PHOENIX — While NowAuto Group still sustained a net loss during the first quarter of its 2011 fiscal year, the company recently reported double-digit improvements in gross margin as well as the cost of charge-offs and defaults.

The company indicated first-quarter revenue came in at $1.1 million, resulting in a net loss of 5 cents per diluted share. In the prior-year quarter, Now Auto posted the same net loss per diluted share, but its revenue total was $1.4 million.

Executives highlighted that during the quarter that ended Sept. 30 gross margin improved to 62.9 percent. They said the rise was due to improved capture of vehicle costs.

Meanwhile in light of what NowAuto prefaced by stating "in spite of general economic conditions and the significant impact on auto purchasing," the company determined its cost of charge-offs and defaults improved by 13 percent against the year-ago quarter. The company contends the improvement came as a result of increased credit criteria, improved contract management and system upgrades.

Nevertheless, management indicated that it chose to increase the bad debt accrual as a hedge against future potential losses.

NowAuto went on to mention that its net investment increased 5 percent year-over-year. The company also pointed out its operating income — defined as income before charge-offs and interest expense — improved 34 percent year-over-year.

Chief executive officer Scott Miller elaborated about how NowAuto has navigated through an extended economic downturn.

"The present condition of the subprime and below-subprime auto market has continued to impact our industry and our company," Miller began.

"While we have managed to increase gross margin our challenge has been, and will continue to be, on maintaining accounts and collections. Our challenge in the current environment is to aggressively work with our customers to maintain active contracts," he continued.

Miller also noted that certain processes NowAuto used in the most recent quarter could bring better performances going forward.

"Tighter underwriting criteria yielded positive results in the September 2010 quarter," Miller pointed out.

"Nevertheless, we expect a difficult environment for the foreseeable future. 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," he added.

Chief financial officer Faith Forbis emphasized a similar position.

"We continue to seek ways to operate with greater efficiency," Forbis stated. "Our goal is to broaden our customer base through better service and rewards."

In closing, chief operating officer Tino Valenzuela offered a look into what other strategies NowAuto plans to implement.

"Beginning in our second fiscal quarter, we will be rolling out additional business lines, including wheel and rim financing and title loan programs to complement our core auto finance business," Valenzuela explained.

"These new lines require minimal capital investment and require virtually no additional overhead so we expect results of these new lines to immediately contribute to the bottom line," he concluded.