Good morning, everyone. Thank you for holding, and welcome to America's Car-Mart's First Quarter Fiscal 2024 Conference Call. Before we begin today's call is being recorded and will be available for replay for the next 12 months. During today's call, management may make certain statements that are considered forward-looking, 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, 2023, and its current and currently -- quarterly reports furnished to or filed with the Securities and Exchange Commission on Forms 8-K and 10-Q. Please see the company's website for the earnings release for the first quarter of fiscal 2024, along with the second news release about a leadership transition. Participating on the call this morning are Jeff Williams, CEO; Doug Campbell, President; and Vickie Judy, CFO. I will now turn the call over to Jeff Williams, CEO. You may begin.

Okay. Well, thank you for joining us on the call this morning, and thank you for your interest in America's Car-Mart. I'm pleased to report that we delivered strong revenue growth for the quarter. We had solid improvements in many areas of our business. Near-term credit results are a challenge, and we'll discuss that in more detail in just a few minutes. Before we get into the details, I'm excited to cover our other news today that President, Doug Campbell, will succeed me as CEO effective October 1. Over the last year in his role as President, Doug has more than demonstrated his readiness for the new role. In my role as CEO and a board member, there are many responsibilities, but succession planning has been at the very top of the list for me, identifying a candidate with a strong cultural fit, the skill set to capitalize on opportunities and navigate the challenges ahead is why we first engaged with Doug almost two years ago now. Doug's appreciation of the company's culture, strong industry knowledge and being a change agent is why he's the perfect fit to lead us to the next level. Our transition plan will allow for a smooth handoff and I'll be here to fully support Doug as we move forward. So congratulations, and thank you, Doug. I'll now turn it over to Vickie and Doug to review the quarter results, update you on the status of initiatives and provide an outlook on our business. Doug?

Thanks, Jeff. I want to thank Jeff for all that he's done for the company over his 18 years of service and in particular, the last 6 years as CEO. We have continued to source inventory and grow our business despite the industry being very constrained and volatile over the last couple of years. While competitors are exiting the business unable to manage capital constraints, we have been investing in our business. It's in stark contrast with how others are managing through the environment and a testament to Jeff's both leadership and vision for the company in what has been one of the most challenging environments in the history of our industry. I owe Jeff a debt of gratitude for the time he has spent with me over the last year, and during that time, we've cultivated a fantastic working relationship that will serve us in facilitating the transition ahead. I'm equally appreciative to our Chair and our Board members who have been investing in my development and their feedback and guidance has been valuable. On a personal note, I'm deeply humbled and thankful for the opportunity. As I look forward, I'm more enthusiastic about our future here at America's Car-Mart than it was a year ago. We're focused on the long-term health and success of our business and are demonstrating our ability to operate in any environment. Before we transition over to the quarterly results, I'd like to thank our associates who worked tirelessly to deliver improvements in sales volume, gross margin, procurement efforts, wholesale performance and reductions in repair spend. Their relentless pursuit to both put and keep our customers on the road continues to be a winning combination. Let's start with sales performance. Our sales performance was strong, generating 15,912 units sold, which was up 2.4% over…

Good morning, and thank you, Doug. For the current quarter, our net charge-offs as a percentage of average finance receivables were 5.8%. That's compared to 5.1% for the first quarter of '23 and 6.3% sequentially. It is above our five-year average of 5% and our 10-year average of 5.6% for first quarters. Both of these include the low credit loss pandemic period. For some comparisons to pandemic, our first quarter losses for fiscal year '18 and '19 were 6.1%. A little over half of the increase in losses contributed compared to the first quarter of fiscal '23 was due to the higher severity of losses and the remainder being an increased frequency in the losses. Our recovery values were down from historically high levels in the prior year quarter of 32% and held flat sequentially at approximately 27%. As of July 31, the allowance for loan losses was 23.91% of finance receivables, net of deferred revenue. And as discussed in the press release, our provision exceeded actual charge-offs by $14.8 million. We have over $125 million of deferred revenue on the balance sheet. And in addition, we also collected an additional $12 million in interest income, an increase of 27.3% when compared to Q1 of fiscal '23. We also mentioned in the press release the benefit of the LOS and attracting additional customers. It's also going to be instrumental in helping us improve deal structures and ultimately, the success rate of our customers once it is fully implemented across all lots. Our customer scores during the quarter remained consistent with the prior year. On the delinquency side, our accounts plus past due was at 4.4% compared to 3.6% in the prior year quarter. The month ending on a Monday versus a Sunday in the prior year contributed to part of…

Okay. Well, thank you, Vickie. The demand for our offering will continue to increase. Our model is the very best way to serve our high-touch customer base and the unique challenges that require a balance between face-to-face decentralized decisioning and leveraging scale where it makes sense. We're striking just the right balance, and that's more apparent as we continue to pick up market share. Current demand exceeds what we can supply. We believe that affordability will improve over time as basic transportation must be available for average consumers. Currently, many customers are sitting out and will flow back into the market over time. In many respects, our customers are always in recession, which makes the current environment ideal as we focus on affordability and delivering outstanding service to keep our customers on the road. Foundational investments are nearing completion and will be leveraged, allowing us to become a more efficient data-driven company. We've not yet seen the benefit that will come. We're on track to sell between 40 and 50 retail units per dealership per month in the next few years and eventually serve 1,000 customers per dealership. We believe credit results will improve, especially as we look at the opportunities with the LOS, increasing car quality and execution levels. We believe gross profit percentages will improve and will leverage SG&A as we move forward. And as discussed in the press release, we're in a unique period in the industry, and we have significant opportunities in the acquisitions areas. And we're talking to several strong operators with highly accretive opportunities, very excited about that. We have great days ahead and Doug is ready to lead our team forward. Thank you to all of our passionate associates who have signed on to our vision to be the best and dreams big about what we could be while taking care of our customers one at a time. Thank you, and we'll now open it up for questions. Operator?

Thank you. [Operator Instructions] And our first question comes from John Murphy from Bank of America. Your line is now open.

Good morning, everybody. Congrats to Jeff and Doug on the next legs of your careers here. I guess just a first question. When you think about the extension in contract terms to help with the monthly affordability equation, I'm just curious if you think that ever reverses? Or is this something that is now structurally in place and that we'll continue to see lengthening? Or has there been a period of time Car-Mart's history or over time where contract terms have actually shortened once they've been entered over time?

Yeah. We do see an opportunity in the future to reel back in and decrease terms as we go forward. Our customers' wages continue to go up. And I think the last few months, few quarters, we've seen real wage increases for our consumers. So we do feel like eventually, we can move that term in the other direction. But that's going to be based to a large extent on what happens with car prices and wages as we go forward and other inflationary pressures. But we would certainly like to really in term, and we do think there's a very realistic and real possibility of us moving that direction, especially as we look at the LOS and all the different features and functions and benefits we're going to get when that tool gets fully rolled in.

That's helpful. And then just a follow-up on some of the comments that were made in the press release about the changes in purchase and disposition of vehicles. And I'm just wondering if you could sort of expand on what changes have actually occurred? And is it something where we're just looking at slightly newer vehicles that are being put into inventory that have lower recon costs, and that's the efficiencies that are gained and just what's actually changing there that's making that more efficient over time? Because I thought you've been pretty good at that historically, but it sounds like you see room for improvement.

Yeah. Thanks for the question. I would say historically, we have been very good at that. It was, I think, my very first call on -- that I spoke about how we had used that as a lever to mitigate some of the costs. And we went to a little bit older car with a little bit higher mileage. And while it had its benefits upfront, there's a repair cost associated with that downstream, which has been somewhat problematic. And so what we're trying to do is get back to our historical norms. But beyond that, we've seen efficiency gains what I would call that are more closer to pre-pandemic levels. And so the car we used to sell might have been nine or 10 years old, we're able to shave a year off that and improve the overall mileage by 10,000 to 12,000 miles, what I would call versus pre-pandemic. So the car inherently is a lower mileage car, which should generate less in repairs and ultimately, I think it gives us a second chance at retailing the unit, should we have to go down the repossession route. It creates a second chance to -- for the inventory to have another purpose in our business.

John, I would add in the last two or three years with the pandemic and the chip shortage and the used car issues and all the supply chain issues we had that there was some real disruption in our historical performance on product and procurement and is kind of working itself out at the same time that we're making some good improvements internally.

All right. Thank you very much, guys. I'll get back in the queue. That's very interesting. Thank you.

Thank you.

Thank you. [Operator Instructions] And our next question comes from Kyle Joseph from Jefferies. Your line is now open.

Hey, good morning, guys. Congrats Jeff. Let me know if you or everyone go play golf. Anyway, so kind of piggybacking on that last question in terms of gross profit margin. Obviously, used car prices have been elevated. It seemed like they may be coming back to earth for a while. But longer term, do you think the gross profit margin has changed systemically? Or do you think gradually over time and get back to where it was?

Yeah. Thanks, Kyle, for the question. I think there's an opportunity to sort of have a middle ground there. But as we sort of called out earlier, maybe we set our expectations a little too low on that 36%, and we're realizing in real time. There's benefits beyond what we initially anticipated, especially when you consider items like transportation that maybe wasn't sort of initially on the table, but we're looking at any and all things in the business to sort of drive improvements there. One thing that I didn't mention in the last answer was what we own those cars relative to the book value. And if I just go back, if I used, I call it, this time last year to the current time. So over the last 12 or 13 months, how we own those cars relative to the book has improved 8% or 9%. So it's a combination of an improvement of how these cars are starting life in our portfolio. There's the improvement in a younger car with lower miles which all should have benefits downstream in terms of credit loss and fair market value retention, right? It sort of takes some of that risk and exposure off the table.

Got it. Very helpful. And then, yeah, my follow-up would be the health of the underlying consumer. I know you mentioned the quarter ended on a different day and -- but at the end of the day, the low-end consumer still employed inflation pressures are easing a bit? How would you gauge the health of your underlying consumer?

Yeah. I don't think we're seeing any large changes yet. Again, to your point, unemployment still very low. They're working, wages are still good, hours worked are still good. But there are still a lot of inflationary pressures and just the adjustment to those inflationary pressures and the lack of stimulus that was there for a point in time. So credit, the use of credit has gone back up for our consumers. We're seeing that kind of across the board. But again, our consumers are almost typically always in a recession, living paycheck to paycheck. So it's really just an adjustment and getting them back used to the higher car payments and keeping them in their car.

But overall, the health of our consumer is increasing quarter-over-quarter. As we move forward, we believe that's going to be a better situation for us as we go forward and as Vickie mentioned, unemployment rates are historically low and real wages are gaining some steam in the areas we serve and the customers we serve.

And I think a piece of that is, as Doug mentioned, the tightening in the lending environment, we are seeing a different cohort of consumers come down into our market. We continue to see that.

Got it. Thanks Vickie, thanks, Doug, thanks Jeff.

Thanks, Kyle.

And thank you. [Operator Instructions]And our next question comes from John Rowan from Janney Montgomery Scott. Your line is now open.

Good morning. Congrats Jeff and Doug. I guess some other larger lenders have postulated that with the potential for our strike, and you guys mentioned this in your prepared remarks a little bit, that there would be an increase in dealer inventory, guys would take up floor plan loans. Obviously, fiscal 2023 midyear, you were very heavy in inventory. Are you planning on raising inventory levels at all if this strike looks like it's going in one direction? And I'm not sure really -- obviously, everything flows downstream. I don't necessarily think there's necessarily an immediate shortage in used cars, but just curious if you think there'll be a ripple effect that could cause you to raise inventory levels?

I don't -- so I think about it differently. It's a great question and certainly been on our minds. I don't know sort of which way it's going, but we're sort of trying to prepare ourselves for any variation of an outcome. I think ultimately, if you go back to the last strike on record, I think it was the GM strike, and you go track overall used car prices, which you saw was upward pressure, especially on those brands. I think it was a General Motor strike. If you go back and look at those brands, you saw a nice increase in pop and pricing is days supply diminished on the ground. It almost happened in real time because there's a lot of speculation in and around that. And so when you have three automakers, right, potentially going on strike and the deadline is looming here, you have to sort of be ready for that, and it's going to be more than just the overall impact on those three automakers. It will just be a shortage of supply on the ground. If you looked at absolute supply in our industry, it's still really at sort of all-time lows. And so the instance of something like this happening could drive values up. And so for us, that is some headwind on the buying side. We can combat that with being more selective on the cars we buy. But to your point, I think what you're alluding to is, do we stock up for an event like that? I don't think that is necessarily a lever we would pull. However, I do think if there was some appreciation in value, it becomes a tailwind on the fair market values that we have for the cars that were taken back the repo vehicles. So there's good and bad to us being having the lending side to this, and -- we're just trying to make sure we're ready. We don't know sort of which way it's going to go, but our job is to be ready for that, and we're looking at those options available to us now.

You mentioned on the last call, too, that a lot of competition that we have is struggling with capital. We had a couple of sizable competitors go out of business in the last six months or so, too. So there's some positive on the supply side in addition to some potential negatives too. So that all balances out. And we're pretty nimble on our procurement. So we'll be able to address and adjust any situation we see.

Great. Thank you.

Thanks, John.

And thank you. [Operator Instructions] And our next question comes from Vincent Caintic from Stephens. Your line is now open.

Hey, good morning. Thanks for taking my questions. Doug, congratulations and look forward to working with you and Jeff, it's been a pleasure working with you for the past several years, and we'll miss you. So first one to zoom out just kind of a broad question about the CEO transition. And if you could walk us through that. It sounds like this process has been going on for the past few years. So I just wanted to kind of get a sense for why now is a good time for the transition and then Doug, anything in particular you'd like to focus on as we start your tenure?

Well, yes, as to the timing, this is just a good time in our history. We've -- we've been through some pretty difficult times. Things are still tough, but getting a little bit better in some of these long-term, highly complex, labor-intensive investments and initiatives we've had in place. Doug has been able to participate in those for the last year. And those are all coming into play and with Doug and his experience and his talent level. It's just -- it's a perfect time for us as a company, especially with the transition being extended. There will be plenty of support, plenty of time to transition appropriately as we go forward. So this is just a good time for me, for Doug and for our company and our associates and shareholders. It's a good time in history to be making this change, especially with the transition plan we have in place.

My first, obviously, opportunity to be a CEO of the company. And again, I'm humbled, but at the end of the day, there are a lot of associates who are relying on smooth transition -- shareholders relying on a smooth transition. And the more we thought about it, the longer Jeff stayed on to help assist with the transition for the things we know and especially on the credit side of the business of Vincent that it sort of made more sense to accelerate making the announcement and then having Jeff stand up for a longer period of time as opposed to postponing it and doing the transition to a shorter period of time. And I think leading to your question, I'll probably spend more time on the credit side of the business, the underwriting side of the business and see what improvements that we have there, especially given credit loss. And when I think about some of the improvements we made in other areas of the business, I'm excited to sort of roll up my sleeves and see what other opportunities are there as well.

Okay. Great. That's super helpful. My next question, I wanted to touch on the shelf filing that was filed a couple of weeks ago and in some of the comments that were made in the shelf filing, particularly the kind of the unprecedented opportunities you might be seeing, if you could talk about that in more detail what you're seeing and sort of what you're looking for that makes you excited about those opportunities?

Yeah. The industry, obviously, has been in turmoil. We've had major competitors going out of business. There's a lot of folks that have been in the business for decades that don't have an exit strategy, don't have a succession plan, the cost of being in the business continues to go up. So there's a lot of very good, very strong operators out there of size that are looking for a succession plan or how to get out of the business. And so what we do and what we've offered on the acquisition side is appealing to more and more good operators, and we've got some good discussions going on. Very optimistic about being able to continue to pick up productivity and profits from our existing store base and then add this acquisition's effort on separate and apart from all the other good stuff going on. And it could be really a good point, a great point in history for us to be going out and getting more aggressive with acquisitions and we're setting ourselves up to do just that. And the shelf registration was just another aspect to that opportunity and giving us more options on the financing side, if and when needed, to support some acquisitions.

Okay. Great. Thank you. And if I could maybe sneak one more in for Vickie. Just on the credit side, the credit reserves have been increasing and understandably about the mix and the term and so forth. Just as the way things stand right now, do you foresee that the credit reserves where we're at, is that sort of the right level? Or should we be anticipating just help term and mix things continue to change? Thank you.

Sure. Well, we continue to look at that quarterly based on historical numbers and what's happening in the current market as well as some forecasting for some economic events. So we did increase it slightly in the fourth quarter. We were able to keep it level this quarter. So it's hard to say quarter-over-quarter, but we're working on a lot of things. As we mentioned in the press release and in a few of my comments in bringing down term, working on down payments hopefully reducing some selling price finance as we move forward. So those will all be things that we're working on to hopefully offset the impact of any allowance increases. But that's certainly a possibility as we move forward here and depending on what happens over the next few quarters.

Okay, that's super helpful. Thanks, again, everyone.

Thank you.

Thank you, Vincent.

And, thank you. And I am showing no further questions. I would now like to turn the call back over to Jeff Williams for closing remarks.

Okay. Well, once again, thank you for listening to our call, and thank you for your interest in America's Car-Mart. Doug, congratulations again on your promotion to CEO. We'll have a smooth transition and we appreciate and respect all of our associates out there that have passion for what we do and support each other and support our customers at a very high level. So thank you, and have a great day.

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