Conn's, Inc. (NASDAQ:CONN) Q2 2020 Earnings Conference Call Transcript

Sep 03, 2019 • 11:00 am ET

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Conn's, Inc. (NASDAQ:CONN) Q2 2020 Earnings Conference Call Transcript

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Presentation
Executive
George L. Bchara

primarily due to strong portfolio performance. The allowance for bad debts and uncollected interest as a percent of the total portfolio was 13.3% at July 31, 2019, which was down approximately 20 basis points from the prior fiscal year period. SG&A expense in the credit segment for the second quarter increased 4.4% versus the same quarter last fiscal year and on an annualized basis as a percentage of the average customer portfolio balance was 10.2% compared to 10.1%. The increase in credit SG&A primarily reflects continued investments we are making in our recovery effort and an increase in operational expenses to support our growth. Interest expense for the second quarter was $14.4 million, which declined 7.5% from the same period last fiscal year, as a result of reductions in our weighted average cost of funds.

For the second quarter, annualized interest expense as a percentage of the average portfolio balance was 3.7% compared to 4.2% for the same period last fiscal year. Average net debt as a percentage of the average portfolio balance was approximately 62% -- 61% for the second quarter of fiscal year 2020 compared to 62% for the prior fiscal year period. ABS notes currently outstanding include all classes of our 2019 A and 2018 A notes and the B and C classes of our 2017 B note. We currently expect to complete one additional ABS transaction during the current fiscal year.

I am very pleased with the improvements we continue to make in our capital position. We expect to fund our anticipated growth through internally generated funds and from our existing capital sources. As Norm mentioned, through August 29, we have repurchased a total of 3.1 million shares at an average price of $18.79 per share, which is approximately 6% below our book value as of April 30th, 2019.

The total amount repurchased through August 29 under our $75 million share repurchase plan was $57.9 million or 9.6% of our outstanding shares. During the second quarter, we repurchased $34.3 million of our common stock and funded the growth of our customer receivables portfolio while our net debt to adjusted EBITDA ratio declined. Before opening the call up for questions, I want to note that we continue to expect our annual effective tax rate to be between 25% and 27% for the current fiscal year.

With this overview, Norm, Lee and I are happy to take your questions. Operator, Please open the call up to question.