AMERICAS CARMART INC Q3 FY2025 earnings call

• Investment in talent: Hired Sam Smith as Vice President of Capital Markets and Treasury and Josh Smith as Chief Technology Officer. - Balance sheet improvement: Completed extension and upsizing of ABL facility to $350 million maturing in March 2027 and sixth ABS transaction of $200 million, which was oversubscribed. - Operational results: Revenue, sales, and gross margin details; progress in collections and receivables terms. - Financial results: Net charge-offs, allowance for credit losses, SG&A and interest expense details.

Total revenue increased by 8.7% despite average selling prices declining by 90 basis points, driven by higher sales volume, 5.1% increase in interest income, and a price increase in the service contract product suite. Sales volumes were up 13.2% for the quarter, with the operations team executing on a plan that included an acceleration of the tax season promotion and utilization of new CRM tools. Gross margin was 35.7% compared to 34.2%, driven by vehicle procurement and disposal initiatives but partially offset by increased accident protection plan claims related to recent weather events. Net charge-offs as a percentage of average finance receivables were 6.1% for the quarter, improved from 6.8% in the prior year quarter. The allowance for credit losses as a percentage of finance receivables improved to 24.31% at quarter-end. SG&A expense was up $2.9 million, an increase of 6.7%, primarily due to acquisitions and higher stock compensation, but sequentially decreased $947,000. Interest expense increased by $192,000 or 1.1%, but sequentially decreased due to benchmark rate improvements and securitization rate positives.

• Focus on diversifying capital structure and continuing to improve the funding toolkit to pass savings to customers and shareholders. - Expectations on underwriting and risk-based pricing, with plans to elongate the tax season and test broader market reach for serving higher credit risk customers. - Continued efforts to exploit benefits from loan origination system and process improvements.

• Macro factors such as used car affordability, tariffs, and other potential impacts creating uncertainties for consumers. - Weather impact on delinquencies, although trends back down quickly. - Uncertainty in consumer navigation of new economic environments.

Q: Asked about underwriting trends, weather impact on delinquencies, and timing/acquisition ramp.

A: Doug Campbell discussed underwriting trends and Vickie Judy addressed weather impact on delinquencies and acquisition details.

Q: Inquired about provisioning, acquisitions, and COO's reason for joining.

A: Vickie Judy and Jamie Fischer responded on provisioning, acquisition timing, and COO's motivation for joining.

Q: Questioned on application pool, tax season, and process improvement benefits.

A: Doug Campbell provided updates on application pool, tax season performance, and future process improvement plans.