Financial Data and Key Metrics Changes - Total revenue for the quarter was $341.3 million, a decrease of 1.9% from the prior year, primarily due to fewer retail units sold [12] - Gross margin expanded to 36.6%, a 160 basis point increase over the prior year quarter [14] - Interest income increased by 7.5%, supported by a larger portfolio and more payments collected year over year [12] - Total collections rose by 6.2% to $183.6 million, highlighting the effectiveness of the Pay Your Way platform [19] - Operating expenses for SG&A totaled $51.4 million, a 10.1% increase from $46.7 million in the prior year [18] Business Line Data and Key Metrics Changes - Volumes declined by 5.7% to 13,568 units compared to 14,391 units a year ago [13] - The average selling price of vehicles decreased by $144 year over year [13] - The company saw a 10% year-over-year increase in credit applications, indicating strong customer demand [15] Market Data and Key Metrics Changes - The procurement costs rose by an incremental $500 per unit during the quarter, impacting inventory capacity [7] - Delinquencies greater than thirty days increased to 3.8%, representing a 30 basis point increase [20] - The average FICO score for new contracts improved by approximately 20 points year over year [50] Company Strategy and Development Direction - The company is focused on quality, growth with affordability, and protecting returns while modernizing payment and collections processes [29] - The rollout of LOS V2 and risk-based pricing is expected to drive improvements in deal quality and cash flow predictability [27] - The company is actively exploring alternative financing solutions to address capital constraints impacting working capital and inventory management [26] Management's Comments on Operating Environment and Future Outlook - Management noted that demand remained solid, with a significant increase in credit applications, particularly in July and August [15][33] - The company expects to see a positive effect on revenue from average selling prices, excluding ancillary products, while remaining disciplined on gross margin [14] - Management expressed confidence in the company's ability to navigate current challenges and position for long-term growth [27] Other Important Information - The company completed a $216 million term securitization at a weighted average interest rate of 6.27% [22] - The recent securitization transaction was nearly eight times oversubscribed for Class A notes and nearly 16 times for Class B notes, indicating strong market interest [22] - The company has taken significant steps to remediate material weaknesses in financial reporting and enhance transparency [25] Q&A Session Summary Question: What has been observed regarding procurement costs subsequent to the quarter end? - Management indicated that pricing has smoothed out and has come down slightly, with demand remaining strong [33] Question: How quickly can delinquencies stabilize with the new LOS systems? - Management expects normal seasonal fluctuations in net charge-offs and believes the portfolio is now weighted with mostly new underwriting in place [36] Question: What are the expectations for SG&A expenses moving forward? - Management anticipates that roughly half of the SG&A increase from this quarter will unwind in the second half of the year as technology implementations are completed [38] Question: What is the outlook for used car pricing and the duration of impacts from tariffs? - Management expects some seasonality and pricing decline in the back half of the year, as the effects of tariffs become known [45] Question: How is the health of the consumer characterized given the increase in delinquencies? - Management noted that while the consumer base is generally strained, the structures in place today are much better than a year ago, with a significant portion of the portfolio under enhanced underwriting standards [60]

Financial Data and Key Metrics Changes - The company reported a net income of $17.9 million for the fiscal year 2025, a significant improvement of over $49 million from a net loss of $31.4 million in the previous year [11] - Gross margin for Q4 increased to 36.4%, up from 35.5% in the prior year, with a full-year gross margin of 36.7%, reflecting a 200 basis point improvement [24][25] - Net charge-offs as a percentage of average finance receivables improved to 6.9% in Q4 from 7.3% in the prior year [27] Business Line Data and Key Metrics Changes - The company sold 57,022 units for the full year, a decrease of 1.7% year-over-year, but Q4 saw a 2.6% increase in unit sales volume [21] - Interest income increased by 4.2% in Q4, contributing to incremental revenue growth despite a decrease in vehicle sales price [21] - The average time to repossession improved by 14% compared to the same period in the prior year, indicating better customer retention [27] Market Data and Key Metrics Changes - The average selling price of vehicles decreased by $316 to $17,240 in Q4, yet the company managed to drive a 1.5% increase in revenue compared to the prior year [21] - The company experienced a tighter supply environment, with procurement costs increasing by approximately $300 per unit due to tariffs [34] Company Strategy and Development Direction - The company is focusing on enhancing its collections infrastructure and has relaunched the "Pay Your Way" platform to provide more flexible payment options for customers [12][13] - A new seven by seven underwriting scorecard has been implemented to improve risk assessment and pricing strategies, which is expected to enhance credit performance [15][19] - The company aims to leverage its balance sheet and integrated sales and financing model to capture additional market share and drive future growth [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the dynamic used car market and emphasized the importance of diversifying underwriting to expand the asset base [34][35] - The leadership team acknowledged the ongoing challenges posed by a tighter supply environment but remains optimistic about the company's strategic initiatives and growth opportunities [36] Other Important Information - The company successfully closed a term securitization, issuing $216 million in asset-backed notes with a weighted average coupon of 6.27%, reflecting improved investor confidence [9] - SG&A expenses increased by 8.6% due to investments in technology and talent, but the company achieved a 6.1% increase in SG&A per customer, indicating improved cost efficiency [31] Q&A Session Summary Question: Impact of macroeconomic factors on business - Management noted that the speculative nature of the wholesale environment began affecting pricing towards the end of the quarter, but overall sales growth is seen as sustainable rather than a pull forward from tax season [40][41] Question: Updates on operational upgrades and partnerships - Management highlighted that gross profit margins have improved, and they are optimistic about the ongoing partnership with Cox Automotive to enhance operational efficiency [46][47] Question: Effects of risk-based pricing on P&L - The rollout of risk-based pricing is expected to improve returns on lower-ranked customers while also driving volume growth among higher-quality customers [53][54] Question: Condition of low-end consumers - Management indicated that while there are signs of strain on consumers, there are no significant cracks in the foundation yet, and the company remains a competitive option for financing [70][73] Question: Future direction of underwriting changes - Management is exploring opportunities to move upmarket while ensuring that core customers continue to have access to financing options [75][78] Question: Capital markets success and its impact - The company is focused on maturing its capital structure and has successfully securitized over $2 billion in receivables, which is expected to lower interest rates and fuel growth [82][84]