America's Car-Mart, Inc.

Good morning, everyone. Thank you for holding and welcome to America's Car Mart's fourth quarter fiscal 2023 conference call. The topic of this call will be the earnings and operating results for the company's fourth quarter of fiscal year 2023. Before we begin, today's call is being recorded and will be available for replay for the next 12 months. As a reminder, some of management's comments today may include forward-looking statements. which inherently involve risks and uncertainties that could cause actual results to differ materially from managed present view. These statements are made pursuant of the safe harbor provisions of the Private Security Litigation Reform Act of 1995. The company cannot guarantee the accuracy of any forecast or estimate, nor does it undertake any obligation to update any 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, 2022, and its current and quarterly reports furnished to or filed with Security Exchange Commission on Form 8K and 10Q. Participating on the call this morning are Jeff Williams, the company's Chief Executive Officer, Doug Campbell, President, 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.

Thank you for joining us this morning. Productivity and market share gains continue, but current profitability is not representative of where the company and the business will be in the future. Our model is flexible, and we will continue to deploy capital to maximize appropriate long-term returns. Expect to earn returns on equity at levels we were generating prior to the pandemic, the mid-teens. We're extremely excited about our company and the unique, profitable opportunity in front of us. There's no other company sitting in a position to scale in this highly fragmented industry. Our book value is $79 per share. We have $500 million in equity, which we will protect as we move forward. As discussed in our press release, competitive dynamics are rapidly moving in our favor. Our industry has had significant disruptive challenges over the last 12 to 18 months, leading to the sudden exit of two large regional competitors, who are collectively serving over 80,000 customers, mostly in the southeast region of the U.S. We will see benefits in our procurement and inventory areas, as well as in our sales and collection efforts from these two companies exiting the marketplace. We've gone from a period of consumers having trillions in stimulus with zero inflation to no stimulus with very high inflation. Again, in our industry in particular, inflation has been especially pronounced showing up in used car prices, parts, shop labor rates, transport services, all being at record highs. Interest rates for auto loans have escalated sharply. According to Cox Automotive, credit availability was tighter year over year by 8.5% across all loan and lender types in April. Consumers have been stretched, affordability's been tight, but as Vicki will talk about more in a minute, our net charge-off levels are just slightly above pre-pandemic levels back in 2019. All of these challenges are working in our favor. We have not just persevered, we have significantly improved our position. Fiscal year 23 represents steps, huge steps in the right direction. In the face of all these challenges, we've added great talent to our team and pushed on with difficult, complex, time-consuming, resource-heavy investments and initiatives. We are clearly seeing the signs of the expected benefits of our efforts. Our model is the best way to serve our customer base who needs us and the service we provide, which is evident by the increasing demand for our offering. Just a quick update on some initiatives. As to people, we've now completed the key additions to our leadership team. The incredible talent that we've attracted to our company is, as expected, serving as an accelerant in driving operational improvements through change management, and completing and leveraging our initiatives that we have in process. Our ERP initiative is progressing as expected and will be completed by the end of this calendar year. It's hard to quantify the enormous benefits of us moving away from our legacy system, but the move is essential for us to become a data-driven company, better supporting operations as we serve customers. This change is foundational to efficiency improvements, elimination of manual tasks, giving us operating flexibility, allowing for future profitable growth. Also, as we've discussed, the CRM module, parts of which are being utilized currently, sits within the ERP and will allow us to significantly increase and improve our marketing, selling, and supporting customers. And as a reminder, the CRM provides the underpinning to our loan origination system in attracting a higher number of better credit score customers, which Doug will expand on in a minute. Also, as we've communicated, we will look to acquisitions of well-operated dealerships as a powerful use of capital. Our acquisition team has their ear to the ground, and we expect further disruptions in the competitive landscape to provide additional opportunities as we move forward. We're actively talking to a number of parties regarding some of those opportunities. As mentioned in the press release, we have completed a large percentage of the heavy lifting related to our extensive long-term investments, and we're now set to push efficiencies and leverage our cost structure as we bring credit losses down and we bring gross margin percentages up. I'll now turn it over to Doug. Doug?

Thanks, Jeff, and good morning, everyone. A big thank you to our field and corporate teams for doing a nice job on executing our strategy to be ready for the tax season. We had a multi-pronged approach, which included ensuring our stores were stocked, that we work through high cost and aged inventory, and reduce overall inventory levels by 25%, mainly through finding gains in efficiency while not missing our sales target. This would not be an easy task while also navigating a tricky wholesale pricing environment. Given the rate of wholesale price decline that we saw in the last year, which was over 20% and the highest on record, one might argue that it was too much decline and too fast a time period. Especially when you consider that wholesale and retail inventory levels for our industry were at historical lows. It had all the ingredients to drive abnormal price strength above and beyond what we might experience on a seasonal basis. Despite the average income tax refund being down 7%, the spring selling season was robust. and there were several areas that we can look back on and be proud of. For the quarter, we sold 17,655 units, a record for the best sales volume for any quarter in the company's history, which was up 7.5% over the prior year's quarter. February in particular was notable, being the best on record and having the single best sales day of 620 units. When looking at sales on a same-store sales basis, they were up 5.6%. This growth that we're seeing is really showcasing the impact of some of our more recent acquisitions and their future benefits to the organization. For the fiscal year, sales were up 4.9%. We were able to achieve our targeted reduction in inventory by 25% by finding efficiency gains in our ecosystem, like cutting the time it takes to inflate vehicles in half. We turned retail and wholesale inventory faster at 7.4 turns up from 6.7 turns versus last year's fourth quarter, which got our inventory aging, at a manageable and acceptable level. The team also navigated the pricing environment well. Wholesale pricing typically falls early in the year and starts to increase in late February, then peaking in April, which we call the spring bounce. During that time period, prices normally would float back to their January 1st values and even climb a point or two before cooling off and then declining at a more normal rate for the balance of the year. The ability to anticipate these fluctuations and timing it around the pricing, both on your purchases and disposals, is critical when operating large fleets. Unlike a normal pricing season, increases were seen very early, as early as the second week of the year, which is much earlier than normal. Prices then peaked at six or seven percent above their January 1st values in early April before beginning to cool. However, when looking at small and mid-sized car segments, Those saw increases of more than 10% as dealers competed for vehicles to meet the affordability challenges that already exist in our industry. Our ability to plan and effectively navigate this environment is critical. During this period, our purchase price of vehicles deviated less than 3% by doing a majority of our purchasing earlier in the season, and we shifted make and model mix around to avoid having materially higher sales prices that could slow our sales pace. In fact, if you looked at sales prices sequentially between the third and the fourth quarter, there was only a $42 variance in price, despite working through some of our high-cost inventory. As Jeff mentioned in the press release, we are doing a better job being more strategic and efficient with our investment here in inventory. A large part of the growth that we saw is related to our ability to drive traffic, both online and in-store with our new LOS. The ease at which customers can apply, get approved, and then scheduled for appointments drove incremental traffic into our stores, and contributed to the strong growth that we witnessed during the quarter. The online application volume was just up over 22% relative to the same period last year. But we know that customers have also shifted where they start the buying process. However, if I look at both online and in-store traffic, total application volume was still up over 10% versus the prior year's quarter, showing this effort with the LOS is truly accretive to our business. Additionally, we're seeing incremental growth of higher scoring customers applying for credit. Jeff has alluded to this several times in the past, that with credit tightening, we'll start seeing this customer profile trickle in at a greater rate. And we're prioritizing these applications, giving the rising cost of capital and their inherent ability to drive better performance in our receivables portfolio. Lastly, as a quick update on the LOS, I spoke earlier on the application volumes. And on the last call, I mentioned how the application portal was live throughout all of our stores. We're now going live by digitizing our sales process. The first store goes live this week. So what does that even mean? It means less paperwork for the customer to sign. In fact, that will be reduced by 75%, making the sales process faster. It allows for more capacity in terms of what we can process without having to change staffing levels. Subsequent standing and processing of documents will also be reduced and makes it easier for our office staff after the sale. It also provides more control at a centralized level from an underwriting perspective, but most importantly, all of the data that is now being analyzed to drive better decision-making, which will add a level of agility that we didn't have before. After rolling out our pilot store, we'll be activating other stores state by state over the coming months. I'll flip over to gross margins. For the quarter, we finished at 33.4%, down about 2% versus the prior year. Wholesale loss had been one of the contributing factors, but much less so now. We've had additional improvement here again in the quarter by reducing losses by 27% versus the prior quarter, And we continue to make strides here and have an opportunity to really outperform pre-COVID norms. Another, and I think our biggest opportunity as it relates to gross margins, would be what we spend on the repair of vehicles. There's basically two categories here. The first is related to making inventory frontline ready. Our reconditioning pilot that we've mentioned in the past is driving savings here. And on the prior call, we stated that our initial findings that there would be a benefit between $300 and $500 on a per unit basis. For what we've processed through the last quarter, those savings are north of $500 per unit. The issue we're having here is getting enough inventory through this channel, especially when considering what's happened with pricing during the last quarter, but we'll continue to persevere here. Second are the repairs to vehicles in our receivables portfolio, which would be associated with service contract obligations or customer repairs made to keep our customers on the road. We've seen a sharp increase on what we spend here in a year-over-year basis. While a normalized environment would yield a better outcome, there are steps we've been taking to drive better performance. I'll give you an example. During the pandemic, we used a vehicle's age and mileage as a lever within the business to combat vehicle cost. While it served its purpose up front, some of these vehicles had higher than normal repair costs after the sale. We've anticipated this, and as a company, modified service contract pricing to capture what the predicted exposure would be. But the real opportunity is to get this back in line while keeping the benefit of the higher revenue on the service contract. and the benefits that it provides. An obvious solution would just be to pivot back to normal in terms of what normal is on the agent miles of the vehicle that we purchase or accelerate this by targeting newer cars with lower miles than your historical average. And that's a solution we've been working on for six months now. Over that time period, we've augmented purchasing guidelines to procure a vehicle that's two years newer with 10 to 12,000 less miles for the same cost. These are vehicles that we've been selling over the last quarter and a half There are also tactical solutions that we're doing at a field level to overmanage the active fleet, which will aid in containing some of these costs and pay dividends as it relates to service contract failure rates and the instance we would need to intervene with a customer on a repair that's out of warranty. We look forward to updating you in the quarters ahead and are excited to share our efforts toward the progress we're seeing here. I'll now turn it over to Vicki, who'll cover our financial results. Vicki?