Car-Mart(US:CRMT)2025-12-09 20:55Sales Performance - For the first six months of fiscal 2026, sales decreased by 1.8% compared to the prior-year period, driven primarily by a 3.4% decline in retail units sold, partially offset by a 0.9% increase in the average retail sales price [166]. - Total revenues decreased by $3.8 million or 0.5% for the six months ended October 31, 2025, with sales revenue declining by $10.5 million or 1.8% due to a 3.4% decrease in units sold [186]. - Same store revenue growth for the three months ended October 31, 2025, was (0.2)%, compared to (8.4)% in the prior year [178]. - The average retail sales price for the six months ended October 31, 2025, was $19,820, an increase of $170 compared to the prior-year period [189]. - The average retail sales price for the three months ended October 31, 2025, was $20,075, compared to $20,031 in the prior year period [178]. - The average retail sales price, including ancillary products, was $20,075 for the second quarter of fiscal 2026, an increase of $44 compared to the prior-year quarter [181]. Financial Performance - The Company's gross profit margin as a percentage of sales for the first six months of fiscal 2026 marginally decreased to 37.1% from 37.2% in the prior year period [173]. - The Company's gross profit per retail unit sold decreased to $7,868 from $8,166 in the prior year [178]. - The cost of sales as a percentage of sales increased to 62.5% for the three months ended October 31, 2025, compared to 60.6% for the same period in the prior fiscal year, resulting in a gross margin of 37.5% [180]. - Selling, general and administrative (SG&A) expenses as a percentage of sales increased to 20.0% for the three months ended October 31, 2025, compared to 16.6% in the prior year, with an absolute increase of $9.8 million [182]. - For the six months ended October 31, 2025, the company reported a net loss of $28.2 million compared to a net income of $4.1 million for the same period in 2024 [200]. Credit Losses and Provisions - The provision for credit losses as a percentage of sales increased to 39.50% for the first six months of fiscal 2026, compared to 34.00% for the same period in fiscal 2025 [168]. - Provision for credit losses as a percentage of sales was 41.6% for the three months ended October 31, 2025, compared to 34.8% for the same period in the prior fiscal year, with an increase of $19.6 million in absolute terms [183]. - Provision for credit losses as a percentage of sales was 39.5% for the six months ended October 31, 2025, compared to 34.0% for the same period in the prior fiscal year, with an increase of $27.2 million in absolute terms [191]. - The allowance for credit losses at October 31, 2025, was $338.8 million, representing 24.19% of the principal balance in finance receivables of $1.5 billion, down from 27.42% at October 31, 2024 [218]. - The allowance for credit losses is influenced by external factors such as industry trends and economic conditions [225]. Interest and Financing - Interest income rose by 5.5% for the first six months of fiscal 2026 [166]. - The average finance receivable's weighted average interest rate increased to 17.6%, up from 17.4% during the same prior year period [179]. - Interest expense as a percentage of sales decreased to 5.5% for the three months ended October 31, 2025, from 6.3% for the prior year period, reflecting a decrease of $2.4 million [184]. - The Company had an outstanding balance of $300 million on its senior secured note as of October 31, 2025 [230]. - A 1% increase in interest rates would lead to an additional annual interest expense of approximately $3 million, reducing net income before income tax [230]. - The Company's finance receivables carry annual interest rates ranging from 12.99% to 23.00% [231]. - The interest rate on the Company's senior secured note payable is generally SOFR plus 7.5% [231]. Operational Insights - The Company operated 154 dealerships as of October 31, 2025, with five locations closed subsequently as part of footprint optimization initiatives [165]. - Finance receivables, net, decreased by 0.7% compared to April 30, 2025, reflecting lower originations and normal portfolio amortization [193]. - Inventory decreased by $7.5 million, or 6.7%, compared to April 30, 2025, with annualized inventory turns increasing to 6.5 from 6.0 in the prior year [194]. - The company leased approximately 87% of its dealership properties, with operating lease commitments totaling $82.4 million [207]. - The Company expects the historical seasonality pattern of higher vehicle sales in the first and fourth fiscal quarters to continue [227]. - The third fiscal quarter (November through January) has historically been the slowest period for vehicle sales [227]. Liquidity and Cash Management - The company had approximately $122.4 million in cash on hand as of October 31, 2025, indicating a strong liquidity position [208]. - The company issued $387.96 million in non-recourse notes payable during the financing activities, with a total increase in cash of $126.43 million for the period [200]. - The weighted average fixed coupon rate for the asset-backed non-recourse notes was 7.86%, with scheduled maturities extending through 2032 [209]. - The company believes it will have adequate liquidity to continue growing revenues and satisfy capital needs through expected financing sources [212]. - The company expects to use cash from operations to grow its finance receivables portfolio and fund dealership acquisitions as opportunities arise [211]. Strategic Initiatives - The company has made substantial efforts to enhance its purchasing processes, including strategic partnerships and expanding purchasing territories [205]. - The company anticipates that macro-economic pressures will continue to affect customer demand and credit losses, necessitating ongoing process improvements in collections [206]. - The Company is currently evaluating the impact of ASU 2024-03 on its financial statement disclosures [226]. - The Company does not use financial instruments for trading purposes but has utilized an interest rate swap agreement to manage interest rate risk [229]. - The Company is exposed to market risk from changes in interest rates, particularly related to its debt obligations [229].