10q10k10q10k.net

What changed in AMERICAS CARMART INC's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of AMERICAS CARMART INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+223 added−216 removedSource: 10-K (2024-07-15) vs 10-K (2023-06-26)

Top changes in AMERICAS CARMART INC's 2024 10-K

223 paragraphs added · 216 removed · 175 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

64 edited+5 added−14 removed79 unchanged
Biggest changeWe continue to follow the CDC COVID-19 guidelines and established Company procedures to maintain facilities that are clean, safe, and sanitized. 14 From a health perspective, the Company believes it is important to support the physical, mental, social, environmental and financial well-being of our Car-Mart associates at work and at home.
Biggest changeFrom a health perspective, the Company believes it is important to support the physical, mental, social, environmental and financial well-being of our Car-Mart associates at work and at home. The Company is committed to doing so with key initiatives that inspire associates to strive for long-term sustainable health and wellness for themselves and their families.
The Company’s dealership managers meet monthly on an area, regional or Company-wide basis. At these meetings, corporate office personnel provide training and recognize achievements of dealership managers. Near the end of every fiscal year, the respective area operations manager, regional vice president and senior management conduct “projection” meetings with each dealership manager.
The Company’s dealership managers meet monthly on an area, regional or Company-wide basis. At these meetings, corporate office personnel provide training and recognize the achievements of dealership managers. Near the end of every fiscal year, the respective area operations manager, regional vice president and senior management conduct “projection” meetings with each dealership manager.
Judy is a Certified Public Accountant and prior to joining the Company her experience included approximately five years in public accounting with Arthur Andersen & Co. and approximately 17 years at National Home Centers, Inc., a home improvement product and building materials retailer, most recently as Vice President of Financial Reporting.
Judy is a Certified Public Accountant and prior to joining the Company her experience included approximately five years in public accounting with Arthur Andersen & Co. and approximately 17 years at National Home Centers, Inc., a home improvement product and building materials retailer, most recently as Vice President of Financial Reporting. Jeffrey A.
The used automobile financing industry is served by traditional lending sources such as banks, savings and loans, and captive finance subsidiaries of automobile manufacturers, as well as by independent finance companies and Integrated Auto Sales and Finance dealers. Many loans that flow through the more traditional sources have historically ended up packaged in the securitization markets.
Used Car Financing. The used automobile financing industry is served by traditional lending sources such as banks, savings and loans, and captive finance subsidiaries of automobile manufacturers, as well as by independent finance companies and Integrated Auto Sales and Finance dealers. Many loans that flow through the more traditional sources have historically ended up packaged in the securitization markets.
Management continues to actively pursue additional acquisitions, including in regions beyond the Company’s existing geographic footprint, and believes that disruptions in the current competitive landscape will provide unique opportunities to acquire productive dealerships in good markets managed by experienced owners and their staff. 11 Corporate Office Oversight and Management.
Management continues to actively pursue additional acquisitions, including in regions beyond the Company’s existing geographic footprint, and believes that disruptions in the current competitive landscape will provide unique opportunities to acquire productive dealerships in good markets managed by experienced owners and their staff. Corporate Office Oversight and Management.
The corporate office uses this information to compile Company-wide reports, plan dealership visits and prepare monthly financial statements. Periodically, area operations managers, regional vice presidents, compliance auditors, loss prevention associates, and senior management visit the Company’s dealerships to inspect, review and comment on operations.
The corporate office uses this information to compile Company-wide reports, plan dealership visits and prepare monthly financial statements. 11 Periodically, area operations managers, regional vice presidents, compliance auditors, loss prevention associates, and senior management visit the Company’s dealerships to inspect, review and comment on operations.
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. 10 New Dealership Openings. Along with strategic dealership acquisitions, the Company continues to explore opportunities for new dealership openings.
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. New Dealership Openings. Along with strategic dealership acquisitions, the Company continues to explore opportunities for new dealership openings.
APP is available in most of the states in which the Company operates and the vast majority of financed customers elect to purchase this product when purchasing a vehicle in those states. The Company has a 7-day vehicle exchange policy.
APP is available in most of the states in which the Company operates, and the vast majority of financed customers elect to purchase this product when purchasing a vehicle in those states. 9 The Company has a 7-day vehicle exchange policy.
For covered components and assemblies, the Company coordinates service with third-party service centers with which the Company typically has previously negotiated labor rates. The vast majority of the Company’s customers elect to purchase a service contract when purchasing a vehicle. Additionally, the Company offers its customers to whom financing is extended an accident protection plan (APP) product.
For covered components and assemblies, the Company coordinates service with third-party service centers with which the Company typically has previously negotiated labor rates. The vast majority of the Company’s customers elect to purchase a service contract when purchasing a vehicle. Additionally, the Company offers its customers to whom financing is extended an accident protection plan (“APP”) product.
The Company monitors operating costs as a percentage of revenues, per customer served, and per unit sold, and strives to provide excellent service at a low cost. Well-Capitalized. The Company believes it can fund its planned growth from net income generated from operations supplemented by its external capital resources.
The Company monitors operating costs as a percentage of revenues and per customer served and strives to provide excellent service at a low cost. Well-Capitalized. The Company believes it can fund its planned growth from net income generated from operations supplemented by its external capital resources.
The Company has successfully completed acquisitions in two of the last three fiscal years and anticipates that future acquisitions will likely contribute to its growth. These plans are subject to change based on both internal and external factors. Selling Basic Transportation. The Company focuses on selling basic and affordable transportation to its customers.
The Company has successfully completed acquisitions in each of the last three fiscal years and anticipates that future acquisitions will likely contribute to its growth. These plans are subject to change based on both internal and external factors. Selling Basic Transportation. The Company focuses on selling basic and affordable transportation to its customers.
Integrated Auto Sales and Finance dealers typically offer their customers certain advantages over more traditional financing sources, such as less restrictive underwriting guidelines, flexible payment terms (including scheduling payments on a weekly or bi-weekly basis to coincide with a customer’s payday), and the ability to make payments in person, an important feature to individuals who may not have a checking account. 12 Used Car Financing.
Integrated Auto Sales and Finance dealers typically offer their customers certain advantages over more traditional financing sources, such as less restrictive underwriting guidelines, flexible payment terms (including scheduling payments on a weekly or bi-weekly basis to coincide with a customer’s payday), and the ability to make payments in person, an important feature to individuals who may not have a checking account.
As of April 30, 2023, approximately 71% of the Company’s dealerships were located in cities with populations of 50,000 or less. The Company believes that by operating in smaller communities it develops strong personal relationships, resulting in better collection results.
As of April 30, 2024, approximately 71% of the Company’s dealerships were located in cities with populations of 50,000 or less. The Company believes that by operating in smaller communities it develops strong personal relationships, resulting in better collection results.
The Company’s recent acquisitions have not only expanded the Company's geographic reach but also allowed the Company to leverage the acquired dealerships' operational efficiencies and customer relationships, leading to enhanced value for both the Company and its customers.
The Company’s recent acquisitions have not only expanded the Company's geographic reach but also allowed the Company to leverage the acquired dealerships' operational efficiencies, experienced personnel, and customer relationships, leading to enhanced value for both the Company and its customers.
Campbell held management positions at AutoNation from September 2014 to March 2018 serving as Used Vehicle Director, Eastern Region, in AutoNation’s corporate office and later as General Manager of its Honda Dulles dealership. Preceding AutoNation, Mr. Campbell served fifteen years with Coral Springs Auto Mall, most recently serving as Executive General Manager. 16
Campbell held management positions at AutoNation from September 2014 to March 2018 serving as Used Vehicle Director, Eastern Region, in AutoNation’s corporate office and later as General Manager of its Honda Dulles dealership. Preceding AutoNation, Mr. Campbell served fifteen years with Coral Springs Auto Mall, most recently serving as Executive General Manager. Vickie D.
Williams served as Chief Financial Officer of the Company since 2005. He also served as Vice President Finance from 2005 to March 2016 and as Secretary of the Company from 2005 to May 2018. Mr.
Williams also served as Chief Financial Officer of the Company from 2005 to January 2018. He also served as Vice President Finance from 2005 to March 2016 and as Secretary of the Company from 2005 to May 2018. Mr.
Below is a summary of dealerships operating during the fiscal years ended April 30, 2023, 2022 and 2021: Years Ended April 30, 2023 2022 2021 Dealerships at beginning of year 154 151 148 Dealerships opened or acquired 3 3 3 Dealerships closed (1 ) - - Dealerships at end of year 156 154 151 Below is a summary of dealership locations by state as of April 30, 2023, 2022 and 2021: As of April 30, Dealerships by State 2023 2022 2021 Arkansas 37 38 38 Oklahoma 30 30 28 Missouri 18 18 18 Alabama 16 16 16 Texas 14 13 13 Kentucky 12 12 12 Georgia 9 9 9 Tennessee 10 8 7 Mississippi 5 5 5 Illinois 3 3 3 Indiana 1 1 1 Iowa 1 1 1 Total 156 154 151 8 Dealerships are located on leased or owned property between one and four acres in size.
Below is a summary of dealerships operating during the fiscal years ended April 30, 2024, 2023 and 2022: Years Ended April 30, 2024 2023 2022 Dealerships at beginning of year 156 154 151 Dealerships opened or acquired 1 3 3 Dealerships closed (3 ) (1 ) - Dealerships at end of year 154 156 154 8 Below is a summary of dealership locations by state as of April 30, 2024, 2023 and 2022: As of April 30, Dealerships by State 2024 2023 2022 Arkansas 37 37 38 Oklahoma 29 30 30 Missouri 18 18 18 Alabama 16 16 16 Texas 14 14 13 Kentucky 12 12 12 Georgia 9 9 9 Tennessee 9 10 8 Mississippi 5 5 5 Illinois 3 3 3 Indiana 1 1 1 Iowa 1 1 1 Total 154 156 154 Dealerships are located on leased or owned property between one and four acres in size.
For a reconciliation of adjusted debt to equity ratio to the most directly comparable GAAP financial measure, see “Non-GAAP Financial Measure” included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Significant Expansion Opportunities.
For a reconciliation of the adjusted debt to finance receivables ratio to the most directly comparable GAAP financial measure, see “Non-GAAP Financial Measure” included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Significant Expansion Opportunities.
Generally, the Company purchases vehicles between 5 and 12 years of age with 70,000 to 140,000 miles and pays between $7,000 and $15,000 per vehicle with an average cost of $10,000 per vehicle. The Company focuses on providing basic transportation to its customers. The Company sells a variety of vehicles that include primarily sport utility vehicles, trucks, and sedans.
Generally, the Company purchases vehicles between 5 and 12 years of age with 70,000 to 150,000 miles and pays between $7,000 and $15,000 per vehicle with an average cost of $7,300 per vehicle. The Company focuses on providing basic transportation to its customers. The Company sells a variety of vehicles that include primarily sport utility vehicles, trucks, and sedans.
The Company only provides financing to its customers for the purchase of its vehicles and related ancillary products, and the Company does not provide any type of financing to non-customers.
The Company only provides financing to its customers for the purchase of its vehicles and selected ancillary products, and the Company does not provide any type of financing to non-customers.
Human Capital Resources At America’s Car-Mart, Inc., our associates are the heart of our business. Our associates are committed to making a difference for customers, their communities and each other. As of April 30, 2023, the Company, including its consolidated subsidiaries, employed a diverse associate base of approximately 2,260 fulltime associates.
Human Capital Resources At America’s Car-Mart, Inc., our associates are the heart of our business. Our associates are committed to making a difference for customers, their communities and each other. As of April 30, 2024, the Company, including its consolidated subsidiaries, employed a diverse associate base of approximately 2,280 fulltime associates.
The Company requires that payments be made on a weekly, bi-weekly, semi-monthly or monthly basis, scheduled to coincide with the day the customer is paid by his or her employer, with 79% of payments being due on either a weekly or bi-weekly basis.
The Company requires that payments be made on a weekly, bi-weekly, semi-monthly or monthly basis, scheduled to coincide with the day the customer is paid by his or her employer, with approximately 78% of payments being due on either a weekly or bi-weekly basis.
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 problems. As of April 30, 2023, the Company operated 156 dealerships located primarily in small cities throughout the South-Central United States.
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 problems. As of April 30, 2024, the Company operated 154 dealerships located primarily in small cities throughout the South-Central United States.
The Company focuses on providing a quality vehicle with affordable payment terms while maintaining relatively shorter term lengths compared to others in the industry on its installment sales contracts (overall portfolio weighted average of 46.3 months). Operating in Smaller Communities .
The Company focuses on providing a quality vehicle with affordable payment terms while maintaining relatively shorter-term lengths compared to others in the industry on its installment sales contracts (overall portfolio weighted average of 47.9 months). Operating in Smaller Communities .
Associate compensation is standardized for each dealership position and adjusted for various markets. Other operating costs are closely monitored and scrutinized. Technology is utilized to maximize efficiency. Our recent technology investments in a loan origination system and an enterprise resource planning system are expected to be foundational in improving efficiencies and operational flexibility as the Company grows.
Associate compensation is standardized for each dealership position and adjusted for various markets. Other operating costs are closely monitored and scrutinized. Technology is utilized to maximize efficiency. Our recent technology investments in a new loan origination system and an enterprise resource planning system have been foundational in improving efficiencies and operational flexibility as the Company grows.
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.
For those vehicles that are repossessed, a large portion are returned or surrendered by the customer on a voluntary basis. Other repossessions are performed by Company personnel or third-party repossession agents.
The Company historically targets smaller communities in which to locate its dealerships (i.e., populations from 20,000 to 50,000), but is also continuing to expand its operations in larger cities such as Tulsa, Oklahoma; Lexington, Kentucky; Springfield, Missouri; Chattanooga and Knoxville, Tennessee and Little Rock, Arkansas.
The Company historically targets smaller communities in which to locate its dealerships (i.e., populations from 20,000 to 50,000), but has operations in larger cities such as Tulsa, Oklahoma; Lexington, Kentucky; Springfield, Missouri; Chattanooga and Knoxville, Tennessee and Little Rock, Arkansas.
Under a CFPB rule adopted in 2015, the Company’s finance subsidiary, Colonial, is deemed a “larger participant” in the automobile financing market and is therefore subject to examination and supervision by the CFPB. The states in which the Company operates impose limits on interest rates the Company can charge on its installment contracts.
Under applicable CFPB rules, the Company’s finance subsidiary, Colonial, is deemed a “larger participant” in the automobile financing market and is therefore subject to examination and supervision by the CFPB. The states in which the Company operates impose limits on interest rates the Company can charge on its installment contracts.
Depending on the number of active customer accounts, a dealership may have as few as three or as many as twenty-five full-time associates employed at that location. Associate positions at a large dealership may include a general manager, assistant manager(s), office manager, office clerk(s), service manager, purchasing agent, collections personnel, sales personnel, inventory associates (detailers), and on-call drivers.
Depending on the number of active customer accounts, a dealership may have as few as four or as many as thirty-eight full-time associates employed at that location. Associate positions at a large dealership may include a general manager, assistant manager(s), office manager, office clerk(s), service manager, purchasing agent, collections personnel, sales personnel, inventory associates (detailers), and on-call drivers.
The Company’s hiring practices are designed to find and promote candidates reflecting the various communities in which we operate. As of April 30, 2023, 52% of the Company’s associates were women and 34% of our associates were racially or ethnically diverse. Employee Safety and Health Ensuring the safety of all associates is a critical priority for the Company.
The Company’s hiring practices are designed to find and promote candidates reflecting the various communities in which we operate. As of April 30, 2024, 53% of the Company’s associates were women and 33% of our associates were racially or ethnically diverse. Employee Safety and Health Ensuring the safety of all associates is a critical priority for the Company.
The increased funding to the used automobile industry and the tight supply of used vehicles in our market has led to increased competitive pressures and higher purchase and retail prices which have been the primary contributors to the Company’s decision in recent periods to allow longer term lengths and slightly lower down payments in connection with our customer financing contracts.
The tight supply of used vehicles in our market has led to higher purchase and retail prices which have been the primary contributors to the Company’s decision in recent periods to allow longer term lengths and slightly lower down payments in connection with our customer financing contracts.
With our comprehensive safety and education program and attention to proper procedures at our dealerships, the number of incidents is below industry standards for all retail locations. Our Risk Manager is responsible for safety education and training, and regularly reviews indicators and areas where risks and injuries can occur, helping to eliminate hazards.
With our comprehensive safety and education program and attention to proper procedures at our dealerships, the number of incidents is below industry standards for all retail locations. Our Legal and Compliance departments are responsible for safety education and training, and regularly reviews indicators and areas where risks and injuries can occur, helping to eliminate hazards.
Each dealership is an operating segment with its results regularly reviewed by the Company’s chief operating decision maker in an effort to make decisions about resources to be allocated to the segment and to assess its performance. Individual dealerships meet the aggregation criteria for reporting purposes under the current accounting guidance.
Each dealership is an operating segment with its results regularly reviewed by the Company’s Head of Operations in an effort to make decisions about resources to be allocated to the segment and to assess its performance. Individual dealerships meet the aggregation criteria for reporting purposes under the current accounting guidance.
Judy served as Principal Accounting Officer since March 2016 and Vice President of Accounting since August 2015. Since joining the Company in May 2010, Ms. Judy has also served as Controller and Director of Financial Reporting. Ms.
Judy has served as Chief Financial Officer of the Company since January 2018. Before becoming Chief Financial Officer in January 2018, Ms. Judy served as Principal Accounting Officer since March 2016 and Vice President of Accounting since August 2015. Since joining the Company in May 2010, Ms. Judy has also served as Controller and Director of Financial Reporting. Ms.
The Company uses an outside marketing firm and recently hired a chief digital officer to oversee the Company’s marketing efforts, enhance its brand strategy and broaden the Company’s usage of digital and social media channels. 9 Underwriting and Finance. The Company provides financing to substantially all of its customers who purchase a vehicle at one of its dealerships.
The Company uses an outside marketing firm to enhance its brand strategy and broaden the Company’s usage of digital and social media channels. Underwriting and Finance. The Company provides financing to substantially all of its customers who purchase a vehicle at one of its dealerships.
The Company’s average retail sales price was $18,080 per unit in fiscal 2023, compared to $16,372 in fiscal 2022. Used vehicle pricing continued to increase due to the high demand and tight supply of used vehicles.
The Company’s average retail sales price was $19,113 per unit in fiscal 2024, compared to $18,080 in fiscal 2023. Used vehicle pricing continued to increase due to the high demand and tight supply of used vehicles.
The Company acquired three new dealerships during the year ending fiscal 2023 with 156 locations. The Company intends to continue to add new dealerships primarily through the pursuit of strategic acquisition opportunities that it believes will enhance its brand and maximize the return to its shareholders.
The Company acquired one new dealership during the year ending fiscal 2024 with 154 locations. The Company intends to continue to add new dealerships primarily through the pursuit of strategic acquisition opportunities that it believes will enhance its brand and maximize the return to its shareholders.
As part of the strategy to obtain quality, affordable vehicles, the Company has formed relationships with reconditioning companies to recondition vehicles, in particular repossessions and trades, in order to have access to a larger quantity of and lower cost vehicles. Selling, Marketing and Advertising.
As part of the strategy to obtain quality, affordable vehicles, the Company has formed relationships with reconditioning companies leveraging volumes to negotiate improved labor rates and consistent condition reports to recondition vehicles, in particular repossessions and trades, in order to have access to a larger quantity of and lower cost vehicles. Selling, Marketing and Advertising.
The Company has established standards with respect to the percentage of accounts one and two weeks past due, 15 or more days past due and 30 or more days past due (delinquency standards), and the percentage of accounts where the vehicle was repossessed, or the account was charged off that month (account loss standard).
The Company believes that the timely response to past due accounts is critical to its collections success. 10 The Company has established standards with respect to the percentage of accounts one and two weeks past due, 15 or more days past due and 30 or more days past due (delinquency standards), and the percentage of accounts where the vehicle was repossessed, or the account was charged off that month (account loss standard).
The Company’s installment sales contracts as of April 30, 2023, typically include down payments ranging from 0% to 20% (average of 5.4%), terms ranging from 18 months to 69 months (average of 46.3 months), and a fixed annual interest rate of 18.0% for contracts originating after early December 2022 (up from 16.5%) for all states except Arkansas and Illinois.
The Company’s installment sales contracts as of April 30, 2024, typically include down payments ranging from 0% to 20% (average of 5.4%), terms ranging from 18 months to 69 months (average of 47.9 months), and a fixed annual interest rate of 18.25% for contracts originating after early December 2023 (up from 18.0%) for all states except Arkansas, Illinois and acquired dealerships in Tennessee.
All of the Company’s retail installment contracts are serviced by Company personnel at the dealership level. Approximately half of the Company’s customers make their payments in person at the dealership where they purchased their vehicle; however, in an effort to make paying convenient for its customers, the Company offers a variety of payment options.
Approximately half of the Company’s customers make their payments in person at the dealership where they purchased their vehicle; however, in an effort to make paying convenient for its customers, the Company offers a variety of payment options.
The information contained on the website or available by hyperlink from the website is not incorporated into this Annual Report on Form 10-K or other documents the Company files with, or furnishes to, the SEC. 15 Executive Officers of the Registrant The following table provides information regarding the executive officers of the Company as of April 30, 2023: Name Age Position with the Company Jeffrey A.
The information contained on the website or available by hyperlink from the website is not incorporated into this Annual Report on Form 10-K or other documents the Company files with, or furnishes to, the SEC. 15 Executive Officers of the Registrant The following table provides information regarding the executive officers of the Company as of April 30, 2024: Name Age Position with the Company Douglas Campbell 48 Chief Executive Officer and President Vickie D.
Substantially, all associate incentive compensation is tied directly or indirectly to collection results. The Company has a vice president of collections and support staff at the corporate level to work with field operators to improve credit results. This team monitors efficiencies and the effectiveness of account representatives as they work to improve customer success rates.
A large part of dealership management and account representatives’ incentive compensation is tied directly or indirectly to collection results. The Company has a collections department and support staff at the corporate level to work with field operators to improve collection results. This team monitors efficiencies and the effectiveness of account representatives as they work to improve customer success rates.
After the verification process, the dealership manager makes the decision to accept, reject or modify (perhaps obtain a greater down payment or suggest a lower priced vehicle) the proposed transaction. In general, the dealership manager attempts to assess the stability and character of the applicant.
After the verification process, the dealership manager makes the decision to accept, reject or modify (perhaps obtain a greater down payment or suggest a lower priced vehicle) the proposed transaction. The refinements to the underwriting guidelines in the origination system improved the dealership manager’s ability to assess the stability and character of the applicant.
The Company also utilizes several collection efforts centrally at the corporate office through texting, phone calls and other methods to supplement the field efforts. Over the last five fiscal years, the Company’s annual provision for credit losses as a percentage of sales have ranged from 19.30% in fiscal 2019 to 29.20% in fiscal 2023 (average of 23.74%).
The Company also utilizes several collection efforts centrally at the corporate office through texting, phone calls and other methods to supplement the field efforts. Over the last five fiscal years, the Company’s annual provision for credit losses as a percentage of sales have ranged from a low of 19.31% in fiscal 2021 to 36.48% in fiscal 2024 (average of 26.36%).
Competition The used automotive retail industry is fragmented and highly competitive. The Company competes principally with other independent Integrated Auto Sales and Finance dealers, as well as with (i) the used vehicle retail operations of franchised automobile dealerships, (ii) independent used vehicle dealers, and (iii) individuals who sell used vehicles in private transactions.
The Company competes principally with other independent Integrated Auto Sales and Finance dealers, as well as with (i) the used vehicle retail operations of franchised automobile dealerships, (ii) independent used vehicle dealers, and (iii) individuals who sell used vehicles in private transactions. The Company competes for both the purchase and resale of used vehicles.
Excluding the amount of debt equal to cash, the Company’s adjusted debt to equity ratio (a non-GAAP measure) as of April 30, 2023 was 1.14 to 1.0, which the Company believes is lower than many of its competitors.
Excluding the amount of total cash, the Company’s adjusted ratio of debt to finance receivables (a non-GAAP measure) as of April 30, 2024 was 46.0% which the Company believes is lower than many of its competitors.
The interest rate for sales in Arkansas, which account for approximately 27.4% of the Company’s revenues, is subject to a usury cap of 17%, and therefore, these sales are originated at 16.5%. The interest rate for sales in Illinois ranges from 19.5% to 21.5%. The portfolio weighted average interest rate is 16.7%.
The interest rate for sales in Arkansas, which account for approximately 27.1% of the Company’s revenues, is subject to a usury cap of 17%, and therefore, these sales are originated at 16.75%. The interest rate for sales in Illinois and the acquired Tennessee dealerships range from 19.5% to 23.0%. The portfolio weighted average interest rate is 16.9%.
Upon the customer and the Company reaching a preliminary agreement as to financing terms, the Company obtains a credit application from the customer which includes information regarding employment, residence and credit history, personal references and a budget itemizing the customer’s monthly income and expenses. Certain information is then verified by Company personnel.
Upon the customer and the Company reaching a preliminary agreement as to financing terms, the Company obtains a credit application from the customer which includes information regarding employment, residence and credit history and personal references. These items are entered into the origination system and then certain information is verified by Company personnel.
The Company has been able to attract quality individuals via its General Manager Recruitment and Advancement team as well as other key areas. Management has determined that it will be increasingly difficult to grow the Company without looking for outside talent.
The Company has also been able to attract quality individuals via its Training and Development Team and Recruiting Team. Management has determined that it will be increasingly difficult to grow the Company without looking for outside talent.
The vice presidents of operations and the area operations managers routinely review and monitor the status of customer collections to ensure collection activities are conducted in compliance with applicable policies and procedures. In addition, the vice president of collections oversees the collections department and provides timely oversight and additional accountability on a consistent basis.
The vice presidents of operations and the area operations managers routinely review and monitor the status of customer collections to ensure collection activities are conducted in compliance with applicable policies and procedures.
The corporate office, based in Rogers, Arkansas, consists of regional vice presidents, area operations managers, regional inventory purchasing directors, a sales director, a vice president of collections, a vice president of inventory operations, a director of audit and compliance and compliance auditors, a vice president of human resources, a director of general manager recruitment and development, associate and management development personnel, accounting and management information systems personnel, administrative personnel and senior management.
The corporate office, based in Rogers, Arkansas, consists of regional vice presidents of operations, area operations managers, as well as regional support personnel in inventory, sales, collections, compliance and human resources. The corporate office also provides training and development personnel, accounting and management information systems personnel, compliance and risk personnel, administrative personnel and senior management.
Associates have access to retirement investment plans and legal consultants to help them save for their future needs. The Company also offers professional resources that promote associates’ mental health and general well-being. Talent and Development The Company is committed to building a working environment and culture that attracts, develops and retains motivated associates.
The Company also offers professional resources that promote associates’ mental health and general well-being at no cost to the associates and their immediate families. 14 Talent and Development The Company is committed to building a working environment and culture that attracts, develops and retains motivated associates.
His experience also includes approximately five years as Chief Financial Officer and Vice President of Operations of Wynco, LLC, a nationwide distributor of animal health products. Vickie D. Judy has served as Chief Financial Officer of the Company since January 2018. Before becoming Chief Financial Officer in January 2018, Ms.
His experience also includes approximately five years as Chief Financial Officer and Vice President of Operations of Wynco, LLC, a nationwide distributor of animal health products. 16
Among other things, these laws require that the Company limit or prescribe terms of the contracts it originates, require specified disclosures to customers, restrict collections practices, limit the Company’s right to repossess and sell collateral, and prohibit discrimination against customers on the basis of certain characteristics including age, race, gender and marital status. 13 The Company’s consumer financing and collection activities are also subject to oversight by the federal Consumer Financial Protection Bureau (“CFPB”), which has broad regulatory powers over consumer credit products and services such as those offered by the Company.
Among other things, these laws require that the Company limit or prescribe terms of the contracts it originates, require specified disclosures to customers, restrict collections practices, limit the Company’s right to repossess and sell collateral, and prohibit discrimination against customers on the basis of certain characteristics including age, race, gender and marital status.
Each dealership is ultimately responsible for the quality of its vehicles, making sales contacts, making credit decisions, and collecting the contracts it originates in accordance with established policies and procedures. Approximately 50% of customers make their payments in person at one of the Company’s dealerships.
Maintaining a Decentralized Operation. The Company’s dealerships operate on a decentralized basis. Each dealership is ultimately responsible for the quality of its vehicles, making sales contacts, making credit decisions with our loan origination system, and collecting the contracts it originates in accordance with established policies and procedures.
As of April 30, 2023, the Company’s debt to equity ratio (revolving credit facilities and non-recourse notes payable divided by total equity on the Consolidated Balance Sheet) was 1.28 to 1.0.
As of April 30, 2024, the Company’s ratio of debt to finance receivables (revolving credit facilities and non-recourse notes payable divided by principal balance of finance receivables) was 52.6%.
However, as a result of the recent inflationary environment and increased funding costs, credit availability for used vehicle financing has tightened. Management expects this to continue for the foreseeable future and believes the reduced availability of used vehicle financing will provide the Company an opportunity to gain market share and better serve an increasing customer base.
Management expects this to continue for the foreseeable future and believes the reduced availability of used vehicle financing will provide the Company an opportunity to gain market share and better serve an increasing customer base. 12 Competition The used automotive retail industry is fragmented and highly competitive.
The Company is also subject to a variety of federal, state and local laws and regulations that pertain to the environment, including compliance with regulations concerning the use, handling and disposal of hazardous substances and wastes.
These limits have generally been based on either (i) a specified margin above the federal primary credit rate, (ii) the age of the vehicle, or (iii) a fixed rate. 13 The Company is also subject to a variety of federal, state and local laws and regulations that pertain to the environment, including compliance with regulations concerning the use, handling and disposal of hazardous substances and wastes.
Most recently, the Company continued its expansion efforts by acquiring smaller used car dealerships in Tennessee and Texas. These acquisitions helped the Company further strengthen its footprint and increase its market share. By strategically acquiring established dealerships, the Company believes it can accelerate its growth and solidify its position as a key player in the used car industry.
By strategically acquiring established dealerships, the Company believes it can accelerate its growth and solidify its position as a key player in the used auto industry.
Williams 60 Chief Executive Officer and Director Vickie D. Judy 57 Chief Financial Officer Douglas Campbell 47 President Jeffrey A. Williams has served as Chief Executive Officer of the Company since January 2018, President of the Company from March 2016 until October 2022, and as a director since August 2011. Before becoming Chief Executive Officer, Mr.
Williams served as CEO Emeritus through April 30, 2024 and currently serves as a director of the Company. He previously served as Chief Executive Officer of the Company from January 2018 to September 2023, and President of the Company from March 2016 until October 2022. He has served as a director since August 2011. Mr.
During fiscal 2023, credit losses continued to normalize to pre-pandemic levels, partially due to the inflationary pressure on customers and increasing interest rates from federal monetary policy. See Item 1A, Risk Factors, for further discussion. Maintaining a Decentralized Operation. The Company’s dealerships operate on a decentralized basis.
During fiscal 2024, credit losses signaled a return to more normal pre-pandemic levels, but customers are still faced with continued inflationary pressure and increasing interest rates from federal monetary policy. The percentage of credit loss as a percentage of sales was impacted by the lower sales revenue in fiscal 2024. See Item 1A, Risk Factors, for further discussion.
The Company is committed to doing so with key initiatives that inspire associates to strive for long-term sustainable health and wellness for themselves and their families. We seek to educate and empower associates to improve and maintain their overall health. Further, we offer resources for preventive care, such as flu shots, vaccinations and other preventative health screenings.
We seek to educate and empower associates to improve and maintain their overall health. Further, we offer resources for preventive care, such as flu shots, vaccinations and other preventative health screenings. Associates have access to retirement investment plans and legal consultants to help them save for their future needs.
The Company provides centralized support to the dealership manager in the form of a proprietary credit scoring system used for monitoring and other supervisory assistance to assist with credit decisions. Credit quality is monitored centrally by corporate office personnel on a daily, weekly and monthly basis. Collections.
The Company provides centralized support to the dealership manager by assisting in underwriting decisions when needed, as well as providing training and reporting used for monitoring customer accounts on a daily, weekly and monthly basis. Collections. All of the Company’s retail installment contracts are serviced by Company personnel at the dealership level.
Removed
The Company believes that the timely response to past due accounts is critical to its collections success.
Added
Approximately 50% of customers make their payments in person at one of the Company’s dealerships.
Removed
The Company intends to add new dealerships, subject to favorable operating performance of existing dealerships and availability of qualified managers. Recently, the Company has opened new dealerships under experienced top performing general managers and may continue to do so in order to grow and leverage the talents of these experienced managers.
Added
Dealership Acquisitions. Since 2020, the Company has actively pursued strategic dealership acquisitions to expand its market presence and enhance its business operations. Most recently, the Company continued its expansion efforts by acquiring used car dealerships in Tennessee, Texas and Arkansas. These acquisitions helped the Company further strengthen its footprint and increase its market share.
Removed
The Company’s approach with respect to new dealership openings has been one of gradual development. The manager in charge of a new dealership is normally a recently promoted associate who was an assistant manager at a larger dealership and in most cases participated in the formal manager-in-training program.
Added
However, as a result of the recent inflationary environment, increased funding costs, and increased insurance costs, credit availability for used vehicle financing has tightened.
Removed
The corporate office provides significant resources and support with pre-opening and initial operations of new dealerships. Historically, new dealerships have operated with a low level of inventory and personnel.
Added
The Company’s consumer financing and collection activities are also subject to oversight by the federal Consumer Financial Protection Bureau (“CFPB”), which has broad regulatory powers over consumer credit products and services such as those offered by the Company.
Removed
As a result of the modest staffing level, the new dealership manager performs a variety of duties (i.e., selling, collecting and administrative tasks) during the early stages of his or her dealership’s operations. As the dealership develops and the customer base grows, additional staff are hired.
Added
Judy 58 Chief Financial Officer Jeffrey A. Williams 61 CEO Emeritus Douglas Campbell became Chief Executive Officer, President and a director of the Company in October 2023, after serving as President of the Company for the prior year. Before joining the Company, Mr.
Removed
Some of the recent dealership openings have been in markets that support a higher volume of sales and these dealerships have opened with a higher level of inventory and staffing to accommodate the higher volumes. Monthly sales levels at new dealerships are typically substantially less than sales levels at mature dealerships.
Removed
Over time, new dealerships gain recognition in their communities, and a combination of customer referrals and repeat business generally facilitates sales growth. Historically, sales growth at new dealerships could exceed 10% per year for a number of years, whereas mature dealerships typically experience annual sales growth but at a lower percentage than new dealerships.
Removed
Due to continual operational initiatives, the Company is able to support higher sales levels, and recently the Company has raised its volume expectation level of new locations somewhat as infrastructure improvements related to new dealership openings have improved.
Removed
New dealerships are generally provided with approximately $1.5 million to $2.5 million in capital from the corporate office during the first few years of operation. These funds are used principally to fund receivables growth.
Removed
After this start-up period, new dealerships can typically begin generating positive cash flow, allowing for some continuing growth in receivables without additional capital from the corporate office. As these dealerships become cash flow positive, a decision is made by senior management to either increase the investment due to favorable return rates on the invested capital, or to deploy capital elsewhere.
Removed
This limitation of capital to new, as well as existing, dealerships serves as an important operating discipline. Dealerships must be profitable in order to grow and typically new dealerships can be profitable within the first year of opening. Dealership Acquisitions. Since 2020, the Company has actively pursued strategic dealership acquisitions to expand its market presence and enhance its business operations.

… 3 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

19 edited+1 added−2 removed81 unchanged
Biggest changeThe Company ’ s business is subject to seasonal fluctuations. Historically, the Company’s third fiscal quarter (November through January) has been the slowest period for vehicle sales. Conversely, the Company’s first and fourth fiscal quarters (May through July and February through April) have historically been the busiest times for vehicle sales.
Biggest changeAny of these circumstances could have a material adverse effect on the Company’s future financial condition and operating results. The Company ’ s business is subject to seasonal fluctuations. Historically, the Company’s third fiscal quarter (November through January) has been the slowest period for vehicle sales.
Acquisitions are accompanied by a number of inherent risks, including, without limitation, the difficulty of integrating acquired companies and operations; potential disruption of our ongoing business and distraction of our management or the management of the target company; difficulties in maintaining controls, procedures and policies; potential impairment of relationships with associates and partners as a result of any integration of new personnel; potential inability to manage an increased number of locations and associates; failure to realize expected efficiencies, synergies and cost savings; reaction to the transaction among the companies’ customers and potential customers; and the effect of any government regulations which relate to the businesses acquired. ● Availability of suitable dealership sites .
Acquisitions are accompanied by a number of inherent risks, including, without limitation, the difficulty of integrating acquired companies and operations; potential disruption of our ongoing business and distraction of our management or the management of the target company; difficulties in maintaining controls, procedures and policies; potential impairment of relationships with associates and partners as a result of any integration of new personnel; potential inability to manage an increased number of locations and associates; failure to realize expected efficiencies, synergies and cost savings; reaction to the transaction among the companies’ customers and potential customers; and the effect of any government regulations which relate to the businesses acquired. 18 ● Availability of suitable dealership sites .
The Company may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. 21 Most of the Company's customers provide personal information when applying for financing. The Company relies on encryption and authentication technology to provide security to effectively store and securely transmit confidential information.
The Company may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Most of the Company's customers provide personal information when applying for financing. The Company relies on encryption and authentication technology to provide security to effectively store and securely transmit confidential information.
Any of these circumstances could have a material adverse effect on the Company’s expansion strategy and future operating results. ● Ability to attract and retain management for new dealerships . The success of new dealerships is dependent upon the Company being able to hire and retain additional competent personnel.
Any of these circumstances could have a material adverse effect on the Company’s expansion strategy and future operating results. ● Ability to attract and retain management for new and existing dealerships . The success of new dealerships is dependent upon the Company being able to hire and retain additional competent personnel.
Risks Related to the Company’s Operations The Company may have a higher risk of delinquency and default than traditional lenders because it finances its sales of used vehicles to credit-impaired borrowers . Substantially all of the Company’s automobile contracts involve financing to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders.
Risks Related to the Company ’ s Operations The Company may have a higher risk of delinquency and default than traditional lenders because it finances its sales of used vehicles to credit-impaired borrowers . Substantially all of the Company’s automobile contracts involve financing to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders.
The Company is dependent upon the continued contributions of its management teams. Because the Company maintains a decentralized operation in which each dealership is responsible for buying and selling its own vehicles, making credit decisions and collecting contracts it originates, the key employees at each dealership are important factors in the Company’s ability to implement its business strategy.
The Company is dependent upon the continued contributions of its management teams. Because the Company maintains a decentralized operation in which each dealership is responsible for inspecting and selling its own vehicles, making credit decisions and collecting contracts it originates, the key employees at each dealership are important factors in the Company’s ability to implement its business strategy.
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 27.4% of revenues resulting from sales to Arkansas customers.
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 27.1% of revenues resulting from sales to Arkansas customers.
Further, the Company’s current credit facilities and non-recourse notes payable contain various reporting and/or financial performance covenants. Any failure of the Company to comply with these covenants could have a material adverse effect on the Company’s ability to implement its business strategy.
Further, the Company’s current credit facilities and non-recourse notes payable contain various reporting and/or financial performance covenants. Any failure of the Company to comply with these covenants could have a material adverse effect on the Company’s operating results, financial condition, cash flow and ability to implement its business strategy.
Recent and future disruptions in domestic and global economic and market conditions, including rising interest rates and higher grocery and gasoline, or significant changes in the political environment (such as the ongoing military conflict between Ukraine and Russia) and/or public policy, could adversely affect consumer demand or increase the Company’s costs, resulting in lower profitability for the Company.
Recent and future disruptions in domestic and global economic and market conditions, including rising interest rates and higher grocery and gasoline prices, or significant changes in the political environment (such as the ongoing military conflicts in the Middle East, and Ukraine) and/or public policy, could adversely affect consumer demand or increase the Company’s costs, resulting in lower profitability for the Company.
The Company is also limited in its ability to pay dividends or make other distributions to its shareholders without the consent of its lender. Therefore, stockholders should not rely on future dividend income from shares of the Company’s common stock.
The Company is also limited in its ability to pay dividends or make other distributions to its shareholders without the consent of its lender. Therefore, stockholders should not rely on future dividend income from shares of the Company’s common stock. Item 1B. Unresolved Staff Comments Not applicable.
Our ability to expand our business through additional dealership openings or strategic acquisitions is dependent on a sufficiently favorable level of operating performance to support the management, personnel and capital resources necessary to successfully open and operate or acquire new locations. 18 ● Ability to successfully identify, complete and integrate new acquisitions.
Our ability to increase revenues at existing dealerships or expand our business through additional dealership openings or strategic acquisitions is dependent on a sufficiently favorable level of operating performance to support the management, personnel and capital resources necessary to successfully grow existing locations, open and operate new locations, or acquire new locations. ● Ability to successfully identify, complete and integrate new acquisitions.
The effects of climate change such as natural disasters or the occurrence of weather events, such as rain, snow, wind, storms, hurricanes, or other natural disasters, which adversely affect consumer traffic at the Company’s automotive dealerships, could negatively impact the Company’s operating results.
The effects of climate change such as natural disasters or the occurrence of weather events, such as rain, snow, wind, storms, hurricanes, or other natural disasters, which can adversely affect consumer traffic and operations at the Company’s automotive dealerships as well as customers’ ability to make their car payments, could negatively impact the Company’s operating results.
In addition, if negative domestic or global economic conditions persist for an extended period of time or worsen substantially, the Company’s business may suffer in a manner which could cause the Company to fail to satisfy the financial and other restrictive covenants under its credit facilities. 22 The impact of climate-change related events, including efforts to reduce or mitigate the effects of climate change and inclement weather can adversely impact the Company ’ s operating results.
In addition, if negative domestic or global economic conditions persist for an extended period of time or worsen substantially, the Company’s business may suffer in a manner which could cause the Company to fail to satisfy the financial and other restrictive covenants under its credit facilities.
Therefore, the Company generally realizes a higher proportion of its revenue and operating profit during the first and fourth fiscal quarters. The Company expects this pattern to continue in future years.
Conversely, the Company’s first and fourth fiscal quarters (May through July and February through April) have historically been the busiest times for vehicle sales. Therefore, the Company generally realizes a higher proportion of its revenue and operating profit during the first and fourth fiscal quarters. The Company expects this pattern to continue in future years.
In addition, many of the third parties who provide products, services, or support to the Company could also experience any of the above cyber risks or security breaches, which could impact the Company's customers and its business and could result in a loss of customers, suppliers, or revenue.
Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in the technology used by the Company to protect transaction data being breached or compromised. 21 In addition, many of the third parties who provide products, services, or support to the Company could also experience any of the above cyber risks or security breaches, which could impact the Company's customers and its business and could result in a loss of customers, suppliers, or revenue.
Credit losses tend to be higher at new dealerships due to fewer repeat customers and less experienced associates; therefore, the opening of new dealerships tends to increase the Company’s overall credit losses.
Credit losses tend to be higher at new dealerships due to fewer repeat customers and less experienced associates; therefore, the opening of new dealerships tends to increase the Company’s overall credit losses. This may require the Company to incur additional costs to reduce future credit losses or to close the underperforming locations altogether.
Consequently, the impact of climate change-related events, including efforts to reduce or mitigate the effects of climate change, may adversely impact the Company’s operating results.
The impact of climate-change related events, including efforts to reduce or mitigate the effects of climate change and inclement weather can adversely impact the Company ’ s operating results.
Risks Related to the Company ’ s Common Stock The Company ’ s stock trading volume may result in greater volatility in the market price of the Company ’ s common stock and may not provide adequate liquidity for investors.
Consequently, the impact of climate change-related events, including efforts to reduce or mitigate the effects of climate change, may adversely impact the Company’s operating results. 22 Risks Related to the Company ’ s Common Stock The Company ’ s stock trading volume may result in greater volatility in the market price of the Company ’ s common stock and may not provide adequate liquidity for investors.
At April 30, 2023 the Company increased its allowance for credit losses to 23.91% from 23.65% of the principal balance of finance receivables, net of deferred revenue, primarily due to increases in historical losses as a result of the ending of federal stimulus programs, continuing inflationary pressure on customers and increasing interest rates from federal monetary policy.
At April 30, 2024 the Company had an allowance for credit losses at 25.32% (compared to 23.91% at April 30, 2023) of the principal balance of finance receivables, net of deferred revenue and pending APP claims.
Removed
In addition, new dealerships may experience higher than anticipated credit losses, which may require the Company to incur additional costs to reduce future credit losses or to close the underperforming locations altogether. Any of these circumstances could have a material adverse effect on the Company’s future financial condition and operating results.
Added
The increase in the allowance for credit losses was primarily due to continuing inflationary pressure on customers and the update to our calculation methodology and the performance of our loan portfolio in the second quarter of the fiscal year 2024.
Removed
Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in the technology used by the Company to protect transaction data being breached or compromised.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeFor additional information regarding the Company’s properties, see “Operations-Dealership Locations and Facilities” under Item 1 above and “Contractual Payment Obligations” and “Off-Balance Sheet Arrangements” under Item 7 of Part II.
Biggest changeFor additional information regarding the Company’s properties, see “Operations-Dealership Locations and Facilities” under Item 1 above.
Item 2. Properties As of April 30, 2023, the Company leased approximately 79% of its facilities, including dealerships and the Company’s corporate offices. These facilities are located principally in the states of Alabama, Arkansas, Georgia, Illinois, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee and Texas. The Company’s corporate offices are located in approximately 50,000 square feet of leased space in Rogers, Arkansas.
Item 2. Properties As of April 30, 2024, the Company leased approximately 86% of its facilities, including dealerships and the Company’s corporate offices. These facilities are located principally in the states of Alabama, Arkansas, Georgia, Illinois, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee and Texas. The Company’s corporate offices are located in approximately 50,000 square feet of leased space in Rogers, Arkansas.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeWhile the outcome of these proceedings cannot be predicted with certainty, the Company does not expect the final outcome of any of these proceedings, individually or in the aggregate, to have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Biggest changeWhile the outcome of these proceedings cannot be predicted with certainty, the Company does not expect the final outcome of any of these proceedings, individually or in the aggregate, to have a material adverse effect on the Company’s financial position, results of operations or cash flows. Item 4. Mine Safety Disclosure Not applicable. 25 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−1 removed4 unchanged
Biggest changeThe Company selected the customized peer group because the Hemscott Group 744 Index is no longer available. The graph assumes that the value of the investment in the Company’s common stock and each index or peer group was $100 on April 30, 2018.
Biggest changeThe graph assumes that the value of the investment in the Company’s common stock and each index or peer group was $100 on April 30, 2019. 26 The dollar value at April 30, 2024 of $100 invested in the Company’s common stock on April 30, 2019 was $57.79, compared to $201.71 for the NASDAQ Market Index (U.S.
Stockholder Return Performance Graph Set forth below is a line graph comparing the fiscal year end percentage change in the cumulative total stockholder return on the Company’s common stock to (i) the cumulative total return of the NASDAQ Market Index (U.S. companies), and (ii) the market-weighted value of a customized peer group of automotive dealership companies (“Auto Dealerships”) composed of the common stock of Asbury Automotive Group, Inc.; AutoNation, Inc.; CarMax, Inc.; Copart, Inc.; Group 1 Automotive, Inc.; Lithia Motors, Inc.; Penske Automotive Group, Inc.; Rush Enterprises, Inc.; and Sonic Automotive, Inc. for the period of five fiscal years commencing on May 1, 2018 and ending on April 30, 2023.
Stockholder Return Performance Graph Set forth below is a line graph comparing the fiscal year end percentage change in the cumulative total stockholder return on the Company’s common stock to (i) the cumulative total return of the NASDAQ Market Index (U.S. companies), and (ii) the market-weighted value of a customized peer group of automotive dealership companies (“Auto Dealerships”) composed of the common stock of Asbury Automotive Group, Inc.; AutoNation, Inc.; CarMax, Inc.; Copart, Inc.; Group 1 Automotive, Inc.; Lithia Motors, Inc.; Penske Automotive Group, Inc.; Rush Enterprises, Inc.; and Sonic Automotive, Inc. for the period of five fiscal years commencing on May 1, 2019 and ending on April 30, 2024.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Equity The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol CRMT. Holders of Record As of June 23, 2023, there were approximately 977 shareholders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Equity The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol CRMT. Holders of Record As of June 19, 2024, there were approximately 988 shareholders of record.
No shares of the Company’s common stock were purchased under the Company’s stock repurchase program during the fourth quarter of fiscal 2023. Item 6. [Reserved]
No shares of the Company’s common stock were purchased under the Company’s stock repurchase program during fiscal 2024.
The Company currently intends for the foreseeable future to continue its policy of retaining earnings to finance future growth.
Companies) and $249.06 for the Auto Dealerships peer group. Dividend Policy Since its inception, the Company has paid no cash dividends on its common stock. The Company currently intends for the foreseeable future to continue its policy of retaining earnings to finance future growth.
Removed
The dollar value at April 30, 2023 of $100 invested in the Company’s common stock on April 30, 2018 was $150.3, compared to $180.98 for the NASDAQ Market Index (U.S. Companies) and $241.12 for the Auto Dealerships peer group. 25 Dividend Policy Since its inception, the Company has paid no cash dividends on its common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

78 edited+41 added−24 removed31 unchanged
Biggest changeAs a % of Sales 2023 2022 2021 2022 2021 2023 2022 2021 Operating Statement: Revenues: Sales $ 1,209,279 $ 1,043,698 $ 799,129 15.9 % 30.6 % 100.0 % 100.0 % 100.0 % Interest and other income 196,219 151,853 110,545 29.2 37.4 16.2 14.5 13.8 Total 1,405,498 1,195,551 909,674 17.6 31.4 116.2 114.5 113.8 Costs and expenses: Cost of sales, excluding depreciation shown below 805,873 663,631 479,153 21.4 % 38.5 % 66.6 63.6 60.0 Selling, general and administrative 176,696 156,130 130,855 13.2 19.3 14.6 15.0 16.4 Provision for credit losses 352,860 238,054 153,835 48.2 54.7 29.2 22.8 19.3 Interest expense 38,312 10,919 6,820 250.9 60.1 3.2 1.0 0.9 Depreciation and amortization 5,602 4,033 3,719 38.9 8.4 0.5 0.4 0.5 Loss (gain) on disposal of property and equipment 361 149 (40 ) - - - - - Total 1,379,704 1,072,916 774,342 28.6 38.6 114.1 102.8 97.1 Income before income taxes $ 25,794 $ 122,635 $ 135,332 2.1 % 11.8 % 16.9 % Operating Data (Unaudited): Retail units sold 63,584 60,595 56,806 4.9 % 6.7 % Average dealerships in operation 155 152 150 2.0 1.3 Average units sold per dealership per month 34.2 33.2 31.6 3.0 5.1 Average retail sales price $ 18,080 $ 16,372 $ 13,464 10.4 21.6 Gross profit per retail unit sold $ 6,344 $ 6,272 $ 5,633 1.1 11.3 Same store revenue growth 16.6 % 30.0 % 18.7 % Receivables average yield 15.7 % 15.8 % 15.9 % Fiscal 2023 Compared to Fiscal 2022 Total revenues increased $209.9 million, or 17.6%, in fiscal 2023, as compared to revenue growth of 31.4% in fiscal 2022, principally as a result of (i) revenue growth from dealerships that operated a full twelve months in both fiscal years ($196.7 million), and (ii) revenue from stores opened or acquired during or after the year ended April 30, 2022 ($15.3 million), partially offset by (iii) decreased revenue from dealerships closed during or after the year ended April 30, 2022 ($2.1 million).
Biggest changeAs a % of Sales 2024 2023 2022 2023 2022 2024 2023 2022 Operating Statement: Revenues: Sales $ 1,160,798 $ 1,204,194 $ 1,038,682 (3.6 )% 15.9 % 100.0 % 100.0 % 100.0 % Interest and other income 233,096 196,219 151,853 18.8 29.2 20.1 16.3 14.6 Total 1,393,894 1,400,413 1,190,535 (0.5 ) 17.6 120.1 116.3 114.6 Costs and expenses: Cost of sales, excluding depreciation shown below 758,546 800,788 658,615 (5.3 )% 21.6 % 65.3 66.5 63.4 Selling, general and administrative 179,421 176,696 156,130 1.5 13.2 15.5 14.7 15.0 Provision for credit losses 423,406 352,860 238,054 20.0 48.2 36.5 29.3 22.9 Interest expense 65,348 38,312 10,919 70.6 250.9 5.6 3.2 1.1 Depreciation and amortization 6,871 5,602 4,033 22.7 38.9 0.6 0.5 0.4 Loss on disposal of property and equipment 437 361 149 21.1 142.3 - - - Total 1,434,029 1,374,619 1,067,900 4.3 28.7 123.5 114.2 102.8 (Loss) income before income taxes $ (40,135 ) $ 25,794 $ 122,635 (3.5 )% 2.1 % 11.8 % Operating Data (Unaudited): Retail units sold 57,989 63,584 60,595 (8.8 )% 4.9 % Average dealerships in operation 154 155 152 (0.6 ) 2.0 Average units sold per dealership per month 31.4 34.2 33.2 (8.2 ) 3.0 Average retail sales price $ 19,113 $ 18,080 $ 16,372 5.7 10.4 Gross profit per retail unit sold $ 6,937 $ 6,344 $ 6,272 9.3 1.1 Same store revenue growth (1.0 )% 16.7 % 30.1 % Receivables average yield 16.2 % 15.7 % 15.8 % Fiscal 2024 Compared to Fiscal 2023 Total revenues decreased $6.5 million, or 0.5%, in fiscal 2024, as compared to revenue growth of 17.6% in fiscal 2023, principally as a result of declines in revenue from (i) dealerships that operated a full twelve months in both fiscal years ($13.8 million), and (ii) dealerships that were closed during or after the year ended April 30, 2023 ($14.9 million), partially offset by revenue growth from (iii) dealerships opened or acquired after April 30, 2023 ($22.2 million).
As purchase costs increase, the margin between the purchase cost and the sales price of the vehicles we sell generally narrows on a percentage basis because the Company must offer affordable prices to our customers.
As purchase costs increase, the margin between the purchase cost and the sales price of the vehicles we sell generally narrows on a percentage basis because the Company must offer affordable prices to our customers.
A negative shift in used vehicle supply, combined with strong demand, results in increased used vehicle prices and thus higher purchase costs for the Company. Sustained macro-economic pressures affecting our customers have helped keep demand high in recent years for the types of vehicles we purchase.
A negative shift in used vehicle supply, combined with strong demand for used vehicles, results in increased used vehicle prices and thus higher purchase costs for the Company. Sustained macro-economic pressures affecting our customers have helped keep demand high in recent years for the types of vehicles we purchase.
The Company expects to use cash from operations and borrowings to (i) grow its finance receivables portfolio, (ii) purchase fixed assets of approximately $12 million in the next 12 months as we complete facility updates and general fixed asset requirements, (iii) repurchase shares of common stock when favorable conditions exist and (iv) reduce debt to the extent excess cash is available.
The Company expects to use cash from operations and borrowings to (i) grow its finance receivables portfolio, (ii) purchase fixed assets of approximately $6 million in the next 12 months as we complete facility updates and general fixed asset requirements, (iii) repurchase shares of common stock when favorable conditions exist and (iv) reduce debt to the extent excess cash is available.
Demand for the vehicles we purchase for resale has remained high and the supply has continued to be restricted primarily due to lower levels of new car production. The inflationary environment during fiscal 2023 also contributed to the lower gross margin percentage due to increased costs of vehicle parts, shop labor rates and transport services.
Demand for the vehicles we purchase for resale remained high during fiscal 2023 and the supply continued to be restricted primarily due to lower levels of new car production. The inflationary environment during fiscal 2023 also contributed to the lower gross margin percentage due to increased costs of vehicle parts, shop labor rates and transport services.
Also, expansions or constrictions in consumer credit, as well as general economic conditions, can have an overall effect on the demand and the resulting purchase cost of the types of vehicles the Company purchases for resale. The COVID-19 global pandemic and the resulting macroeconomic effects have negatively impacted the availability and prices of the vehicles the Company purchases.
Also, expansions or constrictions in consumer credit, as well as general economic conditions, can have an overall effect on the demand and the resulting purchase cost of the types of vehicles the Company purchases for resale. 28 The COVID-19 global pandemic and the resulting macroeconomic effects have negatively impacted the availability and prices of the vehicles the Company purchases.
Generally, this is because the management at new and developing dealerships tends to be less experienced in making credit decisions and collecting customer accounts and the customer base is less seasoned. Normally more mature dealerships have more repeat customers and, on average, repeat customers are a better credit risk than non-repeat customers.
Generally, this is because the management at new and developing dealerships tends to be less experienced in making credit decisions and collecting customer accounts and the customer base is less seasoned. More mature dealerships have more repeat customers and, on average, repeat customers are a better credit risk than non-repeat customers.
Critical Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires the Company to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires the Company to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Cost of sales, as a percentage of sales, increased to 66.6% compared to 63.6% in fiscal 2022, resulting in a decrease in the gross margin percentage to 33.4% of sales in fiscal 2023 from 36.4% of sales in fiscal 2022.
Cost of sales, as a percentage of sales, increased to 66.5% compared to 63.4% in fiscal 2022, resulting in a decrease in the gross margin percentage to 33.5% of sales in fiscal 2023 from 36.6% of sales in fiscal 2022.
Negative macro-economic issues, however, do not always lead to higher credit loss results for the Company because the Company provides basic affordable transportation which in many cases is not a discretionary expenditure for customers. 27 The Company continuously looks for ways to operate more efficiently, improve its business practices and adjust underwriting and collection procedures.
Negative macro-economic issues, however, do not always lead to higher credit loss results for the Company because the Company provides basic affordable transportation which in many cases is not a discretionary expenditure for customers. 29 The Company continuously looks for ways to operate more efficiently, improve its business practices and adjust underwriting and collection procedures.
Decreases in the overall volume of new car sales, particularly domestic brands, lead to decreased supply and generally increased prices in the used car market.
Decreases in the overall volume of new car sales, particularly domestic brands, lead to decreased supply and generally increased prices in the wholesale used car market.
Selling, general and administrative expenses, as a percentage of sales decreased to 14.6% in fiscal 2023 from 15.0% for fiscal 2022. Selling, general and administrative expenses are, for the most part, more fixed in nature. During fiscal 2023 we continued investments in inventory procurement, technology and digital areas as well as investing in key additions to our leadership team.
Selling, general and administrative expenses, as a percentage of sales decreased to 14.7% in fiscal 2023 from 15.0% for fiscal 2022. Selling, general and administrative expenses are, for the most part, more fixed in nature. During fiscal 2023 we continued investments in inventory procurement, technology and digital areas as well as investing in key additions to our leadership team.
Net charge offs began to normalize to pre-pandemic levels in late fiscal 2022 and continued to normalize during fiscal 2023. The primary driver was an increased frequency of losses; however, the relative severity of losses also increased. Interest expense for fiscal 2023 as a percentage of sales increased to 3.2% in fiscal 2023 from 1.0% in fiscal 2022.
Net charge offs began to normalize to pre-pandemic levels in late fiscal 2022 and continued to normalize during fiscal 2023. The primary driver was an increased frequency of losses; however, the relative severity of losses also increased. 32 Interest expense for fiscal 2023 as a percentage of sales increased to 3.2% from 1.1% in fiscal 2022.
The distribution limitations under the credit facilities allow the Company to repurchase the Company’s stock so long as either: (a) the aggregate amount of such repurchases after September 30, 2021 does not exceed $50 million, net of proceeds received from the exercise of stock options, and the total availability under the credit facilities is equal to or greater than 20% of the sum of the borrowing bases, in each case after giving effect to such repurchases (repurchases under this item are excluded from fixed charges for covenant calculations), or (b) the aggregate amount of such repurchases does not exceed 75% of the consolidated net income of the Company measured on a trailing twelve month basis; provided that immediately before and after giving effect to the stock repurchases, at least 12.5% of the aggregate funds committed under the credit facilities remain available.
The distribution limitations under the credit facilities allow the Company to repurchase the Company’s stock if either: (a) the aggregate amount of such repurchases after September 30, 2021 does not exceed $50 million, net of proceeds received from the exercise of stock options, and the total availability under the credit facilities is equal to or greater than 20% of the sum of the borrowing bases, in each case after giving effect to such repurchases (repurchases under this item are excluded from fixed charges for covenant calculations), or (b) the aggregate amount of such repurchases does not exceed 75% of the consolidated net income of the Company measured on a trailing twelve month basis; provided that immediately before and after giving effect to the stock repurchases, at least 12.5% of the aggregate funds committed under the credit facilities remain available.
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 April 30, 2023.
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 April 30, 2024.
Over the past three years, the reduction in new car production and fewer off-lease vehicles have negatively impacted the availability of used vehicle inventory and resulted in higher purchase costs. The Company constantly reviews and adjusts purchasing avenues in order to obtain an appropriate flow of vehicles.
Over the past three years, the reduction in new car production and fewer off-lease vehicles have negatively impacted the availability of used vehicle inventory and resulted in higher purchase costs. The Company constantly reviews and adjusts purchasing avenues to ensure an appropriate flow of vehicles.
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 problems. As of April 30, 2023, the Company operated 156 dealerships located primarily in small cities throughout the South-Central United States. Car-Mart has been operating since 1981.
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 problems. As of April 30, 2024, the Company operated 154 dealerships located primarily in small cities throughout the South-Central United States. Car-Mart has been operating since 1981.
In dollar terms, selling, general and administrative expenses increased $20.6 million from fiscal 2022. These investments are expected to be leveraged, creating efficiencies in the business allowing us to serve more customers in future years. 29 Provision for credit losses as a percentage of sales increased to 29.2% for fiscal 2023 compared to 22.8% for fiscal 2022.
In dollar terms, selling, general and administrative expenses increased $20.6 million from fiscal 2022. These investments are expected to be leveraged, creating efficiencies in the business allowing us to serve more customers in future years. Provision for credit losses as a percentage of sales increased to 29.3% for fiscal 2023 compared to 22.9% for fiscal 2022.
Credit losses and charge-offs can also be impacted by market and economic factors, including a competitive used vehicle financing environment and macro-economic conditions such as inflation in the price of gasoline, groceries and other staple items.
Credit losses and charge-offs can also be impacted by market and economic factors, including a competitive used vehicle financing environment and macro-economic conditions such as inflation in the price of childcare, insurance, rent, gasoline, groceries, and other staple items.
During fiscal years 2022 and 2023, the availability of credit to the Company’s customer base was somewhat dampened but remained near recent historical levels.
During fiscal years 2023 and 2024, the availability of credit to the Company’s customer base was somewhat dampened but remained near recent historical levels.
At April 30, 2023, the Company had $167.2 million in outstanding borrowings under the revolving credit facilities. Historically, income from continuing operations, as well as borrowings on the revolving credit facilities, have funded the Company’s finance receivables growth, capital asset purchases and common stock repurchases.
At April 30, 2024 and 2023 the Company had $200.8 million and $167.2 million, respectively, in outstanding borrowings under the revolving credit facilities. Historically, income from continuing operations, as well as borrowings on the revolving credit facilities, have funded the Company’s finance receivables growth, capital asset purchases, and common stock repurchases.
On a longer-term basis, the Company expects its principal sources of liquidity to consist of income from operations, funding from asset-back securitization transactions, and borrowings under revolving credit facilities or fixed interest term loans.
On a longer-term basis, the Company expects its principal sources of liquidity to consist of income from operations, funding from asset-back securitization transactions, warehouse facilities, borrowings under revolving credit facilities or fixed interest term loans, and other potential financing sources.
On a short-term basis, the Company’s principal sources of liquidity include income from operations, proceeds from non-recourse notes payable issued under asset-back securitization transactions and borrowings under its revolving credit facilities.
On a short-term basis, 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 financing sources.
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 April 30, 2023, the weighted average contract term was 46.3 months with 36.3 months remaining.
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 April 30, 2024, the weighted average contract term was 47.9 months with 36.1 months remaining.
Of the $82.2 million total lease obligations, $46.5 million of these commitments will become due in more than five years. The Company expects to continue to lease the majority of the properties where its dealerships are located. The Company’s revolving credit facilities generally restrict distributions by the Company to its shareholders.
Of the $82.9 million in lease obligations, $42.4 million of these commitments will become due in more than five years. The Company expects to continue to lease the majority of the properties where its dealerships are located. The Company’s revolving credit facilities generally restrict distributions by the Company to its shareholders.
The fiscal year 2023 credit losses continued to normalize to pre-pandemic levels, partially driven by the lack of federal stimulus payments in the current fiscal year as compared to prior fiscal years due to the expiration of the CARES Act and the Consolidated Appropriations Act of 2021, and partially driven by the current macro-economic environment.
During fiscal year 2023, credit losses exceeded pre-pandemic levels, partially driven by the lack of federal stimulus payments in the current fiscal year as compared to prior fiscal years due to the expiration of the CARES Act and the Consolidated Appropriations Act of 2021, and partially driven by the current macro-economic environment at that time.
At April 30, 2023, the Company had approximately $9.8 million of cash on hand and $121.4 million of availability under its revolving credit facilities (see Note F to the Consolidated Financial Statements in Item 8).
At April 30, 2024, the Company had approximately $5.5 million of cash on hand and $73.4 million of availability under its revolving credit facilities (see Note F to the Consolidated Financial Statements in Item 8).
The Company’s ability to add new dealerships and implement operating initiatives is dependent on having a sufficient number of trained managers and support personnel. Excessive turnover, particularly at the dealership manager level, could impact the Company’s ability to add new dealerships and to meet operational initiatives.
Hiring, training and retaining qualified associates is critical to the Company’s success. The Company’s ability to add new dealerships and implement operating initiatives is dependent on having a sufficient number of trained managers and support personnel. Excessive turnover, particularly at the dealership manager level, could impact the Company’s ability to add new dealerships and to meet operational initiatives.
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. 31 Property and equipment, net, increased by approximately $16.3 million as of April 30, 2023 as compared to fiscal 2022.
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. 33 Property and equipment, net, decreased by approximately $1.3 million as of April 30, 2024 as compared to fiscal 2023.
The average term for installment sales contracts at April 30, 2023 was 46.3 months, compared to 42.9. months for April 30, 2022.
The average term for installment sales contracts at April 30, 2024 was 47.9 months, compared to 46.3. months for April 30, 2023.
The Company has made improvements to its business processes within the last few years to strengthen controls and provide stronger infrastructure to support its collections efforts. The Company continues to strive to reduce credit losses in spite of the current economic challenges and continued competitive pressures by improving deal structures.
The Company has made improvements to its business processes via the implementation of the loan origination system during the last two years to strengthen controls and provide stronger infrastructure to support its collections efforts. The Company continues to strive to reduce credit losses in spite of the current economic challenges and continued competitive pressures by improving deal structures.
The Company has devoted significant efforts to improving its purchasing processes to ensure adequate supply at appropriate prices, including expanding its purchasing territories to larger cities in close proximity to its dealerships and forming relationships with reconditioning partners to reduce purchasing costs.
The Company has devoted significant efforts to improving its purchasing processes to ensure adequate supply at appropriate prices which includes the new partnership with an industry leader, expanding its purchasing territories to larger cities in close proximity to its dealerships and forming relationships with reconditioning partners to reduce purchasing costs.
The Company believes that the proper execution of its business practices is the single most important determinant of its long-term credit loss experience. Over the last five fiscal years, the Company’s gross margin as a percentage of sales has ranged from approximately 40.4% in fiscal 2019 to 33.4% in fiscal 2023 (average of 38.0%).
The Company believes that the proper execution of its business practices is the single most important determinant of its long-term credit loss experience. Over the last five fiscal years, the Company’s gross margin as a percentage of sales has ranged from a high of approximately 40.2% in fiscal 2021 to a low of 33.5% in fiscal 2023 (average of 36.9%).
The Company’s liquidity is also impacted by our credit losses. Macro-economic factors such as unemployment levels and general inflation can significantly affect our collection results and ultimately credit losses. Currently, as our customers look to cover rising costs of non-discretionary items, such as groceries and gasoline, it may impact their ability to make their car payments.
Macro-economic factors such as unemployment levels and general inflation on core and discretionary items can significantly affect our collection results and ultimately credit losses. Currently, as our customers look to cover rising costs of non-discretionary items, such as childcare, insurance, groceries and gasoline, it may impact their ability to make their car payments.
In recent years, increased competition resulting from the availability of funding to the sub-prime auto industry has contributed to the Company reducing down payments and lengthening contract terms for our customers, which added negative pressure to our collection percentages and credit losses and increased our need for external sources of liquidity.
In recent years, increased competition as well as the increasing used car prices resulting from the availability of funding to the sub-prime auto industry has contributed to the Company reducing down payments and lengthening contract terms for our customers, which negatively pressured collection percentages and credit losses and increased our need for external sources of liquidity.
This strong demand, 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 have begun to soften but remain high by historical standards.
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 but remain high compared to the last several years.
This measure should not be considered in isolation or as a substitute for reported GAAP results because it excludes certain items as compared to similar GAAP-based measures, and such measure may not be comparable to similarly-titled measures reported by other companies.
These measures should not be considered in isolation or as substitutes for reported GAAP results because they exclude certain items as compared to similar GAAP-based measures, and such measures may not be comparable to similarly-titled measures reported by other companies.
In the fourth quarter of fiscal 2023, the Company increased the allowance for credit losses as a percentage of finance receivables from 23.57% to 23.91%. The allowance for credit losses represents the Company’s expectation of future net charge-offs at the measurement date.
The Company increased the allowance for credit losses as a percentage of finance receivables from 23.91% at April 30, 2023 to 25.32% at April 30, 2024. The allowance for credit losses represents the Company’s expectation of future net charge-offs at the measurement date.
These investments reflect our commitment to providing the necessary inventory and facilities to support a growing customer base. 32 Liquidity and Capital Resources The following table sets forth certain historical information with respect to the Company’s Statements of Cash Flows (in thousands): Years Ended April 30, 2023 2022 2021 Operating activities: Net income $ 20,432 $ 95,014 $ 104,820 Provision for credit losses 352,860 238,054 153,835 Losses on claims for accident protection plan 25,107 21,871 18,954 Depreciation and amortization 5,602 4,033 3,719 Amortization of debt issuance costs 5,461 775 391 Stock based compensation 5,314 5,496 5,962 Deferred income taxes 8,866 8,750 7,239 Finance receivable originations (1,161,132 ) (1,009,858 ) (762,717 ) Finance receivable collections 434,458 417,796 370,254 Accrued interest on finance receivables (1,188 ) (1,559 ) (269 ) Inventory 133,047 51,057 5,019 Accounts payable and accrued liabilities 8,621 5,167 14,766 Deferred accident protection plan revenue 17,150 21,850 14,865 Deferred service contract revenue 24,542 30,645 14,760 Income taxes, net (8,984 ) (424 ) (3,691 ) Other (1) (5,884 ) (7,845 ) (1,719 ) Total (135,728 ) (119,178 ) (53,812 ) Investing activities: Purchase of investments (5,549 ) (1,574 ) - Purchase of property and equipment (1) (22,106 ) (15,796 ) (8,952 ) Proceeds from sale of property and equipment 84 20 694 Total (27,571 ) (17,350 ) (8,258 ) Financing activities: Debt facilities, net (207,696 ) (186,037 ) 9,965 Non-recourse debt, net 400,176 399,994 - Change in cash overdrafts - (1,802 ) 1,802 Purchase of common stock (5,196 ) (34,698 ) (10,616 ) Dividend payments (40 ) (40 ) (40 ) Exercise of stock options, including tax benefits and issuance of common stock 1,502 (1,195 ) 4,292 Total 188,746 176,222 5,403 Increase (decrease) in cash, cash equivalents, and restricted cash $ 25,447 $ 39,694 $ (56,667 ) (1) Prepaid expenses and other assets at April 30, 2022, reflects an immaterial reclassification of approximately $6.0 million of capitalized implementation costs related to a cloud-computing arrangement previously recorded in Property and equipment, net, and did not impact operating income.
These investments reflect our commitment to providing the necessary inventory and facilities to support a growing customer base. 34 Liquidity and Capital Resources The following table sets forth certain historical information with respect to the Company’s Statements of Cash Flows (in thousands): Years Ended April 30, 2024 2023 2022 Operating activities: Net income $ (31,393 ) $ 20,432 $ 95,014 Provision for credit losses 423,406 352,860 238,054 Losses on claims for accident protection plan 34,504 25,107 21,871 Depreciation and amortization 6,871 5,602 4,033 Amortization of debt issuance costs 5,139 5,461 775 Stock based compensation 4,174 5,314 5,496 Deferred income taxes (21,507 ) 8,866 8,750 Finance receivable originations (1,079,946 ) (1,161,132 ) (1,009,858 ) Finance receivable collections 455,828 434,458 417,796 Accrued interest on finance receivables (792 ) (1,188 ) (1,559 ) Inventory 139,186 133,047 51,057 Accounts payable and accrued liabilities (9,338 ) 8,621 5,167 Deferred accident protection plan revenue (1,229 ) 17,150 21,850 Deferred service contract revenue 1,540 24,542 30,645 Income taxes, net 6,301 (8,984 ) (424 ) Other (1) (6,642 ) (5,884 ) (7,845 ) Total (73,898 ) (135,728 ) (119,178 ) Investing activities: Purchase of investments (4,815 ) (5,549 ) (1,574 ) Purchase of property and equipment (1) (6,146 ) (22,106 ) (15,796 ) Proceeds from sale of property and equipment 316 84 20 Total (10,645 ) (27,571 ) (17,350 ) Financing activities: Debt facilities, net 27,330 119,580 (186,037 ) Non-recourse debt, net 83,381 72,900 399,994 Change in cash overdrafts 823 - (1,802 ) Purchase of common stock (365 ) (5,196 ) (34,698 ) Dividend payments (40 ) (40 ) (40 ) Exercise of stock options, including tax benefits and issuance of common stock (173 ) 1,502 (1,195 ) Total 110,956 188,746 176,222 Increase in cash, cash equivalents, and restricted cash $ 26,413 $ 25,447 $ 39,694 (1) Prepaid expenses and other assets at April 30, 2022, reflects an immaterial reclassification of approximately $6.0 million of capitalized implementation costs related to a cloud-computing arrangement previously recorded in Property and equipment, net, and did not impact operating income.
For fiscal year 2023, growth in finance receivables, net of deferred revenue, of 24.2% exceeded revenue growth of 17.6%, due primarily to the increases in term lengths of our installment sales contracts as the Company strives to keep payments affordable for our customers.
For fiscal year 2024, growth in finance receivables, net of deferred revenue, of 4.9% exceeded revenue decline of 0.5%, due primarily to the increases in term lengths of our installment sales contracts as the Company strives to keep payments affordable for our customers.
Fiscal 2022 Compared to Fiscal 2021 Total revenues increased $285.9 million, or 31.4%, in fiscal 2022, as compared to revenue growth of 22.2% in fiscal 2021, principally as a result of (i) revenue growth from dealerships that operated a full twelve months in both fiscal years ($269.2 million), and (ii) revenue from stores opened or acquired during or after the year ended April 30, 2021 ($16.8 million), partially offset by (iii) decreased revenue from dealerships closed during or after the year ended April 30, 2021 ($86,000).
Fiscal 2023 Compared to Fiscal 2022 Total revenues increased $209.9 million, or 17.6%, in fiscal 2023, as compared to revenue growth of 31.2% in fiscal 2022, principally as a result of (i) revenue growth from dealerships that operated a full twelve months in both fiscal years ($196.7 million), and (ii) revenue from stores opened or acquired during or after the year ended April 30, 2022 ($15.3 million), partially offset by (iii) decreased revenue from dealerships closed during or after the year ended April 30, 2022 ($2.1 million).
Revenue can be affected by our level of competition, which is influenced to a large extent by the availability of funding to the sub-prime automobile industry, together with the availability and resulting purchase cost of the types of vehicles the Company purchases for resale. Revenues can also be affected by the macro-economic environment.
The Company’s cost structure is more fixed in nature and is sensitive to volume changes. Revenue can be affected by our level of competition, which is influenced to a large extent by the availability of funding to the sub-prime automobile industry, together with the availability and resulting purchase cost of the types of vehicles the Company purchases for resale.
The Company believes that the amount of credit available, even with it tightening in 2023, for the sub-prime auto industry will remain relatively consistent with levels in recent years, which management expects will contribute to continued strong overall demand for most, if not all, of the vehicles the Company purchases for resale. 34 The Company has generally leased the majority of the properties where its dealerships are located.
The Company believes that the amount of credit available for the sub-prime auto industry, even with it tightening in 2023 and 2024, will remain relatively consistent with levels in recent years, which management expects will contribute to continued demand for most, if not all, of the vehicles the Company purchases for resale. 36 The Company’s business model relies on leasing the majority – approximately 86% as of April 30, 2024 – of the properties where its dealerships are located.
The Company consistently focuses on collections. Each dealership is responsible for its own collections with supervisory involvement of the corporate office. Over the last five fiscal years, the Company’s credit losses as a percentage of sales have ranged from approximately 19.30% in fiscal 2019 to 29.20% in fiscal 2023 (average of 23.74%).
The Company consistently focuses on collections. Each dealership is responsible for its own collections with supervisory involvement of the corporate office. Over the last five fiscal years, the Company’s provision for credit losses as a percentage of sales has ranged from a low of approximately 19.31% in fiscal 2021 to 36.48% in fiscal 2024 (average of 26.36%).
Finance receivables, net, increased by $231.4 million during fiscal 2022. The purchase price the Company pays for a vehicle has a significant effect on liquidity and capital resources. Because the Company bases its selling price on the purchase cost for the vehicle, increases in purchase costs result in increased selling prices.
The purchase price the Company pays for a vehicle has a significant effect on liquidity and capital resources. Because the Company bases its selling price on the purchase cost for the vehicle, increases in purchase costs result in higher selling prices.
Accounts payable and accrued liabilities increased by approximately $8.1 million at April 30, 2023 as compared to April 30, 2022 primarily due to higher accounts payable related to increased inventory and sales activity.
Accounts payable and accrued liabilities decreased by approximately $5.9 million at April 30, 2024 as compared to April 30, 2023 primarily due to lower accounts payable related to decreased inventory and sales activity.
Borrowings on the Company’s revolving credit facilities fluctuate primarily based upon a number of factors including (i) net income, (ii) finance receivables changes, (iii) income taxes, (iv) capital expenditures, (v) common stock repurchases and (vi) other sources of financing, such as our recent issuance of asset-backed non-recourse notes.
Borrowings on the Company’s revolving credit facilities fluctuate primarily based upon a number of factors including (i) net income, (ii) finance receivables changes, (iii) funds available from asset-backed securitization offerings and/or warehouse facilities, (iv) income taxes, (v) capital expenditures, and (vi) common stock repurchases.
We present an adjusted debt to equity ratio, a non-GAAP financial measure, as a supplemental measure of our financial condition. The adjusted debt to equity ratio is defined as the ratio of total debt, net of cash, to total equity.
We present debt, net of cash, and an adjusted debt to finance receivables ratio, each a non-GAAP financial measure, as supplemental measures of our financial condition. Debt, net of cash, is defined as total debt minus total cash, cash equivalents, and restricted cash on the balance sheet.
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 continuing strong wage increases for our customers will cause affordability to improve gradually over the next couple of 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.
The increase in interest expense is primarily due to the higher average borrowings in fiscal 2022 ($333.2 million in fiscal 2022 compared to $220.7 million in fiscal 2021). 30 Financial Condition The following table sets forth the major balance sheet accounts of the Company at April 30, 2023, 2022 and 2021 (in thousands): April 30, 2023 2022 2021 Assets: Finance receivables, net $ 1,073,764 $ 863,674 $ 632,270 Inventory 109,290 115,302 82,263 Income taxes receivable, net 9,259 274 - Property and equipment, net (1) 61,682 45,412 34,719 Liabilities: Accounts payable and accrued liabilities 60,802 52,685 49,486 Deferred revenue 120,469 92,491 56,810 Income taxes payable, net - - 150 Deferred income tax liabilities, net 39,315 30,449 21,698 Non-recourse notes payable, net 471,367 395,986 - Revolving line of credit, net 167,231 44,670 225,924 (1) Prepaid expenses and other assets at April 30, 2022, reflects an immaterial reclassification of approximately $6.0 million of capitalized implementation costs related to a cloud-computing arrangement previously recorded in Property and equipment, net, and did not impact operating income.
Financial Condition The following table sets forth the major balance sheet accounts of the Company at April 30, 2024, 2023 and 2022 (in thousands): April 30, 2024 2023 2022 Assets: Finance receivables, net $ 1,098,591 $ 1,063,460 $ 856,114 Inventory 107,470 109,290 115,302 Income taxes receivable, net 2,958 9,259 274 Property and equipment, net (1) 60,361 61,682 45,412 Liabilities: Accounts payable and accrued liabilities 49,207 55,108 47,925 Deferred revenue 120,781 120,469 92,491 Deferred income tax liabilities, net 17,808 39,315 30,449 Non-recourse notes payable, net 553,629 471,367 395,986 Revolving line of credit, net 200,819 167,231 44,670 (1) Prepaid expenses and other assets at April 30, 2022, reflects an immaterial reclassification of approximately $6.0 million of capitalized implementation costs related to a cloud-computing arrangement previously recorded in Property and equipment, net, and did not impact operating income.
Years Ended April 30, 2023 2022 2021 Growth in finance receivables, net of deferred revenue 24.2 % 34.1 % 28.7 % Revenue growth 17.6 % 31.4 % 23.7 % At fiscal year-end 2023, inventory decreased 5.2% ($6.0 million), compared to fiscal year-end 2022, primarily due to a concerted effort to increase efficiencies in our inventory operations resulting in annualized inventory turns of 7.2 compared to 6.7 for the previous year.
Years Ended April 30, 2024 2023 2022 Growth in finance receivables, net of deferred revenue 4.9 % 24.2 % 34.1 % Revenue growth (0.5 )% 17.6 % 31.2 % At fiscal year-end 2024, inventory decreased 1.7% ($1.8 million), compared to fiscal year-end 2023.
The Company has also increased the level of accountability for its purchasing agents including updates to sourcing and pricing guidelines. The Company continues to build relationships with national vendors that can supply a large quantity of high-quality vehicles. Even with these efforts, the Company expects gross margin percentages to remain under pressure over the near term.
The Company has also increased the level of accountability for its purchasing agents including updates to sourcing and pricing guidelines. The Company continues to build relationships with national vendors that can supply a large quantity of high-quality vehicles. The Company’s liquidity is also impacted by our credit losses.
The Company anticipates going forward that the growth in finance receivables will generally continue to be slightly higher than overall revenue growth on an annual basis due to the overall term length increases in our installment sales contracts in recent years.
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 sales contracts, partially offset by improvements in underwriting and collection procedures in an effort to reduce credit losses.
Finance receivables, net, increased by $210.1 million during fiscal 2023. Cash flows from operations in fiscal 2022 compared to fiscal 2021 decreased primarily as a result of (i) an increase in finance receivable originations and (ii) an increase in inventory, partially offset by increases in (iii) finance receivable collections and (iv) deferred revenue.
Cash flows used in operating activities for fiscal 2023 compared to fiscal 2022 increased primarily as a result of (i) an increase in finance receivable originations and (ii) a decrease in deferred revenue, partially offset by an increase in (iii) finance receivable collections.
The allowance for credit losses at April 30, 2023 of $299.6 million, was 23.91% of the principal balance in finance receivables of $1.4 billion, less unearned accident protection plan revenue of $53.1 million and unearned service contract revenue of $67.4 million.
The allowance for credit losses at April 30, 2024 of $331.3 million, was 25.32% of the principal balance in finance receivables of $1.4 billion, less unearned accident protection plan revenue of $51.8 million, unearned service contract revenue of $68.9 million and, pending APP claims of $6.4 million.
The Company’s gross margin is based upon the cost of the vehicle purchased, with lower-priced vehicles typically having higher gross margin percentages but lower gross profit dollars, and 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.
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.
As of April 30, 2023, the Company leased approximately 79% of its dealership properties. At April 30, 20223 the Company had $82.2 million of operating lease commitments, including $13.3 million of non-cancelable lease commitments under the lease terms, and $68.9 million of lease commitments for renewal periods at the Company’s option that are reasonably assured.
At April 30, 2024 the Company had $82.9 million of operating lease commitments, including $23.8 million of non-cancelable lease commitments under the lease terms, and $59.1 million of lease commitments for renewal periods at the Company’s option that are reasonably assured.
The landscape for hiring remains very competitive as business activity and workforce participation continue to adjust post-pandemic. The Company has continued to add resources to recruit, train, and develop personnel, especially personnel targeted to fill dealership manager positions. The Company expects to continue to invest in the development of its workforce.
The landscape for hiring remains very competitive. The Company has continued to add resources to recruit, train, and develop personnel, especially personnel targeted to fill dealership manager positions. The Company expects to continue to invest in the development of its workforce. 30 Consolidated Operations (Operating Statement Dollars in Thousands) % Change 2024 2023 Years Ended April 30, vs. vs.
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. Recently Issued Accounting Pronouncements Not Yet Adopted In March 2022, the FASB issued an accounting pronouncement (ASU 2022-02) related to troubled debt restructurings (“TDRs”) and vintage disclosures for financing receivables.
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 March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses .
Down payments, contract term lengths and proprietary credit scoring are critical to helping customers succeed and are monitored closely by corporate management at the point of sale. After the sale, collections, delinquencies and charge-offs are crucial elements of the Company’s evaluation of its financial condition and results of operations and are monitored and reviewed on a continuous basis.
After the sale, collections, delinquencies, and charge-offs are crucial elements of the Company’s evaluation of its financial condition and results of operations and are monitored and reviewed on a continuous basis.
Management believes that developing and maintaining a relationship with its customers and earning their repeat business is critical to the success and growth of the Company and can serve to offset the effects of increased competition and negative macro-economic factors. 26 The Company focuses on the benefits of excellent customer service and its “local” face-to-face offering in an effort to help customers succeed, while continuing to enhance the Company’s digital services and offerings to meet growing demands for an online sales experience.
The Company focuses on the benefits of excellent customer service and its “local” face-to-face offering in an effort to help customers succeed, while continuing to enhance the Company’s digital services and offerings to meet growing demands for an integrated digital-online sales and service experience.
We plan to adopt this pronouncement and make the necessary updates to our vintage disclosures for the interim period beginning May 1, 2023, and aside from these disclosure changes. 37 Non-GAAP Financial Measure This Annual Report on Form 10-K contains financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP).
We plan to adopt this pronouncement for our fiscal year beginning May 1, 2025, and we do not expect it to have a material effect on our consolidated financial statements. 39 Non-GAAP Financial Measure This Annual Report on Form 10-K contains financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP).
The Company earns revenue from the sale of used vehicles, and in most cases a related service contract and an accident protection plan product, as well as interest income and late fees from the related financing. The Company’s cost structure is more fixed in nature and is sensitive to volume changes.
The decrease was partially offset by a 5.7% increase in the average retail sales price and an 18.8% increase in interest income. The Company earns revenue from the sale of used vehicles, and in most cases a related service contract and an accident protection plan product, as well as interest income and late fees from the related financing.
To the extent finance receivables growth, common stock repurchases and capital expenditures exceed income from operations we historically increased our borrowings under our revolving credit facilities and most recently also utilized the securitization market. 33 Cash flows from operations in fiscal 2023 compared to fiscal 2022 decreased primarily as a result of (i) an increase in finance receivable originations and (ii) a decrease in deferred revenue, partially offset by an increase in (iii) finance receivable collections.
To the extent finance receivables growth, common stock repurchases, and capital expenditures exceed income from operations, the Company has increased borrowings under our revolving credit facilities and secured additional funding through the issuance of asset-backed non-recourse notes. 35 Cash flows used in operating activities for fiscal 2024 compared to fiscal 2023 decreased primarily as a result of (i) an increase in the provision for credit losses and (ii) a decrease in finance receivable originations, partially offset by an (iii) increase in cash used for accounts payable and accrued liabilities and (iv) a net loss.
The gross margin percentage decreased in fiscal 2023 to 33.4% from 36.4% in the prior fiscal year, while total gross profit per retail unit sold increased by $72, primarily as a result of the Company selling on average a higher priced vehicle in fiscal 2023.
The total gross dollars per retail unit sold increased from the prior fiscal year by $593, primarily as a result of the Company selling on average a higher priced vehicle in fiscal 2024. The Company’s gross margin is based upon the cost of the vehicle purchased, with lower-priced vehicles typically having higher gross margin percentages but lower gross profit dollars.
We strongly encourage investors to review our consolidated financial statements included in this Annual Report on Form 10-K in their entirety and not rely solely on anyone, single financial measure. The reconciliation between the Company’s debt to equity ratio and debt, net of cash, to equity ratio for fiscal year ending April 30, 2023, is summarized in the table below.
We strongly encourage investors to review our consolidated financial statements included in this Annual Report on Form 10-K in their entirety and not rely solely on any one, single financial measure. The reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures as of April 30, 2024, are provided in the table below.
Off-Balance Sheet Arrangements The Company has two standby letters of credit relating to insurance policies totaling $2.9 million at April 30, 2023. 35 Other than its letters of credit, the Company is not a party to any off-balance sheet arrangement that management believes is reasonably likely to have a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Other than its letters of credit, the Company is not a party to any off-balance sheet arrangement that management believes is reasonably likely to have a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. 37 Related Finance Company Contingency 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.
We believe the debt, net of cash, to equity ratio is a useful measure to monitor leverage and evaluate balance sheet risk.
The adjusted debt to finance receivables ratio is defined as the ratio of total debt, net of total cash, cash equivalents, and restricted cash divided by the outstanding principal balance of our finance receivables. We believe debt, net of cash, and the adjusted debt to finance receivables ratio are useful measures to monitor leverage and evaluate balance sheet risk.
The Company also maintains a revolving line of credit with a group of lenders with available borrowings based on and secured by eligible finance receivables and inventory. Interest under the revolving credit facilities is payable monthly at an interest rate determined based on the Company’s consolidated leverage ratio for the preceding fiscal quarter.
These notes accrue interest at fixed rates with a weighted average rate of 9.0% as of April 30, 2024. The Company also maintains a revolving line of credit with a group of lenders with available borrowings based on and secured by eligible finance receivables and inventory.
Interest expense as a percentage of sales increased slightly to 1.0% in fiscal 2022 from 0.9% in fiscal 2021.
Interest expense for fiscal 2024 as a percentage of sales increased to 5.6% in fiscal 2024 from 3.2% in fiscal 2023.
The increase in revenue for fiscal 2022 is attributable to (i) a 21.6% increase in average retail sales price, (ii) a 6.7% increase in retail units sold and (iii) a 37.4% increase in interest and other income.
The decline in revenue for fiscal 2024 is attributable to an 8.8% decrease in retail units sold, largely reflecting the challenging macroeconomic environment for our customers, partially offset by an 18.8% increase in interest and other income and a 5.7% increase in the average retail sales price.
On a dollar basis, our gross margin per retail unit sold increased by $639 in fiscal 2022 compared to fiscal 2021. The average retail sales price for fiscal 2022 was $16,372, a $2,908 increase over the prior fiscal year, reflecting the high demand for used cars, especially in the market we serve.
On a dollar basis, our gross margin per retail unit sold increased by $593 in fiscal 2024 compared to fiscal 2023. The average retail sales price for fiscal 2024 was $19,113, a $1,033 increase over the prior fiscal year, with over half of the increase attributable to vehicle price and the remaining related to ancillary products.
Provision for credit losses as a percentage of sales increased to 22.8% for fiscal 2022 compared to 19.3% for fiscal 2021. Net charge-offs as a percentage of average finance receivables increased to 18.3% for fiscal 2022 compared to 18.0% for the prior year. The stimulus payments during fiscal 2021 had positive impacts on collections and net charge-off metrics.
Net charge-offs as a percentage of average finance receivables increased to 27.2% for fiscal 2024 compared to 23.3% for the prior year.
Deferred revenue increased $28 million at April 30, 2023 over April 30, 2022, primarily resulting from the increase in sales of the accident protection plan and service contract products, as well as the increased terms on the service contracts.
Deferred revenue increased $312,000 at April 30, 2024 over April 30, 2023, primarily resulting from the increase in average retail sales price as well as the increased terms on the service contracts, partially offset by the decrease in retail unit sold. Deferred income tax liabilities, net, decreased approximately $21.5 million on April 30, 2024, compared to April 30, 2023.
We incurred approximately $22.3 million in expenditures during fiscal year 2023, primarily related to new locations, relocations and finalizing our rebranding project. The increase to property and equipment, net, was partially offset by depreciation expense of $5.6 million and disposals of approximately $454,000 in furniture and equipment.
The Company incurred approximately $6.1 million in expenditures during fiscal year 2024, primarily related to remodeling of existing locations. These expenditures were offset by $6.9 million in depreciation expense during fiscal 2024.
Deferred income tax liabilities, net, increased approximately $8.9 million at April 30, 2023 as compared to April 30, 2022, due primarily to the increase in finance receivables, net. The Company had $471 million and $396 million of non-recourse notes payable outstanding related to asset-backed term funding transactions for the periods ended April 30, 2023 and 2022, respectively.
As of April 30, 2024, the Company had an expected federal net operating loss carryforward of $83 million, which may be carried forward indefinitely until the loss is fully recovered. The Company had $553.6 million and $471.4 million of non-recourse notes payable outstanding related to asset-backed term funding transactions as of April 30, 2024 and 2023, respectively.
Selling, general and administrative expenses remained, for the most part, more fixed in nature. In dollar terms, overall selling, general and administrative expenses increased $25.3 million from fiscal 2021. The increase was primarily focused on investments in our associates, especially building our customer experience team and investing in procurement, combined with increased commissions due to higher net income.
Selling, general and administrative expenses are, for the most part, more fixed in nature. In dollar terms, selling, general and administrative expenses increased $2.8 million from fiscal 2023.
Car-Mart has grown its revenues between approximately 4% and 32% per year over the last ten years (average 12.0%). Growth results from same dealership revenue growth and the addition of new dealerships.
While Car-Mart has grown its revenues between approximately 3.5% and 31.2% per year over the last ten years preceding 2024 (average 12.0%), revenue for the fiscal year ended April 30, 2024, declined slightly compared to fiscal 2023 primarily due to an 8.8% decrease in retail units sold.
Removed
Revenue increased 17.6% for the fiscal year ended April 30, 2023 compared to fiscal 2022 primarily due to a 10.4% increase in average retail sales price, a 4.9% increase in units sold and a 29.2% increase in interest income.
Added
Revenues can also be affected by the macro-economic environment. Down payments, contract term lengths and credit scoring are critical to helping customers succeed and are monitored closely by corporate management at the point of sale.

… 63 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−0 removed0 unchanged
Biggest changeThe Company’s finance receivables carry a fixed annual interest rate of 16.5% (prior to December 2022) to 18.0% (effective December 2022) for all states except Arkansas (which is subject to a usury cap of 17%) and Illinois (where dealerships originate at 19.5% to 21.5%), based on the Company’s contract interest rate as of the contract origination date, while its revolving credit facilities contain variable interest rates that fluctuate with market interest rates. 38
Biggest changeThe Company’s finance receivables now carry a fixed annual interest rate of 18.25% (up from 18.0% at April 30, 2023) for all states, except Arkansas at 16.75% (which is subject to a usury cap of 17.0%), Illinois (originates at 19.5% – 21.5%), and acquired dealerships in Tennessee (which originate at up to 23.0%), based on the Company’s contract interest rate as of the contract origination date, while its revolving credit facilities contain variable interest rates that fluctuate with market interest rates. 40
Item 7A. Quantitative and Qualitative Disclosures about Market Risk The Company is exposed to market risk on its financial instruments from changes in interest rates. In particular, the Company has historically had exposure to changes in the federal primary credit rate and has exposure to changes in the prime interest rate of its lender.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk The Company is exposed to market risk on its financial instruments from changes in interest rates. In particular, the Company has historically had exposure to changes in the federal primary credit rate and changes in the prime interest rate of its lender.
The Company does not use financial instruments for trading purposes but has in the past entered into an interest rate swap agreement to manage interest rate risk. Interest rate risk. The Company’s exposure to changes in interest rates relates primarily to its debt obligations.
The Company does not use financial instruments for trading purposes but has in the past utilized an interest rate swap agreement to manage interest rate risk. Interest rate risk. The Company’s exposure to changes in interest rates relates primarily to its debt obligations.
The Company is exposed to changes in interest rates as a result of its revolving credit facilities, and the interest rates charged to the Company under its credit facilities fluctuate based on its primary lender’s base rate of interest. The Company had an outstanding balance on its revolving line of credit of $167.2 million at April 30, 2023.
The Company is exposed to changes in interest rates as a result of its revolving credit facilities, and the interest rates charged to the Company under its credit facilities fluctuate based on its primary lender’s base rate of interest.
The Company’s earnings are impacted by its net interest income, which is the difference between the income earned on interest-bearing assets and the interest paid on interest-bearing notes payable.
The Company’s earnings are impacted by its net interest income, which is the difference between the income earned on interest-bearing assets and the interest paid on interest-bearing notes payable. During the third quarter of fiscal 2024, the Company increased the interest rate by 0.25%.
The impact of a 1% increase in interest rates on this amount of debt would result in increased annual interest expense of approximately $1.7 million and a corresponding decrease in net income before income tax.
The impact of a 1% increase in interest rates would result in increased annual interest expense of approximately $2.0 million and $1.7 million based on the amounts outstanding at April 30, 2024 and 2023, respectively, and a corresponding decrease in net income before income tax.
Added
The Company had an outstanding balance on its revolving line of credit of $200.8 million at April 30, 2024 and $167.2 million at April 30, 2023.

Other CRMT 10-K year-over-year comparisons