CRMT - Earnings call transcript Q2 2021 | 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 2021 Conference Call. The topic of this call will be the earnings and operating results for the company's second quarter for fiscal 2021.

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.

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

Jeff Williams

Okay. joining us. Well, you for thank morning and good

we release, focused us is getting challenges our the press mentioned many in approach through of disciplined XXXX. As our

for has especially has increases the future The in revenue. resulted growth. groundwork you the an but of volume laying business -- investments significant moving areas our lower is of some challenges, the to the improving our key all of and also in at market business dedicated price meaningful real X,XXX used in Our and the direction. is model resiliency pace, accelerating vehicle in We're making associates at supply/demand forward imbalance when led points the and pulling have same value the in the

and serve better destiny prepare us change in are able is targeted accelerating and large and us shopping Consumer our fragmented. we side. to on and own adapt expectations procurement long-term. the control order reinvesting committed business in of the relief The be and some changing. rate reinventing market the supply initiatives we're to are and Our give is preferences to And the to to for

us significant borrowing to and customer sheet, the a to serve increase Our continues our enable and a prepare productivity. areas continue Again world help much recruiting to the training. inventory making Improvements investments place very to traffic customer increased the both in generate areas us and time business in in procurement at key base. cash maintaining us conservative we're experience, solidify balance which these larger same and flow significant of drive and will will and capacity

also provide support Our invested and foundation systems for initiatives to will be these in and growth. upgrades technology a solid future

look take to away functions preferences of aggressively structure continued We're of key building and our process the will customer efficient noncore our important with success. community out make decisions not consumer centralizing in will locally extremely compare We that localized to friendly certain based buying sales to digital advantages any seamless an is alternatives. and possibilities ability that changes addressing and favorably to customer

heavily more promote have they're by turn As area of realize keeping our of Vickie I'll it aggressively on lives intangible believe the an real, and take customers to of we to the the time. peace stress some of customers road. Vickie? over out we to more Car-Mart now give the We strongly over obligation cost We advantage market infrastructure over one that mind total and our go them when our ownership will significantly we'll but numbers. of we family. customers' that benefit customers lower strengthens, serve part

Vickie Judy

and in net Thank terms income. of morning, We you another had quarter Good everyone. Jeff. revenues record

revenues X.X% the The same-store up an to increase increase and XX.X% from in units sales increase in to XX.X%, increased in a retail revenue Interest and total a XX.X% income revenues also by due increased sales primarily Our $XXX increased were and million. were stores, resulted up sold. price revenues XX%, less age, average our than five for in up of to stores $XX XX.X%. stores were XX% years in years category of XX over XX to Revenues the age million. up year from about were up the five

the five Although, sales from quarter quarter, old have points. XX years supply XX% the years zero remaining improving old and did dealerships the inventory, XX age continue volumes to XX% or to from were particularly of or five our of years At impacted to tight of XX or by were were XX XX end, we during be volumes the price at lower older.

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

contracts was and second offset to The Our the collections receivables only for in delinquent selling prior X.X% month contract to X.X a average term months up price to X% primarily up compared term was increase improved with compared the from at average XX.X% X.X The for average originating also were XX.X down sequentially. on compared the up prior average months compared months percentage XX.X term XX.X to year year was the quarter. accounts. percentage $X,XXX improved, quarter. year prior the finance extension our quarter, the payment by the and of Collections prior This due for -- quarter. to partially was year in XX.X% as a

$XXX. is average approximately Our payment monthly

rate, $XXX, $XX.X contract receivables modifications, the approximately Our per $X.X finance million was end was compared Interest in retail unit for flat XX.X%, And at basically of year weighted the months year flat up year profit down but This improvement gross due prior at age million quarter. a for The $X,XXX. increased approximately higher average XX.X the increase was compared compared entire the weighted quarter, increase. the prior XX.X% margins, profit partially including gross prior offset margin to average average months. to term selling for but finance at which portfolio, compared price average the the XX.X XX.X% the weighted the all XX% was gross the percentage, An to due quarter the units. quarter, months a income priced primarily was XX.X% of average sold of supply nine margin lower gross year. sequential to quarter. improved per in and is the quarter, resulted margin low dollars prior the XX.X% demand wholesale profit the percentage XX.X%. or The portfolio lower the year strong to the to retail Gross receivables, increasing on in prior interest was lower from to the The for increased unit. from results units by from

lower selling gross at type consistent. a the was higher Our of The of quarter. approximately the fairly sold are mix margin prior SUV vehicle price. X% increased year percentages over sales

a good digital great increasing the that $X.X initiatives credit cost continued customer finance on the sales sales with of we as metric of was quarter. year to our business large for our of in service goal down service contracts and SG&A efforts, with higher revamped number customer and road associates, from these progress pre-pandemic car in service on for the up percentage on levels companies the losses. was is our and million SG&A the to serve are of as efforts along percentage spend but of up of and and volumes investments XX.X% us, improved for compared of XX.X% as procurement as quarter, volumes good with sales support and can keeping less at the back year efforts toward total making XX.X% SG&A important time. efforts to year prior an the quarter. down is of revenues, vendors, the prior reconditioning losses part each integrated driving of are move to provision This dealership. a a inventory We're credit XX.X% we our and sales to very prior area tax to training recruiting the the quarter compared all preferred for customers Our for compared and purchases focused in rental customers auto

the to at our X.X% For credit the the X.X% of fourth from of current as quarter. uncertainty year quarter, due of accounts a we for and compared our prior COVID the At XX.X% increase the to environment. related to the in the allowance quarter, quarter. and end average macroeconomic We percentage losses charge-offs, did in second X.X%, was in X.X% net past was XX-plus accounts finance delinquent down year saw improvements prior receivables

the its positive, portfolio customers, there The loss Although the environment related quarter is quarter benefit impact much caused XX.X% quarter and of credit and Income tax tax for COVID-XX forward. effective solid year continues be XX.X% are year to for tax an to repossessions and move respectively. and prior on as our rate potential uncertainty income economic was the $XXX,XXX included collections, the current overall our for income prior and quarter. we second our compensation our expense the compared to results $XXX,XXX by share-based

option any base exercises. XX.X% to from be benefits to our prior excess expect tax effective approximately We forward rate stock going tax

sheet. balance $XXX quarter We in cash cash our over strong revolving approximately At million was $XX We total and availability solid and end, $XX.X facilities. under a our million. credit continue to had debt million in have flows additional

XX.X% time last cash to to Our net receivables XX% current of this ratio year. at compared is debt finance

with $XX.X $X.X finance We net During only total million million the by of expenditures. cash. $XX.X receivables. increased capital of $XX.X a a in added net debt or quarter million $XX.X We inventory in we million increase funded million in

it back to I'll Now turn Jeff.

Jeff Williams

thank you, Well Okay. Vickie.

is said offering significant to XXX dealerships serve our we've grow. unique have markets we room As and to our repeatedly, existing the

gaining we we buying have caused may not we from and more couple a forward. term. have We're will volume little our with going there of prioritize fully areas last going there allocation and end not to to currently our a share in market of quarters, During help as the capital talent frenzy market, of in efforts vehicle as procurement a sales the a again This consciously in used was proven decided the us the history return customer at standpoint. the normal us cost long consumer the But we products the value serve, in management to the did market short think base. lower the participate to of flow decision

same captive more. and focus and currently to we're other believe making our authentic to a opened We a Edmond, in support process advantages to this Oklahoma taking our of have communities especially also is We've our is our and superior offering proud possible offerings our offering, will areas cases our our see of you about two thank we that each COVID year Norman, the customers, commitment more costs, in and by associates to be model. the investing of the infrastructure very at that focused is market. fiscal new with and and We're better. the in care two because dealerships associates who we Coupled thank growing. I serve in customers. believe much and And larger many, commitment an customers to We bright. and presence on the on arrangement other genuine our have of rise superior for consumer our for as our you business business. in There's building future real time a proposition, many and This of local trade largely power lending we driven are our enthusiasm Oklahoma. XX,XXX our

for will to the We turn it now over operator questions. Operator?

Operator

Our the John first of question line Bank Instructions] from comes Murphy from of [Operator America.

now is open. line Your

John Murphy

everybody. morning, Good

coming forward loss I the too credit how your Just demand that seen disruption hit for because areas Vickie, unfortunate driving for vehicles that will accounting their up past rules the in process the loans. in are some didn't expectation thinking around experience that reserves potential with you're about what your more willing curious just seeing and first you'd reality has as I'm people a was those curious pay thought trouble reserves? is so has increase around of be just to far think you're on number where questions. COVID and the you're how increased in just go I ramp-up because are what much COVID. maybe been in and

Vickie Judy

but little a deferments that Sure. both we we side stimulus are end. right an additional I Well, several staying the sales an rent from like unsure as demand know to think and we're all loss and their are now of vehicles, you the are out and in we said political any look and unsure side, people here seeing coming moratoriums are increased of the environment, there we're payment credit

around still their to up. there's I've back the be statistics businesses. a small additional be expected next used how think regarding I seen lot a mean, months used I lot businesses cash following BCP stuck few may of back and many as over their or had bankruptcy up used questions of they've and -- businesses

So I'd that out just how is our you look consider say, when customers things impacts -- under CECL to credit losses. one there it need at macroeconomic especially uncertainty you and your of that the

additional felt just next that was a months little think related on and until I at coming to time. clarity so there's over prudent And time happens and reserve leave those this we more the collections books tax it what in

John Murphy

then do you layer and that that sounds PPP these important how then you on stimulus like have stimulus cake maybe the about consumers how just of to checks? you follow-up a think do been I important checks on behind you your that And as stimulus forward? Okay. And think concern? PPP small there's quick as equally think have been mean going has that. individual some to directly It a Do businesses. you mentioned as

Vickie Judy

think and both do people help that small Yes. has that I the and had then employed. our obviously to consumers keeping businesses

continue an to we've good within consumers. too do also company to a think I certainly with had I though made think So work that's our impact. that effort

we to are improvements continue helping I So internally that think too. make

what out there we're it's internally weigh the to in doing what's So hard versus happening marketplace.

know value we'll working you that as there them we're keep of as to on point business are and our be this in consumers other and road for And out to a in proposition, feel got As lot a cars. is Jeff's what like consumers. we the options with long able we've their

Jeff Williams

that of toward John add just most of of kind the would the stimulus July. I And end ran out

entire out. and term was much than other quarter the actually this were stimulus there our the quarter basically pretty quarter last year's -- run So had even any than stimulus second without out though consumer collections our collections were better the

John Murphy

stretch relief. inventory is at think you interesting I inventory really you're when like now relatively the I normalizing restock saying very the did Yes, And then little sounds eased at speak. I supply this So dynamic. it or at acquisition I'm bit Did price maybe mean that curious it's are you either is supply moment? it what obviously, just about you're sound reasonable we mean, normalized your costs? but as you a on think there supply on just mean, And need getting Jeff. out eases? vehicles to like overtime? right do to a that how

Jeff Williams

Yes. smaller been There's the It's of real dollar a at car. hard to lot say. A frenzy price dealers again facing a low points. are lower

if we're getting to will. frenzy out that kind of And you of time. closer tax step to So we chose now

cost on at closer cars though until little tax demand of and up tax to time pricing supply a where more used car cars time, huge or up above change the cars us months. they get maybe expecting until So going of not new in for we relief really summer of are not maybe expecting bit a of point through the are really the than repossessions we're a were. after flowing sales availability a even little the much We're the

John Murphy

Got it.

just really yours mean, bit openings on -- of more about at doing to online growth helpful. probably mean, hasn't thinking your kind the thinking growth a maybe but how about here I drive accelerating Is significant quite maybe store? lend mean consumer I very about this a it's are just parameters overtime? focus maybe when store lastly what yet, per acceleration then sort overtime or and future? any parameters And little you're although productivity of in growth. I That's you Jeff, are Okay. talking you

Jeff Williams

back to the several a bit management with making been little inventory all procurement. years, investments Yes. up in the the starting and I'll last we've

know to large we enough forward. as for sound pretty the price enough we confident a have, seen people and be at to this to find have number very we of talented our that we're company a and cars mechanically good point going We able good move be

the lot trained. far in new company we just making what we've around recruiting them sure progress side. of some side in the time, mentioned, Vickie a corner. infrastructure comfort service huge sales we're on people there. to experience have we're So make the doing we're side, keeping then as right And getting got the building procurement the the And some training same then and as an online the and on At contracts customer as on

pushing get markets spot all share the we're serve. in feeling of -- that We're is less we levered was our year than it ago market really handle we're just is fantastic feel point then significant with pick the more move better normal the volume are we've around to continue market we're acquisition So look a existing like locations that the also to when and -- what about and comes ready another we sheet and where new for the in things balance and year share where be lot business we a in better economy and in each good currently And volumes indicator beyond have and fact back to keep we're spot up the seen gearing more to the really today we move up company key more a several we're just a to to pandemic We how areas our actually back opportunities. some a we're the is. and markets. growth going think up add powerful

John Murphy

helpful. so That’s Thank very Okay. much you Great. guys.

Jeff Williams

you. Thank

Vickie Judy

you. Thank

Operator

you. Thank

Our line next from Joseph from of question Jefferies. comes Kyle the

Your is line now open.

Kyle Joseph

nice morning, used seeing commented lot about for credit. on your Obviously, car And us quarter. through terms Congrats walk frequency you you've guys trends guys. in prices. questions. thanks a business taking from my obviously and been losses benefits you severity Good that perspective? good Can thing is a for of The a

Vickie Judy

losses We're and back helping COVID a is in and Again, situations real much to of situations right changes job markets. for people on that's lower. these the from our nice now. this obviously, through need coming frequency Well, doing them job a perspective, a the are going

much lower level. a improved frequency The much at lower So improved. severity -- was is

will severity we We when miles higher-priced to price to But that better that, the we experience you and car some is a the positive continue selling more repair much a continues have forward as of is going be think car the for selling also losses in challenges when move vehicle back. and lower do both you're increase. the with for take that's worth to terms a to consumer car credit and it

really of kind So a right positives there's now. get we're lot uncertainties through we area this these in going once in of of market some that

Kyle Joseph

And traditional when of it. that? terms you heard of have helpful. of providers pandemic seen a in credit? Have lot loosening then anecdotally that any you the competition seen Very guys we the Got pulling space were started of credit in back. Or

Jeff Williams

there, share -- we returns up the competition the feel there's fund advantages market seen can we move we have still that funding any to the is investing -- aggressively We're loosening appropriate or pick fact to have do as what Certainly continue the businesses in share over is know, the have the us. going market going and forward. balance areas that not gain keep -- and makes we in sense after for We're that businesses unique like very sheet. competition healthy but competition again a we some and out

Kyle Joseph

the one all Got might But call you This there, next difficult normal door. the a would it. one very given of unique further And the and obviously forward? anticipate out kind thrown me. as it, for be one uncertainty seasonality business out XXXX over perspective you're was was out the but seasonality year or thinking from last about going a seasonality

Jeff Williams

preparing and with and of if be tax the kind -- Well that up then of stimulus still the hard We're say then same of summer a the timing understanding whether the see be that in demand to of the the normal we're kind solid some that's are it might time, back we months. tax the summer, kind for might and vaccines gets anything probably good as normal. jobs air if won't it's time. the humming in to the by -- expect And out economy come there

it's us hard so And for little to right now. tell a

Kyle Joseph

my Got Thanks it, understand. answering very for totally questions. much

Vickie Judy

you, Kyle. Thank

Operator

Our line Rowan Janney. comes the from from John question of next

Your now open. line is

John Rowan

Good morning.

Vickie Judy

Good morning.

John Rowan

you starting are softening the how Jeff, nearly XX to still at of from I portfolio the levels car high prices peak summer? -- with given comfortable duration, we're mean we are months see the that used but

Jeff Williams

Well our I have didn't that confidence in think we we product looking on as historically our business, much maybe do back historically now.

were conservative just we our of we the car term So on I the as quality think now. ultra not stability mechanical in the do and confidence much having as

we So feel the term sound we and negative. And competitors we're adding on for the a good putting term solid believe out mechanically customers don't still a there. is that right we're below like car significantly

positive far some as just In to at as that payment us marketing. payment keep competitive monthly with look folks down keep a that fact and it's

sale eye them for contact contracts, with is the set able keeping success. closer road. maintenance issues our to keep how all leave that are supplier a going cars confident we focusing after really are level, all on at back quality staying in be to of to at So network, again the new sure that our customers goes it we're don't up product that on I service we with think in has And believe customer of making better the how after any a then lot our sale, we car even we our let

support customer that we're the not It's stretching out. to right after right and them road. the with and on the the we're right going have keep the so term car And concerned to sale

John Rowan

the are monthly duration guess I with if at payment, I which quarter conversion day you keep the in understand and order on want of the because that end the direction, with duration one of cash a if pull giving the the conversion mostly higher in if or going for proactively continue prices duration, stay I you to to wholesale is the duration claw think coming or cycle? if struggle to little figure because of extend a in to and higher-priced what back along them up a paring more trying the payments cash bit best market last and better slower Okay. do duration out, we after move speed back customers the function down the actually a said it's affordable, you that's cash vehicles to is more your duration start to I have cycle conversion and and current to that minute. just

Jeff Williams

to And I great there's if used commodity the we yeah, is a market. part think, car adapt great aspect Well, adjust the market. would and – part our business to one the about

the subject and of we're the So there extent. a what's quality to we're – kind of pricing large to quantity out the and

do pretty adjust So we on what and got to we we've it. do how quickly flexible be and

term, it's balance And an to always opportunity And would us. we and shorten so conditions have do of advantage take if certainly we change, yeah, that. that a for

Vickie Judy

better we and customers customer we count point, looking point, out to to to for support add they're in of will probably vehicle, customers Jeff's these want that, family the keep try continue grow better some more have keep But area. we those customers that, flexible with as to in be to there and I and that to we're little a some will and John, trying they Jeff's term. options

John Rowan

Okay.

here, to may you Correct? business. much to to a term is record Car-Mart basically good prices it's think come because keep if duration cooling the you I'm customers who come are not as from the as quite what So, we that, see down we want used car I take that, of simply, offering could more but within mean, and not do – this going it's off but paraphrasing see you I down,

Jeff Williams

are And Yeah. as means – as successful. customers cash conversion that far that more

a where So back. cash term customers, situation to take improved, we defaults, do actually a you is we're because higher better have are out, when and paying our car flows less actually rates, but have recovery could having the

So equation it's not a here. one-for-one

John Rowan

you Thank very right. All Okay. much.

Jeff Williams

you, John. Thank

Vickie Judy

Thank you.

Operator

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

Jeff Williams

listening highest Okay. customers And at thank taking in. taking you our associates taking care great once for that communities, care of all Car-Mart. your other, there interest you America's again our thanks each once Well, care Thank are for again, out our of in level. of and to of the

thank great So a you and have day.

Operator

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

You disconnect. may now

America's Car-Mart (CRMT) 17 Nov 202021 Q2 Earnings call transcript