CRMT
Americas Carmart INC
NASDAQ
8-K: America's Car-Mart Reports Mixed Q1 Results Amidst Economic Headwinds
Sentiment:
Quarterly Report
4 September 2024 7:30 AM
America's Car-Mart reported a 5.2% decrease in revenue for the first quarter of fiscal year 2025, alongside improvements in some credit metrics and a net loss per share.
Worse than expected
The company reported a net loss per share of $0.15 compared to a diluted earnings per share of $0.63 in the same quarter last year.
Revenue decreased by 5.2% year-over-year.
Net charge-offs as a percentage of average finance receivables increased to 6.4% from 5.8%.
Summary
- America's Car-Mart's revenue decreased by 5.2% to $347.8 million in the first quarter of fiscal year 2025, primarily due to a decline in retail units sold.
- Interest income increased by 7.2% to $4.1 million, and total collections rose by 4.3% to $172.9 million.
- The company experienced a favorable adjustment to the allowance for credit losses, decreasing it to 25.0% from 25.32%.
- Net charge-offs as a percentage of average finance receivables increased to 6.4% from 5.8%.
- Interest expense rose by 28.3%, or $4.0 million.
- The company reported a loss per share of $0.15, compared to a diluted earnings per share of $0.63 in the same quarter last year.
- Retail unit sales decreased by 9.6% to 14,391 units.
- Gross profit margin improved to 35%, or $6,996 per unit, a 3.4% increase.
- Delinquencies improved by 90 basis points year-over-year to 3.5% of finance receivables, but increased sequentially by 40 basis points from the previous quarter.
- Average down payments improved to 5.2%, a 20 basis point increase year-over-year.
- The projected cash-on-cash returns for the quarter improved to 72.4%, a 290-basis points improvement over the prior quarter.
- Debt to finance receivables was 53.4%, and debt, net of cash, to finance receivables was 46.7%.
Sentiment
Score: 4
Explanation: The sentiment is moderately negative due to the decrease in revenue, net loss, and increase in net charge-offs, although there are some positive aspects such as improved gross profit margin and cash-on-cash returns. The company is facing economic headwinds and challenges in its loan portfolio.
Positives
- Interest income saw a notable increase of 7.2%, or $4.1 million.
- Total collections increased by 4.3% to $172.9 million.
- The allowance for credit loss decreased to 25.0% from 25.32%, indicating improved credit quality.
- Gross profit margin improved to 35%, or $6,996 per unit, a 3.4% increase.
- Delinquencies improved by 90 basis points year-over-year to 3.5% of finance receivables.
- Average down payments improved to 5.2%, a 20 basis point increase year-over-year.
- Projected cash-on-cash returns improved to 72.4%, a 290-basis points improvement over the prior quarter.
- The company's new loan origination system (LOS) contributed to higher down payments and improved deal structures.
Negatives
- Revenue decreased by 5.2% to $347.8 million, primarily due to a decline in retail units sold.
- Net charge-offs as a percentage of average finance receivables increased to 6.4% from 5.8%.
- Interest expense increased by 28.3%, or $4.0 million.
- The company reported a loss per share of $0.15, compared to a diluted earnings per share of $0.63 in the same quarter last year.
- Retail unit sales decreased by 9.6% to 14,391 units.
- Delinquencies increased sequentially by 40 basis points from the previous quarter.
- SG&A per customer increased by 2% to $453 compared to $444 the prior year.
Risks
- The company faces ongoing economic challenges that impact customer affordability.
- There is a continued increase in both the frequency and severity of losses, primarily from FY 22 and FY 23 originations.
- The company's debt to finance receivables ratio increased to 53.4% from 49.3% year-over-year.
- The company is experiencing higher than projected losses on originations in fiscal years 2021 through 2023.
- The company's ability to underwrite and collect its contracts effectively is crucial, and any failure to do so could impact results.
- The company is exposed to general economic conditions, including fluctuations in gas prices, grocery prices, and employment levels.
Future Outlook
The company believes that its strategic priorities, including acquisitions and cost control initiatives, will strengthen its competitive position and drive better results for the remainder of the fiscal year. They expect to see continued improvement in average retail sales price throughout the balance of the calendar year. They also expect SG&A leverage to improve in subsequent quarters.
Management Comments
- President and CEO Doug Campbell stated he is encouraged with the rebound in sales volume from two quarters ago, despite the ongoing economic challenges.
- Doug Campbell noted that the new loan origination system (LOS) contributed to higher down payments and improved deal structures.
- Doug Campbell recognized the operations team for improvements on several credit metrics.
- Doug Campbell emphasized that affordability remains Car-Mart's number one focus.
- Management believes that strategic priorities, including acquisitions, will strengthen their competitive position.
Industry Context
The results reflect the challenges faced by the used car market, including economic pressures on consumers and the need to balance sales volume with credit quality. The company's focus on affordability and strategic acquisitions aligns with industry trends of adapting to changing consumer needs and market conditions.
Comparison to Industry Standards
- While specific competitor data is not provided in the document, the increase in net charge-offs to 6.4% suggests a return to pre-pandemic levels, which ranged from 5.9% to 8.7%.
- The company's focus on improving cash-on-cash returns and credit metrics is a common goal in the auto finance industry.
- The company's debt to finance receivables ratio of 53.4% and debt, net of cash, to finance receivables ratio of 46.7% should be compared to industry averages to assess the company's leverage and risk profile.
- Companies like CarMax and AutoNation, which also operate in the used car market, would be relevant comparables, but their specific financial metrics would need to be analyzed separately to provide a detailed comparison.
Stakeholder Impact
- Shareholders will be impacted by the net loss and decrease in revenue.
- Employees may be affected by cost control initiatives.
- Customers may benefit from the company's focus on affordability.
- Creditors will be impacted by the company's debt levels.
Next Steps
- The company will hold a conference call to discuss its quarterly results on September 4, 2024.
- The company will continue to focus on strategic priorities, including acquisitions and cost control initiatives.
- The company will continue to monitor and update expected credit losses quarterly.
Key Dates
- 2024-07-31: End of the first quarter of fiscal year 2025.
- 2024-09-04: Date of the press release announcing first quarter results and date of the 8-K filing.
Keywords
used car sales, auto finance, credit losses, loan origination, retail sales, finance receivables, cash-on-cash returns, delinquencies, interest income, net charge-offs
CRMT
Americas Carmart INC
NASDAQ
Sector: TBD
Filings with Classifications
Better than expected
18 June 2025 6:34 PM
Beneficial Ownership Statement
- The purchase of company stock by a Chief Financial Officer is generally viewed as a positive signal, indicating management's belief that the stock is undervalued or that the company's future performance will be strong.
Capital raise
12 June 2025 7:30 AM
Quarterly and Annual Results
- On May 29, 2025, Car-Mart completed a term securitization transaction involving the issuance of $216 million of asset-backed notes.
- The securitization achieved an overall weighted average life adjusted coupon of 6.27%, which improved by 22 basis points compared to the Company's January 2025 issuance and by 117 basis points from the October 2024 securitization transaction.
- Net proceeds from the securitization were used to pay down the outstanding balance on the Company's revolving line of credit.
- The Company continues to explore options to diversify and expand its financing sources, such as potential warehouse lines of credit and the issuance of longer-term debt securities.
Better than expected
12 June 2025 7:30 AM
Quarterly and Annual Results
- Diluted EPS for FY25 turned profitable at $2.33, compared to a significant loss of $4.92 in FY24, indicating a strong financial recovery.
- Q4 FY25 diluted EPS significantly increased to $1.26 from $0.06 in Q4 FY24, demonstrating strong quarterly performance.
- Gross margin percentage improved by 200 basis points for the full year and 90 basis points for Q4, reflecting effective cost and pricing strategies.
- Net charge-offs as a percentage of average finance receivables improved for both Q4 and the full year, signaling better credit quality and risk management.
- The allowance for credit losses improved to 23.25% at April 30, 2025, from 25.32% a year prior, indicating a healthier loan portfolio.
Worse than expected
11 June 2025 7:14 PM
Insider Transaction Report
- The document details planned significant sales of common stock by a Director and 10% owner, Adam K. Peterson, and his affiliated entities.
- A total of 154,269 shares are planned to be sold, representing approximately 9.75% of their prior beneficial ownership.
- Such a substantial planned reduction in holdings by a key insider is generally perceived as a negative signal by the market.
Better than expected
4 June 2025 11:21 AM
Securitization Announcement
- The weighted average coupon of 6.27% is lower than previous issuances (22 basis points better than January 2025 and 107 basis points better than October 2024), indicating more favorable financing terms for the Company.
Capital raise
4 June 2025 11:21 AM
Securitization Announcement
- The Company completed a term securitization transaction, issuing $216 million in principal amount of asset-backed notes.
- Net proceeds of approximately $214.5 million were generated from the offering.
- The proceeds are being used to pay outstanding debt and make initial deposits into collection and reserve accounts.
Better than expected
13 March 2025 10:22 AM
Quarterly Report
- The company reported diluted earnings per share of $0.37 compared to a loss per share of $1.34 in the same quarter last year.
- Gross margin percentage improved by 150 basis points to 35.7%.
- Net charge-offs as a percentage of average finance receivables improved to 6.1% compared to 6.8%.
Capital raise
10 March 2025 4:08 PM
Quarterly Report
- On September 20, 2024, the Company completed an underwritten public offering of 1,700,000 shares of its common stock at a price per share of $43.00.
- The net proceeds of the public offering were approximately $68.2 million after deducting the underwriting discount and offering costs of approximately $4.9 million.
- On October 22, 2024, the Company completed the sale of an additional 138,272 shares of common stock at a price of $43.00 per share, in connection with a partial exercise by the underwriter of an option.
- The net proceeds to the Company of the underwriters partial exercise of the Over-Allotment Option were approximately $5.6 million after deducting the underwriting discount and offering costs of approximately $346,000.
- The Company used the net proceeds from this offering to pay down a portion of the Companys revolving line of credit.
Better than expected
10 March 2025 9:00 AM
Quarterly Report
- The company reported an 8.7% increase in total revenue, reaching $325.7 million for the third quarter of fiscal year 2025.
- Sales volumes rose by 13.2% to 13,198 units, indicating strong sales performance.
- The company's gross margin percentage improved by 150 basis points to 35.7%, driven by better vehicle procurement and disposal strategies.
- Diluted earnings per share were $0.37, a significant improvement compared to a loss of $1.34 per share in the same quarter of the previous year.
Better than expected
5 February 2025 1:46 PM
Securitization Announcement
- The weighted average coupon improved by 95 basis points compared to the October 2024 securitization.
Capital raise
9 December 2024 4:40 PM
Quarterly Report
- The company completed a public offering of 1,700,000 shares of its common stock at a price of $43.00 per share, raising net proceeds of $68.2 million.
- The company also sold an additional 138,272 shares through the partial exercise of an over-allotment option, raising an additional $5.6 million.
- The net proceeds from the offering were used to pay down a portion of the company's revolving line of credit.
Better than expected
9 December 2024 4:40 PM
Quarterly Report
- The company's net income of $5.1 million is a significant improvement compared to a net loss of $27.5 million in the same quarter of the previous year.
- The company's gross margin improved to 39.4% of sales, including a 2.9% benefit from a change in service contract revenue recognition.
- The provision for credit losses decreased by 26.5% to $99.5 million.
Capital raise
5 December 2024 7:30 AM
Quarterly Report
- The company completed an underwritten public equity offering, resulting in net proceeds of $73.8 million.
- The company also completed a private asset-backed securitization offering, resulting in net proceeds of $297.9 million.
- The proceeds from these offerings were primarily used to pay down existing debt.
Better than expected
5 December 2024 7:30 AM
Quarterly Report
- The company reported a significant improvement in diluted earnings per share, moving from a loss to a profit.
- Gross margin improved, both including and excluding the impact of the service contract accounting change.
- Net charge-offs as a percentage of average finance receivables decreased, indicating better loan performance.
Capital raise
22 October 2024 4:06 PM
Capital Raise Update
- The company initially sold 1,700,000 shares at $43.00 per share, generating $67.8 million in net proceeds.
- The underwriters partially exercised their over-allotment option, purchasing 138,272 additional shares at $43.00 per share, resulting in an additional $5.6 million in net proceeds.
Better than expected
11 October 2024 8:30 AM
Securitization Announcement
- The weighted average coupon rate of 7.44% is a 198 basis point improvement compared to the January 2024 transaction, indicating better terms for the company.
Capital raise
20 September 2024 4:05 PM
Public Offering Announcement
- The company is raising capital through a public offering of 1,700,000 shares of common stock.
- The underwriters have an option to purchase an additional 255,000 shares.
- The company expects to receive approximately $67.8 million in net proceeds from the offering.
Capital raise
18 September 2024 2:22 PM
Loan Agreement Amendment
- The company is required to complete a junior capital raise of $50 million or more.
- The net proceeds of the capital raise must be used to pay down the outstanding principal balance of the line of credit.
- A fee of 0.10% of the total permitted borrowings will be charged if the capital raise is not completed by October 31, 2024.
Worse than expected
18 September 2024 2:22 PM
Loan Agreement Amendment
- The reduction in the credit line and the imposition of minimum availability requirements suggest a tightening of financial conditions for the company.
- The requirement to complete a capital raise by a specific date to avoid a fee indicates potential financial pressure.
Worse than expected
16 September 2024 12:11 PM
Quarterly Report
- The company's net loss of $964,000 is worse than the net income of $4.2 million in the same period last year.
- The decrease in revenue by 5.2% is worse than the prior year period.
- The increase in the provision for credit losses as a percentage of sales to 33.2% is worse than the 31.0% in the prior year period.
Capital raise
16 September 2024 12:11 PM
Quarterly Report
- The amendment to the revolving credit agreement requires the company to use the net proceeds of any junior capital raise of $50 million or more to pay down the outstanding principal balance of the line of credit.
- The company will pay a fee to the lenders of 0.10% of the total permitted borrowings under the line of credit if the company has not completed such a capital raise by October 31, 2024.
Worse than expected
4 September 2024 7:30 AM
Quarterly Report
- The company reported a net loss per share of $0.15 compared to a diluted earnings per share of $0.63 in the same quarter last year.
- Revenue decreased by 5.2% year-over-year.
- Net charge-offs as a percentage of average finance receivables increased to 6.4% from 5.8%.
Worse than expected
16 July 2024 4:29 PM
Proxy Statement
- The company reported a net loss of $31.4 million compared to the prior year's net income.
- Revenues decreased 0.5% over fiscal 2023, driven by a 8.8% retail unit volume decrease and a 0.1% decrease in customer count.
Worse than expected
15 July 2024 4:01 PM
Annual Results
- The company's net income decreased from a profit of $20.4 million to a loss of $31.4 million.
- The provision for credit losses increased significantly to 36.5% of sales.
- Retail unit sales decreased by 8.8%.
Worse than expected
18 June 2024 7:30 AM
Quarterly Report
- The company reported a loss per share for the full year, compared to a profit in the previous year.
- Revenue decreased both for the quarter and the full year.
- Net charge-offs as a percentage of average finance receivables increased.
- Interest expense increased significantly.
Worse than expected
11 March 2024 9:00 AM
Quarterly Report
- The company reported a net loss of $8.5 million for the quarter, compared to a net income of $1.5 million in the same period last year.
- Total revenue decreased by 7.9% year-over-year, driven by a decline in retail unit sales.
- The provision for credit losses increased to 37.3% of sales, up from 31.2% in the prior year's quarter.
Worse than expected
8 March 2024 8:00 AM
Quarterly Report
- The company reported a loss per share of $1.34 compared to earnings per share of $0.23 in the same quarter last year.
- Total revenue decreased by 7.9% year-over-year.
- Retail units sold decreased by 19.6% compared to the prior year quarter.
Worse than expected
5 March 2024 4:04 PM
Loan Agreement Amendment
- The reduction in the total borrowing capacity from $600 million to $340 million is a negative development.
- The increase in the unused line fee rate to 0.50% for low utilization is a negative development.
- The removal of pricing tiers for interest rates may result in higher borrowing costs.
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