Good morning everyone. Thank you for holding and welcome to America's Car-Mart's Third Quarter Fiscal 2020 Conference Call. The topic of this call will be the earnings and operating results for the company's third quarter for fiscal 2020. 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 our 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 one of the company's annual report on Form 10-K for the fiscal year ended April 30, 2019 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 this 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. It is good to see us pick up market share and serve more customers with our continuing efforts to leverage our existing footprint with the many talented, smart and hardworking associates that we have at all levels in our company. We will continue to invest in our business and especially in our people as we move forward to provide outstanding advancement opportunities for our hardworking associates. Our general managers and their staffs are really upping our game in the field by focusing on the customer experience starting with a vehicle and then by providing outstanding service after the sale to keep our customers on the road, a peace of mind that only Car-Mart can give. Our vision is to be America's best auto sales and finance company in the eyes of our associates and customers, while improving the communities we serve. There is tremendous demand for our offering and we have an obligation to serve more customers at the highest levels because we believe that their lives are better when they're part of our Car-Mart family. I'll now turn it over to Vickie to go over some numbers. Vickie?

Good morning. We were pleased to see a revenue increase of 15.9%, up to $187 million. This resulted from a 16.8% increase in sales, an 11% increase in volumes, and a 5% increase in average sales price. We also had a 10.5% increase in interest income. And we're very happy to see same-store revenues up 15.1%. Revenues from stores in the over 10 years of age category was up 14%. Stores in the 5- to 10-year category was up 19% and revenues for stores in the less than five years of age category was up about 47% to about $17 million. At quarter-end, 18% or 12% of our dealerships were from 0 to 5 years old, 41% or 28% were from 5 to 10 years old and the remaining 86 were 10 years old or older. Our overall productivity was 30.6 units per lot per month, up almost 10% from 27.9 compared to the prior year quarter. Our 10-year-plus lots produced 33.1 units per month per lot for the quarter compared to 30.4 for the prior year quarter. Lots in the 5- to 10-year category produced 28.6 compared to 26.9. And the lots less than 5 years of age had productivity of 23.4 compared to 20.7 for the third quarter of last year. Our down payment percentage was basically flat compared to the prior year quarter. And collections as a percentage of average finance receivables was flat at 13.2%, but up on a relative basis due to the increase in term. Our term increase was primarily due to the increasing average selling price of the car. The average originating contract term for the quarter was 30.8 months compared to 29.4 for the prior year quarter and up from 30.4 per month sequentially. The average selling price was up $604 with a 1.4 month increase in the term. Our weighted average contract term for the entire portfolio including modifications was 32.5 months compared to 32 months for the prior year. The weighted average age of the portfolio was flat at nine months. Interest income increased $2.2 million or 10.5% compared to the prior year, primarily due to a $55.9 million increase in finance receivables, a 10.4% increase. The weighted average interest rate for all finance receivables at the end of the quarter was approximately 16.4%, flat from the prior year quarter. Gross profit per retail unit sold increased by $84 to $4,938, a 1.7% increase compared to the prior year quarter. The gross profit percentage was 40.3% compared to 41.5% for the prior year quarter and down just slightly from the sequential quarter. Again, the average selling price increased $604 over the prior year quarter and gross margin percentages are lower at higher selling prices. The majority of this selling price increase relates to the overall strength of the used car values in our market and a continuing effort to buy high-quality vehicles. We did see a slight increase in the number of SUVs sold over the prior year quarter. We have increased our quality and our selection of vehicles to meet customers' needs during the upcoming tax refund season with an additional $6 million investment in inventory most of which relates to increased quantities. With these increased investments in inventory, both volume and quality, it's essential that we stay very efficient in our operational processes. SG&A for the quarter was up $3.8 million, 18.66% of sales compared to 18.9% for the prior year quarter and 61.9% of total revenues less cost of sales and provision for credit losses compared to 60.5% for the prior year quarter. Most of the increase is due to payroll costs for additional associate count as well as continued investments in pay benefits and training. The current quarter did have approximately $357,000 of additional stock compensation expense compared to the prior year quarter. These investments are being made to ensure that we can service a growing customer base at the highest level and earn their repeat business. We believe the investments that we're making in our associates, our system, and the infrastructure are essential to continuing operational improvements and being prepared to take care of our customers. We added over 5,100 customers since this time last year and over 1,300 this quarter. We'll always continue to stay focused on efficiencies and cost control while continuing to invest for the long-term. For the current quarter, net charge-offs as a percentage of average finance receivables was 5.9%, down from 6.2% in the prior year third quarter. We continue to see improvement in both the frequency and the severity of losses compared to the prior year as a result of a higher quality vehicle, improved deal structures, and our focus on the operational non-negotiables related to collection. Recovery rates for the quarter were slightly lower than the third quarter of 2019 and approximately flat compared to the sequential quarter. Our effective income tax rate was 19% for the third quarter compared to 23.7% for the prior year quarter. The income tax expense did include an income tax benefit of $922,000 and $41,000 related to share-based compensation for the current quarter and the prior year quarter, respectively, or about $0.13 per diluted share. We expect our base effective tax rate to be approximately 24% going forward prior to any excess tax benefits from stock option exercises. At quarter-end, our total debt was approximately $184 million and we had over $56 million in additional availability under our revolving credit facilities. Our debt-to-equity ratio is 63.2%. And our debt-to-finance receivables ratio is 30.3% and this was compared to 31.4% at this time last year. Here, we did repurchase 12,384 shares of our company during the quarter for $1.1 million at an average of $91 per share. Since 2010, we've repurchased approximately 54% of the company for $240 million at an average price of $38 per share. We continue to have very strong cash flows. For the first nine months, we've added $64.2 million in finance receivables, repurchased $15.8 million of common stock, funded $3.2 million in net capital expenditures, and increased inventory by $16.5 million, a total of $99.7 million with only a $31.3 million increase in debt. Thank you and I'll turn it back to Jeff now.

Okay. Thank you, Vickie. As you saw in the press release, we are close to finishing our Taylor Motors acquisition and we'll be opening our Cabot, Arkansas dealership during the fourth quarter. This will give us six new dealerships for fiscal 2020. We are progressing on our new dealership locations in Edmond, Oklahoma and in Chattanooga, Tennessee. And we recently signed a lease for a new location in Norman, Oklahoma. New dealership openings will be part of our growth plan going forward and we're also open to other opportunities, like the Taylor Motors opportunity, as we move forward. As we've said over the last few years, most of our existing general managers have the ability and are in towns and locations that have the potential to serve 1,000 customers or more over time. We will continue to look to leverage that opportunity. We have such a strong culture and our associates give 100% every day to help each other and to help our customers succeed. There is real purpose in our work and we're very proud of the difference we're making and we're very excited to be in a position to expand what we do to more customers. And lastly, thank you to all of our hardworking, passionate associates who come to work every day to make a difference. You make Car-Mart great and thank you. We will now open it up for questions.

Thank you. We will now answer questions from the callers. I want to emphasize that my earlier remarks about forward-looking statements apply to both the prepared comments from the participants and anything that arises during the Q&A. Our first question comes from John Murphy with Bank of America. Your line is open.

Good morning, guys. This is Yarden Amsalem for John.

Good morning.

So, first question regarding your top line: what do you think is responsible for the very strong same-store sales increase? Can you identify one or two key factors? Would you say it was driven more by our newest store or by legacy stores?

I would say it's a combination of things. It starts with inventory. We're doing a better job with inventory procurement. We're carrying more cars, better quality cars. We've also spent a lot of time training our field sales reps. So it's an investment in training, inventory. Our digital efforts online are also contributing to the sales improvements. And I would say, it's pretty much across the board as far as volume improvements and productivity improvements. All of our dealerships are seeing more traffic, more interest and we're closing more sales.

Thank you. So, just to follow-up on that, you've recently talked about your investment in digital platform and online capabilities and marketing. Can you maybe share more color on these efforts and what kind of traction are you getting from your consumers?

We've started our online credit application at the beginning of this fiscal year, and it's attracting a lot of traffic and applications. We're doing a decent job of converting these online applications into physical visits at the dealerships, and the sales closure rate is quite high. Although we are still in the early stages of this initiative, we are optimistic that our digital efforts will improve over time. So far, we've seen an increase in traffic and good results.

We've also just tried to have a bigger and a better presence on just several of the social media channels with customer reviews and customer testimonials. And, I think, some of that Google reviews and that type of thing. And I think that's helped some as well.

Excellent. Thank you. And I guess lastly, how should we think about gross margins for the new vehicles going forward? I know the deterioration of this is partly driven by higher average selling prices. But I'm just curious to hear if you guys think it should keep coming under pressure next year? Or maybe can you ever go back towards the 42% level?

Yeah. The 42% level probably becomes a bit of a challenge. I don't think we'll see that big of a change to get back to that percentage with the used vehicle market where it's at especially with the quality that we're trying to carry and the increased demand for the SUVs and trucks there also. So, I think there'll continue to be some pressure there as we try to expand our customer experience and step into some different areas there. So...

We do have some room to continue to look at productivity improvements and efficiencies in the field in the repair cost. There are things that we're working on to maintain those gross profit percentages. But the dollar gross margin is going up, but the percentage is a little more of a challenge. But we know that, and we're trying to do all we can to keep that gross margin percentage up.

Yeah. Okay. Thank you very much. That’s it for me.

Thank you.

Thank you. And our next question comes from the line of Kyle Joseph with Jefferies. Your line is open.

Hey. Good morning, guys, and thanks for taking my question.

Good morning, Kyle.

I wanted to get your thoughts on the competitive environment. Based on your same-store sales trends, we can infer some insights about the competition. I’d like to hear what you’re observing there.

Competition is still very strong. I don't think that we've seen any decrease there. But what we're trying to do is make sure we've got the quality vehicle. And then we're trying to stress our value, and what we offer compared to our competitors out there. Just trying to get better in what we're doing.

Yeah. And we do emphasize our lower interest rate, our shorter term, the total cost of ownership with Car-Mart, and then the peace of mind that's so important to the quality of lives of our customers. When you put all that together, what we offer is superior to other offerings in the market. But there are a lot of other offerings in the market and competition is very high. But we're doing good in a market just because of our efforts to really block and tackle run the play and treat these customers at the highest level.

Got it. And then given that we're in February now, could you guys give us a sense for expectations for tax refunds this year in terms of size and timing?

The timing has been delayed a bit again this year. Refunds haven't started being released yet, so everything will likely happen in a very short time.

Got it. Okay. And then just lastly in terms of credit obviously things have been stable in terms of your down payments and collections. But going forward with the revamped growth here, can you give us kind of your outlook for both charge-offs as well as the provision going forward, and any impact the sort of renewed new growth would have there?

Yeah. So, of course with the increased selling price and the term going out a little bit, the severity becomes a little bit stressed when you do take something back, and then if process change in your FMVs and that puts some pressure there as well. So, we're going to be focused on the customer experience and making sure that we keep our frequency of the units that we're repossessing down and that we're taking care of all of those customers. But there will certainly be some pressure from the severity side as we move forward.

But we are convinced that we're putting a better product out, a higher quality car, and that our service levels have improved immensely and our collections efforts are solid and strong. And we expect continuing good improvements that result in the credit loss line as we go forward even with the increased volumes.

Yes, our underwriting is very solid. We feel like we've kept a good handle on our underwriting there.

Got it. That’s it for me. Thanks very much for answering my questions.

Thank you.

Thank you. And our next question comes from Vincent Caintic with Stephens. Your line is open.

Thank you. Good morning. I wanted to address two points. Following up on Kyle's question about the competition, we've heard from other lenders, such as Credit Acceptance, who are experiencing challenges in the competitive landscape. It's encouraging to see your growth remains strong. Regarding your growth, are you capturing market share, or are you primarily serving customers who were previously underserved? What does the current environment look like in terms of new opportunities versus gaining market share?

I believe we have effectively leveraged our digital initiatives, as Vickie pointed out, particularly in advertising, brand reputation, and community involvement. When you couple that with an increased inventory of vehicles that are more diverse and of higher quality at our dealerships, along with educating our associates and communities about the true costs of ownership, our transactions are becoming increasingly attractive to customers who have various options in the market. Additionally, we've been able to add about three units a month in sales. While it's challenging to pinpoint the exact source of those three units in each community, I view it as a result of our collective efforts. We are confident there is still ample opportunity to inform the market about the true value we offer and the reassurance we provide to customers in keeping their vehicles operational. Although the market remains highly competitive, I believe the positive strides we are making are more than sufficient to counteract the competitive challenges.

Okay, great. What are you seeing with used car prices? Have you benefited from that, or are you still experiencing pressure from higher prices? Thank you.

There hasn't been much change recently. We are working on expanding some of the markets we are purchasing in and exploring different buying options. However, we haven't observed a significant shift in the cost of the cars we are acquiring. This time of year, especially around tax season, tends to see higher prices, but the change hasn't been substantial.

Okay. And maybe just one more from me. The initiative for keeping cars on the road just kind of wondering how that rollout has gone and if there's more work that needs to be done or any more investments that need to be done. Thank you.

We continue to look for creative value-added ways to help our customers stay on the road and keep those cars in good operating shape. So, we continue to work on things that are going to set us apart from the competition even more than we have already. And anything that we come up with will be directed at that consumer, helping that consumer out, keeping them in the car, keeping their car on the road. And we feel like we've got to the room to continue to look for creative ways to improve our already outstanding offer.

Okay, great. Thanks very much.

Thank you.

Thank you. Our next question comes from John Rowan with Janney. Your line is open.

Good morning.

Good morning.

Vickie, you mentioned increased loss severity earlier. I didn't catch the reason for this increase. Is it primarily due to the rise in used car pricing affecting your costs, or is it related to duration? What factors are contributing to this?

Currently, we are still noticing a decline in severity. Recently, we've observed decreases in both frequency and severity on a quarter-over-quarter basis. Looking ahead, as our selling price continues to increase or as we sell more higher quality vehicles, including a greater mix of SUVs, if that sales price keeps rising, it does exert pressure on severity.

Okay. And then you also talked about tax refund season. And I guess just to dig in a little bit more, we've obviously seen some of the initial data coming out of the IRS. But I mean last year there was a policy shift around earned income tax credit and the additional child care tax credits that really pushed around significantly the timing of tax refunds. Are you aware of any similar change in IRS policy that would have a structural shift in the timing of certain large tax refund cohorts similar to what happened last year?

Our customers were mostly unaffected last year. In fact, they actually received slightly more in refunds last year, and we expect similar refunds this year as well. There are no significant changes this year, other than the timing being somewhat delayed.

Okay. Thank you.

Thank you.

Thank you. And I'm not showing any further questions at this time.

Okay. Well, thank you for listening in again. Thank you for your interest in America's Car-Mart, and have a great day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.