Executive Summary

Q2 FY25 revenue was $347.3M, down 3.5% year over year; GAAP basic EPS was $0.62, but excluding a non-recurring service contract revenue recognition change ($13.2M acceleration), adjusted loss per share was $(0.24). Gross margin improved to 39.4% (adjusted 36.5%), with margin expansion driven by procurement, Cox partnership benefits, and pricing discipline .
Credit metrics improved: net charge-offs fell to 6.6% (vs. 7.2% prior year), allowance for credit losses decreased to 24.72% from 25.00% sequentially, and delinquencies were stable at 3.5% .
Funding strengthened: completed $300M ABS at a 7.44% weighted average coupon (198 bps improvement vs. January), and raised ~$74M net equity proceeds used primarily to reduce debt; debt-to-finance receivables fell to 51.8% and debt net of cash to 43.0% .
Management is piloting risk-based pricing and highlighted LOS-driven underwriting gains (21% improvement in cumulative net losses vs. legacy cohorts); expects ~100 bps ongoing gross margin benefit from the service contract revenue recognition change .
Estimates context: S&P Global consensus was unavailable via the API today; we cannot assess beat/miss vs Street for Q2 FY25. We anchor any estimate comparisons to S&P Global when available and note unavailability here.

What Went Well and What Went Wrong

What Went Well

Margin execution: gross margin expanded to 39.4% (adjusted 36.5%), with improved wholesale results, procurement, and pricing discipline; CFO expects ~100 bps ongoing benefit from the revenue recognition change for service contracts .
Underwriting improvements: LOS-originated receivables now ~50% of portfolio dollars; down payments rose to 5.2%, originating terms tightened, and delinquencies held at 3.5%; management cites a 21% improvement in cumulative net losses from LOS cohorts .
Balance sheet actions: ~$74M net equity raise and $300M ABS with tighter spreads reduced debt net of cash; debt-to-finance receivables improved to 51.8% (from 52.6% prior year) and net debt ratio to 43.0% (from 46.0%) .

What Went Wrong

Top-line pressure: unit volumes declined 9.1% y/y (13,784 units), same-store revenue fell 8.4%, and average units per store slipped to 29.8 per month; September weather and two dealership closures contributed to the volume shortfall .
SG&A inflation: SG&A increased 5.7% to $47.4M, driven by recent acquisitions (+$2.1M) and stock compensation; SG&A per customer rose to $459, with leverage expected as acquisitions scale .
Interest burden: interest expense rose 8.8% y/y to $18.0M, reflecting higher rates and debt (partially easing sequentially post-equity raise) .

Financial Results

Revenue, EPS, Margins vs Prior Periods and Estimates

Metric	Q4 2024	Q1 2025	Q2 2025	Consensus (Q2 2025)
Total Revenue ($USD Millions)	$364.7	$347.8	$347.3	N/A (S&P Global unavailable)
Sales Revenue ($USD Millions)	$306.6	$287.2	$285.8	N/A (S&P Global unavailable)
Interest Income ($USD Millions)	$58.0	$60.5	$61.5	N/A
Basic EPS ($USD)	$0.07	$(0.15)	$0.62	N/A
Adjusted EPS (Non-GAAP) ($USD)	N/A	N/A	$(0.24)	N/A
Gross Margin % (GAAP)	35.5%	35.0%	39.4%	N/A
Adjusted Gross Margin %	N/A	N/A	36.5%	N/A
Pre-tax Margin % (as % of Sales)	0.2%	(0.4)%	2.5%	N/A

Notes: Adjusted EPS excludes the $13.2M service contract revenue recognition change; diluted EPS impact was +$0.85 in Q2 .

Revenue Components and Credit Costs

Metric	Q4 2024	Q1 2025	Q2 2025
Cost of Sales ($USD Millions)	$197.9	$186.6	$173.2
Provision for Credit Losses ($USD Millions)	$102.1	$95.4	$99.5
Interest Expense ($USD Millions)	$17.8	$18.3	$18.0

Key KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Retail Units Sold (units)	15,251	14,391	13,784
Avg Retail Sales Price ($)	$19,256	$19,250	$20,031
Gross Profit per Unit ($)	$7,132	$6,996	$8,166
Same-Store Revenue Growth (%)	(5.3)%	(8.6)%	(8.4)%
Net Charge-offs (% of avg receivables)	7.3%	6.4%	6.6%
Total Collected ($USD Thousands)	$187,214	$172,872	$173,778
Avg Collected per Active Customer per Month ($)	$607	$562	$560
Recency (% current, excl. 1–2 day)	80.1%	82.3%	81.8%
Avg Down-payment (%)	6.5%	5.2%	5.2%
Accounts >30 DPD (%)	3.1%	3.5%	3.5%
Principal Balance of Finance Receivables ($USD Thousands)	$1,435,388	$1,465,259	$1,473,794
Weighted Avg Total Contract Term (months)	47.9	48.1	48.2

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance/Commentary	Change
Gross Margin % (GAAP)	Go-forward	Not quantified	CFO expects ~100 bps ongoing uplift from service contract revenue recognition change; management targeting 37–38% over time	Updated (raise trajectory)
Vehicle Affordability (Avg Price)	Near-term	Not quantified	Sequential reductions in vehicle-only retail price; focus on removing $500–$800 from procurement costs to expand addressable market	Updated (strategic focus)
SG&A per Customer	18–24 months	Not quantified	SG&A per customer expected to flatten as acquisitions add 5,000–6,000 accounts over 18–24 months	Maintained with timeline
Funding/Revolver	FY25	Matures Sep 2025	Company in discussions to extend revolver; building redundancy with warehouse capacity and bespoke lines	Updated (work-in-progress)
Risk-based Pricing	CY25 rollout	Not applicable	Pilot launched; plan to take ~20% of organization live by year-end to retain/grow volumes and optimize returns	New initiative

No formal quantitative revenue/EPS guidance was issued in Q2 FY25; management commentary emphasizes margin trajectory, affordability actions, and funding structure evolution .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY24)	Previous Mentions (Q1 FY25)	Current Period (Q2 FY25)	Trend
Underwriting/LOS performance	LOS early benefits; down payments up; tightening standards; cash-on-cash returns improving	LOS at 147/156 dealerships; ~40% portfolio; 30 bps allowance benefit; down payments +20 bps	LOS ~50% of portfolio dollars; 21% improvement in cumulative net losses vs legacy; continued down-payment/term optimization	Improving
Technology stack (ERP, CRM)	ERP go-live (May 1) to drive SG&A leverage	CRM enhancements to boost application conversion	Tech upgrades ongoing; focus on operational efficiency; SG&A managed despite stock comp	Building leverage
Affordability & procurement	Cox partnership to lower acquisition and repair costs; vendor consolidation	Sequential vehicle price reductions, targeting $500–$800 procurement savings	Sequential vehicle-only price down $212; Cox partnership benefits reflected in margins	Improving affordability
Funding & capital structure	ABS program; revolver availability	Revolver availability ~$33M at Q1 end	$300M ABS at 7.44%; ~$74M equity raise; revolver extension discussions; lower net debt ratios	Strengthening
Volumes & store footprint	Q4 units down; performance managing underperforming stores; 3 closures	Sequential y/y unit improvement; selective originations; acquisitions (TAC)	Units down 9.1% y/y; September weather impact; two closures; pursuing accretive M&A post funding setup	Mixed
Credit trends	Net charge-offs within pre-pandemic ranges; allowance reduced	Net charge-offs 6.4%; allowance 25.0%; recency 82.3%	Net charge-offs 6.6%; allowance 24.72%; delinquencies stable at 3.5%	Stabilizing/improving

Management Commentary

CEO on funding and equity raise rationale: “Our performance over the past few quarters was below our expectations… we felt that equity was more prudent… the best decision for all shareholders to maintain flexibility during marketplace challenges in a higher interest rate environment.”
CFO on service contract accounting change: “We reduced our revenue recognition period… resulted in an acceleration of deferred service contract revenue of $13.2 million during this quarter and will result in a 25% quicker recognition… expected to improve gross margin of approximately 1% on a go-forward basis.”
CEO on underwriting progress: “An update through October is now showing… a 21% improvement in cumulative net losses… we expect a crossover point at the end of the fiscal year where the LOS will start to be a larger driver on both frequency and severity.”
CEO on risk-based pricing pilot: “We enabled risk-based pricing… results to date are good… gives us another lever… to retain and grow the business.”
CEO on tax season preparation: “We’re starting ad campaigns… earlier in the season… set up from an inventory and advertising standpoint… excited about this year’s tax season.”

Q&A Highlights

Service contract adjustment clarification: $13.2M pull-forward in Q2; ~100 bps ongoing gross margin tailwind from shorter recognition period .
Underwriting posture: LOS remains tight for lower-rank cohorts (1–4), with improved down payments and shorter terms; pilot risk-based pricing targets both upper-end retention and pricing for lower-rank returns .
Tax season and competitive dynamics: Early marketing, inventory positioning; competitive M&A landscape favorable given smaller peers’ funding challenges; pipeline active pending funding setup .
Store portfolio optimization: Restricting capital to underperforming locations, selectively winding down where returns are insufficient; two closures in Q2 .
Funding flexibility: Workstream to extend revolver, add warehouse capacity, redesign floor plan, bespoke lines to diversify options around ABS timing and redundancy .

Estimates Context

S&P Global consensus estimates (EPS, revenue) for Q2 FY25 were unavailable via the API today; as a result, we cannot formally assess beat/miss versus Wall Street consensus for this quarter. We default to S&P Global for consensus when available and note unavailability here.
Internally, management provided non-GAAP framing: adjusted loss per share of $(0.24) excluding the service contract revenue recognition change, and adjusted gross margin of 36.5% (vs. 39.4% GAAP) .
Where estimates are needed for future modeling, consider updating once S&P Global access is available; margin trajectory and credit normalization are likely to drive revisions.

Key Takeaways for Investors

Margin trajectory is improving, with structural tailwinds: procurement/Cox, LOS underwriting, and ~100 bps ongoing benefit from service contract revenue recognition change; watch for sustained 37–38% gross margin targets over the next few quarters .
Credit normalization and portfolio mix shift: LOS-originated receivables approaching half of portfolio dollars with materially better loss performance; allowance ratio trending down; monitor crossover as LOS dominates both frequency and severity drivers by FY-end .
Funding de-risking: $300M ABS at tighter spreads and ~$74M equity reduce net leverage; revolver extension and added warehouse capacity would further reduce funding risk into FY25; catalysts include updates on facilities .
Volume headwinds remain near-term: affordability constraints, weather impacts, and targeted store closures press units; risk-based pricing and inventory affordability actions are the levers to re-accelerate volumes (particularly into tax season) .
SG&A leverage to come with scale: near-term pressure from acquisitions and tech investments, but SG&A per customer should flatten as newly acquired stores build accounts over 18–24 months .
Non-GAAP adjustments matter: Q2 GAAP EPS benefited from a one-time accounting change; use adjusted EPS and margin to gauge underlying trends and avoid over-attributing strength to non-recurring items .
Trading implications: Near-term performance likely keyed to margin continuation and funding updates; medium-term thesis centers on LOS-driven credit outcomes, affordability-driven volume recovery, and disciplined capital deployment (M&A and store optimization) .

Sources: Q2 FY25 8-K press release and exhibits ; Q2 FY25 earnings call transcript ; Q2 FY25 press release ; Prior quarters Q1 FY25 PR & call ; Q4 FY24 PR ; ABS transaction PR .

AMERICAS CARMART INC (CRMT)·Q2 2025 Earnings Summary