America's Car-Mart's Q1 2026: Contradictions Emerge on Tariff Impacts, Credit Strategies, and G&A Cuts

Date of Call: September 4, 2025

Financials Results

• Revenue: $341.3M, down 1.9% YOY
• Gross Margin: 36.6%, up 160 basis points YOY

Guidance:

• Unwind approximately half of the SG&A increase in the back half of the fiscal year.
• Pay Your Way expected to deliver ~5% annual SG&A cost savings over time.
• Target mid-16% SG&A as a percentage of retail sales as technology and efficiency gains materialize.
• Evaluating financing solutions and actions to expand inventory capacity so demand, not financing, determines sales.
• Expect ASPs (ex-ancillary) to positively affect revenue while remaining disciplined on gross margin rate.

Business Commentary:

* Revenue and Volume Trends: - America's Car-Mart reported total revenue of $341.3 million for Q1 2026, a decrease of 1.9% from the prior year, primarily due to fewer retail units sold. - This was partially offset by a 7.5% increase in interest income, supported by a larger portfolio and more payments collected year-over-year.

• Inventory and Pricing Pressures:
• The company experienced a 5.7% decline in retail units sold compared to the previous year, with an average selling price reduced by $144.

• This was attributed to increasing procurement costs, which rose by $500 per unit due to tariffs and wholesale pricing constraints.

  

• Credit Quality and Underwriting Improvements:

• The company reported that 72% of its portfolio was originated under enhanced underwriting standards, contributing to stronger credit profiles.

• This improvement was driven by the implementation of LOS V2, which better aligns expected returns with customer profiles, enhancing deal quality and cash flow predictability.

• Collections and Payment Infrastructure Enhancements:

• America's Car-Mart saw a 6.2% increase in total collections to $183.6 million, with a higher average collection per active customer of $585.

• This increase was supported by the upgraded Pay Your Way platform, which shifted payment behavior towards more consistent and digital channels, improving operational efficiency.

• Securitization and Capital Efficiency:

• The company achieved a 400 basis point improvement in the overall weighted average coupon of its securitizations since 2024-1, with a 75% reduction in spreads.
• Strong capital markets receptivity and a modernized collections platform are paving the way for incremental reductions in the cost of capital, contributing to better financing terms and portfolio performance.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted multiple improvements: gross margin expanded to 36.6%, interest income rose 7.5%, collections increased 6.2%, and securitization pricing improved (2025-3 at 5.46%, 81 bps better than May). They emphasize LOS V2 and Pay Your Way are improving portfolio quality, payment behavior and lowering cost of capital, indicating constructive operational momentum.

Q&A:

• Question from Kyle Joseph (Stephens Inc., Research Division): Just on the unit volume decline... what you've seen subsequent to the quarter end in terms of procurement cost?
  Response: Pricing has smoothed post-quarter (slightly down nominally) and demand seen in July continued into August and early September, so procurement pressure is moderating while demand remains strong.

• Question from Kyle Joseph (Stephens Inc., Research Division): With new LOS covering >70% of the portfolio, given increases in DQs and NCOs, how quickly should credit metrics stabilize under LOS V2?
  Response: Expect normal seasonal fluctuations with only small basis-point moves; LOS V2 now represents the majority of originations and should produce ongoing stabilization within the company's normal operating range.

• Question from Kyle Joseph (Stephens Inc., Research Division): On SG&A cadence—should Q2 be similar to Q1 and benefits show later in the year?
  Response: Yes; roughly half of the SG&A increase should unwind in the back half as implementations finish, with Pay Your Way and other tech delivering ~5% SG&A savings over time and supporting a path toward mid-16% SG&A/sales.

• Question from John Hecht (Jefferies LLC, Research Division): Are the tariff-related procurement cost increases a one-time step change or temporary spike; how long will used car pricing pressure persist?
  Response: Tariffs created ~5–6% industry pricing increase versus prior year; management expects some seasonality and pricing decline in the back half as tariff effects become clearer, while navigating near-term impacts and pursuing financing solutions.

• Question from John Hecht (Jefferies LLC, Research Division): What factors should we look for as green shoots that headwinds are dissipating?
  Response: Look for continued LOS V2 adoption, higher share of applicants in ranks 5–7, rising average FICO in originations and sustained elevated application volumes—these signal improving asset mix and ability to scale when supply eases.

• Question from Web Participant (Web): Can you explain the deal-structure changes rolled out with LOS V2 and their impact on down payments and rates?
  Response: LOS V2 applies risk-based pricing: highest-ranked customers received slight rate/down-payment breaks, lower ranks put up more down (13% higher) and financed less, producing stronger returns and shorter terms for lower-risk cohorts.

• Question from Web Participant (Web): How would you characterize current consumer health given tighter credit?
  Response: Consumers are more constrained versus a year ago, driving higher application volume, but portfolio structures and underwriting are materially stronger (72% of portfolio under enhanced standards), which provides comfort on credit quality.

• Question from Web Participant (Web): 30-day delinquencies were up 30 bps—does this indicate consumer strain?
  Response: The uptick was partly timing-related due to Pay Your Way implementation and reenrollments; delinquencies have since normalized (daily range ~3.4–3.6%, ended August at 2.8%), and recurring-payment enrollments have doubled.

Contradiction Point 1

Impact of Tariffs on Sales and Pricing

It involves the differing impacts of tariffs on sales and pricing, which are crucial for understanding the company's financial health and market strategies.

Are the tariffs' effects on inventory pricing a one-time occurrence or a long-term issue? - John Hecht(Jefferies LLC)

2026Q1: The current pricing increase is about 5%-6% year-over-year. - Douglas Campbell(CEO)

How have tariffs and higher used car prices impacted consumer behavior and sales? - Vincent Albert Caintic(BTIG)

2025Q4: The increase in procurement costs per unit due to tariffs is manageable, at around $300. - Douglas Campbell(CEO)

Contradiction Point 2

Focus on Credit Quality and Customer Segmentation

It highlights the company's strategic focus on credit quality and customer segmentation, which directly impacts its risk management and future growth prospects.

What factors should we monitor during the recovery period? - John Hecht(Jefferies LLC)

2026Q1: We aim for another step change in credit quality. - Douglas Campbell(CEO)

How far upmarket can Car-Mart move, and what are the potential benefits? - John Joseph Murphy(Bank of America)

2025Q4: Car-Mart is focused on the core subprime market but sees opportunity to expand with risk-based pricing. - Douglas Campbell(CEO)

Contradiction Point 3

Impact of Trade Tariffs on Inventory Pricing

It directly impacts the company's financial and operational performance, as tariffs can significantly affect inventory costs and overall profitability.

Is the tariff impact on inventory pricing a one-time event or an ongoing issue? - John Hecht (Jefferies LLC, Research Division)

2026Q1: Wholesale pricing has stabilized but is still above prior year levels. We expect some seasonal pricing decline in the back half. The current pricing increase is about 5%-6% year-over-year. - Douglas Campbell(CEO)

Jamie, what attracted you to America's Car-Mart and what opportunities do you see in your role as COO? - John Murphy (Bank of America)

2025Q3: Our initial assessment indicates that tariffs will impact us by approximately 1% to 2%. Therefore, we have initiated a response plan to mitigate these potential impacts. - Doug Campbell(President & Chief Executive Officer)

Contradiction Point 4

Credit Metrics Stabilization with the New LOS System

It involves expectations regarding the stabilization of credit metrics, which are critical for assessing the company's risk management and financial health.

How soon will DQs and NCOs stabilize with the new LOS implementation? - Kyle Joseph (Stephens Inc., Research Division)

2026Q1: The portfolio is now majority under new underwriting. NCOs should stabilize with normal seasonal fluctuations. The recent benefits from LOS are showing normal seasonal patterns. - Douglas Campbell(CEO)

Can you break down the impact on core consumers versus the benefits of the LOS? - John Murphy (Bank of America)

2025Q3: The benefits are primarily from underwriting improvements. Improvements in origination practices have been significant, and the customer base has not materially improved. - Vickie Judy(CFO)

Contradiction Point 5

G&A Expense Reduction

It involves changes in financial forecasts and strategies for reducing G&A expenses, which directly impact operational efficiency and cost management.

What is the trajectory of G&A expenses for the rest of the year? - Kyle Joseph (Stephens Inc.)

2026Q1: Half of the G&A increase will unwind in the second half. Technologies like Pay Your Way will reduce costs by about 5% annually. Future G&A costs are aimed to reach mid-16% of retail sales. - Jonathan Collins(CFO)

Could you clarify the year-over-year increase in the G&A line and the impact of acquisitions and technology investments? - Stacy Rasgon (Bernstein Research)

2025Q2: G&A has been higher this year as well due to the loss of high-quality team members, the rollout of new technology and acquisitions and partnerships. Our dealership footprint has grown by 13.5% in the last 2 years due to these strategic actions. - Vickie Judy(CFO)