CRMT - Earnings call transcript Q2 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 Second Quarter Fiscal 2020 Conference Call. The topic of this call will be the earning and operating results for the company's second quarter for fiscal 2020.

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 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 Forms on XX-Q. and the X-K Commission reports of year Part and with the XXXX, Exchange and Securities quarterly

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

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

Jeff Williams

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

pleased road provide The the we and our that's after great the we consumer the customers levels. And to results do taking large good high. operational pledge with line real to focusing in is keep on our of solid the can with rate experience basics customer We that service another power. The great for we of quality needs the sustainable customer and associates vehicle, to model serve our and ability The ends service a highest transportation with very have serve we at an work gives our customers obligation starts grow for validation everything vehicles demand on hard count and further sale. of and to peace care at and mind is to fragmented, customer quarter. report our are and business and expected market local were the

of on benefits market rates, putting with of terms and the offering our educate focus We a of road. about with our shorter to have an real position, the that in top financial continue customers to on equity will interest of we lower to sense bottom along our keep knowing mind valued from consumers customers in the urgency the peace

better customers' of life part is quality of Car-Mart family. they're the when Our overall

it to numbers. Vickie go turn over now I'll to some Vickie? over

Vickie Judy

morning. Good

great Jeff and of resulted vehicle had vehicles, selection higher quarter our including made attracting record We dealerships. of since The an had of income. and is we volumes As mentioned, fit customers in great with an increase did of repeat up saw were a sales Same-store in revenues increase million. quality get October a a ages contributing solid increases additional our We customers. job X.X% that needs. $XXX across sales XX.X% a from that This revenues interest XX.X%. a all investment their solid we've more potential by million into helping in to inventory, last $X.X associates customers,

years of XX and was $XX Revenues was in less of stores than to revenues to age the Stores in XX% XX%. category category for in was five million. up category XX year from stores X up age over the XX%, the about years

sold our year. X increased XX% or XX XX years and last units At $XX,XXX old, quarter old, increased XX% XX older. dealerships the Retail years compared $XX,XXX retail XX to years sales from to the or by X.X% X and remaining X or of price XX were to by to end, were X.X%, from old average dealerships were

XX.X. up month, units X.X% Our overall productivity per per lot from XX.X was

productivity five category X Lots compared the year. the year. than compared of XX prior Our units prior to XX-year-plus per to second for sold month And the per year of produced the lots last lots XX.X of quarter. in had age XX.X the XX.X lot for quarter to to for produced less quarter XX.X XX.X compared for the XX.X year years

increasing Our percentage points term, to quarter. to Collections did prior compared see The XX.X some up with XX.X%. term X% primarily year increases for average increase We up But as year average basis in for a slight was price the X.X% selling XX.X average XX.X and to the compared finance due was slightly in XX receivables down months the to average contract to again, up prior payment the percentage month term. price. of X.X a selling originating $XXX, from sequentially. quarter, up was was months

Our of The portfolio, for October. the an term weighted portfolio $XX.X modifications XX.X months. million X.X% year average or months to basically due average for at million compared the approximately to entire contract in $X.X was quarter, X.X% Interest the average the nine age increase increase. receivables, to the weighted compared year income prior prior including primarily was flat XX.X finance increased

rate year quarter. prior as the compared all interest of margin flat was quarter, primarily quarter average sequential finance receivables of flat lower the from second at are XX.X% prior for the for price. percentages the our This result higher profit gross was prior gross the is quarters. average weighted selling The end The percentage approximately to higher XX.X%, a two basically but for year the at XX.X% a compared selling to the quarter price

vehicle market. overall focus sell the to did the an of values the increase the prior car a selling and our in result SUVs quality a relates strength on few cost higher of overall to of used inventory we year, as compared more While most our

credit sales important XXX less basis of down driving prior Our revenues efforts in year on year. quarter, to XX.X% of per our compared $X.X good at and sales customers million for gross profit focused to compared up have the or per cost credit for This the unit prior the increased by sold XX.X% losses part losses. was quarter or compared for of improvement of prior the a provision total and year X.X% XX.X% $X,XXX dollars $XXX large is SG&A unit as keeping to point and $X,XXX margin the been quarter. for to XX.X%

measurement this business. important sales integrated and So for is finance

increased the making continuing benefits, to operational believe as associates, stock-based We focused customer investments improvements. are are investments long-term was including making compensation and support a over on infrastructure essential in this growing related X,XXX and customers and The SG&A great added salaries quarter. base. to and We and this recruiting last infrastructure mostly that spend to associates we developing our systems X,XXX are an we year since time

control the We while efficiencies to stay invest for and focused long continue cost to continuing term. on

current in second year the the net percentage from of quarter, X.X% X.X%, as quarter. a down our finance prior For was charge-offs receivables average

related the losses of of consistent year vehicle, prior We as to structures collections compared our continue the operational severity and to result frequency see a both improvement the on higher practices. both quality the and deal to nonnegotiables focus in improved

contributed severity year. quarter better improved of focused but than the on were their points while will The fiscal approximately that rates lower the first the great road. we car provide to of to of same flat decreased stay on XX We customers quarter ensuring 'XX, in the basis Recovery and compared customer service these, after slightly the the keep quarter last collections losses. sale the for to

for was prior compensation year for $X.XX the for to and change. a does tax to of income and XX.X% current respectively, the the compared The $XXX,XXX benefit per effective second rate the quarter include expense income share-based XX.X% quarter, tax quarter. prior an Income $XXX,XXX about tax year share second quarter related

had We benefits We total to to approximately At expect approximately million. our tax in over $XXX availability was be under base XX% quarter credit exercises. prior our effective facilities. going stock any additional million tax debt rate forward our option excess from end, $XX

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

shares did million of approximately we've an company repurchased We $XX approximately XX% an average for our per average at of for the repurchase share. price of $XX Since share. per at during quarter approximately $XXX million XXX,XXX $XX XXXX, cost

have to continue strong flows. cash We

added back a million have turn of million the $XX.X is CapEx For This of receivables, $X.X only and total Jeff. $XX.X stock, by in inventory debt. with finance repurchased it a common $XX.X X in Thank million $XX.X million. I'll to you, in and increase million we million funded increased $XX.X months,

Jeff Williams

thank you, Well, Okay. Vickie.

Our in Chattanooga, have detail and this us We've two and attention in a year, Arkansas. healthy Tennessee hard manner. and Cabot, dealerships we in to allowing is to work new process opened grow locations

Additionally, we've Edmond, work in begun dealership our release, press in Oklahoma. as new on the mentioned

as have stores forward. high open We for expectations to we new openings, new move we will and continue

time our Car-Mart. or from more have that As we've we share and said current existing have a X,XXX many we significant serve dealerships continue time. will It's in locations, Most talents the opportunities customers our market we these to -- of dealership in general to and be potential times, already management from the dealerships, leverage cost have over structure place. their America's great to existing managers

team succeed. great associates helping a such have We our to dedicated are customers and

the transportation to to hard customers to needs. our work -- to And for associates is their pushing to our coming our Thanks There we're day. for and work, this better and hard get in real effort. purpose for every and dedication for us our

questions. We it for up Operator? open will now

Operator

Instructions]. [Operator

Murphy question America. John first from Our is of Bank from

Yarden Amsalem

for This is John. Yarden Amsalem on

over on strong Can about to gross as cost in the the been can question in has recent get And is first The that over you side. XQ it more high or was time? think XXs better about getting even taking SG&A to you're the you it mid- little see talk well. there? You a time? very actions going number where of maybe potentially and to quarters, do incrementally better kind specific limit

Jeff Williams

the continue to a certainly healthy line Well, feel like we rate. can at top grow

to team continue addition some collection the the see And We're working operations to going help do improvements higher focused And credit level. a that's to that, our at with running in We're then hard. on ratio. doing line. we work. is loss play So expect good that to on

that continue would good expect to in improvements to we ratio. some see So

Yarden Amsalem

versus just of what And variable? remind can your is fixed you us SG&A percentage

Jeff Williams

our going all Yes, fixed. most of -- to SG&A be is

large are But our are costs a think related. benefit in majority our almost cost, of fixed nature. of salaries all our I

are So important to volumes us. incremental extremely

Yarden Amsalem

give of that then Was were sales was there Okay, through the or us other? cadence stronger than can or weaker an growth kind even quarter? on particular maybe it. And got throughout details the month some any you it

Jeff Williams

a pretty was quarter, consistent solid pretty it months. No, between

Operator

question Our next from Miller Buckingham. is Hugh from

Hugh Miller

following up on on just side, prior the And question. the sales

those in rebound of Are think more bit credit quarters growth as kind in a unit quality drivers digital kind inventory? maybe, bigger provide this the being just you us more can quarter, of nice just inventory. benefits a seeing total referenced any of what the over we that? improvement, I about you're your of online couple cost little thoughts color on having on change kind the others consumers of a bit If past you can education than seeing of or little of just And to you you there? you on and drivers As the the the of the the give from ownership? think versus success seeing of volume are the any app more

Jeff Williams

of all made Yes, increase also it's quality with the have things the of a a improve dealerships. of we it you we've and combination to good at push volumes And cars our does mentioned, inventory the inventory. start

hard attracting working and more we're functioning level our traffic units to the get from at that's front, to So place. titled sales we also have just on-display efforts out that in a We're field higher dealerships.

And existing everything improvements adding grow. us. in we level. do and what apps, place the done customer nice think really fairly We with to our work online allow -- to us last and online some All These communities is in just the too, we have lot we've but pick the effort those certainly and within then So to six credit like room we new us up at in to and market hard our months, service, benefit, the share share so feel continue seeing areas. need generally, to adding online for better that's that's we're some then all more up some we've will market all got locations. inventory

Hugh Miller

higher quality And on. bit working of more your the a larger so some process to and Okay, about that's maybe inventory, procurement and bit costs maybe then with maybe kind a talked some inventory source reduce wholesalers you've helpful. of

quarters? you that update the and potential coming If an can the stand us on where to give see things an with in improvement

Jeff Williams

Yes, the have procurement With we we've looking made past. we at good size our than efforts, are some more in progress. leveraging

few but a sources, the creating holding sources accountable, through partnerships maybe from chain. more those Sourcing less

business, got at And getting by of the a our on like to right the in partnering wholesalers. the cars for we're of good terms procurement and good going really feel we're good there the us, side some good of things in for answers right prices new places a going times catching have lot so better with on the procurement a up hurry but we've and with relatively it's side and effort

Hugh Miller

the And we liquidate channel order with and a helpful. else? that typically how a process one us you auction you the the defaults. that's Okay, about through something for are in sense, When me. versus maybe of then think scrapping consumer repossession kind going asset give going an to more Can car, kind car of to much or

Jeff Williams

all are and repos of to run going don't Most to the of auction. sold almost do repos are our anything salvage. auction. at be through our straight Well, processed We

Operator

Instructions]. [Operator

is John Janney. from from question next Rowan Our

John Rowan

the there's mean, up follow of that lane, cars a Most to then up I auction, on wind there Is in value. the don't then a remember there's talking that at so scrap question. salvage to bid no for percent, get situation? always minimums you Just going and good or sold in about auction hitting I rate but last hit repossessed a got percent be cars a

Jeff Williams

to going that's minor. fairly Yes, be

average think this at our price with I point sales around wholesales is $X,XXX.

think a a there in So puzzle. big or our are piece that I range, don't at that's the that $XXX, $XXX are average $XXX but of few

John Rowan

it because car mechanically one put car live, probably have used about sound, reason values consumers is -- the as positive, more that's a obviously you'd right? a better why something on being which in repossess you in car reduction running. would number always You really could get Okay. people the to if Well, stops talk a

how through the lot are better forward reduction indexes can showing of obviously, your seen, impacts us of you values. car a recovery deals So now the a have you look what Can in versus talk used credit, the on how that give fall, people the kind in on that car? just if impacts we've out you

Jeff Williams

far outweigh the negatives. Yes, I positives think the

to a money. in As going chance us down, prices car you our are put when better say, it customers a gives same the for

rates, business. very -- XX XXX,XXX be There on car might a thing recovery say, as a our even we're as you that, but for it's far it. year-old a good miles there So plus is slight selling negative might with short-term a

we levels that above So as at significant get as is the folks operate us. not depreciation

prices car very thing we So a business. be consider our deflation used on to for good

John Rowan

But and that from scrapping a the to that, to that you metal certain the to and getting wholesale get better, where Does number goes a your running the an to right? scrap be right? asymmetrical you're of consumers impact are having for the me, a it I for mechanically sound, of there to more -- recovery because benefit better seems value, you're not But because think, goes that's back asymmetrical If of retail weaker necessarily getting a like there's earning a the cars. market. benefit having would that's an sound you're price -- price car. a And your about benefit -- Car-Mart -- car,

Jeff Williams

hit do We floor. the that hit we floor Yes, Yes. pretty quick.

John Rowan

clarify, was duration weighted correct? months gave, a it term last XX.X numbers that to Is just year. then versus total Vickie, that I And you think XX.X Okay. portfolio the

Vickie Judy

Yes. year. XX.X last this XX.X year,

John Rowan

or Okay. any And to see comments implement the scenario? then me. allowance happening And you're to Whether that's under a What it on it? not for CECL CECL? going you

Vickie Judy

Sure. to scenario result in any our should financials. not The change significant case

a our provisioned little already for are term, our shorter. the being especially through with entire term portfolio We

once there So do financial we're some it. additional impact, not expecting we will disclosures a be adapt

Operator

Joseph is Jefferies. question next Our Kyle from from

Kyle Joseph

of good but on a follow them just Congratulations have been a quarter. answered, few ups. Most

think touched the you quarter. sales it sales but helpful the same-store of some know of if the overall environment as talking competitive increase on as well? would you the about, terms could inventory you an as well I were comment on acceleration initiatives be in I In in

Jeff Williams

place negatives Yes. while with to put on Competitive environment and company with improvements within product title, improve product in We're the and stable we that the now. is speak a efforts front has not been better internally sales pretty we're or seeing the quite for positives the and of really carry efforts. any blocking tackling competitive more our to seeing

money there's way. feel our is in environment stepping plenty competitive these But we're -- the still there game but up -- chasing big we still So like consumers. of out a

Kyle Joseph

last for it. And one one then me. Got

in the there. numerous putting guys better out Just you you've like accelerating macro credit, the sounds underlying for are health and quarters. growth a of of as terms factors, credit consumer And had weighing it car obviously, improving just that your your as well fact

we are your credit an give outlook thoughts on Just where from going us can forward? and you

Vickie Judy

increasing with. Well, here. got a factors price dealing couple I been selling think of the that we've that One, we've

some this still at and term place, the we're quality to, to think, after we point, have putting But for the extent. stable, with talking customer keep overall, some we've car may we're about got adjustments. the improving practices the there in make that and of we some out collections So I that we our certainly those sell hope vehicle not if to service

Jeff Williams

the in Yes. we add focused that well, know that, know in on want history, really maybe are have customer their of past, on very much asking used family. a the keeping why. have the be customers family we to division to car graduated dealership, would we're they new And payment that a and to and and than we them keep to car longer we in the historically, Car-Mart on And we

we for cost them family So in higher offering increases may their right life over proven years. to go reasons and worthiness we credit forward by the customers more these they've term keep higher the as little car but try a the see some of for quality,

market up share. company is this need we to pick what as exactly So doing be a to

Operator

question next from is Our Miller from Buckingham. Hugh

Hugh Miller

Yes.

you mix improved things where stood mix the also overall lot? vehicles company. terms do quality the level vehicles the have How how versus and heading inventory into this that the well know feel quarter inventory for view is the inventory traffic of of you of but quarter-over-quarter, the the sales I mentioned as higher in aiding into say about would you last quarter? now of the you heading the on quality So as right your of

Jeff Williams

like improving we'll get feel like quality year it shape forward. in move we to We improving, better as feel the the it's a ago, today we and better and than continue quickly. And was is mix

Hugh Miller

on us well Okay. be on And the you the dealership then Edmond. Cabot about we to in sense as up? a Can as Chattanooga, give at time coming the horizon coming you release, mentioned press some also one point as in those thinking at and should opening

Jeff Williams

looking a be we're fourth and quarter the can. at quickly and very the little to those a Chattanooga are Cabot, going have those time but we with all to to Edmond for for us, Yes, new specified just yet, we're trying open we're get dealerships of and good three as still lease as

Hugh Miller

of And beyond managers terms impact now? and then, calendar about talked outlook about bench of an think open you do the play for ability openings. ones dealership where the obviously, kind will bench have the longer-term the is about the And maybe dealerships you've How to in talked how think now of XXXX? we you

Jeff Williams

Yes.

Our bench stronger. is getting

getting efforts and good Our better. very training are

we at dealership good with But nothing will very in to We have some getting Edmond. like a far in it's some And open do safe to as say be so and we're year. But this new few track But when to we it's a as area. qualified of expectations to open 'XX folks on that going 'XX feel we spots. good a run point. a like bench that a a dealerships in locations open closer high dealership, plan we're dealerships, to specific

Hugh Miller

think -- rise the we I are a is you've right a last gaining as me. customer? and how initiative predominantly you're by should price. that? is the going selling for that the the driven Should then kind customers little How but the significant repeat that that's that Okay. we we factor? that, think much an think up And average really progressing? bit had, Or in spectrum it's in traction increase Obviously, in you of for that about playing credit know

Jeff Williams

we rate. And street know they increasing. and is we offer consumers is might higher better interest with a get what a deal business than repeat that our the a Well, down financial longer-term

to So that and a educate the it trying markets transaction, another a choose about might Car-Mart we're our difference it is benefits really making customers, and with folks financial option. is bringing repeat of in

us, And answer think sure good to going make to if is got the consumers benefit so up we're very we communities standpoint. from a we're on communities of cost cost total to educating a total And for it's those ownership. we've

Operator

turn At Jeff I'm I further call no back over for to to time, the Williams like questions, showing closing would remarks. this

Jeff Williams

once our Well, to call this Okay. again morning. listening for thanks

out and thank to like and associates got their of there, this all pushing on. going to dedication just our great for effort. to always, keep As we're We've commitment a team

have a day. So thanks, and great

Operator

Ladies and call. this Thank conference for concludes today's you participating. gentlemen,

You may disconnect. now

America's Car-Mart (CRMT) 19 Nov 192020 Q2 Earnings call transcript