America’s Car-Mart Reports First Quarter Fiscal 2024 Earnings
- Strong revenue growth in Q1 FY2024
- Increase in customer count
- Net income negatively impacted by credit results
- Provision for credit losses increased
ROGERS, Ark., Sept. 05, 2023 (GLOBE NEWSWIRE) -- America’s Car-Mart, Inc. (NASDAQ: CRMT) (“we,” “Car-Mart” or the “Company”) today reported strong revenue growth in the first quarter of fiscal year 2024, with net income negatively impacted by credit results. Diluted earnings per share were
Also today, the Company announced that current President Doug Campbell will succeed Jeff Williams as Chief Executive Officer and join the Board of Directors, effective October 1, 2023. Williams will remain a Board Member and serve as CEO Emeritus and an advisor to the Company. See associated press release America’s Car-Mart Names Doug Campbell CEO & Board Member.
Highlights First Quarter 2024
The following are the key highlights from the first quarter. All comparisons are based on the first quarter of fiscal year 2024 vs. the first quarter of fiscal year 2023, unless otherwise noted.
- Revenues of
$368.0 million , up8.6% . - Total retail unit sales increased
2.4% . Same store retail revenue growth was8.2% . - Sales volume productivity per store per month was 34.2 vs. 33.6, an increase of
1.8% . - Gross profit per car sold was
$6,768 compared to$6,524 1. - Provision for credit losses as a percentage of sales was
30.9% compared to25.9% 1. Net charge-offs as a percentage of average finance receivables for the quarter were5.8% compared to5.1% 1. - Interest income was up
27.3% to$56.5 million , compared to$44.3 million . - SG&A as a percentage of sales was relatively flat at
14.9% vs.14.7% . SG&A was up$3.2 million and up$0.7 million , sequentially. Excluding stock-based compensation, SG&A was down$0.6 million sequentially. SG&A per average customer was$449 vs.$450. - Interest expense was
$14.3 million , compared to$7.3 million . - Total debt to finance receivables was
49.3% up from46.5% at April 30, 2023 and total debt, net of cash, to finance receivables (non-GAAP), was42.9% 2 at the end of the first quarter, up from41.5% 2 at April 30, 2023. - Customer count increased
8.1% to 104,734 active customers. Customers served per dealership was 680, compared to 629. - Diluted EPS was
$0.63 vs.$2.07 1.
CEO Commentary
“In the first quarter, improvements in many areas of the business - unit sales, gross margin, repair costs, diminishing wholesale losses, online credit application activity, working capital management and closing underperforming stores were overshadowed by the increase in the provision for loan losses during the period. The major drivers behind higher loan losses related to post-stimulus normalization of charge-offs, additional provisioning resulting from increased contract term, and a higher average interest rate for the portfolio. Said in a different way, we are experiencing the same credit results on the portfolio as we have historically, but the contract length has changed,” commented CEO Jeff Williams. “We anticipate this dynamic will reverse in the future leading to a more normalized reserve provision. In effect, the current principal collected, as a percentage of finance receivables, has been lower, creating a higher allowance for losses rather than being reported in earnings and equity. We continue to increase our allowance for credit losses, providing
Sales
Continued strength in the growth of online credit applications drove a
Our average retail sales price rose by
Gross profits
Last quarter we committed to recovering 260 bps of gross margin to
Credit and Interest Income
Net charge-offs as a percentage of average finance receivables were
Interest income was
SG&A
SG&A was
Leverage and liquidity
Interest expense was
Debt to finance receivable and debt, net of cash to finance receivables (non-GAAP) 2 were
Acquisitions & Dispositions
As significant disruptions in the competitive landscape continue, we are building a pipeline of acquisition prospects and are entertaining several highly accretive opportunities. We have recently hired a vice president to head our acquisitions effort and will continue to develop and strengthen the team and processes to capture the tremendous opportunities before us. We have a competitive advantage in the industry and our opportunity for value creation through acquisitions is quite large as an increasing number of good operators look for an exit strategy.
We recently closed two stores and are in the process of reviewing a handful of others that do not generate appropriate returns. We will allocate the capital freed up by these underperforming stores to acquisitions and more attractive projects.
Business Investments, Capital Expenditures and Technology
We are actively rolling out a new Loan Origination System (“LOS”) which we expect to complete within the next few months. As we have discussed, the LOS will be transformational for our company, increasing the funnel of potential customers and the retention of existing customers that have high life-time value. We are receiving more than 16,000 on-line credit applications each month. Because of the high and increasing level of interest in our offering, the LOS will provide data enabling us to be more selective in choosing customers to finance and structure our deals to improve success rates. Attracting and retaining higher credit customers over time will drive down credit losses. We will have the ability to continuously update our scoring system and apply risk-based pricing to capture the desired market share. We are excited about the enormous benefits from access to robust data. In addition, the LOS will reduce the time it takes to complete a sale, providing more time to focus on customer service. Lastly, streamlining back-office functions will provide significant efficiencies when compared to current processes.
Our implementation of Microsoft Dynamics 365 Enterprise Resource Planning project (“ERP”), including our Customer Relationship Management (“CRM”) module, is also progressing and, like the LOS, our expectations are high. These platforms will significantly improve our back-office accounting, inventory management/procurement, information technology and other functions while elevating our customer service levels. In addition to achieving operational gains through improved utilization of data, we expect to see cost savings as we eliminate manual processes and improve efficiency. We expect the ERP to be completed by early calendar year 2024.
We expect capital expenditures to be approximately
Conference Call
Management will hold a conference call on Tuesday, September 5, 2023, at 11:00 a.m. Eastern Time to discuss quarterly results. Participants may access the conference call via webcast using this link: Webcast Link Here. To participate via telephone, please register in advance using this Registration Link. Upon registration, all telephone participants will receive a one-time confirmation email detailing how to join the conference call, including the dial-in number along with a unique PIN that can be used to access the call. All participants are encouraged to dial in 10 minutes prior to the start time.
A replay of the conference call and webcast will be available on-demand, which will be available for 12 months.
About America's Car-Mart
America’s Car-Mart, Inc. (the “Company”) operates automotive dealerships in 12 states and is one of the largest publicly held automotive retailers in the United States focused exclusively on the “Integrated Auto Sales and Finance” segment of the used car market. The Company emphasizes superior customer service and the building of strong personal relationships with its customers. The Company operates its dealerships primarily in smaller cities throughout the South-Central United States, selling quality used vehicles and providing financing for substantially all of its customers. For more information about America’s Car-Mart, including investor presentations, please visit our website at www.car-mart.com.
Non-GAAP Financial Measures
This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP). We present total debt, net of total cash, to finance receivables, a non-GAAP measure, as a supplemental measure of our performance. We believe total debt, net of total cash, to finance receivables is a useful measure to monitor leverage and evaluate balance sheet risk. This measure should not be considered in isolation or as a substitute for reported GAAP results because it may include or exclude certain items as compared to similar GAAP-based measures, and such measures may not be comparable to similarly-titled measures reported by other companies. We strongly encourage investors to review our consolidated financial statements included in publicly filed reports in their entirety and not rely solely on any one, single financial measure or communication. The most directly comparable GAAP financial measure, as well as a reconciliation to the comparable GAAP financial measure, for non-GAAP financial measures are presented in the tables of this release.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address the Company’s future objectives, plans and goals, as well as the Company’s intent, beliefs and current expectations regarding future operating performance and can generally be identified by words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” and other similar words or phrases. Specific events addressed by these forward-looking statements may include, but are not limited to:
- future returns on equity;
- operational infrastructure investments;
- same dealership sales and revenue growth;
- customer growth;
- gross profit percentages;
- gross profit per retail unit sold;
- business acquisitions;
- technological investments and initiatives;
- future revenue growth;
- receivables growth as related to revenue growth;
- new dealership openings;
- performance of new dealerships;
- interest rates;
- future credit losses;
- the Company’s collection results, including but not limited to collections during income tax refund periods;
- seasonality; and
- the Company’s business, operating and growth strategies and expectations.
These forward-looking statements are based on the Company’s current estimates and assumptions and involve various risks and uncertainties. As a result, you are cautioned that these forward-looking statements are not guarantees of future performance, and that actual results could differ materially from those projected in these forward-looking statements. Factors that may cause actual results to differ materially from the Company’s projections include, but are not limited to:
- general economic conditions in the markets in which the Company operates, including but not limited to fluctuations in gas prices, grocery prices and employment levels;
- the availability of quality used vehicles at prices that will be affordable to our customers, including the impacts of changes in new vehicle production and sales;
- the availability of credit facilities and access to capital through securitization financings or other sources on terms acceptable to us to support the Company’s business;
- the Company’s ability to underwrite and collect its contracts effectively;
- competition;
- dependence on existing management;
- ability to attract, develop, and retain qualified general managers;
- changes in consumer finance laws or regulations, including but not limited to rules and regulations that have recently been enacted or could be enacted by federal and state governments;
- the ability to keep pace with technological advances and changes in consumer behavior affecting our business;
- security breaches, cyber-attacks, or fraudulent activity;
- the ability to identify and obtain favorable locations for new or relocated dealerships at reasonable cost;
- the ability to successfully identify, complete and integrate new acquisitions; and
- potential business and economic disruptions and uncertainty that may result from any future public health crises and any efforts to mitigate the financial impact and health risks associated with such developments.
Additionally, risks and uncertainties that may affect future results include those described from time to time in the Company’s SEC filings. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.
Contact: Vickie Judy, CFO at (479) 464-9944
Investor_relations@car-mart.com
(1) Subsequent to the issuance of our interim financial statements for the period ended July 31, 2022, certain immaterial errors were identified and have been corrected in our historical information related to the classification of deferred revenue of ancillary products at the time an account is charged off and the calculation for allowance for credit losses. As a result, certain amounts for sales revenue, provision for credit losses, charge-offs, net of collateral recovered, gross profit per vehicle sold and the allowance for credit losses have been revised from the amounts previously reported to correct these errors. The impact of these adjustments resulted in an increase in diluted earnings per share for the three months ended July 31, 2022, of
(2) 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.
America's Car-Mart, Inc. | ||||||||||||||||||
Consolidated Results of Operations | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
% Change | As a % of Sales | |||||||||||||||||
Three Months Ended | 2023 | Three Months Ended | ||||||||||||||||
July 31, | vs. | July 31, | ||||||||||||||||
2023 | 2022 | 2022 | 2023 | 2022 | ||||||||||||||
Operating Data: | ||||||||||||||||||
Retail units sold | 15,912 | 15,536 | 2.4 | % | ||||||||||||||
Average number of stores in operation | 155 | 154 | 0.6 | |||||||||||||||
Average retail units sold per store per month | 34.2 | 33.6 | 1.8 | |||||||||||||||
Average retail sales price(1) | $ | 18,799 | $ | 18,065 | 4.1 | |||||||||||||
Total gross profit per retail unit sold(1) | $ | 6,768 | $ | 6,524 | 3.7 | |||||||||||||
Total gross profit percentage | 34.6 | % | 34.4 | % | 0.4 | |||||||||||||
Same store revenue growth | 8.2 | % | 21.5 | % | ||||||||||||||
Net charge-offs as a percent of average finance receivables(1) | 5.8 | % | 5.1 | % | ||||||||||||||
Total collected (principal, interest and late fees) | $ | 165,747 | $ | 148,221 | 11.8 | |||||||||||||
Average total collected per active customer per month | $ | 535 | $ | 516 | 3.7 | |||||||||||||
Average percentage of finance receivables-current (excl. 1-2 day) | 80.5 | % | 80.4 | % | ||||||||||||||
Average down-payment percentage | 5.0 | % | 5.4 | % | ||||||||||||||
Period End Data: | ||||||||||||||||||
Stores open | 154 | 154 | - | % | ||||||||||||||
Accounts over 30 days past due | 4.4 | % | 3.6 | % | ||||||||||||||
Active customer count | 104,734 | 96,899 | 8.1 | |||||||||||||||
Principal balance of finance receivable | $ | 1,440,707 | $ | 1,185,276 | 21.6 | |||||||||||||
Weighted average total contract term | 46.9 | 44.0 | 6.6 | % | ||||||||||||||
Statements of Operations: | ||||||||||||||||||
Revenues: | ||||||||||||||||||
Sales(1) | $ | 311,569 | $ | 294,476 | 5.8 | % | 100.0 | % | 100.0 | % | ||||||||
Interest income | 56,456 | 44,342 | 27.3 | 18.1 | 15.1 | |||||||||||||
Total | 368,025 | 338,818 | 8.6 | 118.1 | 115.1 | |||||||||||||
Costs and expenses: | ||||||||||||||||||
Cost of sales | 203,879 | 193,115 | 5.6 | 65.4 | 65.6 | |||||||||||||
Selling, general and administrative | 46,470 | 43,234 | 7.5 | 14.9 | 14.7 | |||||||||||||
Provision for credit losses(1) | 96,323 | 76,241 | 26.3 | 30.9 | 25.9 | |||||||||||||
Interest expense | 14,274 | 7,345 | 94.3 | 4.6 | 2.5 | |||||||||||||
Depreciation and amortization | 1,693 | 1,151 | 47.1 | 0.5 | 0.4 | |||||||||||||
Loss on disposal of property and equipment | 166 | 8 | - | 0.1 | - | |||||||||||||
Total | 362,805 | 321,094 | 13.0 | 116.4 | 109.0 | |||||||||||||
Income before taxes | 5,220 | 17,724 | 1.7 | 6.0 | ||||||||||||||
Provision for income taxes(1) | 1,034 | 4,027 | 0.3 | 1.4 | ||||||||||||||
Net income | $ | 4,186 | $ | 13,697 | 1.3 | 4.7 | ||||||||||||
Dividends on subsidiary preferred stock | $ | (10 | ) | $ | (10 | ) | ||||||||||||
Net income attributable to common shareholders | $ | 4,176 | $ | 13,687 | ||||||||||||||
Earnings per share: | ||||||||||||||||||
Basic(1) | $ | 0.65 | $ | 2.15 | ||||||||||||||
Diluted(1) | $ | 0.63 | $ | 2.07 | ||||||||||||||
Weighted average number of shares used in calculation: | ||||||||||||||||||
Basic | 6,381,704 | 6,373,326 | ||||||||||||||||
Diluted | 6,635,002 | 6,601,586 | ||||||||||||||||
(1) Subsequent to the issuance of our financial statements for the period ended July 31, 2022, certain immaterial errors were identified and have been corrected in our historical information related to the classification of deferred revenue of ancillary products at the time an account is charged off and the calculation for allowance for credit losses. The amount of deferred revenue related to ancillary products for a customer account that is charged off has historically been recognized as sales revenue at the time of charge-off because the earnings stream for the deferred revenue is completed at the time of charge-off. It was determined that this amount should more appropriately be recorded as a reduction to customer accounts receivable at the time of charge-off, thus reducing the amounts historically reported in sales revenue, net charge-offs, the provision for credit losses and the allowance for credit losses. As a result, certain amounts for sales revenue, provision for credit losses, charge-offs, net of collateral recovered, and the allowance for credit losses have been revised from the amounts previously reported to correct these errors. The impact of these adjustments resulted in an increase in diluted earnings per share for the three months ended July 31, 2022 of
America's Car-Mart, Inc. | |||||||||||||||
Condensed Consolidated Balance Sheet and Other Data | |||||||||||||||
(Dollars in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
July 31, | April 30, | July 31, | |||||||||||||
2023 | 2023 | 2022 | |||||||||||||
Cash and cash equivalents | $ | 6,314 | $ | 9,796 | $ | 4,362 | |||||||||
Restricted cash from collections on auto finance receivables | $ | 85,887 | $ | 58,238 | $ | 37,521 | |||||||||
Finance receivables, net(1) | $ | 1,126,992 | $ | 1,074,464 | $ | 930,149 | |||||||||
Inventory | $ | 117,186 | $ | 109,290 | $ | 145,181 | |||||||||
Total assets(1) | $ | 1,504,721 | $ | 1,420,431 | $ | 1,258,255 | |||||||||
Revolving lines of credit, net (2) | $ | (1,035 | ) | $ | 167,231 | $ | 188,921 | ||||||||
Non-recourse notes payable, net | $ | 711,789 | $ | 471,367 | $ | 323,105 | |||||||||
Treasury stock | $ | 297,489 | $ | 297,421 | $ | 297,421 | |||||||||
Total equity(1) | $ | 504,729 | $ | 498,547 | $ | 488,304 | |||||||||
Shares outstanding | 6,381,954 | 6,371,404 | 6,367,605 | ||||||||||||
Book value per outstanding share(1) | $ | 79.15 | $ | 78.56 | $ | 76.75 | |||||||||
Finance receivables: | |||||||||||||||
Principal balance | $ | 1,440,707 | $ | 1,373,372 | $ | 1,185,276 | |||||||||
Deferred revenue - accident protection plan | (54,716 | ) | (53,065 | ) | (46,896 | ) | |||||||||
Deferred revenue - service contract | (70,883 | ) | (67,404 | ) | (53,459 | ) | |||||||||
Allowance for credit losses(1) | (314,442 | ) | (299,608 | ) | (255,836 | ) | |||||||||
Finance receivables, net of allowance and deferred revenue | $ | 1,000,666 | $ | 953,295 | $ | 829,085 | |||||||||
Allowance as % of principal balance net of deferred revenue | 23.91 | % | 23.91 | % | 23.58 | % | |||||||||
Changes in allowance for credit losses: | |||||||||||||||
Three months ended | |||||||||||||||
July 31, | |||||||||||||||
2023 | 2022 | ||||||||||||||
Balance at beginning of period(1) | $ | 299,608 | $ | 237,823 | |||||||||||
Provision for credit losses(1) | 96,323 | 76,241 | |||||||||||||
Charge-offs, net of collateral recovered(1) | (81,489 | ) | (58,228 | ) | |||||||||||
Balance at end of period | $ | 314,442 | $ | 255,836 | |||||||||||
(1) Subsequent to the issuance of our financial statements for the period ended July 31, 2022, certain immaterial errors were identified and have been corrected in our historical information related to the classification of deferred revenue of ancillary products at the time an account is charged off and the calculation for allowance for credit losses. The amount of deferred revenue related to ancillary products for a customer account that is charged off has historically been recognized as sales revenue at the time of charge-off because the earnings stream for the deferred revenue is completed at the time of charge-off. It was determined that this amount should more appropriately be recorded as a reduction to customer accounts receivable at the time of charge-off, thus reducing the amounts historically reported in sales revenue, net charge-offs, the provision for credit losses and the allowance for credit losses. As a result, certain amounts for sales revenue, provision for credit losses, charge-offs, net of collateral recovered, and the allowance for credit losses have been revised from the amounts previously reported to correct these errors. The impact of these adjustments resulted in a cumulative decrease in the allowance for credit losses of
(2) As of the period ended July 31, 2023, the revolving line of credit balance was
America's Car-Mart, Inc. | ||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||
(Dollars in thousands) | ||||||||||
(Unaudited) | ||||||||||
Three months ended | ||||||||||
July 31, | ||||||||||
2023 | 2022 | |||||||||
Operating activities: | ||||||||||
Net income | $ | 4,186 | $ | 13,697 | ||||||
Provision for credit losses(1) | 96,323 | 76,241 | ||||||||
Losses on claims for accident protection plan | 7,769 | 6,108 | ||||||||
Depreciation and amortization | 1,693 | 1,151 | ||||||||
Finance receivable originations | (297,732 | ) | (287,416 | ) | ||||||
Finance receivable collections | 109,291 | 103,879 | ||||||||
Inventory | 23,953 | (521 | ) | |||||||
Deferred accident protection plan revenue(1) | 1,651 | 6,570 | ||||||||
Deferred service contract revenue(1) | 3,479 | 7,358 | ||||||||
Income taxes, net(1) | 770 | 3,621 | ||||||||
Other(2) | 3,218 | 8,910 | ||||||||
Net cash used in operating activities | (45,399 | ) | (60,402 | ) | ||||||
Investing activities: | ||||||||||
Purchase of property and equipment and other(2) | (850 | ) | (6,920 | ) | ||||||
Net cash used in investing activities | (850 | ) | (6,920 | ) | ||||||
Financing activities: | ||||||||||
Change in revolving credit facility, net | (168,516 | ) | 144,036 | |||||||
Payments on non-recourse notes payable | (116,862 | ) | (74,532 | ) | ||||||
Change in cash overdrafts | - | 1,108 | ||||||||
Issuances of non-recourse notes payable | 360,340 | - | ||||||||
Debt issuance costs | (4,091 | ) | (89 | ) | ||||||
Purchase of common stock | (68 | ) | (5,196 | ) | ||||||
Dividend payments | (10 | ) | (10 | ) | ||||||
Exercise of stock options and issuance of common stock | (377 | ) | 1,301 | |||||||
Net cash provided by financing activities | 70,416 | 66,618 | ||||||||
Increase (decrease) in cash, cash equivalents, and restricted cash | $ | 24,167 | $ | (704 | ) | |||||
(1) Subsequent to the issuance of our financial statements for the period ended July 31, 2022, certain immaterial errors were identified and have been corrected in our historical information related to the classification of deferred revenue of ancillary products at the time an account is charged off and the calculation for allowance for credit losses. The amount of deferred revenue related to ancillary products for a customer account that is charged off has historically been recognized as sales revenue at the time of charge-off because the earnings stream for the deferred revenue is completed at the time of charge-off. It was determined that this amount should more appropriately be recorded as a reduction to customer accounts receivable at the time of charge-off, thus reducing the amounts historically reported in sales revenue, net charge-offs, the provision for credit losses and the allowance for credit losses. As a result, certain amounts for sales revenue, provision for credit losses, charge-offs, net of collateral recovered, and the allowance for credit losses have been revised from the amounts previously reported to correct these errors. Management has evaluated the materiality of these corrections to its prior period financial statements from a quantitative and qualitative perspective and has concluded that this change was not material to any prior annual or interim period.
(2) Prepaid expenses and other assets at July 31, 2022, reflects an immaterial reclassification of approximately
America's Car-Mart, Inc. | ||||||||||
Reconciliation of Non-GAAP Financial Measures | ||||||||||
(Dollars in thousands) | ||||||||||
(Unaudited) | ||||||||||
Calculation of Debt, Net of Total Cash, to Finance Receivables: | ||||||||||
July 31, 2023 | April 30, 2023 | |||||||||
Debt: | ||||||||||
Revolving lines of credit, net (1) | $ | (1,035 | ) | $ | 167,231 | |||||
Non-recourse notes payable, net | 711,789 | 471,367 | ||||||||
Total debt | $ | 710,754 | $ | 638,598 | ||||||
Cash: | ||||||||||
Cash and cash equivalents | $ | 6,314 | $ | 9,796 | ||||||
Restricted cash from collections on auto finance receivables | 85,887 | 58,238 | ||||||||
Total cash, cash equivalents, and restricted cash | $ | 92,201 | $ | 68,034 | ||||||
Debt, net of total cash | $ | 618,553 | $ | 570,564 | ||||||
Principal balance of finance receivables | $ | 1,440,707 | $ | 1,373,372 | ||||||
Ratio of debt to finance receivables | 49.3 | % | 46.5 | % | ||||||
Ratio of debt, net of total cash, to finance receivables | 42.9 | % | 41.5 | % | ||||||
(1) As of the period ended July 31, 2023, the revolving line of credit balance was