Car-Mart(US:CRMT)2023-09-05 17:45Financial Data and Key Metrics Changes - The company reported strong revenue growth for the quarter, with sales performance generating 15,912 units sold, up 2.4% year-over-year [12] - Gross margin improved to 34.6%, up 20 basis points compared to the previous year and up 120 basis points sequentially [18] - Net charge-offs as a percentage of average finance receivables were 5.8%, compared to 5.1% in the prior year quarter [23] - Total collections increased by 12% to $166 million, with collections per active customer per month rising to $535 from $516 [28] Business Line Data and Key Metrics Changes - Same-store sales increased by 8.2%, positively impacting inventory turns, which rose from 5.9 to 7.2 turns [12] - Online credit applications grew by 19% for the quarter, accounting for about 70% of all applications [12] - Average selling prices increased by 4.1% year-over-year, driven by both vehicle prices and ancillary products [15] Market Data and Key Metrics Changes - Credit availability remains tight compared to the previous year, although there has been mild improvement recently [14] - The industry is experiencing a decline in wholesale pricing, with procurement teams managing to lower purchase prices sequentially throughout the quarter [16] Company Strategy and Development Direction - The company is focused on long-term health and success, with a commitment to investing in the business despite industry challenges [10] - There is an emphasis on improving operational efficiencies and leveraging technology to enhance vehicle transportation and procurement processes [20] - The company is exploring acquisition opportunities as many competitors are struggling, which could lead to significant growth [78] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future demand, stating that the current environment is ideal for focusing on affordability and customer service [37] - The company believes that credit results will improve as they enhance vehicle quality and execution levels [39] - Management noted that foundational investments are nearing completion, which will allow for a more efficient, data-driven operation [38] Other Important Information - The company has over $125 million in deferred revenue on the balance sheet and closed on a third securitization with net proceeds of $356 million [25][34] - The transition of CEO from Jeff Williams to Doug Campbell is set for October 1, with a focus on ensuring a smooth handoff [7][10] Q&A Session Summary Question: What is the outlook on extending contract terms for affordability? - Management believes there is potential to decrease contract terms in the future as consumer wages increase, but this will depend on car prices and inflationary pressures [47] Question: What changes have occurred in vehicle purchase and disposition? - The company has improved efficiency by purchasing slightly newer vehicles with lower mileage, which should reduce repair costs and enhance resale value [48][49] Question: How is the health of the underlying consumer? - The health of consumers remains stable, with low unemployment and good wages, but inflationary pressures are still a concern [56][58] Question: Will the company raise inventory levels in response to potential strikes? - Management is preparing for various outcomes but does not plan to stock up on inventory; they will remain selective in vehicle purchases [63][66] Question: What are the opportunities seen in the current market? - The company is optimistic about acquiring strong operators looking for succession plans, which could lead to increased productivity and profits [78]