America's Car-Mart Q1 2025 Earnings Call Transcript: Strong Fundamentals and Solid Demand Amidst Tariffs and Wholesale Pricing Constraints

America's Car-Mart (CRMT) Q1 2025 earnings call highlights steady progress on fundamentals, with gross margin expanding to 36.6%, interest income up 7.5%, and total collections rising 6.2%. Demand remained solid, with credit applications up 10% YoY, but volume was paced due to tariffs and wholesale pricing constraints. The company is evaluating actions to expand inventory capacity under its current capital facility.

America's Car-Mart (CRMT) reported mixed results for the first quarter of 2025, with the company showcasing improvements in gross margin and interest income while facing headwinds from tariffs and wholesale pricing constraints. The earnings call highlighted several key financial metrics and strategic initiatives.

Financial Performance

- Gross Margin: CRMT's gross margin expanded to 36.6%, a 160-basis point increase from the prior year quarter [1].
- Interest Income: The company saw a 7.5% increase in interest income, driven by a larger portfolio and more payments collected [1].
- Total Collections: Total collections rose by 6.2% to $183.6 million, indicating stronger payment performance [1].
- Operating Expenses (SG&A): Operating expenses for sales, general, and administrative (SG&A) increased by 10.1% to $51.4 million, primarily due to payroll growth and technology investments [1].
- Net Charge-Offs: Net charge-offs as a percentage of average finance receivables rose slightly to 6.6% [1].
- Delinquencies: Delinquencies greater than 30 days increased by 30 basis points to 3.8% [1].
- Allowance for Credit Losses: The allowance for credit losses improved to 23.35%, down from 25% at July 31, 2024 [1].
- Debt to Finance Receivables: Debt to finance receivables improved to 51.1% from last year [1].
- Interest Expense: Interest expense decreased by 6.9% to $17 million [1].
- Units Sold: Units sold declined by 5.7% to 13,568 compared to 14,391 units a year ago [1].
- Average Selling Price: The average selling price of vehicles decreased by $144 year over year [1].
- Credit Applications: Credit applications increased by 10% year over year [1].
- Active Customer Account: The number of active customer accounts grew by 1.4% to almost 104,700 customers [1].

Demand and Procurement

Douglas Campbell, President and CEO, noted that procurement costs have stabilized and even slightly decreased. Demand remains strong, with the same level of interest seen in July continuing through August and into September, attributed to consumers turning to America's Car-Mart as credit tightens elsewhere [1].

Credit Performance and Expenses

Jonathan Collins, CFO, expects about half of the SG&A increase to unwind in the second half of the year as technology implementations are completed. The modernization of collections infrastructure is anticipated to yield a 5% cost savings, contributing to their goal of mid-16% SG&A as a percentage of sales [1].

Inventory and Pricing

While there was no typical seasonal decline in pricing post-tax season, Campbell expects some pricing relief in the back half of the year. The impact of tariffs is now known, and they are managing through current pricing levels while exploring financial solutions to unlock capacity [1].

Outlook and Strategic Initiatives

The company is evaluating actions to expand inventory capacity under its current capital facility. The release of LOS V2 is expected to continue improving credit quality, and they are seeing a positive shift in the distribution of customer ranks, indicating better-qualified customers are being attracted [1].

Polestar (PSNY) Q1 2025 Earnings Highlights

Polestar reported significant financial and operational performance improvements in Q1 2025, with revenue growth of 84% and a gross margin of 7%. The company also secured or renewed over USD 900 million worth of financing facilities in Q1 2025, maintaining a strong cash position of USD 732 million [2].

References:

[1] https://finance.yahoo.com/news/americas-car-mart-inc-crmt-070131479.html

[2] https://www.businesswire.com/news/home/20250512313129/en/Polestar-reports-Q1-2025-revenue-growth-of-84-and-significant-gross-margin-improvement-to-positive