Americas Car-Mart (NASDAQ:CRMT) Inc. reported a larger-than-expected loss in its latest quarterly earnings, with earnings per share (EPS) coming in at negative 24 cents, compared to the anticipated negative 10 cents. Despite this, the company's stock surged by over 18% in pre-market trading, driven by investor optimism over strategic initiatives and operational improvements. The company's revenue for the quarter was $347.3 million, surpassing the forecast of $335.68 million.
Key Takeaways
- Americas Car-Mart posted a wider loss than expected, with EPS at negative 24 cents versus a forecast of negative 10 cents.
- Revenue exceeded expectations, reaching $347.3 million compared to the forecasted $335.68 million.
- The stock price jumped 18.16% in pre-market trading, indicating positive investor sentiment.
- Strategic initiatives, including a new Loan Origination System, are aimed at improving underwriting and risk management.
- The company faces challenges from a volatile wholesale vehicle market and inflationary pressures.
Company Performance
Americas Car-Mart reported a decrease in total revenues by 3.5% year-over-year, with retail units sold declining by 9.1%. The average vehicle retail sales price also saw a slight reduction of 1.2%, bringing it down to $17,251. Despite these declines, the company highlighted improvements in its underwriting process, which contributed to a 21% improvement in cumulative net losses.
Financial Highlights
- Revenue: $347.3 million, a 3.5% decrease year-over-year.
- Earnings per share: Negative 24 cents, compared to the forecast of negative 10 cents.
- Gross margin: 39.4%, or 36.5% excluding service contract revenue recognition.
- Net charge-offs: 6.6% of average finance receivables, down from 7.2%.
Earnings vs. Forecast
Americas Car-Mart's EPS of negative 24 cents significantly missed the forecasted negative 10 cents, representing a larger-than-expected loss. This marks a notable miss for the company, which has seen revisions with three downward EPS adjustments over the past 90 days. However, revenue outperformed expectations, coming in at $347.3 million against a forecast of $335.68 million, showcasing strong sales performance despite a challenging environment.
Market Reaction
Following the earnings release, Americas Car-Mart's stock experienced a significant 18.16% increase in pre-market trading, rising from a last close of $45.70. This surge brought the stock closer to its 52-week high of $83.07, reflecting investor confidence in the company's strategic direction and operational enhancements.
Company Outlook
Looking ahead, Americas Car-Mart plans to continue optimizing its underwriting processes and expand its risk-based pricing strategy. The company is also preparing for the upcoming tax refund season, which is expected to drive consumer activity. Additionally, potential dealership acquisitions and new funding structures are being explored to support growth initiatives.
Executive Commentary
"We're pleased with the progress we've made on underwriting powered by our technology investments," said Doug Campbell, CEO. He also emphasized the importance of timely delivery by the credit team, stating, "Our credit team has done a nice job of ensuring this was delivered timely and without issue."
Q&A
During the earnings call, analysts inquired about the company's revised service contract revenue recognition and the improvements in LOS underwriting. There was also discussion on potential credit performance expectations and the impact of consumer confidence on market opportunities.
Risks and Challenges
- Volatile wholesale vehicle market: Fluctuations in vehicle prices can impact margins and sales.
- Inflationary pressures: Rising costs may affect consumer affordability and purchasing decisions.
- Macroeconomic environment: Broader economic conditions could influence consumer behavior and credit performance.
- Competitive landscape: Limited M&A activity and intense competition may pose challenges to market share expansion.
- Supply chain disruptions: Any disruptions could affect inventory levels and sales operations.
Full transcript - Americas Car-Mart Inc (CRMT) Q2 2025:
Conference Operator: Hello, and thank you for standing by. Welcome to America's Car Mart Second Quarter Fiscal 2025 Results. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to hand the conference over to Vicki Judy.
You may begin.
Vicki Judy, Chief Financial Officer, America's Car Mart: Good morning. I'm Vicki Judy, the company's Chief Financial Officer. Welcome to America's Car Mart's Q2 fiscal year 2025 earnings call for the period ending October 31, 2024. Joining me on the call today is Doug Campbell, our company's President and CEO. We issued our earnings release earlier this morning and it is available on our website along with supplemental slides detailing our cash on cash returns and our new loan origination system performance improvements.
We will post the transcript of our prepared remarks following this call and the Q and A session will be available through the webcast. During today's call, certain statements we make may be considered forward looking and inherently involve risks and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. The company cannot guarantee the accuracy of any forecast or estimate, nor does it undertake any obligation to update such forward looking statements. For more information, including important cautionary notes, please see Part 1 of the company's annual report on Form 10 ks for the fiscal year ended April 30, 2024, and our current and quarterly reports furnished to or filed with the Securities and Exchange Commission on Forms 8 ks and 10 Q.
I'll let Doug start with color on the quarter and perspective on Car Mart's business strategies. Doug, I'll turn it to you now.
Doug Campbell, President and CEO, America's Car Mart: Thank you, Vicki. We had significant activity during this quarter that I want to comment on, which were designed to shape our outcomes in the future. In September, we amended our revolving credit facility. The purpose was to provide additional cushion around our financial covenants to help navigate uncertainty around the macroeconomic environment and the back half of the year. We also raised approximately $74,000,000 of net proceeds through the issuance of new shares.
It's important for me to explain the rationale for this decision. Our management team and Board of Directors gave very thoughtful consideration and review ahead of this decision given its dilutive effect on current shareholders. Our performance over the past few quarters was below our expectations which was an important factor in our decision to bolster our balance sheet. As we talked about in the past, we've been challenged by marketplace factors. On the sales side, we've tightened underwriting standards given the industry wide auto loan loss pressure, evident by the performance of our own back book.
Our consumer is and has been more susceptible to challenges in today's inflationary environment. We needed breathing room in our forecast to account for these factors. We did consider options that would increase additional leverage in various forms, but ultimately we felt that equity was more prudent. This decision pained us to execute. However, we felt it was the best decision for all shareholders to maintain flexibility during marketplace challenges and a higher interest rate environment.
With the equity raise completed, the company is currently in discussions to extend the revolving credit facility, which matures in September 2025. And we're working through potential initiatives to expand the company's funding program, while also making it more robust. These initiatives include options to add warehouse capacity, a redesigned floor plan facility and a bespoke line of credit for receivables originated by our acquired dealers. The objectives of these facilities are to increase overall availability, optionality and when we enter the ABS market and to build a level of redundancy and conservatism in our funding structure. We appreciate the support of our ABL partners and they will continue to be a critical part of our capital structure.
They have been supportive for many years and we appreciate their consideration in navigating near term challenges to date. We will share more with you in our progress on these initiatives in the coming quarters. We completed our 5th ABS transaction in October. This transaction was $300,000,000 in size and well oversubscribed, generating over $1,500,000,000 in demand. We believe improved demand was for loans underwritten by LOS, which represented approximately 70% of the receivables in this transaction.
Ultimately, this enabled us to have the tightest spreads we've had to date, which when combined with lower benchmark rates resulted in overall coupon of 7.44%, a nearly 2 point improvement over our January transaction. This platform is important for us given its material improvement in the advance rate relative to the ABL and the access to additional capital for a growing portfolio. Also in October, we welcomed our new Chief Operating Officer, Jamie Fisher to our leadership team. Last quarter, I mentioned how important existing and new talent will be in rounding out our leadership team. Her skill sets will complement and accelerate our growth and she's already proven to be a great fit within the organization.
Before turning it over to Vicki, I want to comment on our continued improvements in underwriting. Back in June, I spoke about the LOS results relative to the loans generated in our legacy system during the LOS rollout. At the time, we noted that it was still early, but we were optimistic that the results that we were seeing showed a 20% improvement in cumulative net losses through May. An update through October is now showing this at a 21% improvement in cumulative net losses. On the surface, it's very difficult to see where such nominal changes to down payments, originating term lengths, payment to income ratios and overall amounts financed could represent such an improvement to cumulative net losses.
But our focus has been on the cohorts of customers with the most risk within our customer rankings. We rank our customers 1 through 6 with 6 having the very best credit and 1 ranked customers holding the most risk. Approximately 40% of our sales come from ranks 1 through 4 consumers and that has been where most of our focus has been for us on improving loan structures and allowing more flexibility to 56 rank customers. On these lower cohorts, we systematically now can hold more control over these structures when compared to our legacy system. This has resulted in a 15% improvement in down payments allowing us to carry smaller loan sizes of $400 to $800 less depending on the customer rank and curtail originating terms by 3 months on average in addition to lower payment income ratios.
Looking at the bottom quartile of stores, those results are even more pronounced. The LOS receivables within the portfolio at quarter end represent almost 50% of the portfolio dollars. In terms of the number of contracts, it's about 38%. It's why we're starting to see an improvement sequentially in the severity of loss, but the volume of contracts originated in the legacy system are still driving the frequency of loss. We were able to take another reduction in our loan loss reserve percentage based on the LOS improved performance and increasing size of the portfolio impacted by it.
We expect a crossover point at the end of the fiscal year where the LOS will start to be a larger driver on both frequency and severity. With that overview, let's turn to the Q2 financial results. Vicki?
Vicki Judy, Chief Financial Officer, America's Car Mart: Thanks, Doug. Before I get started on the details, I want to cover an accounting adjustment that we made in quarter related to our service contracts. Our longer term service contracts that we rolled out in 2021 have now been through a full cycle. And based on a detailed performance analysis, we found that customers reach the mileage portion of their service contract earlier than the contract term. Because of this, we reduced our revenue recognition period to better match the time of usage by the consumer.
This resulted in an acceleration of deferred service contract revenue of $13,200,000 during this quarter and will result in a 25% quicker recognition of revenue on both existing contracts and any new contracts originated going forward. This started in the Q2 and is expected to improve gross margin of approximately 1% on a go forward basis, absent any other variances to gross margin. In my remaining commentary, the comparisons that I will cover will be the Q2 of fiscal 2025 versus the Q2 of fiscal 2024 unless otherwise noted. Total (EPA:TTEF) revenues decreased $12,500,000 or 3.5 percent, largely due to the 9.1% decline in retail units sold. This was partially offset by 3.6% increase in interest income and the $13,200,000 service contract benefit.
Sales volumes were impacted by a number of factors, including the affordability of vehicles for our consumers, although we did see sequential improvement. This past quarter was also impacted by some weather events and the closing of 2 dealerships early in the quarter accounting for about 15% of the sales mix to the prior year. We continue to balance the appropriate underwriting risk with sales volumes and have limited originations at a select number of dealerships to focus on collections and servicing to maximize returns. This has also contributed to lower productivity on average, but improved asset quality. I'll cover more on the portfolio statistics in a moment.
The average vehicle retail sales price excluding ancillary products was $17,251 a reduction of $2.12 or 1.2 percent sequentially. We provided a breakout of the total average retail sales price per unit versus the ancillary sales in our earnings release this morning. This should make it easier to isolate the vehicle price movement going forward. Gross margin as a percentage of sales was 39.4% or 36.5% excluding the impact of the $13,200,000 service contract revenue recognition benefit. The initiatives around procurement and our partnership with Cox continue to drive improvements to vehicle affordability and the resulting gross margin percentage.
We're pleased with the continuing progress in improving the gross margin percentage and we'll continue to be focused on driving to the 37% to 38% that we've mentioned in prior quarters. Net charge offs as a percentage of average finance receivables for the quarter were 6.6% compared to 7.2%. Our fiscal year 2023 and earlier originations are still the primary cause of underperformance, but represent less than 30% of the portfolio dollars currently. However, as Doug mentioned, the LOS originations represent approximately 50% of the portfolio dollars and are continuing to drive the improvements in the allowance for credit losses. The allowance as a percentage of finance receivables, net of deferred revenue and accident protection plan claims was 24.72% at quarter end, down from 25% at July 31, 2024.
Doug covered the work we've done to achieve improvements in underwriting through our LOS system. Down payments for the quarter were up 30 basis points to 5.2%. The focus of our sales teams on larger down payments, especially with higher risk customers is benefiting the performance of fiscal 2025 pools and will benefit our customers as well. Our average originating term was 44.2 months, close to flat compared to the prior year and a slight reduction sequentially. This term flattening is improving collections and benefiting loss improvement.
We continue to optimize the distribution of the term by customer score, shortening term for our highest credit risk customers and allowing additional term for our best credit scoring customers. At the end of the quarter, the weighted average total contract term for the portfolio is 48.2 months with 35.9 months remaining. The weighted average age is 12.3 months. We continue to make progress on boosting overall collections, which are up 3.3% over last year. This is also a sequential improvement from the Q1.
The monthly average total collected per active customer was $5.60 from $5.33 Delinquencies or accounts over 30 days past due improved 10 basis points to 3.5 percent atquarterend and was flat with the Q1 of fiscal 2025. Recency was 81.8% for the quarter. Moving to SG and A. SG and A expense was up $2,500,000 an increase of 5.7%. This was primarily driven by $2,100,000 increase related to the 2 acquisitions completed since last year.
As mentioned, we measure SG and A efficiency on a per account basis. In the short term, these acquisitions create headwinds in our ability to leverage SG and A on a per customer basis, while they build out a portfolio of customers. These acquisitions are expected to add 5,000 or more accounts over the next 18 to 24 months. Sequentially, SG and A increased approximately $697,000 primarily due to stock compensation increases. Interest expense increased by approximately $1,500,000 or 8.8 percent due to the rise in rates and secondarily an increase in debt.
Sequentially, we had a decrease of approximately $270,000 in interest expense as we began to see the improvement in rates and results from the equity raise and reducing the amount of debt net of cash. As of October 31, we had $8,000,000 in unrestricted cash and approximately $97,000,000 in additional availability under our revolving credit facilities calculated on our borrowing base of receivables and inventory. Now I'll turn things back to Doug.
Doug Campbell, President and CEO, America's Car Mart: Thanks, Vicki. We're pleased with the progress we've made on underwriting powered by our technology investments. However, last quarter I discussed the importance of and
Doug Campbell, President and CEO, America's Car Mart: we
Doug Campbell, President and CEO, America's Car Mart: and we were successful in that effort. We're currently in a few markets testing pricing structures and the results to date are good. In this pilot, we enabled risk based pricing and the implementation of a new scorecard that adds more granularity to the applicant pools and gives us better predictability of loss. This gives us another lever to pull to help both retain and grow the business. We believe this makes us more competitive in the upper end of our credit spectrum and will also allow us to price inappropriate returns for lower ranked customers in our system.
Our credit team has done a nice job of ensuring this was delivered timely and without issue. We should have a more comprehensive update by the fiscal year end as we get more data and results flowing through the system. Additionally, we are pleased to see gross margin continue to improve and vehicle price come down sequentially. In fact, excluding the service contract benefit, this was the highest gross margin percentage on a quarterly basis in the past 10 quarters. We expect to see continued benefits in the back half of the fiscal year on affordability and it's especially important to get this right as the tax season approaches.
Our teams are critical to the company's success. Their hard work and focus on the execution of our initiatives continue to drive these improvements. We appreciate the contributions of all of our associates in serving our customers. Overall, we're focused on our stakeholders, customers, associates and shareholders. We appreciate their belief in the platform and we believe Car Mart is well positioned for future growth and profitability.
We'll move on to the Q and A session now. Operator, please provide instructions to ask questions.
Conference Operator: Thank Our first question comes from the line of Kyle Joseph with Stephens. Your line is open.
Kyle Joseph, Analyst, Stephens: Hey, good morning guys. Thanks very much for taking my questions. Vicki, just want to make sure I understand the service contracted adjustment. So the big adjustment was in this quarter, but then going forward, I think you mentioned kind of a positive 100 basis point impact on the gross margin. Is that about it?
Vicki Judy, Chief Financial Officer, America's Car Mart: That's correct. So essentially, what we did, if you go back historically, we had a 1 year service contract. We added in 2021, we added multiple years, a 1, 2 3 year service contract. At the time we rolled those out, it was unclear on the timing of claims, the mileage driven by customers under these new contracts. And so we were conservative in our revenue recognition and recognized it just over the contract term.
As those have now completed a life cycle of our 3 year contracts are completing their 3rd year, we began our full performance review and determined that our consumers are using up the contract in a shorter period of time than the actual contract term. So we had a one time pull forward of the 13,200,000 dollars And then on a go forward basis, each contract that still sits on our books today and any sold going forward will be recognized over that shorter time period.
Kyle Joseph, Analyst, Stephens: Got it. Very helpful. Thank you. And then appreciate all the color you gave on the new LOS, but can you just kind of frame where you are in terms of underwriting versus when you first rolled out the LOS over that timeframe and how much that's changed under the new LOS or whether you kept that fairly consistent since the LOS was rolled out?
Doug Campbell, President and CEO, America's Car Mart: Great question. Good morning, Kyle. How are you doing? It's Doug. So great question.
If you remember, it was this time last year, we had just rolled it out and we were talking about being too tight. And certainly, we've gone back and revisited some of our assumptions. And those are mainly around our higher rank customers in terms of what we did in terms of term and down payment. We have stayed focused and we have obviously kept the underwriting much tighter on that bottom 40% of those customers, which are 1 to 4 rank customers, and continue to iterate there and focus on down payments. And so the color around there, around getting more money down, that wasn't, I would call it, a step change for those customers.
They are sort of still living in that same environment of tightness when we initially rolled it out. I'd say it's largely unchanged. We've fiddled around with some other things in terms of PTI and originating term lengths. But for the most part, it's been all our focus has been around the 1 to 4 rank customers. We're trying to not deviate too far off of what we did for them because the results are really, really positive.
Like I mentioned, when you're getting 15% and sometimes 20% more down on those lower ranked customers, that's a really, really big difference in the portfolio, especially when you can take out a bunch of term there as well. So we like the results of what we're seeing there.
Kyle Joseph, Analyst, Stephens: Got it. Thank you. And then, yes, you mentioned tax refund season. I think over the last 5 years, Paul, between stimulus and inflation, the traditional tax refund season has been anything but traditional kind of can you give us a sense for your what your expectations are for this year's tax refund season?
Doug Campbell, President and CEO, America's Car Mart: Yes. So being better prepared would be one of them and just making sure we're staying on top of it. The pricing market has been somewhat volatile, it's a little softer in the summer than we expected. We certainly took advantage of that. But obviously, given the storms that have come through and then what I would call all the software noise and nonsense, which created a bunch of turmoil in the wholesale market from a pricing standpoint, has really sort of kept pricing propped up in the back half of the year.
We've sort of capitalized where we can and are in a good position here setting up for tax season. In fact, we're starting ad campaigns and all of that like right now. So we'll be probably earlier in the season than we have in most cases, because to your point, it has been anything but normal the last couple of years. So we wanted to just ensure we're set up from an inventory and an advertising standpoint. Obviously, having Jamie Fisher on the team is going to go a long way.
She certainly added some perspective on things we could do differently. So we're excited about the year's tax season coming up.
Kyle Joseph, Analyst, Stephens: Great. Thanks. And then one last one for me. Just an update on the competitive environment and then tied to that just the M and A environment as well.
Doug Campbell, President and CEO, America's Car Mart: Sure. It is there's still a lot of, I would call M and A activity. The acquisitions, we've talked about that in the past in terms of building out a small team. There is so much that we are learning, having the opportunity to talk to a lot of owners. And the competition on the M and A side is, I would say, smaller non existent almost.
And the environment is still tough for these folks to navigate in terms of the higher interest rate and floor plan costs. And so they're really looking for help. These conversations, we have been really, really selective on what we're looking at, but it's very fruitful what we can do out there. But we need to get the funding set up properly before we resume that. And so that'll be something that we take care of here over the next quarter or so and then get back in the fight on some of those because we have clear line of sight onto several opportunities we're excited about.
Kyle Joseph, Analyst, Stephens: Got it. Thanks very much for answering all my questions.
Doug Campbell, President and CEO, America's Car Mart: Very welcome. Thanks, Collyn.
Conference Operator: Please standby for our next question. Our next question comes from the line of Vincent Caintic with BTIG. Your line is open.
Vincent Caintic, Analyst, BTIG: Hey, good morning. Thanks for taking my questions. And it's great to see the good credit performance continue that trend. So my first question actually is on credit. So it was nice to see that trend, the LOS having the benefit, the back book shrinking.
And I'm just sort of wondering if we can talk about kind of how you view things once your portfolio evolution is complete. I guess if you could compare where your portfolio is now versus what you're underwriting to. So let's say once the back book is less is goes to 0 and the LOS originations become 100% of your portfolio, what sort of losses and allowance credit reserve rates should we be expecting in that environment?
Doug Campbell, President and CEO, America's Car Mart: Yes. If you go to we've included the first time a supplemental chart showing the LOS improvement. If you sort of buy into that, right, it was I remember the first time we shared it, we were 4 or 5 months in. Now we're here on month 12 or 13 of the cycle and it's still holding a 21% improvement. When you're coming off years, the last 2 years averaging $400,000,000 in credit loss, it would imply that business is $80,000,000 better.
We certainly believe if we didn't change anything that we could continue to hold that, but we do want to serve more customers. And I think we're still writing our story for what that looks like. And when I start talking about things like risk based pricing, I want to make sure we give ourselves the latitude to make those decisions and go conquest some new customers, retain customers that we were losing before at the very upper end of the credit spectrum and maybe customers that we couldn't come to terms on in today's environment in terms of pricing the appropriate amount of return in on a risky customer that we have the opportunity to do that. And so I think that's still sort of a question mark. I don't obviously think we'll hold the line exactly where we are because we have this new lever that we're going to begin to pull here.
We have a handful of stores now live, Vincent, and we're going to take 20% of the organization live here by the end of the year. We're going to learn quite a bit over the next couple of months. And I think that will really help shape our outcome side as you give me a couple of quarters to give you a better answer on that.
Vincent Caintic, Analyst, BTIG: Okay, great. Sounds good. We'll ask you that in a couple of quarters. But yes, it sounds like you have a you're having a nicer control of your credit versus your sales volume opportunity. So I appreciate that.
And then last question. So I saw the you sold 2 dealerships this quarter and you've been selling a couple of dealerships here and there and then also adding a couple of dealerships here and there. If you can talk about your thought process with that. So when you're looking at maybe selling or shutting down dealerships, what are you looking for in the pruning of the business? And then what can you add assuming to your point earlier, you get your funding lined up?
What are you looking for when you're adding business and where you're shaping the overall Car Mart company? Thank you.
Doug Campbell, President and CEO, America's Car Mart: Yes. So some of the, I would say, older businesses that we have, Vincent, they've been around for quite a while. Some of them need facilities improvements, etcetera. It's really an opportunity to revisit some of that and whether we want to make some of those investments. I certainly given the performance of the LOS and our ability to control underwriting at a rooftop level now with some sort of central oversight, it has sort of changed our mind of thinking our frame of thinking on what we can do there to manage what I would call originations if we're seeing a lack of performance.
But there still is this sales volume part and we still need to look at the markets and what they're bearing. And sometimes we're in a long place for 20 or 30 years. Things are different, right? Plants close, manufacturing plants close. Those things have happened.
And we're trying to take action. We haven't sold any of these. These have been ones that we're closing. And so we're going to continue to look at that. I've spoken about that a couple of times about the prudent deployment of capital.
And if we're not seeing the appropriate returns, even if we can manage the credit side, but there's just not healthy volume inbound, then it sort of doesn't make sense, especially when you have line of sight to opportunities. And some of these new opportunities, the second part of your question, they range in size from things that look very similar to us to locations that have 5 and 6x the potential. And so we want to do that where it complements our footprint, where we can operationally manage those and certainly where we can continue to exploit and manage and leverage the Cox partnership. That's been a nice add on that we're continuing to get the benefit of in terms of gross margin as well.
Vincent Caintic, Analyst, BTIG: Okay, great. Super helpful. Thanks very much.
Doug Campbell, President and CEO, America's Car Mart: You got it. Thanks for your question.
Conference Operator: Please standby for our next question. Our next question comes from the line of John Murphy with Bank of America (NYSE:BAC). Your line is open.
John Murphy, Analyst, Bank of America: Good morning, everybody. Doug, I just had a first question on sort of the tightening of the credit box and it sounds like with Ellis and the scorecard that you're finding ways to kind of loosen that very responsibly at the higher end. I'm just curious how much volume you think you may have lost and how much you may gain for that adjustment at the higher end of the credit spectrum or your rankings And what percentage of your customers you think that is roughly?
Doug Campbell, President and CEO, America's Car Mart: Yes. So great good morning, John. Good to hear from you. So the 5 6 ranked customer, what we have been sort of deeming the upper end is about on any given month, 55% to 60% of our customer base. What we've seen over the last year is sort of those customers sit on the sidelines a little bit.
But over the last quarter, that traffic has been pretty robust. We're excited about the opportunity. If you think about the opportunity to sort of yield up on these lower rank customers or potentially give away some price, get stronger down payments, incentivize these customers to work with us more. The opportunity certainly exists on the volume side. And so, we're excited in terms of the pilot and where we can do that, especially where you consider, we have a large density of stores, in Arkansas home base and, there's a user recap there.
And so our ability to go after those customers, which have some of the highest incomes in the country for us certainly gives us volume opportunities in and around there Missouri, Texas, Oklahoma. We're certainly looking at that as an opportunity to drive and grow volume. But there are these other areas where we need customers that are customers to serve, but we just haven't been able to price in the appropriate returns. And so on the other end of the spectrum, we're excited about what we can do to still have a way to serve these customers while getting the appropriate return. Through all of the rising rate environment, we didn't really pass much if any of that on to our consumers because we couldn't do it sort of across the board.
We had no surgical systematic way to do it, but now we do. And so we're excited about that, John.
John Murphy, Analyst, Bank of America: And then just a second question around the confidence of your consumer because obviously that plays a big part in getting them into the transaction. What are you seeing in traffic with your customers? And it seems like there's a little bit of a spurt that's coming in consumer confidence at the low end and also in some of your states that might be a little bit more red more recently in some of the readings. I mean, how much of a help could that be going forward?
Doug Campbell, President and CEO, America's Car Mart: It could be a huge help. Obviously, we help that lower end consumer and I hear what you're saying. Certainly, they have spoken and they want the help. And I think they're from a consumer confidence index standpoint, they're maybe feeling a little bit more confident about the future hopeful. For us, we try to be agnostic to all that's going on in that outside environment.
Our job is to stay focused on the consumer and find them every way to help. And I feel like today where we stand, we certainly have more tools in our toolbox to be able to serve more of these customers and help them smartly. To your point earlier, it's like we want to do it and take those risks appropriately just given the backdrop, everything that's going on. And there will be a day where we'll sort of throttle volume higher, maybe return to the normal a little bit, but that's not today. Today, we want to make sure that we're setting up our future to be a very bright one.
John Murphy, Analyst, Bank of America: And then just lastly on
Vincent Caintic, Analyst, BTIG: the
John Murphy, Analyst, Bank of America: recap for the equity raise in the ABS. I mean, you mentioned, obviously, it was a bit painful, but probably the right thing to do for the company in total or was the right thing, that probably was the right thing to do for the company in total. Why wouldn't you have maybe done a little bit more to get the funding to maybe get a little bit more aggressive on the acquisitions of folks that might be a little bit more motivated sellers more recently?
Doug Campbell, President and CEO, America's Car Mart: Yes, it's a great question. We certainly consider that as an option. But what we're banking on is a convergence of several things, right? Falling interest rates, the initiatives coming into place, and we wanted this to be as least dilutive as possible. And so when we have line of sight to these things that we can do, which we'll announce here in the upcoming quarters around ways that we can help our customers in terms on the collection side, we got to get some of those things right and we don't think we had to do it all through equity raise.
There are certainly things we can do as a management team to drive some of those benefits and we have clear line of sight to that. But this certainly gave us some breathing room in doing that.
John Murphy, Analyst, Bank of America: Okay. Thank you very much.
Doug Campbell, President and CEO, America's Car Mart: Very welcome. Thank you, John.
Conference Operator: Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Doug for closing remarks.
Doug Campbell, President and CEO, America's Car Mart: Thank you, operator. Thank you guys for your interest in America's Karma and we'll talk to you next quarter.
Conference Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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