CRMT - NASDAQ

I'm Vickie Judy, the company's Chief Accounting Officer. Welcome to America's Car-Mart's Fourth Quarter Fiscal Year 2025 Earnings Call for the period ending April 30, 2025. Joining me on the call today is Doug Campbell, our company's President and CEO; Jonathan Collins, our CFO; and Jamie Fischer, our COO. We issued our earnings release earlier this morning and the supplemental materials are on our website. We will post a transcript 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 1 of the company's Annual Report on Form 10-K 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-K and 10-Q. As a note, the comparisons that we will cover will be the fourth quarter of fiscal 2025 versus the fourth quarter of fiscal 2024, unless otherwise stated. Doug, I'll turn it over to you now.

Thank you, Vickie, and thank you, everyone, for your interest in America's Car-Mart and for joining us to hear more about our fourth quarter and full year results. Before we get into the fourth quarter and full year performance, I want to take a moment to address a leadership transition that's important to the future of America's Car-Mart. After more than 15 years of dedicated service to our company, half of that time as our Chief Financial Officer, Vickie Judy has transitioned into a newly created Chief Accounting Officer role. Vickie has played an integral part of Car-Mart's growth, helping us navigate through multiple market cycles, improve financial discipline and build the foundation of a resilient and scalable finance organization. Her deep institutional knowledge, operational grounding and unwavering commitment to our mission, have earned her the trust and respect of our Board, leadership team and investor community. We're fortunate that Vickie will remain with Car-Mart, working closely with our new CFO. This move reflects not only her commitment to a smooth and thoughtful transition but also our intent to further strengthen our financial leadership. With that, I'm pleased to formally welcome Jonathan Collins as our new Chief Financial Officer. Jonathan brings over 2 decades of global finance experience across large public companies, high-growth digital platforms and emerging markets. He is a strategic and results-driven leader who has served in senior roles at Walmart, Flipkart Group and KPMG. His background in operational transformation, capital efficiency and long-term value creation will be critical as we sharpen our focus on disciplined execution and financial performance. With that, I'd like to turn it over to Jonathan Collins, our new CFO, to briefly introduce himself and share a bit about why he chose America's Car-Mart, and what he sees in our future. Jonathan?

Thank you, Doug. Today marks my official 1-month anniversary with the company, and I'm looking forward to spending more time with each of you in the investment community in the weeks and months ahead. I, too, want to acknowledge Vickie for her many years of dedicated service and the strong partnership we've quickly established. Doug and I both recognize that Car-Mart operates in a unique corner of the market, one where deep experience in sub-prime consumer finance and automotive lending is critical. To that end, I'm excited to announce a new addition to my team, Marie Persichetti, our new Senior Vice President of Capital Markets. Marie is a seasoned finance executive with over 20 years of leadership in consumer auto finance. Marie will lead our capital markets activity, helping to diversify and improve our funding platforms. What originally drew me to America's Car-Mart continues to energize me every day. We are a mission-driven company dedicated to keeping our customers on the road. Since my arrival, I have developed an even deeper appreciation for our mission, our unique business model and our exceptional associates. We recently held a company-wide field leadership meeting where I had the opportunity to connect with our dealership and field level management. It was energizing and inspiring to see the commitment and passion that our associates have for our customers. I also want to recognize our talented finance team who provide critical support to our shareholders, board, leadership team and dealership associates. In fact, I got to engage with many of them within my first week as we successfully closed our seventh term securitization, issuing $216 million in asset-backed notes. The transaction was well received by the market and we achieved a weighted average coupon of 6.27%, a 22 basis point improvement versus our January issuance and 117 basis points tighter than our October 2024 issuance. I was pleased with the depth of demand we saw and the favorable structure we achieved. This continued improvement in execution is a direct reflection of our growing investor confidence in the quality of our portfolio and the underlying credit performance. My enthusiasm for the company grows daily as I consider the opportunities ahead of us. I'm particularly excited about how we'll leverage our current investments, capitalize on the strength of our balance sheet, maximize our unique integrated sales and financing business model to capture additional market share and continue building on our remarkable depth of talent. We are establishing the foundation for significant future growth and it is an exciting time to be at America's Car-Mart. Doug, back to you.

Thanks, Jonathan. I have great confidence in the team's ability to improve the cost of our capital structure, optimize our risk management capabilities and execute against the priorities that matter most to our shareholders. Fiscal year 2025 was a defining year for our company, one that marked a clear operational and financial turnaround. The performance of sales, collections, resulting gross margins, underwriting were all evident moving from a net loss of $31.4 million in the prior year to generating $17.9 million in net income this year, an improvement of more than $49 million. This performance reflects the strength of our strategy, our disciplined execution and the unwavering commitment from our team. As we advance key initiatives we remain grounded in the values that guide and service our associates, customers and communities. Over the past year, we successfully executed several strategic initiatives to elevate our platform, and position Car-Mart as a compelling multiyear growth opportunity. On the last call, I mentioned I've been thinking about ways to improve our collections infrastructure. It's a critical piece of the business that is needed to support future growth. As a part of our commitment to evolve the customer experience, I want to highlight the relaunch of Pay Your Way, our expanded suite of payment options that reflect how our customers live and manage their finances. Many of our customers operate outside of the traditional banking system. They often are underbanked, lacking consistent access to a checking account, a credit card or even a stable banking relationship. For years, we supported them through in-person payments at our stores or with basic debit and ACH channels. But as digital financial tools have grown more accessible, so too have the expectations and the opportunities to serve this customer base in a smarter, more flexible way. Our updated Pay Your Way platform will give customers more control and convenience than ever before. We've added widely used platforms like Apple Pay, Google Pay, Venmo and PayPal, all tools that don't require a traditional bank account and are already familiar to many of our customers. We've also made cash payments easier and far more accessible. Access to a cash payment network has grown from about 14,000 to over 80,000 locations, now including Dollar General, CVS, Walgreens, Walmart and more. And thanks to a mobile pass that is stored directly in a digital wallet, customers can self-service by walking into these locations, scanning a barcode and pay without ever needing to remember their account details. It's fast, secure and tailored to their reality. In our stores, we're launching a campaign that allows customers to sign up for auto pay at the time of sale with different payment options than we've offered in the past. This helps reduce missed payments and gives customers more peace of mind, all while relieving some of the day-to-day account management burden on our store teams. We believe these changes will strengthen payment performance, improve customer satisfaction, and ultimately deepen the relationship between our brand and the communities we serve. This pilot is live now in a few of our stores and will scale nationwide during the current quarter. Another important step that we've taken this year to strengthen credit performance is a transition to a more advanced underwriting and pricing model. For years, we've used a 6x6 scorecard to evaluate customer profiles and deal structures. While effective, it limited our ability to finely segment risk and align pricing accordingly. About a year ago, we began testing a new 7x7 scorecard in parallel with our existing model. This gave us the opportunity to observe how customers would migrate between score bands and to analyze the impact with real-world data before making a full transition. The expanded scorecard provides greater granularity and accuracy in projecting loss ratios. And based on the data we've accumulated to date, we believe it will lead to an improvement in overall credit losses. It's still early, but we're optimistic about how this will translate into improved credit performance and more informed capital deployment. In conjunction with the scorecard rollout, we also launched our first iteration of risk-based pricing. I shared in the last quarter, we began this pilot in December across a small group of stores with 34 locations live at the time of our last earnings call. Over the course of the fourth quarter, we collected valuable insights that are now shaping our go-forward strategy. We started by testing rate increases in the riskiest segments, our 1 and 2 rated customers. We increased originating interest rates by a few hundred basis points and modestly increased the required down payments. What's notable is that we saw no material drop in application conversion indicating that we have pricing power even in our highest risk bands. Conversely, we tested modestly lower interest rates for our highest quality customers, those 7 rated and saw a meaningful improvement in sales volume. The early read suggests there's a real opportunity to grow share among better qualified consumers while enhancing the returns at the bottom of the credit spectrum. The strength of these results gave us the confidence to accelerate this rollout. And as of May 8, risk-based pricing is now live nationwide across all of our stores, except for our acquisition dealerships. This transition doesn't just impact underwriting. It has broader implications for how we operate. A shift towards higher-rated customers will influence the inventory mix we carry. Over time, it should lower reconditioning costs, and reduce the claims on our warranty products, creating either margin leverage or financial relief for the consumer. Altogether, we see this evolution in underwriting and pricing as a major enabler of smarter growth, better risk-adjusted returns and ultimately, a more resilient business model. With this overview, I'll now turn the call over to Jamie to review our fourth quarter operating results.

Thanks, Doug, and good morning, everyone. Throughout the fiscal year, we remained focused on improving affordability. In the third quarter, we made a strategic decision to increase inventory levels by approximately 28% compared to the prior year ahead of the tax season. Our intent was to steer around the normal tax season bump and procurement price, but this became especially important given the uncertainty around tariffs. The result was less pressure on procurement during what has been a very speculative wholesale environment, and ultimately reduced our reliance on the volume of cars we would normally procure during the season. It's why our customers enjoyed the benefit of a vehicle sales price decrease during the fourth quarter of $316 to $17,240. Despite the decrease in selling prices, we were still successful in driving incremental revenue of 1.5% in the fourth quarter compared to the prior year's quarter. This was driven in 2 ways. The first by an increase of 2.6% in unit sales volume and the second by a 4.2% increase in interest income. For the full year, we sold 57,022 units, down just 1.7% year-over-year. I would like to take a moment to recognize and thank our associates. Their improved execution and customer-focused approach played a major role in the second half performance lift where the company rebounded with a 7.2% unit growth after ending the first half of the year down 9.3%. Beyond operational execution, we took several decisive steps that fueled our fourth quarter performance. Our Q3 decision to raise service contract pricing continues to contribute to incremental revenue growth. And to date, we have not seen any negative impact on product penetration. We launched our tax season marketing campaign earlier than last year, generating demand sooner and we leveraged our CRM platform that was implemented last summer, which has meaningfully improved our efficiency as we engage with customers throughout their buying journey. When looking at the full year, revenue was relatively flat given the headwind we experienced in the first half of the year. Looking ahead, as Doug mentioned, we launched the new 7x7 scorecard and risk-based pricing in early May. These tools give us greater insight into the buying power of our top customers and open the door to exploring adjustments to our inventory mix strategy. Over the coming year, we will be evaluating ways to balance our vehicle mix to the potential demand driven by our risk-based pricing. Finally, Q4 gross margin came in at 36.4%, up from 35.5% a year ago. A key driver of this improvement was stronger performance in our wholesale channel. Due to market reactions to ongoing tariff uncertainty, prices are more elevated than the typical spring, allowing us to capitalize on recovery values in the wholesale environment to achieve stronger retention on units sold in Q4. As we shared in prior calls, our long-term target for gross margin remains 37% to 38% on an annualized basis. For the full fiscal year, gross margin finished at 36.7%, a 200 basis point improvement. Looking ahead, we will continue to pursue opportunities to leverage technology, enhance profitability within our protection plans and deepen the impact of our Cox partnership as we work toward our goal. I'll now turn it over to Vickie to cover the rest of our results.

Thank you, Jamie. As mentioned in the press release, we improved net charge-offs as a percentage of average finance receivables for the quarter to 6.9% compared to 7.3% in the prior year quarter, and an improvement of 130 basis points for the full year. On a relative basis, we saw overall improvement in both the frequency and severity of loss. Our average time to repossession improved by 14% compared to the same period in the prior year. Our customers are staying on the road longer. With that backdrop, we made meaningful progress in how we address portfolio risk, and I want to briefly explain the change in our allowance for credit loss reserves. In Q4, we implemented several enhancements to our CECL allowance methodology, which when combined with our improved performance led to a $10.3 million net reduction in our reserve balance. These changes are expected to improve the precision of the model. As our data sets have matured, especially in connection with our LOS originations, we've been able to model the performance of our receivables at a more granular level. We now have over 18 months of actual loss history related to the LOS originated receivables, which gives us confidence to weigh it more appropriately. And because performance in this portfolio has consistently outperformed our legacy book, particularly around loss severity, the result is a lower expected loss profile overall, now that it accounts for 65.7% of our receivables, excluding our acquisition receivables. So while the headline number is a reserve reduction, the takeaway is stronger. We've reached a point in our underwriting and data maturity that allows us to reserve more precisely. These improvements will better align capital with risk, and we believe that's a positive development for both the business and our investors. The allowance for credit losses as a percentage of finance receivables net of deferred revenue and accident protection plan claims was 23.25% at quarter end. Our average originating term was 44.4 months, up from 44 months compared to the prior year quarter and down from 44.6 months sequentially. We continue to optimize the distribution of the term by customer score, shortening the term for our highest credit risk customers and allowing additional term length for our best credit scoring customers. At the end of the quarter, the weighted average total contract term for the portfolio was 48.3 months, the weighted average age was 12.4 months, a 5% improvement over the prior year's quarter. We continue to make progress on boosting overall collections, which are up 2.1% over last year. Our teams executed well in collecting our seasonal tax payments and improved the monthly average total collected per active customer to $612 compared to $607 in the same period last fiscal year. SG&A expenses increased by $3.8 million or 8.6% primarily driven by our continued investments in technology, talent and strategic acquisitions. These acquisitions are part of our long-term growth strategy and while they temporarily impact SG&A leverage, they are instrumental in expanding customer portfolios and enhancing future revenue potential. Importantly, we remain focused on improving cost efficiency on a per customer basis. In this regard, we made meaningful progress, achieving a 6.1% increase in SG&A per customer, which is notably lower than the overall dollar increase. This reflects our commitment to scaling effectively while investing in growth. Interest expense decreased by $388,000 or 2.2% as we begin to benefit from the improvement in benchmark rates as well as the positive impacts from our recent improvements in securitization rates. Finally, it has been a privilege to be part of Car-Mart's evolution and growth over the past 15 years. In my new role as CAO, I'm excited to continue supporting the company's success, expand our financial capabilities and continue to help take Car-Mart to the next level. Thank you, and I'll turn it back to Doug to finish this out.

Thanks, Vickie. I am proud of the experienced leadership team we have built as we focus on our mission on delivering successful outcomes to our customers and creating long-term value for our shareholders. As we look to the future, I want to provide some expectations for fiscal year 2026. From a macro perspective, we believe the used car market will remain dynamic. We've done a nice job navigating the impact of tariffs on pricing thus far and the impact on the vintage of vehicles we procure has been relatively muted at around an increase of $300 per unit. Given the cost that we've taken out of procurement over the last year, this is very manageable. The tighter supply environment will be a challenge, but it has been for some time. As we think about diversifying our underwriting it presents an opportunity on the procurement side as we can expand the base of assets we buy. We are very focused on helping our existing customers navigate the the company and a more thoughtful way to grow our receivables. We'll also continue to think about ways we can connect and manage our relationships with our customers that support growing and scaling this business. Also, the continued enhancements of our LOS and related risk-based pricing strategy are key initiatives that we expect will strengthen credit performance and grow the size of our portfolio in the fiscal year. While we remain mindful of the macroeconomic backdrop, we are confident in our strategy, our team and our platform. So with this overview, we'll move on to Q&A. Operator, please provide instructions to ask questions.

[Operator Instructions] Our first question comes from Vincent Caintic with BTIG.

First, Jonathan, congratulations. Look forward to working with you. And Vickie as well, congratulations and well done. First, I wanted to focus on kind of the macro and consumer behavior. There's been so many things happening over the past quarter with tariffs and higher used car prices. Just wondering how that's affected the business, if at all? Like for instance, did you see a pull forward of sales? And has there been any difference in consumer behaviors for spending and from a credit perspective?, And then since the quarter in May and June, any differences there as well?

Vincent, it's Doug. On the sales standpoint, the real impact that we're seeing around the speculative nature in the wholesale environment really started to sort of rear its head in the April time period. So it was towards the end of the quarter there for us. So I wouldn't say it had an impact on actual pricing for most of the quarter. So what we've seen thus far, where I articulated about a $300 increase on the procurement side per unit, we really started to see that in April and throughout May. And so to the extent that, that persists, that piece is manageable, and that's sort of what I was referencing in my prepared remarks. I don't think this is sort of more of a pull forward on the tax season. I know coming off Q3, we were talking about sort of lapping a weaker comp. And I think sort of the growth that we're seeing now is sort of more sustainable in nature. When I think about our just activity, lead activity in general, we had double-digit growth for the full year in terms of lead activity growth. And so we feel really confident about the consumers and the need for the service that we provide. It's just that we're being more selective. And I think we have to be, just given the supply environment, the industry on a whole from a trend perspective is starting the year with less inventory on the ground from a used car supply perspective than it ever has in the last several years. And so it behooves us to make sure that we're doing the most with the capital that we're deploying and make sure we can get optimum returns. And that's why we're so focused on the credit piece. And so there's a lot that we can do, as I mentioned before. We've finished rolling out our risk-based pricing model throughout all our stores. That wasn't the original plan. We were going to sort of test that throughout the balance of the calendar year. But given sort of the backdrop on tariffs, we thought it would be prudent to pull that forward to have that as a lever in the business, and we're quickly learning sort of what some of those opportunities are. And the early indicators are that in those upper bands, we can see growth that are approaching double-digit growth in the bands that we can get. So we're excited about that. It's still very early, but I would look at that as an opportunity to maybe navigate additional headwinds that may come our way.

Okay. Great. Very helpful. And then second question, I wanted to get an update on all the different upgrades you're doing to your operations to procurement, to your partnership with Cox Automotive and how that process is -- which inning are we in, in terms of getting all those processes done? And then your view of how that's going to affect your gross profit margins and the sales per store per month?

Yes, sure thing. From the gross profit perspective, that has been a bright spot, obviously. We were up 90 basis points on the quarter, up 200 basis points year-over-year. We had articulated that we had this target for this 37% to 38% range over several years. As I said before, I think we can get there sooner. And I think that there's more that we can do just around the optimization of those products. And I think our work isn't done sort of with the partnership and what it can yield there. So we'll have to let that play out. But clearly, we're thinking beyond this 37%, 38% margin, but there's got to be tactics to sort of get there. I think from the operational perspective, we feel really good about where the partnership is at what we need to deploy. Clearly, we've turned our attention to how we're collecting for the consumer. So when I think about setting us up for growth, there were some fundamental things we needed to do there. That included talent leadership. Obviously, we brought Jamie on board. We are very focused on gross margin and making sure that, that's appropriate and more of a return to the norm that it has been over several years. But on the credit side, on the collection side, in particular, the way that we interact with our consumers, there's so much opportunity. It's very manual today and there was not a lot of technology that supports that but our first step towards that is the relaunch of our Pay Your Way campaign. And when I think about the opportunity for these consumers, about half of households sort of use some of these mechanisms, nontraditional banking mechanisms to pay bills, et cetera. When we did a study with the buy here pay here segment, in particular, roughly 25% of consumers use some of those digital methods, which aren't in any of our collections practices today. I think that represents a tremendous opportunity to take the burden off some of the work that happens at the store level and the potential to collect better from our consumers and take the friction out of the process. That would be part 1. The second part is really around how do we interact and interface with these consumers, the day-to-day phone calls, et cetera. And similar to how we did on the sales side, we're focused on how do we make sure that piece happens. It's one thing to diversify the payment channels that they can operate in. It's another thing to have the communications and a build-out of that experience on the back side to maintain the stickiness with these consumers that we've enjoyed over a long period of time. And the back half of that's already in flight and we think we can get that done in the back half of the fiscal year. To me, those are critical components before we sort of really get focused on unit growth. I do see a very clear path to continue to grow receivables just based on how we are underwriting. But I would consider us to be more focused on unit growth here as we wrap up these 2 projects.

Our next question comes from Kyle Joseph with Stephens.

Doug, if you don't mind, just walk us through -- you talked about rolling out risk-based pricing, just how we can expect that to kind of impact the P&L, specifically either on yields or on margins?

Sure thing. So we rolled out risk-based pricing. We're live throughout all our stores. Through the fourth quarter, we had about 20% of the organization on. It was version 1 of this risk-based underwriting. It included the scorecard, which gives us better accuracy to underwrite and project loss ratios. And obviously, we get additional definition there moving to a 7x7 scorecard, and this creation of the 7 rank customer, which is like our super tier internally. For us, the bottom side of the portfolio in sort of testing price elasticity, there is room to grow there. We've moved about 200 basis points up with no real breakage in conversion, and also higher down payment. So what we're trying to do is get better returns on these lower rank customers. There's a ton of opportunity that remains for the company, but we want to do that in a really smart, thoughtful way. And so we're going to continue to test that. What I think throughout our organization that there's only one real limitation from a user recap standpoint, which should be Arkansas. I think we have 36 or 37 stores there. The rest of the organization can sustain sort of more yield management. So we will look to do that in the coming quarters. We have our second pilot that's getting ready to go in flight this month, and so we'll continue to test that piece. On the upper end, we really focus on the 7 rank customer. And so what we try to do for these consumers who present the very least risk to us is offer them slightly lower down payment options and a slight rate break, and we did see some growth in overall volume within that customer segment. And so it got us thinking about what we could do with consumers who are similar in nature 5, 6 and 7 ranked customers. It was -- our test was really limited to the 7 rank customers. But clearly, there's an opportunity to drive more volume that way. That would be our preference to continue to grow that way. And our pilot for that rolls out. Our second iteration, I would say, rolls out here this month as well. The rest of the organization is on V1, and we've started to see some of those results in May as well. And so we're really focused on trying to make sure we get higher quality customers in the portfolio. It obviously creates an opportunity, as I mentioned and Jamie mentioned as well to diversify the stocking mix. So the pressure around procuring sort of one type of asset. If we sort of moved up scale a little bit, obviously, a little bit nicer car, needs a little bit less repair prior to sale and post-sale. And obviously, that would take a burden off the consumer and help gross margin when we're not having to manage the repairs for those vehicles downstream. So that credit piece that you're referencing does have impact both on the credit side and on the gross margin side potentially.

Great. And then just a follow up with -- I want to make sure I understand what's going on with unit volumes. Obviously, you guys had really strong growth in the third quarter, and you guys talked about comps to a certain extent. Was there -- and I know you referenced there wasn't really like a pull forward in terms of tariffs. But was any sort of fourth quarter volume moved into the third quarter? I think last call, you guys referenced that you started maybe tax season incentives a little earlier and just trying to get to piece out what the real underlying growth of units as between the 2 quarters.

Yes. I wouldn't say it was really a pull forward. We did see a little bit of impact in January right towards the tail end of the quarter. Our marketing campaign started mid-December for that. The stocking campaign associated with that, we really -- it was like a January sprint where we tried to make sure we were getting in front of the tax season. And obviously, was reflected in our balance sheet when we were carrying a heavier amount of inventory going into the tax season. What I really think that did is allow us to enjoy not to have to participate in some of the tariff noise there, and that really showed up in average selling prices. Obviously, you follow us very closely. Typically, we see a bump in retail selling prices. We saw a reduction, and that was based on the stocking strategy. That piece is gone. And so we're in the market procuring vehicles. And I think to the extent that we're out there and the tariff piece persists. That piece is manageable. I focus on the supply piece is what would really be the driver for volume, and it's a tight environment. Obviously, everyone is sort of following consumers going after, I would call it pre-tariff inventory on the new vehicle side that drove a ton of trade-ins, those trade-ins dealers are capitalizing on but that's a short-lived play. I think sort of going into the summer, people will be sort of really challenged with trying to find the right supply and balance of supply of inventory, and we're working on strategies to combat that. Clearly, we're expanding the base of assets that we can stock and procure. And so we look at that as a potential way to mitigate some of that.

[Operator Instructions] Our next question comes from John Murphy with Bank of America.

Doug, just a first question just on the condition of your customer because there's kind of some cross currency here, it seems like things are getting a bit better with some of your low-end customers, but other data and sources would indicate the sub-prime consumers under a bit more stress. I'm just curious, on a like-for-like basis, if you can talk about sort of the condition of your low-end consumer. Because I mean, if you are able to absorb higher rates, it seems like they're probably doing just probably better than people are fearing just kind of on a like-for-like basis, maybe on a year-over-year and sequential basis, how are you seeing your condition of your -- particularly your low-end consumer?

John, appreciate the question. Obviously, we've sort of articulated our consumers live sort of in a recessionary environment. I very much believe that, that's the case. They are sort of used to navigating that they come to us for a need. If I think about sort of the forward-looking indicators for us like delinquencies look at contract modifications, late payment arrangements that we make and ultimately the resulting net charge-offs, there's no sort of cracks in the foundation that we see yet with these consumers. When I think externally about the things that can impact our consumer, we myopically focus on fuel costs, consumables, what they're paying at the grocery store, rent and auto insurance. Those are huge drivers of defaults for us as a company, and we focus on those things. But those have been persistent for the last 2 years. And so there's no real change quarter-to-quarter on that. There certainly is this backdrop of there's more strain on the consumer. It doesn't mean that it can't happen. It's just that we're not seeing it show up yet. Especially when I start to think about the demand side, when we look at website visits and overall traffic, et cetera, we're not seeing that as well. Also, when I think about our originating interest rate, which was the last part of your question. I don't think there are a lot of options out there for consumers just think about sort of the credit tightening out there and think about the originating interest rate that Car- Mart has versus its peer set. And so we have been originating interest rates 2 years ago with a 17 handle that had changed to about 18.25% in aggregate, When we're moving up a couple of hundred basis points, I still think that's a really competitive option for the consumer at about 20% when compared to our peer set when we're looking at these consumers. And so the fact that we've seen no breakage to me just means that we're still a competitive option, and it's the lack of options for the consumer. That in its sort of on its face is the value that we sort of have in the marketplace. So hopefully, that answers your question, John.

That's super helpful. Just a second question. When you think about these underwriting changes and what you're doing and sort of pushing towards the -- your sort of your Tier 7 customers sort of at the high end, it was a long history of sub-prime auto financing companies moving upmarket and being very successful at it. It seems like you're starting to do that. I'm just curious, Doug, how far you think you're going to take this? I mean, is this the kind of thing where 3 to 5 years from now, you could be still doing the sub- prime with your Tier 1 and 2 customers, but also all the way up to sort of a vintage of customer and vehicle that might compete with the likes of CarMax and Carvana?

It's an interesting question. It reminds me of our conversation on the panel back in December about going upmarket. And obviously, I had an inside track on what we were thinking about. I don't know. The answer is it's very, very early. Clearly, it's been on our mind and the direction that we can take the business. I think also our core customer, there is a ton of opportunity there, especially when I think about an environment that might be sort of degrading slightly where we would see additional inflow is for these consumers. And we're really focused on ensuring that they also have options as well. From an environment that is also deteriorating, we do and are paying attention to the fact that there's going to be more consumers in the top of our funnel. And it creates a tremendous opportunity for the consumer to grow the brand with those -- with a newer consumer that we normally wouldn't see. And so we want to make sure we're positioned right there at that intersection where typically maybe they weren't thinking about a Car-Mart, but that's a marriage of both marketing, the right asset type and these consumers, which typically maybe we haven't seen before. And I don't know how far upstream it will go, but there's enough opportunity sort of at the very top and right to where we were as a 6-rated customer for us to do more just with that base and slightly just expanding. We'll have to see sort of what the business sort of evolves into overtime, but it's been 3 months' worth of this underwriting style and we're on about, I think, 5 weeks sort of nationwide. And so we're learning a lot and really quickly. But I think that is one of the things that we wanted to do to make sure that we have levers deployed to navigate whatever the environment is. So hopefully, that answers your question there, John.

Yes. And if I could sneak 1 last 1 in and highly correlated with all this stuff is, I mean, the changes in success you're having in cap markets in the ABS issuance. I'm just curious how you think that success sort of sets you apart from your competition out there? And how much of that might help fuel growth as well? Because I mean, it seems like the LOS is really expanding, you're getting tighter on the 7x7 box or better, I should say. It just seems like your -- what you're presenting to the market is getting more consistent, maybe slightly higher quality, so be real opportunities out there. I mean how do you think about sort of that flow through to the capital markets and then how that circles back with the growth in the business over time?

Yes. Let me let our new CFO give you an opportunity to answer that. Go ahead, Jon.

John, nice to hear from you. Yes, I think -- I mean, first, you can see in our press release, we're quite pleased with our most recent securitization. We continue to kind of expand or tighten spreads from what we're seeing. As a reminder, as a company, our history is managing this company through organic growth with an ABL and a revolver. Then a couple of years ago, we started to mature our capital structure. We've entered into the securitization market. And to date, we've securitized over $2 billion in receivables. I mentioned in my prepared remarks, we've hired Marie, who's a real thought leader from a capital markets and starting to help us think through what could a more mature capital structure look like that would match both the size of our company today, but also the improving economics that we're trying to drive through the business. So one of the things, both she and I are critically focused on is one of the other elements that we should be thinking about to expand kind of our tools in our toolkit, things like warehouse loans, maybe longer tenure of type debt facilities and structures. We're very early in our thinking, but we're working very hard and very quickly to try to come up with what should the future of that look like. I think we'll continue to utilize the securitization market. I think we'll -- our last few securitizations have been slightly smaller and slightly more frequent. You would expect in the future or we would get back to kind of that normal cadence of 2 to 3 times a year, a bit larger than we've done in the last couple. But I would expect, given the improving economic performance that we should see ultimately lower interest rates from an income statement as the market kind of continues to understand our business and get more comfortable with us.

I would add just 1 or 2 things there. 2/3 of the portfolio now sits with this LOS underwriting. I think as we've sort of approached the market sort of sequentially, people understand that, and they're getting sort of a different look at the blend of percentage of receivables that are LOS underwritten. And so you're seeing that sort of reflect there in the coupon. It's also notable that like we still have a single A ratings cap, there are things that we need to do to optimize the structure. But absent none of those changes, I still think there's more to go get. And so that is sort of the opportunity in addition to the things that Jon mentioned.

Forgive me for my ignorance, and I probably should know this at this point, but you don't have a standard warehouse facility right now to like to push ABS into the market, you're still working off an ABL revolver. Is that correct?

We do have a warehouse facility in place. but it's 0 utilized. And again, like everything, and as Doug mentioned, you could look across our entire balance sheet and P&L. And there's room to improve. I'm always slightly dissatisfied and I want to improve further and so we're continuing to think about what that might look, how that might look differently, how our ABL might look differently? Are there changes to our securitization model and how we approach the market, how that might look differently? All to be able to improve what comes on to our income statement and ultimately be able to kind of serve our customers better.