Car-Mart(US:CRMT)2023-02-22 17:25Financial Data and Key Metrics Changes - The company reported a net charge-off percentage of 5.9%, which is flat sequentially and compared to the pre-pandemic third quarter of fiscal year 2019, but slightly above the five-year average of 5.6% [33] - Total collections increased by over 11% to $153 million, with collections per active customer per month rising by 5.9% to $519 [38] - The average selling price of vehicles increased by 8% or approximately $1,341 compared to the same period last year [28] Business Line Data and Key Metrics Changes - The company finished the quarter with over 14,500 units sold, with a sales performance increase of approximately 5% to 6% if not for adverse weather impacts [25][27] - The average originating contract term for the quarter was 42.5 months, compared to 40.4 months for the prior year quarter [38] - The gross margin for the quarter was reported at 33.6%, with a noted improvement of 147 basis points sequentially due to better management of wholesale vehicle sales [30][31] Market Data and Key Metrics Changes - The company noted that access to auto credit tightened again in January, reflecting the tightest conditions since June 2021, although there was a slight loosening for the independent dealer channel [8] - The company expects used car affordability to shift back to historical levels over time, which will likely increase customer demand for credit [7] Company Strategy and Development Direction - The company is focusing on improving processes, increasing accountability, and reorganizing work to maximize efficiency, with significant investments in ERP and CRM systems [12][13] - Acquisitions are expected to play a leading role in future growth, with plans to add five or more dealerships per year [14] - The company aims to achieve returns on equity at historical levels by increasing volume productivity and improving gross margins through procurement initiatives and acquisitions [52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future cash flows improving as vehicle costs flatten and efficiencies in inventory management are gained [51] - The company is confident in its ability to provide quality vehicles with affordable payment terms, which is seen as a significant opportunity for growth [55] - Management highlighted the importance of the new loan origination system in enhancing customer experience and streamlining operations [54] Other Important Information - The company completed the acquisition of three new dealerships in December, located in Knoxville, Tennessee, and Tyler, Texas [14] - The weighted average age of the portfolio increased by 12.5% from approximately 8.8 months to 9.9 months [40] Q&A Session Summary Question: Inquiry about the impact of modifications on delinquencies - Management confirmed that modifications were slightly higher this quarter but within a normal range, and they are working with customers as they approach the income tax refund season [61][64] Question: Discussion on post-pandemic annual earnings run rate - Management indicated that cash-on-cash returns look healthy and they expect to achieve returns on equity closer to historical levels over time due to ongoing initiatives [68][69] Question: Inquiry about inventory levels and normalization - Management stated that they expect to return to historical levels of inventory and are making progress in addressing inventory challenges, although some work remains [72][75]