America’s Car-Mart Earnings Call: Growth Amid Challenges

America’s Car-Mart, Inc. ((CRMT)) has held its Q3 earnings call. Read on for the main highlights of the call.

America’s Car-Mart, Inc. recently held its earnings call, revealing a mixed sentiment with both positive developments and notable challenges. The company reported increased revenue and sales volume growth, alongside successful capital transactions. However, it also faced rising delinquencies, increased SG&A expenses, and a challenging customer environment. Strategic investments and leadership additions are expected to support future growth.

Revenue Increase

America’s Car-Mart, Inc. reported an 8.7% increase in total revenue, despite a slight decline in average selling prices by 90 basis points. This growth was primarily driven by higher sales volume and a 5.1% increase in interest income, showcasing the company’s ability to generate more revenue even in a challenging market.

Sales Volume Growth

The company experienced a 13.2% increase in sales volumes for the quarter. This growth was attributed to the acceleration of the annual tax season promotion and improved lead management, indicating effective marketing strategies and customer engagement.

Gross Margin Improvement

Gross margin improved to 35.7% from 34.2% in the previous year. This improvement was aided by better vehicle procurement and disposal practices, reflecting the company’s efficient operational strategies.

Improved Net Charge-offs

Net charge-offs as a percentage of average finance receivables improved to 6.1% from 6.8% in the prior year. This indicates better credit management and collection practices, contributing to the company’s financial health.

Successful Capital Transactions

America’s Car-Mart completed an extension and upsizing of its ABL facility to $350 million and a $200 million ABS transaction. These moves improved the company’s capital structure, providing more financial flexibility for future operations.

Leadership Additions

The company strengthened its leadership team by hiring Sam Smith as Vice President of Capital Markets and Treasury and Josh Smith as Chief Technology Officer. Their extensive experience is expected to drive strategic initiatives and technological advancements.

Delinquencies Increase

Accounts over 30 days past due increased by 40 basis points to 3.7% at the quarter’s end, attributed to winter weather impacts. This rise in delinquencies highlights the challenges in maintaining customer payment schedules.

SG&A Expense Increase

SG&A expenses rose by $2.9 million or 6.7%, primarily due to acquisitions and higher stock compensation. This increase reflects the company’s investment in growth and talent acquisition.

Challenging Customer Environment

Persistent inflationary trends, higher used car prices, and elevated interest rates continue to pose challenges for customers. These factors create a difficult environment, impacting customer purchasing power and financing options.

Forward-Looking Guidance

Looking ahead, America’s Car-Mart provided several key metrics and updates. The ABL facility was extended and upsized to $350 million, maturing in March 2027, while a $200 million ABS transaction was completed. Sales volumes increased by 13.2%, driven by an early tax season promotion, despite a decline in average selling prices. The company also noted improvements in its loan origination system and emphasized maintaining quality credit in a challenging environment.

In summary, America’s Car-Mart, Inc.’s earnings call reflected a blend of optimism and caution. While the company achieved revenue growth, sales volume increases, and capital structure improvements, it also faces challenges such as rising delinquencies and a difficult customer environment. Strategic investments and leadership changes are expected to support future growth and stability.