America's Car-Mart, Inc. Q4 FY2025 earnings call

• Leadership Transition: Vickie Judy transitioned to Chief Accounting Officer, Jonathan Collins joined as CFO, and Marie Persichetti was hired as Senior Vice President of Capital Markets.
• Initiatives: Relaunched Pay Your Way with expanded payment options including Apple Pay, Google Pay, etc. Transitioned to a 7x7 underwriting and pricing model. Implemented risk-based pricing nationwide. Adjusted inventory management in Q3 2025 to navigate wholesale environment. Improved collections with 2.1% year-over-year growth in collections and monthly average total collected per active customer up to $612.
• Investments: SG&A expenses increased due to technology, talent, and acquisitions, but SG&A per customer improved by 6.1%. Interest expense decreased by 2.2% due to favorable benchmark rates and securitization improvements.

In the fourth quarter of fiscal 2025, America's Car-Mart saw a significant improvement in net income, moving from a net loss of $31.4 million in fiscal 2024 to $17.9 million in fiscal 2025, an improvement of over $49 million. Revenue in the fourth quarter had incremental growth of 1.5%, driven by a 2.6% increase in unit sales volume and a 4.2% increase in interest income. For the full year, 57,022 units were sold, down 1.7% year-over-year. Q4 gross margin was 36.4%, up from 35.5% in the prior year, and the full year gross margin finished at 36.7%, a 200 basis point improvement. Net charge-offs as a percentage of average finance receivables improved to 6.9% in Q4 2025 from 7.3% in the prior year quarter, with a 130 basis point improvement for the full year.

• Fiscal year 2026 expectations include continuing to leverage risk-based pricing and underwriting models. Balancing vehicle mix based on demand driven by risk-based pricing. Working toward the long-term gross margin target of 37% to 38% on an annualized basis. Focus on enhancing credit performance and portfolio growth through improved underwriting and collections strategies.

• Macro-economic uncertainties such as tariff impacts on procurement costs and supply chain disruptions. Potential deterioration in consumer conditions affecting credit performance. Dependence on capital market conditions for securitization and funding stability.

Q: Impact of tariffs and consumer behavior A: Doug mentioned that the impact of tariff-related wholesale environment speculation started in April, with a manageable $300 increase in procurement cost per unit. Lead activity had double-digit growth for the full year, and growth is seen as sustainable.

Q: Update on operations, Cox partnership, and gross margin A: Doug stated gross margin improved by 90 basis points in Q4 and 200 basis points year-over-year. Focus on collections and payment methods, with the relaunch of Pay Your Way and ongoing partnership with Cox Automotive to enhance profitability.

Q: Impact of risk-based pricing on P&L A: Doug explained risk-based pricing is live nationwide. Testing on lower-rank customers showed 200 basis point yield increase with no breakage in conversion. Growth in higher-rank customer segment with slight rate breaks and lower down payments.

Q: Condition of low-end consumers and underwriting changes A: Doug noted no immediate cracks in consumer condition despite recessionary environment. Underwriting expanded to a 7x7 scorecard, providing better accuracy in projecting loss ratios and opportunities to grow returns on lower-rank customers.

Q: ABS issuance and capital markets A: Jonathan Collins and Doug discussed successful securitization, with plans to mature capital structure through warehouse loans and longer tenure debt facilities. Focus on improving capital market access to fuel growth and serve customers better