Good morning everyone. Thank you for holding and welcome to America's Car-Mart's First Quarter 2017 Conference Call. The topic of this call will be the earnings and operating results for the Company's Fiscal First Quarter of 2017. 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 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 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 1 of the company's annual report on Form 10-K for the fiscal year ended April 30, 2016, 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 Hank Henderson, the company's Chief Executive Officer, and Jeff Williams, President. And now I'd like to turn the call over to the Company's Chief Executive Officer, Hank Henderson.

Good morning and thank you all for joining us. As you can see in our press release this morning, we had very solid improvements in our bottom line this quarter with earnings of $0.87 per share compared to $0.52 for the same quarter last year. While we did see a positive increase in the top line year-to-year, the biggest improvement was with regard to credit losses. We had significantly fewer losses this year compared to last. As we talked about on our last call, our 30-plus delinquencies were lower at April 30 than they had been in several years, and that certainly made a big difference as each month of the quarter we had fewer credit losses than the same month of the prior year, so it was improvement throughout the entire quarter. Throughout the year, we've been working hard to improve the overall quality of our inventory and to improve the efficiencies of our collections process. And in the course of this past year, as we have talked about previously, we also made some very significant improvements to our underwriting process, and all of these things worked together to help assure greater success for our customers, which equates to greater success for our company. Our success is very well aligned with our customers' success, and we feel that is how it should be. We will continue to keep our focus on each of these elements in an effort to help assure the highest possible level of customer success and earn their repeat business in the future. So I'll go ahead and turn it over to Jeff now to give you more details on our results for the quarter.

Thank you, Hank. Total revenues increased 2.2% to $146 million with same-store revenues up 0.5%. Excluding the effect of the four dealerships we closed during the fourth quarter, revenues were up about 3.2%. We would note that the prior-year revenue increase was on the high side, so we aren't disappointed in 3.2%, and we do look to improve on that as we go forward. Revenues from stores in the 10-plus year category was basically flat with the prior year. Stores in the five- to 10-year category was up about 2%, and revenues from stores in the less than five-year category was up about 13% to $33 million. The overall average retail units sold per month per dealership for the quarter was 27.9, down from 28.9 for the first quarter of last year, and down a little bit from 28.2 sequentially. At the end of the quarter, 41 of our dealerships were from 0 to 5 years of age, 20 were from five to 10 years old, and the remaining 82 dealerships were 10 years old or older. Our 10-year plus lots produced 30.6 units sold per month per dealership for the quarter, compared to 31.1 for the prior year. It was up a little bit from 30.3 for the fourth quarter. Our lots in the five- to 10-year category produced 26.5 compared to 26.8, and our lots in the less than five year age category had productivity of 23.1 compared to 25.1 for the first quarter of last year. We believe we have room for future productivity improvements and we are very excited that we have 82 dealerships that are 10 years old or older. These older, more established dealerships are in good position to take advantage of market opportunities and to grow the customer base. Our average selling price…

Thanks. You know, back in March of this year, Jeff took on his new role as President and Leon Walthall became our field operations officer. And these transitions have gone very well and have definitely been great moves for our Company. The scrutiny and the intensity level of many areas of our business have been stepped up a notch, as I am sure many of our folks around here will attest. And we are very proud of how our regional vice presidents, area operations managers, general managers and all of our associates for that matter have stepped it up and their efforts are showing up in the results. And while we have made some improvements that we can be very proud of, we know that we still have a long way to go, and still have room to be all that much better than we are today. Striving for excellence has forever been a vital component of our culture and while, at some points in time, we've come closer to it than others, we never stopped striving for it. We have recently named Curtis Valentine to Director of Future Managers. We have redefined, elevated and expand this role, taking it from what was more of a training position to one with a scope that could truly own this piece and is devoted entirely to the recruitment, development, and selection of our future managers. Curtis was most recently an area operations manager where he did an excellent job, and prior to that was the general manager in Oxford, Mississippi. It is vital to the future growth of our company that we have a solid bench of well-prepared, high quality individuals working to get their own store, so our intent is to create some healthy internal pressure to grow, and as that progresses, we will be opening some new stores commensurately. So, that concludes our prepared remarks, and we would like to move on to your questions. Operator?

[Operator Instructions] Our first question or comment comes from the line of John Rowan from Janney. Your line is open.

Good morning guys.

Morning.

I was obviously surprised a little bit by the rate of expansion in the gross profit margin. Can you maybe comment, obviously you talked about process improvements, but is there anything to be said for any shift in make or mileage of cars that would contribute to that type of gross profit expansion, or is it, you know, Jeff, I know you alluded to the wholesale market not bringing much on recovery. But could that same dynamic also be helping the gross profit on your purchasing?

As we mentioned, we did see a slight improvement in the age and the mileage, but it wasn't anything significant. I think, more than anything, we've had intense focus on vehicle repair, how we're getting cars repaired, who are using, the rates we are paying, an intense focus on just better blocking and tackling on the inventory repair side. And I think bringing inventory levels down, especially wholesale inventory levels down, have allowed our folks in the field to have more time to manage inventory effectively. So I think it's been mostly related to just intense focus and good practices surrounding inventory repairs.

Does that mean that you are repairing more units you have to pick up versus, I know, in the past, you used to scrap a decent amount of them. Are you repairing and reselling more than you were in the past?

I would say it's the other way. We're probably passing on some cars for repair issues that we may have repaired in the future. So it's probably the opposite of that.

This isn't just related to repossessions or such as this applies to what we call our first buy units, so we've tightened up some of the requirements on those, and also having fewer wholesales impacts that as well.

Okay. Talking about inventory a little bit, do you guys have any stop-sales because of the airbag recalls or is that not something that would affect your inventory?

No, not at this time.

So, if there is something that's recalled, you would still continue to sell the car? I know a lot of other retailers do. I just wanted to double check your policy.

We've always reviewed this policy like any other, and we think we're current and consistent with all the requirements.

Okay. And then any idea when, I mean, it sounded like there was a little bit of a decrease in duration on the initial contract sequentially. Did I hear that correct? If that's the case, then maybe when you're going to be able to continue to walk down, do you foresee your ability to continue to walk that down or was this just really a minor shift that we shouldn't amount too much more than that?

Right. Sequentially, it was nice to see a decrease sequentially, but it really had more to do with that sequential price decrease coming out at tax time. So we are still seeing pressure on term. We do think we are buying a much better car, so we don't think adding a month or so to that contract term is going to be negative in any way at all. But sequentially it was just really due to the price decrease from the fourth quarter.

All right. Thank you.

Thank you.

Thank you. Our next question or comment comes from the line of Elizabeth Suzuki from Bank of America. Your line is open.

Good morning. Just looking at provisions for credit losses, they were down about 6% year-over-year even though the collections as a percent of finance receivables were down and accounts over 30 days past due were up, and down payment percentage was down. Do you think provisions and charge-offs would go up in the coming quarters given the year-over-year easing of lending standards, or are you seeing something else in the ability of your customers to pay that points to a lower provision rate going forward?

We are expecting improvements with the credit loss line. Last year, it was certainly much higher than we would like to see, and we are pushing hard for improvements. We saw some good results in the first quarter. Some of the better results in the first quarter were due to the fact that we came into the quarter with much lower delinquencies. So we are a little higher at the end of July on a year-to-year basis with delinquencies, but we are - we feel like we are writing better deals, better cars, and so we do expect continuing improvements over prior years. But realistically, mathematically, we are probably going to be a little higher in the second quarter than we were in the first just based on delinquencies.

I would add to that, in reference to our financing requirements, while the down was slightly down, we do, as everyone knows, have some special upfront payments, and those actually have increased, so there was offset there. And the terms is pretty relative to our selling price, and so actually we don't feel like there's been, despite those factors you see there, we don't feel like there's been anything relaxed in our lending standards. But actually we really stepped them up. We think we are doing a much better job this year with our screening and underwriting, and so forth with our new system that we rolled out last fall, and we think some of the benefits that we are actually seeing now are tied to that.

Some of the decrease in the collections was due to the quarter ending on a Sunday. We do have a fair amount of Friday/Saturday payments that kind of roll over to that next week, so we did have an effect between quarters on collections just related to where the quarter ended.

Okay, great. I'm sure you have your own credit scoring system that you use internally, but do you know the average FICO score of your customers this quarter compared to a year ago, or just, directionally, if there's been any change up or down in average credit score?

It's been about the same. I think we've commented previously that it's around 500. Half of our customers don't really have a FICO, and the ones that do, it is around 500. That hasn't changed much.

Okay. Thanks. Just one more quick one. Was there anything that came out of the CFPB's due diligence back in January or any further queries or follow-ups from them since then, or is that just kind of done now?

Yes, still they have not notified us of any violations or anything that would significantly change our operational practices. That is still the status now.

Great, thank you.

Thank you.

Thank you. Our next question or comment comes from the line of Bill Armstrong with CL King & Associates. Your line is open.

Good morning Hank and Jeff, very nice quarter.

Thank you.

So, on the lower charge-offs, you mentioned less frequency. You came into the quarter with a very low 30-day past-due figure. And so I guess what the question is are you actually seeing customers doing a better job in keeping up on their payments, or how should we think about that? Or is it just because you kind of had cleaned up the portfolio going into the quarter?

I think it's some of both. There's no question that it was cleaned up. And as Jeff mentioned earlier, we came into the quarter with lowest point we had seen in any April in five years. So that obviously had a big factor. I think the rise that we've just recently seen and, as Jeff alluded to, some of that was more just rolling over as we do have more weekend payments, so we don't feel like that rises quite as bad as it could be. And we do feel like, as we said earlier, throughout this year, with the improvements in inventory, the improvements in underwriting, and we do feel like overall you're getting more efficient with our collections, we think we do expect to continue to see some ongoing improvements in our loss levels.

Okay. So the quarter ending on a Sunday, you are referring to the spike up in the accounts past-due. So I was assuming that you got some payments coming in the following Monday or Tuesday.

That's part of it. That's not the whole piece, but that is part of it.

Okay. Turning to inventory, it looks like you're starting to see more SUVs and trucks. Could you comment overall on what you are seeing in terms of availability when you are sourcing inventory for SUVs and pickups?

It's competitive. I mean it is. And we have actually increased this past year the number of purchasing agents out there so we can cover more ground. We've done some restructuring with our purchase department, but, overall, we are keeping our stores pretty well-stocked. And as Jeff mentioned earlier, through this year, we did see some increase in price, but at the same time, we did actually realize a little bit of improvement with age and mileage. So, we feel like, paying a little extra, we are getting a little better too.

And when your buyers are going to the wholesalers where you're sourcing these vehicles, are they maybe seeing more - higher levels of, or more quantities of SUVs and pickups, or is it simply a matter kind of maybe being willing to pay a little more so you can make sure you get enough?

Yes, we are not seeing an increase in supply out there. It's still fairly tight with good SUVs and trucks, so we are having to pay up a little bit but feel like we are getting pretty good quality.

Okay, great. Thank you.

Thank you.

Thank you. Our next question or comment comes from the line of Mike Del Grosso of Jefferies. Your line is open.

Good morning gentlemen. Thank you for taking my question and congratulations on the quarter. I guess the first high-level question is on competition, specifically as it relates to trends that we saw earlier in the year. Can you talk about any competitive factors? Have they eased at all? What's really driving this improvement this quarter? Thanks.

If there has been any easing, it's been slight. And most of that we get is anecdotal from talking with our managers, because they have a feel, they see how many of our customers trade in elsewhere, that sort of thing. And in then talking with them, we are not really seeing any or certainly no dramatic shifts or easing in the competition. I think most of this improvement that you’ve seen was again just related to some improvements ion efficiencies. There may be, now that this cycle is less and so long there maybe some number of customers that are kind of tried it, didn’t like it and they are returning to us. So had a little of that, it will qualify forward, how much, but in general most of the improvements you're seeing are from better underwritings that are customer service in general, just be more efficient with our business.

And there have been a few indirect lenders exit the business, and it's kind of hard to see how that effect trickles down. But as we've said previously, we are in a pretty small portion of the market, so a little bit of a pullback at the deep, deep sub-prime area that we serve might not catch any headlines anywhere but certainly makes a big difference to us on an individual lot basis. And we might look up and be selling one or two or three more cars per dealership, especially on these 82 dealerships over 10 years old, and then taking back two or three less per month and it may be related to just a little bit of an easing on the indirect side at the very bottom of the market. So we may be seeing a little bit of that, and as always, we do expect some continuing relief down there as folks experience higher losses.

Great, thanks. And then on new dealership locations, how should we think about expansion going forward?

I will tell you, right now, we do have two properties secured but we are not actively doing or remodeling all that. As I said, we feel like we need to get our bench strength a little bit stronger. I think that, over the years, the margin for error has kind of shrunk in this business, and we've got to get things right. So we will definitely in the future be opening some more stores, but for right now, our immediate plan is to get our folks developed and ready. So we don't have any openings to announce right now. And as we have these calls, we will continue to keep everyone updated. But we don't have any scheduled openings right now.

Thanks. That answers all my questions. Thank you.

Thank you.

Thank you. Our next question or comment comes from the line of Brian Hollenden from Sidoti. Your line is open.

Good morning and thanks for taking my call.

Morning.

How sustainable is your higher operating margin for the full year, and does the unit sales increase come at the expense of operating margin improvement?

Well, as we mentioned, the gross profit percentage did surprise us a little bit on the upside. From what we can tell, we've still got some room there for continuing improvements as far as repair expenses. Our margin does go down a little bit percentage wise as the sales price goes up, so we will be fighting that a little bit, but we feel like gross margin percentages are going to be good. SG&A should continue to see some leveraging. Credit losses, as we mentioned earlier, may be a little higher in the second quarter than first just simply based on how we entered the quarter. But we are working very hard to write better deals, to buy better cars, and to operate effectively in the field. So if we push a little harder on the sales side, we don't expect any big negatives below that.

Okay. Just one final question. If third-party financing starts to dry up for your competitors, how quickly does that translate to Car-Mart sales, or does demand also dry up?

I would say it would equate immediately. And as Jeff said earlier, it doesn't take a whole lot of change there. And when our stores begin to sell just even two or three a month more to individual dealerships, that adds up substantially, so I would say if that availability dries up. And there's also kind of something that happens in addition to just drying up. It could still be available. But I think one thing we may be seeing now is some people have tried that, and at these levels, they may - there's some education of the market that realizes these five- and six-year terms aren't all they're cracked up to be. The payment may be a little less and all that, but it's not really a situation that they want to be in. So I think we may be experiencing just a little bit of education of the customer as well.

Thanks for taking my questions and congrats on the quarter.

Thank you.

Thank you. Our next question or comment comes from the line of Ben Chandler with Sunfire Acceptance. [ph] Your line is open. Q – Unidentified Analyst: Hey, guys, congratulations on the quarter, one quick question. You mentioned that one of the contributing factors to lowering charge-off in the first quarter was a contribution of a special payment early on in the note. I was just wondering if you could shed some light as to what those actually are.

Yes, we always give customers an opportunity to increase that equity and keep that term down. If they don't have a full down payment, then they are given an opportunity to make some special payments on the front end to keep that equity up and keep that term down so they've got a real asset there. Q – Unidentified Analyst: Okay, great. Last question, another contributing factor to lowering charge-off in the first quarter, you mentioned some operational efficiencies, pickup in underwriting. Anything of particular importance worth noting on a deal-by-deal basis on maybe some deals that you are not buying today that you would have bought this time last year?

Yes, with our new scoring system, it's given us a lot more information on the customer standalone, and then combined with the deal structure, so we've got a lot of good math there, and it's allowed us to, more than anything at this point, just to peel off the lower quality deals. So, we've gotten some good benefit overall from passing on some riskier deals down at the bottom. And fortunately, we've replaced many of those deals on the low quality with some higher quality deals, and we do expect and we are pushing hard on our scoring system to utilize it more to increase our business down with those better deals. So far, we've gotten good benefit from just getting rid of a number of bad deals. We haven't seen the true benefit of the new scoring yet in terms of growing sales with the really higher quality deals, but that's the direction we are going. Q – Unidentified Analyst: One follow-up question just talking about your efficiency pickups on underwriting. From a prime online retailing perspective, we've seen startups like Carvana kind of explode out of the market and really shed some light on the opportunities available to the auto retailing market to purchase their vehicles front to back online. Are you doing anything internally to improve a shopper's ability to purchase or get financed online on your website?

We do have our inventory out there and we always have whatever sales or promotions. But keep in mind that we are in small towns and despite how the world is changing, and we certainly try to use some digital marketing and all that. Our business still remains very face-to-face. We are small towns, and we feel like that relationship of working with our customers, seeing our customers throughout the term, it's what we do, it's who we are, and we think, for our market, there will always be that need.

As a reminder, there's so much of our business that happens after that sale. Our very best customers are going to have issues pop up all the way during that contract term. They will need two or three modifications, and so it really is a high touch, face-to-face business. And so our customers, once again, only about half have a FICO, and that FICO is pretty low. So this is going to happen at that local dealership. Even though we will try to keep making improvements with our technology, it is mostly face-to-face sitting down across the table from these customers. Q – Unidentified Analyst: Appreciate the insight. Congratulations again. Thanks.

Thank you.

Thank you. [Operator Instructions] We have a follow up question from Mr. John Rowan, from Janney. Your line is open.

Hey guys. Jeff, in response to one of the questions, you said that we expect credit costs or credit whatever to be higher in the second quarter versus the first quarter. Can you just clarify? Was that the dollar provision being higher than the $33.4 million? Is that the provision relative to sales or are we talking about the net charge-off rate being higher sequentially?

Just on the income statement, I think, when you roll into a quarter with five-year lows on delinquencies, we did see some benefit in the first quarter from that. We are not going into the second quarter quite so low on delinquencies, so just mathematically at this point, we expect nothing dramatic, and improvements over the prior year certainly, but sequentially we would expect a little bit of an increase in credit losses….

Thank you.

Thank you. I'm showing no additional questions in the queue at this time. I would like to turn the conference back over to Mr. Henderson and Mr. Williams for any closing remarks.

Thank you all for joining us today. I appreciate the interest. We will get back to work and I think we've got some - a good year started. We've got some good momentum and we will stay after it. So you all have a great weekend. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.