Q2 2021 Conn's Inc Earnings Call
Good morning, Thank you for holding.
Welcome to Cons incorporated conference call to discuss earnings for the fiscal quarter ended July 31.
2020.
My name is Diego and I'll be the your operator today.
During the presentation, all participants will be and they listen only mode.
After the speaker's remarks, you'll be invited to participate in the question and answer session.
As a reminder, this conference call is being recorded.
The Companys earnings release dated September Threerd 2020 was distributed before market opened this morning and can be accessed via the company's Investor Relations website website at <unk> IR Dot coms Dot com.
During today's call management will discuss.
Among other financial performance measures adjusted net income.
And adjusted earnings per diluted share.
Please refer to the Companys earnings release that was issued today for a reconciliation of these non-GAAP measures to their most comparable GAAP measures.
I must remind you that some of the statements made in this call are forward looking statements within the meaning of federal Securities laws.
These forward looking statements represent the companys present expectations or beliefs concerning future events.
The company cautions that such statements are necessarily based on certain assumptions.
Which are subject to risks and uncertainties.
What's your could cause actual results could differ materially from those indicate it today.
Your speakers today, our norm Miller the Companys CEO.
Lee Wright the Companys COO.
And George Beshara, the company's CFO.
I would now like to turn the conference call over to Mr. Miller.
Please go ahead, Sir good morning, and welcome to concept can quarter fiscal year 2021 earnings conference call.
I want to start today's call by updating you on our response to the covert 19 crisis before turning the call over to lead George who will provide additional details on the quarter and the actions, we're taking to navigate the current economic and business landscape.
The economic environment remains extremely fluid at the pandemic continues to impact many communities across the country.
We have adopted a conservative operating approach that we believe has positioned the company to successfully navigate these challenging market conditions.
Overall, our second quarter results were better than expected given the unprecedented disruption the covert Nike in crisis has caused.
Cash and third party sales increased 51% compared to the same period in the prior fiscal year, reflecting our ability to capitalize on strong demand for home related products.
Applications in the second quarter also increased compared to the prior year further demonstrating the demand for our products and credit offerings.
Despite strong application performance the underwriting changes the we put in place earlier this year in response to the Goldeneye gene crisis drove a 36% decline in sales financed through our in house credit offerings.
At the onset of the pandemic. We responded quickly do adjust our credit operations and mitigate the potential impacts high unemployment, an economic uncertainty would have on our business.
I believe recent trends speak to our conservative approach as well as the resiliency of our business model and the value of our essential home related products diverse credit offerings and customer service capabilities.
The favorable credit performance combined with proactive reductions NSG. It expenses had a positive impact on second quarter profitability in earnings increase nearly 13% to 70 cents per diluted share over the prior fiscal year period.
In addition, we produced robust operating cash flow during the quarter and our balance sheet and liquidity position remains strong.
Considering the disruption caused by the cobot Nigerian crisis, and what we expect to be lasting changes in consumer buying habits, we are accelerating and increasing investments in our digital and omni channel capabilities.
We now plan to open between seven and nine new storage this fiscal year, which is down from the 14 showrooms opened last fiscal year.
We also expect to open between eight and to ensure rooms next fiscal year, primarily in the Florida market in order to leverage our Lake one distribution center that is scheduled to open in January 2021.
We believe the digital investments we are pursuing in conjunction with more targeted new store growth will enhance our competitiveness through the kobin Nigerian crisis, and expand our market leading value proposition to more customers in the future.
As you can see we continue to focus on successfully navigating the cobot 19 crisis, while investing in our business to support the significant growth opportunities. We believe we have in the future.
I want to personally thank all of our associates for their continued dedication during this challenging period.
On behalf of everyone at college, we remain committed to helping our customers and communities in this time of me.
So with this overview, let me turn the call overly who'll provide more details on our second quarter operating results and the specific actions, we're taking to respond to the covert 19 crisis.
Thanks Norm I'll start my prepared remarks with a quick update on the recent impacts of Hurricane Laura which made landfall in Louisiana on August 27.
Prior to the Hurricanes landfall, we closed certain showrooms to allow our employees tied to a backed away from the path of the store.
All affected showrooms are now reopened and we're focused on supporting our local communities as they start the rebuilding process.
We do not expect hurricane Laura to have a meaningful impact on our third quarter financial result.
So with this update let's look at our second quarter credit segment performance in more detail.
We believe it the prudent underwriting changes we implemented in mid March have positioned us to successfully navigate the impacts of the coven 19 crisis.
For example, the balance of customer accounts 60, plus days past due has declined approximately 32% since the beginning of the fiscal year, which we believe will lead to sequentially lower charge offs for the remainder of this fiscal year.
We expect continued improvements in overall credit trends as newer originations benefit from higher FICO scores at a higher mix of existing customers. In addition, we're seeing a larger population higher quality applications as other prime and near Prime lenders have tightened their underwriting standards.
Strong cash repayments on outstanding loans within our portfolio exceeded typical seasonal trends normally experience in the second quarter. In fact, we experienced the best second quarter cash payment rate within our portfolio in nikes fiscal years, which we believe was driven by strong internal collection efforts and the benefit.
Of government support programs.
Consumers are also spending lessons saving more and we are encouraged that they are using their available cash to pay down debt.
We believe these trends are also having a positive impact on cash collection within our portfolio.
To help our customers navigate the immediate impacts of the cobot 19 pandemic, we provided financial relief in the form of payment deferrals to our customers.
We were pleased to support our customers in their time need and the performance at these accounts is inline with our expectations.
We're also focused on controlling the balance of reagent accounts within our portfolio and in June we revised certain reach programs to be more restrictive as a result, we're starting to see a decline in reach accounts as a percentage of the portfolio.
I'm also encouraged that the dollar balance a reach accounts has declined approximately 14% since January 30, Onest 2020.
As you can see we continue to pursue a conservative credit approach given the uncertainties associated with the cobot Nike pandemic, the overall economic environment.
And the continuation of government stimulus and support programs.
However, unlike other companies, we have the flexibility to prudently reduce risk while still providing consumers with alternative financing options as a result of our multiple third party partnerships.
We believe our second quarter results highlight the success and flexibility or unique hybrid credit in retail business model and the ability to de risk our credit business, while still supporting retail demand through our diverse credit options.
So looking at our retail segment performance in more detail total retail sales declined 8.6%, while same store sales declined 13.2% for the second quarter, primarily due to the underwriting adjustments that we began implementing in mid March in response to the cobot 19 crisis.
We believe tighter underwriting reduce same store sales by an estimated 20% during the second quarter.
Given the continued uncertainty related to the economic environment, we expect to remain cautious in our underwriting approach, which will likely impact a level of sales finance through our in house credit offerings for the remainder of our fiscal year.
Overall, we continue to see strong demand for appliances during the quarter, which typically have lower average selling prices and lower retail gross margin appliance sales during the quarter increased 8.4%.
Personally demand for more discretionary products, such as furniture, and mattress and consumer electronics remain below pre cobot levels sales of furniture and mattress represent our highest ticket purchases and were most impacted by the underwriting changes while consumer electronics continues to experience significant TB price deflation.
As a result furniture and mattress and consumer electronic sales were down, 18.6% and 11.7% respectively for the second quarter.
Out of stock inventory also impacted second quarter retail sales. It was caused by global manufacturing and logistics issues at our vendors as well as higher than forecasted demand primarily within the appliance category.
Well manufacturer supply chains are generally improving the environment remains fluid in fourth quarter demand is expected to strain the global supply chain.
We are partnering with our vendors, who support current and future demand, while managing inventory levels heading into the holiday season.
As norm mentioned, we're also prioritizing and accelerating investments in our digital and omni channel initiatives.
Last year's launch of our new ecommerce platform and upgraded web site has supported recent E commerce growth in second quarter sales through this channel increased approximately 72% compared to the prior fiscal year period.
New investments will focus on extending our digital capabilities and make it easier for our customers to interact with cause online or through their mobile device.
Our marketing strategy is also evolving to support our omni channel and ecommerce growth plan, we are establishing new partners investing in new capabilities in refining our overall marketing approach.
I am pleased with the early progress, we're making transforming the effectiveness and sophistication of our marketing function. In fact total applications increased 5.1% from the prior year period, despite a meaningful reduction in marketing expenses during the quarter.
Finally, we have put a greater emphasis on driving efficiencies across our organization and we have successfully lowered operating expenses across several categories since mid March.
Retail has seen a expenses are down nearly 11% compared to the prior fiscal year period, Despite an approximately 8% year over year increase in retail square footage.
In August we opened two additional showrooms, bringing the total number of new stores opened to date to six all of which had been within existing markets.
So to conclude my prepared remarks, I am pleased with the progress, we're making navigating the cobot Nike pandemic, while refining our strategies to support the current and future needs of our business.
We believe our second quarter results demonstrate the resiliency of our business model and the growing success of our digital platform.
This combined with our compelling financial model experienced leadership team and strong balance sheet provides the necessary resources to successfully manage the business through this challenging period on behalf of the entire leadership team I'd like to thank our employees for your continued hard work service and dedication.
Now, let me turn the call over to Georgia to review our financial performance.
Thanks, Lee starting with our liquidity position year to date, the business has generated $305.7 billion of operating cash flow, including $153.2 million in the second quarter.
The strong operating cash flow was driven by the significant year over year increase in cash and third party sales and the decline in our customer accounts receivable balance as a result of tighter underwriting and strong cash collections.
Year over year increase in operating cash flow drove a decline in net debt as a percent of the ending portfolio balance for approximately 59% at January 31st 2022, approximately 50% at the end of the second quarter.
Net debt as a percent of the portfolio balance is at the lowest level since the beginning of the 2015 fiscal year.
We ended the second quarter with cash and immediately available liquidity, a $416.1 million before giving effect to the minimum liquidity requirement of $125 million.
As you can see our liquidity position remains strong, which we believe will enable us to continue to navigate to covert 19 crisis and support the current and future needs of our business. In addition, we continue to expect to complete one ABS transaction before the end of our fiscal year.
Moving onto our financial results on a consolidated basis revenues were $366.9 million for the second quarter, representing an 8.5% decline from the same period last fiscal year.
We reported GAAP net income of 70 cents per diluted share for the second quarter compared to GAAP net income 62 cents per diluted share for the same period last fiscal year.
On a non-GAAP basis adjusting for certain charges and credits we reported net income of 75 cents per diluted share for the second quarter compared to net income of 62 cents per diluted share for the same period last fiscal year.
Reconciliations of GAAP to non-GAAP financial measures are available in our second quarter earnings press release that was issued this morning.
Our financial results for the second quarter reflect the success of our cost savings initiatives as consolidated <unk> expenses were $115.3 million, a 9.6% decline from the prior year. Despite 14 additional stores.
While we remain focused on cost controls, we expect SGN expense to be flat to slightly up on a year over year basis for the remainder of our fiscal year.
Looking at our retail segment in more detail total retail revenues for the second quarter were $279.9 million, an 8.6% decline from the same period last fiscal year.
Retail gross margin for the second quarter was 36.9% decrease of 360 basis points from the same period last fiscal year.
The reduction in retail gross margin reflects strong sales of appliances, which have lower retail gross margin.
You leveraging fixed logistics costs on lower sales and a decline in retrospective income on our state commissions also impacted retail gross margin during the quarter.
We expect these trends will continue to put pressure on our retail gross margin on a year over year basis throughout the back half of this fiscal year.
Retail segment operating income was $23.2 million compared to $36.1 million, but the same period last fiscal year, primarily due to lower retail sales and lower retail gross margin, partially offset by reductions in retail asked you know expense.
Turning to our credit segment finance charges and other revenues were $87 million during the second quarter.
8.2% decline from the same period last fiscal year was primarily due to a 7.3% reduction in the average balance of the customer receivable portfolio lower insurance commissions due to do a decline in the balance of sale of our in house credit financing and a decline in insurance retrospective income.
For the remainder of fiscal year 2021, we expect finance charges and other revenue to be down year over year as a lower balance of loans more than offsets increasing yields.
As a reminder, undersea. So we are required to reserve for lifetime expected losses last quarter, we recorded an increase in our allowance for bad debts related to future estimated losses associated with the covert 19 crisis.
This quarter, our provision benefited from a decline in the allowance for bad debts. As a result of an improving performance and shrinking portfolio balance, which was magnified by higher reserve percentages under Cecil.
As a result, our second quarter provision for bad debts was $32 million compared to $49.7 million for the same period last fiscal year, despite elevated charge offs during the quarter.
Higher charge offs this quarter, well driven by loans originated last fiscal year, and we're already reserved in our allowance.
Our credit spread for the second quarter was 2.2% compared to 8.9% for the same period last fiscal year and reflects the elevated charge offs associated with the counts originated a year ago.
Despite the decline in our credit spread credit segment income before taxes was $5 million compared to a loss before taxes of $8.7 million for the same period last fiscal year.
The year over year improvement was driven by a decline in the provision for bad debts, which reflects strong cash collections newer higher quality originations and the reduction in the portfolio balance as a result of higher cash and third party sales.
So with this overview normally and I are happy to take your questions. Operator, Please open the call up to questions.
Thank you.
At this time, we will be conducting the question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation total indicate that your line is in the question Q.
You mean press star followed by the number two if you would like to remove your question from the Q per participant do think speaker equipment. It may be necessary to pick up your handset. The four pressing the star keys, one moment, please while we pull for questions.
Our first question comes from Brian Nagel with Oppenheimer. Please state your question.
Hi, good morning, guys.
Good morning, Brian.
The first I'll look I'm not going to give my congratulations on managing the business really Walter I, obviously difficult time I'm not worried speak for themselves such great. Congrats on that.
Hi.
The question I have what we spent a lot of time in the prepared comments is talking about your your strategic decision to pull back on a London on why did you are giving up then probably but if we you mentioned, we expect the tighter lending standards to remain in place through the balance of the year.
So because I'd make a few questions on what W. Beyond the obvious <unk> are there specific indicators you're looking for.
Could lead you to is a company to less need to less interest restrictions.
Then secondly, if it isn't at all or nothing or could you start to go market by market you Ben recognizing there's different risk profiles in the category as you sell category by category.
Within your stores.
Absolutely I'll answer the second part first which is it is not all or nothing they're there and although we anticipate being tighter and from an underwriting standpoint, the back half of the year.
Relative to last year last year, I don't necessarily that does not necessarily mean at the 20% levels, which are really that at that Titan.
Tighten underwriting standpoint, Brian that's that's tighter than any time that accompanies band in the last 10 years I would not expect necessarily has to be at that level of tightening through the to the entire back half of this year. There are opera, we believed that there are opportunities both geographically and what's different said.
Thats, if customers to give us some opportunity to take appropriate risk going forward in the back half of the year I guess the underlying message is you know we're just we're being quite cautious as we go forward with unemployment is still a double digits and unknown, what's going to happen have.
Obviously never been true a pandemic.
We'd rather be a little more cautious here in the short term and ensure that.
As we come out of that our portfolio is it very strong shape, we believe because of the non con financing a sales opportunities being up over 50%.
Demonstrates that from a business model standpoint, we have an opportunity as long as we can keep our portfolio and and very strong shape coming out of the pandemic to capture not only increased retail sales opportunities, but continue to benefit from a strong credit business as well.
Got it.
It's maybe it's just a couple of quick follow ups norm on that so I mean one.
Yeah look I think I mean at least my view coupons to some extent stands alone in what you're doing the marketplace, but did you if you look out there or or competitors.
You can work right standpoint doing something similar to recon aurs are the chance that.
Within certain issues of your market direction here you can given how tight you always with lunch right now you could be losing market share temporarily then that's the second once that is if I want make sure I asked this correctly, but we talk about here you have this lets you just mentioned second ago. This the significant surge in sales that are not tied to your in house credit.
Is that mutually that Sears mutually exclusive from what you're seeing what's your credit or do you actually have customers that since they can't get your your credit are still buying the product in your stores using somebody credit <unk>.
I'll answer the second part first.
No I don't think their exclusive I mean.
With the increase on our third party financing on the cash side and the synchrony.
Those costs I think work attracting both customers because of our our Oh.
Our full credit spread spectrum offering we're attracting those customers actually marketing to those customers probably more than we have in the past. So I think there's opportunities and we expect coming out of this out of the pandemic that our mix will skew higher than it was pre pandemic.
On on some of those alternative financing and what separates us at the end of the day going to your first question is the full credit spectrum offering that we have yeah. There are others out there that obviously have synchrony or high credit.
Offerings are options for those prime customers or.
Higher credit quality customers and there are businesses out there and competitors out there that have lease to own as well. So there is competition on both of those end.
But as far as for MOCON financing 550, 655 go it's still about 50% of the business Theres no one out their underwriting at our 29% a PR for that credit quality customer I'm currently in the marketplace that the war.
Sarah.
I would just add to that Brian from a consumer finance standpoint, what you're seeing in terms of our pull back on origination is not unique to us there are.
Number of other consumer finance companies, who are are always originations are down or up to 90% for the second quarter. So it is not a college phenomenon. It and this is a this is something that you can see across the industry.
Got it I appreciate the color.
One last thing on that a Brian I'd say is we are seeing more opportunities as a as higher credit a finance.
Our banks and other options are tightening from a from a higher credit quality, we are seeing the opportunities at our higher ended the credit spectrum to that we think will create opportunities for us going forward.
Credit tightens across the entire spectrum, not just from us, but from everyone else along the entire credit spectrum.
I appreciate the color. Thanks, guys. Good luck thanks, great. Thanks, Brian.
Our next question comes from Rick Rick Nelson with Stephens. Please state your question.
[laughter] good morning.
I'd like to ask you about sales trends.
As a third quarter per grouse, what you're saying you're not code current quarter to date.
Yeah, Hey, Rick its fleet so.
Clearly, we saw a little bit of a deceleration as we went through.
The quarter and.
As we saw some of the government stimulus.
That Wayne with the carriers that are being ended the end of July.
Clearly, we were not giving guidance on the go forward.
As we set our press release, but we don't expect anything in particular to change from sort of where we're where we stood in the second quarter.
From an overall standpoint, I'd say, that's the case.
We had and Lee mentioned in his comments some inventory constrained.
On the appliance at home office standpoint that hurt us in the back half for the quarter that we are seeing some improvement there here in August but now as long as we're maintaining our underwriting which we are currently at least at that 20% plus range.
We would expect to see a same store sales approximately where there after the quarter.
[laughter] currents and set up [laughter] <unk>, you know under credit side, what picking up a static loss a beta.
We have caused stuff up accumulated curve laws. So.
The current fiscal 18 1920.
Great and their true if you could speak about how much is.
Her kids coal grid or drill burn that where you see little final a lot is right on those branches from any commentary as to what true moderates Park for the coast Coke 20 War.
Lot lot spreads.
Yeah, Hey, Rick this is George.
I'm not going to comment on any specific vintages, but what I would tell you is that undersea. So as a reminder, we're now fully reserved for lifetime losses on anything in our portfolio. So unlike that incurred loss model appreciates all any.
Losses that are that we expect on our existing portfolio are already reserved for in our in our allowance Hey, Rick and just as a follow up clearly one of the things that you've seen I know you follow or credit stats very closely as you look at what we put into the portfolio in Q2, we feel very good about as we continue to go.
Forward, even trying to pandemic I think we're very pleased with the performance were seen of those new originations.
And again as the portfolio itself and you've seen those metrics as the entire portfolio I think continue to get better even during a pandemic. So we're pleased with that.
Great.
And then [laughter].
Gross margin.
Well.
You talked about the mix yes.
Correct.
Sure.
Good.
To like for like a category. So if there is getting any pressure.
Are you having to do at a more aggressive at all what price parents to attract more cash and data credit card buyers.
I'd say from a general standpoint, because we don't break break out the specific detail, but you know them the margin deceleration that you're seeing is not being driven because we're being more aggressive from a pricing standpoint, as we sit here it is being driven by two primary items.
The mix shift, obviously number one and the de leveraging from a sales standpoint on the logistic side of the house are really the two drivers.
The two primary drivers that are driving the margin change.
[laughter].
Thanks, a lot and good luck.
Thanks, Thanks, Rick.
Our next question comes from Kyle Joseph with Jefferies. Please state your question.
Hey, good morning, guys. Thanks for taking my questions on just wanted to touch a little bit more on credit obviously, a lot a lot of moving parts with a shrinking portfolio stimulant and tighter underwriting there.
He said earlier that you expect.
Net charge downstairs that is out on a dollar basis or is that on a percentage basis as well just given a denominator effect with that with a shrinking denominator.
There are referenced was on a dollar basis Kyle. So so we expect charge offs to be down sequentially for the balance of the year and provision in total for the back half a year to be down on a year over year basis.
Got it you know it seems that your reserve level from here, obviously you talked about.
For for lifetime losses.
But you know, giving credit for delinquency a little bit of uncertainty surrounding a stimulus can you give us a sense for.
Are you expecting kind of their reserve levels to hang around where it is.
As a percentage I would say that it's got to be flat to declining in the back half of their as as we see the benefits of better performing new originations in the portfolio. The bigger driver, though as you know he's going to be the level of Oh, the balancing the portfolio.
Yeah got it and then you know stimulus ran out at the end of July have you seen any noticeable changes in terms of credit performance August or early September.
Hey, Kyle mostly so again, it's norm stated we've been very conservative with what we're booking and originations because of the pandemic. So we havent seen anything from a new booking the only thing that we have seen is from a payment rate clearly you saw we laid out in the investor deck the enhancement of the.
Payment rate over prior year, we have seen that come down.
A little bit, but still strong. So we've been pleased this combination of collection execution, which is up and very impactful, but also.
Given the fact that we did get that government stimulus funds, we get further from that or expectations that will come down so.
Got it and then last question for me our call I think you got to tighten underwriting a bit at least in all of last year I'm, just trying to get a sense from kind of when we when we lapped the <unk>.
The underwriting changes in terms of supporting the top.
Yes, So oh, that's that's correct in the fall we did do some tightening last year. So we will lap that as we come in its really October yeah sort of the October October November timeframe.
Okay very helpful. Thanks, very much for answering my questions guys.
Thanks, guys.
Our next question comes from Brad Thomas with Keybanc. Please state your question.
Hey, Marty this is Andrew on for Brad Thanks for taking our question.
We were encouraged by the online growth corridor could you talk about online as a percentage of cons, our credit portfolio. How do you think about that impacting profitability of the credit business going forward.
I'll take that first passat. It then we can add any comments he wants it's about 2% it's been running between two and 3% of balances sale.
For our business here, which is up materially as you heard over 70% from prior year, we believe ultimately it can be.
You know a 10% of our business in total for Labelle sales standpoint.
From a profitability standpoint.
It could actually we charged to same pricing from a credit sample online for the most part that we do in stores. So we don't typically we don't see a significant drop from a margin standpoint, with our online business that other retailers do not because of the finance.
Financing element of it now we because of the fact from an underwriting standpoint with cons financing, although we do do business with Con financing online. We are much tighter online than we are in the stores to ensure from a risk standpoint that we don't have issues with the portfolio, but the ultimate.
Profitability overall because of the tightened underwriting is similar to what we see in store.
Understood. Thanks for the detail there and then with progressive increasing to 8.4% of your overall financing mix.
Talk about how that relationship is playing out and how you expect it to evolve over the coming quarters.
Yeah, I mean, clearly your we're happy that we still think there's significant opportunity for more obviously as we talked about with tightening 20% we think there's.
A lot of opportunity for at least some partner. So we think there should be additional growth there an opportunity.
Gotcha and then my last question is.
We appreciate the detail that you all provided on.
The underlying sales drivers.
The quarter, but could you talk about the types of customers you're seeing in how average selling price. It is changing and then has this changed at all as the as you move into August or as you moved into August.
What I'd say is from it.
We have seen a reduction from an overall ASP, but it's driven by the mix shift from a category standpoint.
If you look historically now appliances have a lower average sales A.S.P.
Then our furniture and mattress categories. So we have seen pressure from an overall ASP, but it's not being driven by a it's being driven by two things predominantly number one or the shift a appliances, that's a larger mix of our overall sales plus the tightened underwriting.
One of the major things we've done from an underwriting standpoint, it to reduce risk is lower overall credit limits across the credit spectrum. So that has resulted in all of our categories with some lower ASP, but that's that's driven proactively by us to mitigate risk with the portfolio.
Understood I appreciate I appreciate that that's all for me.
Thanks.
Our next question comes from Bill Ryan with Compass point. Please state your question.
Thanks, a couple of questions first I'm thinking about the underwriting side of the equation.
Is there any incremental tightening that took place in the second quarter and the thought process behind that is I believe you said in may.
In House Finance sales was kind of in the 57% range and I think it closed out the quarter and.
49 ish, 50% area. So I just wonder if there's any incremental.
Tightening that took place during the course of the quarter.
Most of it was done at the end at at the very ended there was very almost nothing down in the second quarter was at that 20, low 20% a range from an underwriting standpoint, all quarter Bill you build a one impact that you do get obviously is as we made those changes it takes a little bit of time, they do our customers do have an.
Open time period to use their credit so that does have a little bit of flow throughs, there's probably some of the effect you. So okay. Okay. That's helpful and then.
No kind of segregating the provision I'm just trying to put everything together for modeling purposes going forward you know, you've you've definitely tighten credit and you're seeing some good results from it.
You kind of implied that the provision or call. It the reserve levels going to remain flat, maybe slightly lower going forward that with a tighter underwriting standards. It seems like it should be coming down so sort of what the thought process is on that and then.
If you can be more specific I'm not sure if you can but to the specific provisioning.
Great that you're looking kind of within a range on some of your new originations given the tighter underwriting.
Hey, Bill this is George the way you described on the thought process around the allowance percentage for the back half into your makes sense. Obviously the environment right now is still on certain and so that's why we characterize it as flat to slightly down.
Terms of the specific provision rate or or percentages were not providing our guidance at this time, but I think that gives you enough to think through the modeling for the back half of their okay. Thank you.
Thank you we have reached the end of the question and answer session and now I will turn the call over to norm Miller for closing remarks.
First I want to thank everyone for their interest in the company and their participation on the call.
We also want to take another opportunity to thank all of our associates across 14 States, we do business. It in our headquarters and call centers for their work during these challenging times, it's a it's been remarkable.
We look forward to talk with you at the next earnings call. Thank you.
Thank you. This concludes todays conference all parties may disconnect have a great day.