Executive Summary

Q3 FY2025 revenue rose 8.7% year over year to $325.7M, with units up 13.2%, gross margin +150 bps to 35.7%, and basic EPS $0.38 versus $(1.34) YoY; net charge-offs improved to 6.1% from 6.8% .
Sequentially, revenue declined versus Q2 (Q3: $325.7M vs Q2: $347.3M), and interest expense fell $1.1M, aided by better securitization execution and benchmark rate improvement .
Funding profile strengthened: $200M ABS closed at a 6.49% WAL-adjusted coupon (95 bps better than Oct-2024) and ABL upsized to $350M with maturity extended to March 2027, improving liquidity and cost of capital .
Management reiterated its operational margin target framework (37–38% annualized) and highlighted underwriting quality from its LOS, CRM-driven demand capture, and risk-based pricing pilots expanding to 34 stores—key narrative drivers into tax season and Q4 seasonality .

What Went Well and What Went Wrong

What Went Well

Volumes and margins improved: retail units +13.2% YoY to 13,198, gross margin 35.7% (+150 bps), supported by procurement/disposal improvements; collections up 5.2% and average collected per customer up to $568 .
Credit metrics strengthened: net charge-offs improved to 6.1% (vs 6.8% YoY, 6.6% sequentially), allowance ratio fell to 24.31% as LOS-originated receivables reached ~58% of portfolio balance (ex acquisitions) .
Capital structure advances: $200M ABS 10x oversubscribed at 6.49% WAL-adjusted coupon and ABL commitment increased to $350M; CEO: “Our LOS has transformed our underwriting… [and]… competitive funding structure going forward” .

What Went Wrong

Sequential revenue softness: Q3 revenue ($325.7M) decreased from Q2 ($347.3M), reflecting tax season timing and Q2’s service contract revenue recognition change that lifted Q2 reported metrics .
SG&A headwinds: SG&A rose to $46.5M (6.7% YoY), SG&A per average customer increased to $449, driven by recent acquisitions still building customer bases .
Delinquencies uptick: accounts >30 days past due rose to 3.7% (up 40 bps YoY and 20 bps sequentially), largely due to recent weather events, with improvement after quarter end per CFO commentary .

Financial Results

Quarterly financials (oldest → newest)

Metric	Q1 FY2025	Q2 FY2025	Q3 FY2025
Revenue ($USD Millions)	$347.763	$347.269	$325.726
EPS (Basic) ($USD)	$(0.15)	$0.62	$0.38
Gross Margin %	35.0%	39.4%	35.7%
Adjusted Gross Margin %	n/a	36.5% (ex service contract change)	n/a
Provision for Credit Losses ($USD Millions)	$95.423	$99.522	$86.652
Interest Expense ($USD Millions)	$18.312	$18.042	$16.923

Notes: Q2 includes a service contract revenue recognition change (+$13.2M), which impacts reported gross margin and EPS; adjusted metrics provided in Q2 8-K .

Q3 YoY comparison

Metric	Q3 FY2024	Q3 FY2025	YoY Change
Revenue ($USD Millions)	$299.614	$325.726	+8.7%
EPS (Basic) ($USD)	$(1.34)	$0.38	Improvement
Gross Margin %	34.2%	35.7%	+150 bps
Net Charge-offs (% of avg fin receivables)	6.8%	6.1%	Improvement
SG&A Expense ($USD Millions)	$43.562	$46.460	+6.7%
Interest Expense ($USD Millions)	$16.731	$16.923	+1.1%

KPIs (oldest → newest)

KPI	Q1 FY2025	Q2 FY2025	Q3 FY2025
Retail units sold	14,391	13,784	13,198
Average retail sales price ($)	$19,250	$20,031	$19,275
Total gross profit per unit ($)	$6,996	$8,166	$7,131
Same-store revenue growth (%)	(8.6%)	(8.4%)	3.1%
Net charge-offs (% of avg fin receivables)	6.4%	6.6%	6.1%
Total collected ($USD Thousands)	$172,872	$173,778	$176,338
Avg collected per active customer per month ($)	$562	$560	$568
Recency (%)	82.3%	81.8%	81.3%
Average down-payment (%)	5.2%	5.2%	5.1%
Accounts >30 days past due (%)	3.5%	3.5%	3.7%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Gross Margin %	FY2025 (annualized)	Management target framework 37–38% mentioned in prior quarters	“Focused on driving to the 37% to 38% annualized gross margin”	Maintained
Service Contract pricing	Q3 FY2025	n/a	Price increase to align with parts/labor inflation; no meaningful change in penetration	Implemented pricing change
ABL Facility Commitment ($)	Q3 FY2025	$320M prior commitment	$350M commitment; maturity to Mar 2027	Raised/extended
ABS WAL-adjusted coupon	Jan 31, 2025	Oct-2024 transaction at higher coupon (not disclosed here)	6.49%; 95 bps improvement vs Oct-2024	Lower cost (improved)
Interest expense sequential trend	Q3 FY2025	Q2: $18.042M	Q3: $16.923M; down $1.1M sequentially	Lowered

No formal revenue/EPS guidance provided in Q3 materials .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY2025)	Previous Mentions (Q2 FY2025)	Current Period (Q3 FY2025)	Trend
LOS underwriting quality	LOS driving higher down payments, improved deal structures	LOS improving historical loss rates; ~50% of portfolio under LOS by 10/31/24	LOS-originated receivables ~58% of portfolio; improved credit performance and allowance ratio	Strengthening
Risk-based pricing	n/a	Early pilots referenced indirectly	Active pilots in 34 stores; post-tax-season learnings to inform strategy	Expanding
CRM/marketing for tax season	n/a	n/a	CRM drove lead management; advanced tax season promotion boosted applications (+3.6%)	Improving execution
Vehicle procurement/disposal	Focus on gross margin execution	Procurement/disposal improved margins; adjusted GM 36.5%	Continued margin benefit; aiming for 37–38% annualized	Sustained
Capital markets/funding	n/a	Equity and ABS proceeds used to reduce debt; leverage improved	$200M ABS at 6.49% (95 bps better), ABL upsized to $350M	Funding costs improving
Macroeconomy/tariffs	n/a	n/a	CEO cautious on affordability, references Washington tariffs uncertainty; Car-Mart positioned for tighter credit environment	Cautious
Service contract program	n/a	Revenue recognition period reduced, +$13.2M in Q2; adjusted EPS $(0.24)	Price increases to reflect parts/labor inflation; penetration unchanged	Adjusted/priced
Delinquencies/weather	n/a	Lower Q2 volumes in Sept due to weather; DQs 3.5%	DQs increased to 3.7% due to weather; improved post quarter-end	Volatile seasonally

Management Commentary

CEO (press release): “We continue to strengthen our business by enhancing our financial flexibility, improving our operational and technology capabilities… Our LOS has transformed our underwriting with meaningfully improved credit performance…” .
CEO (call): “Our ABL facility… extended and upsizing… represents an important milestone… We also completed our sixth ABS transaction… overall WAL-adjusted coupon of 6.49%, a 95-basis-point improvement… capital markets are recognizing the success… underwritten by our enhanced LOS” .
COO: “We accelerated the launch of our annual tax season promotion… 3.6% increase in prequalified leads… utilization of our new CRM tool… We are focused on driving to the 37% to 38% annualized gross margin” .
CFO: “Net charge-offs… improved to 6.1%… allowance… 24.31%… LOS now accounts for 58% of the total portfolio balance… interest expense decreased $1.1M sequentially… benefiting from improved securitization rates and benchmark rates” .

Q&A Highlights

Underwriting stance: Management relaxed some tightness from the initial LOS rollout while emphasizing differentiated risk-based pricing over broad loosening; current volumes imply still below FY’23 highs by ~6–8% .
Delinquencies/weather impact: CFO noted DQs rose late January due to winter weather but trended back down quickly post quarter-end, consistent with expectations .
Acquisition ramp/SG&A: Two recent acquisitions are expected to add 5,000+ accounts over 18–24 months; SG&A pressure from acquisitions should ease as portfolios build .
Provisioning/consumer stress: Credit gains largely from improved underwriting (LOS) rather than consumer health; “most of the benefits… coming from how we’re originating the paper” .
Tax season demand/applications: Earlier promotion and advertising increased application volume; tax refunds roughly flat YoY but below pre-COVID; company preparing to extend presence to serve higher-scored customers longer into season .

Estimates Context

Wall Street consensus (S&P Global) for Q3 FY2025 EPS and revenue was unavailable via API at the time of analysis; estimates comparison is therefore omitted [GetEstimates errors].
Given the absence of consensus, investors should focus on YoY improvement in revenue, margins, and credit metrics, and weigh sequential trends—particularly the Q2 service contract accounting change that affected comparability .

Key Takeaways for Investors

Funding cost and liquidity improved materially (ABS at 6.49% WAL-adjusted coupon, ABL upsized to $350M, oversubscription indicates market confidence), a tailwind for interest expense and growth capacity .
Margin trajectory is encouraging with procurement/disposal gains; management is targeting a 37–38% annualized gross margin and continues to optimize deal structures via LOS and risk-based pricing .
Credit quality continues to normalize/improve: net charge-offs down to 6.1%, allowance ratio down to 24.31%, LOS share of portfolio rising, supporting lower provision expense .
Demand capture and lead conversion improving through CRM and earlier tax-season promotion; watch Q4 seasonality (spring/tax season) for unit and collections momentum .
SG&A leverage is a near-term watch item—recent acquisitions elevate per-customer SG&A, but expected to normalize as account bases scale over 18–24 months .
Comparability note: Q2’s service contract revenue recognition change lifted reported gross margin/EPS; use adjusted figures for run-rate assessment; Q3 shows organic improvement without similar adjustments .
Narrative catalysts: continued risk-based pricing rollout (34 stores), funding toolkit expansion, and demonstration of margin/credit progress through tax season could drive sentiment; macro/tariff uncertainty remains a caution .

AMERICAS CARMART INC (CRMT)·Q3 2025 Earnings Summary