Monday, Feb. 18, 2008, 07:00 PM UPDATED 11:59 AMBy Nick Zulovich
TEMPE, Ariz. — NowAuto Group recently reported results for the fiscal 2008 second quarter, which ended Dec. 31, 2007. Highlighting the report was a drop in revenue from the previous year but an improvement in gross margin and a decrease in bad debt charges.
The company indicated its quarterly revenue to be $1.1 million with a net loss of $0.03 per diluted share. In the same period last year, revenue was $2.1 million with net loss of $0.06 per diluted share.
However, gross margin inclined to 50 percent during the quarter, suggesting increased finance income and improved margin sales.
Bad debt charges were reported at $237,000, a significant decline from the $580,000 a year ago.
"Extraordinary efforts have been made over the past several months to improve our bottom line. Now we are beginning to see the results and are looking forward to stronger results in the future," indicated Faith Forbis, NowAuto's chief financial officer.
Officials explained that switching from sales to leases and tightening underwriting standards have meant lower revenues but better gross margins and lower bad debt costs.
The company noted it had lower volume in the quarter because of lower contract purchases as a result of lower credit quality and sales volume.
However, defaults and charge-offs were improved from the previous quarter, and net contract receivables had an 8 percent year-over-year increase, officials indicated.
The company also indicated fixed costs were reduced from the first quarter. Taking away bad debt charges, the company reported loss of less than $0.01 per share for the quarter.
"The present condition of the subprime and below-subprime auto market has continued to impact our industry and our company," commented NowAuto chief executive officer Scott Miller. "While our emphasis is always on collections, our challenge in the current environment is to aggressively work with our customers to maintain active contracts."
"Efforts begun in the September quarter to maintain contracts have resulted in significantly improved bad debt charges over the prior quarter and year," Miller added. "Our commitment to customers and shareholders alike remains. NowAuto will do whatever it can to maintain productive contracts without placing imprudent demands on our customers."
Tino Valenzuela, chief operating officer, discussed the importance of conditioning and maintaining the company's vehicles, before and after they are sold.
"That is why we have invested in a new vehicle conditioning center that opened Dec. 1, 2007. While this will serve our customers by providing lower cost vehicle maintenance and repair, we expect this part of our business to be a profit center by the end of fiscal 2008," Valenzuela explained.
Miller went on discuss the company's search for a possible acquirer.
"While, we hope to be in a position to make a public announcement in coming weeks, it is more important that the best candidate be chosen and completion of due diligence be done before any announcement is made," Miller noted.
"Consummation of a transaction, if there indeed is one, will not likely occur until later in 2008. Our goal is to find the candidate that offers to our shareholders the best prospects for the future," Miller concluded.
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