America's Car-Mart, Inc.

Good morning, everyone. Thank you for holding and welcome to America's Car Mart fourth quarter fiscal 2021 conference call. The topic of this call will be the earnings and operating results for the company's fourth quarter and full fiscal year 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 dial-in 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 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 regarding forward-looking information, please see part one of the company's annual report on Form 10-K for the fiscal year ended April 30th, 2020, and its current and quarterly reports furnished to or filed with the Securities 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 Vicki Judy, Chief Financial Officer. And now I'd like to turn the call over to the company's Chief Executive Officer, Jeff Williams.

Okay. Well, thank you for joining us this morning. We are proud of our work, and we're pleased to see the continuing benefits from our various investments and initiatives, which are aimed at allowing us to leverage, scale, and grow the business by improving the customer experience journey. There are many touch points and opportunities to exceed customer expectations in our business, and we believe that no other company can keep customers on the road and reduce the stress related to local transportation needs like America's Car Mart can, and we will only get better over time. Our ground-level, local, personalized offering, combined with our technology and scale, give us unique advantages in our market. We will continue to look to centralize non-core field functions that can be performed more efficiently with corporate support without losing the benefits of our decentralized decision-making at ground level and close to the customer. This will allow our associates in the field to focus on service and growing the number of customers we serve. Our investments in the areas of customer experience Recruiting, training and retention, inventory procurement and management are allowing us the ability to grow market share and move from a collections company to a sales company that's very good at collections. We're making good progress in all areas and our efforts in the technology area will continue to give us additional opportunities to utilize data to our advantage. And we have a very high expectation for our consumer-facing digital experiences as we move forward. Our community-based bricks and mortar presence combined with our digital opportunities give our model real strength. We will continue to invest in our business to allow us to be the market leader over the long term. Our corporate customer experience team is making great progress and is directly involved with our consumers and working with our dealership personnel to ensure our customers have consistently great experiences. We will continue to look to industry partnerships, which are becoming a bigger part of our overall efforts. Our current profits are strong, and we have an obligation to reinvest these current profits for our future. Customers need what we do, and we have an obligation to serve more customers over time. Our new service contracts are rolling out company wide and the customer response has been very positive and very strong. Our associates are proud to be offering these new products that include extended terms, roadside assistance and oil changes, all with keeping you on the road pledge. We're making great progress with our inventory management efforts and we're optimistic that we will continue to see significant benefits from this area of the business. We've put together a strong team to lead our inventory transformation. Again, industry partnerships are playing a key role in our progress. We're very proud of our company and the hard work and dedication of our associates. This last fiscal year, which started on May 1st of 2020, was extremely difficult. but our associates continued to rise to the occasion, working many hours under very difficult and uncertain conditions, never wavering in their efforts to support each other, our customers, and our communities. We show the resourcefulness and the creativity and how nimble our business can be because of the quality of our associates that we have in place and their dedication to our purpose. Now I will turn it over to Vicki to go over some numbers. Vicki.

Hello and good morning. Our total revenue increased 42.6% up to $279 million, resulting from a 24.3% increase in retail units sold, a 15.9% increase in average retail sales price, and interest income increased by 28.1%. Our same-store revenues were up 37.6%. Revenues from stores in the over 10 years of age category were up 41%, stores in the five to 10 year category were up 48%, and revenues for stores in the less than five years of age category was up to about 15 million. Our associates across the company worked tirelessly this past year and throughout the fourth quarter to serve our customers with exceptional service which translated into productivity improvements of an average of 36.5 units sold per store per month. This was also possible due to the investments in our inventory and our procurement processes, including our preferred vendor-partner relationships. Our retail inventory was up due to higher quantities and combined with higher pricing. As a reminder, the inventory levels at April 30, 2020, were low due to the pandemic environment. At quarter end, 16 or 11% of our dealerships were from 0 to 5 years old, 39 or 26% were from 5 to 10 years old, and the remaining 96 were 10 years old or older. Our overall productivity was 36.5 units sold per store per month, compared to 30.2 for the prior year quarter and 31.1 for the sequential quarter. Our 10 year plus lots produced 38.1 units sold per month per lot for the quarter compared to 30.5 for the prior year quarter. Lots in the five to 10 year category produced 34.4 compared to 27.4 for the prior year quarter. and the lots less than five years of age had productivity of 32.3 compared to 23.5 for the fourth quarter of last year. Our down payment percentage was 8.7% compared to 7.8% for the prior year quarter. Collections as a percentage of average finance receivables were at 14.9% compared to 15% for the prior year quarter. Collection percentages were positively impacted by tax time refunds, stimulus payments, and the CARES unemployment. The average originating contract term was 37.1 months compared to 31.8 for the prior year quarter and up from 35 months sequentially. The average selling price was up 15.9% or $1,979.00 with a 5.3 month increase in the term compared to the prior year fourth quarter. These term increases are necessary to ensure affordability for our customers as the retail sales price increases. The quality of the vehicle in terms of age and mileage continues to improve as well. We will continue to be mindful of balancing this term length with affordability, but believe we are putting a better customer and higher quality vehicle for the most successful outcome. Our weighted average contract term for the entire portfolio, including modifications, was 37.3 months compared to 33.3 for the prior year quarter. And the weighted average age of the portfolio decreased slightly from approximately 8.8 months to 8.2 months. Interest income increased 6.7 million or 28.1% compared to the prior year quarter. primarily due to the $158 million increase in average finance receivables, a 25.6% increase. The weighted average interest rate for all finance receivables at the end of the quarter was approximately 16.5% relatively flat from the prior year quarter. Gross profit per retail unit also increased by $800 to $6,032. This was a 15.3% increase compared to the prior year fourth quarter. The gross profit percentage was 40.2% compared to 40.5% for the prior year quarter and down from the sequential quarter at 40.6%. The reduction in gross profit resulted from the lower margin on the retail units partially offset by improved wholesale margins due to the strong demand in the used car market and also lower repair costs. The 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 higher selling prices. The mix of the type of vehicles sold had increases in car and SUV sales over the prior quarter and pickup sales decreasing due to the high price and tight supply of trucks. Our SG&A for the quarter was up 5.7 million compared to the prior year quarter, but down as a percentage of sales to 14.5% compared to 17.7% for the prior year quarter. SG&A as a percentage of total revenues, best cost of sales and provision for credit losses was 45.6% compared to 54.6% for the prior year quarter, excluding the impact of the allowance changes. This metric is important for our integrated sales and finance business as a large part of our efforts are focused on keeping customers on the road. Our investments continue to be primarily payroll focused as we build our customer experience team, invest in our procurement team, and combined with increased commissions because of the higher net income. Our new customer relationship module of our ERP system went live in May of 2021. and we will continue to invest and improve our technology and digital platforms to enhance the customer experience as we move forward. We'll also be investing in additional marketing as we continue to promote our brand image with our new tagline and our new service contracts. As always, our expectation is that we will continue to leverage these investments with market share growth over the long term. We are now serving over 7,400 additional customers compared to this time last year at an improved service level. For the current quarter, net charge-offs as a percentage of average finance receivables was 4.8%, down from 5.6% in the prior year fourth quarter, and down from 6.4% for the quarter ended 4-30-19 pre-pandemic. We saw improvements in delinquent accounts and our accounts 30 plus past due was at 2.6% compared to 6.2% for the prior year fourth quarter. The CARES Act enhanced unemployment benefits and stimulus payments certainly contributed to this improvement along with our increased efforts working with our customers to help them through these challenging times. Recovery rates of repossessed units also contributed to the decrease in net charge offs Recovery rates for the quarter were approximately 28.5% compared to 26.7% in the prior year quarter. As a result of these improved delinquencies, our overall credit loss results, and our outlook for projected losses, we have lowered our allowance for credit losses from 26.5% to 24.5% as a percentage of finance receivables net of deferred revenue. This decrease in the allowance resulted in a 15.1 million pre-tax decrease in the provision for credit losses. This impact was a diluted earnings per share increase of $1.65, resulting in diluted earnings per share of $4.54, excluding the allowance change for the fourth quarter of 21. The effective income tax rate was 21.5% for the fourth quarter of fiscal 21, compared to 15% for the prior year quarter. Income tax expense included an income tax benefit of $729,000 and $160,000 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 24% going forward prior to any excess tax benefits from stock option exercises. At quarter end, our total debt was approximately $226 million. We had $3 million in cash and approximately $99 million in additional availability under our revolving credit facilities. Our current debt net of cash to finance receivables ratio is 27.6% compared to 25.1% at this time last year. This percentage increase relates to the increase in our inventory investment compared to this time last year, an additional $45.8 million. During the fiscal year, we added $188.4 million in receivables. We increased inventory by $45.8 million, repurchased $10.6 million of our common stock, and funded $9 million in capital expenditures, a total of $253.8 million, with only a $67 million increase in debt out of cash. We are well positioned to serve more customers and grow our market share. Now I'll turn it back to Jeff.