Good morning, everyone. Thank you for holding, and welcome to America’s Car-Mart Fourth Fiscal Quarter 2022 Conference Call. The topic of this call will be the earnings and operation results for the company’s fourth quarter and full fiscal year 2022. 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 website at www.car-mart.com. As you all know, some of the 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 30, 2021, and its current 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 Vickie 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're very proud of our team and all of our great associates living out our mission, vision, and values in our daily work. We give our customers peace of mind by keeping them on the road. That's our purpose, and we have an obligation to serve more customers. As detailed in our press release, we had another outstanding quarter and year in very difficult conditions. We have a number of significant initiatives in process that are allowing and will allow us to continue to grow into the future, better utilizing data, continuing to centralize certain functions, and leveraging our scale as we move forward. There is tremendous demand from consumers for our offering, and we have a lot of work to do, but the body of work is impressive. We're now serving over 95,000 customers, soon to be over 100,000 and growing from there, as we discussed in our press release. Revenues over $1.2 billion, return on equity for the year was 21%, and averaged 18% for the previous five years. And return on assets was 9.5%, with a previous five-year average of 9.2%. And looking back, since we started our consistent share repurchase program at the end of fiscal 2010, we’ve bought back over 6.8 million shares for $286 million, resulting in a 42% reduction in our fully diluted share count. We've grown finance receivables to over $1.1 billion. So, in effect, almost all of the $400 million in our total debt net of cash is the result of our share buybacks, demonstrating the cumulative power of our focus on operating cash flows in this capital-intensive business. We will continue our investments in the digital and data areas as we move forward. The investments are focused on inventory, underwriting and…

Thank you, Jeff, and good morning, everyone. We are pleased with the results for the quarter, with productivity by dealership of 35.6 units. That's second only to last year's fourth quarter at 36.5 units. Last year's fourth quarter included a significant impact - positive impact from the largest stimulus payment, which was disbursed in March of 2021. For comparison to pre-pandemic, the fourth quarter of fiscal year 2019 was 30.3 units per dealership. Our objective of increasing productivity per dealership and leveraging existing talent and facilities, is moving in the right direction. We added over 7,000 customers during the fiscal year. For the current quarter, net charge-offs as a percentage of average finance receivables was 5.6% compared to 4.8% in the prior year fourth quarter. Again, the prior year fourth quarter included stimulus payments, which also positively impacted collections and net charge-offs in the prior year. Net charge-offs were 5.6% for the quarter ended 4/31/20, and 6.4% for the quarter ended 4/30/19 pre-pandemic. We believe we will continue to see some normalization of credit losses as we move forward. However, we also believe that our investments in our customer experience area, our expanded service contracts, and our focus of keeping customers on the road, will keep us closer to the lower end of those historical ranges. We did see improved recovery rates in the fourth quarter as well at approximately 30 .5% compared to 28.5% in the prior year quarter. Our account 30-plus pass due was at 3% compared to 2.6% in the prior year fourth quarter. The average originating contract term for the quarter was 42.1 months compared to 37.1 for the prior year, and up from 40.4 months sequentially. Our weighted average contract term for the portfolio, including modifications, was 42.9 months compared to 37.3 for the prior…

Okay. Thank you, Vickie. In summary, we are pleased, but not at all content with sales volume productivity, even in light of the headwinds around higher car prices and consumer sentiment. Collections and credit results are strong. Investments will continue in areas to support a substantially larger business. Even though we have a lot of work to do, our support infrastructure, including centralization efforts, have never been more solid, which will allow us to handle growth that we expect to come our way. Rising interest rates and inflation will be addressed by us, primarily with increased volumes and continuing efficiency improvements. While we would prefer an environment with lower used car prices, we continue to believe that we will not see any drastic wholesale price reductions for our product over the short-term. However, as we have stated, lower used vehicle prices would actually be good for our business over the longer-term. Again, our model has performed well in all conditions. And to that point, results for us during the great recession were very good, with some of our best credit results in history. We are structurally in a much better place today, and we'll be able to capture market share as credit above us tightens up and more consumers move down into our market. We will now open it up for questions. Operator?

Thank you. At this time, the participants will now answer questions from the callers. I would like to reiterate that my earlier comments regarding forward-looking statements apply both to the participants’ prepared remarks, and to anything that may come up during the Q&A. [Operator Instructions]. And our first question comes from John Murphy from Bank of America. Your line is now open.

Good morning, everybody. Actually, a first question on your state of your consumer. I think in your press release, you said you have high consumer demand for your offering. So, it sounds like you have really strong demand, but we're hearing different things in different slices of the used car market, and certainly in retail. Just curious if you can comment on the state of your consumer. And Jeff, you just kind of alluded to credit tightening and maybe pushing consumers down into your slice of the used car market. I'm just curious what that could mean for demand ultimately as well.

Yes, we are seeing good solid demand, especially with the higher credit type customer, but at the same time, we're seeing some challenges with volumes from an affordability standpoint. So, we do expect, as car prices level off, or maybe even come down just a little bit, that affordability may be less of a factor for us, allowing us to pick up even more volumes. But we are seeing good solid demand from good credit risk customers, and we expect that to continue and hopefully get some relief and have more room at those lower price points as we move forward.

Okay. And then to follow up on that, I mean, if we look at your average selling price over the last two years, it's gone from around about $12,000. Now, we just finished up the quarter that was approaching $18,000. I mean, it's a 50% increase. They're kind of mimicking what's going on in the used car market. How did the business change? And are you seeing different consumers coming to your used car lots, as opposed to what you saw two years ago? Because I mean, that is - I’m just trying to understand what that structurally means for the business. I mean, you're not expecting a big fade in the near-term, because that's a big step up.

Right. Yes. We were actually moving upstream on the consumer side before the pandemic and before the big run-up in car prices. We have really focused on keeping customers in the family for life. So, we were offering a nicer product at a higher price prior to the run-up in car prices. So, the 50% sales price increase is something that everybody's having to deal with, and we're certainly having to extend the term to keep those payments affordable, but payments have gone up. The car prices have gone up. We're dealing with that as best we can, and we feel like we're in a better position than anyone to keep those customers on the road, keep those cars in good shape, serve our customer base at a high level. And - but it has been at the cost of a longer-term and a longer cash version cycle. But as we've discussed, we expect returns to be at or above historical levels as we go forward with all the improvements we've made to the business.

Okay. And then just lastly, there's inflation in costs, particularly around labor, which curious how you're dealing with that directly. And then also, maybe for your consumer, how much of a tailwind that is for wages increasingly to help offset some of these rising costs you just discussed.

Well, we certainly are aware of and adjusting to inflationary pressures with our business in all areas, especially on the wage side. And we - it's a continuous process for us to make sure that our wages and benefit packages are competitive in our markets, and we've made adjustments and we'll continue to make adjustments to stay competitive and retain our very best associates. Vickie, anything you want to add?

Yes, we continually evaluate our wages. We always look for ways to be more efficient. Jeff mentioned several of our systems that we're implementing, again, just to better efficiently use our data, our associates to be more efficient. So, we are continually evaluating all of that.

And for us, it's all about continuing to gain market share, serve more customers, sell more cars, and increase that productivity to offset the effective inflation.

Great. Thank you very much, guys.

Thank you. And our next question comes from John Rowan from Janney Montgomery Scott. Your line is now open.

Good morning. Jeff, you make the point that lower prices are actually good for your business in the longer term. What about like the near-term, right? If prices come down, what is kind of the initial reaction? I mean, do your charge-offs go higher as loss severity increases? I'm kind of curious what the more immediate term impact is.

Well, we don't think that the car that we buy and supply to our consumers is going to have much of a price reduction, if any. It's an eight-year-old car, and the demand for that car, a mechanically sound car that's going to last beyond the contract terms, we don't see that value decreasing any time in the near to midterm. But if it does, that would have some effect on some current results on recoveries and credit. Again, we don't expect that to happen, but if it does, there might be a short-term negative, but the positives on the other side would be much more and greater than the negatives on the front end in terms of affordability, more consumers qualifying for a contract with us and overall serving more customers.

Okay. And then you gave some guidance in the press release around credit, stating that it’s going to normalize towards the lower end of the historical ranges. You gave the five and 10-year charge-off figures. I'm curious, are those the guide points that we're supposed to look for, that - or is it something else that we're supposed to look at?

Well, if you just go back and look at the range that end up with those averages, with the improvements we've made to the business, centralization efforts, we're just more better structurally than we've ever been on the support side. So, there's a lot of unknowns in terms of what normal credit losses are going to look like. But to us, we think it'll be closer to the lower end than the higher end of those ranges as we go forward.

Okay. And then, any guidance on the gross profit margin going forward? Obviously, there was a dip down in the fourth quarter. Do you think it continues to migrate down? Or with car prices at least stable here, do you think you keep inventory percentages relatively the same and your gross profit flattens out? I'm trying to gauge if that number stays flat, comes down, or it improves

A big piece of that will depend on the market and the used car prices. Again, our guideline pricing is set based on our purchase cost. So, if purchase prices continue to increase, it does put more pressure on that gross margin percentage. The dollars improve, but the percentage becomes lower. So, if prices stabilize, then that gross margin will stabilize as well. And again, this quarter we did see some inflationary pressure on some of the fuel and transportation as well. The biggest - the primary change was due to the pricing, though, over half of it.

Okay. Thank you. Yep.

Thank you. [Operator instructions]. And I’m showing no further question. I would now like to turn the call back over to Jeff Williams for closing remarks.

Okay. Well, once again, thank you for joining us this morning. Thank you for your interest in America's Car-Mart. We’d like to stay thank you to all of our associates that dedicate their lives to helping our customers succeed. We've got a great group of associates, a lot of momentum as a company, and we're in a great spot as we look forward. So, thanks and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.