CRMT - Earnings call transcript Q1 2020 | 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 First Quarter Fiscal 2020 Conference Call. The topic of this call will be the earnings and operating results for the company's first quarter for fiscal 2020.

Before we begin, I would like to remind everyone that this call is being recorded, and it will be available for replay for the next 30 days. The dial-in number and access information are included on 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, risk 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 Annual for information, please fiscal see X Report information on XX, more company's Form furnished to, April current regarding forward-looking ended the or For its filed on Commission and and the Forms Exchange reports of year XX-Q. Part and with, the XXXX, and X-K Securities quarterly

Executive Officer; Vickie Financial the Chief call and morning Officer. on Williams, this Chief the Jeff Judy, Participating and are company's President

turn I'd the over Jeff to Executive now, Chief like call the Officer, company's And Williams. to

Jeff Williams

thank joining America's for you Car-Mart. Thank us, in Okay. for and your interest you

pleased a we good to solid We for another and year. start fiscal great quarter report are to off are the

topline customers for we up the added X,XXX almost Our quarter. X% and was

lives and our with that happy results our we’re credit the our that to service says improvement about adding the in are the product value significant customers. and We what and of

of care We believe operational long-term success and creation. will that taking people drive value

We and in provide terms development and at to consumers will associates the continue cost savings we of ownership. invest of the of educate our in training total on same time the

move for customers and keep that as to life over goal profiles the time. their market With credit improve

leverage line our top in the customer and will infrastructure grow We count. built we

start-up excited place ground many getting and we ways years and initiatives are the in just have in history, said, we company. have As important even old though XX world. our are Many we we the about are a of great are

our great careers. build putting a team and have associates our they we customers experience their supporting as and giving Our is everything

company the aim our best touch said, in As way model we be this credit and serve solutions challenge providing at we’ve to transportation the market best to high the world represents to customers.

Vickie to go I will some numbers. to over over turn now it

Vickie Judy

morning. Good

Stores XXX age revenues from same a over increase was store up stores the to overall the about X dealerships category of X the up years in X.X%. Revenues X%, XX X%. XX income. about and category was in were resulted revenues XX% of For in category years a quarter, the less revenues This million X.X% was age interest XX-year sales than in for to and the up and X.X% from with increase million. at

result price the increase were of a selling Most volumes the as of increased was sales sales flat. basically

Our price selling This in This customers. resulted increased compared market the high-quality efforts car increase average increase quarter. a was from demand vehicle for X.X% a an year for to of $XXX, $XXX also to our used to the and high prior provide vehicles sequentially. or continued $XX,XXX our

or old, old to [XX of years quarter-end, X being XX from years XX%] dealerships our XX were to old the XX%] XX older. from X [XX remaining or At with or were X years

compared to XX.X, prior productivity units the from per month, quarter. overall XX year Our down was

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

quarter than to XX.X compared category X compared the the XX.X, of of XX.X year XX.X, XX-year year. of Lots five productivity to Lots quarter. in last had to the prior for age less for produced first years

area. the improve potential ongoing believe sales inventory, volumes our to with increase and in productivity and being investments digital to our continue efforts have we sales We field the made

XX.X for was XX to finance last XX.X receivables basis to originating up to contract The down X.X%, percentage year. Collections XX.X sequentially. prior was [versus] finance XX.X%, a Our X.X% from as the average quarter. the and XX.X% for up year to up payment slightly slightly points prior term compared of to was year percent months, quarter average compared compared

to contract for was million the at prior compared XX.X entire month, age approximately quarter, an million increased quarter the XX.X increase. to July. of Interest up for X.X average The for or basically from portfolio the to income X.X% nine all term including primarily average finance million prior weighted receivables the of months. – modifications X.X portfolio, flat the weighted at The the compared the to was finance Our average weighted XX.X. XX.X, approximately average year was receivables in due rate increase at end XX.X X.X% interest

margin quarter. sold $X,XXX year in Our dollars by to to compared per retail units gross profit $X,XXX, prior the increased $XXX, [X.X%]

Our for sold up quarter. X.X sales, year. with year for compared prior This the increase million of XX.X% was was mix XX.X consistent retail the SG&A prior of units the quarter to was customer benefits, and almost on great to stock-based long-term and as we’re focused salaries related a growing base. to investments developing including compensation an making and entirely support associates recruiting infrastructure

our We’ve X,XXX this efficiency improved customers number added again fiscal per and since the year. on based quarter time served associate. over since customers by year-end of X,XXX this last

We’re and while be cost to prepared to and long-term. on for the grow able focused to To continuing on be capitalize efficiencies control, invest market opportunities.

integrated company, improvements have seen not sales would finance in and our without net investments. credit and the As we these income losses an

in vehicle, percentage of X.X% For and down Both quality quarter. X.X%, offs receivables prior structures, average improved compared net from higher prior severity as collections of to first improved the finance improved, of current deal a practices. have quarter, the our and a charge result the frequency year year losses the as was

experience of customer results in concerns reduced on focus addressing Our a are contributed have ensuring customer manner frequency timely the and losses. to

year contributed higher and Recovery XX%, compared better for and approximately severity losses. were prior points quarter to quarter, to the XX% XX% in quarter. last basis the XX recovery the rates decreased of rate collections, Improved

and successful have and very We’re this pleased continued in being we that vehicles. credit in results with improvement more customers staying their the fact

per allowance XX% As or losses to in as offs from after-tax million XX. and diluted improvements X million the losses XX.X%, we $X.XX charge a our for net This allowance the a result share. credit for our in quality July portfolio, these of a resulting X.X continued in credit of was net decrease in benefit the reduced of income

quarter for credit the Excluding XX.X% losses benefit Income XX.X% respectively. for would XX.X% income to the this rate to of of quarter first fiscal compensation the the The compared was additional the XXX,XXX did been XXXX, compared sales related tax adjustment, for XXX,XXX to tax XX.X% year expense prior include the income income prior and for effective have current statement for share-based quarter tax the year current and on prior year quarter, for provision the quarter. an quarter. of

in be receivables expect prior benefits million. forward, our base stock to continue was availability and our approximately XX.X%. rate over to XX is XXX debt-to-finance facilities and current approximately excess option tax going any our We ratio effective had XX% our credit At under from quarter-end, exercises. to debt-to-equity our debt additional million is We tax total XX.X%,

shares company of quarter, $XX XX% the at XX,XXX million we’ve repurchased $XXX for an an repurchased we X.X company our at [$XX.XX] average Since of of approximately During share. per average price for approximately million, the share. per XXXX, of

have to strong continue cash flows. We

X.X receivables, debt. X.X added stock, net X.X and of in inventory in of million, in only For by a $X million our with funded finance million million million XX.X CapEx, total XX.X million increase the common increased quarter, we repurchased

Thank back you. it turn I’ll to now Jeff.

Jeff Williams

Okay. Well, thank you, Vickie.

Bryant, have Arkansas. did year. these in quarter, new expect one open as off last we the two in start, from the good and release, and during things the we to dealerships new These Arkansas the open great lots as dealerships well in in mentioned As one Conway, a gotten locations, other press

at in locations additional add and associates a that the to will We ability matches rate future highest the levels. our support customers at

the X,XXX and in to top full deserve proven leaders. existing Our a customers pick high up market have or levels that more our they us will leverage their and over markets. focus managers to These and serve continue we near-term are they build be as as performing can number large attention share help leaders support a our executing future our very general

we As happen. facilities, there. are more better Once for to built and keeping we is grow are the that as significantly being to we’ve our of again, aggressive obligation number associates that support making necessary we into an and customers experience make infrastructure investments Car-Mart as when communities believe can transitioning guide, a and great an a higher company, have inventory, with in with customers life customer

will now We it open up for Operator? questions.

Operator

the the both At Bank now America. from answer this my John during callers. Q&A. like time, Instructions] and may comes would from up first [Operator of to participants’ with that Our anything to earlier questions apply reiterate that I remarks statements to participants the will Murphy regarding come forward-looking question prepared comments

may with question. You your proceed

Yarden Amsalem

the of impact the competitive morning, you’re on relatedly, you credit Could seeing how subprime is in as This there? well dynamic? space, interest as share terms rate availability I Amsalem is John. And Good low Yarden for with guess what environment us guys. in

Jeff Williams

to a There’s available to our our Well, we do know, you still is that deep you job offering offering and lot there. consumers. see of it competition consumers competitive. to look and continue offering total pricing the money but We and for ownership, of so healthy competitive. educate it the cost subprime, compared very believe subprime is have at When our the out to we others, value is on attractive on is our those of that

room, have customers is dealing about of better The our those aggressive family. the customers trying and customer and and to with intense. more and better, to competitive in experience But savings is we’re repeat those believe, the the we when certainly the flushed our we lot it's know pretty with market a Car-Mart, educate do we and offering and make – cash market customers be with that keeping cost benefit consumers to

Yarden Amsalem

guess Obviously, bit, the seeing I do in that? driving a credit past you in recent think but accounts from over I what Okay. you health change think picked your metrics little up credit a quarters, you was And relatedly consumer? any are XX-day materially and your improved –

Jeff Williams

of slight slide]. look as We a are it say deal. up; that strong; is pretty at was A the [such customers wages don't are increase health overall, Well, a the XX in the plus. I’d up. worked our hours big

with more offering. the attracting We’re repeat customers

it believe is we healthier today than overall a was year know, You the ago. portfolio

Yarden Amsalem

Thank Okay. you.

Vickie Judy

day the that’s you the I’ll that we’re ordinary, to – the not plus something the – that now. and of concerned just right know, months month pretty – that where so, closes at day some seeing we’re sensitive XX on, too the the week out of or add of to those the unless about they the the are of

Yarden Amsalem

my you for guess Thank buybacks managers, last the your share on? on prioritizing openings, bringing strategy? and capital versus you. talk in you’re question; How I Thank investment you debt so maybe store can color. down broadly allocation more

Vickie Judy

in invest for to have but investments our we Well, excess to buybacks, business first those our first and our when you first certainly opportunistically, priority then, always our they to prior associates is so buybacks our we the order business service to make know, provide cash, of is of and that's care business that that be. first can is for, where going we’re order looking take customers, of then better for

Jeff Williams

that as managers a good in have mentioned, we number are number And general very of talented a of – businesses. running

capital our percentages. already impressive top for And to market so, to try folks improve is build the repeat as priority business those increase share allocations and us we and

Yarden Amsalem

Okay. very Thank That’s you, my thank and it end. much. from you

Jeff Williams

you. Thank

Operator

our Thank with Miller from you. next Hugh Buckingham. question And comes

You may question. proceed you with

Hugh Miller

for questions. thanks Hi, my taking

internal you’ve one improvement would versus that benefits car? by have about which, think the of the you guys you of as quality you say from You guess much of know, that know to you we efficiency deliver know, higher just, kind is able how collections driven been kind enjoyed, enhancements in I

Jeff Williams

improvements do We believe improvements. internal the most is seeing we’re that of from

delinquent better much have visibility We accounts. on

quicker We than we much were are delinquent before. getting resolution with accounts

and hiring the at the the great field involved we better; collections productivity have; in personnel account field. efforts visibility a with team level in corporately and we the field to matters the seeing We’re have with is those place that in didn't and reps assist training

mechanically for the the the the certainly, think blocking we field, we and reason more improvements creditworthy So, more you’ve credit running a losses in are there, tackling and as good to out lower believe know, the also basic with do out primary play car, attract is, you higher, customer car expectations but you product there. try better to put sound a putting we’re especially, a got customer,

piece that too. is certainly equation So a the of

Hugh Miller

you how mentioned guess, to base? other spectrum customer that as the you time create that and the base, That’s should customer kind line the gross margin and with progress And on about know, we you them, up of I know, then, initiatives life, helpful. move the income also for kind maintain think customers of of Thank you. the over influence item kind revenue the as with credit you

Jeff Williams

move bit know to some our car, of known of a the sometimes we and know, room of Well, and dealerships there's over on customers that us that’s up longer graduated we would moved and better us the above at a offering that have certainly and we age a a good quality mileage good keep quality special at to that. look lower Car-Mart question, and the maybe customers believe is – and dealers or us car maybe and customer new risks that time, car, those quite the with for little the finance car beyond and payment, good by product, have customers what years, paying with the term support independent you credit pricing over above a of when

know. with underwriting marketing to already So, being and we more and we're looking customers inventory with aggressive at

As advantages mean markets continuing above quality little our price bit, little above and drift to we've is a we on us, going inventory, some is good maybe inventory inventory, the a carrying for the what's time mix would which which and sales thing. we up, certainly think see, being us competitive over higher a of more got more

Hugh Miller

there. the little you what's color and of point know, is know, some this there, intensification volumes, but, Or, mix made? be mentioned a we of, you’ve more about would you are enhancements and on then, just a driving past of in volumes you kind know, I any think competition? of that? great? headwinds website there, know know, to about talk helpful you been the us basis some you of, that just to know, as That’s sell inventory having know, seeing you’ve any kind mix benefit you unit that recently more you there think bit and seen kind the about the has right notice the we’ve important, has some to should it. color how of that kind and And Got can Just on unit of go-forward about we you you’ve

Jeff Williams

Well, we of are bit – gain little transition. it’s a a

customers, be our and certainly the of on improving know, are and and We quality a quality we There’s the repeat the focusing is competitive. in lot it quantity more Really inventory, the we’ve customers of to we money competitive. side inventory, value our transition is got to to educate our service, a the consumers are digital bit our the in the about of the very consumers, little quality of the of us. so new with educating car, period already

fantastic. in bit and The and increased value but is direction bring we’re are like period, application. side areas the market The still online that online efforts, we the credit The The in volumes, meantime very there pictures the losses to marketing we with nice new of two, fantastic, we proposition right a things within is movements for us. little going all there. We're in some last or see of inventory we're in those optimistic but cars in credit plenty a feel of selling online. quarter are transition of and the

in good So, pretty we’re a sport. really

Hugh Miller

I what tax And in little should about go rate basis you. tax there. be from color on appreciate you lower looking great? think guidance a rate the forward for, a came Thank the we’re me, how about Great provide any you can last then than we would that. know

Vickie Judy

over when and items. or we do Otherwise, tax be XX% exercises get the options quarters, We some we know get rate, under exercised. Sure. just excluding to few stock-based benefit those discrete continue always when we should don't will the discrete pretty from be expiring a but close exactly next those those. the that that are is of The compensation really only have item difference done, still

Hugh Miller

Got you much. it. very Thank

Jeff Williams

you. Thank

Operator

Thank you.

with question Our comes Joseph Kyle Jefferies. from next

with You may proceed question. your

Kyle Joseph

morning on guys. Hi, another thanks and good taking good Congratulations quarter, for my questions.

and one you on approval on don't vehicles changes terms collections, front the credit, talked just more if or mind, First better there? rates anything any about better underwriting in of

Jeff Williams

inventory have improve so and on to improvements efforts up. efforts the field, obviously. No. traffic our up improved, actually efforts and online The traffic field is based The has been with sales traffic the online

the seeing thing and being finance dealerships so, more And a a little and a more online, company. we’re selective. good we're for at that’s customers And

right little aggressive a rated higher with that we’re traffic selective and have being risks, up be to the and has that trying underwriting more and dealerships always we’re getting balance the picking on both solid more but the very We're find and the credit we make customers. really at cherry sure there, best have online some loosen but after and been to we room to those go room and

Kyle Joseph

you follow-up how me, can week us Got remind had, cycles? it. then in for just your performs given just one the we’ve And business economic

Jeff Williams

Well, great of we’re company's credit is, not the that recession example recent tail recession. the last end at results and actually all-time the you only is it’s the recent know, anymore lows, the

the good So, supporting was to the credit a by and significantly for basic happen as transportation for out be for very putting there if these product last certainly service constrict us, actually Car-Mart. somebody a a was that market their fair support recession to price positive good and the that’s and would that with things providing good in affordable customers lives, these in customers,

Kyle Joseph

questions. very answering Thanks much it. my Got for

Jeff Williams

Thank you.

Operator

comes Thank John you. Instructions] with from Our question Janney. Rowan [Operator next

proceed may with your You question.

John Rowan

morning. Good

Vickie Judy

morning. Good

John Rowan

down Just cars the better frequency underwriting? and loss decrease a soundness the how Obviously, more. as severity the talked much quality to bit opposed of providing wanted frequency to into improving and a a in little in that a mechanical you to you severity lot is of drill consumer, are of function about change

Vickie Judy

a and lot stuff mean, related of improving. see it The upfront and we the cars. our continue tweak underwriting of down obviously our and to equity is to I is our majority payments that

car, little of customer getting sooner, any timely say a on So, we’re sure related basis. just and resolving is in of and the to the it a majority making us I to the would issues front

it, You they up. guys know, can't far, get if back let can't you then too of they out catch these go and

a is I our internal processes. of it and lot think again So, the car

Jeff Williams

but work visibility. the our frequency folks out, Yes, like you if in are in it biggest break to factor the we feel good had of is the of doing kind field

combination We fits but it’s quality too, and collections have car of the things. there a efforts in on the of

John Rowan

duration seen conversion situation out reduce far in or goes, theoretically we’ve the duration, come you know the as up that the Is give improve, but frequency that severity. even gave down, can and information past over the a we’ve we’ve obviously and figure on And cycle much if which year to driving as Okay. go I don't static duration seen security of the severity? should seen down payment is cash reduction in – you how so, speak

Vickie Judy

Yes.

So, it’s not huge.

at compared X.X, it’s so term. portfolio overall months, – Our last a the was to XX reduction big not year, in compared

We keeping little their over customers are in month cars, a longer. a

is car to severity contributes that our more if we, you have as well. the it. there, So, it and repo there to some when know, better, values on reduced wholesale we and getting do market We're

John Rowan

big and of repo-ing been in and So, back taking that opposed a to has scrapping as number there repo-ing cars change you’re the to auction?

Vickie Judy

No. been It’s pretty consistent. really

John Rowan

Okay. much. you Alright. very Thank

Jeff Williams

Thank you.

Operator

Thank you. time. further for this Jeff further any at questions not now turn would call like over back any to remarks. the to showing And I'm I Williams

Jeff Williams

customers. to associates Very great out there like We again as for Okay. our we’d interest going future. thank our of a feel our great to call your and to work in America's in all Car-Mart. the we’re company. excited for take like all And listening care on about as a sport thank Well, always, you

think where have that’s serve same grow page over going. pulling same the to and we customers on all we're obligation and the an more We’re and direction, and time

Thank have you. So, day. guys you a great

Vickie Judy

you. Thank

Operator

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

America's Car-Mart (CRMT) 16 Aug 192020 Q1 Earnings call transcript