AMERICAS CARMART INC
For the period ended Jul 31, 2025. Filed Sep 9, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 31, 2025 · Filed Sep 9, 2025
CRMT$1.44-5.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-01-31; filed 2025-03-10.
0001628280-25-011664
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-07-31; filed 2025-09-09.
0000799850-25-000006
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 116 previous paragraphs and 105 current paragraphs.
58 unchanged; 34 reworded; 13 added; 24 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
•customer growth;
Current report
•performance of new dealerships;
Current report
However, the Company continues to believe that the proper execution of its business practices is the single most important determinant of its long-term credit loss experience. The Company continuously looks for ways to operate more efficiently, improve its business practices and adjust underwriting and collection procedures. During the quarter, the Company advanced its credit and collections infrastructure through upgrades to its loan origination system ("LOS"), which incorporate a new scorecard and embedded risk-based pricing. These enhancements are more closely aligning expected returns with customer risk profiles, with early results showing a shift in originations toward higher-ranked customers and away from lower-tier applicants, consistent with the system’s design. In parallel, the Company implemented updates to its payments platform, which are facilitating a shift from in-store to online payments and supporting more consistent customer payment behavior. Together, these initiatives are expected to further strengthen the Company’s underwriting discipline and enhance the effectiveness of its collection efforts, providing a more scalable framework to support long-term growth.
Current report
Selling, general and administrative (SG&A) expenses as a percentage of sales increased to 18.6% for the three months ended July 31, 2025 compared to 16.3% the same period in the prior fiscal year. In absolute terms, SG&A expenses rose by $4.7 million from the same period in the prior fiscal year. The increase is primarily related to additions in technology and increases in compensation and benefit expense, related to additions to the leadership team in areas such as finance and accounting.
Current report
Interest expense for three months ended July 31, 2025 as a percentage of sales decreased to 6.2%, from 6.4% for the prior year period. In dollar terms, interest expense decreased $1.3 million, reflecting improvements in our securitization platform and a more favorable interest rate environment.
Current report
Accounts payable and accrued liabilities increased by $9.7 million at July 31, 2025 as compared to April 30, 2025, related primarily to timing of payments and check clearings.
Current report
Deferred income tax liabilities, net, increased approximately $0.6 million at July 31, 2025 as compared to April 30, 2025, primarily because of re-measurement of previously recorded temporary differences.
Current report
The purchase price the Company pays for a vehicle has a significant effect on liquidity and capital resources, as selling prices are directly tied to acquisition costs. Higher purchase costs generally require higher selling prices, which can make it more difficult to maintain gross margin percentages and contract terms in line with historical results, given customers’ limited incomes and the need to keep payments affordable. Several external factors influence vehicle acquisition costs. Reduced volumes of new car sales, particularly domestic brands, constrain supply in the used car market, while broader economic downturns may also affect auction and wholesaler activity. Recently imposed tariffs on the automotive industry have added approximately $500 per vehicle to procurement costs since the beginning of the year. Although procurement costs have stabilized in the near term, future tariffs, trade restrictions, or declines in new car sales could create uncertainty, which may exacerbate challenges related to sourcing inventory or increase the cost of vehicles.
Current report
The Company’s liquidity is also influenced by its credit losses. Macro-economic factors, such as unemployment rates and general inflation affecting both core and discretionary items, can significantly impact collection results and, consequently, credit losses. At present, as customers face rising costs for non-discretionary items like childcare, insurance, groceries, and gasoline, their ability to meet vehicle payment obligations may be strained. To mitigate these risks, the Company has implemented several process improvements, including the introduction of LOS over the past two years, which strengthens controls and provides a more robust infrastructure to support collections. The Company also launched an upgraded payments platform, which has begun facilitating a shift from in-store to online payments and should support more consistent payment behavior. Management remains focused on enhancing execution at the dealership level, particularly in terms of individualized customer engagement related to collection matters.
Current report
The Company had $610.8 million of asset-backed non-recourse notes as of July 31, 2025 with a weighted average fixed coupon rate of 7.86%. The notes payable have scheduled maturities through June 20, 2028, June 20, 2030, January 21, 2031, August 20, 2031, November 20, 2031 and February 20, 2032, but may be repaid earlier, depending upon collections from the underlying auto finance receivables.
Current report
The allowance for credit losses represents the Company’s expectation of future net charge-offs at the measurement date. The allowance takes into account quantitative and qualitative factors such as historical credit loss experience, with consideration given to changes in contract characteristics (i.e., customer interest rates, credit deterioration and delinquency rates), current and forecasted inflationary economic conditions, amongst others. The allowance for credit losses is reviewed at least quarterly by management with any changes reflected in current operations.
Current report
In October 2023, the FASB issued an accounting pronouncement (ASU 2023-06) related to disclosure or presentation requirements for various subtopics in the FASB’s Accounting Standards Codification (“Codification”). The amendments in the update are intended to align the requirements in the Codification with the U.S. Securities and Exchange Commission’s (“SEC”) regulations and facilitate the application of GAAP for all entities. The effective date for each amendment is the date on which the SEC removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or if the SEC has not removed the requirements by June 30, 2027, this amendment will be removed from the Codification and will not become effective for any entity. Early adoption is prohibited. We do not expect this update to have a material impact on our consolidated financial statements.
Current report
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard requires public business entities to provide enhanced disclosures of certain natural expense categories within relevant income statement captions. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of this standard on its financial statement disclosures.
Removed paragraphs (24)
Previous report
•customer growth and engagement;
Previous report
•inventory acquisition, reconditioning, transportation, and remarketing;
Previous report
•performance of new or existing dealerships;
Previous report
In the fourth quarter of fiscal year 2024, the Company entered into a strategic partnership with a leading automotive services and technology provider, to improve the efficiencies within the Company’s inventory supply chain process. This partnership is allowing the Company to utilize reconditioning and auction facilities, which the Company expects will improve the Company’s vehicle quality.
Previous report
The Company continuously looks for ways to operate more efficiently, improve its business practices and adjust underwriting and collection procedures. The Company has a proprietary credit scoring system which enables the Company to monitor the quality of contracts. Corporate office personnel monitor proprietary credit scores and work with dealerships when the distribution of scores falls outside of prescribed thresholds. Additionally, the Company’s training department continuously strengthens its training for collections. The Company’s collection department and support staff oversees collection and provides timely oversight and additional accountability on a consistent basis. The Company believes that the proper execution of its business practices is the single most important determinant of its long-term credit loss experience.
Previous report
Selling, general and administrative expenses, as a percentage of sales, were 17.6% for the three months ended January 31, 2025, an increase of 6.7% from the same period of the prior fiscal year. Selling, general and administrative expenses are, for the most part, more fixed in nature. In dollar terms, overall selling, general and administrative expenses increased approximately $2.9 million in the third quarter of fiscal 2025 compared to the same period of the prior fiscal year. The Company’s two most recent acquisitions drove $1.8 million of the increase with most of the remainder related to higher stock compensation.
Previous report
Interest expense as a percentage of sales decreased to 6.4% for the three months ended January 31, 2025, compared to 7.0% for the prior year period. In dollar terms, interest expense increased $192,000 due to an increase in the average borrowings of approximately $42.0 million during the three months ended January 31, 2025, partially offset by decreasing interest rates.
Previous report
Nine months ended January 31, 2025 vs. Nine months ended January 31, 2024
Previous report
Consolidated Operations
Previous report
(Operating Statement Dollars in Thousands)
Previous report
Revenues decreased by approximately $8.5 million, or 0.8%, for the nine months ended January 31, 2025 as compared to the same period in the prior fiscal year. The decrease resulted from a decline in revenue at dealerships that operated a full nine months in both the current and prior year quarter ($52.4 million decrease) and by dealerships that were closed during the prior year nine-month period ($15.2 million decrease), partially offset by revenue growth from dealerships opened or acquired after the prior year nine months ($59.1 million). The revenue decline was primarily related to a 3.2% decrease in retail units sold, partially offset by a 5.3% increase in interest income and a 2.5% increase in the average retail sales price. Interest income increased approximately $9.2 million for the nine months ended January 31, 2025, as compared to the same period in the prior fiscal year, due to the $28.6 million increase in average finance receivables and an increase in the weighted average interest rate to 17.5% from 17.2% in the prior year.
Previous report
Cost of sales, as a percentage of sales, decreased to 63.3% for the nine months ended January 31, 2025 compared to 65.6% for the same period of the prior fiscal year, resulting in a gross margin as a percentage of sales of 36.7% for the current year period, including 1.0% from the impact of the service contract accounting change in estimate for revenue recognition, compared to 34.4% for the prior year period. The primary driver of this cost of sales decrease was the Company’s continued focus on inventory efficiencies in procurement, remarketing, and repairs. The average retail sales price for the nine months ended January 31, 2025 was $19,531, an increase of $469 or 2.5% over the prior year period. However, this increase was primarily due to the $13.2 million benefit in the second quarter of fiscal year 2025 as a result of the service contract accounting change in estimate for revenue recognition, rather than as a result of purchase cost increases.
Previous report
Selling, general and administrative expenses, as a percentage of sales, were 16.8% for the nine months ended January 31, 2025, an increase of 4.2% from the same period of the prior fiscal year. In dollar terms, overall selling, general and administrative expenses increased approximately $5.7 million in the nine months ended January 31, 2025, compared to the same period of the prior fiscal year. The Company has made increasing investments in several areas including senior management, inventory procurement and management, customer experience and digital efforts. The addition of new dealerships through acquisitions since last year drove most of the increase. The Company continues to focus on controlling costs, while at the same time ensuring a solid infrastructure to support a growing customer base with a high level of support for its customers.
Previous report
Provision for credit losses as a percentage of sales was 33.7% for the nine months ended January 31, 2025 as compared to 37.6% for the nine months ended January 31, 2024. Net charge-offs as a percentage of average finance receivables were 19.1% for the nine months ended January 31, 2025 and 20.0% for the prior year period. The decrease in the provision is largely attributable to improvements in the frequency of losses, partially offset by an increase in the severity of loss. The allowance for credit losses as a percentage of finance receivables, net of deferred revenue and pending accident protection plan claims, was 24.31% at January 31, 2025 compared to 25.74% at January 31, 2024.
Previous report
Interest expense as a percentage of sales increased to 6.4% for the nine months ended January 31, 2025, compared to 5.6% for the prior year period. In dollar terms, interest expense increased $5.7 million due to increasing interest rates and an increase in the average borrowings of approximately $49.0 million during the nine months ended January 31, 2025. Approximately 43% of the increase in interest expense was related to the increase in rates over the same period of the prior fiscal year.
Previous report
Accounts payable and accrued liabilities increased by $19.1 million during the first nine months of fiscal 2025 as compared to accounts payable and accrued liabilities at April 30, 2024, related to the increased inventory and increased sales levels during the most recent quarter.
Previous report
The Company had $526,000 of income taxes payable, net, at January 31, 2025 compared to $3.0 million of income taxes receivable, net at April 30, 2024. The change from income taxes receivable at April 30, 2024 to income taxes payable at January 31, 2025 was primarily due to a timing of the income tax payments and/or refunds.
Previous report
Deferred income tax liabilities, net, decreased approximately $8.3 million at January 31, 2025 as compared to April 30, 2024, primarily due to a net operating loss carryforward for the related finance company for the nine months ended January 31, 2025.
Previous report
On September 20, 2024, the Company completed an underwritten public offering of 1,700,000 shares of common stock at a price per share of $43.00. The net proceeds of the public offering were approximately $68.2 million after deducting the underwriting discount and offering costs of approximately $4.9 million. Under the terms of the Underwriting Agreement entered into in connection with the offering, on October 22, 2024, the Company completed the sale of an additional 138,272 shares of common stock at a price of $43.00 per share, in connection with a partial exercise by the underwriter of an option (the “Over-Allotment Option”) granted in the Underwriting Agreement for the underwriters to purchase up to 255,000 additional shares at the public offering price to cover over-allotments. The net proceeds to the Company of the underwriter’s partial exercise of the Over-Allotment Option were approximately $5.6 million after deducting the underwriting discount and offering costs of approximately $346,000. The Company used the net proceeds from this offering to pay down a portion of the Company’s revolving line of credit.
Previous report
The purchase price the Company pays for a vehicle has a significant effect on liquidity and capital resources. Because the Company bases its selling price on the purchase cost for the vehicle, increases in purchase costs result in higher selling prices. As the selling price increases, it generally becomes more difficult to keep the gross margin percentage and contract term in line with historical results because the Company’s customers have limited incomes and their vehicle payments must remain affordable within their individual budgets. Several external factors can negatively affect the purchase cost of vehicles. Decreases in the overall volume of new vehicle sales, particularly domestic brands, lead to decreased supply in the used vehicle market. Also, constrictions in consumer credit, as well as general economic conditions, can increase overall demand for the types of vehicles the Company purchases for resale as used vehicles become more attractive than new vehicles in times of economic instability. A negative shift in used vehicle supply, combined with strong demand for used vehicles, results in increased used vehicle prices and thus higher purchase costs for the Company.
Previous report
The Company’s liquidity is also impacted by our credit losses. Macro-economic factors such as unemployment levels and general inflation on core and discretionary items can significantly affect our collection results and ultimately credit losses. Currently, as our customers look to cover rising costs of non-discretionary items, such as childcare, insurance, groceries, and gasoline, it may impact our customers’ ability to make their vehicle payments. The Company has made improvements to its business processes via the implementation of the loan origination system during the last two years to strengthen controls and provide stronger infrastructure to support its collections efforts. Management continues to focus on improved execution at the dealership level, specifically as related to working individually with customers concerning collection issues.
Previous report
On February 28, 2025, the Company entered into Amendment No. 9 to its revolving credit agreement that, among other things, extends the maturity date of the credit facility to March 31, 2027 and increases the total permitted borrowings by $30 million to $350 million. Under the amendment, the Company will be required to maintain a minimum amount available to be drawn under the credit facilities, based on eligible finance receivables and inventory, of $20 million when the outstanding principal balance under the line of credit is less than or equal to $325 million. If the outstanding principal balance under the line of credit is greater than $325 million, the Company will be required to maintain a minimum availability of $50 million. The amendment makes further adjustments to the required fixed charge coverage ratio, including incremental increases in the required ratio through July 31, 2026. The amendment also decreases the Company’s permissible capital expenditure limit from $35.0 million to $25.0 million in the aggregate during any fiscal year.
Previous report
In March 2022, the FASB issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses. The guidance changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. This guidance will affect the Company’s vintage disclosures related to current-period gross write-offs by year of origination for financing receivables. The amendments in this update are effective for fiscal years beginning after December 15, 2022. The Company adopted this standard on May 1, 2023, under a prospective basis. In regard to installment sale contract modifications, management notes that the Company primarily modifies a customer’s installment sale contract to allow for insignificant payment delays. This type of modification is generally done to account for payday changes for the customer and minor vehicle repairs.
Previous report
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which sets forth improvements to the current segment disclosure requirements in accordance with Topic 280 “Segment Reporting,” including clarifying that entities with a single reportable segment are subject to both new and existing segment reporting requirements. ASU 2023-07 will be effective retrospectively for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. Early adoption is permitted. Adoption of this ASU will result in additional disclosure, but will not impact the Company’s consolidated financial position, results of operations or cash flows.
Reworded paragraphs (34)
Previous wording
•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 and inflationary pressure on operating costs;
Current wording
•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;
Previous wording
Over the last ten fiscal years, the Company’s revenue growth averaged 11.4%. Revenue for the first nine months of fiscal 2025 declined 0.8% compared to the same period of fiscal 2024, primarily due to a 3.2% decrease in retail units sold. The decrease was partially offset by a 2.5% increase in the average retail sales price and a 5.3% increase in interest income. Our dealership volume productivity averaged 29.7 sales per month for the first nine months of fiscal 2025, down from 30.8 during the same period last year.
Current wording
Over the last ten fiscal years, the Company’s revenue growth averaged 10.6%. Revenue for the first three months of fiscal 2026 declined 1.9% compared to the same period of fiscal 2025, primarily due to a 5.7% decrease in retail units sold. The decrease was partially offset by a 7.5% increase in interest income.
Previous wording
The Company has been focused on improving vehicle quality by bringing lower mileage and on average newer model-year vehicles to our consumers, while balancing this with affordability. The Company believes this will aid in driving down our customers’ vehicle repair costs, reduce our service contract repair expenses, and lead to better recovery values in the event of repossession. When combined with inventory procurement efficiencies, these changes are expected to drive improved customer experience and contribute to better gross margins.
Current wording
The Company has been focused on improving vehicle quality by procuring lower-mileage vehicles, while balancing affordability for customers. The Company believes this will aid in driving down our customers’ vehicle repair costs, reduce our service contract repair expenses, and lead to better recovery values in the event of repossession. When combined with inventory procurement efficiencies, these changes are expected to drive improved customer experience and contribute to better gross margins.
Previous wording
Over the last five fiscal years, the Company’s provision for credit losses as a percentage of sales averaged 26.36%, with a pre-pandemic rate of 23.71% in fiscal 2019. During fiscal 2024, credit losses well exceeded pre-pandemic levels, partially due to the inflationary pressure on customers and increasing interest rates from federal monetary policy. For the first nine months of fiscal 2025, the provision for credit losses as a percentage of sales declined to 33.7%, compared to 37.6% for the same period of fiscal 2024, with lower sales partially offsetting the 12.4% improvement in provision for credit losses. Based on the Company’s current analysis of credit losses, the allowance for credit losses at January 31, 2025 was 24.31% of finance receivables, net of deferred revenue and pending accident protection plan (“APP”) claims, an improvement from 25.74% at January 31, 2024 and 24.72% at October 31, 2024, resulting in a $5.6 million reduction to the provision for credit losses from the second quarter of fiscal 2025.
Current wording
Over the last five fiscal years, the Company’s provision for credit losses as a percentage of sales averaged 30.2%. During fiscal 2025, credit losses well exceeded the pre-pandemic rate of 23.71% in fiscal 2019, partially due to the inflationary pressure on customers and increasing interest rates from federal monetary policy. For the first three months of fiscal 2026, the provision for credit losses as a percentage of sales increased to 37.3%, compared to 33.2% for the same period of fiscal 2025, resulting from an increased frequency and severity of losses coupled with the effect of lower sales revenues. Based on the Company’s current analysis of credit losses, the allowance for credit losses at July 31, 2025 was 23.35% of finance receivables, net of deferred revenue and pending accident protection plan (“APP”) claims, an improvement from 25.00% at July 31, 2024 and a decline from 23.25% at April 30, 2025, resulting in a $3.0 million increase to the provision for credit losses from the fourth quarter of fiscal 2025.
Previous wording
The Company’s credit losses and charge-offs are impacted by market and economic factors, including macro-economic conditions such as inflation in the cost of vehicle insurance, rent, groceries, the price of gasoline, childcare, and other staple items, and overall unemployment levels, as well as the personal income levels of the Company’s customers. Historically, credit losses, on a percentage basis, also tend to be higher at new and developing dealerships than at longer tenure locations with experienced management. Generally, this is because the management at new and developing dealerships tends to be less experienced in making credit decisions and collecting customer accounts, and the customer base is less seasoned. Normally more mature dealerships have more repeat customers and, on average, repeat customers are a better credit risk than non-repeat customers.
Current wording
The Company’s credit losses and charge-offs are impacted by market and economic factors, including macro-economic conditions such as inflation in the cost of vehicle insurance, rent, groceries, the price of gasoline, childcare, and other staple items, and overall unemployment levels, as well as the personal income levels of the Company’s customers.
Previous wording
The Company’s gross profit dollars per retail unit sold increased by $562, or 8.2%, during the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024. Gross margin as a percentage of sales for the first nine months of fiscal 2025 increased to 36.7% of sales, including a 1.0% benefit from the impact of the service contract accounting change in estimate for revenue recognition made in the second quarter of fiscal year 2025. The Company’s initiatives around pricing discipline, reduced transportation costs and lower vehicle repair costs also contributed to the increase in gross profit dollars. The Company’s gross margin is based upon the cost of the vehicle purchased, with higher-priced vehicles typically having higher gross margin dollars but lower gross margin percentages. Gross margin is also affected by the percentage of wholesale sales to retail sales, which relates, for the most part, to repossessed vehicles sold at or near cost. The Company plans to continue to focus on managing gross margin dollars in the near term, as demonstrated by the increase during the first nine months of fiscal year 2025, as well as continuing to focus on improving wholesale results, cost controls, and operational improvement around the acquisition and disposal of vehicles.
Current wording
The Company’s gross profit dollars per retail unit sold increased by $460, or 6.6%, during the first three months of fiscal 2026 compared to the first three months of fiscal 2025, and gross margin as a percentage of sales for the first three months of fiscal 2026 increased to 36.6% of sales from 35.0% in the prior year period. The increase in gross profit dollars per retail unit sold was related to a decrease in the aggregate cost of the vehicles sold during the respective periods related to the Company’s initiatives around pricing discipline, lower frequency and severity of vehicle repair costs, and improved retention of wholesale buyers for vehicles repossessed by the Company. The Company’s gross margin is based upon the cost of the vehicle purchased, with higher-priced vehicles typically having higher gross margin dollars but lower gross margin percentages. Gross margin is also affected by the percentage of wholesale sales to retail sales, which relates, for the most part, to repossessed vehicles sold at or near cost. The Company plans to continue to focus on managing gross margin dollars in the near term, as demonstrated by the increase during the first quarter of fiscal 2026, as well as continuing to focus on improving wholesale results, cost controls, and operational improvement around the acquisition and disposal of vehicles.
Previous wording
The Company consistently focuses on collections. Each dealership is responsible for its own collections with supervisory involvement and oversight from the corporate office. Total collections of principal, interest, and late fees for the first nine months of fiscal 2025 increased by $21.3 million, or 4.2%, over the prior year period. Principal collections, as a percentage of average finance receivables, increased slightly to 23.1%, compared to 22.7% for the same period in prior year.
Current wording
The Company consistently focuses on collections. Each dealership is responsible for its own collections with supervisory involvement and oversight from the corporate office. Total collections of principal, interest, and late fees for the first three months of fiscal 2026 increased by $10.7 million, or 6.2%, over the prior year period. Principal collections, as a percentage of average finance receivables, increased slightly to 7.9%, compared to 7.8% for the same period in prior year.
Previous wording
The Company continues to prioritize investments to improve its products and services and operate more efficiently over time. One of the Company’s largest recent investments has been improving its processes and technology for credit applications and decision-making through a new loan origination system (“LOS”). This online loan application system allows the consumer to apply for credit faster in anticipation of their vehicle purchase, authorize a soft credit pull during the application process, and receive a response via text message on the status of their application, as well as have access to centralized appointment-setting. At the end of the third quarter, the Company had implemented the LOS in 145 of its 154 dealerships, with centralized decision-making on approvals of applications submitted via the online platform. The remaining nine dealerships, which were acquired, are still in their earn-out period or have yet to be integrated. Through the LOS, the Company has tightened its credit approval standards, primarily by requiring a higher down payment and shorter terms from certain customers.
Current wording
The Company continues to prioritize investments to improve its products and services and operate more efficiently over time. During the quarter, the Company deployed updates to its processes and technology for credit applications and decision-making through a new version of LOS. Since the implementation of the initial LOS, this online loan application system has allowed consumers to apply for credit faster in anticipation of their vehicle purchase, authorize a soft credit pull during the application process, receive status updates via text message, as well as have access to centralized appointment-setting. At the end of the first quarter, the Company had implemented LOS in 145 of its 154 dealerships, with centralized decision-making on approvals of applications submitted via the online platform. The remaining nine dealerships, which were acquired, are still in their earn-out period or have yet to be integrated. Through LOS, the Company has tightened its credit approval standards, primarily by requiring a higher down payment and shorter terms from certain customers. The updates to LOS implemented during the first quarter introduced an upgraded, more predictive scorecard and risk-based pricing capabilities, improving risk identification and customer rankings. The revised scorecard provides improved risk identification by assigning customer rankings with greater granularity. As a result, the Company made a higher proportion of its sales during the first quarter to customers ranked 5–7, rankings which have historically demonstrated a lower probability of loss and delivered stronger overall returns on their installment sale contracts compared to lower-ranked customers. In addition, the Company implemented upgrades to its payments platform in late June 2025, which are driving a shift from in-store to online payments, enhancing convenience for customers while supporting more consistent payment behavior and improved collections efficiency.
Previous wording
Revenues increased by approximately $26.1 million, or 8.7%, for the three months ended January 31, 2025 as compared to the same period in the prior fiscal year. The increase resulted from an increase in revenue at dealerships that operated a full three months in both the current and prior year quarter ($9.1 million increase) and revenue growth from dealerships opened or acquired after the prior year quarter ($20.1 million increase), partially offset by a decline in revenue at dealerships that were closed during the prior year quarter ($3.1 million decrease). The increase in revenue was related to a 13.2% increase in retail units sold, largely resulting from a combination of underperformance in the prior year period and operational improvements in this year’s quarter. Revenue was further improved by a 5.1% increase in interest income. Interest income increased for the three months ended January 31, 2025, as compared to the same period in the prior fiscal year, due to the $30.9 million increase in average finance receivables and an increase in the weighted average interest rate to 17.5%, up from 17.2%.
Current wording
Total revenues decreased $6.5 million, or 1.9%, for the three months ended July 31, 2025 as compared to the same period in the prior fiscal year. The decrease was primarily as a result of declines in revenue at dealerships that operated a full three months in both the current and prior year quarter ($13.7 million decrease) and by a decline in revenue at dealerships that were closed during the prior year quarter ($3.0 million decrease), partially offset by revenue growth from dealerships opened or acquired during or after the prior year quarter ($10.2 million increase). The primary decrease in revenue was related to a 5.7% decrease in retail units sold, largely resulting from balancing affordability for the consumer, profit margins and portfolio quality. The purchase cost of vehicles rose during the quarter, consuming more of our borrowing capacity, which limited the amount of inventory we carried and had an impact on the sales volumes. The decrease in revenue was partially offset by a 7.5% increase in interest income. Interest income increased for the three months ended July 31, 2025, as compared to the same period in the prior fiscal year, due to the $35.4 million increase in average finance receivables and an increase in the weighted average interest rate on outstanding finance receivables to 17.6%, up from 17.4% during the prior year period.
Previous wording
Cost of sales, as a percentage of sales, decreased to 64.3% for the three months ended January 31, 2025 compared to 65.8% for the same period of the prior fiscal year, resulting in a gross margin as a percentage of sales of 35.7% for the current year period, compared to 34.2% for the prior year period. The improvement in gross margin resulted from better procurement processes and operational efficiencies, partially offset by increased accident protection plan claims as a result of winter weather.
Current wording
The cost of sales as a percentage of sales decreased to 63.4% for the three months ended July 31, 2025 compared to 65.0% for the same period of the prior fiscal year, resulting in a gross margin as a percentage of sales of 36.6% for the current year period compared to 35.0% for the prior year period. The improvement in gross margin compared to the same period in the prior fiscal year resulted from continued efforts related to vehicle sales pricing improvements, reduced repairs in both frequency and severity and improved rates on wholesale retention.
Previous wording
Gross margin as a percentage of sales is significantly impacted by the average retail sales price of the vehicles the Company sells, which is largely a function of the Company’s purchase cost and includes the price of ancillary products sold with the vehicle, such as the APP and vehicle repair plan. As purchase costs increase, the margin between the purchase cost and the sales price of the vehicles the Company sells generally narrows on a percentage basis because the Company must offer affordable prices to its customers. The average retail sales price for the third quarter of fiscal 2025 was $19,275, a $180 decrease from the prior year quarter. The Company continues to focus on gross margin improvement through pricing discipline, reduced transportation costs and lower vehicle repair costs.
Current wording
Gross margin as a percentage of sales is significantly impacted by the average retail sales price of the vehicles the Company sells, which is largely a function of the Company’s purchase cost and includes the price of ancillary products sold with the vehicle, such as the APP and the vehicle service contract. As purchase costs increase, the margin between the purchase cost and the sales price of the vehicles the Company sells generally narrows on a percentage basis because the Company must offer affordable prices to its customers. The average retail sales price for the first quarter of fiscal 2026, including ancillary products, was $19,564, reflecting an increase of $278 over the prior year quarter. The improvement in gross margin for the quarter demonstrates the Company's continued focus on gross margin improvement through pricing discipline, reduced transportation costs and lower vehicle repair costs.
Previous wording
Provision for credit losses as a percentage of sales was 32.9% for the three months ended January 31, 2025 compared to 37.3% for the prior year period. In overall dollars, the provision for credit losses decreased $2.9 million in the third quarter of fiscal 2025 compared to the same period of the prior fiscal year due to a decrease in the allowance for credit losses and the improved experience of contracts underwritten in the Company’s new loan origination system.
Current wording
Provision for credit losses as a percentage of sales was 37.3% for the three months ended July 31, 2025 compared to 33.2% for the same period in the prior fiscal year. In overall dollars, the provision for credit losses increased $7.6 million in the first quarter of fiscal 2025 compared to the same period of the prior fiscal year. This increase was a result of increases in both the frequency and severity of losses coupled with softer sales.
Previous wording
Finance receivables, net, have increased 4.3% and 5.6% since April 30, 2024 and January 31, 2024, respectively, while revenues decreased 0.8% for the nine months ended January 31, 2025 compared to the same period in the prior fiscal year. The Company currently anticipates that the growth in finance receivables will generally be slightly higher than overall revenue growth on an annual basis due to overall term length increases in our installment sale contracts, partially offset by improvements in underwriting and collection procedures in an effort to reduce credit losses.
Current wording
Finance receivables, net, have increased 0.2% and 5.1% since April 30, 2025 and July 31, 2024, respectively, while revenues decreased 1.9% for the three months ended July 31, 2025 compared to the same period in the prior fiscal year. The Company currently anticipates that the growth in finance receivables will generally be slightly higher than overall revenue growth on an annual basis due to overall term length increases in our installment sale contracts, partially offset by improvements in underwriting and collection procedures in an effort to reduce credit losses.
Previous wording
During the first nine months of fiscal 2025, inventory increased by $36.5 million compared to inventory at April 30, 2024, due to the most recent acquisition which added $10.5 million to the inventory balance, as well as increased volumes across all dealerships, as the Company expanded the frontline much earlier than last year in preparation for spring selling and tax season. Annualized inventory turns decreased for the current year quarter at 5.4 versus the prior year’s third quarter at 5.8. The Company strives to improve the quality of the inventory and maintain adequate turns while maintaining inventory levels to ensure an adequate supply of vehicles in volume and mix, and to meet sales demand.
Current wording
During the first three months of fiscal 2026, inventory increased by $0.2 million, or 0.2%, compared to April 30, 2025. Annualized inventory turns decreased for the current year quarter at 6.2 versus the prior year first quarter at 6.7. The Company strives to improve the quality of the inventory and maintain adequate turns while maintaining inventory levels to ensure an adequate supply of vehicles in volume and mix, and to meet sales demand.
Previous wording
Property and equipment, net, decreased by $2.3 million at January 31, 2025 as compared to property and equipment, net, at April 30, 2024. The Company incurred $3.1 million in expenditures during the first nine months of fiscal 2025 primarily related to remodeling existing locations in order to support growth. The Company incurred $5.7 million in depreciation and amortization expense during the first nine months of fiscal 2025.
Current wording
Property and equipment, net, decreased by $1.7 million at July 31, 2025 as compared to April 30, 2025. The Company incurred $0.5 million in expenditures during the three months ended July 31, 2025 primarily related to remodeling existing locations. These expenditures were offset by $2.1 million in depreciation expense during the first three months ended July 31, 2025.
Previous wording
Deferred revenue decreased $13.3 million at January 31, 2025 as compared to April 30, 2024, primarily resulting from the prior quarter's $13.2 million benefit in service contract revenue which was a result of the service contract accounting change in the Company’s estimate for the applicable revenue recognition period.
Current wording
Deferred revenue decreased $1.0 million at July 31, 2025 as compared to April 30, 2025, primarily resulting from the decrease in units sold.
Previous wording
The Company had $722.2 million and $553.6 million of notes payable outstanding related to asset-backed term funding transactions as of January 31, 2025 and April 30, 2024, respectively. These non-recourse notes issued by the Company accrue interest at fixed rates with a weighted average rate of 8.2% as of January 31, 2025. The Company completed its two most recent issuances of asset-backed term funding on January 31, 2025 and October 9, 2024 and used the proceeds of the issuances to pay down existing debt. Prior to the repayment of the Company's warehouse loan facility in October 2024, the funds borrowed under that facility accrued interest at a rate equal to the term SOFR plus 350 basis points. See Note F for further details on the non-recourse notes payable, warehouse loan facility and the revolving line of credit.
Current wording
The Company had $610.8 million and $572.0 million of notes payable outstanding related to asset-backed term funding transactions as of July 31, 2025 and April 30, 2025, respectively. These non-recourse notes issued by the Company accrue interest at fixed rates with a weighted average rate of 7.86% as of July 31, 2025. During fiscal year 2025, the Company completed two issuances of asset-backed term funding, followed by an additional issuance in the first quarter of fiscal year 2026. The net proceeds from these issuances were used to repay outstanding borrowings under the Company’s revolving credit facility. See Note F to the Consolidated Financial Statements for further details on the non-recourse notes payable.
Previous wording
Borrowings on the Company’s revolving credit facilities fluctuate based upon a number of factors including (i) net income, (ii) finance receivables changes, (iii) funds available from asset-backed securitization offerings, warehouse facilities and/or other capital financing sources, (iv) income taxes, and (v) capital expenditures. Historically, income from operations, as well as borrowings on the revolving credit facilities and securitized debt, have funded the Company’s finance receivables growth and capital asset purchases and, as applicable, common stock repurchases. The overall increase in total borrowings during the first nine months of fiscal 2025 was made to support an increase in finance receivables, with longer terms, and a growing customer base. During the first nine months of fiscal 2025, the Company funded finance receivables growth of $50.6 million, increased inventory by $36.5 million, and invested in an acquisition and fixed assets of $10.6 million, with income from operations, increased total debt of $40.9 million, and increased total cash by $31.9 million from April 30, 2024. The proceeds from the Company’s common stock offering during the second quarter substantially offset the increase in total debt for the first nine months of 2025.
Current wording
Borrowings on the Company’s revolving credit facilities fluctuate based upon a number of factors including (i) net income, (ii) finance receivables changes, (iii) funds available from asset-backed securitization offerings, warehouse facilities and/or other capital financing sources, (iv) income taxes, and (v) capital expenditures. Historically, income from operations, as well as borrowings on the revolving credit facilities and securitized debt, have funded the Company’s finance receivables growth, capital asset purchases and, where applicable, common stock repurchases. During the three months ended July 31, 2025, the Company funded finance receivables growth of $2.8 million, increased inventory by $0.2 million, and acquired fixed assets of $0.5 million, with a $1.6 million decrease in total debt.
Previous wording
The primary drivers of cash flows include (i) top line sales, (ii) interest income on finance receivables, (iii) gross margin percentages on vehicle sales, and (iv) credit losses, a significant portion of which relates to the collection of principal on finance receivables. Historically, most or all of the cash generated from operations has been used to fund finance receivables growth, capital expenditures, and as applicable, common stock repurchases. To the extent finance receivables growth, capital expenditures and common stock repurchases have exceeded income from operations, the Company has increased borrowings under our revolving credit facilities and secured additional funding through the issuance of asset-backed non-recourse notes.
Current wording
The primary drivers of operating profits and cash flows include (i) top line sales (ii) interest income on finance receivables, (iii) gross margin percentages on vehicle sales, and (iv) credit losses, a significant portion of which relates to the collection of principal on finance receivables. Historically, most or all of the cash generated from operations has been used to fund finance receivables growth, capital expenditures, and as applicable, common stock repurchases. To the extent finance receivables growth, capital expenditures and common stock repurchases have exceeded income from operations, the Company has increased borrowings under its revolving credit facilities and secured additional funding through the issuance of asset-backed non-recourse notes.
Previous wording
Cash flows used in operating activities for the nine months ended January 31, 2025 compared to the same period in the prior fiscal year increased primarily as a result of a decrease in inventory acquired in repossessions activity and an increase in inventory purchasing, partially offset by a decrease in finance receivables originations and an increase in finance receivable collections. Finance receivables, net, increased by $47.6 million from April 30, 2024 to January 31, 2025.
Current wording
Cash flows used in operating activities for the three months ended July 31, 2025 compared to the three months ended July 31, 2024 decreased primarily as a result of (i) a decrease in net income, partially offset by, (ii) an increase in finance receivable collections and (iii) a decrease in finance receivable originations. Finance receivables, net, increased by $2.8 million from April 30, 2025 to July 31, 2025.
Previous wording
Sustained macro-economic pressures affecting our customers have helped keep demand high in recent years for the types of vehicles we purchase. This strong demand for used vehicles, coupled with modest levels of new vehicle sales in recent years, have led to a generally ongoing tight supply of used vehicles available to the Company in both quality and quantity. Wholesale prices continued to soften in calendar year 2024 and into 2025 but remain high compared to the last several years. The Company expects the tight used vehicle supply and strong demand for the types of vehicles we purchase to continue to keep purchase costs and resulting sales prices elevated for the short-term but anticipates that an increase in marketplace wages for our customers could enhance affordability.
Current wording
Sustained macro-economic pressures affecting our customers have helped keep demand high in recent years for the types of vehicles we purchase. This strong demand for used vehicles, coupled with modest levels of new vehicle sales in recent years, have led to a generally ongoing tight supply of used vehicles available to the Company in both quality and quantity. Wholesale prices continued to soften in calendar year 2024 and into 2025 but began to increase late in fiscal year 2025. The Company expects that the tight supply of used vehicles, strong demand for the types of vehicles we purchase, and market reactions to ongoing tariff uncertainty will continue to keep purchase costs and resulting sales prices elevated in the short term. However, an increase in marketplace wages for our customers could enhance affordability.
Previous wording
The Company has devoted significant efforts to improving its purchasing processes to ensure adequate supply at appropriate prices which includes the new partnership with an industry leader, expanding its purchasing territories to larger cities in close proximity to its dealerships and forming relationships with reconditioning partners to reduce purchasing costs. The Company has also increased the level of accountability for its purchasing agents including updates to sourcing and pricing guidelines. The Company continues to build relationships with national vendors that can supply a large quantity of high-quality vehicles.
Current wording
The Company has made substantial efforts to enhance its purchasing processes in order to secure an adequate supply of vehicles at competitive prices. This includes a strategic partnership with an industry leader, the expansion of its purchasing territories into larger cities near its dealerships, and the establishment of relationships with reconditioning partners to reduce procurement costs. Additionally, the Company has heightened accountability for its purchasing agents through updates to sourcing and pricing guidelines. Ongoing efforts also include the cultivation of relationships with national vendors capable of supplying large volumes of high-quality vehicles.
Previous wording
The Company’s business model relies on leasing the majority of the properties where its dealerships are located. As of January 31, 2025, the Company leased approximately 87% of its dealership properties. The Company expects to continue to lease the majority of the properties where its dealerships are located.
Current wording
The Company’s business model relies on leasing the majority of the properties where its dealerships are located. As of July 31, 2025, the Company leased approximately 87% of its dealership properties. The $86.1 million of operating lease commitments includes $28.5 million of non-cancelable lease commitments under the lease terms and $57.6 million of lease commitments for renewal periods at the Company’s option that are reasonably assured. The Company expects to continue to lease the majority of the properties where its dealerships are located.
Previous wording
The Company’s principal sources of liquidity include income from operations, proceeds from non-recourse notes payable issued under asset-back securitization transactions, warehouse facilities, borrowings under its revolving credit facilities, and other potential debt or equity financing sources. At January 31, 2025, the Company had approximately $8.5 million of cash on hand and approximately an additional $45.0 million of availability under its revolving credit facilities (see Note F to the Condensed Consolidated Financial Statements). The revolving credit facility had a scheduled maturity date of September 30, 2025, with total permitted borrowings of $320 million at January 31, 2025. In July 2024, the Company entered into Amendment No. 7 to its revolving credit agreement to allow for, among other things, the entry into an amortizing warehouse agreement and to amend the fixed charge coverage ratio under the credit agreement. On September 16, 2024, the Company entered into Amendment No. 8 to its revolving credit agreement that, among other things, reduced the total permitted borrowings under the revolving line of credit by $20 million to $320 million. Amendment No. 8 required the Company to maintain a minimum amount available to be drawn under the credit facilities, based on eligible finance receivables and inventory, of $20 million, or $50 million, if the outstanding principal balance under the line of credit equaled or exceeded $300 million. The amendment also required the Company to use the net proceeds of any junior capital raise of $50 million or more to pay down the then outstanding principal balance of the line of credit. The Company used the $73.8 million in aggregate net proceeds from its underwritten public common stock offering completed during the second quarter of fiscal year 2025 to pay down a portion of the outstanding balance of the line of credit. The amendment also made certain modifications to the fixed charge coverage ratio covenant under the credit agreement and restricts the Company from making future repurchases of its common stock, along with the agreement’s existing restrictions on other distributions to the Company’s shareholders. Thus, the Company is limited in its ability to pay dividends or make other distributions to its shareholders without the consent of the Company’s lenders.
Current wording
The Company’s principal sources of liquidity include income from operations, proceeds from non-recourse notes payable issued under asset-back securitization transactions, warehouse facilities, borrowings under its revolving credit facilities, and other potential debt or equity financing sources. At July 31, 2025, the Company had approximately $9.7 million of cash on hand and approximately an additional $20.8 million of availability under its revolving credit facilities (see Note F to the Consolidated Financial Statements). The revolving credit facility has a scheduled maturity date of March 31, 2027, with total permitted borrowings of $350.0 million at July 31, 2025.
Previous wording
In July 2024, the Company entered into a $150 million amortizing warehouse agreement backed by a portion of its finance receivables. The warehouse facility accrued interest at a rate of SOFR plus 350 basis points, with payments of principal and interest due monthly and a scheduled maturity date of July 12, 2026. The Company primarily used the funds from the warehouse facility to pay down the current revolving loan balance. On September 16, 2024, the Company entered into an amendment to the warehouse agreement that amended the fixed charge coverage ratio covenant consistent with Amendment No. 8 to the revolving credit agreement and modified certain other financial covenants under the warehouse agreement. In October 2024, the Company used the proceeds from its October 2024 asset-back term securitization funding to pay down the outstanding balance under the warehouse loan facility. No debt was outstanding under the warehouse loan facility as of January 31, 2025.
Current wording
In July 2024, the Company also entered into a $150.0 million amortizing warehouse agreement backed by a portion of its finance receivables, which was amended in September 2024 and subsequently repaid with proceeds from the Company’s October 2024 asset-backed securitization. No debt was outstanding under the warehouse loan facility as of July 31, 2025.
Previous wording
The Company expects to use cash from operations and other financing sources to (i) periodically pay down the outstanding principal balance of the revolving line of credit, (ii) grow its finance receivables portfolio, (iii) purchase fixed assets of approximately $9 million in the next 12 months as we complete facility updates and general fixed asset requirements, (iv) fund dealership acquisitions as opportunities arise on terms acceptable to the Company, and (v) reduce the Company’s remaining debt to the extent excess cash is available.
Current wording
The Company expects to use cash from operations and other financing sources to (i) pay down the outstanding principal balance of the revolving line of credit as funds are available, (ii) grow its finance receivables portfolio, (iii) purchase fixed assets of approximately $9 million in the next 12 months as we complete facility updates and general fixed asset requirements, (iv) fund dealership acquisitions as opportunities arise on terms acceptable to the Company, and (v) reduce the Company’s remaining debt to the extent excess cash is available.
Previous wording
The Company believes it will have adequate liquidity to continue to grow its revenues and to satisfy its capital needs for at least one year from the financial statement issuance date through expected financing sources such as additional securitized borrowings or public registered offerings.
Current wording
The Company believes it will have adequate liquidity to continue to grow its revenues and to satisfy its capital needs for the foreseeable future through expected financing sources such as additional securitized borrowings, warehouse loan facilities or other debt or equity financing arrangements.
Previous wording
The Company has two standby letters of credit relating to insurance policies totaling $4.4 million at January 31, 2025.
Current wording
The Company has three standby letters of credit relating to insurance policies totaling $4.7 million at July 31, 2025.
Previous wording
Car-Mart of Arkansas and Colonial do not meet the affiliation standard for filing consolidated income tax returns, and as such they file separate federal and state income tax returns. Car-Mart of Arkansas routinely sells its finance receivables to Colonial at what the Company believes to be fair market value and is able to take a tax deduction at the time of sale for the difference between the tax basis of the receivables sold and the sales price. These types of transactions, based upon facts and circumstances, have been permissible under the provisions of the Internal Revenue Code as described in the Treasury Regulations. For financial accounting purposes, these transactions are eliminated in consolidation and a deferred income tax liability has been recorded for this timing difference. The sale of finance receivables from Car-Mart of Arkansas to Colonial provides certain legal protection for the Company’s finance receivables and, principally because of certain state apportionment characteristics of Colonial, also has the effect of reducing the Company’s overall effective state income tax rate by approximately 250 basis points. The actual interpretation of the Regulations is in part a facts and circumstances matter. The Company believes it satisfies the material provisions of the Regulations. Failure to satisfy those provisions could result in the loss of a tax deduction at the time the receivables are sold and have the effect of increasing the Company’s overall effective income tax rate as well as the timing of required tax payments.
Current wording
Car-Mart of Arkansas and Colonial do not meet the affiliation standard for filing consolidated income tax returns, and as such they file separate federal and state income tax returns. Car-Mart of Arkansas routinely sells its finance receivables to Colonial at what the Company believes to be fair market value and is able to take a tax deduction at the time of sale for the difference between the tax basis of the receivables sold and the sales price. These types of transactions, based upon facts and circumstances, have been permissible under the provisions of the Internal Revenue Code as described in the Treasury Regulations. For financial accounting purposes, these transactions are eliminated in consolidation and a deferred income tax liability has been recorded for this timing difference. The sale of finance receivables from Car-Mart of Arkansas to Colonial provides certain legal protection for the Company’s finance receivables and, principally because of certain state apportionment characteristics of Colonial, also has the effect of reducing the Company’s overall effective state income tax rate. The actual interpretation of the Regulations is in part a facts and circumstances matter. The Company believes it satisfies the material provisions of the Regulations. Failure to satisfy those provisions could result in the loss of a tax deduction at the time the receivables are sold and have the effect of increasing the Company’s overall effective income tax rate as well as the timing of required tax payments.
Previous wording
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires the Company to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the Company’s estimates. The Company believes the most significant estimate made in the preparation of the accompanying Condensed Consolidated Financial Statements relates to the determination of its allowance for credit losses, which is discussed below. The Company’s accounting policies are discussed in Note B to the Condensed Consolidated Financial Statements.
Current wording
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires the Company to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the Company’s estimates. The Company believes the most significant estimate made in the preparation of the Consolidated Financial Statements in Item 8 relates to the determination of its allowance for credit losses, which is discussed below. The Company’s accounting policies are discussed in Note B to the Consolidated Financial Statements in Item 1.
Previous wording
The Company maintains an allowance for credit losses on an aggregate basis at a level it considers sufficient to cover estimated losses expected to be incurred on the portfolio at the measurement date in the collection of its finance receivables currently outstanding. At January 31, 2025, the weighted average contract term was 48.3 months, with 35.7 months remaining. The allowance for credit losses at January 31, 2025 of $333.3 million, was 24.31% of the principal balance in finance receivables of $1.5 billion, less unearned accident protection plan revenue of $50.4 million and unearned service contract revenue of $57.1 million, less APP claims of $7.3 million.
Current wording
The Company maintains an allowance for credit losses on an aggregate basis at a level it considers sufficient to cover estimated losses expected to be incurred on the portfolio at the measurement date in the collection of its finance receivables currently outstanding. At July 31, 2025, the weighted average contract term was 48.3 months with 35.7 months remaining. At July 31, 2024, the weighted average total contract term was 48.1 months with 36.1 months remaining. The allowance for credit losses at July 31, 2025, $326.1 million, was 23.35% of the principal balance in finance receivables of $1.5 billion, less unearned accident protection plan revenue of $50.9 million, unearned service contract revenue of $61.3 million, and pending APP claims of $7.0 million. The Company decreased the allowance for credit losses as a percentage of finance receivables from 25.00% at July 31, 2024 to 23.35% at July 31, 2025 and increased it slightly from 23.25% at April 30, 2025.
Previous wording
•judgment is required to determine whether the model used to generate the allowance for credit losses produces results that appropriately reflect a current estimate of lifetime expected credit losses.
Current wording
•judgment is required to evaluate whether the model used to generate the allowance for credit losses, which is then adjusted for changes in customer interest rates, credit deterioration and delinquency rates, as well as the expected effects from current and forecasted inflation, produces an allowance that appropriately reflects a current estimate of lifetime expected credit losses.
Previous wording
Because management’s estimate of the allowance for credit losses involves a high degree of judgment, such as the subjectivity of the assumptions used, there is uncertainty inherent in such estimates. Changes in these estimates could significantly impact the allowance and provision for credit losses.
Current wording
Because management’s estimate of the allowance for credit losses involves a high degree of qualitative judgment, such as the subjectivity of the assumptions used, there is uncertainty inherent in such estimates. Changes in these estimates could significantly impact the allowance and provision for credit losses.
Previous wording
In December 2023, the FASB issued an accounting pronouncement (ASU 2023-09) related to income tax disclosures. The amendments in this update are intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. We plan to adopt this pronouncement for our fiscal year beginning May 1, 2025, and we do not expect it to have a material effect on our consolidated financial statements.
Current wording
In December 2023, the FASB issued an accounting pronouncement (ASU 2023-09) related to income tax disclosures. The amendments in this update are intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. We will adopt this pronouncement in our Annual Report on Form 10-K for the fiscal year ending April 30, 2026, and we do not expect it to have a material effect on our consolidated financial statements.