America's Car-Mart Inc (NASDAQ:CRMT) Q2 2020 Earnings Conference Call - Final Transcript

Nov 19, 2019 • 11:00 am ET

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America's Car-Mart Inc (NASDAQ:CRMT) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Vickie D. Judy

vehicle as a result of our focus on quality inventory and the overall strength of the used car values in our market.

Our gross profit margin dollars per unit sold increased by $116 or 2.4% to $4,935 compared to $4,819 per unit in the prior year. SG&A for the quarter was up $2.1 million or 16.9% of sales compared to 17.9% for the prior year quarter and at 57.4% of total revenues less cost of sales and the provision for credit losses compared to 60.5% for the prior year quarter. This 310 basis point improvement is important as a large part of our efforts have been focused on keeping good customers and driving down credit losses. So this measurement is important for integrated sales and finance business. We believe the investments that we are making in our associates, systems and infrastructure are essential to continuing operational improvements. The increased SG&A spend was mostly related to salaries and benefits including stock-based compensation, as we are making long-term investments, focused on recruiting and developing great associates and an infrastructure to support a growing customer base.

We added over 4,500 customers since this time last year and 1,700 this quarter. We continue to stay focused on efficiencies and cost control, while continuing to invest for the long term. For the current quarter, our net charge-offs, as a percentage of average finance receivables was 6.1%, down from 6.6% in the prior year second quarter. We continued to see both improvement in both the frequency and severity of losses compared to the prior year, as a result of the higher quality vehicle, improved deal structures and the consistent focus on our operational non-negotiables related to collections practices. We will stay focused on these while ensuring that we provide great customer service after the sale to keep customers in their car and on the road. The improved collections of 30 basis points better contributed to the decreased severity of the losses. Recovery rates for the quarter were slightly lower than the first quarter of fiscal '20, but approximately flat compared to the same quarter last year. The effective income tax rate was 22.7% for the second quarter compared to 20.1% for the prior year second quarter. Income tax expense does include an income tax benefit of $140,000 and $543,000 related to share-based compensation for the current quarter and the prior year quarter respectively. It's about a $0.06 per share change. We expect our base effective tax rate to be approximately 24% going forward prior to any excess tax benefits from stock option exercises.

At quarter end, our total debt was approximately $177 million. We had over $63 million in additional availability under our credit facilities. Our current debt-to-equity ratio is 63.6% and our debt to finance receivables is 30.1%. We did repurchase 112,091 shares during the quarter for approximately $10 million at an average cost of $89 per share. Since 2010, we've repurchased approximately 54% of our company for $239 million at an average price of