• Total Revenue Increase: 8.7% increase despite a 90 basis point decline in average selling prices.
• Sales Volume Increase: 13.2% increase for the quarter.
• Interest Income Increase: 5.1% increase driven by $31 million year-over-year receivables growth.
• Gross Margin: 35.7% compared to 34.2% in the prior year quarter.
• Net Charge-Offs: Improved to 6.1% from 6.8% in the prior year quarter.
• Allowance for Credit Losses: 24.31% at quarter end, improved from 25.74% in the prior year.
• Average Originating Term: 44.6 months, up from 43.3 months in the prior year quarter.
• Collections Increase: 5.2% increase over last year.
• Delinquencies: Increased 40 basis points to 3.7% at quarter end.
• SG&A Expense Increase: $2.9 million or 6.7% increase, driven by acquisitions and higher stock compensation.
• Interest Expense: Increased by $192,000 or 1.1%.
• Unrestricted Cash: $8.5 million at January 31, 2025.
• ABL Facility: $75 million drawn with a new facility extended to $350 million.

• Warning! GuruFocus has detected 9 Warning Signs with CRMT.

Release Date: March 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• America's Car-Mart Inc (NASDAQ:CRMT) reported an 8.7% increase in total revenue, driven by higher sales volume.
• The company successfully completed an extension and upsizing of its ABL facility to $350 million, maturing in March 2027.
• The sixth ABS transaction was completed, raising $200 million and was more than 10 times oversubscribed, indicating strong market confidence.
• Gross margin improved to 35.7% from 34.2%, aided by better vehicle procurement and disposal strategies.
• Net charge-offs as a percentage of average finance receivables improved to 6.1% from 6.8% in the prior year quarter.

Negative Points

• Persistent inflationary trends, higher used car prices, and elevated interest rates continue to challenge the customer environment.
• Average selling prices declined by 90 basis points, despite the increase in total revenue.
• Delinquencies increased by 40 basis points to 3.7% at quarter end, partly due to weather impacts.
• SG&A expenses rose by 6.7%, driven by acquisitions and higher stock compensation, creating short-term headwinds.
• The allowance for credit losses remains high at 24.31% of finance receivables, despite improvements.

Q & A Highlights

Q: Can you provide an update on the unit recovery and underwriting trends over the past year? A: Douglas Campbell, CEO, explained that last year they were too tight with underwriting after rolling out the LOS, resulting in a 19.9% decline in the third quarter. They have since relaxed some controls, focusing on risk-based pricing rather than overall relaxing of core controls. Current run rates imply a 6% to 8% decline compared to fiscal year '23, which was a high watermark.

Q: How did weather impact delinquencies, and what trends have you seen since? A: Vickie Judy, CFO, noted that while it's hard to isolate the weather's impact, delinquencies have trended back down quickly and are in line with expectations.

Q: Can you provide details on recent acquisitions and their impact on SG&A? A: Vickie Judy, CFO, stated that they closed a dealership in Hot Springs, Arkansas, last December, and two large Texas Auto Center dealerships in June. These acquisitions are expected to add 5,000 or more accounts over the next 18 to 24 months, impacting SG&A as they build out a portfolio of customers.

Q: How are provisioning benefits being realized, and what is the impact of the LOS on consumer stress? A: Vickie Judy, CFO, explained that most benefits are from underwriting improvements rather than consumer conditions. Douglas Campbell, CEO, added that 60% of the portfolio is under new LOS controls, providing flexibility and helping navigate broader macroeconomic uncertainties.

Q: What opportunities do you see for America's Car-Mart, and why did you join the company? A: Jamie Fischer, COO, expressed excitement about joining a company where she can make a significant impact. Coming from a larger company, she sees opportunities to implement changes and improve collections, contributing to the organization's success story.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.