America's Car-Mart, Inc.

Good morning, everyone. Thank you for holding and welcome to America's Car-Mart's first quarter fiscal 2021 conference call. The topic of this call will be the earnings and operating results for the company's first quarter for fiscal 2021. Before we begin, I would like to remind everyone that this call is being recorded and will be available for replay for the next 30 days. The dialer number and access information are included in last night's press release, which can be found on America's Car-Mart's website at www.car-mart.com. As you all know, some of management's comments today may include forward-looking statements which inherently involve risk and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the safe harbor provisions of the private securities litigation reform back in 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 regarding forward-looking information, please see Part 1 of the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2020, and its current and quarterly reports furnished to or filed with the Securities and Exchange Commission on Forms 8-K and 10-Q. Participating on the call this morning are Jeff Williams, the Company's President and Chief Executive Officer, and Vickie Judy, Chief Financial Officer. And now I'd like to turn the call over to the Company's Chief Executive Officer, Jeff Williams.

Good morning, and thank you for joining us, and thank you for your interest in America's Car-Mart. As we mentioned in our press release, we had another good, solid quarter, and we're very proud of our team and how we've responded during these trying times in our country. We will continue to do our part to build bridges and be a positive force in our communities. We have a unique business that starts with a desire best reflected by our vision statement to be America's best auto sales and finance company in the eyes of our associates and customers while improving the communities we serve. We have made and will continue to make significant investments in all of our associates to allow them to grow and participate and the opportunities we're creating as we expand our dealership and customer accounts and build an infrastructure to support a much larger business. Day in and day out, we put in the hard work required to serve our customers at the highest levels. Our purpose has never been more clear and our offering and how we conduct business has a direct positive effect on the quality of life in the communities we serve. We give customers peace of mind by standing with them when life's challenges happen by keeping them on the road after the sale. Again, we are very proud of our work, but we have a real sense of urgency to improve and get better quickly as we move forward. I will now turn it over to Vickie to go over the numbers. Vickie?

Well, good morning. We had a strong quarter with a revenue increase of 9.3% up to $188 million. The increased revenues resulted from an 8.5% increase in sales. This was due to a 12.2% increase in the average sales price, partially offset by a 2.8% decrease in the retail units sold. Interest income increased by 15.2%. And same-store revenues were up 5.5%. Revenues from stores in the over 10 years of age category were up 5%. Stores in the 5-10 year category were up 7% and revenues for stores in the less than 5 years of age category was up about 63% to about 18 million. Our first quarter sales volumes were impacted due to the reduced inventory levels, especially at the lower price points and lower customer traffic, both as a result of the pandemic. At quarter end, 20 or 13% of our dealerships were from 0 to 5 years old, 41 or 27% were from 5 to 10 years old, and the remaining 89 or 10 years old or older. Our overall productivity was 27.4 units per month per lot compared to 29 for the prior year quarter. Our 10-year plus lots produced 29.6 units sold per month per lot for the quarter, compared to 31.6 for the prior year quarter. Lots in the five to 10 year category produced 24.6 compared to 26.2 for the prior year quarter. And lots less than five years of age had productivity of 23.3 compared to 20.2 for the first quarter of last year. Our down payment percentage was 7.6% compared to 6.5% for the prior year quarter. and collections as a percentage of average finance receivables were at 13% compared to 13.5% for the prior year quarter. An extension in the average contract term and slightly higher modifications were the primary drivers of the lower collection percentage. This was partially offset by improved collections on delinquent accounts. The average originating contract term was 32.4 months compared to 29.9 for the prior year quarter and up from 31.8 months sequentially. The average selling price was up $1,390 with only a two and a half month increase in the term compared to the prior year first quarter. Our average monthly payment is approximately $430. Our weighted average contract term for the entire portfolio, including modifications, was 33.9 months compared to 32.1 for the prior year. The weighted average age of the portfolio was basically flat at approximately nine months. Our interest income increased 3.3 million or 15.2% compared to the prior year quarter, primarily due to the 78.6 million increase in average finance receivables at a 14.2% increase. The weighted average interest rate for all finance receivables at the end of the quarter was approximately 16.4% flat from the prior year quarter. Gross profit per retail unit sold increased by $693 to $5579, up 14.2% compared to the prior year quarter. The gross profit percentage was 41.7% compared to 40.8% for the prior year quarter and up from the sequential quarter at 40.5%. The improvements in gross profit resulted from improved wholesale margins due to the strong demand and the low supply of the lower-priced units and also reduced expenses of the payment protection plan product. This was partially offset by the lower margin on the retail units. Increasing average selling prices result in lower gross margin percentages but higher gross margin dollars per unit. as our gross margin percentages are lower at a higher selling price. The mix of the type of vehicles sold was fairly consistent, with SUV sales increasing approximately 3% over the prior year quarter. Our inventory volumes are back up to pre-pandemic levels, and we've been able to take advantage of recent efforts by rental car companies to reduce their fleets, allowing us to acquire some newer model, lower mileage vehicles at affordable prices for our customers. This will continue to be a part of our procurement effort as we move forward. SG&A for the quarter was up 86,000 compared to the prior year quarter, but down as a percentage of sales to 17.7% compared to 19.1% for the prior year quarter. SG&A as a percentage of total revenue, less cost of sales, and provision for credit losses was 50.5% compared to 58.7% for the prior year quarter, excluding the reduction in the allowance for losses in Q1 of the prior year. This metric is important for our integrated sales and finance business as a large part of our efforts are focused on keeping good customers and driving down credit losses. As a reaction to COVID-19, we did significantly reduce expenses including part-time and hourly payroll as well as other non-associate-related expenses, and this continued through most of the first quarter. All associates are now back to normal working hours, and we're moving forward with the investments and initiatives that we were working on pre-pandemic. These initiatives include our revamped procurement efforts with preferred vendors, purchases from rental car companies, and reconditioning efforts. Our customer service efforts in the digital area and improved service contracts along with the continued investments in the recruiting and training of our associates. All of this with the goal of great customer service and increasing the number of customers served at each dealership. We will continue to focus on efficiencies and cost control while continuing to invest for the long term. and the health and safety of our associates and customers continues to be a top priority as we adapt to the changing environment amidst the continued pandemic. For the current quarter, net charge-offs as a percentage of average finance receivables was 4.8% down from 5.4% in the prior year first quarter. Our collection efforts returned to normal operating procedures during the first quarter while continuing safety measures related to COVID-19. We did see improvements in our delinquent accounts, and our accounts 30 days past due was at 2.6% compared to 3.8% in the prior year first quarter. The CARES Act enhanced unemployment benefits did contribute to this improvement along with our efforts at working with our customers to keep them in the car and on the road. At the end of the fourth quarter, we did increase our allowance for credit losses by $11.7 million pre-tax, to 26.5% related to the COVID and macroeconomic uncertainties. And although we have seen improvements in our portfolio in the current quarter, there continues to be much uncertainty caused by COVID-19 and its potential impact on our customers, collections, repossessions, and the overall economic environment as we move forward. The effective income tax rate was 23.4% for the first quarter of fiscal 21 compared to 21.8% for the prior year. Income tax expense did include an income tax benefit of $91,000 and $276,000 related to share-based compensation for the current quarter and the prior year quarter, respectively. We expect our base effective tax rate to be approximately 23.5% going forward prior to any excess tax benefits from stock option exercises. We continue to have strong cash flows and a solid balance sheet. At quarter end, our total debt was approximately $214 million, and we had $50.6 million in cash and over $26 million in additional availability under our revolving credit facilities. Our current debt net of cash to finance receivables ratio is 25.4%. compared to 28% at this time last year. During the quarter, we added $22.2 million in finance receivables, funded $2.9 million in net capital expenditures, increased inventory by $19.8 million for a total of $44.9 million with only a $7.7 million increase in debt net of cash. Thank you, and now I'll turn it back to Jeff.