America’s Car-Mart, Inc. (NASDAQ:CRMT) Q3 2026 Earnings Call Transcript

America’s Car-Mart, Inc. (NASDAQ:CRMT) Q3 2026 Earnings Call Transcript March 12, 2026

America’s Car-Mart, Inc. misses on earnings expectations. Reported EPS is $-12.6474 EPS, expectations were $-0.25667.

Operator: Good day, and thank you for standing by. Welcome to the America’s Car-Mart, Inc. Third Quarter Fiscal 2026 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Jonathan Collins, Chief Financial Officer. Please go ahead.

Jonathan Collins: Good morning. I am Jonathan Collins, the company’s Chief Financial Officer. Welcome to America’s Car-Mart, Inc.’s Third Quarter Fiscal Year 2026 Earnings Call for the period ended 01/31/2026. Joining me on the call today are Doug Campbell, our President and CEO, and Jamie Fischer, our COO. We issued our earnings release earlier this morning; a supplemental presentation is available on our website. We will post the transcripts of our prepared remarks following this call and the Q&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 I of the company’s Annual Report on Form 10-K for the fiscal year ended 04/30/2025 and our current and quarterly reports furnished to or filed with the Securities and Exchange Commission on Forms 8-K and 10-Q. As a note, the comparisons we will make will be for 2026 versus 2025 unless otherwise stated. Doug, I will turn it over to you now.

Douglas Campbell: Thank you, Jonathan, and good morning, everyone. Thank you for joining us today. I want to start by being direct about what happened in the third quarter. Our retail volume declined 22.1% year over year. That is a significant number, and I want to address it head on. This was not a demand story. It was a capital structure story. Let me explain what that means. Throughout the third quarter, ability to purchase inventory at full capacity was constrained by the ongoing transition of our financing platform. Specifically, as I mentioned last quarter, we need a revolving warehouse facility to bridge originations to securitizations. Without that facility, our purchasing had to be managed against available cash rather than a rotating credit line, and that limited how much inventory we could put on our lots.

Top-of-funnel demand tells the real story here. Website traffic was up 4% year over year. Credit applications remained elevated. Our customers are there. Our team is there. The constraint is capital deployment. And we are actively working to resolve that. I also want to note an incremental headwind unique to the third quarter. Winter Storm Fern struck in January and directly impacted our entire South Central operating footprint. The timing—final days of the quarter—compressed what was already a volume-challenged period. Jamie will speak to how the Pay Your Way platform performed through the storm, and the performance that gave us real confidence in the resilience of the collections infrastructure we are building. The subprime auto capital markets have been operating in a more measured environment since last fall.

The industry absorbed significant disruption following the failures of several subprime lenders—events that raised serious and legitimate questions among warehouse providers, rating agencies, and ABS investors about collateral integrity, loan tape accuracy, and the controls governing these businesses. In the midst of that negative industry noise, we completed our 2025-4 ABS transaction: $161.3 million in asset-backed notes, rated and successfully placed in a turbulent market. It was our first ABS transaction incorporating a residual cash flow structure—a non-turbo deal. For those less familiar with ABS mechanics and jargon, a turbo structure accelerates principal payment to investors as a form of credit protection. We call that overcollateralization.

A turbo structure is structurally simpler to rate and easier to sell because the collections on the assets—remaining after paying service provider fees and interest on the notes and topping up liquidity reserve accounts—are used to repay principal to investors. As a result, the investors get their money back faster, and the level of overcollateralization increases during the life of the deal. A residual cash flow structure does quite the opposite. Rather than using all the collections remaining to repay principal on notes, the issuer repays principal on the notes only in an amount necessary to achieve a targeted level of overcollateralization. Once that level is met, the funds remaining each month—after paying the provider fees and interest and principal on the notes and topping up liquidity reserves—are released back to the issuer, the company.

The company’s ability to complete this 2025-4 transaction with a residual cash flow structure can be viewed as a sign of investor and rating agency confidence in the company and its asset-backed securitization program, which is particularly noteworthy in light of the heightened sensitivity and market stress plaguing the securitization markets in 2025. We have made meaningful progress on the transformation of our capital structure this fiscal year, and I want to recognize that even as I acknowledge there is more to do. In October, we closed a $300 million term loan which fully retired our revolving line of credit and removed the income statement covenants that had previously limited our operating flexibility. In December, we completed this 2025-4 ABS transaction with a residual cash flow structure that delivers monthly cash flows to the company, improving capital efficiency and reducing our long-term cost of capital.

These are real milestones. The ABS markets remained a viable and productive funding source for us throughout this period, and we intend to continue accessing it on a regular cadence. However, the capital markets are not without their challenges: elevated rates, the complex macro backdrop, and the heightened scrutiny that followed the industry disruptions I mentioned. But we have demonstrated that we can execute in that market. The critical remaining step is securing a revolving warehouse facility. That is the bridge financing that connects originations to securitizations and will allow us to fully serve the demand that we are seeing. We are actively working on this, and we will update you when we have something definitive to share. Until that facility is in place, volumes will remain below what our demand and team are capable of producing.

While we have been working on our capital transition, we have also been executing on the operational side. We have executed phase one and phase two of our SG&A cost control plan, which included a reduction in workforce and store consolidations, which are now complete. Eighteen total locations have been rationalized, and our active store count now stands at 136. These consolidations are not just about reducing cost. They are about concentrating resources and inventory to our strongest performing locations, so that when volume recovers, we can recover into a more productive and efficient footprint. The financial benefits of these consolidations are expected to be reflected in the fourth quarter, as full run-rate savings flow through the P&L. And with that, I will turn it over to Jamie for the operational detail.

Jamie Fischer: Thanks, Doug. You have outlined the capital structure context and its impact on volumes. Let me now provide the operational detail behind those results, as there are a few dynamics worth separating clearly. I will start by sharing about Winter Storm Fern and its ripple effects on the operations of the business. To provide some context on the scale of that disruption, Winter Storm Fern was a significant weather event, not a routine weather day. The storm was an ice and snow event concentrated in the South Central U.S., which is precisely where our entire dealership network operates, meaning there was no part of our business that was insulated from its impact. Our entire operating footprint was closed, including our corporate office, for a period of three days.

However, the effects extended well beyond these days. The residual impact of excessively cold temperatures, infrastructure damage, and supply chain disruptions in the aftermath meant partial closures, delayed reopenings, and operational constraints which included closed wholesale auctions in our markets, halting our ability to dispose of inventory; disruptions to vehicle transportation preventing us from moving vehicles; repair and reconditioning timelines extended well after we reopened as parts supply chains experienced storm-related delays; and, critically, our customers’ ability to make payments and our associates’ ability to collect them were both meaningfully impacted during and after the storm. We will speak to those specific impacts as we move through the operational discussion; we wanted to frame the magnitude of the event so the results can be viewed in the proper context.

As Doug noted in his remarks, retail units sold decreased 22.1% to 10,275 units. The decline in sales volume was driven by three primary factors: lower inventory availability across the quarter, a 12% smaller footprint versus prior year, and Winter Storm Fern. Total revenue was $286.8 million, down 12% year over year. While average retail sales price increased 7.1% year over year to $20,634, the revenue was partially offset by improved gross margin and interest income. Interest income was $64.2 million, up 3.1% year over year, supported by the continued strong performance of the existing portfolio. Despite lower volumes, gross profit per retail unit sold was up 8.8%, outpacing the vehicle sales price increase, indicating that we also achieved a 1.9% improvement in underlying unit cost.

That cost discipline was driven by continued progress in vehicle quality as reflected in lower service contract repair costs. Inventory levels bottomed in December, which corresponded with our lowest sales volume of the quarter. We began rebuilding inventory in January in preparation for tax season, and that investment began to show. Sales volumes were improving throughout the month before Winter Storm Fern tempered the recovery right at quarter end. By the time tax season kicked off in February, inventory had increased 44% from the December bottom, providing a meaningfully stronger foundation than our quarter-end numbers alone would suggest. That said, sustaining the inventory build trajectory is dependent upon the completion of our warehouse facility, which will enable us to normalize the pace and scale of ongoing inventory purchases going forward.

Pay Your Way adoption continues to expand in ways that matter for the long-term economics of the business. Since launch in Q1, we have seen more than a 250% increase in customers enrolled in automatic recurring payments, and approximately 65% of payment transactions are now consistently made remotely, a level that has stabilized since Q2. One highlight worth calling out is how the platform performed during Winter Storm Fern. In response to storm-related disruptions, we temporarily suspended remote payment fees to assist our customers and saw a significant increase in remote payment activity as a result. Historically, a weather event of this magnitude would have required us to wait for normal store operations to resume before we could meaningfully reengage collections.

Pay Your Way fundamentally changed that dynamic, giving us the ability to maintain business continuity, simultaneously giving our customers the convenience and peace of mind to make payments on their own terms during an otherwise disruptive period. That is a direct proof point for what our upgraded digital payment infrastructure means for our business resilience, and it gives us confidence in the platform’s long-term value. The Salesforce Collections CRM, we scaled significantly during Q3, moving from a three-store pilot at the end of Q2 to approximately 15% of our store base live on the platform by quarter end. Achieving full chain-wide adoption remains the prerequisite to entering phase three of our SG&A cost control strategy, as we expect rapid expansion as we move into the new fiscal year.

Finally, on our SG&A cost control strategy, the consolidation operation was a deliberate and carefully managed process, integrating thousands of customer accounts into nearby locations, while ensuring our associates have the support needed to maintain continuity of service throughout the transition. That level of intentionality is reflected in early results. Collections performance at phase one inheriting locations is tracking in line with the rest of the company, which we view as meaningful proof that the integration was executed well. It is too early to draw similar conclusions from phase two as those consolidations occurred midway through January, but we are encouraged by the phase one trajectory and we will continue to monitor phase two performance closely as those locations mature into their new footprint.

Jonathan, I will now turn it over to you.

Jonathan Collins: Thank you, Jamie. SG&A totaled $51.5 million for the quarter, or 23.1% of reported sales. The current quarter included approximately $2.8 million of non-recurring impairment and restructuring charges related to the phase two store consolidations. Excluding these items, adjusted SG&A was $48.7 million, or 21.9% of sales. Put that 21.9% in context, the gap versus our 16.5% long-term target is almost entirely a volume denominator issue. We have taken significant fixed cost out, but those savings become most visible at normalized origination levels. As Doug and Jamie mentioned, phase one and phase two together eliminated 18 locations from our footprint. These consolidations also remove meaningful costs from both our field and corporate structure; the associated savings are expected to be reflected beginning in the fourth quarter.

Our guiding principle is straightforward. Our cost structure must match our volume and receivables base. We will not wait passively for volume to recover. If our top line requires a different expense profile, we will take the necessary actions to align accordingly. We continue to evaluate opportunities for further efficiency across the business. Turning to credit performance. Underlying credit performance remained stable throughout the quarter. Net charge-offs as a percentage of average finance receivables were 6.5% compared to 6.1% in the prior quarter. Two dynamics explain the headline increase. First, a denominator effect. Slower origination growth has reduced the average finance receivables, which mechanically puts upward pressure on the charge-off rate, even without a change in underlying loss behavior.

Second is portfolio mix. Acquired locations purchased over the last few years now represent approximately 13% of our portfolio and are maturing into their expected loss curves. Modest year-over-year increase in loss frequency was driven almost entirely by these locations. Core legacy locations were essentially flat. Loss severity also remained flat, and losses per dollar of principal were slightly improved. This is consistent with our underwriting expectation and does not reflect credit deterioration. These dynamics, combined with Winter Storm Fern, influenced the quarter’s headline metrics. What matters most is whether the underlying portfolio is getting healthier. And it is. Our highest credit tier customers now represent 66.7% of accounts receivable, up from 62.8% a year ago.

Contracts originated under LOS continue to represent a growing share of the portfolio, and those vintages are performing as expected. On current origination quality this quarter, our highest quality tier ranked seven customers maintained its share at 18.4%, essentially flat from Q2. In a volume-constrained environment, we focused on retaining the strongest deal structures—appropriate down payments, affordable monthly payments, and customer equity—rather than stretching to close weaker deals. This was true across all customer segments. The volume decline was concentrated in transactions with less favorable financial terms, regardless of the customer’s credit profile. Our LOS v2 platform enabled this discipline by helping field teams identify and prioritize the strongest deal structures available.

On delinquencies, our 30-day-plus metric was elevated at quarter end due to the timing of Winter Storm Fern, which struck in January. Accounts over 30 days past due increased to 4.4% from 3.7%, but the storm’s impact extended beyond customers who were already delinquent. It affected payment behavior across the portfolio. Our recency percentage, excluding one- to two-day grace period accounts, declined to 71.4% from 81.3%, reflecting the broad disruption to customers’ ability to make timely payments during the storm. As Jamie mentioned, in response, we temporarily suspended remote payment fees while stores were closed, and our Pay Your Way platform allowed customers to continue making payments. Since the quarter end, we have seen meaningful normalization in both metrics.

By mid-February, accounts over 30 days past due had improved to the 3.7% to 3.8% range. Despite the disruption, total collections were $179 million, up 1.5% year over year. Cash collected as a percentage of average finance receivables improved 11 basis points year over year. That improvement reflects both the quality of the portfolio and our team’s execution. Average collected per active customer account per month was $581 compared to $568 in the prior-year quarter, a 2.3% improvement that reflects continued portfolio health and the effectiveness of our Pay Your Way platform. Our allowance for credit losses as a percentage of finance receivables increased to 25.53% at 01/31/2026 compared to 24.31% at 01/31/2025. Importantly, this increase occurred while realized credit performance actually improved sequentially.

Net charge-offs declined from $106 million to $96 million. Units charged off fell roughly from 10,300 to 9,200. The reserve increase reflects the portfolio dynamics I described earlier, as well as the macroeconomic pressures that our customers face. As the receivable base contracts, and the LOS portfolio seasons into expected loss curves, the allowance ratio rises, even without deterioration in expected losses. At current levels, our reserve represents approximately 3.6 times quarterly charge-offs, and we believe this appropriately reflects the risk profile of the portfolio. Doug covered our capital structure transformation in detail, including the strategic importance of the December ABS transaction and the residual cash flow structure. Let me add the financial specifics.

On the term loan, we closed $300 million in October, which fully retired our revolving line of credit. On the ABS side, the 2025-4 transaction resulted in $161.3 million in asset-backed notes at a weighted average coupon rate of 7.02%. Turning to the balance sheet. Total cash, including restricted cash, was $237 million at 01/31/2026, compared to $124.5 million at 04/30/2025. Total debt was $892.2 million. Debt, net of total cash to finance receivables, was 44.7% compared to 43.2% at 04/30/2025, a modest increase reflecting the full-quarter impact of the term loan. As Doug emphasized, securing an additional financing source such as a revolving warehouse facility remains our critical next step in our capital structure transition. Interest expense for the quarter was $21.8 million, or 5.8% of sales, compared to $16.9 million, 6.4%, in the prior-year quarter.

The increase reflects the full-quarter impact of the $300 million term loan. On a nine-month basis, interest expense was $54.5 million compared to $53.3 million in the prior-year period. That is a much more modest increase reflecting favorable ABS coupon improvements we have realized this fiscal year. As origination volumes recover, and a larger share of our funding comes through residual-structure ABS transactions, we expect the blended cost of our capital to decline and interest expense as a percentage of revenue to improve. Turning to taxes. During the quarter, we recognized a noncash income tax charge of $47 million. This charge establishes a full valuation allowance against our deferred tax asset associated with the net operating losses at Colonial Auto Finance.

Under GAAP, we are required to assess all available evidence when making this determination, and that evidence includes three years of cumulative pretax losses at Colonial Auto Finance. I want to be clear about what this does and does not mean. This allowance has no impact on our cash tax position. It also does not affect our ability to utilize net operating loss carryforwards in the event of a return to profitability. It is an accounting adjustment, not an economic change. And finally, on earnings per share, loss per share for the quarter was $9.25 on a GAAP basis. The loss included three significant noncash and nonrecurring items. First, the $47 million tax asset valuation allowance I just described. Second, $18.2 million in credit loss allowance adjustments reflecting the reserve build.

And third, $2.8 million in asset impairment charges related to our phase two store consolidations. Adjusted for these items, adjusted loss per share was $1.53. With that, I will turn it back to Doug. Thank you, Jonathan.

Douglas Campbell: Let me close with a few points that I want to leave with investors this morning. The story of this quarter is straightforward. Volume was constrained by our capital structure transition, not by demand. That matters because it tells us the path forward. We are not rebuilding demand. We are not re-underwriting the portfolio. We do not have a broken business model. We are closing the final gap on our financing platform so that the demand that we already have can be served by operational infrastructure that we have already built and can generate the volumes that we are capable of. And I want to return briefly to the point I made in my opening, because I think it is underappreciated. We executed a non-turbo residual cash flow ABS deal in December in one of the most difficult subprime capital market environments in recent memory, and the market priced our paper.

The market accepted our structure. That does not happen unless people on the other side of the trade trust what is in the portfolio. That trust has been earned over time and is the foundation on which we will build the rest of the capital structure. Let me be direct in where we stand with the warehouse facility and what makes it genuinely difficult to predict timing. We have identified partners. The conversations are very active, substantive. But completing a warehouse facility in the current environment requires aligning multiple stakeholders, each with their own view of risk, their own obligations, their own timelines. In a normal market, that alignment moves quickly. In this market, it moves deliberately. And we respect that because the parties that we are working with are being appropriately careful.

Our job is to give them every reason to say yes through our credit performance, through our leadership, our transparency, and our operational discipline. And we are doing that work. But I want to be radically transparent with our investors. The path to closing is not determined by us alone. It requires simultaneous agreement across parties whose cooperation we are actively cultivating but cannot unilaterally compel. That is an honest description of where we are. We are managing, excuse me, this business with clear eyes about our options. Market conditions and counterparty timing require us to operate more conservatively, concentrating our resources for collections, deferring origination growth, or making structural decisions about our footprint that further reduce our cash obligations.

We have the framework and the willingness to do that. Some of those decisions, if required, are reversible when conditions improve. Some are not. We will make the irreversible ones carefully, only when necessary. But I want investors to understand we are not waiting passively for a solution. We are actively managing our resource base to preserve optionality, and ensure this business has the runway it needs to reach the outcome that we believe is achievable. Our near-term priorities are clear. First and foremost, the warehouse facility. That is the singular focus. Everything else matters—normalized origination capacity, volume recovery, managing our SG&A—but it all flows from that. Second, volume recovery. Inventory has already begun building, as Jamie mentioned earlier, ahead of the tax season and from our December low point.

The tax season demand is real from our customers, and we intend to serve it as well as our capital position allows. Third is cost structure. We are a leaner organization today than we were 12 months ago. The phase one and phase two consolidations, the SG&A reductions that we have already taken—those benefits are starting to flow through. And we will not be passive about our cost structure. We have the willingness to align our expense base to our revenue environment, whatever that environment requires. And we will use those levers decisively if we need to. Fourth is continued quality of credit. The underlying credit story is a good one, and it is getting better. I also want to acknowledge the broader environment our customers are navigating, and I want to be honest that we focus on our execution within our existing capital structure, not on tailwinds.

Inflation remains elevated. The geopolitical backdrop, including the ongoing conflict abroad, carries the risk of additional pricing and supply shocks that could affect vehicle costs, fuel prices, and household budgets of our customers. We are not oblivious to that. A persistent conflict does not resolve these pressures. It compounds them. We are building a business that can perform in a very difficult environment, not one that requires conditions to improve in order to succeed. Every decision we are making on cost, inventory, and collections is calibrated on that reality. Our customers are resilient. The need for reliable, affordable transportation does not diminish in a difficult economy. It tends to become more acute. Our markets are durable, and we are managing this business to serve it well across a range of different outcomes.

Before I open the line for questions, I want to take a moment to thank our associates across the country who show up every single day for our customers and for each other—especially those who navigated Winter Storm Fern with professionalism and care. I also want to thank our customers who have trusted us with their transportation needs, their payments, often in very difficult personal circumstances. And I want to thank our investors and analysts for their continued engagement and patience as we work through this transition. We believe in what we are building. We have the team, the platform, and once the warehouse facility is in place, our capital structure to execute. We are not done. We are clear on what needs to happen next. And with that, I will hand it back to the operator to open the line for questions.

Operator: Thank you. And our first question comes from John Hecht of Jefferies. Your line is open.

John Hecht: Morning, guys. Thanks very much for taking my question. Doug, you gave us a very, you know, deliberate update on the warehouse negotiations. I am wondering, can you give us, like, what are the sticking points? Are they environmental? Or is it just negotiating factors tied to the mechanics of the deal? I am just kind of wondering if there is any other details you can provide us around that. Okay. That is helpful. And then yeah, we are, I guess, in the early innings, but we are in the innings of tax refunds. And you know, the expectations are there—they are generally larger this year. How are you seeing the effects of that at this point? Or, I guess, is weather still a constraint? And how do you think about how that affects the sales in the coming months?

Q&A Session

Douglas Campbell: Good morning, John. Good to be with you. As I said before, I get the frustration with the lack of a specific timeline, but I want to be direct without creating a sense of false certainty. We have identified partners. These conversations that we are in are very active and substantive. And that level of specificity does give us confidence that we are working towards a close. But it is difficult to predict timing. And that timing is structural. It is not motivational. All parties at the table want to move forward. Completing this kind of financing arrangement requires simultaneous agreement across multiple stakeholders. Each of them have complicated credit committee processes, their own view of risk in the market, as you mentioned, and then their own obligations.

But we cannot close until we get all parties aligned. And as I mentioned, in a normal environment, that happens pretty quick. In this sort of environment, it takes what it takes, especially given what has happened in the subprime auto market over the last six months. And, candidly, we respect that. And we want partners who have been appropriately rigorous. We think the testament of us entering the market and executing our 2025-4 transaction, they understand they are partnered with the right type of company and the right quality receivables, you know, but there are other factors that they are trying to measure and calculate for. Sure. So as you have reported and others, the tax refund per consumer is up about 10%. The question is, like, what does that mean to us?

Are we able to capitalize on that? And the early indicators, John, are that we are. Deal structures are better, have more down payments that we are collecting, and we have seen throughout the month of February. And the tax seasonal payments that we schedule here annually—we are at a high rate of collections. And so those are all indicators that that additional cash flow the consumers have, which is an incremental $300 or $400, that we are getting a piece of that and that, for the tax seasonal payments, they are able to make those payments even more timely given that the macro environment certainly has not improved since last year. And so one could argue that there was more risk going into this year. And I think that buffer helps create and insulate us a bit just based on the collection rates we are seeing.

So those are favorable. In terms of the stores, all stores are back online since the storm and have been since February 1.

John Hecht: Great. Thank you guys very much.

Douglas Campbell: You got it. Thank you, John.

Operator: Thank you. And our next question comes from Kyle Joseph of Jefferies. Your line is open.

Kyle Joseph: Hey, good morning, guys. Thanks for taking my questions. Just wanted to get a little more color on the unit decline. I know you guys—it was 22%, and there were three primary factors. You know, between the factors, call it weather, inventory, and the smaller footprint, how would you allocate that 22%? Is it fairly ratable across all three of those, or did one have a disproportionately large impact on sales in the quarter? Yes, just following up on John and trying to get a better sense for how sales are trending in the fourth quarter. Got it. Very helpful. And then, on a similar question, Jonathan, I think I picked up on it, but just kind of ex the storm, how you think the delinquency would have trended? I get the dynamics going on with charge-offs, but specifically on delinquencies.

Is there any way you could quantify the impact of the storm on DQs? And I know the timing was right at the end of the quarter as well. Got it. Very helpful. One last one from me. I think on G&A, you guys, ex the one-time items, are running a little below $49 million for the quarter. And then, you know, how much more is left to take out of that factoring in the incremental store closures and the RIF in the third quarter?

Douglas Campbell: Yeah. You know, first of all, good morning. Good to be with you. The inventory levels are the single biggest driving force there. With more inventory, we certainly would have sold more cars. And so just given what we know, we would expect that to be the number one driver. Number two, as Jamie mentioned, was Winter Storm Fern. And for us, that hit right in the heart of our organization and from, you know, Alabama, Mississippi, bursted pipes, stores out of commission. Like, we sort of went through it all. And then the persistent cold weather following that where schools were shut down for more than a week and the ice, etcetera, just meant consumers there really sort of, you know, when people think about that, they think people cannot get to us and shop.

But then we also have to worry about the portfolio management, right, and how they can get to us and make payments. And so Winter Storm Fern, certainly, if you just sort of break down the impact for us, it was an eight- or nine-day event. And so, you know, that might be, you know, one looking at 8% or 9% of the quarter. So if you are thinking about that as sort of 8% or 9% with no sales, and then you have, you know, what we would call a 12% smaller footprint, you could argue that that makes up for most of it. The performance we saw with the inventory that we did have was exceptional. And so I am really proud of the team and sort of what they have done. But to me, the inventory piece is the largest opportunity, and that is just based on the credit apps.

We certainly could have served more customers with more inventory.

Jonathan Collins: Yeah. Hi. Good morning, Kyle. Difficult to say with precision, I think there are—I would call out two things. One is by mid-February, delinquencies have pretty significantly come down. That was a very positive sign. It is true that coming out of the holidays, our customers are slightly more stressed than they are at any other time, and so we typically see a little bit elevated delinquencies, but, you know, adjusting for kind of seasonality, the winter storm definitely had an impact. And like I said, by mid-February, those had come down into what we would have normally expected the ranges to be.

Douglas Campbell: The other thing, Jonathan, I would add to that—you know, Jonathan called out this decline from our recency metric from 81% down to 71% or thereabouts. That sort of showed you that was not related to just the 30-day. That was portfolio-wide. And as he mentioned, those operating metrics have come well within line just a couple weeks later. And so, like, that is what we look at. The other side to that question—and for our more savvy investors, they would go with the did that get flushed out in charge-offs? And the answer is no. We did not see any elevated charge-offs in the month of February, because you can certainly clean that up with write-offs, but that is not what happened either. So

Jonathan Collins: We will start to see the full impact of that starting this quarter. I mean, just as a reminder, we closed phase two stores in mid-January. And so from a quarterly perspective, you are not seeing really the savings—you are seeing the impact of the impairment, but you are not seeing the savings flow through. So we will see that flow through starting in Q4.

Douglas Campbell: Yeah. The important thing there also, Jonathan, you know, when we did these phased closures and consolidations, we did one in November, and we did the other one the week of January 13, so the week right before the storm. And so we largely did not see the benefits of that. So the $48.7 million, I would not look at as the run rate. If I just sort of isolated, you know, January alone, we are more in that $45 million to $46 million range. And so, like, our expectation would be to be somewhere between $45 million and $46 million where we sit today, and there are still some things there that are cleaning up, and then we should see flow through the fourth quarter as well.

Kyle Joseph: Got it. Really helpful. Thanks for taking all my questions.

Douglas Campbell: You got it. Thanks, Kyle. Thank you.

Operator: And our next question comes from Vincent Caintic of BTIG. Your line is open.

Vincent Caintic: Hey, good morning. Thanks for taking my questions. And I do appreciate all the detail and directness with the transparency here. On the inventory, so I see they are down 30% year over year in this quarter. I guess, if you could maybe talk about where we are now—so in February and March, how have those trended? Have you been able to get—sounds like you have been able to get some inventories back. So maybe if you can talk about that in more detail. And maybe if you can put into context the inventories being down 30% this past quarter year over year versus where you would want to be now just to kind of frame the sales impact? Thank you. Got it. That is helpful. Thank you. And then talking about the tax refund season, if you can maybe describe what has been going on so far.

Have you been seeing an increase in maybe some cash inflow as a result of, hopefully, people paying down their loans? Thanks. Okay. Great. Thank you. And then, last one for me. Just on the capital structure discussion again. And I understand you cannot talk much about the warehouse line. But so is that process the, I guess, the floor plan for your inventory? Is that what is—if you could talk about that, what that is supporting specifically? Or is it beyond just floor plan for inventory? And then are there other things you can do—I mean, you had a successful December ABS issuance, to your point about the non-turbo—wondering if there are other sort of transactions that might work out in the meantime. Thank you.

Douglas Campbell: Vincent, brother, good morning. It is good to hear from you. So if I think about this, if you are tying sort of our financial transactions and trying to understand inventory flow, we closed our securitization the week—I think it was December 17. And so that was right in the midst of the holidays. We largely did not really start to build back inventory until the turn of the year. Obviously, you know, a bunch of the auctions, etcetera, are closed for the holidays. And so there was not a ton of ground that could be made there. But we were off to the races in January. We had been purchasing vehicles right up through January and still right into what I would call the third week into February building for the tax season.

And so I do not think the January 1 exit rate is representative of sort of where we sit and are set up for the tax season, you know? And that is not what February’s results would indicate. The question there would be, like, you know, can we sustain what we are seeing in February, which I would consider largely positive, through the remainder of the quarter, and that will—that is a function of the warehouse and the capital structure, and we just need to make sure we are mindful of that. But the inventory levels out there, the affordability crisis that is out in the auto market—there is a ton of demand for these inexpensive cars. It is that category, this six-, seven-, eight-, nine-year-old vehicle, that is sort of really on fire. And so we have seen pronounced pricing in those assets—December, January—really just all year.

And, of course, that is on the back of, you know, the inflationary environment that we saw, you know, coming out of Q2. And so there is incredible demand. I would say we have gotten our fair share for January and into February, and I feel really good about that. The question will be, you know, do we have the structure to continue to support that through the remainder of the quarter? So, it is a great question. For those who understand our business, the tax seasonal payments we set up are usually scheduled at January and then throughout February and March just based on when people file their refunds. And so, it is a really great question in terms of, like, are we getting those refunds, or are those—are people coming to show up? Obviously, the storm disruption was a huge issue and drove a lot of concern for us here internally.

What was interesting, and as we mentioned, overall collections were still up despite the storm for the quarter. So if you just sort of think about this sort of 8% or 9% of the quarter that was disrupted from the storm, it was such a godsend to have our Pay Your Way platform stood up. And what we did, tactically, is remove the fee structures around all the ways that a consumer could pay. And we were really, really pleased at how much cash inflow we saw when people did not need to come into the store. And so we have seen the largest amount of remote payments that we have ever had on these tax seasonal payments. And as you mentioned, you know, these tax seasonal payments per customer, they are up. We feel like we are getting our fair share. And throughout the month of February was really positive as well.

And so I feel good about that. On the deal structure side, we are getting some more money down relative to prior year for what we are seeing here in February, and so that is positive. We had started to see that in January as well, as people who are using their last paycheck of December, getting early advance refunds and tax refund loans. We are starting to see that as well. So I will answer the second question first and then go back. On the ABS transaction structure, yes, we had a successful issuance. We are always both working, you know, with our partners who run the deals and the rating agencies as well. There is a lot we can do. Obviously, we talked about the new sort of finance team between Jonathan and Marie and others on the leadership team there.

And they are really doing fantastic work, not only on the execution of the structures, but the iterative nature of the improvements to remove our single-A ratings cap and working along the rating agencies. And so there is always ongoing work there. And, obviously, it is more important now than ever to make sure that we have touch points with these investors so that when we need to go execute a deal, we can. And so we sort of always leave, you know, that proverbial pump primed. In terms of the financing, you know, we talked about this broader language in terms of is it an ABS deal or a warehouse facility or an inventory line. That broad language is just prudent disclosure practice. You know, we need a warehouse. That is the main thing that seasons the receivables.

A warehouse line is something that, you know, we have looked at as well. But what we are going to need to host and season the receivables is a warehouse line and a revolving facility. So that is sort of the thing that we are focused on.

Vincent Caintic: Okay. Great. Very helpful. Thank you.

Operator: This concludes our question and answer session in today’s conference call. Thank you for participating and you may now disconnect.