| | | | | |
Notes to Consolidated Financial Statements (Unaudited) | America’s Car-Mart, Inc. |
A – Organization and Business
America’s Car-Mart, Inc., a Texas corporation (the “Company”), is one of the largest publicly held automotive retailers in the United States focused exclusively on the “Integrated Auto Sales and Finance” segment of the used car market. References to the Company typically include the Company’s consolidated subsidiaries. The Company’s operations are principally conducted through its two operating subsidiaries, America’s Car Mart, Inc., an Arkansas corporation (“Car-Mart of Arkansas”), and Colonial Auto Finance, Inc., an Arkansas corporation (“Colonial”). The Company primarily sells older model used vehicles and provides financing for substantially all of its customers. Many of the Company’s customers have limited financial resources and would not qualify for conventional financing as a result of limited credit histories or past credit difficulties. As of July 31, 2025, the Company operated 154 dealerships located primarily in small cities throughout the South-Central United States.
B – Summary of Significant Accounting Policies
General
The accompanying condensed consolidated balance sheet as of April 30, 2025, which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of July 31, 2025 and 2024, have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended July 31, 2025 are not necessarily indicative of the results that may be expected for the year ending April 30, 2026. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended April 30, 2025.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of America’s Car-Mart, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated.
Segment Information
The Company operates in a single reportable segment which represents our core business of offering integrated automotive sales and financing solutions for customers with limited financial resources regardless of credit history. For more information regarding one reportable segment, see Note N.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect 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 period. Actual results could differ from those estimates. Significant estimates include the Company’s allowance for credit losses.
Concentration of Risk
The Company provides financing in connection with the sale of substantially all of its vehicles. These sales are made primarily to customers residing in Alabama, Arkansas, Georgia, Illinois, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee, and Texas, with approximately 30% of revenues resulting from sales to Arkansas customers.
As of July 31, 2025, and periodically throughout the period, the Company maintained cash in financial institutions in excess of the amounts insured by the federal government. The cash is held in several highly rated banking institutions.
The Company regularly monitors its counterparty credit risk and mitigates exposure by the amount it invests in one institution.
Restrictions on Distributions / Dividends
The Company’s revolving credit facilities generally restrict distributions by the Company to its shareholders. On September 16, 2024, the Company entered into an amendment to its revolving credit facilities that, among other things, restricts the Company from future repurchases of the Company’s stock. As of July 31, 2025, the Company may not repurchase shares of the Company’s stock (other than receiving shares surrendered to pay the exercise price or tax withholding in connection with equity-based awards issued under the Company’s equity incentive plans), pay dividends or make other distributions to its shareholders without the consent of the Company’s lenders.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents.
Restricted Cash
Restricted cash is related to the financing and securitization transactions discussed below and is held by the respective securitization trusts.
Restricted cash from collections on auto finance receivables includes collections of principal, interest, and late fee payments on auto finance receivables that are restricted for payment to holders of non-recourse notes payable pursuant to the applicable agreements.
The restricted cash on deposit in reserve accounts is for the benefit of holders of non-recourse notes payable and these funds are not expected to be available to the Company or its creditors. If the cash generated by the related receivables in a given period was insufficient to pay the interest, principal, and other required payments, the balances on deposit in the reserve accounts would be used to pay those amounts.
Restricted cash consisted of the following at July 31, 2025 and April 30, 2025:
| | | | | | | | | | | |
| (In thousands) | July 31, 2025 | | April 30, 2025 |
| | | |
| Restricted cash from collections on auto finance receivables for non-recourse notes payable | $ | 48,616 | | | $ | 48,571 | |
| Restricted cash on deposit in reserve accounts for non-recourse notes payable | 63,145 | | | 66,158 | |
| | | |
| | | |
| | | |
| Restricted Cash | $ | 111,761 | | | $ | 114,729 | |
Financing, Securitization, and Warehouse Transactions
The Company utilizes term securitizations to provide long-term funding for a portion of the auto finance receivables initially funded through the debt facilities. In these transactions, a pool of auto finance receivables is sold to a special purpose entity that, in turn, transfers the receivables to a special purpose securitization trust. The securitization trust issues asset-backed securities, secured or otherwise supported by the transferred receivables, and the proceeds from the sale of the asset-backed securities are used to finance the securitized receivables.
The Company recognizes transfers of auto finance receivables into the term securitization trust as secured borrowings, recording the auto finance receivables and the related non-recourse notes payable on our consolidated balance sheet. These auto finance receivables can only be used as collateral to settle obligations of the related non-recourse notes payable until the issued notes are repaid in full. The term securitization investors have no recourse to the Company’s assets
beyond the related auto finance receivables, the amounts on deposit in the reserve account, and the cash from collections on auto finance receivables.
The Company’s principal operating subsidiary and a newly formed subsidiary also entered into a loan and security agreement in the first quarter of fiscal 2025 under which the Company’s affiliate borrowed $150 million through an amortizing warehouse loan facility collateralized by certain additional auto finance receivables originated by the Company’s operating subsidiaries. Under the loan and security agreement, the warehouse lender has recourse against the Company for up to 10% of the aggregate amount borrowed under the facility. The Company paid off the warehouse loan facility in October 2024. No debt was outstanding under the warehouse loan facility as of July 31, 2025. See Notes C and F for additional information on auto finance receivables, non-recourse notes payable and warehouse loan facility.
The Company carries the debt from the term securitization trusts on its balance sheet in recognition of the Company’s residual economic interest in the receivable pools for each transaction. The Company or one of its subsidiaries serves as the servicer for each securitization, managing collection activities as it does with its overall portfolio of receivables. The overcollateralization in each financing serves to absorb credit losses (subject to limitations) and the Company receives remaining assets of the trust upon repayment in full of the related indebtedness.
Finance Receivables, Repossessions and Charge-offs and Allowance for Credit Losses
The Company originates installment sale contracts from the sale of used vehicles at its dealerships. These installment sale contracts carry a weighted average interest rate of approximately 17.6% using the simple effective interest method including any deferred fees. The Company originates contracts at interest rates ranging from 12.99% up to 23.00% based on the credit score of the customer and applicable state usury limits. Contract origination costs are not significant. The installment sale contracts are structured to have variable payments whereby borrowers are obligated to pay back principal plus the full amount of interest that will accrue over the entire term of the contract. Finance receivables are collateralized by vehicles sold and consist of contractually scheduled payments from installment contracts net of unearned finance charges and an allowance for credit losses. Unearned finance charges to be collected represent the balance of interest receivable to be earned over the remaining term of the related installment contract, and as such, have been reflected as a reduction to the gross contract amount in arriving at the principal balance in finance receivables. Total earned finance charges were $8.1 million and $7.4 million at July 31, 2025 and April 30, 2025, respectively, on the Consolidated Balance Sheets.
An account is considered delinquent when the customer is one day or more behind on their contractual payments. While the Company does not formally place contracts on nonaccrual status, the immaterial amount of interest that may accrue after an account becomes delinquent up until the point of resolution via repossession or write-off, is reserved for against the accrued interest on the Condensed Consolidated Balance Sheets. Delinquent contracts are addressed and either made current by the customer, which is the case in most situations, or the vehicle is repossessed or written off if the collateral cannot be recovered quickly. Customer payments are set to match their payday, with approximately 78% of payments due on either a weekly or bi-weekly basis. The frequency of the payment due dates combined with the general decline in the value of collateral lead to prompt resolutions on problem accounts. On July 31, 2025, 3.8% of the Company’s finance receivable balances were 30 days or more past due, compared to 3.4% at April 30, 2025.
Substantially all of the Company’s installment sale contracts involve contracts made to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders. Contracts made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better credit. At the time of originating an installment sale contract, the Company requires customers to meet certain criteria that demonstrate their intent and ability to pay for the financed principal and interest on the vehicle they are purchasing. However, the Company recognizes that their customer base is at a higher risk of default given their impaired or limited credit histories.
The Company strives to keep its delinquency percentages low, and not to repossess vehicles. Accounts one to three days late are contacted by telephone or text messaging notifications. Notes from each contact are electronically maintained in the Company’s computer system. The Company also utilizes text messaging that allows customers the option to receive due date reminders and late notifications, if applicable. The Company attempts to resolve payment delinquencies amicably prior to repossessing a vehicle. If a customer becomes severely delinquent in his or her payments, and management determines that timely collection of future payments is not probable, the Company will take steps to repossess the vehicle.
The Company regularly offers contract modifications to its customers. Approximately half of the Company’s installment sale contracts on average require one or more minor modifications to accommodate changes in the customer’s
financial circumstances over the life of the contract. These modifications are made at the discretion of dealership management without requiring the account to be re-processed through the loan origination system or meet standard origination criteria. Modifications typically involve adjustments to payment terms, such as modest extensions to the overall contract term to lower the installment payment amount, with such modifications being expected to increase recoveries and improve the likelihood of repayment. At the time of the modification, payment terms are restructured so that the Company expects to collect all amounts due, including accrued interest at the contractual rate, during the modification period. When a customer’s contract is modified, the outstanding balance generally remains unchanged. Extension periods are limited to twelve months beyond the initial payment term and are available for use in one or more modifications over the life of the contract. The Company’s use of contract modifications helps the Company mitigate credit loss and potential repossession of the underlying vehicle.
A limited subset of the Company’s installment sale contracts—representing approximately 1.5% and 1.1% of total finance receivables as of July 31, 2025 and April 30, 2025, respectively—require modification due to customers entering bankruptcy protection. These modifications typically include a combination of reductions in interest rates and extensions of contract terms as part of the bankruptcy plan. When a customer enters Chapter 13 bankruptcy proceedings and includes their vehicle in the bankruptcy plan, the Company transitions the account relationship from the customer to the bankruptcy trustee upon confirmation of the customer’s bankruptcy plan. Under these circumstances, the bankruptcy trustee assumes responsibility for distributing payments to creditors on behalf of the bankruptcy court, including the Company, as allocated under the court-approved bankruptcy plan. The Company suspends its standard collections practices following the customer's bankruptcy filing and treats these accounts as being administered by the bankruptcy trustee rather than the customer, conducting all account-related communications, payment processing, and modification activities with the trustee in accordance with the bankruptcy plan and applicable bankruptcy law. Payments received from the bankruptcy trustee are applied first to accrued interest charges and then to principal reduction if sufficient funds remain. The Company continues to identify the related receivable as current in the Company’s receivables aging records while the account is being paid through the bankruptcy court system and assesses the collectability of these accounts based on factors including the trustee's payment history, the customer’s compliance with the bankruptcy plan, and the specific terms and duration of the court-approved plan. If the customer’s bankruptcy proceeding is dismissed, the Company’s collection process reverts back to the existing terms of the installment sale contract.
For those vehicles that are repossessed, the majority are returned or surrendered by the customer on a voluntary basis. Other repossessions are performed by Company personnel or third-party repossession agents. Depending on the condition of a repossessed vehicle, it is either resold on a retail basis through a Company dealership or sold for cash on a wholesale basis primarily through physical or online auctions.
The Company takes steps to repossess a vehicle when the customer becomes delinquent in his or her payments and management determines that timely collection of future payments is not probable. Accounts are charged-off after the expiration of a statutory notice period for repossessed accounts, or when management determines that the timely collection of future payments is not probable for accounts where the Company has been unable to repossess the vehicle. For accounts with respect to which the vehicle was repossessed, the fair value of the repossessed vehicle is charged as a reduction of the gross finance receivables balance charged-off. On average, accounts are approximately 71 days and 70 days past due at the time of charge-off at July 31, 2025 and April 30, 2025, respectively. For previously charged-off accounts that are subsequently recovered, the amount of such recovery is credited to the allowance for credit losses. The amount of net repossession and charge-off loss is also reduced by any deferred service contract and accident protection plan revenue at the time of charge-off.
The quantitative portion of the Company’s allowance for credit losses is measured using an undiscounted cash flow (“CF”) model whereby the undiscounted cash flows are adjusted by a prepayment rate and then the loss rate is applied and compared to the amortized cost basis of finance receivables to reflect management’s estimate of expected credit losses. The CF model is based on installment sale contract level characteristics of the Company’s finance receivables, such as the contractual payment structure, maturity date, payment frequency for recurring payments, and interest rates, as well as the following assumptions:
•a historical loss period, which represents a full economic credit cycle utilizing loss experience, to calculate the historical loss rate;
•static annualized historical rate based on average time of charge-off; and
•expected prepayment rates based on our historical experience, which also incorporates non-standard contractual payments such as down payments made during the first ninety-days or annual seasonal payments.
The Company’s allowance for credit losses also considers qualitative factors not captured within the CF modeled results such as changes in underwriting and collection practices, economic trends, changes in volume and terms of installment sales contracts, credit quality trends, installment sale contract review results, collateral trends, and concentrations of credit. The Company’s qualitative factors incorporate a macroeconomic variable forecast of inflation over a reasonable and supportable forecast period of one year that affects its customers’ non-discretionary income and ability to repay. The reasonable and supportable forecast period of one year is based on management’s current review of the reliability of extended forecasts and is applied as an adjustment to the historical loss rate.
The Company maintains an allowance for credit losses on an aggregate basis at an amount it considers sufficient to cover net credit losses expected over the remaining life of the installment sales contracts in the portfolio at the measurement date. At July 31, 2025, the weighted average total contract term was 48.3 months, with 35.7 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 deferred accident protection plan revenue of $50.9 million and deferred service contract revenue of $61.3 million, less pending accident protection plan claims of $7.0 million. The allowance for credit losses is periodically reviewed by management with any changes reflected in current operations.
In most states, the Company offers retail customers who finance their vehicle the option of purchasing an accident protection plan product as an add-on to the installment sale contract. This product contractually obligates the Company to cancel the remaining principal outstanding for any contract where the retail customer’s vehicle is totaled, as defined by the product, or the vehicle has been stolen. The Company periodically evaluates anticipated losses to ensure that if anticipated losses exceed deferred accident protection plan revenues, an additional liability is recorded for such difference. At July 31, 2025, anticipated losses did not exceed deferred accident protection plan revenues.
Inventory
Inventory consists of used vehicles and is valued at the lower of cost or net realizable value on a specific identification basis. Vehicle reconditioning costs are capitalized as a component of inventory. Repossessed vehicles and trade-in vehicles are recorded at fair value, which approximates wholesale value. The cost of used vehicles sold is determined using the specific identification method.
Goodwill
Goodwill reflects the excess of purchase price over the fair value of specifically identified net assets purchased. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to qualitative annual impairment tests at the Company’s year-end. The impairment tests are based on the comparison of the fair value of the reporting unit to the carrying value of such unit. The implied goodwill is compared to the carrying value of the goodwill to determine the impairment, if any. During the three months ended July 31, 2025, the Company evaluated goodwill and recorded an immaterial impairment of $14 thousand due to the closure of an acquired dealership location in the first quarter of fiscal year 2024.
The Company had $23.7 million and $22.8 million of goodwill for the periods ended July 31, 2025 and April 30, 2025, respectively.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Expenditures for additions, remodels and improvements are capitalized. Costs of repairs and maintenance are expensed as incurred. Leasehold improvements are amortized over the shorter of the estimated life of the improvement or the lease period. The lease period includes the primary lease term plus any extensions that are reasonably assured. Depreciation is computed principally using the straight-line method generally over the following estimated useful lives:
| | | | | |
| Furniture, fixtures and equipment | 3 to 7 years |
| Leasehold improvements | 5 to 15 years |
| Buildings and improvements | 18 to 39 years |
Long-Lived Assets
Long-lived assets, such as property and equipment, capitalized internal-use software and operating lease right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares the undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, such assets are considered to be impaired, and the impairment is recognized to the extent that the carrying value exceeds its fair value. There were no impairment charges recognized during any of the periods presented.
Cloud Computing Implementation Costs
The Company enters into cloud computing service contracts to support its sales, inventory management, and administrative activities. The Company capitalizes certain implementation costs for cloud computing arrangements that meet the definition of a service contract. The Company includes these capitalized implementation costs within prepaid expenses and other assets on the Condensed Consolidated Balance Sheets. Once placed in service, the Company amortizes these costs over the remaining subscription term to the same caption on the Condensed Consolidated Statement of Operations as the related cloud subscription. Capitalized implementation costs for cloud computing arrangements accounted for as service contracts were $21.3 million and $19.9 million as of July 31, 2025 and April 30, 2025, respectively. Accumulated amortization of capitalized implementation costs for these arrangements was $1.4 million and $958 thousand for the three months ended July 31, 2025 and 2024, respectively.
Cash Overdraft
As checks are presented for payment from the Company’s primary disbursement bank account, monies are automatically drawn against cash collections for the day and, if necessary, are drawn against one of the revolving credit facilities. Any cash overdraft balance principally represents outstanding checks, net of any deposits in transit that as of the balance sheet date had not yet been presented for payment, net of any deposits in transit. Any cash overdraft balance is reflected in accrued liabilities on the Company’s Condensed Consolidated Balance Sheets.
Deferred Sales Tax
Deferred sales tax represents a sales tax liability of the Company for vehicles sold on an installment basis in the states of Alabama and Texas. Under Alabama and Texas law for vehicles sold on an installment basis, the related sales tax is due as the payments are collected from the customer, rather than at the time of sale. Deferred sales tax liabilities are reflected in accrued liabilities on the Company’s Condensed Consolidated Balance Sheets.
Income Taxes
Income taxes are accounted for under the liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates expected to apply in the years in which these differences are expected to be recovered or settled. The quarterly provision for income taxes is determined using an estimated annual effective tax rate, which is based on expected annual taxable income, statutory tax rates and the Company’s best estimate of nontaxable and nondeductible items of income and expense. The effective income tax rates were 22.51% and 18.5% for the three months ended July 31, 2025 and 2024, respectively. The Company recorded a discrete income tax provision for the three months ended July 31, 2025 of $52,000 related to decreased tax benefits on share-based compensation. The Company did not record a discrete income tax benefit for the three months ended July 31, 2024.
Occasionally, the Company is audited by taxing authorities. These audits could result in proposed assessments of additional taxes. The Company believes that its tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from those of the Company, which could result in the imposition of additional taxes.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent
likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applies this methodology to all tax positions for which the statute of limitations remains open.
The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for the years before fiscal 2022.
The Company’s policy is to recognize accrued interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company had no accrued penalties or interest as of July 31, 2025 or April 30, 2025.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"), which includes, among other provisions, restoring 100% bonus depreciation under Section 168(k) for assets placed in service after January 19, 2025 and reverting to the higher EBITDA-based, business interest expense limitation under Section 163(j). The Company is still evaluating the impact of the OBBBA and the results of such evaluations will be reflected on our Form 10-K for the fiscal year ending April 30, 2026.
Revenue Recognition
Revenues are generated principally from the sale of used vehicles, which in most cases includes a service contract and an accident protection plan product, as well as interest income and late fees earned on finance receivables. Revenues are net of taxes collected from customers and remitted to government agencies. Cost of vehicle sales include costs incurred by the Company to prepare the vehicle for sale including license and title costs, gasoline, transport services, and repairs.
Revenues from the sale of used vehicles are recognized when the sales contract is signed, the customer has taken possession of the vehicle and, if applicable, financing has been approved. Revenues from the sale of vehicles sold at wholesale are recognized at the time the proceeds are received. Revenues from the sale of service contracts are recognized ratably over a nine-month term for each 12,000 miles. Service contract revenues are included in sales and the related expenses are included in cost of sales. Accident protection plan revenues are initially deferred and then recognized to income using the “Rule of 78’s” interest method over the life of the contract so that revenues are recognized in proportion to the amount of cancellation protection provided. Accident protection plan revenues are included in sales and related losses are included in cost of sales as incurred. Any unearned revenue from ancillary products is charged-off at the time of repossession. Interest income is recognized on all active finance receivables accounts using the simple effective interest method. Active accounts include all accounts except those that have been paid-off or charged-off.
Sales for the three months ended July 31, 2025 and 2024 consisted of the following:
| | | | | | | | | | | |
| Three Months Ended
July 31, |
| (In thousands) | 2025 | | 2024 |
| | | |
| Sales – used autos | $ | 234,985 | | | $ | 251,305 | |
| Wholesales – third party | 10,794 | | | 9,696 | |
| Service contract sales | 21,793 | | | 17,072 | |
| Accident protection plan revenue | 8,668 | | | 9,175 | |
| | | |
| Total | $ | 276,240 | | | $ | 287,248 | |
At July 31, 2025 and 2024, finance receivables more than 90 days past due were approximately $7.8 million and $5.6 million, respectively. Late fee revenues totaled approximately $1.7 million and $1.2 million for the three months ended July 31, 2025 and 2024, respectively. Late fees are recognized when collected and are reflected in interest and other income on the Condensed Consolidated Statements of Operations. The amount of revenue recognized for the three months ended July 31, 2025 that was included in the April 30, 2025 deferred service contract revenue was $12.4 million.
Earnings (Loss) per Share
Basic earnings (loss) per share are computed by dividing net income (loss) attributable to common stockholders by the average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed by dividing net income (loss) attributable to common stockholders by the average number of common shares outstanding during the period plus dilutive common stock equivalents. The calculation of diluted earnings per share takes into consideration the potentially dilutive effect of common stock equivalents, such as outstanding stock options and non-vested restricted stock, which if exercised or converted into common stock would then share in the earnings of the Company. In computing diluted earnings per share, the Company utilizes the treasury stock method and anti-dilutive securities are excluded.
Stock-Based Compensation
The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock, based on the fair value of those awards at the date of grant over the requisite service period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards. The Company may issue either new shares or treasury shares upon exercise of these awards. Stock-based compensation plans, related expenses, and assumptions used in the Black-Scholes option pricing model are more fully described in Note J. If an award contains a performance condition, expense is recognized only for those shares for which it is considered reasonably probable as of the current period end that the performance condition will be met. The Company accounts for forfeitures as they occur and records any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Operations in the reporting period in which the exercise occurs. The Company recorded a discrete income tax provision for the three months ended July 31, 2025 of $52,000 related to decreased tax benefits on share-based compensation. The Company did not record a discrete income tax benefit for the three months ended July 31, 2024. As a result, the Company’s income tax expenses and associated effective tax rate will be impacted by fluctuations in stock price between the grant dates and exercise dates of equity awards.
Treasury Stock
Treasury stock may be used for issuances under the Company’s stock-based compensation plans or for other general corporate purposes. The Company has a reserve account of 10,000 shares of treasury stock to secure outstanding service contracts issued in Iowa in accordance with the regulatory requirements of that state and another reserve account of 14,000 shares of treasury stock for its subsidiary, ACM Insurance Company, in accordance with the requirements of the Arkansas Department of Insurance.
Recent Accounting Pronouncements
Occasionally, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies which the Company will adopt as of the specified effective date. Unless otherwise discussed, the Company believes the implementation of recently issued standards which are not yet effective will not have a material impact on its consolidated financial statements upon adoption.
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.
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.
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.
C – Finance Receivables, Net
The Company originates installment sale contracts from the sale of used vehicles at its dealerships. These installment sale contracts, which originate at interest rates ranging from 12.99% to 23.0% are collateralized by the vehicle sold and typically provide for payments over periods ranging from 18 months to 79 months. The Company’s finance receivables are defined as one segment and one class of loans, which is sub-prime consumer automobile contracts. As of July 31, 2025, the Company maintains two distinct loan pools for the purpose of estimating expected credit losses under the CECL model in accordance with ASC 326. These pools are grouped based on origination method and are managed collectively under a unified credit risk management framework. Although not considered separate segments under applicable disclosure rules, each pool is evaluated separately for expected credit losses, and the allowance for credit losses is determined accordingly.
The components of finance receivables are as follows:
| | | | | | | | | | | |
| (In thousands) | July 31, 2025 | | April 30, 2025 |
| | | | |
| Gross contract amount | $ | 1,952,693 | | | $ | 1,946,042 | |
| Less unearned finance charges | (437,012) | | | (436,887) | |
| Principal balance | 1,515,681 | | | 1,509,155 | |
| Less: estimated insurance receivables for accident protection plan claims | (3,279) | | | (2,910) | |
| Less: allowance for accident protection plan claims | (3,543) | | | (3,135) | |
| Less allowance for credit losses | (326,070) | | | (323,100) | |
| Finance receivables, net | 1,182,789 | | | 1,180,010 | |
| Loan origination costs | 663 | | | 663 | |
| Finance receivables, net, including loan origination costs | $ | 1,183,452 | | | $ | 1,180,673 | |
Changes in the finance receivables, net are as follows:
| | | | | | | | | | | |
| | Three Months Ended
July 31, |
| (In thousands) | 2025 | | 2024 |
| | | | |
| Balance at beginning of period | $ | 1,180,010 | | | $ | 1,097,931 | |
| Finance receivable originations | 262,746 | | | 271,756 | |
| Finance receivable collections | (118,720) | | | (112,358) | |
| Provision for credit losses | (103,036) | | | (95,423) | |
| Losses on claims for accident protection plan | (8,595) | | | (9,321) | |
| Inventory acquired in repossession and accident protection plan claims | (29,616) | | | (26,975) | |
| | | | |
| Balance at end of period | $ | 1,182,789 | | | $ | 1,125,610 | |
Changes in the finance receivables allowance for credit losses are as follows:
| | | | | | | | | | | |
| | Three Months Ended
July 31, |
| (In thousands) | 2025 | | 2024 |
| | | | |
| Balance at beginning of period | $ | 323,100 | | | $ | 331,260 | |
| Provision for credit losses | 103,036 | | | 95,423 | |
| Charge-offs | (128,876) | | | (121,605) | |
| Recovered collateral | 28,810 | | | 29,346 | |
| | | | |
| Balance at end of period | $ | 326,070 | | | $ | 334,424 | |
Amounts recovered from previously written-off accounts were approximately $925 thousand and $772 thousand for the three months ended July 31, 2025 and 2024, respectively. These amounts are netted against recovered collateral in the table above.
The Company increased the allowance for credit loss in the first quarter to 23.35% from 23.25% at April 30, 2025, resulting in an addition of $3.0 million to the calculated provision.
The following table presents the finance receivables that are current and past due as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in thousands) | July 31, 2025 | | April 30, 2025 | | July 31, 2024 |
| | | | | | | | | | | |
| | Principal
Balance | | Percent of
Portfolio | | Principal
Balance | | Percent of
Portfolio | | Principal
Balance | | Percent of
Portfolio |
| Current | $ | 1,206,214 | | | 79.58 | % | | $ | 1,208,330 | | | 80.06 | % | | $ | 1,155,006 | | | 78.82 | % |
| 3 - 29 days past due | 247,549 | | | 16.33 | % | | 249,263 | | | 16.52 | % | | 259,145 | | | 17.69 | % |
| 30 - 60 days past due | 42,080 | | | 2.78 | % | | 34,407 | | | 2.28 | % | | 38,035 | | | 2.60 | % |
| 61 - 90 days past due | 12,007 | | | 0.79 | % | | 11,461 | | | 0.76 | % | | 7,463 | | | 0.51 | % |
| > 90 days past due | 7,831 | | | 0.52 | % | | 5,694 | | | 0.38 | % | | 5,610 | | | 0.38 | % |
| Total | $ | 1,515,681 | | | 100.00 | % | | $ | 1,509,155 | | | 100.00 | % | | $ | 1,465,259 | | | 100.00 | % |
Accounts one and two days past due, as well as bankruptcy accounts, are considered current for this analysis, due to the varying payment dates and variation in the day of the week at each period end. The Company suspends its standard collections practices following a customer’s bankruptcy filing and treats these accounts as being administered by the bankruptcy trustee rather than the customer, conducting all account-related communications, payment processing, and modification activities with the trustee in accordance with the bankruptcy plan and applicable bankruptcy law. See Note B for further discussion of customer accounts in bankruptcy. Delinquencies may vary from period to period based on the average age of the portfolio, seasonality within the calendar year, the day of the week and overall economic factors. The above categories are consistent with internal operational measures used by the Company to monitor credit results.
Substantially all of the Company’s installment sale contracts involve contracts made to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders. Contracts made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better credit. The Company monitors customer scores, contract term length, payment to income, down payment percentages, and collections for credit quality indicators.
| | | | | | | | | | | |
| Three Months Ended
July 31, |
| 2025 | | 2024 |
| | | |
| Average total collected per active customer per month | $ | 585 | | | $ | 562 | |
| Principal collected as a percent of average finance receivables | 7.9 | % | | 7.8 | % |
| Average down-payment percentage | 4.9 | % | | 5.2 | % |
Average originating contract term (in months) | 44.9 | | 44.3 |
| | | | | | | | | | | |
| As of |
| July 31, 2025 | | July 31, 2024 |
Portfolio weighted average contract term, including modifications (in months) | 48.3 | | 48.1 |
Total dollars collected per active customer increased 4.1% year over year and principal collections as a percentage of average finance receivables increased slightly by 10 basis points compared to prior year. The portfolio weighted average contract term increased slightly from the prior year quarter but was flat compared to April 30, 2025. Average originating term has increased slightly from prior year due to a couple of factors including: 1) focus on addressing affordability for the highest risk customers by slightly increasing the maximum terms over the last year and 2) the business is booking a higher percentage of better quality customers that qualify for longer terms.
When customers apply for financing, the Company’s proprietary scoring models rely on the customers’ credit histories and certain application information to evaluate and rank their risk. The Company obtains credit histories and other credit data that includes information such as number of different addresses, age of oldest record, high risk credit activity, job time, time at residence and other factors. The application information that is used includes income, collateral value and down payment. The scoring models yield credit grades that represent the relative likelihood of repayment. The Company has historically utilized a six-point scorecard for credit evaluation. In May 2025, a new seven-rank scorecard was fully implemented, offering greater granularity and improving the accuracy of loss ratio projections. Under this enhanced scoring model, customers with the highest probability of repayment are 7-rated customers. Customers assigned a lower grade are determined to have a lower probability of repayment. For loans that are approved, the credit grade influences the terms of the agreement, such as the maximum amount financed, term length and minimum down payment. After origination, credit grades are generally not updated.
The following table presents a summary of finance receivables by credit quality indicator, as of July 31, 2025, segregated by customer score and year of origination.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of July 31, 2025 |
| | | | | | | | | | | | | | | |
| (Dollars in thousands) | Fiscal Year of Origination | | Prior to | | | | |
| Customer Rating | 2026 | | 2025 | | 2024 | | 2023 | | 2022 | | 2022 | | Total | | % |
| 1-2 | $ | 32,567 | | | $ | 24,592 | | | $ | 12,365 | | | $ | 3,742 | | | $ | 552 | | | $ | 65 | | | $ | 73,883 | | | 4.9 | % |
| 3-4 | $ | 71,617 | | | $ | 183,952 | | | $ | 102,214 | | | $ | 32,313 | | | $ | 6,218 | | | $ | 768 | | | $ | 397,082 | | | 26.2 | % |
| 5-7 | $ | 151,763 | | | $ | 510,742 | | | $ | 237,276 | | | $ | 109,996 | | | $ | 31,229 | | | $ | 3,710 | | | $ | 1,044,716 | | | 68.9 | % |
| Total | $ | 255,947 | | | $ | 719,286 | | | $ | 351,855 | | | $ | 146,051 | | | $ | 37,999 | | | $ | 4,543 | | | $ | 1,515,681 | | | 100.0 | % |
| | | | | | | | | | | | | | | | |
| Charge-offs | $ | 2,241 | | | $ | 69,568 | | | $ | 37,819 | | | $ | 15,307 | | | $ | 3,586 | | | $ | 355 | | | $ | 128,876 | | | |
The following table presents a summary of finance receivables by credit quality indicator, as of July 31, 2024, segregated by customer score.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of July 31, 2024 |
| | | | | | | | | | | | | | | |
| (Dollars in thousands) | Fiscal Year of Origination | | Prior to | | | | |
| Customer Rating | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | 2021 | | Total | | % |
| 1-2 | $ | 18,758 | | | $ | 34,722 | | | $ | 10,548 | | | $ | 2,645 | | | $ | 245 | | | $ | 90 | | | $ | 67,008 | | | 4.6 | % |
| 3-4 | $ | 94,738 | | | $ | 251,217 | | | $ | 94,939 | | | $ | 26,565 | | | $ | 2,899 | | | $ | 396 | | | $ | 470,754 | | | 32.1 | % |
| 5-6 | $ | 148,448 | | | $ | 424,197 | | | $ | 246,371 | | | $ | 93,171 | | | $ | 14,071 | | | $ | 1,239 | | | $ | 927,497 | | | 63.3 | % |
| Total | $ | 261,944 | | | $ | 710,136 | | | $ | 351,858 | | | $ | 122,381 | | | $ | 17,215 | | | $ | 1,725 | | | $ | 1,465,259 | | | 100.0 | % |
| | | | | | | | | | | | | | | |
| Charge-offs | $ | 2,619 | | | $ | 70,413 | | | $ | 36,752 | | | $ | 10,578 | | | $ | 1,048 | | | $ | 195 | | | $ | 121,605 | | | |
The percentage of the portfolio in the highest customer ratings (5-7) continues to grow as a result of the Company’s early risk based pricing testing as well as the conversion to the new, more predictive, scorecard.
Contract Modifications
During the preparation of the Company's Annual Report on Form 10-K for the year ended April 30, 2025, management identified material omissions of required disclosures under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 310-10-50-42 through 50-44 related to loan modifications for borrowers experiencing financial difficulty. The previously issued financial statements have been restated to include such disclosures.
The Company identifies and discloses modifications made to customers experiencing financial difficulty after the origination date. Due to the subprime nature and limited financial resources of the majority of the Company’s customers, all modifications that result in a term extension are identified by the Company as modifications made to customers experiencing financial difficulty and are therefore included in the related disclosures. These modifications are made with the intent to support customers while preserving asset value and minimizing credit losses.
The following tables present the aggregate outstanding principal balance of contracts that have been modified during the three months ended July 31, 2025 and 2024, categorized by type of modification. These modifications represent management’s efforts to work with customers experiencing financial difficulty to help them maintain their vehicle ownership while preserving asset value for the Company. The percentages shown represent the portion of the total gross finance receivables portfolio as of July 31, 2025 and 2024 that has been modified at least once during the period.
The following table presents contract modifications by type of modification at three months ended July 31, 2025 and 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in thousands) | | Contract Modifications by Type |
| | July 31, 2025 | | July 31,2024 (Restated) | | |
| Type of Modification | | Principal Balance | | % of Portfolio | | Principal Balance | | % of Portfolio | | | | |
| | | | | | | | | | | | |
| Term extension | | $ | 192,122 | | | 12.7 | % | | $ | 199,667 | | | 13.6 | % | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Combination (1) | | 2,818 | | | 0.2 | % | | 2,894 | | | 0.2 | % | | | | |
| Total | | $ | 194,940 | | | 12.9 | % | | $ | 202,561 | | | 13.8 | % | | | | |
(1)These modifications result from customer bankruptcy filings and have been made in accordance with bankruptcy court requirements. They generally consist of a reduction in the contractual interest rate and/or an extension of the contract term as part of the customer’s court-approved payment restructuring plan.
The following table describes the financial effect of the modifications for each period:
| | | | | | | | | | | | | | | | |
| Type of Modification | | Three Months Ended July 31, 2025 | | Three Months Ended July 31, 2024 (Restated) | | |
| | | | | | |
| Term extension | | Added a weighted average of 1.4 months to the life of contracts, which reduced payment amounts due from borrowers. | | Added a weighted average of 1.6 months to the life of contracts, which reduced payment amounts due from borrowers. | | |
| | | | | | |
| | | | | | |
| Combination | | Added a weighted average of 10.2 months to the life of contracts, which reduced payment amounts due from borrowers and/or reduced the interest rate to a weighted average of 8.14%. | | Added a weighted average of 12.5 months to the life of contracts, which reduced payment amounts due from borrowers and/or reduced the interest rate to a weighted average of 7.00%. | | |
The Company closely monitors the performance of the contracts that are modified to understand the effectiveness of its modification efforts. The following table depicts the status of contracts that have term modifications in the three months ended July 31:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payment Status (Principal Balance) |
| | | | | | | | | | | | |
| (In thousands) | | Total | | Current | | 3-29 Days Past Due | | 30-60 Days Past Due | | 61-90 Days Past Due | | 90+ Days Past Due |
| | | | | | | | | | | | |
| For Three Months Ended July 31, 2025 | | $ | 192,122 | | | $ | 143,015 | | | $ | 42,693 | | | $ | 5,745 | | | $ | 669 | | | $ | - | |
| For Three Months Ended July 31, 2024 (Restated) | | 199,667 | | 143,949 | | | 48,961 | | | 6,234 | | | 523 | | | - | |
| | | | | | | | | | | | |
The following table depicts the status of contracts that have term modifications due to the combination of modifications due to bankruptcies for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payment Status (Principal Balance) | | |
| (In thousands) | | Total | | Payment Received in Last 30 Days | | Payment Received in Last 31-60 Days | | Payment Received in Last 61-90 Days | | Payment Received in Last 90+ Days | | |
| | | | | | | | | | | | |
| For Three Months Ended July 31, 2025 | | $ | 2,818 | | | $ | 772 | | | $ | 753 | | | $ | 605 | | | $ | 688 | | | |
| For Three Months Ended July 31, 2024 (Restated) | | 2,894 | | | 871 | | 589 | | 844 | | 590 | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
For the three months ended July 31, 2025 and 2024, customer contracts with an aggregate principal balance of $4.6 million and $4.9 million, respectively, were charged off within the period following contract modifications.
These modifications and their subsequent performance were evaluated under the Company’s CECL methodology, and the related allowance for credit losses reflects expected future losses based on borrower performance, economic conditions, and the nature of the modifications. The Company continues to monitor the performance of all modified contracts and has credit risk management processes in place to assess and manage these exposures.
D – Property and Equipment, Net
A summary of property and equipment is as follows:
| | | | | | | | | | | |
| (In thousands) | July 31, 2025 | | April 30, 2025 |
| | | |
| Land | $ | 11,998 | | | $ | 11,998 | |
| Buildings and improvements | 23,604 | | | 23,575 | |
| Furniture, fixtures and equipment | 26,140 | | | 26,139 | |
| Leasehold improvements | 51,586 | | | 51,466 | |
| Construction in progress | 1,115 | | | 1,028 | |
| Less accumulated depreciation and amortization | (59,240) | | | (57,312) | |
| | | | |
| Total | $ | 55,203 | | | $ | 56,894 | |
E – Accrued Liabilities
A summary of accrued liabilities is as follows:
| | | | | | | | | | | |
| (In thousands) | July 31, 2025 | | April 30, 2025 |
| Cash overdraft | $ | 7,452 | | | $ | 1,289 | |
| Employee compensation | $ | 9,704 | | | $ | 7,983 | |
| Deferred sales tax (see Note B) | 11,412 | | | 10,326 | |
| Fair value of contingent consideration | 6,954 | | | 6,298 | |
| Accrued interest payable | 2,347 | | | 2,155 | |
| Other | 8,738 | | | 7,898 | |
| Total | $ | 46,607 | | | $ | 35,949 | |
F – Debt Facilities
A summary of debt facilities is as follows:
| | | | | | | | | | | |
| (In thousands) | July 31, 2025 | | April 30, 2025 |
| Revolving line of credit | $ | 168,626 | | | $ | 208,322 | |
| Debt issuance costs | (4,232) | | | (3,553) | |
| | | | |
| Revolving line of credit, net | $ | 164,394 | | | $ | 204,769 | |
| | | | |
| Non-recourse notes payable - 2023-1 Issuance | $ | – | | | $ | 46,289 | |
| Non-recourse notes payable - 2023-2 Issuance | 73,142 | | | 92,949 | |
| Non-recourse notes payable - 2024-1 Issuance | 51,696 | | | 73,158 | |
| Non-recourse notes payable - 2024-2 Issuance | 155,426 | | | 194,139 | |
| Non-recourse notes payable - 2025-1 Issuance | 139,399 | | | 168,318 | |
| Non-recourse notes payable - 2025-2 Issuance | 193,690 | | | - | |
| Debt issuance costs - non-recourse notes payable | (2,603) | | | (2,843) | |
| | | |
| Non-recourse notes payable, net | $ | 610,750 | | | $ | 572,010 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | | |
| Total debt | $ | 775,144 | | | $ | 776,779 | |
Revolving Line of Credit
At July 31, 2025, the Company and its subsidiaries have $350.0 million of permitted borrowings under a revolving line of credit. The revolving credit facilities are collateralized primarily by finance receivables and inventory, are cross collateralized and contain a guarantee by the Company. Interest is payable monthly under the revolving credit facilities with a scheduled maturity date of March 31, 2027. The current applicable interest rate under the credit facilities is SOFR plus 3.5% or for non-SOFR amounts the base rate of 7.5% plus 1.0% at July 31, 2025 and 8.50% plus 1.0% at July 31, 2024. The credit facilities contain various reporting and performance covenants including (i) maintenance of certain financial ratios and tests, (ii) limitations on borrowings from other sources, (iii) restrictions on certain operating activities and (iv) restrictions on the payment of dividends or distributions (see Note B).
The Company was in compliance with the covenants at July 31, 2025. The amount available to be drawn under the credit facilities is a function of eligible finance receivables and inventory; based upon eligible finance receivables and inventory at July 31, 2025, the Company had additional availability of approximately $20.8 million under the revolving credit facilities.
Non-Recourse and Recourse Notes Payable
During the quarter, on May 29, 2025, the Company completed a securitization transaction, which involved the issuance and sale in a private offering of$165.2 million aggregate principal amount of 5.55% Class A Asset Backed Notes (the “Class A Notes”) and $50.8 million aggregate principal amount of 7.25% Class B Asset Back Notes (the “Class B Notes”), with an overall weighted average life adjusted coupon of 6.27%. The Notes were issued by ACM Auto Trust 2025-2, an indirect subsidiary of the Company. The Notes are collateralized by $363.0 million of accounts receivables related to installment sale contracts originated by the Company’s operating subsidiaries, America’s Car Mart, Inc and Texas Car-Mart, Inc. The Class A Notes mature on June 20, 2028, and the Class B Notes mature on February 20, 2032.
As of July 31, 2025, the Company has six outstanding series of asset-backed non-recourse notes (known as the “2023-1 Issuance”, “2023-2 Issuance”, “2024-1 Issuance”, “2024-2 Issuance”, “2025-1 Issuance”, and “2025-2 Issuance”). All six issuances are collateralized by installment sale contracts directly originated by the Company. Credit enhancement for the non-recourse notes payable consists of overcollateralization, a reserve account funded with an initial amount of not less than 2.0% of the pool balance, excess interest on the auto finance receivables, and in some cases, the subordination of certain payments to noteholders of less senior classes of notes. The timing of principal payments on the non-recourse notes
payable is based on the timing of principal collections and defaults on the related auto finance receivables. In July 2025, the Company fully paid off the 2023-1 Issuance. The notes payable related to the remaining term securitization transactions accrue interest predominately at fixed rates and have scheduled maturities through June 20, 2028, June 20, 2030, and January 21, 2031, August 20, 2031, November 20, 2031 and February 20, 2032, respectively, but may be repaid earlier, depending upon collections from the underlying auto finance receivables. The original principal balance and weighted average fixed coupon rate for the outstanding securitizations are as follows:
| | | | | | | | | | | |
| Original Principal Balance (in thousands) | | Weighted Average Fixed Coupon Rate |
| | | |
| | | |
| 2023-2 | $ | 360,300 | | | 8.80 | % |
| 2024-1 | 250,000 | | | 9.50 | % |
| 2024-2 | 300,000 | | | 7.44 | % |
| 2025-1 | 200,000 | | | 6.49 | % |
| 2025-2 | 216,000 | | | 6.27 | % |
On July 12, 2024, the Company’s principal operating subsidiary, America’s Car Mart, Inc., and a newly formed affiliate entered into a loan and security agreement under which the Company’s affiliate borrowed $150 million in funding through an amortizing warehouse loan facility collateralized by installment sale contracts directly originated by the Company’s operating subsidiaries. The Company used the funding from the warehouse loan facility to pay down outstanding amounts borrowed under the Company’s revolving line of credit to fund its finance receivables. The loan and security agreement provided for additional borrowing availability, subject to the terms and conditions of the agreement, and recourse against the Company with respect to up to 10% of the aggregate amount borrowed under the warehouse facility payable. Interest on any outstanding balances accrues at a rate of SOFR plus 350 basis points, with a scheduled maturity date of July 12, 2026. In October 2024, the Company used the proceeds from its 2024-2 Issuance to pay down the outstanding balance under the warehouse loan facility. No debt was outstanding under the warehouse loan facility as of July 31, 2025.
G – Fair Value Measurements
Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also establishes a fair value hierarchy that requires the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Topic 820 describes three levels of inputs that may be used to measure fair value:
•Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities.
•Level 2 Inputs – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 Inputs – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Because no market exists for certain of the Company’s financial instruments, fair value estimates are based on judgments and estimates regarding yield expectations of investors, credit risk and other risk characteristics, including interest rate and prepayment risk. These estimates are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.
The methodology and assumptions utilized to estimate the fair value of the Company’s financial instruments and other assets are as follows:
| | | | | | | | |
| Financial Instrument and Other Assets | | Valuation Methodology |
| | |
| Cash, cash equivalents, and restricted cash | | The carrying amount is considered to be a reasonable estimate of fair value due to the short-term nature of the financial instruments (Level 1). |
| | |
| Repossessed inventory | | The fair value approximates wholesale value (Level 1). |
| | |
| Finance receivables, net | | The Company estimated the fair value of its receivables at what a third-party purchaser might be willing to pay. The Company has had discussions with third parties and has bought and sold portfolios and has had a third-party appraisal in October 2022 that indicates a range of 34% to 39% discount to face would be a reasonable fair value in a negotiated third-party transaction. The sale of finance receivables from Car-Mart of Arkansas to Colonial is made at a 38.5% discount. For financial reporting purposes these sale transactions are eliminated (Level 2). |
| | |
| Accounts payable | | The carrying amount is considered to be a reasonable estimate of fair value due to the short-term nature of the financial instrument (Level 2). |
| | |
| Contingent consideration payable for acquisition | | The fair value is based upon inputs from the earn-out projection for the applicable acquisition (Level 2). |
| | |
| Revolving line of credit | | The fair value approximates carrying value due to the variable interest rates charged on the borrowings, which reprice frequently (Level 2). |
| | |
| Notes payable | | The fair value is based upon inputs derived from prices for similar instruments at period end (Level 2). |
The estimated fair values, and related carrying amounts, of the financial instruments and other assets included in the Company’s financial statements at July 31, 2025 and April 30, 2025 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | July 31, 2025 | | April 30, 2025 |
| (In thousands) | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
| Cash and cash equivalents | $ | 9,666 | | | $ | 9,666 | | | $ | 9,808 | | | $ | 9,808 | |
| Restricted cash | 111,761 | | | 111,761 | | | 114,729 | | | 114,729 | |
| Inventory - Repossessions | 16,432 | | | 16,432 | | | 18,845 | | | 18,845 | |
| Finance receivables, net | 1,183,452 | | | 932,144 | | | 1,180,673 | | | 928,130 | |
| Accounts payable | 33,977 | | | 33,977 | | | 34,980 | | | 34,980 | |
| Contingent consideration | 6,954 | | | 6,954 | | | 6,298 | | | 6,298 | |
| Revolving line of credit, net | 164,394 | | | 164,394 | | | 204,769 | | | 204,769 | |
| | | | | | | |
| Non-recourse notes payable, net | 610,750 | | | 619,380 | | | 572,010 | | | 581,029 | |
H – Capital Stock
The Company is authorized to issue up to 50,000,000 shares of common stock, par value $0.01 per share, and up to 1,000,000 shares of preferred stock, par value $0.01 per share. Each share of the Company’s common stock has the same relative rights as, and is identical in all respects to, each other share of the Company’s common stock. The shares of preferred stock may be issued in one or more series having such respective terms, rights and preferences as are designated by the Board of Directors. The Company has not issued any preferred stock.
A subsidiary of the Company has issued 500,000 shares of $1.00 par value preferred stock which carries an 8% cumulative dividend. The Company’s subsidiary can redeem the preferred stock at any time at par value plus any unpaid dividends. After April 30, 2017, a holder of 400,000 shares of the subsidiary preferred stock can require the Company’s subsidiary to redeem such stock for $400,000 plus any unpaid dividends.
On September 20, 2024, the Company completed an underwritten public offering of 1,700,000 shares of its common stock, par value $0.01 per share, at a public offering price of $43.00. Net proceeds from the offering were $73.8 million after deducting the underwriting discount, commissions and offering costs. Under the terms of the Underwriting Agreement entered into in connection with the offering, the Company granted the underwriter an option (the “Over-allotment Option”), exercisable for 30 days, to purchase up to 255,000 additional shares of common stock (the “Option Shares”) at the public offering price, less underwriting discounts and commissions. On October 22, 2024, the Company completed the sale of 138,272 Option Shares in connection with the partial exercise by the underwriter of the Over-allotment Option at the public offering price of $43.00 per share. The Company received net proceeds from the sale of the Option Shares of approximately $5.6 million after deducting the underwriting discount, commissions and offering costs, resulting in aggregate net proceeds to the Company from the offering of approximately $73.8 million.
As of July 31, 2025, the Company has a total of 8,277,613 shares of its common stock outstanding, compared to 8,263,280 outstanding as of April 30, 2025.
I – Weighted Average Shares Outstanding
Weighted average shares of common stock outstanding used in the calculation of basic and diluted earnings per share were as follows:
| | | | | | | | | | | |
| | Three Months Ended
July 31, |
| | 2025 | | 2024 |
| | | | |
| Weighted average shares outstanding-basic | 8,274,054 | | 6,396,757 |
| Dilutive options and restricted stock | - | | - |
| | | | |
| Weighted average shares outstanding-diluted | 8,274,054 | | 6,396,757 |
| | | | |
| Antidilutive securities not included: | | | |
| Options | 628,934 | | 534,767 |
| Restricted stock | 6,250 | | 14,176 |
J – Stock-Based Compensation
The Company has stock-based compensation plans under which awards of non-qualified stock options, incentive stock options and restricted stock have been or may be granted to employees, directors and certain advisors of the Company. The stock-based compensation plan being utilized at July 31, 2025 is the 2024 Equity Incentive Plan. The 2024 Equity Incentive Plan was approved by the Company’s shareholders and became effective on August 27, 2024. This plan governs all new equity-based awards granted on or after its effective date. The 2024 Equity Incentive Plan includes a reserve of 500,000 shares authorized for issuance of awards under the plan. At July 31, 2025, a total of 336,772 shares
remained available for future awards under the 2024 Equity Incentive Plan. The Company recorded total stock-based compensation expense for all plans of approximately $1.2 million ($905 thousand after tax effects) and $1.3 million ($1.1 million after tax effects) for the three months ended July 31, 2025 and 2024, respectively. Tax benefits were recognized for these costs at the Company’s overall effective tax rate, excluding discrete income tax benefits related to excess benefits on share-based compensation.
Stock Option Awards
The Company has options outstanding under the Amended and Restated Stock Option Plan. The shareholders of the Company approved the Amended and Restated Stock Option Plan (the “Restated Option Plan”) on August 5, 2015, which extended the term of the Stock Option Plan to June 10, 2025 and increased the number of shares of common stock reserved for issuance under the plan by an additional 300,000 shares to 1,800,000 shares. On August 29, 2018, August 26, 2020, and August 30, 2022, the shareholders of the Company approved amendments to the Restated Option Plan increasing the number of shares of common stock reserved for issuance under the plan by an additional 200,000, 200,000 and 185,000 shares, respectively. At July 31, 2025, a total of 427,448 shares of common stock are reserved for issuance of outstanding stock options under the Restated Option Plan. Options outstanding under the Restated Option Plan expire in the calendar years 2026 through 2034. As of July 31, 2025, there were 230,486 unvested options under the Restated Option Plan. No further awards may be granted under the Restated Option Plan.
The 2024 Equity Incentive Plan, which replaced the Restated Option Plan, provides for the grant of options to purchase shares of the Company’s common stock to employees, directors and certain advisors of the Company at a price not less than the fair market value of the stock on the date of grant and for periods not to exceed 10 years. As of July 31, 2025, there were 63,818 unvested options under the 2024 Equity Incentive Plan.
| | | | | | | | | | | |
| Restated Option Plan | | 2024 Equity Incentive Plan |
| Minimum exercise price as a percentage of fair market value at date of grant | 100% | | 100% |
| Last expiration date for outstanding options | May 9, 2034 | | June 5, 2035 |
| Shares available for grant at July 31, 2025 | 0 | | 336,772 |
The aggregate intrinsic value of outstanding options at July 31, 2025 and 2024 was $466,000 and $4.8 million, respectively.
The fair value of options granted is estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions in the table below.
| | | | | | | | | | | |
| Three Months Ended
July 31, |
| 2025 | | 2024 |
| Expected terms (years) | 1.9 | | 4.9 |
| Risk-free interest rate | 3.93 | % | | 5.13 | % |
| Volatility | 54 | % | | 60 | % |
| Dividend yield | - | | | - | |
The expected term of the options is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on historical volatility of the Company’s common stock. The Company has not historically issued any dividends and does not expect to do so in the foreseeable future.
There were 61,318 options granted during the three months ended July 31, 2025 under the 2024 Equity Incentive Plan. There were 22,281 options granted during July 31, 2024 under the Restated Option Plan. The grant-date fair value of options granted during the three months ended July 31, 2025 and 2024 was $875,000 and $350,000, respectively. The options were granted at fair market value on the date of grant. Generally, options vest after three to five years.
Stock option compensation expense was $288,000 ($223,000 after tax effects) and $200,800 ($164,000 after tax effects) for the three months ended July 31, 2025 and 2024, respectively. As of July 31, 2025, the Company had approximately $1.6 million of total unrecognized compensation cost related to unvested options that are expected to vest. These unvested outstanding options have a weighted-average remaining vesting period of 1.3 years.
The Company had no options exercised for the three months ended July 31, 2025 and 2024.
As of July 31, 2025, there were 427,448 vested and exercisable stock options outstanding with an aggregate intrinsic value of $459,000, a weighted average remaining contractual life of 4.6 years, and a weighted average exercise price of $81.23.
Restricted Stock Awards
On August 5, 2015, the shareholders of the Company approved the Amended and Restated Stock Incentive Plan (the “Restated Incentive Plan”), which extended the term of the Company’s Stock Incentive Plan to June 10, 2025. On August 29, 2018, the shareholders of the Company approved an amendment to the Restated Stock Incentive Plan that increased the number of shares of common stock that may be issued under the Restated Incentive Plan by 100,000 shares to 450,000. The 2024 Equity Incentive Plan replaced the Restated Incentive Plan. As of August 27, 2024, no further awards may be granted under the Restated Incentive Plan. For shares issued under the Restated Incentive Plan and the 2024 Equity Incentive Plan, the associated compensation expense is generally recognized equally over the vesting periods established at the award date and is subject to the employee’s continued employment by the Company.
There were 29,363 restricted shares granted during the three months ended July 31, 2025 and 16,364 restricted shares granted during the three months ended July 31, 2024. There were 263,779 unvested restricted shares outstanding as of July 31, 2025 with a weighted average grant date fair value of $57.61.
The Company recorded compensation cost of approximately $869,000 ($673,000 after tax effects) and $1.1 million ($839,000 after tax effects) related to the Restated Incentive Plan and 2024 Equity Incentive Plan during the three months ended July 31, 2025 and 2024, respectively. As of July 31, 2025, the Company had approximately $4.9 million of total unrecognized compensation cost related to unvested awards granted under the Restated Incentive Plan and 2024 Equity Incentive Plan, which the Company expects to recognize over a weighted-average remaining period of 1.9 years.
There were no modifications to any of the Company’s outstanding share-based payment awards during fiscal 2025 or during the first three months of fiscal 2026.
K – Commitments and Contingencies
Letter of Credit
The Company has standby letters of credit relating to insurance policies totaling $4.7 million and $3.9 million at July 31, 2025 and 2024, respectively.
Facility Leases
The Company leases certain dealership and office facilities under various non-cancelable operating leases. Dealership leases are generally for periods from three to five years and contain multiple renewal options. As of July 31, 2025, the aggregate rentals due under such leases, including renewal options that are reasonably assured, were as follows:
| | | | | |
| Maturity of lease liabilities | |
| 2026 (remaining) | $ | 7,723 | |
| 2027 | 9,733 | |
| 2028 | 9,025 | |
| 2029 | 8,120 | |
| 2030 | 6,945 | |
| Thereafter | $ | 44,598 | |
| Total undiscounted operating lease payments | 86,144 | |
| Less: imputed interest | (19,196) | |
| Present value of operating lease liabilities | $ | 66,948 | |
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. For the years ended July 31, 2025 and 2024, rent expense for all operating leases amounted to approximately $929,000 and $2.6 million, respectively.
Litigation
In the ordinary course of business, the Company has become a defendant in various types of legal proceedings. The Company does not expect the final outcome of any of these actions, individually or in the aggregate, to have a material adverse effect on the Company’s financial position, annual results of operations or cash flows. The results of legal proceedings cannot be predicted with certainty, however, and an unfavorable resolution of one or more of these legal proceedings could have a material adverse effect on the Company’s financial position, annual results of operations or cash flows.
Related Finance Company
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.
L - Supplemental Cash Flow Information
Supplemental cash flow disclosures are as follows:
| | | | | | | | | | | |
| | Three Months Ended
July 31, |
| (In thousands) | 2025 | | 2024 |
| Supplemental disclosures: | | | |
| Interest paid | $ | 16,850 | | | $ | 17,062 | |
| Income taxes paid, net | 85 | | | 1,297 | |
| | | |
| Non-cash transactions: | | | |
| Inventory acquired in repossession and accident protection plan claims | 29,616 | | | 26,975 | |
| | | |
| Right-of-use assets obtained in exchange for operating lease liabilities | - | | | 384 | |
| Right-of-use assets obtained in exchange for operating lease liabilities through acquisitions | - | | | 7,433 | |
M – Acquisitions
On June 3, 2024, the Company completed its business combination of Texas Auto Center (“TAC”), which includes two dealership locations in Austin and San Marcos, Texas.
The total purchase price of the TAC acquisition was $13.5 million, which included $3.5 million of contingent consideration. The structure of the transaction is consistent with prior transactions whereby the Company did not acquire existing finance receivables and the seller may receive a performance-based earn-out in the future ranging from zero to a maximum of $15 million based on cumulative pre-tax income.
The excess of the purchase price over the preliminary fair values of the net assets acquired was allocated to goodwill, all of which is deductible for tax purposes and represents the future economic benefits expected to arise from anticipated synergies and intangible assets that do not qualify for separate recognition. The Company recorded the preliminary fair values of the assets acquired and liabilities assumed in the TAC acquisition, which resulted in the recognition of: (1) net working capital assumed of $100,000, (2) inventory of $5 million, (3) gross right use of asset and lease liability of $7.4 million and (4) goodwill of $8.5 million.
N - Segment Reporting
The Company conducts its operations through a single reportable segment representing the consolidated entity selling and financing used vehicles. Management has determined the Company consists of a single operating and reportable segment. The chief operating decision maker (“CODM”), who is the Chief Executive Officer, manages the Company on a consolidated basis and utilizes sales, provision for credit losses, and net income (loss) as presented on the Condensed Consolidated Statements of Operations as the primary financial measures used in assessing the performance of the Company.
The CODM is provided with the following significant segment expenses within selling, general and administrative expenses on the consolidated statement of operations. Other segment items within consolidated net income (loss) are all separately disclosed on the Condensed Consolidated Statement of Operations.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended July 31, | | |
| (Dollars in thousands) | 2025 | | Change | | 2024 | | | | | | |
| | | | | | | | | | | |
| Compensation and benefits: | | | | | | | | | | | |
| Compensation and benefits, excluding share-based compensation expense | $ | 32,031 | | | 12.4 | % | | $ | 28,496 | | | | | | | |
| Share-based compensation expense | 1,157 | | | (11.7) | | | 1,311 | | | | | | | |
| Total compensation and benefits | $ | 33,188 | | | 11.3 | | | $ | 29,807 | | | | | | | |
| Store occupancy costs | 5,495 | | | 13.3 | | | 4,850 | | | | | | | |
| Advertising costs | 1,344 | | | 33.3 | | | 1,008 | | | | | | | |
| Other overhead costs | 11,381 | | | 3.0 | | | 11,046 | | | | | | | |
| Total selling, general and administrative expenses | $ | 51,408 | | | 10.1 | | | $ | 46,711 | | | | | | | |
O – Subsequent Events
On August 28, 2025, the Company completed a securitization transaction, which involved the issuance and sale in a private offering of $133.3 million aggregate principal amount of 5.01% Class A Asset Backed Notes (the “Class A Notes”) and $38.6 million aggregate principal amount of 6.08% Class B Asset Back Notes (the “Class B Notes”), with an overall weighted average life adjusted coupon of 5.46%. The Notes were issued by ACM Auto Trust 2025-3, an indirect subsidiary of the Company. The Notes are collateralized by $291.5 million of accounts receivables related to installment sale contracts originated by the Company’s operating subsidiaries, America’s Car Mart, Inc and Texas Car-Mart, Inc. The Class A Notes mature on January 20, 2030, and the Class B Notes mature on July 20, 2032.