Q3 2021 Conn's Inc Earnings Call
Dead dead dead.
Thursday Thursday
Thursday
Good morning, and thank you for holding. Welcome to the conference call to discuss earnings for the fiscal quarter ended October. My name is Doug and I'll be your operator of going to presentation. All participants will be in a listen-only mode after the speakers remarks. You'll be invited to participate in a question-and-answer session.
As a reminder this conference call is being recorded. The company's earnings release dated December 8th. 2020 was distributed before Market opening Thursday morning. I can be accessed via the company's investor relations website at management will discuss among other Financial. I just in the income and adjusted earnings per diluted share. Please refer to the company's earnings release that was issued today for a Reconciliation of these non-gaap to their most comparable gaap measures. I just want to remind you that some of the statements made in this call are forward-looking statements within the meaning of federal Securities laws about these forward-looking statements represent. The company's expectations or beliefs concerning future events.
The company's cost since that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties which could cause actual results to differ materially from those indicated today your speaker's today our normal hours. The company seats CEO Lee right the company CEO. Oh and George Bush or the Company CFO. I would not like to turn the conference over to mister Miller's please go ahead. Good morning and welcome to Carmen's third quarter of fiscal year 2021 earnings conference call. I'll begin the call with a strategic overview. Then we will provide additional details on the quarter before returning the call over to George who will complete our prepared remarks with additional comments on the financial results.
The economic environment remains extremely fluid as the pandemic continues to impact many communities across the country We Believe are conservative operating approach has allowed the company to successfully navigate current market conditions while also positioning the business to capitalize on our long-term growth opportunities are home related product strategy and multiple financing options continue to drive strong growth of cash and third-party credit sales which increase 32.7% year-over-year during the the overall same-store sales continue to be impacted by the underwriting changes. We implemented beginning in March 2020 in response to the COVID-19 crisis wage We Believe underwriting changes combined with industry-wide inventory shortages in certain product categories reduced year-over-year same-store sales by approximately 20% in the wage.
despite
These impacts I am encouraged by the sequential Improvement in same-store sales third-quarter credit performance reflects, the quick Improvement adjustments. We made earlier this year with the potential impacts on our business of high unemployment and economic uncertainty as a result. Our credit segment is benefiting from newer higher-quality origination and strong cash collections, since the beginning of our fiscal year. Our balance sheet is strengthened significantly as a result of the reduction in the portfolio balance due to a stronger rate of cash Collections and higher cash and third party sales. In fact, we ended the third quarter with the lowest level of net debt as a percent of the portfolio the balance in over six fiscal years. We also successfully close in an ABS transaction in October 2020 our first since the onset of the pandemic we yep.
Leave the progress we made during the quarter provides us with significant flexibility to support our business through the COVID-19 crisis during the third quarter. We also continue to invest in our long-term growth initiatives which include expanding the capabilities of our e-commerce and omni-channel platforms enhancing our credit platform to extend credit to more customers while achieving 1000 basis points of credit spread and capturing more declined applications for consecrated to third-party least own Solutions with these actions will not only help our business through the COVID-19 pandemic, but will also expand our long-term growth opportunities.
In addition, we continue to pursue our Geographic expansion strategy and open new showrooms and targeted markets on November 6th. We opened our first Florida showed up in Pensacola and we are excited by the potential of the Florida Market represents. We plan to open a majority of our new showrooms next fiscal year in Florida to leverage Our Lake distribution center that is scheduled to open in January twenty Twenty-One. As you can see we continue to focus on successfully navigating the COVID-19 crisis while investing our business to support future growth opportunities. I want to personally thank all of our Associates for their continued dedication during this challenging. On behalf of everyone at cons. We should remain committed to helping our customers and communities in this time of need. So with this overview, let me turn the call over to Lee who will provide more details on our third quarter birth.
Getting results. Thanks Norm. I'll start my prepared remarks today looking at our credit operation in more detail over all our credit business reflects. The successful execution of The Prudent Crepes tragedies. We implemented in mid-march to successfully navigate the impacts of the COVID-19 crisis while supporting our retail sales with our multiple third-party credit options.
the strength of
Past three payments on outstanding loans within our portfolio is encouraging and continues to exceed the seasonal Trends. We typically typically experience. In fact the third quarter payment rate increased 16.3% year-over-year in represented the best third-quarter cash payment rate in over ten fiscal years. We believe is strong internal collection efforts and lower consumer spending are having positive impacts on cash back within our portfolio as we stated our last conference call. We revise certain of our rebate programs in June to be more restrictive and improve the balance of reagent counts within our portfolio off as a result the dollar balance of the carrying value of reagent counts on October 31st, 2020 has declined seventy five point seven million dollars or 17.9% year-over-year off and it's down like forty five point five million dollars or 11.6% from July 31st, 2020 in addition. The dollar balance of 60 plus day delinquencies has declined wage.
Fiscal year. It will take time for overall credit trans to normalize given the severe economic challenges the COVID-19 pandemic has caused in The Prudent credit strategies. We have put in place long. However, we expect favorable underlying performance within our portfolio to continue to lead to sequentially lower charge off for the remainder of this fiscal year in addition accounts originated after marches of writing changes have benefited from higher FICO scores and higher mix of existing customers. We also continue to see a larger population of higher quality applicants as other Prime and near Prime lenders have tightened their wages and standards as we continue to successfully navigate this challenging and uncertain economic. We are encouraged by the improving credit Trends. We are experiencing at October 30th, 2020 a credit spread was 6.4% representing a 420 basis point improvement from July 31st, 2020.
We also continue to expand the capabilities and enhance the infrastructure of our credit segment TJ Fenton join cause in July as a company's Chief credit officer and has over twenty years of leadership experience at various Prime and near Prime consumer finance companies. TJ is quickly contributing to our success in several credit initiatives are underway to identify opportunities to increase sales while maintaining credit risk capturing more retail sales through our third party leads own Solutions remains an important priority for our team and represents a significant opportunity for cons in our third party providers. We have a strong belief that Lisa own sales should be at least 10% of our total retail sales compared to 7.2% in the most recent quarter. This is especially true. We are declining more applications as a result of our tighter underwriting standards.
We are working with both our existing partner and testing other Lisa and providers to achieve this goal and I look forward to updating investors on our success in the coming quarters.
Overall, we believe our third-quarter results highlight the resiliency and flexibility of our younique credit and retail business model and the ability to de-risk our credit business while still supporting retail demand throughout your first credit app options.
So looking at our retail segment performance and more detail total retail sales declined 7.3% while same-store sales declined 10.9% for the third quarter compared to the prior-year. Merrily due to the underwriting adjustment. So we began implementing in mid-march in response to the COVID-19 crisis and to a lesser extent limited product availability.
You believe these headline numbers do not reflect the positive underlying trends that are occurring within our retail segment which include strong year-over-year growth and cash and third-party sales sequential movements and monthly same-store sales throughout the third quarter and a 1.2% year-over-year increase in third-quarter same-store transactions.
These favorable Trends have occurred despite the continued impact on retail sales of tighter underwriting which we believe combined with industry-wide inventory shortages reduced year-over-year same-store sales by an estimated 20% off during the third quarter. We are pleased to see the November same-store sales came in better than the third quarter results despite the Nationwide COVID-19 Resurgence in the continued impacts of tighter underwriting.
Looking at our product categories in more detail total appliance sales during the quarter increased 10.5% which represents a 210 basis point increase from the growth rate in the second quarter. We are also starting to experience improving Trend within our Furniture and Mattress category as total sales of Furniture and Mattress increased 2.2% Sequentially conversely. Our consumer electronics catalog remains Challenge and continues to experience significant TV price deflation.
Industry-wide supply chain challenges continued throughout the third quarter across most of our categories inventory availability suffered as a result of COVID-19 related impacts on factory production as well as Transportation delays, especially for imports, we expect inventory constraints to continue throughout the holiday season with the product availability improving him the first quarter of our upcoming fiscal year off to our retail growth initiatives. We are constantly testing new ways to leverage our unique in-house financing and better serve our core customers flooring and fitness are two product groups where we believe our poor customer is under served after a successful test of both product groups within select markets home fitness equipment is now for sale in all of our showrooms and flooring is now sold and more than half of our showrooms. We plan to come back to expand and refine our product strategies to offer more home related products that resonate with our core customers.
Last year's launch of our new e-commerce platform and upgraded website continue to support eCommerce growth in third-quarter sales through this channel increase nearly 61% compared to the prior-year period Ecommerce represents only 1.9% of trailing-twelve-month sales. And we believe that we have a substantial opportunity to increase sales through this channel as a result of increased investments in our e-commerce efforts and expect to accelerate these initiatives over the coming year, which we expect will impact our total sg&a spend.
Just an offsetting higher e-commerce Investments. We continue to focus on driving cost savings and improving efficiencies across our organization, and we successfully lowered operating expenses across several categories since May March compared to the prior fiscal year. Retail sg&a expenses have declined 13.9 million dollars a year to date despite in approximately four and half percent year-over-year increase wage retail square footage. We open to additional showrooms during the third quarter and have open 1 new showroom in the fourth quarter bringing the total number of new stores open today in the fiscal year to serve as of today. We operate a total of 140 four showrooms across fifteen States and have plans to open 8 to 10:00 new showrooms next fiscal year.
We continue to believe that as an omni-channel retailer. We have opportunities to grow both our brick-and-mortar and online business simultaneously, so to conclude my prepared remarks. I'm pleased with the progress. We are making navigating the COVID-19 pandemic while refining our strategies to support the current and future needs of our business. We believe our third 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 name is challenging. 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 George to review our financial performance thankfully over the past nine months our balance sheet and capital position have strengthened materially because of the actions we took to mitigate the potential impacts on our business of high unemployment.
And economic uncertainty the business generated operating cash flow of 79.7 million dollars during the third quarter and 385.5 million dollars a year to date which is a $593 increase from the prior-year today. This is primarily driven by the significant year-over-year increase in cash a third party sales and the decline in our customer accounts receivable balance as a result of tighter underwriting and a stronger rate of cash collections, the year-over-year increase in operating cash flow also drove a decline in net debt as a percent of the ending of all your balance from approximately 59% at January 31st, 2022, approximately 48% at the end of the third quarter in October. We closed our latest ABS traction and our first since the onset of the pandemic our 2028 transaction exhibited strong demand and favorable pricing.
We sold the class A and Class B notes for 241 million dollars with an all-in cost of funds of approximately 4.4%
This reflects the second best pricing through the class B note we have achieved in the ABS market and is only sixty four basis points higher than our last transaction.
Also chose to retain the sixty two point nine million dollars of Class C notes issued in the transaction based on our strong liquidity position and the current capital needs of the business The Classy notes may be sold out on a date to support the future liquidity needs of the business at October 31st, 2020. We had total cash and immediately available liquidity of approximately 384.7 thousand dollars, which included one hundred seven point eight million dollars in cash and cash equivalents and 276.9 million dollars of availability under our existing revolving credit facility. I believe this provides more than enough liquidity to support the current needs of our business and on November 30th, 2020. We announced a cash tender offer for up to 100 million dollars of our 7.5% senior notes that mature in July is 1 + 22
Respect to complete the tender by the end of the calendar year.
As you can see our Capital position and liquidity remain strong and we are proactively managing our cost of funds while ensuring we have the financial resources to support the long term use of our business office moving to our financial results on a Consolidated basis revenues were three hundred and thirty four point two million dollars for the third quarter of representing an 11.1% decline from the same period last fiscal year. We reported net income of $0.25 per diluted share for the third quarter compared to net income thirty-nine 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 $0.25 per diluted share for the third quarter compared to net income of $0.49 per diluted share for the same period last year but cancellations of gaap to non-gaap financial measures are available in our third quarter earnings press release that was issued this morning.
Our financial results for the third quarter reflect the success of our cost savings initiatives Consolidated sg&a expenses will 120 2.2 million dollars a 3.4 million dollar declines year your today Consolidated sg&a expenses have declined twenty point six million dollars from the prior fiscal year. While we remain focused on cost controls. We took fourth quarter sg&a expense to be approximately flat year-over-year.
Looking at our retail segment in more detail total retail revenues for the third quarter or two hundred fifty nine point nine million dollars a 7.3% decline from the same period last fiscal year off gross margin for the third quarter was 38.3% decrease of 90 basis points from the same period last fiscal year a decline in our state commissions and retrospective income as a result of lower sales and college in house financing was the primary driver of the year-over-year decline in retail gross. Margin, we expect this will continue to put pressure on our retail gross. Margin on a year-over-year basis in the fourth quarter. We just segment operating income was fifteen point two million dollars compared to nineteen point six million dollars for the same period last fiscal year primarily due to lower retail sales rep lower retail gross margin partially offset by reductions in retail sg&a expense.
Turning to our credit.
Finance charges and other revenues were 74.2 million dollars during the third quarter the 22.5% decline from the same period last fiscal year was primarily due to a 16% reduction in the average balance of the customer receivable portfolio lower Insurance commissions due to a decline in the balance of sale of our in-house credit financing and the decline insurance rep of income.
For the fourth quarter of fiscal year 2021, we expect finance charges and other Revenue to be down year-over-year primarily due to a lower balance of loans.
A provision for bad debts continues to benefit from a decline in the allowance for bad debts as a result of a shrinking portfolio balance, which was magnified by higher Reserve percentages under Cecil month in addition during the third quarter. The allowance for bad debts declined as a result of a decline in forecasted unemployment rates. This decrease was partially offset by an increase in our allowance related to account that receives the COVID-19 payment deferral based on the portfolio performance of these accounts as a result. Our third quarter provision for bad gas was twenty seven point four million dollars compared to forty five point four million dollars for the same period last fiscal year despite higher year-over-year charge-offs.
Our credit spread for the third quarter was 6.4% a 420 basis point increase from the credit spread of 2.2% last quarter.
What is segment lost before taxes improved to a loss a 2.7 million dollars compared to a loss before taxes a 4.3 million dollars for the same period last fiscal year.
Year-over-year Improvement was driven by a decline in the provision for bad debts, which reflects and stronger cash collections rate newer higher-quality origination and the reduction in the portfolio balance as a result of cash and third-party sales. Finally. The third quarter tax rate was 41% compared to 24.8% for the same period last fiscal year the Year every year in college in the effective tax rate was driven by one point seven million dollar discrete tax expense recognizing the current. As a result of a reversal of a tax loss carry-back that was recognized earlier this year.
We expect to recognize a discrete tax benefits in the fourth quarter as a result of tax planning in connection with the cares act. So with this overview normally in I are happy to take your questions later. Please open the call up to questions.
Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. If you'd like to ask a question. You may press star one on your telephone keypad a confirmation tunnel indicate. Your line is in the question ma'am. You may press star to if you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key. Our first question comes on the line of Rick Nelson. Which Stephens please proceed with your question. Thanks. A lot of good morning North Lake area is what you think about driving sequential Improvement that you saw in same-store sales during the third quarter and the fourth quarter to date and if you could get more specific I was trying to you know, especially the Black Friday.
yes, so as we as we mentioned in his in his comments, we saw Improvement each month through the third quarter on same-store sales and Kolb need to
See Improvement as we mentioned in the month of November. So very pleased we have not changed from a credit underwriting standpoint where we've been at mid March, so it's not because of anything we're doing on the credit side of the house. It's really being driven by that cash and third-party customer, you know, the combination of Sanford cash and lease-to-own and the Improvement year-over-year is driving that are you getting more aggressive I guess with them since we could could see some urgent declines here over here.
No, I I would say our promotions are fairly consistent year-over-year. That's certainly not what's what's driving and I think the execution is better and I think some of our eCommerce efforts, you know, for the very first time we've never had buy online pickup in-store. We implemented that and uh in the month of November October and has been doing very well for us helping to drive our e-commerce sales as well. So the digital and e-commerce site as well as the non-conference financing wage are really the primary drivers of what's driving the sales and that's why we're so bullish about next year because you know as we look at opportunities on the cons financing and the credit we know we have we will have opportunities there next year to help us from the same store sales side. So to be at you know, what 20% impact
Same-store sales and only be down, you know ten and half percent speaks to the power of the business model and what we believe our opportunity is for next year. Hey Rick and one thing to add on a category specific basis is clearly. We're pleased with the strength and appliances but also the Improvement we saw Furniture and Mattress, which is clearly important category. So we were pleased to see that continued progression. Can you speak to Commerce penetration where you stand there or these recent recommendations from CBC to avoid in the store shopping? Have you seen any change in a customer Behavior?
Yeah, certainly. There's no question that customers are more reluctant to enter into a showroom. So we were pleased to see obviously, you know our overall growth in e-commerce. But again, if you think about or e-commerce opportunity, we think we have a unique opportunity to grow that significantly today for the last 12 months were basically a 2% balance of sales room. He Commerce and we think we had the ability to grow that significantly buy multiples is customers get more accustomed to shopping online as you guys know, we we've started to invest and have been investing significantly long. As I said my prepared remarks continue to invest in that important channel for us that we really, you know, we were going to be that omni-channel retailer and that we will be there for our customers whether they want to shop online or in our showroom know and certainly have the broadest spectrum of financing options, which we think we have a unique ability to offer to our customers.
Thanks for the color and then shifting to the credit side. You know where you think lawsuits are going to shake out especially in the recent Thursday it is we look at the static loss data and it looks like things hurt are widening a bit there. If you could, what where your expectation is, clearly you're looking at the Vintage which obviously we've discussed in previous calls where we had took some higher risk. And obviously we knew we were going to and we talked about that that we would have higher charge offs from there. One of the things that we did include in that cable though, which we think is important to think about the progression clearly Thursday, the higher interest rates the yield that we're getting so that offsets it but again, you know clearly is I talked about my prepared remarks. Yeah. We've got TJ on board or chief credit officer. We're doing something
For a credit perspective that we think is very exciting and you know, we talked about being able to approve more but maintain the level of risk. So we're excited about what we have going forward. We work off TJ looking at new credit score cards new systems. We think we have a unique opportunity. So we're pleased going forward and I guess the last thing I would tell you reckon. I know you're focused on the losses, but clearly with Cecil. We reserve it a full lifetime of life. So, you know, those reserves are Incorporated. Um, so really there's there's nothing that we're going to see unexpected as we as we look going forward because we're reserving full lifetime Los remember I took a significant Point Cecil at the change the Cecil at the beginning of the year. So we believe were adequately reserved even for that for those of writing changes. We made last summer that that clearly impacted some losses in the back half of fiscal twenty however with fiscal twenty one month
Since the pandemic very very positive with fpds and sixty-day delinquencies and those trends that will vote for strong performance going forward in the next year.
Very good. Thanks for the commentary and good. Good luck this holiday season.
Our next question comes from the line of Brad Thomas with keybanc capital markets. Please proceed with your question.
Hi, good morning. Normally in George. Thanks taking my question. Just want to follow up on that last topic around the you know, the underwriting a trans man is clearly a number of metrics that would indicate that the customer is going into the portfolio of late have set up a backdrop for one of the stronger portfolio took some time. I guess could you help to quantify to some degree what sort of opportunity you might have to loosen or return maybe to normal until what price friends were what kind of benefit that might be able to be, uh to sales as you get comfortable that the world is getting more normal.
sure, so what I would
Hey Brad, is you're right. I mean the portfolio both from a size standpoint as well as a performance standpoint probably both smaller and stronger performing than any time in the last six or seven years for certain maybe longer than that. So what that bodes to is, you know with TJ coming aboard and and not just TJ we bought additional resources there as well. It really does two things number one more aggressively at more than we've ever done going after the noncoms financing side of the house both Thursday Commerce as well as Lee mentioned on the lease to own Side Opportunities. We still believe we have there but also as the world gets a little more normal and hopefully, we come out of the pandemic early part of next year our expectation is that 20% that that we've taken a cut to that there's a material amount of that. We believe that God.
We'll be able to start taking greater risk with will it be 20% know we we don't believe we'll need to go to that to be able to have a positive same-store sales. But we believed material opportunity there in the first half of next year great and and Norm you you talked about the plans to continue opening in Florida next year. If I'm if I'm not mistaken, you talked about about eight to ten stores next year and in the past, is that still the plan and can you give us some sense of the timing of those opening and maybe George any any color on next year early color? You might be able to share about how to think about yesterday and and p&l implications from from getting the store opening not going. Yeah. I'll start an issue with the the storage stuff. Yeah. We're 8 to 10 is the right number that we're targeting most of those will we expect to be the vast majority of those to be in Florida as wage?
The new Distribution Center that opens in January a significant portion of the stores will be in the first half of the Year. Even the first quarter. So I think I mentioned on sg&a that we would be flattish you over here in the fourth quarter this the quarter we're now part of that is because we're incurring expenses as long talk as we get ready to open a new stores in Florida. Yeah, our our guidance around pre-opening expenses Brad hasn't changed. So we would still expect to see something around 250 or 350 thousand dollars per new store in the first six months preceding the the opening but now that we're opening 8 to 10 stores next year's to 9 stores this year on a year-over-year basis. You won't see as much of an impact to sg&a. But remember as you're looking at sg&a next year relative to this year. It's going to be higher on a dog.
Just because of some of the cost.
To be put in place that have now we've started to resuspend here in the back of the year.
Very helpful. Thank you all so much and hope you all have a great holiday.
Our next question comes from the line of Brian Nagle with Oppenheimer & Company. Please proceed with your question.
Hi, good morning. Thanks for taking my questions. I think a bit of a follow-up to Rick & Brad's questions to but you know the first off congratulations on we're closing the significant benefits to the Titan The Lending standards here and you're on your financials. The question I have is the sales that you're with tight with with the life has been tightened. You're sure you're forgoing some sales any idea where those sales would be going.
And then the question I had another question is as you know, is is is the environment allows you to get maybe a little more aggressive with you want in standards. Is there the risk that you run having discs disappointing or or distance yourself some of those customers they may not return.
The first that's a good question Ryan the first question as far as those customers that don't get approved from the financing standpoint. There are options really are are very odd fairly limited. They can they can go to a lease-to-own option, you know, either in our store or to it to a rent-to-own store and as you know a number of retailers as well have we Stone option another a number of big box retailers have we Stone options as well? Or they go to a cheaper item and pay cash. They typically would not have another opportunity from a financing standpoint.
And then regarding the second question. Well, yeah and and Brian just to go back to clearly with regards to is why we talked about the importance of cake Co, you know the fact that we are declining more we want to make sure which is as I mentioned my prepared remarks, you know work working with our existing partner very closely on making sure that we're maximizing the clients that we have. But as I mentioned, you know, we're testing some additional Solutions out there as well. That's an important piece and then, you know to the extent that you know, we've disappointed customers and you know, will they come back clearly? I think that we know and that we offer best-in-class financing solution for those customers for their needed HomeGoods. So and obviously we have the ability to remarket to them as well. So, I mean we want to make sure that we're giving them an appropriate experience and we can bring them back. We're keeping track of it. So good news. We've been around for a long time, but it is a good question Brian, but we'll obviously continue to suck.
After those customers and bring them back in the fold We Believe especially with our digital marketing efforts as well and at the 29% APR the war at they really don't have that option if they want to finance it someplace else and and we recognize that and they do as well and why we offer the lease to own and at least said, you know, frankly who have been disappointed with our with our balance of sale on these thoughts down and and believe firmly in our and I'm very confident. We will get noise of 10% their balance of sale here in the coming year.
It's helpful very helpful. Then just one quick follow-up just just to understand that math. And I think you were the one that prepared comments, this but you said that the the actions you've taken and them combined with some I guess Supply constraints of reduced your sales by by 20% So does that mean it with cops or down called Ten without those factors? Your comps be plus 10th said that's sick right now. Very good. Thank you. Next question comes in the line of Brian car with Jefferies. Please proceed with your question.
Hey, good morning guys, and thank you for taking my question and congrats on the you know, positive impacts to credit performance. Definitely shown out to date. This year is the first question for me. I you know, obviously you are going you are adopting more along the lease to own side as well as the as well synchrony. I mean just curious where you think it'll shake out in terms of whether your work on percentage of financing is going to be last quarter is a little bit under 50% this quarter. You're 52% So really, you know taking into account the 10% lease-to-own shareware. Do you think Thursday you'll really be running from a you know from a you're you're part of the book financing.
But we've been very I've been very cautious about giving a number because we we really are not targeting a set percentage within the pie because our goal is not just to run a allocate the pieces of the pie but the most importantly to grow the pie overall having said that so, you know, as long as we can underwrite from a risk standpoint, we're comfortable with that with what we're putting in place very comfortable with cons financing being more than the 52% It was for this quarter, you know, certainly being up to 60,000 even over 60 historically. It's been it's been as high as the high sixties. So, you know, we're we're comfortable at those percentages with the appropriate risk from an in-house standpoint, but at the same time we think the growth opportunity on synchrony cash customers if you look at synchrony and cash customers combined over the edge.
It's almost 40% of the business versus pre covet it was 25% of the business or thereabouts approximately. So will it stay at that level comfortable there and certainly marketing and and going after that business on an ongoing basis, but and that's why we I really can't put a number of saying here's where the percentage should be because we want to let it play out with whatever the customer wants from a financing standpoint. As long as we're comfortable with in-house financing that we can do that with appropriate risk will let the percentage wage whether they may but I would expect cons financing to move up over the next year higher than the 52% because of the significant opportunity we have there.
Got it. Thank you very much. It was very helpful. And then I guess you know within that as well you saw record cash collections year-to-date. I mean you see the same performance from a cash purchase home or are you seeing the same Trends in that regard or what a what have you observed to date on that? Yeah, you know as I as I said before, I mean our cash collections cash the cash we're generating and collecting is is a combination of two things number one collecting at a higher level from the portfolio standpoint, but also collect more cash from third-party transactions as well which include not only cash but sacred and lease-to-own as well. So all of that impact on our thoughts on the cash collected and and we continue to see that as we mentioned I think in his comments, you know, we're at a ten-year high of cash Collections and the birth
Quarter and you know even going on into the fourth quarter and we we we continue to see it perform nicely above prior-year which as you know that certainly helps with your performance standpoint significantly.
Got it. Then last one for me delinquencies were up a bit quarter-to-quarter. I mean is that just a function of the lower portfolio balance or what what really caused the decline or the increase their? It's been a couple of things first seasonality wise third-quarter is typically the highest quarter of any of the quarters from delinquency standpoint. And then it's really the denominator effect is the primary driver $60 or actually down, but the portfolio is declining at a faster rate than the 60-day dollars are going down. Yeah, and it's as you know, right off seasonal impact as well, which you see going from Q2 to Q3 and from a dollar perspective looking year-over-year was only up about ten million versus twenty Million last year as well.
God, well, thank you very much is very helpful.
Thanks, right.
Our next question comes from the line of Bill Ryan with compass point. Please proceed with your question. Thanks and good morning question on the allowance and the provision sort of looking back. When your Dodge diesel the allowance level looked to be about 20 just under 21% of receivables closer to 25 right now, you know, I know you're holding reserves up fairly High wage, you know, I guess it's a not knowing how everything's going to going to perform kind of the wait-and-see mentality of things. But, you know looking at it going forward with the tide origination standards that you have both, you know credit eventually kind of working its way through one way or another. I mean is it fair to assume you know that the provisioning rate on the new receivables will be you know, that that reserved level might drift of lower than where it was at the beginning of the year.
yes, that is a
Over the long term with a significantly lower balance of sale of concentrating as we've seen with with much higher quality underwriting it is it is fair to assume that over time the allowance rate will you know trip down drip down below where it was before the the one key factor as you pointed out to me is the fact that we've got a significant Reserve still on the on the balance sheet associated with the increase in forecasted unemployment rates. And so that that's the X Factor in terms of whether I when we will actually start to see the reserve percentages drift down below below where they were when we adopt a system not only that bill in addition as you heard in the comments. I mean our ages and Thursday are balances and and percentages are coming down as well. So and we've done that Pro actively and aggressively to de-risk the portfolio and it's you know, those are reserved at Birth.
Really higher rates. So it's those balances continue to come down and and we focus there that will ultimately result in a lower allowance and provision as well. Okay, and just a follow up a little bit more granular but on the provision in the quarter you mentioned there's a couple of factors, you know, kind of one push the provisional will hire one was a little bit lower, you know, the benefit being a lower unemployment rate, you know, if you net those two out where they kind of a wash on the on the those two factors mean the provision is kind of like, you know, net-net kind of a fair number to use relative. The origination is that you're putting on the books for the quarter when you look at it on a relative basis, the primary driver of the of the decrease in the office hours was the portfolio shrinking quarter-over-quarter. So the allowance rate was about flat quarter-over-quarter. All right. Thank you.
So no further questions. I'd like to hand the call back to mister Miller for closing remarks.
Thank you. We appreciate everyone's interest in the company and look forward to talking to everyone at the conclusion of our fourth-quarter wishing everyone a Merry Christmas and a happy holidays. Thank you, This does conclude today's teleconference. Thank you for your participation. You may just connect your lines at this time and have a wonderful day.