CRMT - Earnings call transcript Q1 2023 | 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 2023 Conference Call. The topic of this call will be the earnings and operating results for the first quarter of fiscal year 2023.

Before we begin, today's call is being recorded and will be available for replay for the next 12 months.

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

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

Jeff Williams

for and with you in your interest thank hello and quarter morning up Well, Unit the thank you us for up for XX%. were Car-Mart. joining America's this volumes revenues X.X%

Given and market forward. environment customers we're lower that lack get points, more offering the market price operating attractive. of our of and expected concerns. of demand for only will eventually opportunities Consumer convinced at us conditions affordability for up improve We challenging will out the and staying to product increase many we're are solid remain macro share potential because picking is inflationary the high moving believe and volume the

growing we We so of our profitable be keeping we to mind time, leverage that high touch, a the and before, infrastructure a have them place during us Infrastructure in base road. the over lot We will give peace be to headwinds to after support even We the market switch ready we remain more larger, to of on is by can in customers more. a our to important. friction the segment tailwinds, when control, support initiatives sale. customer extremely operate consumers things will especially the need the focused much and of allow high company on

through We have a we credit long business anyone. and do of and believe better it history than cycles we many different success

certainly food to stimulus, with believe of materially negative are high job are forward. that move We effects prices inflation the feeling combined are at time, the prices increase moderate a strong market and will absence are of the off gasoline most car Also areas clip but the customers leveling some. Our wages increasing in and to as same down wages continue some. expected at costs specifically, are serve and the healthy we we is

Car-Mart. will America's one we numbers. always, Vickie? that a That's each best That's keep way time what turn I'll to to over it over road. we As now at customer to Vickie do. possible them we ensure the the on go in support some

Vickie Judy

over Thank Thank increase you drove increase the being morning. quarter. retail and the prior increase, Jeff. a volume increase this price in sales in you, morning. with XX% a A Good sales us XX% income X% interest XX% year all revenue for

at high with to overall tough a prices overall softening and Our productivity inflation, product vehicle even the year compared in a per was XX.X our in market. demonstrates flat store for demand environment This the high last demand units.

up options sale expenses price, and inflationary selling quarter increased gross cost sequential the unit with coupled increase wholesale. in XX.X%, the down profit repair other Our slightly the The quarter. costs and was and costs the the average increased XX% on pressures transportation XX.X%. fees, the per for lower parts, This from resulted percentage by fuel and of dollars profit gross over sequential decrease from prior at year primarily from

with line average quarter, finance as X.X% and current our prior compared in charge-offs the and the of year percentage a prior was average quarter. net X-year For in receivables to X.X%

our X/XX/'XX charge-offs slight historical ended was For frequency for charge-offs of the losses, losses. an with XX-year increased for is The in increased pre-pandemic, comparison coupled X.X% severity quarter were net a first increase the average a driver the X%. relative quarter primary and of at of

a Our quality remain coupled we're and continue and that does of credit customers to to our be to confident making, more we continue the need able service we we'll transportation and environment. offer well investments believe improve the dependable perform we customer that that reliable in normalized with

rates flat were approximately at essentially recovery XX%. Our

XX-plus pre-pandemic, X.X% was quarter's in to at due line at year prior Our and with accounts past X/XX/'XX. X.X% the historical quarter compared X.X% in

per XX. provision up to for million on was $XXX. million portion important of note quarter to the a to were expenses This increase collections allowance $XX million the were larger the the a of that grows, July month balance. related per total balance over reserve active an total $XXX up XX% allowance receivables $XXX portfolio at our of It as is to collections Our customer to and total significant X%

Our during months. finance last principal grew receivable by million quarter over $XXX and $XX the XX million balance the

hard the XX.X the weighted weighted A maintaining XX% to modifications XX.X the sheet and in while short months for the for portfolio the approximately in prior at was as year deferred XX We keep and the months that from X.X-month enhanced year term And $XX possible including the the of to sequentially. last XX.X XX% as up during affordable up by out approximately to average the term is rolled average our quarter. contract for price quarter the service Our price for compared selling increase months the was contract months. increased million term to months. originating The XX customer. for payment compared balance products the portfolio X.X age increase, quarter is related entire we average X a $X,XXX prior first with contracts term was compared work the increased XXXX. fully year our from months prior quarter. ancillary average selling from Of early has on to revenue to the The XX million at $XXX

inflationary a environment. have We labor in challenging initiatives several process and and

of adjust and business a larger time. our more technology can while customers that collect well, to to our number company a our serve continue of We to in over digital order enhancing sales

an effective in this committed We that are sales manner doing are volumes increases efficient these and so in with productivity and to additional over costs time. leveraged

had sequential over $X.X annual to sequential payroll $X.X Our prior leveraging at million increased nice SG&A the first related of benefits The increased the majority versus in quarter. the XX.X% the spend collection quarter costs. related We increase increased year grants. stock the and increased of of quarter $X.X and XX.X% year over prior is quarter. in the and sales million option investment million

be approximately long We At million. We had on our in and borrowing availability $X.X part spend our history of cash forward inventory. facilities our and as that's well. additional current going of base and SG&A have end, in a to commitment approximately receivables quarter our million our revolving $XXX moving of based under debt $XXX leveraging credit was million revolving

which related nonrecourse was completed million at securitized securitization $XX rate. Our those of cash notes end fixed payable the the $XXX at to a is April with in We notes. million, restricted

discussed, increases has revolver And doing securitization be by up fiscal our the our year. another we third quarter or of interest recent expect since rate Our as in to Fed to been fourth impacted year-end. X%

the increase increases. receivables finance the to relates net cash Our ratio debt to X.X% of XX.X%. was debt, for About quarter total of inventory

with As stock had while primarily issues the keep to chain dealership reconditioning inefficiencies, ready to the appropriate and mentioned shop related release, all the and press time, of in we trying supply mix quantity some parts and units. delays,

and improvements efficiencies improves. We on as will be the operational focusing market

sheet, forward. our the balance with to strong access solid Our should history moving operating us our and provide securitization capital access appropriate the to market

receivable the fund prices business retail higher and a with base a requires debt terms, growing level. sales we As higher longer

our our is our returns very However, attractive the use growing and base and our cash-on-cash of best still AR are capital. customer

quarter, During in finance you $XX by funded million expenditures. receivables common $XX stock we million. inventory million. grew let and $X of $X by I'll Jeff capital We repurchased out. close and this increased our million We Thank the

Jeff Williams

time, were are we're business looking The more speeds hard about in were care benefits the and now consumers' child credits and in in ease enhanced a there the before. but at but market, out Vickie. never changes seen This that never this still and checks. largest last happened unemployment hands inflation. you, we've potential. at advance the had is the Thank our Okay. gone have stimulus at is all tax consumers tight. massive of is there's optimistic Last Supply in stimulus that it year X% we of been will our industry received been think We

we prices. However, of seeing are leveling some off

that long come challenge down at do proven with believe market needs serve said, affordability record is the customers lives customer our right paycheck Our we're of and into customers. now. we all track more than what positively we better a ever paycheck We're This With personal our that working best absolutely of from customer to above. and transportation. a have see we beginning to we

available is time. again just clearly and over there other option believe will the that certainly While transportation be our are options, we best show basic to itself

share is we and market to the have far intend being We worse opportunity. competition We believe are enormous than acquisition we an capitalize. disrupted

or not we car already upside more be customers from believe time. price environment is affordable significant average have we current and rectify We used This areas that are dealership believe does market but should for serve. in share of XXX prices over the We X,XXX it gradually The persist gaining over per of and a itself the that not the reality time. that section vehicles population disconnected all. situation from will we for mean this of cannot longer economic

the like that play industry scale, better doing a at to some to be to what the think high we level. in need and can expertise serve offense sheet our a tough making player far We're larger we the customers the have markets We base, do, investments balance this. significant customer

will currently years. recession, including just periods XX,XXX to most disruptions we are and customers, living supporting challenges paycheck life's and for through keep them and almost work paycheck on them have we the other pandemics, with inflationary like road We XX

serve obligation X, work an day will the XX be associates customers. have will and proud And of our and people and do each to every and our we incredible to us support we X ready. customers in support years, to more need We other. more I'm

up open Operator? questions. will We it now for

Operator

John from of line the from Rowan comes question Janney. First Instructions] [Operator

John Rowan

You a frequency duration, function that in car higher is the prices it opening both lower severity more comments and some of charge-off off? Or down the the severity. of payments? guys Is function said of a was leveling

Vickie Judy

The balances the have relates time to of at severity that customers charge-offs. the the just higher

quarters, average play. So average the price as has recent amount that's comes over where selling increased into severity the and financed that the

John Rowan

on now obviously, ABS. teeing is a will you said, what us marginal ABS the you’re give versus you then where up revolver of this just And cost price? new Okay. think you Can the debt

Vickie Judy

Currently, about percentage it's points Yes. X difference.

John Rowan

XXX So it's basis points lower?

Vickie Judy

Yes.

Operator

Our next Vincent comes of from from line Caintic the question Stephens.

Vincent Caintic

good this near year or to off you a or a the a past there and macro that things forecasting should first such But and looking about that the is be we be I stabilized going Just think forward? at think question just I’m us in overview you wondering in you else in there’s going the of that have quarter lot on about changes as if of know this this something you’re future should right broad that be for anticipating modeling now. that is quarter, business thinking

Jeff Williams

car wages we like, off leveling Well, are are prices feel and up. going again,

components those So we of feel both of forward. the good look about

at customers serve to them cars high the their and in road. going are on very keep a and level We

we and looking wages So expect be forward. that leveling optimistic and solid going to continue strong look strong are results the to and do up labor forward be we anticipate to again, market And be will we're pick and we as our the better little go better over good moving timing of a time of expect forward. The prices, and benefits off for to as but putting that customers improvements do prices car some forward. is cars see we some in unknown

Vincent Caintic

understood. Okay,

so taking what you’re originating and I guess comfortable the selling are you were the term the and averages the the But of like sales for about terms kind average churn? taking know you talking of talk of loans that today, – loans then about today, seeing comfortable where you’re forth. also, And the For new you’re you price? I what originating where could you’re price the average are

Jeff Williams

level Yes. prices I we're -- off. are mean some we seeing again,

We less expensive little to a It's now. find a product. are for intentionally right looking tough

payment our there to better of We term that positions, are same out that make customers a is this short product of and and little as them a affordable. equity and at So positions time, we a in but laser-focused we good lose customers our sure control and for shortest expensive put in less keep like term as product keep putting the that not on is can. out we the good can

taking opportunities sales So line see same move price market of off can we we for to time. see prices level we some that love some look And leveling road that advantage at focused some opportunities the even as and we'd as really, off off on are more with reductions and in the term prices term time. down forward, over level

Vincent Caintic

that Okay. And last the we taking you year-over-year. guess, expenses, I SG&A for think, about, forward SG&A? me. business I about what more I up XX% making in a on Where you’re thinking and The one it’s feel understand go basis? do investments be comfortable should

Vickie Judy

up. the wages mentioned we Again, Yes. Jeff still are going investing.

as putting some business, our on service our are And they you as the very to associates provide wages associates know, and So important. up in also our for pressure when they're for this they're customers, high-touch well. our customers going

our So we have going this to just frugal our efficiencies to continue and to Jeff's like be. expenditures to customers with are leverage as on move very We've been point, always focused forward. we

have that. to continue quarter-over-quarter a hard investments be we'll move on Again, sometimes forward. been to as basis. The some of part will continue look we So there largest to made leverage but it's our

Vincent Caintic

great. Okay,

one Vickie, sorry, And more.

Just ongoing going to quickly, interest right forward? the quarterly what's be the forecasted expense, expense

Vickie Judy

still few there's that a to there increases lot this the look the forward that, I think coming Fed I be and of expectations will will that Yes. up the rate market think we over expectations course, there mean, the in are more that benchmarks three perhaps next doing as Well, will even what are securitization as does on, that depend of market. and the year, quarters. mean what increase spreads I well. I

some the market. in that we that well. too, we’re balances increases would I growing finance higher growing in expense share, And environment the that’s in be receivables, interest here then, will as there in So, I expect forward continue to move as based debt on just and now as mentioned market results

Operator

not at [Operator questions any moment. the Instructions] further this I'm in queue showing

Jeff Williams

we're disruption, more XX in. we everybody, to take and so going listening once does We've of and customers Once Okay, And the business our We've years. end more always more we're company we now handle set leverage through and do cycles, thanks, SG&A, we you. out our shape. a some And other as to a be handle thank gone in company see again, for what come we be and well. growth up in of credit what over again, cycles. to great been productive number seeing when do these in when expect, for spot do better switch, headwinds advantage we

at So the excited their about in where our do. we're our world. to what hard we future for of company. we're and Thanks appreciate We're of we very and our work to everybody. place all We're associates proud of our dedication very proud and extremely

and good So a thank have day. you

America's Car-Mart (CRMT) 18 Aug 222023 Q1 Earnings call transcript