CRMT - Earnings call transcript Q4 2018 | America's Car-Mart, Inc.

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Operator

Good morning, everyone. Thank you for holding, and welcome to America's Car-Mart's Fourth Quarter 2018 Conference Call. The topic of this call will be the earnings and operating results for the company's fiscal fourth 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 estimate to company the cannot nor obligation or any of does it undertake statements.

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

Jeff Williams

and you us. joining thank for morning Good

prices the down-payments same way. at after quarter the and As per improve per little Vickie charge-offs and into of do Collections other the serve sales volume very very were in a with quarter up month contributed a units XX%. seeing the lot also training release, have real area for a for during and with seeing we're we positive and momentum, lot get down on sales a we quarter have with repurchased conservative with productivity, still points volume from were were the support productivity up a and almost quarter practices efficiently and engagement number with solid being inventory is improve urgency about better this a second working Increased push of positive going communities will level a the and efforts. with Net detail to sheet our increases and our better row ended highlights several made to moving our receivables in the for percentage. local past digital of to We're system. to our we buying we but making. also blocking X work of continue we vehicles up proud addition room years tackling making. Better quarter company efforts we And to the investments need press some basis balance had you offering, due of XXX in in good will very very XX%. real a has progress Revenues minute. and in improvements better. We're XX-plus the X% We in a what time. had almost our inventory are in progress we're saw of of to we other good in we community associates had and go in our strong more lower purpose There a and and at continuing our debt enthusiasm we’re cars have and our to our through hard sense the some of social starting with we and do

engagement we company, and service bricks measure and customer mortar customer As levels within important that it's and very our the a experience to communities. the us

efforts our this I'll ensure strong customer us have some that now and turn better getting area. in Vickie? Vickie digital help are will for it over social our and We to relationships to and numbers.

Vickie Judy

everyone. morning, Good Jeff. you, Thank

and the XXX the in was five resulted about up end, been sales years year in old an increase from a XX increase being XX were revenues quarter. revenue XX% Overall to to For zero million, of on less XX.X%. XX.X% were XX.X% At the from This prior in quarter, a over XX.X% and revenue our same increase or store the Continuing and and a our over dealerships practices of training XX% year focus ten stores than for to has category XX%. category from age XX% five XX old, XX were older. or old years major age Revenues inventory up was to stores Stores these million. million in to was five five or XX up years XX% years interest ten from about XX with was revenues quarter ten remaining years driver of in income. category the up increases. the

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

year. lots of year and to year lots of for of the produced for ten compared to prior the last fourth five compared XX.X had productivity XX.X Our the the category XX.X five XX.X than quarter in age less to quarter years

and to price X.X% a better some to a term meet We increase prior however, the will this the overall year in the and compared of volume including or from for $XXX anticipate sales hope the of sequentially. an XX,XXX, and increase dollar increases or prior to increased fourth near results customers that continue be less put years X.X% the of also cars portion We in about to slight demand. larger for to selling money. vehicles, compared consumer we SUVs increased our average high same able see currently quarter, or to and pickups to $XXX process some we’ll Our soften market flat in it selling typically quarter prices increase

a X.X% downpayment XX.X% Collections, XX.X% to X% quarter. of compared prior year the percentage average last finance to was as year. compared was receivables, for Our percentage

XX.X prior was contract third originating quarter. XX.X% term average from Our for up flat and slightly quarter at compared to months relatively year XX for the the

the of considering increase up We year. certainly X.X prior was the in X.X compared in no finance Our price. up to modifications, contracts began weighted over receivable, a approximately all Interest was were XX.X flat of increase especially the which rate to success entire on their end. contract. from in from increase from was finance year interest end months to including with up The average little XX.X% the the to rate lengths, age and XX.X%, XX.X% due the for pleased XX% contract X.X a million prior increase term the quarter customer selling million term at XX%, average the of for of weighted always higher in last months. average weighted portfolio, income XX.X was for average average portfolio to at end goal must on affordability due focus at The of interest our the see We May of receivables the year our XX. also

margin of selling our gross from for price. gross percentages the percentage sales, the was average XX.X% quarter, higher was XX.X% margin For primarily of year higher lower and prior a decrease down This the fourth price quarter. result selling the profit are third a as at

for Our per quarter. did increase slightly gross dollars the profit sale

We better repair and stay inventory continue focused to management. expense on

decreased. XXXX full customer from for associates time For the the Overall, XX.X% beginning count since were and quarter, dollars was SG&A added has as of percentage flat. SG&A, per of the the prior X customer XX.X% as a by quarter. a up SG&A year percentage prior customers was basically the year We’ve the million of number compared of quarter. year sales, to

also general recruitment, commissions are of and related associates with to additional tremendous increased to at and marketing, for support collections bonus income. general managers the includes We the improvements focused sales the several level We be digital continue compensated increase levels especially and and especially in on heavily training customers. advancement SG&A net to service believe areas. our our This investments the manager net necessary these our these primarily And on will our bring and higher associates, are increased to our along our and an efforts. income value of relates

collections. as a frequency finance down For the quarter, was losses in improvement from down severity quarter. of lot and receivables, due per year of X.X%, a The the from resulted net current to lower about X.X% average for decrease prior was percentage $XXX charge-offs,

the to in our under higher XX.X% prior increase of the by receivables average interest million increase primarily resulted At lower with contract receivables due The in collections value pressure our remained Principal to rates average delinquencies, credit XX% age a percentage the the and was wholesale facilities. continue finance end, the XX.X% revolving offset year. modifications, to our to lower million approximately quarter approximately additional of recovery was Our of and in under XX%. rates. quarter, XXX come level collections, availability XX a debt for as compared total at for

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

half about to interest compared quarter due did also in Our quarter to of and debt, increase last interest this the to year's the expense the due increase rates. increased increase XXX,XXX

we of XX.XX quarter, shares XXX,XXX our average repurchased our company per XXXX, repurchased million Since or of of we have at XXX an company share. for an During of almost million XX% for price average approximately X.X% $XX. at the XX

cash to flows. have strong continue We

Thank A with million common to and net year, it million and total increased to million grow we million you. continue turn to debt. stock, we as million. able managers XX XX only back our forward XX.X we I'll increase in now, inventory being will We're business, to funded opportunistically. fiscal experienced the shares of X.X talented of develop added For in Jeff. repurchased XX receivables, in by a X capital million and looking expenditures the And repurchase

Jeff Williams

Vickie. Thank you,

we people what with with recruitment There will at a move do getting training a that opportunities continue purpose to in a we're we're provide lot stronger. the and but possibilities forward. serve customers and paycheck, quality really focus. to We very continue company the improve banks stronger areas We but talented unique a good to we tough getting our business, our optimistic all general get are people. our with people strides love get to real and for some join our that and make need team levels. we right know manager are we to advancement We places our unlimited of as highest in It's offer career we

release, fiscal close the year. uses. new first expect in open year. experienced begin capital And in second we new Oklahoma; anticipate We Fayetteville, currently and to mentioned Bixby, general dealership Montgomery, And our have did in of to quarter Alabama and under to Arkansas. dealerships in allocate to openings managers, later the we press starting during performing more one dealership these lot Pryor, four the process, all this the top couple As openings we another productive quarters Oklahoma;

final we up grow liquidity provide will to business, to can improvements the our some pick market and to continue to with note, balance us making we allow we’re continue share sheet a markets believe the in Our current strong do that healthy our in way. to

might you questions Operator? any take we'll have. Now,

Operator

Instructions] first [Operator Merrill John of Lynch. of America is from Our Bank question Murphy

John Murphy

of term just down about customers? first if longer volatility seems up. of sort good pricing relationship there's for because question you also, sort used good spiking think quality that supply. of of about the improvement of short we of in we And Was been lots the the vehicles, prices, then year half and sort think vehicle of in supply your comment If and as at if on vehicles in longer curious quality population for a last vehicle some pricing, Just there just in cars there statement and an improvement cars your with and – good on term, been prices. first can of is it’s like back increasing the the term for the are of we good think

Jeff Williams

looking does to certainly room than was maybe bit ago, months out helpful. Yeah. But is feel do is negotiating team supply better down our more be product more prices, there more there a negotiating which pretty But the slowing the got at cars, itself we on those in improve just for on our better a or doing we've think is demand car little cars, we six checking to for. looking prices, There's plenty still of tight. like today of job just still market year we're seem a

So longer put bit time. of mechanically every that think term customers over a yes, little point quality, been should to a positive and then I better, on in the allow a to that to has by, over time the continue XX-year your goes gets our which sound cars better, car old us year quality just

Vickie Judy

and also so John, the of and of number on expanding as are, well. online looking to suppliers that going we're kind We that of some working increasing we’re some

John Murphy

as four managers, deep – training And the the general human is or there kind and human other opening to mean, a question the it then bench second new on is working new is. lots and the we stores? around of stores about things deep should capital capital restraints bench obviously opening that you're the of you that like this how with four opening constraint to hurdles be sounds sort How new you’re biggest I think experienced management. is thinking are new or

Jeff Williams

That to good term up. of long this is and focus it time, lower a skilled, the we bench retain managers. that working it and takes can position right we build is really now that we direction. time. us performers But fit and what train over the time, like be. But work human we to attract job. term bench in and GM over do our our is managers really our in just certain time, on pretty for and mentioned, building talented, need most the a takes we with where their while group it's and bench expect results big right general as good of the with opportunities over our side feel of do to difficult getting to managers and over have the leverage other same we're talents It about to time we're hard skill stronger increase is general and trying bench improving experienced, very stronger, get customer job, count capital fit short constraint the very customers, good company up with strength the talented to not is at at is our the and a set company feel a that and person it certain now, do we and to increase manage number those do the But we've But

John Murphy

at debt comfortable? do almost Vickie, capital And you then in or five leveraging, go point just you're most think understand available. to about could a that receivables, so point we where the you that finance look range is or as you push talked you increase where you lastly, much can you think can What's how to,

Vickie Judy

Yeah.

there. somewhere that to do want so we stay ready add that, the I have think in people to when when to the have there. still we have we do opportunity We conservative, always dealerships in we're

we of point. still funding we leave there have So want to at always be for that. we But room sure that this plenty do

Jeff Williams

dealership can we John, base. And grow from existing our

We and grow opportunities to share lot dealerships. market have pick of a existing up

want a issues we ever be a So never in the to to growing business. position with have capital thought of base having

conservative we with with So balance the sheet with been where we're share this the aggressive industry, we've and repurchases, because happy we're more always more that got year, the business, with past. this a like we're we little stock where a and you more leverage in little more going. and we It’s at could we bought back so year share than the had

John Murphy

of have a Great. target XX%, is a have that there you you receivables, just lot with -- in case finance to need range you to think room it? you a But debt or work

Jeff Williams

on but really be that direction. out business really at We just have and percentage at in spot need balance buying a stopped to to leverage We always push saying, of could base target grow don't talented point. to we're We use sheet, of we'd bench the kind to this to the GMs opportunistically. shares really there have work that have we're that in and that a leverage room sharing more we like we've

Operator

question of John is Rowan next Our from Janney.

John Rowan

twice. it mentioned you Jeff,

improve, after I happening your stabilized. when given cash fact gaining about many is juxtapose You share level, on What's are that, improve, that from, in the collection branch that are wondered talk competitive cycle comes of you're function that term share market how these talking the years and simply a extending improving market all that. of about either easing symptomatic Is environment now of year-over-year environment? kind seeing of, we're the just your gaining just and competitive where productivity items downpayments you the

Jeff Williams

that most improvements of seeing seeing feel most we're the of -- positive like would we're made. productivity internal volume are I that say we've results more the we

of think easing or I outside on think something you inside to some see We focused are on front that anything relate would to we're within for going our car a going little the something that than we're internally, and relate starts on if a deals company, better more large improvements good getting ask anybody all having really making that's out majority starting car good the results, on seem better getting traffic be aware I for positive and at increasing dealerships. improvements foot display it does us market, job the majority fact else, to doing to that and good getting us, displayed with a good but the price competitive of the of good on prices, and and a cars closing on but certainly the getting we're done, of those our customers we're but the properly does side, competitive

us more has so I than think helped far. that anything

John Rowan

a then of just that and that, bit gross also Vickie, a because comment the was margin little your on purchasing -- cars, And I the would then gross the car expensive dovetail into margin the expensive will next about of I'm more more XX it general question, go or actually on not the that car, a that is a cars it gross basis or the better expensive down just and talked is on retail price you you how explanation about in there sequentially, -- the side. margin, made more that decline to newer? my into both drive not, And sales points, wanted drive would down side lower expensive a better more versus car? better? a sure why What’s just higher? what's Is I'm Is -- car driving it and is mileage year-over-year a SUV

So it's I a part know two loaded question?

Vickie Judy

Okay.

price So we purchase -- the a price, percentage. price margin markup off vehicles and of the our the based the purchase higher just off as of less is

So sell intrinsically continue higher biggest be is sales, other in trying cost of just going lot are of mix still when our of but that margin to cars, we track different a items gross quarter piece there really job was dollar to more repairs less. We the of our that the vehicles. the the this the and it of to selling get

John Rowan

slightly will or price move the that in the profit higher, just that gross guidance is quarters, your lower coming based slightly price. mean this stay margin flat flat sales or So that on does

Vickie Judy

So, quarter look the you a year price, is always price bit and at if still fourth our little somewhere around higher we're XX,XXX.

stay probably it'll change and somewhere in not should very margin there much. the gross So

Jeff Williams

We're good focus of cars good cars XX%, getting main prices John. kind share. And thinking, out market still in good and around is the we’re customers those some getting where taking and but for

John Rowan

obviously just the more Okay. to And of the bigger last are question, cars, on then your cars the cars are cars expensive part and that that mileage? is less

Jeff Williams

of are little job guys more being negotiating and cars, a at of – we're better, is a more job taking both. better tires mileage and prices all purchasing it’s inventory bit accountable. more really they little doing just on are It's our general the cars, better, holding above. passing better agents The -- the and managers doing are in looking the sources of A we're and really increasing a a newer, cars buying little just from are

John Rowan

what’s expected year. And then just for your rate tax question, last next

Vickie Judy

XX% our base will be rate.

Operator

of Hecht John from is question next Our Instructions] Jefferies. [Operator

John Hecht

I just quick fine one, a first the on modeling. tuning guess So

You change. rolled of couple through mentioned that in or Is completely the quarters? there next in of tailwind rate a more be should the that interest

Vickie Judy

close, there. it’s pretty about It’s

average you saw portfolio, yeah, if XX.X. So our

rolled pretty getting we're So out. to that close

John Hecht

like is numbers you something internal system other during rolled guys of I geographies writing Vic, attribute the you guys a particular jump there but came Is of relative talking, do the you some decent it I older stores, ones. that the in or vintage those was have then out seemed the there a to? you in to think were just quarter? What through at older the measures when anything the was that or cohorts And that lot some of execution

Vickie Judy

Jeff like that mentioned, General and selling. execution on that car and Managers really product it’s are focus that the these just that was into that It bought important they're

was And just the execution. it so really

Jeff Williams

easing felt at better. the are of the have the that competition, dealerships is it older and dealerships the same brunt maybe The bit, a getting just maybe, now time, little competition we're

on surprise volumes picking it that us decent older dealerships. So we're some up doesn't those

John Hecht

I with guidance, time, think but And move range competitive credit, to or range the if of in provisions to up long a I in kind I’m to the in guess it to back then and of about think you mid-XXs more the a to were in shifting do respect mid-XXs period think to now I you terms of the I for were really time, are just of, a recall how that seeing market, upper the due sales the flavor range back what we for for you're of guys guys trends? traditional ends just asking the XXs zone might it market, in where not market overall

Jeff Williams

have contracts they then Well, car it love six on used than much, when we of that could been or were the there the that than be, in on industry interest is a interest to a fair happen, the changes certainly we market the and rates to And used some lot value be. a decade recovery the repossess have lower it for but zero contracts for are to have higher now years the to than term but with and you rates rates ago. is seven much longer structural happen would

is were in So we get new we collections based far can drive low but as we our driving limited it industry. days, best efforts, to the performing the be keep and the maybe of underwriting down able actually on be but be mechanically, on just love may back our as it of how We'd we just down, not down, can that we goal. realities but in to better

John Hecht

you question, term. I the duration, the guess final just mentioned

after way time couple quarters determine flat have other the were you’re need kind series you to going being. one of or out, not the where of of at tail of they much been pressed last where the competitive generally the take for time end that a cycle think I to

Jeff Williams

think term term. sure has asset the that statement. really We've day an that's on the beyond short, lasts I a keeping contract focused and the customer fair making asset on one

up So for good if miss to we're miss But looking some to an to and as out that's don't requires folks to want that possible. as hardworking opportunity market don’t we consumers the that the share really what want we’ll term good keep same pick with a customer, time, at short a have out term, so there then and more little today. want

Operator

I’m back questions at to call turn this Williams Jeff further for you. like time. I'd Thank showing any the Mr. to And remarks. no over further

Jeff Williams

all Well, today. in just Car-Mart work employees. to there for of Car-Mart to, dealerships associates is to thanks as would and like always, for place us and Okay. your say out our a and our interest fired I our hardworking about joining to we're we’d thank like at future. our you for great thanks great up

thank and good have you So day. a

Operator

in conference. may does program have Ladies a disconnect. today’s for and conclude thank participating This great gentlemen, day. and you all Everyone, you today's

America's Car-Mart (CRMT) 22 May 182018 Q4 Earnings call transcript