ROGERS, Ark., March 08, 2024 (GLOBE NEWSWIRE) -- America's Car-Mart, Inc. (NASDAQ:CRMT) ("we," "Car-Mart" or the "Company"), today reported financial results for the third quarter ended January 31, 2024. Third Quarter Key Highlights (Q3 FY24 vs. Q3 FY23, unless otherwise noted) Completed implementation of updated loan origination system (LOS)Q3 revenue was $299.6 million, down 7.9%Total collections increased 9.3%Allowance for credit loss adjusted to 25.74%, down sequentially 30 bpsNet charge-offs as a % of ...

Financial Performance - Q3 FY24 revenue was $299.6 million, down 7.9% from $325.3 million in Q3 FY23[12] - Loss per share for the quarter was $1.34, compared to diluted earnings per share of $0.23 in the prior year[12] - Revenues for the nine months ended January 31, 2024, were $854,170, a decrease of 1.8% compared to $869,775 in the same period of 2023[26] - Net income (loss) for the nine months ended January 31, 2024, was $(31,819), a significant decline from a net income of $18,344 in the same period of 2023[26] Profitability and Expenses - Gross profit per unit increased to $7,043, a 10.5% improvement from $6,373 in the prior year[5] - SG&A expenses were $43.6 million, down from $44.7 million in the prior year quarter, reflecting a 6.7% decrease per average account[14] - Interest income increased by 21.8% year-over-year, reaching $175,051, contributing positively to overall financial performance[26] Credit and Collections - The allowance for credit losses decreased to 25.74%, providing a $3.9 million benefit to the provision for credit losses[6] - The provision for credit losses rose by 28.2% to $321,300, compared to $250,719 in the prior year, indicating increased risk in finance receivables[26] - Net charge-offs as a percentage of average finance receivables increased to 6.8% from 5.9% in the prior quarter[12] - Net charge-offs as a percentage of average finance receivables increased to 6.8% from 5.9% year-over-year, indicating a rise in credit losses[30] - Total collections increased by 9.3% year-over-year, indicating improved cash flow management[12] Sales and Market Activity - Sales volume decreased to 11,664 units, down 19.6% compared to 14,508 units in the prior year quarter[13] - The average retail sales price increased by 7.5%, partially offsetting the overall revenue decline driven by fewer retail units sold[29] - The average down-payment percentage for finance receivables was 5.1%, up from 4.8% in the previous year, reflecting improved customer financing conditions[35] Strategic Initiatives - The company completed the acquisition of Central Auto Sales in Hot Springs, Arkansas, and is exploring further acquisition opportunities[7] - The company entered a strategic partnership with Cox Automotive in February, aimed at enhancing vehicle acquisition and remarketing processes[32] Financial Position - Total assets increased to $1,466,947,000 from $1,414,737,000, reflecting a growth of 3.5% year-over-year[54] - Total equity as of January 31, 2024, was $469,007, a decrease from $498,547 in the previous year[48] - Shares outstanding rose to 6,391,061 from 6,373,404, indicating an increase of approximately 0.3%[54] - Restricted cash from collections on auto finance receivables increased to $90,350,000 compared to $58,238,000, representing a growth of 55.1%[54] - The balance of treasury stock remained stable at $297,757,000, unchanged from the previous period[54] - There were no changes in the prior year net income or shareholder's equity due to reclassification of some items[54]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2023 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number: 0-14939 AMERICA'S CAR-MART, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of in ...

Financial Data and Key Metrics Changes - Revenue for the second quarter was $361.6 million, up 2.8% year-over-year, primarily due to a 23% increase in interest income [12][68] - Sales volumes decreased to 15,162 units from 15,885 units sold last year, reflecting a decline of 4.6% [6][68] - Gross profit dollars per retail unit sold improved by 11.5%, and gross profit percentage increased by 220 basis points year-over-year [13] - The allowance for credit loss increased from 23.91% to 26.04% sequentially, resulting in a $28 million charge to provision expense [79] Business Line Data and Key Metrics Changes - Average down payments for the quarter were 4.9%, down 30 basis points year-over-year, but the new loan origination system (LOS) generated higher inbound payments [8][68] - The gross margin initiatives improved materially year-over-year, although there was a slight sequential decrease due to sales mix [9][13] - Inventory dollars decreased by $16.5 million from the prior year quarter, with inventory turns improving to 7.1 compared to 6.7 [104] Market Data and Key Metrics Changes - The company onboarded three additional states, bringing the total to five states, which accounted for about 45% of revenue at quarter end [7] - Online credit applications increased by 19%, and unique website visitors were up 23%, indicating strong demand despite showroom traffic softness [51][97] Company Strategy and Development Direction - The company is focused on operational efficiencies, reducing costs, and prudent capital management to enhance competitive advantages [83] - The rollout of the new LOS is aimed at improving underwriting and sales origination processes, with full implementation expected by the third quarter [69][99] - The company is actively evaluating opportunities to acquire productive stores, enhancing its dealership group [39] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding improvements in delinquencies and unit losses, although the macro environment remains challenging for consumers [11][83] - The company is committed to addressing affordability challenges for consumers and improving vehicle quality through partnerships [10][75] - Management acknowledged the impact of inflation on consumer behavior and the need for strategic adjustments in underwriting [101][125] Other Important Information - The company has $4.3 million in unrestricted cash and approximately $86 million in additional availability under revolving credit facilities [19] - The company plans to continue share repurchases as part of its capital allocation strategy [117] Q&A Session All Questions and Answers Question: What were the underwriting changes in October impacting volume? - Management indicated that the underwriting changes were aimed at decreasing terms and increasing down payments due to rising credit losses [134] Question: What is the outlook for share repurchases given the loss reported? - Management confirmed that share repurchases will continue as part of the capital allocation strategy, ensuring opportunities are not missed [136] Question: How does the company plan to address the affordability challenges faced by consumers? - Management highlighted efforts to improve vehicle quality and affordability, which are critical to generating demand despite external challenges [129]

CRMT Inventory Trends CRMT Earnings Supplemental Material Q2 FY24 AR Growth (net) Capex • $78M 1 2 | --- | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------|--------------|-------| | | | | | Repurchased shares of $156M | | | | | | | | | | | | Added approx. $1B in gross receivables Funded $78M in capex growth projects including LOS, ERP, and facility upgrades Increased $79M of inventory | on strate ...

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Page No. PART I FINANCIAL INFORMATION 4 Texas 63-0851141 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1805 North 2nd Street, Suite 401, Rogers, Arkansas 72756 (Address of principal executive offices) (zip code) (479) 464-9944 (Registrant's telephone number, including area code) Securities registered pursuant to S ...

Financial Data and Key Metrics Changes - The company reported strong revenue growth for the quarter, with sales performance generating 15,912 units sold, up 2.4% year-over-year [12] - Gross margin improved to 34.6%, up 20 basis points compared to the previous year and up 120 basis points sequentially [18] - Net charge-offs as a percentage of average finance receivables were 5.8%, compared to 5.1% in the prior year quarter [23] - Total collections increased by 12% to $166 million, with collections per active customer per month rising to $535 from $516 [28] Business Line Data and Key Metrics Changes - Same-store sales increased by 8.2%, positively impacting inventory turns, which rose from 5.9 to 7.2 turns [12] - Online credit applications grew by 19% for the quarter, accounting for about 70% of all applications [12] - Average selling prices increased by 4.1% year-over-year, driven by both vehicle prices and ancillary products [15] Market Data and Key Metrics Changes - Credit availability remains tight compared to the previous year, although there has been mild improvement recently [14] - The industry is experiencing a decline in wholesale pricing, with procurement teams managing to lower purchase prices sequentially throughout the quarter [16] Company Strategy and Development Direction - The company is focused on long-term health and success, with a commitment to investing in the business despite industry challenges [10] - There is an emphasis on improving operational efficiencies and leveraging technology to enhance vehicle transportation and procurement processes [20] - The company is exploring acquisition opportunities as many competitors are struggling, which could lead to significant growth [78] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future demand, stating that the current environment is ideal for focusing on affordability and customer service [37] - The company believes that credit results will improve as they enhance vehicle quality and execution levels [39] - Management noted that foundational investments are nearing completion, which will allow for a more efficient, data-driven operation [38] Other Important Information - The company has over $125 million in deferred revenue on the balance sheet and closed on a third securitization with net proceeds of $356 million [25][34] - The transition of CEO from Jeff Williams to Doug Campbell is set for October 1, with a focus on ensuring a smooth handoff [7][10] Q&A Session Summary Question: What is the outlook on extending contract terms for affordability? - Management believes there is potential to decrease contract terms in the future as consumer wages increase, but this will depend on car prices and inflationary pressures [47] Question: What changes have occurred in vehicle purchase and disposition? - The company has improved efficiency by purchasing slightly newer vehicles with lower mileage, which should reduce repair costs and enhance resale value [48][49] Question: How is the health of the underlying consumer? - The health of consumers remains stable, with low unemployment and good wages, but inflationary pressures are still a concern [56][58] Question: Will the company raise inventory levels in response to potential strikes? - Management is preparing for various outcomes but does not plan to stock up on inventory; they will remain selective in vehicle purchases [63][66] Question: What are the opportunities seen in the current market? - The company is optimistic about acquiring strong operators looking for succession plans, which could lead to increased productivity and profits [78]

Part I [Business Overview](index=6&type=section&id=Item%201.%20Business) The company is a leading automotive retailer specializing in selling affordable used vehicles and providing in-house financing to credit-challenged customers - The company operates in the **'Integrated Auto Sales and Finance'** segment, selling older used vehicles and providing financing to customers with limited or impaired credit histories[90](index=90&type=chunk)[116](index=116&type=chunk) - As of April 30, 2023, the company operated **156 dealerships**, primarily located in small cities across the South-Central United States[90](index=90&type=chunk) - The business strategy focuses on expanding through controlled organic growth at existing dealerships and pursuing strategic acquisitions, having successfully acquired dealerships in two of the last three fiscal years[69](index=69&type=chunk)[70](index=70&type=chunk) [Business Strategy](index=6&type=section&id=Business%20Strategy) The strategy emphasizes decentralized operations, affordable transportation, strong customer relationships, and growth through expansion and acquisitions - Maintains a **decentralized operation**, with each dealership responsible for its own vehicle quality, sales, credit decisions, and collections[91](index=91&type=chunk) - Focuses on selling basic, affordable transportation, with an average retail sales price of **$18,080** in fiscal 2023[29](index=29&type=chunk) - Grows by increasing revenues at existing dealerships and through strategic acquisitions, adding **3 new dealerships** in fiscal 2023[70](index=70&type=chunk)[74](index=74&type=chunk) - Emphasizes cultivating **customer relationships**, leading to a large percentage of sales from repeat customers and referrals at mature dealerships[54](index=54&type=chunk) [Operations](index=9&type=section&id=Operations) Operations involve decentralized dealerships managing vehicle sales, in-house financing, and collections, with a focus on older, affordable vehicles Dealership Count (Fiscal Years 2021-2023) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Dealerships at beginning of year | 154 | 151 | 148 | | Dealerships opened or acquired | 3 | 3 | 3 | | Dealerships closed | (1) | - | - | | Dealerships at end of year | 156 | 154 | 151 | Typical Vehicle Purchase & Financing Terms (FY 2023) | Metric | Value | | :--- | :--- | | **Vehicle Profile** | | | Age | 5 to 12 years | | Mileage | 70,000 to 140,000 | | Average Cost | $10,000 | | **Financing Terms** | | | Average Down Payment | 5.4% | | Average Term Length | 46.3 months | | Portfolio Weighted Avg. Interest Rate | 16.7% | - Collections are a primary focus, with annual provision for credit losses ranging from **19.30% to 29.20%** of sales over the last five fiscal years[28](index=28&type=chunk) - New dealerships are capitalized with approximately **$1.5 million to $2.5 million** and typically become profitable within the first year of opening[38](index=38&type=chunk) [Competition](index=14&type=section&id=Competition) The company faces intense competition in the fragmented used automotive market, primarily on financing availability, vehicle quality, pricing, and customer service - Competes with other independent **Integrated Auto Sales and Finance dealers**, franchised dealerships, other used car dealers, and private sellers[82](index=82&type=chunk) - Principal competitive factors include the availability of **financing availability** to credit-challenged consumers, **vehicle selection**, **pricing**, and **customer service**[41](index=41&type=chunk) - Increased competition and tight vehicle supply have led to **higher purchase prices** and influenced the company to offer **longer financing terms** and slightly **lower down payments**[82](index=82&type=chunk) [Human Capital Resources](index=15&type=section&id=Human%20Capital%20Resources) The company employs 2,260 associates, emphasizing diversity, safety, and professional development through internal training programs - Employed approximately **2,260 full-time associates** as of April 30, 2023[46](index=46&type=chunk) - As of April 30, 2023, **52% women** and **34% racially or ethnically diverse** associates comprised the company's workforce[44](index=44&type=chunk) - Offers **comprehensive training and development programs**, such as 'Future Manager' and 'Car-Mart U', to foster internal promotion and career growth[218](index=218&type=chunk) [Executive Officers of the Registrant](index=17&type=section&id=Executive%20Officers%20of%20the%20Registrant) The executive leadership team comprises Jeffrey A. Williams (CEO), Vickie D. Judy (CFO), and Douglas Campbell (President) Executive Officers as of April 30, 2023 | Name | Age | Position | | :--- | :--- | :--- | | Jeffrey A. Williams | 60 | Chief Executive Officer and Director | | Vickie D. Judy | 57 | Chief Financial Officer | | Douglas Campbell | 47 | President | [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from economic conditions, inventory costs, intense competition, credit-impaired borrowers, extensive regulation, and stock volatility [Risks Related to the Company's Business, Industry, and Markets](index=18&type=section&id=Risks%20Related%20to%20the%20Company%27s%20Business%2C%20Industry%2C%20and%20Markets) Risks include adverse economic conditions, used vehicle availability and cost, intense competition, extensive regulation, and dependence on successful growth strategies - Disruptions in economic conditions, including **rising interest rates and inflation**, could adversely affect consumer demand and **increase delinquencies, repossessions, and credit losses**, particularly for the non-prime customer base[209](index=209&type=chunk)[253](index=253&type=chunk) - **Reduced availability or increased cost of used vehicles**, affected by new car sales volumes and supply chain issues, could negatively impact inventory and gross margins[210](index=210&type=chunk) - The business is geographically concentrated, with approximately **27.4% of revenues from Arkansas**, making it susceptible to local economic conditions[256](index=256&type=chunk) - The business is subject to **extensive regulation** from federal, state, and local authorities, including the **Consumer Financial Protection Bureau (CFPB)**, which could result in significant compliance costs and penalties[227](index=227&type=chunk) [Risks Related to the Company's Operations](index=21&type=section&id=Risks%20Related%20to%20the%20Company%27s%20Operations) Operational risks include high delinquency rates from credit-impaired borrowers, insufficient credit loss allowance, dependence on key personnel, and cybersecurity threats - Financing sales to individuals with impaired or limited credit histories entails a **higher risk of delinquency, default, and repossession** compared to traditional lenders[262](index=262&type=chunk) - The allowance for credit losses, an estimate based on historical data and forecasts, may be **insufficient to cover actual losses**, which could adversely affect financial results[235](index=235&type=chunk)[263](index=263&type=chunk) - The company's decentralized model makes it **dependent on its management teams** and its ability to attract and retain qualified employees in a competitive market[237](index=237&type=chunk) - Information systems are **vulnerable to security breaches, cyber-attacks, and system failures**, which could disrupt operations, lead to data theft, and cause reputational damage[239](index=239&type=chunk) [Risks Related to the Company's Common Stock](index=24&type=section&id=Risks%20Related%20to%20the%20Company%27s%20Common%20Stock) Common stock risks include price volatility due to low trading volume and the company's policy of not paying cash dividends - The common stock's relatively **low trading volume** may result in **greater price volatility** and may not provide adequate liquidity for investors[245](index=245&type=chunk)[272](index=272&type=chunk) - The company **does not currently pay cash dividends** and intends to retain earnings for future growth, meaning stockholders should not rely on future dividend income[246](index=246&type=chunk)[273](index=273&type=chunk) [Properties](index=25&type=section&id=Item%202.%20Properties) The company leases approximately 79% of its facilities, including its 50,000 sq ft corporate office in Rogers, Arkansas, and dealerships across ten states - The company leases approximately **79% of its facilities**, including most dealerships and its corporate offices[275](index=275&type=chunk) - Corporate offices are located in a **50,000 square foot leased space** in Rogers, Arkansas[275](index=275&type=chunk) [Legal Proceedings](index=25&type=section&id=Item%203.%20Legal%20Proceedings) Management anticipates no material adverse effect on financial position or operations from ongoing legal proceedings - The company does not expect any ongoing legal proceedings to have a **no material adverse effect** on its financial condition or operations[305](index=305&type=chunk) [Mine Safety Disclosure](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This item is not applicable to the company's business - Not applicable[276](index=276&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock (CRMT) trades on NASDAQ, with 977 shareholders; the company retains earnings for growth and did not repurchase shares in Q4 FY2023 - The company's common stock trades on the **NASDAQ Global Select Market** under the symbol **CRMT**[278](index=278&type=chunk) - As of June 23, 2023, there were approximately **977 shareholders** of record[307](index=307&type=chunk) - The company has **not paid cash dividends** and intends to continue retaining earnings for future growth[281](index=281&type=chunk) - **No shares** of common stock were repurchased under the company's authorized program during the fourth quarter of fiscal 2023[310](index=310&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2023 revenues grew 17.6% to $1.41 billion, but net income declined significantly due to a 48.2% increase in credit loss provision and a 250.9% surge in interest expense [Results of Operations](index=30&type=section&id=Results%20of%20Operations) FY2023 revenues rose 17.6% to $1.41 billion, but income before taxes fell sharply due to a 48.2% increase in credit loss provision and a 250.9% rise in interest expense Key Operating Metrics (FY2023 vs FY2022) | Metric | FY 2023 | FY 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1,405.5M | $1,195.6M | 17.6% | | Retail Units Sold | 63,584 | 60,595 | 4.9% | | Average Retail Sales Price | $18,080 | $16,372 | 10.4% | | Gross Margin % | 33.4% | 36.4% | (3.0 p.p.) | | Provision for Credit Losses | $352.9M | $238.1M | 48.2% | | Interest Expense | $38.3M | $10.9M | 250.9% | | Income Before Taxes | $25.8M | $122.6M | (79.0%) | - The increase in provision for credit losses in FY2023 was due to **credit metrics normalizing** to pre-pandemic levels, driven by the absence of government stimulus, inflationary pressures on customers, and an increased frequency and severity of losses[323](index=323&type=chunk)[286](index=286&type=chunk) - Interest expense surged in FY2023 due to **higher interest rates (71%)** and **higher average debt balances (29%)**[293](index=293&type=chunk) [Financial Condition](index=33&type=section&id=Financial%20Condition) Total assets grew to $1.42 billion, driven by a 24.2% increase in net finance receivables to $1.07 billion, funded by increased debt Selected Balance Sheet Data (in thousands) | Account | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | Finance receivables, net | $1,073,764 | $863,674 | | Inventory | $109,290 | $115,302 | | Total Assets | $1,420,431 | $1,154,696 | | Non-recourse notes payable, net | $471,367 | $395,986 | | Revolving line of credit, net | $167,231 | $44,670 | | Total Equity | $498,547 | $476,534 | - Growth in finance receivables (**24.2%**) exceeded revenue growth (**17.6%**) in fiscal 2023, primarily due to an increase in the average contract term to **46.3 months** from 42.9 months in the prior year[327](index=327&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity sources include operations, revolving credit, and securitizations; FY2023 saw $135.7 million net cash used in operations, with $121.4 million available credit - Net cash used in operating activities was **$135.7 million** in FY2023, compared to $119.2 million in FY2022, primarily due to the increase in finance receivable originations[363](index=363&type=chunk)[110](index=110&type=chunk) - Net cash provided by financing activities was **$188.7 million**, largely from the issuance of non-recourse notes and net borrowings on the revolving credit facility[110](index=110&type=chunk) - As of April 30, 2023, the company had **$121.4 million** of availability under its revolving credit facilities, which mature in September 2024[338](index=338&type=chunk)[485](index=485&type=chunk) [Critical Accounting Estimates](index=38&type=section&id=Critical%20Accounting%20Estimates) The allowance for credit losses, $299.6 million (23.91% of receivables) as of April 30, 2023, is the most significant estimate, based on historical data and macroeconomic forecasts - The allowance for credit losses is the **most significant accounting estimate**, determined by management's judgment[372](index=372&type=chunk) - The allowance calculation uses **historical loss experience** adjusted for qualitative factors and a **one-year forecast of macroeconomic conditions**[373](index=373&type=chunk)[348](index=348&type=chunk) - At April 30, 2023, the allowance for credit losses was **$299.6 million**, representing **23.91%** of the net finance receivables principal balance, up from 23.57% at the end of fiscal 2022[344](index=344&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Primary market risk is interest rate exposure on variable-rate revolving credit facilities; a 1% rate increase would raise annual interest expense by $1.7 million - The primary market risk is **interest rate risk** on its variable-rate revolving credit facilities[352](index=352&type=chunk)[398](index=398&type=chunk) - A **1% increase** in interest rates on the **$167.2 million** of revolving debt outstanding at April 30, 2023, would increase annual interest expense by approximately **$1.7 million**[398](index=398&type=chunk) [Financial Statements and Supplementary Data](index=41&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited financial statements with an unqualified opinion from Grant Thornton LLP, highlighting the allowance for credit losses as a critical audit matter - The independent auditor, Grant Thornton LLP, issued an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal control over financial reporting as of April 30, 2023[355](index=355&type=chunk)[384](index=384&type=chunk) - The auditor identified the **allowance for credit losses** as a **critical audit matter** due to the significant management judgments required for its estimation, particularly adjustments for current conditions and macroeconomic forecasts[386](index=386&type=chunk)[402](index=402&type=chunk) [Consolidated Financial Statements](index=44&type=section&id=Consolidated%20Financial%20Statements) FY2023 consolidated financial statements show $1.41 billion in revenues, $20.4 million net income, $1.42 billion total assets, and $638.6 million total debt Consolidated Statement of Operations Highlights (FY 2023, in thousands) | Metric | Amount | | :--- | :--- | | Total Revenues | $1,405,498 | | Cost of Sales | $805,873 | | Provision for Credit Losses | $352,860 | | Income Before Income Taxes | $25,794 | | Net Income | $20,432 | | Diluted EPS | $3.11 | Consolidated Balance Sheet Highlights (As of April 30, 2023, in thousands) | Metric | Amount | | :--- | :--- | | Total Assets | $1,420,431 | | Finance Receivables, Net | $1,073,764 | | Total Liabilities | $921,484 | | Total Debt (Revolving + Non-recourse) | $638,598 | | Total Equity | $498,547 | Consolidated Statement of Cash Flows Highlights (FY 2023, in thousands) | Metric | Amount | | :--- | :--- | | Net cash used in operating activities | ($135,728) | | Net cash used in investing activities | ($27,571) | | Net cash provided by financing activities | $188,746 | | Increase in cash | $25,447 | [Notes to Consolidated Financial Statements](index=48&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, including segment reporting, credit loss allowance, and debt composition, noting a corrected immaterial error in prior period financials - All individual dealerships are aggregated into a **single reportable segment**: Integrated Auto Sales and Finance[117](index=117&type=chunk) - The allowance for credit losses is a significant estimate. At April 30, 2023, it was **$299.6 million**, or **23.91%** of the net principal balance of finance receivables[118](index=118&type=chunk)[426](index=426&type=chunk) - Total debt of **$638.6 million** at April 30, 2023, consists of a $168.5 million revolving line of credit and $472.9 million in non-recourse notes payable from asset-backed securitizations[459](index=459&type=chunk) - Certain **immaterial errors** in prior period financial statements related to deferred revenue and the allowance for credit losses were identified and **corrected**[159](index=159&type=chunk)[509](index=509&type=chunk) [Controls and Procedures](index=70&type=section&id=Item%209A.%20Controls%20and%20Procedures) Disclosure controls were effective as of April 30, 2023, with a previously identified material weakness in CECL analysis fully remediated through personnel and system enhancements - Management concluded that disclosure controls and procedures were **effective** as of April 30, 2023[512](index=512&type=chunk) - A **material weakness** related to the CECL analysis for the allowance for credit losses, identified in a prior quarter, was **fully remediated** as of the end of fiscal 2023[540](index=540&type=chunk)[541](index=541&type=chunk) - Remediation actions included **hiring new Senior Director of Finance**, **implementing third-party software**, and **engaging advisory services** to improve the CECL analysis process[164](index=164&type=chunk) Part III [Directors, Executive Compensation, Security Ownership, and Other Matters](index=73&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10-14, covering directors, executive compensation, and security ownership, is incorporated by reference from the 2023 proxy statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the company's definitive proxy statement[172](index=172&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=74&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all Form 10-K exhibits, including governance documents and material contracts; financial statement schedules are omitted - This section provides a list of **all exhibits** filed with the annual report, including governance documents, material contracts, and required certifications[554](index=554&type=chunk) - Financial statement schedules have been **omitted** because the required information is included elsewhere in the report or is not applicable[553](index=553&type=chunk) [Form 10-K Summary](index=79&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is noted as not applicable in the report - Not applicable[558](index=558&type=chunk)

America's Car-Mart, Inc. (NASDAQ:CRMT) Q4 2023 Results Conference Call May 24, 2023 11:00 AM ET Company Participants Jeff Williams - CEO Doug Campbell - President Vickie Judy - CFO Conference Call Participants Billy Healey - Bank of America Derek Sommers - Jefferies Operator Good morning, everyone. Thank you for holding, and welcome to America's Car-Mart Fourth Quarter Fiscal 2023 Conference Call. The topic of this call will be the earnings and operating results for the company's fourth quarter of fiscal ye ...

Part I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for the period ended January 31, 2023, show significant growth in assets, primarily driven by an increase in finance receivables, while total revenues for the nine-month period grew 19.8% year-over-year, net income declined sharply from $68.6 million to $18.3 million due to substantially higher provisions for credit losses and interest expenses, and the statements also include a correction of an immaterial error from previously issued financials related to deferred revenue and the allowance for credit losses [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows significant asset growth, primarily in finance receivables, funded by an increase in non-recourse notes payable Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Jan 31, 2023 (Unaudited) | Apr 30, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $4,322 | $6,916 | | Finance receivables, net | $1,023,181 | $863,674 | | Inventory | $131,616 | $115,302 | | **Total Assets** | **$1,384,680** | **$1,154,696** | | **Liabilities & Equity** | | | | Non-recourse notes payable | $588,310 | $395,986 | | Revolving line of credit | $27,782 | $44,670 | | **Total Liabilities** | **$889,036** | **$677,762** | | **Total Equity** | **$495,244** | **$476,534** | - Total assets grew by **20%** from April 30, 2022, to January 31, 2023, primarily due to an **18.5%** increase in net finance receivables[10](index=10&type=chunk) - Total liabilities increased by **31.2%** over the same period, largely driven by a **48.6%** rise in non-recourse notes payable used to fund the growth in receivables[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Despite revenue growth, net income significantly declined due to higher credit loss provisions and increased interest expenses Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Jan 31, 2023 | Three Months Ended Jan 31, 2022 | Nine Months Ended Jan 31, 2023 | Nine Months Ended Jan 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $326,530 | $287,292 | $1,017,189 | $849,320 | | Provision for credit losses | $85,650 | $61,646 | $250,719 | $167,987 | | Interest expense | $9,765 | $2,944 | $25,460 | $7,439 | | Net Income | $1,508 | $19,140 | $18,344 | $68,618 | | Diluted EPS | $0.23 | $2.82 | $2.79 | $9.97 | - For the nine months ended January 31, 2023, total revenues increased **19.8%** YoY, but net income plummeted by **73.3%** due to a **49.2%** increase in the provision for credit losses and a **242.3%** increase in interest expense[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities consumed significant cash, primarily offset by cash provided from financing activities, largely through non-recourse notes Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Nine Months Ended Jan 31, 2023 | Nine Months Ended Jan 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($123,339) | ($102,671) | | Net cash used in investing activities | ($25,034) | ($15,199) | | Net cash provided by financing activities | $171,256 | $117,580 | - The company experienced a significant cash outflow from operations, primarily due to finance receivable originations (**$841.4 million**) outpacing collections (**$308.7 million**)[14](index=14&type=chunk) - Financing activities provided net cash of **$171.3 million**, largely from proceeds from non-recourse notes payable (**$400.2 million**), which was used to fund operations, investments, and pay down the revolving line of credit[14](index=14&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) Key notes detail the company's integrated auto sales and finance operations, significant credit loss allowance, recent debt offerings, and correction of prior immaterial errors - The company operates in the Integrated Auto Sales and Finance segment, selling older model used vehicles and providing financing to customers with limited credit histories through **157 dealerships** as of January 31, 2023 (Note A)[21](index=21&type=chunk) - The allowance for credit losses is a significant estimate, calculated to cover expected lifetime losses. As of January 31, 2023, the allowance was **$283 million**, or **23.65%** of the relevant finance receivables principal balance (Note B)[25](index=25&type=chunk)[43](index=43&type=chunk) - The company completed two non-recourse notes payable offerings: **$400.0 million** in April 2022 with a **5.14%** weighted average coupon rate, and **$400.2 million** in January 2023 with an **8.68%** rate (Note F)[94](index=94&type=chunk)[95](index=95&type=chunk) - Immaterial errors in prior financial statements were corrected, related to the classification of deferred ancillary product revenue at charge-off and the allowance for credit losses calculation. This increased previously reported net income for the nine months ended Jan 31, 2022, by **$2.0 million** (Note L)[120](index=120&type=chunk)[121](index=121&type=chunk) - Subsequent to the quarter end, on February 22, 2023, the company amended its loan agreement to expand its borrowing base by including vehicle contracts with terms up to **72 months** (Note M)[122](index=122&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 19.8% revenue growth for the first nine months of fiscal 2023 to a 13.3% increase in average retail sales price and a 4.0% increase in units sold, however, profitability was severely impacted by a decline in gross margin percentage (33.3% vs 36.8%) due to higher vehicle costs, and a significant increase in the provision for credit losses to 28.7% of sales as credit performance normalizes post-stimulus, while rising interest rates also drove interest expense up 242.3%, and the company is funding its growth in finance receivables through increased debt, including two recent securitization transactions, with management also disclosing and remediating a material weakness in internal controls related to its credit loss allowance calculation [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Revenue growth was offset by declining gross margins and significantly higher credit loss provisions, leading to a sharp drop in pretax income Comparison of Operations: Three Months Ended Jan 31, 2023 vs 2022 | Metric | Q3 FY2023 | Q3 FY2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $326.5M | $287.3M | 13.7% | | Gross Margin % | 33.6% | 36.7% | (3.1 p.p.) | | Provision for Credit Losses (% of Sales) | 31.1% | 24.8% | 6.3 p.p. | | Pretax Income | $1.8M | $25.3M | (92.9%) | Comparison of Operations: Nine Months Ended Jan 31, 2023 vs 2022 | Metric | YTD FY2023 | YTD FY2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1,017.2M | $849.3M | 19.8% | | Gross Margin % | 33.3% | 36.8% | (3.5 p.p.) | | Provision for Credit Losses (% of Sales) | 28.7% | 22.7% | 6.0 p.p. | | Pretax Income | $23.5M | $88.7M | (73.5%) | - For the nine-month period, revenue growth was driven by a **13.3%** increase in average retail sales price to **$18,059** and a **4.0%** increase in retail units sold[151](index=151&type=chunk) - Net charge-offs as a percentage of average finance receivables increased to **16.9%** for the nine-month period, up from **13.3%** in the prior year, reflecting normalization from stimulus-aided lows[154](index=154&type=chunk) [Financial Condition](index=37&type=section&id=Financial%20Condition) Net finance receivables and inventory increased, with growth funded by a recent asset-backed securitization - Net finance receivables increased by **18.5%** since April 30, 2022, consistent with historical trends where receivables growth slightly outpaces revenue growth[157](index=157&type=chunk) - Inventory grew by **$16.3 million** since April 30, 2022, to support higher sales volumes and due to increased costs to prepare vehicles for resale[158](index=158&type=chunk) - The company completed a **$400.2 million** asset-backed securitization on January 31, 2023, using the proceeds to pay down its revolving credit facilities and support growth[163](index=163&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Operations consumed significant cash, primarily for finance receivable originations, with liquidity primarily sourced from borrowings and recent securitization market access - The company used **$123.3 million** in cash from operations in the first nine months of fiscal 2023, primarily to fund **$841.4 million** in new finance receivable originations[166](index=166&type=chunk)[168](index=168&type=chunk) - Primary sources of liquidity are income from operations and borrowings. The company has recently accessed the securitization market to increase borrowing capacity and diversify funding[164](index=164&type=chunk)[167](index=167&type=chunk) - As of January 31, 2023, the company had **$4.3 million** in cash and approximately **$148 million** of availability under its revolving credit facilities[176](index=176&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk related to its debt obligations, with the revolving credit facility of $27.8 million at quarter-end having a variable interest rate, where a hypothetical 1% increase in interest rates would increase annual interest expense by approximately $280,000, and while existing non-recourse notes are fixed-rate, future securitizations would likely carry higher rates in the current environment - The company's main market risk exposure is to interest rate changes on its debt obligations, particularly its revolving credit facilities[191](index=191&type=chunk) - The outstanding balance on the variable-rate revolving line of credit was **$27.8 million** at January 31, 2023. A **1%** increase in interest rates would result in an additional annual interest expense of about **$280,000**[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management disclosed a material weakness in internal control over financial reporting, identified in the previous quarter, related to the precision of review controls for the Current Expected Credit Losses (CECL) analysis, and due to this weakness, the CEO and CFO concluded that disclosure controls and procedures were not effective as of January 31, 2023, with the company actively remediating the issue by hiring new personnel with technical accounting expertise and engaging third-party advisors - A material weakness was identified in the company's internal control over financial reporting concerning the precision of management's review of the CECL analysis for the allowance for credit losses[195](index=195&type=chunk) - As a result of the material weakness, the CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of January 31, 2023[196](index=196&type=chunk) - Remediation efforts are underway, including hiring a new Senior Director of Finance and Reporting in January 2023 and engaging a third-party advisory service with CECL expertise[198](index=198&type=chunk) Part II. OTHER INFORMATION [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the ordinary course of business but does not expect the outcomes to have a material adverse effect on its financial position, results of operations, or cash flows - The company is a defendant in various legal proceedings arising from its ordinary course of business[204](index=204&type=chunk) - Management does not anticipate that the final outcome of these proceedings will have a material adverse effect on the company's financials[204](index=204&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended April 30, 2022 - No material changes to the company's risk factors have occurred since the last annual report filing for the fiscal year ended April 30, 2022[205](index=205&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any shares of its common stock under its authorized repurchase program during the third quarter of fiscal 2023, and has not historically paid dividends and does not expect to in the foreseeable future, with payments also being restricted by its credit agreements - No shares were repurchased under the company's stock repurchase program during the third quarter of fiscal 2023[206](index=206&type=chunk) - The company does not expect to pay cash dividends in the foreseeable future, and its ability to do so is limited by its lenders[207](index=207&type=chunk)