about $XX I sales the up up are $X credit we to much

Hank Henderson

rate and what is still they some have have actually actually right, competitive been customers have so Yes, it’s the to level. see back. – that of at gone of our indirect lot in the They the heart we still competitive a right, come from

Brian Hollenden

manager me, and are wage a Thanks. then general turnover maybe And you the tell general us one side could you bit, inflation on seeing little last managers? then what’s of the just like from

JeffWilliams

One has some and out retailer our Yes, there side, a wage have little there, bricks think us the I of that retailer, about so give world all two-thirds we but cost a in of generally the on there wage-related. disruption is the is general is kind been pressure does mortar advantage place. over wage advantage

people all then – We people are are people costs our a business, and about and of two-thirds it’s costs.

our does more same very the token pressures mean too. are we of wage but and that at making customers aware are So, wages wages

to to productivity we and all not it’s higher focused get what we is we we for increases wage do there in on, have levels So, bad and we be offer at to productive make get is really – do sure have pressures that way wage competitive us and – in to our the customers. more are offset just are is what that trying to have but address the we to not some the General wide, is people that best general rank company here we Manager serve and and are be

Brian Hollenden

Thank you.

Operator

Thank no I you. And at am this showing further questions. time

Hank Henderson

Alright. for have joining We further any don’t comments. all Well, thank you us.

are day. covered we up think the all I for

back So, we news will get the to to time. good and bring some next work more plan is continue to

you thank all. So, Have day. a great

Operator

conclude your gentleman, program thank in does today’s Ladies day. and This may Everyone, and participation conference. you for the you all disconnect. have great a

America's Car-Mart (CRMT) 17 Nov 172018 Q2 Earnings call transcript