ROGERS, Ark., Dec. 05, 2024 (GLOBE NEWSWIRE) -- America's Car-Mart, Inc. (NASDAQ: CRMT) ("we,” "Car-Mart” or the "Company”), today reported financial results for the second quarter ended October 31, 2024.

"As we navigated industry and economic pressures, we made strategic decisions to ensure we exited stronger and better positioned to profitably grow our market share during the second half of the fiscal year.  I am pleased with our progress, as we continue to benefit from our enhanced underwriting or loan origination system (LOS).  We improved deal structures, generated higher down payments, and benefited from higher collections and gross margins. We continue to focus on improving affordability for customers by reducing the average retail price. We're closely managing expenses during ongoing implementation of technology upgrades to strengthen our operations. We believe Car-Mart is well positioned for future growth and profitability.”

_{¹ During the second quarter of fiscal year 2025, the Company made an adjustment after a performance analysis on our service contract program leading to an accounting change reducing the estimated revenue recognition period.   This analysis revealed that our customers reach the mileage portion of their service contract 25% sooner than the expiration of the contract term. Because of this, we reduced our revenue recognition period to better match the time of usage by the consumer.  This resulted in an acceleration of deferred service contract revenue on outstanding contracts of $13.2 million this quarter and will result in faster revenue recognition in subsequent periods.  Excluding the impact of this accounting adjustment, the Company's adjusted loss per share for the quarter was $0.24. Calculation of this non-GAAP financial measure and a reconciliation to the most directly comparable GAAP measure are included in the tables accompanying this release.}

TOTAL REVENUE - A 3.5% decline in revenue was primarily driven by a decrease in retail units sold. The decline in revenue was partially offset by an increase in interest income and a $13.2 million benefit in service contract revenue.  The increase in service contract revenue was a result of a performance analysis on our service contract program resulting in an accounting change reducing the estimated revenue recognition period.

SALES - Sales were 13,784 units vs. 15,162 units. The 9.1% reduction in sales volumes for the quarter was impacted by lower volumes in September, due partially to weather events in various markets. The Company also closed two underperforming dealerships during the quarter. The average vehicle retail sales price, excluding ancillary products, decreased to $17,251, reflecting a $212 decrease in the vehicle retail sales price when viewed sequentially, and for the second quarter in a row.

GROSS PROFIT - Gross profit margin as a percentage of sales was 39.4%, including 290 bps benefit from the impact of the service contract accounting change in estimate for revenue recognition. This accounting change will have a positive effect going forward on gross margin. Absent this change, adjusted gross margin (non-GAAP)² as a percentage of sales for the quarter was 36.5%, which is an improvement of 200 bps over the prior year quarter and 150 bps sequentially. Our initiatives in improving wholesale results and pricing improvements are reflected in these improved margins.

NET CHARGE-OFFS - Net charge-offs as a percentage of average finance receivables improved to 6.6% compared to 7.2%. On a relative basis, we saw improvements in the frequency of losses and a small increase in the severity of loss. We are seeing the severity of loss taper off when looking at loss per unit sequentially.

ALLOWANCE FOR CREDIT LOSSES - The allowance for credit loss as a percentage of finance receivables, net of deferred revenue and pending accident protection plan claims, decreased from 25.00% at July 31, 2024, to 24.72% at October 31, 2024. The primary driver of this change was favorable performance in loans originated under our LOS (our improved underwriting system) and the improvements it is driving in our historical loss rates. As of October 31, 2024, approximately 50% of the outstanding portfolio balance was originated under the Company's enhanced LOS.  Delinquencies (accounts over 30 days past due) improved by 10 bps to 3.5% of finance receivables as of October 31, 2024, and remained flat sequentially.

UNDERWRITING - Average down payments improved 30 bps to 5.2%. The average originating term was 44.2 months, essentially flat compared to the prior year quarter and a slight reduction sequentially. The Company continues to focus on improving deal structures particularly within the underlying credit tiers of customers, which the Company expects to strengthen the performance of the portfolio going forward. Please see the table and supplemental material for Cash-on-Cash returns.

SG&A EXPENSE - SG&A expense was up 5.7% to $47.4 million from $44.9 million. The Company's last two acquisitions completed since last year drove $2.1 million of the increase and the remainder was related to stock compensation increases.  We had favorable declines in payroll and payroll-related costs from prior expense management actions which we are pleased with. SG&A per customer was $459 compared to $429, but we expect this increase to flatten out as the acquisition customer bases grow.  The acquisitions completed last year are projected to add an additional 5,000-6,000 more accounts over the next 18-24 months.

LEVERAGE & LIQUIDITY - Debt to finance receivables and debt, net of cash, to finance receivables (non-GAAP)² were 51.8% and 43.0%, compared to 52.6% and 46.0%, respectively, at the end of the prior year. During the quarter, the Company completed an underwritten public equity offering and a private asset-backed securitization offering resulting in proceeds, net of issuance costs, of $73.8 million and $297.9 million, respectively, which were used primarily to pay down existing debt. During the quarter, the Company grew finance receivables by $8.5 million, increased inventory by $7.6 million, and purchased fixed assets of $1.4 million, with a $49.6 million decrease in debt, net of cash. As of October 31, 2024, the Company had $107.4 million in outstanding borrowings under its revolving line of credit.

ANNUAL CASH-ON-CASH RETURNS - The Company continues to generate solid cash-on-cash returns.

The following table sets forth the actual and projected cash-on-cash returns as of October 31, 2024, for the Company's finance receivables by origination year. The return percentages provided for contracts originated in fiscal years 2017 through 2020 reflect the Company's actual cash-on-cash returns.

_{³ "Cash-on-cash returns” represent the return on cash invested by the Company in the vehicle finance loans the Company originates and is calculated with respect to a pool of loans (or finance receivables) by dividing total "cash in” less "cash out” by total "cash out” with respect to such pool. "Cash in” represents the total cash the Company expects to collect on the pool of finance receivables, including credit losses. This includes down-payments, principal and interest collected (including special and seasonal payments) and the fair market value of repossessed vehicles, if applicable. "Cash out” includes purchase price paid by the Company to acquire the vehicle (including reconditioning and transportation costs), and all other post-sale expenses as well as expenses related to our ancillary products. The calculation assumes estimates on expected credit losses net of fair market value of repossessed vehicles and the related timing of such losses as well as post sales repair expenses and special payments. The Company evaluates and updates expected credit losses quarterly. The credit quality of each pool is monitored and compared to prior and initial forecasts and is reflected in our on-going internal cash-on-cash projections.}