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AC

AMERICAS CARMART INC (CRMT)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 delivered a clear inflection: revenue rose 1.5% to $370.2M and diluted EPS jumped to $1.26, with broad-based improvements in gross margin (36.4%, +90 bps YoY), credit losses, and funding costs .
  • Both top and bottom line exceeded Wall Street: revenue beat ~$343.5M consensus by ~8%* and EPS beat $0.76* by $0.50; beats were driven by higher unit volumes (+2.6% YoY), stronger wholesale retention boosting gross margin, and a lower CECL reserve as the LOS portfolio outperforms .
  • Management accelerated strategic levers: nationwide rollout of risk‑based pricing and a 7x7 underwriting scorecard, plus a “Pay Your Way” collections overhaul (Apple/Google Pay, Venmo, PayPal, 80k+ cash pay locations) to improve payment performance and reduce friction .
  • Capital structure momentum continued: a $216M ABS priced at a 6.27% WAL‑adjusted coupon (22 bps tighter vs Jan), with CFO transition completed in May to deepen capital markets capability—both positive for funding costs and growth capacity .
  • Near‑term stock reaction catalysts: broad EPS/revenue beats, improving credit/CECL, gross margin trajectory toward 37–38%, and tighter ABS coupons; watch same‑store revenue softness (-3.9% YoY), SG&A inflation from investments, and tariff/supply tightness (procurement +~$300/unit) .

What Went Well and What Went Wrong

What Went Well

  • Material beat vs consensus: Q4 FY25 revenue $370.2M vs ~$343.5M* and EPS $1.26 vs $0.76*; upside came from higher units (+2.6% YoY), improved wholesale retention driving gross margin, and CECL reserve precision improvements tied to LOS performance .
  • Credit trends improved: net charge‑offs as % of average finance receivables fell to 6.9% (7.3% PY), delinquencies improved sequentially, and allowance fell to 23.25% as LOS‑originated receivables reached ~65.7% (ex‑acquisitions) .
  • Funding costs improved: May ABS priced at 6.27% WAL‑adjusted coupon (22 bps tighter vs Jan, 117 bps vs Oct’24), reflecting investor confidence; management is pursuing warehouse and longer‑tenor debt options .

What Went Wrong

  • Same‑store revenue declined 3.9% YoY in Q4; while volume rose 2.6%, ASP moderation (supporting affordability) and store‑level pressures weighed on comps .
  • SG&A deleverage from investment cycle: SG&A +8.6% YoY to $48.3M; per‑customer SG&A rose 6.1% to $462, reflecting tech/talent investments and acquired stores still building portfolios .
  • Macro/supply headwinds persist: tariff/supply tightness lifted procurement costs by ~+$300 per unit; management views it as manageable given procurement efficiencies but it remains a watch item .

Financial Results

Headline P&L and Margins

MetricQ4 FY24Q3 FY25Q4 FY25
Revenue ($M)364.7 325.7 370.2
Sales ($M)306.6 263.5 309.7
Interest Income ($M)58.0 62.2 60.5
Gross Margin %35.5% 35.7% 36.4%
Diluted EPS ($)0.06 0.37 1.26
  • YoY: Revenue +1.5%, EPS up sharply; gross margin +90 bps YoY .
  • QoQ: Revenue +13.6%, EPS +$0.89; margin +70 bps vs 35.7% .

Revenue Mix (Sales vs Interest)

MetricQ4 FY24Q3 FY25Q4 FY25
Sales ($M)306.6 263.5 309.7
Interest Income ($M)58.0 62.2 60.5

Key KPIs

KPIQ4 FY24Q3 FY25Q4 FY25
Retail Units Sold15,251 13,198 15,649
Avg Retail Sales Price ($)19,256 19,275 19,049
Gross Profit/Unit ($)7,132 7,131 7,209
Same-Store Revenue Growth(5.3)% 3.1% (3.9)%
Net Charge-offs % Avg FR7.3% 6.1% 6.9%
Avg Collected per Cust/Month ($)607 568 612
30+ DPD (% of FR)3.1% 3.7% 3.4%
Avg Down Payment %6.5% 5.1% 6.2%
Allowance % of FR (period-end)25.32% 24.31% 23.25%

Notes: Q4 text cites vehicle ASP ex‑ancillaries of $17,240 (down $316 YoY, $70 seq), reflecting affordability actions . KPI table values include ancillary products .

Q4 FY25 vs S&P Global Consensus

MetricActualConsensus*Surprise
Revenue ($M)370.2 343.5*+$26.7M / +7.8%
Diluted EPS ($)1.26 0.76*+$0.50

Values marked with * are retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Margin (annualized target)Multi‑year37–38% target reiterated in prior quarters Reaffirmed; management sees path to reach “sooner,” with additional upside tactics (procurement, protection plans, Cox partnership) Maintained/Positive tone
Revenue/EPS/UnitsFY26No formal numeric guidanceNo formal numeric guidance; expect LOS+risk‑based pricing to strengthen credit performance and grow portfolio; macro supply tightness manageable N/A

No explicit quantitative guidance was issued this quarter.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY25, Q3 FY25)Current Period (Q4 FY25)Trend
Underwriting & LOSLOS shows ~21% cumulative net loss improvement; risk‑based pricing pilot started . Expanded to 34 stores; early positive read .Risk‑based pricing live nationwide (ex‑acquisitions) May 8; 7x7 scorecard; higher rates/down payments for low tiers; lower rates for top tier; no conversion breakage at low tiers Accelerating
Collections & PaymentsAnnounced focus to improve collections infrastructure . Continued focus through tax season .Relaunched “Pay Your Way” with Apple/Google Pay, Venmo, PayPal; 80k+ cash locations; in‑store autopay at sale; aim to reduce missed payments and friction Improving
Gross Margin & Cox PartnershipAdj. GM 36.5% in Q2; path to 37–38%; Cox reconditioning partnership benefits . GM 35.7% in Q3; some weather‑related warranty claims .GM 36.4%; wholesale environment aided retention; targeting 37–38% with tech/protection plan/Cox leverage Improving with tailwinds
Capital Structure/FundingOct’24 ABS $300M at 7.44%; equity raise; ABL covenant relief . Jan’25 ABS $200M at 6.49%; ABL upsized to $350M, 2027 maturity .May’25 ABS $216M at 6.27%; evaluating warehouses/longer‑tenor debt; new CFO focused on diversifying funding Improving costs/diversifying
Macro/Supply/TariffsPricing volatility; prepped inventory and early marketing for tax season . Inventory build ahead of tax; demand up .Tariffs added ~+$300/unit procurement; manageable amid procurement savings; supply tightness persists Mixed headwind manageable
M&A & FootprintPruning underperforming stores; selective M&A pipeline once funding set .Acquisitions still building accounts; SG&A elevated near‑term Mixed (investing phase)

Management Commentary

  • “Fiscal year 2025 marked a pivotal period of transformation… expanded capabilities of our loan origination system (LOS)… and the expansion of gross margins.” – Doug Campbell, CEO .
  • “Risk‑based pricing is now live nationwide… We increased originating interest rates by a few hundred basis points [for low tiers] with no material drop in conversion… and saw meaningful improvement in sales volume [for top tier with lower rates].” – Doug Campbell, CEO .
  • “We implemented enhancements to our CECL methodology… combined with improved performance, led to a $10.3M net reduction in our reserve balance… LOS‑originated receivables now account for 65.7% (ex‑acquisitions).” – Vickie Judy, CAO .
  • “We relaunched our Pay Your Way… adding Apple Pay, Google Pay, Venmo, PayPal… cash payment locations grew from ~14k to 80k+… to reduce missed payments.” – Doug Campbell, CEO .
  • “We issued $216M in ABS at a 6.27% weighted average coupon… tightening vs January and October… exploring warehouse lines and longer‑term debt.” – Jonathan Collins, CFO .

Q&A Highlights

  • Macro/tariffs and supply: Procurement cost impact ~+$300/unit; began in April/May; manageable given procurement efficiencies; supply remains tight industry‑wide .
  • Risk‑based pricing impact: Raised rates ~200 bps for lowest tiers with no conversion breakage; modest rate cuts for top tier lifted volume; nationwide rollout expected to enhance yields at low tiers and share at high tiers .
  • Unit volumes/tax season: Early marketing and inventory build steered around typical tax season price spikes; Q4 price decreased while units and interest income drove revenue growth .
  • Consumer health: No cracks evident in forward indicators (delinquencies/mods/charge‑offs); Car‑Mart remains competitive on rate vs peer set even with recent increases .
  • Capital markets: ABS spreads tightening; plan to normalize cadence (2–3 per year) and pursue broader funding toolkit (warehouses, longer tenor) to lower interest expense over time .

Estimates Context

  • Q4 FY25 actuals beat consensus: Revenue $370.2M vs ~$343.5M* and EPS $1.26 vs $0.76*. Number of estimates: 3 for both revenue and EPS*. Surprises driven by unit growth, margin expansion, and reserve methodology improvements as LOS mix grows .
  • Implication: Street models likely need higher gross margin trajectory, better credit loss/allowance assumptions, and lower funding costs as ABS execution improves.

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Beat and trajectory: Broad beats on revenue and EPS with sequential acceleration in units and margins; LOS‑driven credit improvement and CECL precision are compounding tailwinds .
  • Margin runway: Q4 GM at 36.4% and management remains confident in 37–38% annualized; wholesale retention and Cox partnership provide near‑term support .
  • Funding optionality: ABS coupons continue to tighten; adding warehouse/longer‑tenor debt could further lower funding costs and support receivables growth .
  • Strategic mix shift: Nationwide risk‑based pricing and 7x7 scorecard should enhance returns at low tiers and capture higher‑quality customers at the top tier without sacrificing conversion .
  • Collections modernization: “Pay Your Way” and autopay are pragmatic levers to reduce misses and administrative burden—supportive for delinquencies and cash collections .
  • Watch‑outs: Same‑store revenue declines and SG&A inflation from investments/acquisitions; tariff/supply tightness; monitor delinquency trends and per‑customer costs into FY26 .
  • Trading setup: Positive estimate revisions likely on gross margin, credit, and funding costs; catalysts include execution of payment modernization, continued ABS spread tightening, and early read‑throughs from risk‑based pricing rollout .

Appendix: Other Q4‑Period Press Releases

  • Completed $216M term securitization (May 29, 2025) at 6.27% WAL‑adjusted coupon (22 bps better than January, 117 bps vs Oct’24); proceeds used to pay down revolver .
  • CFO transition: Jonathan Collins appointed CFO (effective May 12, 2025); Vickie Judy moved to CAO .