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 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 express my gratitude to Jeff for his contributions to the company over his 18 years of service, especially during the past 6 years as CEO. Despite the industry's challenges over the last couple of years, we have managed to secure inventory and expand our business. While many competitors are leaving the market due to capital constraints, we have continued to invest in our business. This demonstrates a significant difference in our approach and speaks to Jeff's leadership and vision during one of the toughest times in our industry's history. I am thankful for the time Jeff has dedicated to me over the past year, which has helped us build a strong working relationship that will assist us during the upcoming transition. I also appreciate our Chair and Board members for their investments in my development; their feedback and guidance have been invaluable. Personally, I feel honored and grateful for this opportunity. Looking ahead, I am more optimistic about our future at America's Car-Mart than I was a year ago. We are committed to the long-term success of our business and are proving our ability to operate in any situation. Before we discuss the quarterly results, I want to acknowledge our associates for their hard work in improving sales volume, gross margin, procurement, wholesale performance, and reducing repair spending. Their dedication to keeping our customers on the road has been a successful formula. Now, let's review our sales performance. We sold 15,912 units, an increase of 2.4% compared to the same quarter last year. Same-store sales rose by 8.2%, positively influencing inventory turns, which increased from 5.9 to 7.2 turns. Online credit applications grew by 19% this quarter, accounting for approximately 70% of all applications. Overall application volume was up 8.1%, even taking into account contracts at our dealerships. This growth is particularly noteworthy given our increased advertising spend, driven by the effectiveness of LOS in attracting online traffic. LOS remains the main factor in our sales growth, even while many in the industry are experiencing a downturn in sales year-over-year. Credit availability continues to challenge the industry and is tighter than last year, according to the Cox Automotive dealer track credit availability index. While there has been slight improvement recently, it's still not as good as pre-pandemic levels. This situation benefits us, as consumers are turning to us for credit access. Regarding average selling prices this quarter, they increased by 4.1% year-over-year, with about half attributed to vehicle prices and the other half to the ancillary products we offer. Last quarter, I noted that the vehicles we purchased during the spring market had risen by about 3%, so this increase is not unexpected. Additionally, we're now buying newer cars with lower mileage, which qualify for longer warranties and generate more revenue in sales prices. This trend is particularly significant given the price increase we implemented for our service contracts last December. The industry saw a sharp decline in wholesale pricing in May and June, with a more moderate decrease in July. Throughout the first quarter, our procurement teams lowered purchase prices sequentially, resulting in a 3% reduction from our starting point. August wholesale pricing is showing typical seasonal increases, possibly due to strong sales in the marketplace or limited inventory supply. We're closely monitoring developments, including potential impacts from negotiations between the UA team and the Big 3 in Detroit. Gross margin stood at 34.6%, increasing by 20 basis points year-over-year and 120 basis points sequentially from the fourth quarter. We provided detailed information regarding gross margin in the press release and explained our strategy in the last call, so I won't reiterate everything. Simply put, we're executing our plan at a high level. We're acquiring newer, lower mileage assets that are benefiting our operations. Our teams are improving vehicle repair performance, and we're expanding our reconditioning initiative, which aims for savings of $300 to $500 per unit. We are making advancements in all these areas, and I am encouraged by the speed of these benefits. We had expected to recover 260 basis points of gross margin to reach our 36% target discussed during the last call, but we are now exploring additional opportunities. For instance, we've revamped our vehicle transportation technology to optimize loads and routes, which began rolling out in the fourth quarter. Q1 is the first full quarter we are realizing the benefits, resulting in a 20 basis point improvement in gross margin compared to last year. We are currently saving around 15% on vehicle movement. We are also looking into other potential improvements in ancillary products, wholesale, and repairs that could yield further gains, some of which may be realized this fiscal year, while others will have a more long-term impact. I will now hand it over to Vickie to discuss our financial results.

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. 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 in 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 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 this as well as the continuing negative impact of the inflationary environment on our customers. Total collections were up 12% to $166 million and total collections per active customer per month were $535 compared to $516 in the prior year quarter. We continue to work with our customers on payment options and modifications in an effort to keep them in the vehicle and successful on their contract. The average originating contract term for the quarter was 44.7 months compared to 42.8 for the prior year quarter and up slightly from 43.5 months sequentially. We added 1.9 months to the originating contract term compared to the prior year first quarter to assist our customers with affordable payments. Our weighted average contract term for the entire portfolio, including modifications, was 46.9 months compared to 44 for the prior year quarter. The weighted average age of the portfolio increased to approximately 10.4 months. The percentage of the portfolio held by the highest credit quality customers continues to improve compared to the prior year. On the SG&A side, we've been focused on identifying efficiencies in the business across the board. And as mentioned in the release, we had a savings with our SG&A spend of over $600,000 from the fourth quarter, excluding the stock-based compensation. A large percentage of the savings was in advertising. We continue to shift more of our advertising dollars to digital spend, which is more efficient and also helps supplement our LOS efforts. Our customer count increased by 8.1% over the prior year to almost 105,000 customers. Our SG&A spend per average customer improved over the prior year first quarter and the sequential quarter. Our investments are being made to better serve this growing base while improving the efficiencies as we move forward. And although we continually evaluate our return on investment and allocation of capital, it becomes even more important in this environment of increasing funding costs. With that in mind, we did close two underperforming dealerships during the quarter to better allocate our available capital. We'll continue to review and monitor capital invested in each dealership and other investments to maximize returns. At quarter end, we had $6.3 million in unrestricted cash and approximately $159 million in additional availability under our revolving credit facilities based on our current borrowing base of receivables and inventory. Our total securitized non-recourse notes payable was $711.8 million, with $86 million in restricted cash related to those notes. We closed on our third securitization in early July with net proceeds of $356 million and a coupon of 8.8%. This paid off our revolving line of credit. Our total debt, net of cash to finance receivables ratio is at 42.9% and up from 41.5% at April 30. Interest expense increased $6.9 million with approximately 60% of that related to the increased rates over the prior year and the remainder a result of the increased borrowings. I'll now let Jeff close this out.

Okay. Well, thank you, Vickie. The demand for our offering will continue to increase. Our model is the best way to serve our high-touch customer base and the unique challenges that require a balance between face-to-face decentralized decision-making 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 we will leverage SG&A as we move forward. As discussed in the press release, we're in a unique period in the industry, and we have significant opportunities in the acquisitions areas. We're talking to several strong operators with highly accretive opportunities, and we're 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 dream 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.

Thank you. 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 in 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 reel in the term, and we do think there's a very realistic 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.

Thank you for the question. Historically, we have performed well in this area. I remember discussing how we managed to use that to help reduce some costs. We opted for slightly older cars with higher mileage, which provided some initial benefits but also led to repair costs that became an issue later on. Now, we are working to return to our previous standards. Additionally, we have experienced efficiency improvements that are getting closer to levels seen before the pandemic. In the past, the cars we sold were typically nine or ten years old, but now we can offer vehicles that are about a year newer with an overall mileage reduction of 10,000 to 12,000 miles compared to pre-pandemic levels. This means we are handling lower mileage cars, which should lead to fewer repairs and provide us another opportunity to sell the unit if we need to repossess it. This offers our inventory a chance to serve another purpose within 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 it's 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. 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 goes 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 it will gradually over time 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. My follow-up question is about the health of the underlying consumer. I understand you mentioned the quarter ended on a different day, but overall, the low-end consumer is still employed and inflation pressures are easing somewhat. How would you assess 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. Our next question comes from John Rowan from Janney Montgomery Scott. Your line is now open.

Good morning. Congratulations to Jeff and Doug. Some larger lenders have suggested that with the possibility of a strike, there may be an increase in dealer inventory, as you hinted at in your remarks. Given that you had a substantial inventory in mid-2023, are you considering raising inventory levels if the situation with the strike continues in a certain direction? I'm not sure there is an immediate lack of used cars, but I am interested in your thoughts on whether there might be a ripple effect prompting an increase in inventory levels.

I think about it differently. It's a great question and has definitely been on our minds. I can't predict the outcome, but we're preparing for any scenario. If we look back at the last notable strike, the GM strike, we can see that overall used car prices were under upward pressure, particularly for those brands. As the inventory of those vehicles decreased, we saw a significant price increase in real-time due to speculation. With three automakers possibly going on strike and with a deadline approaching, we need to be ready. The impact will go beyond just those automakers; it will result in a supply shortage. Currently, the supply in our industry is at an all-time low, and situations like this can drive prices higher. This presents a challenge for us on the buying side, but we can address it by being more selective in our purchases. Regarding the idea of stocking up for such an event, I don't believe that’s a strategy we would pursue. However, if vehicle values were to increase, that could serve as a positive for the fair market values of repurchased or repossessed cars. There are both advantages and disadvantages to our lending side, and we are just making sure we are prepared. We remain uncertain about the direction things will take, but our role is to be ready and explore the available options.

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. 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 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. All of these are coming into play and with Doug and his experience and talent level, it's just 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.

This is my first opportunity to serve as the CEO of the company, and I feel honored. However, I recognize that many associates and shareholders depend on a smooth transition. The more we considered it, the clearer it became that having Jeff remain to assist with the transition, particularly in the credit segment of the business, was beneficial. It seemed more logical to announce this change and allow Jeff to support us for a longer duration rather than delaying the announcement and shortening the transition timeframe. In response to your question, I intend to focus on the credit aspect and underwriting of the business to identify potential improvements, especially in light of credit losses. I am eager to dive in and explore additional opportunities, building on the progress we have made in other areas of the business.

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 are 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. 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 acquisitions effort on separate and apart from all the other good stuff going on. 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. The shelf registration was just another aspect to that opportunity, 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 helps 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. 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.