TEMPE, Ariz. — NowAuto Group recently announced financial results for its third fiscal quarter. For this period, the company reported revenue of about $1.7 million, compared with about $3.6 million in the previous year.

"Revenue declines were in line with management expectations as emphasis continues on higher margin finance sales than on cash or auction sales," officials explained.

Moreover, executives said gross margin increased from 32.7 percent to 43.5 percent, which reflected higher finance income.

For the nine-month time frame, the company posted revenue of $5.6 million, compared with $8.9 million in the same period of the previous fiscal year.

Gross profit for the nine-month period was up 38.6 percent from 29.1 percent, according to officials. Moreover, executives pointed out that general and administrative expenses declined almost 13 percent due to labor and other fixed-cost reductions. Before bad debt charges, executives said they incurred a slight loss for the time frame when compared to the same period of fiscal 2006.

"There is a maturity developing at the core of this otherwise nascent company," said Faith Forbis, chief financial officer. "We continue to face the challenges and find innovative ways to overcome them."

Discussing the lower revenue results, officials explained that they implemented stringent underwriting criteria in December 2006, which they said is likely to lead to fewer eligible customers. However, they went on to point out that the new underwriting guidelines should result in stronger contracts and fewer charge offs down the road for the company.

"We are continuing to strengthen our portfolio, building on the initiative established last December," explained Scott Miller, chief executive officer. "While we may continue in the next few months to experience higher than normal bad debt charges, we believe we have our focus on the proper place, focusing on selling quality vehicles with more stringent, but not restrictive, underwriting requirements.

"Increasing the size of our finance contract portfolio, while maintaining proper underwriting and maintenance policies is paramount to our stability and growth," he continued.

During the March quarter, NowAuto Group charged off about $622,000 to bad debt expense.

"The larger than normal charge offs was the primary reason for the loss for the quarter ended March 31, 2007," executives explained. "The reasons for the larger than normal charge offs were tighter collection policies that resulted in early repossession and more stringent underwriting criteria whereby customers that previously would have been re-contracted were not allowed to redeem their vehicles."

During the third quarter, executives said they launched a credit counseling initiative for customers with a third-party provider.

"We strive to balance customer service with improved portfolio risk. By introducing a qualified credit-counseling service to our customers, we believe that we can achieve a real win-win situation," Forbis reported.

Moving on, the company also said it launched a buy-here, pay-here concept for motorcycle customers in January. According to officials, this business has grown each month.

"Results have been consistent with our January tests, reflecting better established, and thus lower risk, customers to our portfolio," said Miller. "We intend to expand this portion of our business, as long as the credit characteristics remain as they are presently."

About the Company

NowAuto Group operates four BHPH dealerships in Arizona. Executives said the company manages all of its installment finance contracts and purchases installment finance contracts from a select number of independent used-vehicle dealerships.

Additionally, through its subsidiary, NavicomGPS, the company markets GPS tracking devices primarily to independent dealers.

For more information about the company, visit www.nowauto.com.