Release Date: June 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross margin improved by 200 basis points over the prior year's quarter and 120 basis points for the full fiscal year.
- Partnership with Cox Automotive is driving efficiencies within the vehicle supply chain process.
- Successful implementation of the Loan Origination System (LOS) has led to a 20% reduction in cumulative net loss rates for LOS-originated loans.
- Recent acquisitions, including Texas Auto Center and Central Auto Sales, are expected to generate annual revenues in excess of $60 million.
- SG&A expenses showed the lowest percentage increase in over five years at just 1.5%, demonstrating improved expense efficiency.
Negative Points
- Total revenues decreased by $22.3 million or 5.8%, largely due to a decline in retail units sold.
- Sales were down 13.6% during the quarter, with total application volume down 9.8%.
- Net charge-offs as a percentage of average finance receivables increased to 7.3% from 6.3%, indicating higher losses.
- Interest expense increased by $4.9 million or 38.2% due to rising rates and increased debt.
- Consumers continue to struggle with economic pressures, including skyrocketing auto insurance rates, impacting their ability to cover basic living expenses.
Q & A Highlights
Q: What is the current store count, including the new additions?
A: The current store count is 154. This includes the Central Auto Sales acquisition in December, but the Texas Auto Center acquisition, which closed in June, will be additive to this count. - Vickie Judy, CFO
Q: Can you explain the differences in the loss content between severity and frequency?
A: For the quarter, frequency accounted for about 58% of the change in the provision. We saw higher frequency throughout the year, making it the largest driver of the losses. - Vickie Judy, CFO
Q: How has the new Loan Origination System (LOS) impacted your operations?
A: The LOS has allowed us to improve deal structures, generate better terms, and ultimately reduce loss rates. It has also provided additional data and insights on consumers, helping us to augment our underwriting standards and identify opportunities for portfolio growth while mitigating risk. - Douglas Campbell, CEO
Q: What are the expected benefits of the partnership with Cox Automotive?
A: The partnership with Cox Automotive is expected to drive efficiencies within our vehicle supply chain process, improve operating efficiency of our wholesale process, and provide options to source more affordable vehicles. Early results show favorability in the economics of these areas. - Douglas Campbell, CEO
Q: How did the recent acquisitions impact your financials and growth strategy?
A: The acquisitions of Texas Auto Center and Central Auto Sales are expected to generate annual revenues in excess of $60 million. These acquisitions remain the best use of our capital and are key drivers for our overall growth strategy. - Douglas Campbell, CEO
Q: What measures are being taken to address the economic pressures faced by consumers?
A: We are identifying ways to help consumers with skyrocketing costs like auto insurance rates. Our procurement strategy focuses on sourcing lower-priced units and accessing affordable units through reconditioning efforts. - Douglas Campbell, CEO
Q: How has the implementation of new technology initiatives impacted your operations?
A: The implementation of technology initiatives like LOS and ERP has improved efficiencies and operational flexibility within finance, accounting, and other customer management functions. These technologies will support future strategic growth. - Douglas Campbell, CEO
Q: What are the key areas of focus for fiscal year 2025?
A: Our focus areas include operational excellence leveraging new technology, improving affordability for core customers, optimizing the new loan origination system, capitalizing on the partnership with Cox Automotive, and continued investments in acquisitions. - Douglas Campbell, CEO
Q: How did the tax season impact your results?
A: The tax season had a slow start with refunds trailing about a week behind normal timing. Despite strong overall demand, carrying $20 million less in inventory impacted our results. Sales were down 13.6% during the quarter. - Douglas Campbell, CEO
Q: What improvements have been made in gross margin and SG&A expenses?
A: Gross margin improved by 200 basis points over the prior year's quarter, driven by pricing discipline and improvements in transportation and vehicle repairs. SG&A expense was reduced by $1.3 million due to operational improvements and cost-cutting measures. - Vickie Judy, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
