AMERICAS CARMART INC

Previous wording

Over the last ten fiscal years, the Company’s revenue growth averaged 11.4%. Revenue for the first six months of fiscal 2025 declined 4.3% compared to the same period of fiscal 2024, primarily due to a 9.3% decrease in retail units sold. The decrease was partially offset by a 3.9% increase in the average retail sales price and a 5.3% increase in interest income. Our dealership volume productivity averaged 30.3 sales per month for the first six months of fiscal 2025, down from 33.4 during the same period last year.

Current 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.

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 exceeded pre-pandemic levels, partially due to the inflationary pressure on customers and increasing interest rates from federal monetary policy. For the first six months of fiscal 2025, the provision for credit losses as a percentage of sales was 34.0% compared to 37.9% for the same period of fiscal 2024 as provision for credit losses decreased 15.9% with lower sales partially offsetting the improvements. Based on the Company’s current analysis of credit losses, the allowance for credit losses at October 31, 2024 was 24.72% of finance receivables, net of deferred revenue and pending APP claims.

Current 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.

Previous wording

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 collections department and support staff oversee collections and provide 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.

Current wording

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 wording

The Company’s gross profit dollars per retail unit sold increased by $767, or 11.3%, during the first six months of fiscal 2025 compared to the first six months of fiscal 2024, and gross margin as a percentage of sales for the first six months of fiscal 2025 increased to 37.2% of sales, including a 150 bps benefit from the impact of the service contract accounting change in estimate for revenue recognition, from 34.6% in the prior year period. The increase in gross profit dollars per retail unit sold was primarily related to the impact of the accounting change during the second quarter of fiscal year 2025 in the Company’s estimated revenue recognition period for sales of its vehicle service contracts. 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 six 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 $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.

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 six months of fiscal 2025 increased by $12.6 million, or 3.8%, over the prior year period. Principal collections, as a percentage of average finance receivables, increased slightly at 15.4%, compared to 15.2% in 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 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.

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 October 2024, 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. 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.

Previous wording

Revenues decreased by approximately $12.5 million, or 3.5%, for the three months ended October 31, 2024 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 three months in both the current and prior year quarter ($29.5 million decrease) and by dealerships that were closed during the prior year quarter ($6.2 million decrease), partially offset by revenue growth from dealerships opened or acquired after the prior year quarter ($23.2 million). The decline in revenue was related to a 9.1% decrease in retail units sold, largely reflecting the challenging macroeconomic environment for our customers, partially offset by a 3.6% increase in interest income and a $13.2 million benefit in service contract revenue. The service contract revenue was a result of a performance analysis on the Company’s service contract program resulting in an accounting change in which the Company shortened its estimate for the revenue recognition period to better reflect the actual life of the service contract, which accelerated the Company’s recognition of a portion of its related deferred revenue. . Interest income increased approximately $2.1 million for the three months ended October 31, 2024, as compared to the same period in the prior fiscal year, due to the $8.7 million increase in average finance receivables.

Current 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%.

Previous wording

Cost of sales, as a percentage of sales, decreased to 60.6% for the three months ended October 31, 2024 compared to 65.5% for the same period of the prior fiscal year, resulting in a gross margin as a percentage of sales of 39.4% for the current year period, including 2.9% from the impact of the service contract accounting change in estimate for revenue recognition, compared to 34.5% for the prior year period. The additional improvement in gross margin outside of the service contract adjustment resulted from better procurement processes and operational efficiencies.

Current 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.

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 plans. 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 second quarter of fiscal 2025 was $20,031, a $996 increase over the prior year quarter. However, this increase was due to the $13.2 million benefit as a result of the service contract accounting change in estimate for revenue recognition, rather than as a result of purchase cost increases. 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 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.

Previous wording

Selling, general and administrative expenses, as a percentage of sales, were 16.6% for the three months ended October 31, 2024, an increase of 5.7% 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 $2.5 million in the second quarter of fiscal 2025 compared to the same period of the prior fiscal year. The Company’s two most recent acquisitions drove $2.1 million of the increase with the remainder related to stock compensation expense increases. The Company continued to have favorable declines in payroll and related costs as a result of prior cost cutting measures*.* * *

Current wording

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 wording

Provision for credit losses as a percentage of sales was 34.8% for the three months ended October 31, 2024 compared to 45.1% for the prior year period. In overall dollars, the provision for credit losses decreased $35.9 million in the second quarter of fiscal 2025 compared to the same period of the prior fiscal year due to the improved experience of contracts underwritten in the Company’s new loan origination system. On a percentage of sales basis, the decrease in the provision was partially offset by a decrease in sales of $14.6 million compared to the prior year period.

Current 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.

Previous wording

Interest expense as a percentage of sales increased to 6.3% for the three months ended October 31, 2024, compared to 5.5% for the prior year period. In dollar terms, interest expense increased $1.5 million due to increasing interest rates and an increase in the average borrowings of approximately $13.3 million during the three-month period ended October 31, 2024.

Current wording

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 wording

Revenues decreased by approximately $31.5 million, or 4.3%, for the six months ended October 31, 2024 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 six months in both the current and prior year quarter ($58.5 million decrease) and by dealerships that were closed during the prior year six-month period ($12.1 million decrease); partially offset by revenue growth from dealerships opened or acquired after the prior year six-months ($39.1 million). Revenue decline was primarily related to a 9.3% decrease in retail units sold, partially offset by a 21.3% increase in interest income and a 3.9% increase in the average retail sales price. Interest income increased approximately $6.2 million for the six months ended October 31, 2024, as compared to the same period in the prior fiscal year, due to the $27.5 million increase in average finance receivables.

Current wording

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 wording

Cost of sales, as a percentage of sales, decreased to 62.8% for the six months ended October 31, 2024 compared to 65.4% for the same period of the prior fiscal year, resulting in a gross margin as a percentage of sales of 37.2% for the current year period, including 1.5% from the impact of the service contract accounting change in estimate for revenue recognition, compared to 34.6% 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 six months ended October 31, 2024 was $19,650, an increase of $736 or 3.9% 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.

Current wording

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 wording

Selling, general and administrative expenses, as a percentage of sales, were 16.4% for the six months ended October 31, 2024, an increase of 3.0% from the same period of the prior fiscal year. In dollar terms, overall selling, general and administrative expenses increased approximately $2.8 million in the six months ended October 31, 2024, 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. Increased collections costs due primarily to the higher frequency of repossessions, the addition of new dealerships through acquisitions since last year and the continuing impact of general inflation contributed to the remaining 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.

Current wording

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 wording

Provision for credit losses as a percentage of sales was 34.0% for the six months ended October 31, 2024 compared to 37.9% for the six months ended October 31, 2023. Net charge-offs as a percentage of average finance receivables were 13.0% for the six months ended October 31, 2024 and 13.1% for the prior year period. The decrease in the provision is largely attributable to improvements in the frequency of losses, partially offset by a small 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 24.72% at October 31, 2024 compared to 26.04% at October 31, 2023 and 25.00% at July 31, 2024. The Company decreased the allowance for credit losses rate from 25.00% to 24.72%, sequentially, resulting in a $3.8 million change to the provision for credit losses.

Current wording

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 wording

Interest expense as a percentage of sales increased to 6.3% for the six months ended October 31, 2024, compared to 5.1% for the prior year period. In dollar terms, interest expense increased $5.5 million due to increasing interest rates and an increase in the average borrowings of approximately $52.5 million during the six-month period ended October 31, 2024. Approximately 60% of the increase in interest expense was related to the increase in rates over the same period of the prior fiscal year.

Current wording

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 wording

Finance receivables, net, have increased 3.1% and 2.5% since April 30, 2024 and October 31, 2023, respectively, while revenues decreased 4.3% for the six months ended October 31, 2024 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 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.

Previous wording

During the first six months of fiscal 2025, inventory increased by $14.6 million compared to inventory at April 30, 2024, primarily due to the most recent acquisition which added $5.0 million to the inventory balance. Annualized inventory turns decreased for the current year quarter at 6.0 versus the prior year’s second quarter at 7.1. 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 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.

Previous wording

Property and equipment, net, decreased by $1.2 million at October 31, 2024 as compared to property and equipment, net, at April 30, 2024. The Company incurred $2.3 million in expenditures during the first six months of fiscal 2025 primarily related to remodeling existing locations in order to support growth. The Company incurred $3.8 million in depreciation and amortization expense during the first six months of fiscal 2025.

Current 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.

Previous wording

Accounts payable and accrued liabilities increased by $18.6 million during the first six months of fiscal 2025 as compared to accounts payable and accrued liabilities at April 30, 2024, related primarily to invoice management, vendor efficiencies and the timing of cash overdrafts for outstanding deposits at the end of the month.

Current wording

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 wording

The Company had $1.6 million of income taxes payable, net at October 31, 2024 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 October 31, 2024 was primarily due to a reduction in the credit loss provision and in increase in revenue recognized for the ancillary products due to a change in estimate during the second quarter of fiscal 2025.

Current wording

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 wording

Deferred revenue decreased $14.2 million at October 31, 2024 as compared to April 30, 2024, primarily resulting from the $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 $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.

Previous wording

Deferred income tax liabilities, net, decreased approximately $5.5 million at October 31, 2024 as compared to April 30, 2024, primarily due to a net operating loss carryforward for the six months ended October 31, 2024.

Current wording

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 wording

The Company had $656.4 million and $553.6 million of notes payable outstanding related to asset-backed term funding transactions as of October 31, 2024 and April 30, 2024, respectively. These non-recourse notes issued by the Company accrue interest at fixed rates with a weighted average rate of 9.1% as of October 31, 2024. . The Company completed its most recent issuance of asset-backed term funding on October 9, 2024, and used the proceeds of the issuance to pay down existing debt, including the $150 million balance borrowed under the Company’s warehouse loan facility. Prior to the repayment of the warehouse loan facility, the funds borrowed under the 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 $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.

Previous wording

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 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.

Current wording

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 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 six months of fiscal 2025 was made to support an increase in finance receivables, with longer terms, and a growing customer base. During the first six months of fiscal 2025, the Company funded finance receivables growth of $34.0 million, increased inventory by $14.6 million, invested $13.5 million in dealership acquisitions, and reduced fixed assets by $1.2 million, with income from operations, increased total debt of $9.3 million, and the use of $25.9 million in cash available at 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 six 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 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.

Previous wording

Cash flows used in operating activities for the six months ended October 31, 2024 compared to the same period in the prior fiscal year decreased primarily as a result of a decrease in finance receivable originations, an increase in finance receivable collections, and an increase in accounts payable and accrued liabilities. Finance receivables, net, increased by $34.0 million from April 30, 2024 to October 31, 2024.

Current 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.

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 continue to soften in calendar year 2024 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 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.

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 October 31, 2024, the Company had approximately $8.0 million of cash on hand and approximately an additional $97.0 million of availability under its revolving credit facilities (see Note F to the Condensed Consolidated Financial Statements). The revolving credit facility has a scheduled maturity date of September 30, 2025, with total permitted borrowings of $320 million at October 31, 2024. 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, reduces the total permitted borrowings under the revolving line of credit by $20 million to $320 million. Under the amendment, the Company is required to maintain a minimum amount available to be drawn under the credit facilities, based on eligible finance receivables and inventory, of $20 million. If the outstanding principal balance under the line of credit equals or exceeds $300 million, the Company will be required to maintain a minimum availability of $50 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 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.

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 amends the fixed charge coverage ratio covenant consistent with Amendment No. 8 to the revolving credit agreement and modifies certain other financial covenants under the warehouse agreement. In October 2024, the Company used the proceeds from its most recent 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 October 31, 2024.

Current 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.

Previous 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, (ii) grow its finance receivables portfolio, (iii) purchase fixed assets of approximately $8 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) 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.

Previous wording

The Company has two standby letters of credit relating to insurance policies totaling $3.9 million at October 31, 2024.

Current wording

The Company has two standby letters of credit relating to insurance policies totaling $4.4 million at January 31, 2025.

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 October 31, 2024, the weighted average contract term was 48.2 months with 35.9 months remaining. The allowance for credit losses at October 31, 2024 of $336.7 million, was 27.42% of the principal balance in finance receivables of $1.5 billion, less unearned accident protection plan revenue of $51.0 million and unearned service contract revenue of $55.6 million, less APP claims of $5.3 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 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.