Good morning, everyone. Thank you for holding, and welcome to America's Car-Mart 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 management's present view. These statements are made pursuant of 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 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 Securities and Exchange Commission on Form 8-K and 10-Q. Participating on the call this morning are Jeff Williams, the company's Chief Executive Officer; Doug Campbell, President; 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.

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 were 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 2 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 and affordability has been tight. But as Vickie will talk about more in a minute, our net charge-off levels are just slightly above pre-pandemic levels back…

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 multipronged 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 due finding gains in efficiency while not missing our sales target. So 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 in 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…

Thank you, Doug. Good morning, everyone. For the current quarter, our net charge-offs as a percentage of average finance receivables were 6.3% compared to 5.1% for the fourth quarter of fiscal year '22, and 6.1% for the pre-pandemic quarter ended 4/30/19. These are just above our prior 5-year average of 5.7% and below our 10-year average of 6.8% for fourth quarters. The primary driver of the increased charge-offs was an increased frequency of losses, but we also experienced an increase in the relative severity of losses. Recovery values were held flat in the last quarter at about 28%. As of April 30, 2023, the allowance for loan losses was 23.91% of finance receivables net of deferred revenue. We did increase the allowance percentage in the fourth quarter, up from 23.65% to reflect the effect of the higher net charge-offs on our overall portfolio performance, as well as the uncertain macroeconomic environment and continued stress of the inflation on our consumers. This change resulted in a $3.3 million, or $2.5 million aftertax charged to the provision in the fourth quarter. We will continue to be focused on improving the loan structure with better down payments and upfront equity. The rollout of our LOS will assist us with achieving these improvements. Our internal applicant scores were slightly above the prior year, and we expect to be able to gain market share and attract higher credit quality consumers as other lenders above us continue to tighten credit. An early indicator of this, in the fourth quarter we saw FICO scores for customers originating during the fourth quarter, reflecting the largest percentage improvement that we've seen in several years and higher than any other quarter. This will allow us to continue to improve the percentage of the portfolio held by our highest credit quality…

Okay. Thank you, Vickie. The consumer demand for our offering is high and increasing, and we've been making investments to increase our operating moat. As Vickie mentioned, we're now serving over 102,000 customers. About half of those are repeat customers with a high lifetime value. Our growth in recent years has primarily come from the expansion of the customer base in existing markets, markets that we know well. We've also completed a few highly successful acquisitions, and we'll continue to prioritize our acquisition strategy, especially considering the current competitive marketplace disruptions, which we anticipate more of. While we constantly scrutinize capital deployment, the significant increase in the cost of capital that we've seen recently requires us to be even more diligent and we will be. Our balance sheet is very healthy, and we will keep it that way. We will continue to make prudent investments in the business, and the timing of these investments will be made in an effort to properly align expenses with sales, something we've done successfully for a long period of time. Our CapEx will be lower going forward. And to reiterate, most of our projects are completed or near completion. As to vehicle affordability, we do expect vehicle costs to flatten and normalize even in a tight supply market as we improve our processes. Sales prices and loan terms will also continue to flatten with consumer affordability returning to pre-COVID levels over time as the job market stays strong, wages continue to increase and other inflationary pressures ease. Improvements in affordability will result in higher customer success rates, our ultimate measure. We are confident in our ability around procurement and inventory management, and we're very excited about the potential improvements in this area of our business. And as Vickie mentioned, the SG&A will level off as we move forward. We've had to make significant investments that can now be leveraged. The ERP will allow for huge efficiencies across all administrative and data functions, unleashing powerful benefits. As always, we'd like to thank all of our associates for their dedication to our purpose and for all they do to keep our customers on the road. Thank you, and we will now turn it over to the operator for questions. Operator?

And our first question comes from the line of John Murphy with Bank of America. Your line is open. Please go ahead.

This is Billy Healey on for John Murphy. Can I just ask you about the availability of credit for consumers in total? And like has there been any pullback in aggregate? And have others come in and backfill with that availability?

Yes. I think we're certainly seeing credit restrictions, and the Cox report for April indicated that credit is tighter by about 8.5% compared to this time last year. We're certainly seeing that in our markets. And as Vickie alluded to, the credit scores of customers we're seeing, especially in the fourth quarter, have come up significantly, which would be another indication that credit is certainly tightening above us in our markets.

And if I could follow up, just on the state of your average consumer, what are you seeing there? Are you seeing any improvement at all? Or are your consumers still struggling?

Our customers historically have always struggled in good times and in bad. It's something that we deal with constantly. It is a little tighter now with inflation. But the shock of inflation, we've certainly worked through that. There was an initial period back in summer of last year, where it was a real sudden shock. But I think consumers have adjusted. So -- but there is some additional strain. Inflation is real. But our customers have always made ends meet, especially with our help keeping them on the road. But it was a lot better than it was back in the summer of last year.

Yes. Additionally, I'd add -- this is Doug, that what we saw in the fourth quarter with FICO scores we mentioned about the -- that customer dynamic is changing. If we looked at it from a FICO score basis, we've had the highest influx of a better credit customer for fourth quarters, that if you go back 5 or 6 years -- even if you compare that to any quarter on record over the last 5 or 6 years, that credit profile is better. So that's also really encouraging to see, especially when you have the sort of volume that we did last quarter.

One more, if I may. Just on -- I know you talked about your efforts towards, like reconditioning and getting hopefully flattening out those vehicle costs over time. Can you just talk to like, in total, the availability of supply, of what you'd call recently priced vehicles? Has that improved at all?

Repeat the last part of the question, of what price vehicles?

Reasonably priced.

Reasonably priced, yes.

Yes. So it's tight. We're all -- retailers out there fighting for the same piece of inventory. As rates have continued to go up, we're all out there targeting a piece of inventory. There's a lot of people that are now encroaching in our space for vehicles that we would normally target. So we're having to get more creative. What's been interesting is over the last quarter, we had two large competitors exit the marketplace who also participated in that space. So it has sort of been like a release valve on the procurement side. We have seen the ease in purchasing because we have less competition, right? So someone who -- if you combine those 2 companies, just slightly smaller than us, like that has been sort of a godsend, especially out where the territories that they occupied in the southeast part of the United States, where there's a lot of our procurement activity goes on. So there's that. And then additionally, they serve a different type of customer. With this higher price asset, it is making it easier to offload those cars as well, and it gives us an opportunity for growth there as well.

Our next question comes from the line of Derek Sommers with Jefferies. Your line is open. Please go ahead.

Could you talk about the impact of lighter tax refunds on this quarter's performance, and if there are anticipated to be any lingering impacts from this dynamic moving forward? Seems like the trickle down of FICO scores may have overshadowed this dynamic in the performance.

Well, the refunds were down about 7% for the year. And with the inflationary pressures that consumers are feeling, our tax refund payments were less than they had been, pre-pandemic. So there's just indications that consumers are a little tighter on cash, a little more stretched than they've been in the past. But we fully anticipated that. Not surprised at all. But collections during tax time, as a percent, were lower than pre-pandemic, and that's just based on affordability and other inflationary pressures on the pocket books of consumers, but we're working through that. And again, charge-offs are in good shape, and we're optimistic looking forward.

Yes. I think the flat amount collected per customer is some indication of that as well, so.

Our next question comes from the line of with . Your line is open. Please go ahead.

Its Citadel Investment Advisory. I wanted to ask if you could give us kind of a profile of the companies that have exited the market. Is this the debt by 1,000 lashes with everything seemingly going against the industry? With interest rates up, car prices up, labor shortages, price of everything increasing. So could -- not to pick on anyone specifically, but what has caused them to exit the market? And how do you compare and contrast that to what you're doing?

Yes. I don't -- we don't know specifically what caused the exits. But the things you mentioned certainly played into it. Interest rates are much higher than they were a year ago. The cost of operating the business, especially the cost of the car, is much higher than it's been historically. And so we don't know specifically the issues with these two competitors. But for us, we focus on cash flows. We focus on operating efficiently at the dealership level. We focus on a very clean and strong balance sheet. We're not over levered. We have a lot of equity on the balance sheet, which is extremely important in times like these. So -- and then we've got -- over half of our business is repeat customers, and most of that is in markets that we've been in for a very long period of time. So we've got some real advantages in attracting and retaining a good solid customer base that we know well and have known well for a long time. We're improving our product offering and doing a lot of things corporately to invest in the support of consumers. And I'm not sure if other companies have the ability to go out and invest in the face of some of these challenges like we have to not only persevere, as I said earlier, but to actually be in a much stronger position by utilizing that balance sheet, investing in areas that are going to make a difference in customer success.

The one thing I'd like to follow up with is that the people that have exited the marketplace, how long have they been in business? I mean are these people that have been in the business 5, 10 years or longer, 20, 30 years?

Yes. Longer than 15 years.

And I'm showing no further questions, and I'd like to turn the conference back over to Jeff Williams for any further remarks.

Okay. Well, again, thank you for joining us, and thanks to all of our associates making a difference every day in the lives of other associates and our customers. So thank you, and have a great day.

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