America's Car-Mart, Inc.

Good day, and thank you for standing by. Welcome to the America's Car Mart third quarter 2022 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Jeff Williams, CEO and President. Please go ahead.

Okay. Well, thank you for joining us this morning. Our press release that went out last night was comprehensive, and we hope you've had a chance to review it. We would also encourage you to view our investor video on our website, which covers some important aspects of our business model. We love our business and the purpose in our work and we're very excited about the opportunity we have to support more customers and associates as a dramatically larger, more profitable company over time and be even better at providing our customers with what they need. I would like to thank all of our associates for all they do to make us better. Again, our press release was comprehensive and I won't repeat the press release comments here but we'll leave more time for Q&A at the end of our call. I'll now turn it over to Vicki to go over some numbers. Vicki?

Thanks, Jeff. Good morning, everyone. Our productivity at our dealerships was 30.8 units, down 1.3% over the prior quarter. As we mentioned, our productivity in November and December was up, but down in January, primarily due to the impact of the Omicron variant. and it resulted in staffing shortages at our dealerships, as well as impacting our customer traffic. The third quarter also compared to the prior year quarter, which had some positive impact from the stimulus payments that were dispersed in January of 21. For the current quarter, our net charge-off as a percentage of average finance receivables was 5.3%, compared to 4.9% in the prior year third quarter. And again, the prior year third quarter included stimulus payments, which positively impacted collections and net charge-offs in the prior year. Net charge-offs were 5.9% for the quarter ended 131.20 pre-pandemic. So from a long-term historical perspective, the current quarter net charge-offs are still much improved and well below historical third quarter levels, despite the increase in the average retail sales price. We did see an uptick in our frequency of losses just above the unusually low prior year period levels, while the severity of losses on a relative basis were still improved compared to the prior year quarter. This is all consistent with some expected normalization after the unsustainable historic lows resulting from stimulus payments and other factors that we've experienced over the past two years. Recovery rates of repossessed units also contributed slightly to the decrease in the net charge-offs. Our recovery rates for the quarter were approximately 28.5% compared to 27.1% in the prior year quarter and 26.6% for the third quarter of fiscal 20. Our recoveries on repossessions are a smaller percentage of our overall profitability compared to others in the industry. It's also important to note that as our receivable balance grows, a significant portion of the provision expense is related to increasing the balance sheet allowance reserve on the larger portfolio balance. Our finance receivable principal balance has grown by $220 million and our deferred revenue has increased by $26 million during the last nine months. resulting in an additional provision expense of 47 and a half million reflected in the income statement for the nine month period for the reserve increase. Our 30 plus past due was at 4% compared to 2.8% in the prior year third quarter and 3.6% at 131.20 pre-pandemic. We believe the impact of the Omicron variant on our customers contributed to these higher delinquencies. Total collections of principal interest and late fees increased by 23 million or 20.1% over the prior year quarter and improved 8.2% per average customer. The average originating contract term was 40.4 months compared to 35 for the prior year quarter and up from 39.7 months sequentially. The overall increase in the term was less on a relative basis than the increase in the retail sales price would have indicated. Our weighted average contract term for the entire portfolio, including modifications, was 41.2 months compared to 35.7 months for the prior year quarter. The weighted average age of the portfolio increased slightly from approximately 8.7 months to 8.8 months. The early data that we have on longer contract terms and higher average selling prices looks promising for our collections and our customer success. The total gross profit per retail unit sold increased by nearly $1,000 to $6,773, or up 17.3% compared to the prior year quarter. The gross profit percentage was 37.8% up from the sequential quarter at 37.5%. We did a nice job this quarter of stabilizing the gross margin impact despite a sequential increase in the average retail sales price of $897 or 5.5%. Improved wholesale results and expense efficiencies contribute to this improvement in the gross margin percentage. We continue to leverage the investments we're making in our SG&A. Most of our increased spend has been focused on the payroll and benefits area as the single most important part of our customer service is our associates who support those customers. And we're focused on having highly trained, happy, and engaged associates, especially in this current environment. We are now serving approximately 94,000 customers with an increase of more than 5,800 in the last nine months. and we have over 2,000 total associates. At quarter end, our total debt was approximately $373 million. We had $2.6 million in cash and approximately $84 million in additional availability under our revolving credit facility based on our current borrowing base of receivables and inventory. As a reminder, we do have an existing $600 million commitment from our lenders with a $100 million accordion feature as well as the opportunity to access the securitization market as we grow. Our current debt to finance receivables ratio is 36%. During the first nine months of fiscal 22, we added $220 million in receivables, increased inventory by $37 million, we repurchased $27 million of our common stock, and we funded $14 million in capital expenditures. As we go into income tax refund time, we generally carry more inventory units and a higher cost mix to support the sales during that time. Thank you, and I'll let Jeff close us out.