Car-Mart(CRMT) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Retail volume declined by 22.1% year-over-year, attributed to capital structure constraints rather than demand [7][25] - Total revenue decreased to $286.8 million, down 12% year-over-year, while average retail sales price increased by 7.1% to $20,634 [26] - Interest income rose to $64.2 million, up 3.1% year-over-year, despite lower sales volume [27] - Loss per share for the quarter was $9.25 on a GAAP basis, with an adjusted loss per share of $1.53 [56] Business Line Data and Key Metrics Changes - Retail units sold decreased to 10,275 units, driven by lower inventory availability, a smaller footprint, and Winter Storm Fern [25][26] - Gross profit per retail unit sold increased by 8.8%, indicating improved cost discipline [27] - SG&A expenses totaled $51.5 million, or 23.1% of reported sales, with adjusted SG&A at $48.7 million or 21.9% of sales [36] Market Data and Key Metrics Changes - Website traffic increased by 4% year-over-year, indicating sustained customer interest [9] - The subprime auto capital markets have been operating in a more measured environment since last fall, following disruptions in the industry [10][11] Company Strategy and Development Direction - The company is focused on completing its capital structure transformation, including securing a revolving warehouse facility to enhance inventory purchasing capabilities [18][19] - Operational improvements include executing a cost control plan that resulted in the consolidation of 18 locations, aimed at concentrating resources in stronger performing areas [20][21] - The company is committed to maintaining a leaner cost structure and aligning expenses with revenue [38][64] Management's Comments on Operating Environment and Future Outlook - Management emphasized that the volume decline was due to capital structure issues, not a lack of demand, and expressed confidence in the recovery of sales as inventory levels improve [57][64] - The impact of Winter Storm Fern was significant, affecting operations and customer payment behaviors, but management noted a recovery in collections post-storm [22][44] - The company is preparing for tax season demand, with early indicators showing improved deal structures and collections [78][106] Other Important Information - The company completed a $161.3 million asset-backed securitization transaction, which was a significant milestone in a challenging market [12][15] - The allowance for credit losses increased to 25.53% of finance receivables, reflecting portfolio dynamics and macroeconomic pressures [47] Q&A Session Summary Question: What are the sticking points in the warehouse negotiations? - Management indicated that the timing is structural and requires alignment across multiple stakeholders, which is complicated by the current market environment [74][75] Question: Are you seeing effects from tax refunds this year? - Early indicators show improved deal structures and collections, with tax seasonal payments being collected at a high rate [78] Question: How would you allocate the 22% unit decline among the factors? - The inventory levels were the largest driver of the decline, followed by the impact of Winter Storm Fern [85][88] Question: How have delinquencies trended absent the storm? - By mid-February, delinquencies had significantly decreased, indicating a return to expected ranges [91] Question: What is the expected run rate for SG&A going forward? - The company expects to see savings from recent store consolidations reflected in the fourth quarter, with a target SG&A of around $45-$46 million [96]