Car-Mart(US:CRMT)2019-11-19 17:42Financial Data and Key Metrics Changes - The company reported record revenues of $190 million, representing a 14.6% increase in sales and an 8.7% increase in interest income [6][10] - Same-store revenues increased by 12.2% [6] - The gross profit percentage for the second quarter was 40.5%, down from 41.7% in the prior year quarter [11] - The effective income tax rate was 22.7%, compared to 20.1% for the prior year second quarter [15] Business Line Data and Key Metrics Changes - Retail units sold increased by 8.7%, with the average retail sales price rising by 5.1% to $11,589 [8] - Revenues from stores over 10 years old increased by 13%, while stores aged 5 to 10 years saw a 12% increase, and stores less than 5 years old experienced a 43% increase to $21 million [7] Market Data and Key Metrics Changes - The weighted average interest rate for all finance receivables remained flat at approximately 16.4% [10] - The down payment percentage increased slightly to 6% compared to 5.8% for the prior year quarter [9] Company Strategy and Development Direction - The company is focused on growing customer count in line with operational capabilities and enhancing customer experience through quality vehicles and service [5] - Investments in associates, systems, and infrastructure are deemed essential for operational improvements [13] - The company plans to open new locations, with two already opened this year and more in process [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued top-line growth and improvements in credit loss ratios [20] - The competitive environment is stable, with no significant changes noted [37] - The company aims to keep customers within the Car-Mart family longer, enhancing customer loyalty and market share [39] Other Important Information - The company repurchased 112,091 shares for approximately $10 million at an average cost of $89 per share [17] - Total debt at quarter end was approximately $177 million, with a debt-to-equity ratio of 63.6% [16] Q&A Session Summary Question: Can you talk about the specific actions taken to improve SG&A to gross ratio? - Management indicated that top-line growth will help improve the ratio, alongside expected improvements in credit loss [20] Question: What percentage of SG&A is fixed versus variable? - Most SG&A costs are fixed, primarily related to salaries and benefits [21] Question: How was the sales cadence through the quarter? - Sales growth was consistent throughout the quarter [22] Question: What are the bigger drivers of unit volume growth? - Improvements in inventory quality, field sales efforts, and online initiatives are contributing to growth [24] Question: Can you provide an update on the procurement process? - The company is leveraging size to source higher quality inventory and reduce costs [25] Question: How are repossessed cars typically handled? - Almost all repos are sold at auction, with minimal cars going to salvage [26] Question: How does the reduction in used car values impact recovery? - Lower used car prices allow the company to offer better vehicles to customers, which is seen as a positive [30] Question: What is the outlook on credit going forward? - The company aims to maintain stable credit quality while potentially adjusting terms due to rising selling prices [38] Question: How is the inventory mix heading into this quarter? - The inventory mix and quality are improving compared to the previous year [40] Question: What is the timeline for new dealership openings? - New dealerships in Chattanooga and Cabot are expected to open in the fourth quarter [42] Question: What is the strategy for repeat customers? - The company is focused on educating customers about the financial benefits of their offerings to increase repeat business [45]