CRMT
Americas Carmart INC
NASDAQ
8-K: America's Car-Mart Reports Mixed Q3 Results Amidst Challenging Market
Sentiment:
Quarterly Report
8 March 2024 8:00 AM
America's Car-Mart experienced a revenue decline in Q3, but saw improvements in gross profit per unit and credit loss management.
Worse than expected
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.
Summary
- America's Car-Mart reported a 7.9% decrease in revenue for the third quarter, totaling $299.6 million, primarily due to a 19.6% drop in retail units sold.
- Despite the sales volume decline, the company saw a 10.5% increase in gross profit per retail unit sold, reaching $7,043, driven by better pricing and reduced repair costs.
- Net charge-offs as a percentage of average finance receivables were 6.8%, an increase from 5.9% year-over-year, but a 40 basis point improvement sequentially from the previous quarter.
- The allowance for credit losses decreased to 25.74%, providing a $3.9 million benefit to the provision for credit losses.
- The company completed a $250 million asset-backed securitization with a 9.5% weighted average fixed coupon rate and renewed its revolving credit agreement to $340 million.
- A strategic partnership with Cox Automotive was established in February to improve vehicle acquisition and reconditioning processes.
- The company reported a loss per share of $1.34 compared to earnings per share of $0.23 in the same quarter last year.
Sentiment
Score: 4
Explanation: The document presents mixed results with a significant decrease in sales volume and a loss per share, offset by improvements in gross profit and credit loss management. The overall tone is cautiously optimistic, but the negative financial results temper the positive aspects.
Positives
- Gross profit per retail unit sold increased by 10.5% year-over-year, reaching $7,043.
- Net charge-offs improved sequentially by 40 basis points from the previous quarter.
- The allowance for credit loss decreased to 25.74%, providing a $3.9 million benefit to the provision for credit losses.
- The company successfully completed a $250 million asset-backed securitization.
- A strategic partnership with Cox Automotive is expected to improve vehicle operations.
- The company renewed and extended its revolving credit agreement to September 2025 with a total commitment of $340 million.
- Total collections increased 9.3% year-over-year.
Negatives
- Total revenue decreased by 7.9% year-over-year.
- Retail units sold decreased by 19.6% compared to the prior year quarter.
- Net charge-offs as a percentage of average finance receivables increased to 6.8% from 5.9% year-over-year.
- The company reported a loss per share of $1.34 compared to earnings per share of $0.23 in the same quarter last year.
- Sales volumes fell short of expectations during the quarter.
Risks
- The company is navigating a challenging macro environment that is impacting its customers.
- Sales volumes were lower than expected, indicating potential demand issues.
- The company experienced headwinds in gross profit related to lower prices in the wholesale market and an increased volume of wholesale vehicles related to the higher credit losses in the prior quarter.
- There is a risk of continued economic pressures affecting customers' ability to repay loans.
- The company's performance is subject to general economic conditions, including fluctuations in gas prices, grocery prices, and employment levels.
Future Outlook
The company is focused on improving sales in the fourth quarter and being agile with its cost structure to deliver long-term profitability and shareholder value. The strategic partnership with Cox Automotive is expected to drive better outcomes in vehicle operations.
Management Comments
- While sales volumes fell short of our expectations during the quarter, they are not reflective of the efforts put forth by the team.
- I am encouraged by our continued progress during the quarter in gross profit, credit losses, and initial results generated by our loan origination system.
- We have implemented several initiatives to improve sales during the fourth quarter.
- Our priority is to be agile with our cost structure and investments to deliver long-term profitability and shareholder value.
Industry Context
The results reflect a challenging environment for used car retailers, with decreased sales volumes and increased credit losses. The partnership with Cox Automotive indicates a move towards leveraging technology and scale to improve operational efficiency, which is a common trend in the automotive industry.
Comparison to Industry Standards
- CarMax, a major competitor, has also faced challenges in the used car market, but has maintained higher sales volumes, indicating Car-Mart's struggles may be more pronounced.
- The net charge-off rate of 6.8% is within the historical range of 5.9% 8.7% for Car-Mart, suggesting a return to pre-pandemic levels, but is still higher than some industry benchmarks.
- The strategic partnership with Cox Automotive is similar to moves by other automotive retailers to improve supply chain and reconditioning processes, such as AutoNation's investments in digital platforms and service centers.
- The 9.5% interest rate on the securitized debt is relatively high, reflecting the current interest rate environment and the risk associated with subprime auto loans, which is a common challenge for companies in this sector.
Stakeholder Impact
- Shareholders will be concerned about the loss per share and decreased revenue.
- Employees may be affected by cost control measures and changes in operational processes.
- Customers may benefit from improved vehicle quality and financing options.
- Creditors will be interested in the company's ability to manage debt and credit risk.
- Suppliers may see changes in procurement and reconditioning processes due to the Cox Automotive partnership.
Next Steps
- The company will focus on improving sales during the fourth quarter.
- The company will continue to enhance and update processes within the new loan origination system.
- The company will work to integrate the strategic partnership with Cox Automotive.
- The company will actively pursue other acquisition opportunities.
Key Dates
- January 31, 2024: End of the third fiscal quarter for which results are reported.
- February 2024: Strategic partnership with Cox Automotive was established.
- March 8, 2024: Date of the press release and 8-K filing announcing Q3 results.
Keywords
used car sales, auto finance, credit losses, revenue, gross profit, securitization, Cox Automotive, loan origination system, net charge-offs, asset-backed notes
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.
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
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.
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.
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.
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
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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