Okay. Thank you for joining us, and thank you for your interest in America's Car-Mart.

We are pleased to report another good solid quarter and we are off to a great start for the fiscal year. Our topline was up almost 5% and we added 1,600 customers for the quarter.

We are happy with the significant improvement in our credit results and what that says about our product and service and the value that we’re adding to the lives of our customers. We believe that taking care of people will drive operational success and long-term value creation.

We will continue to invest in training and development of our associates and at the same time educate consumers on the savings we provide in terms of the total cost of ownership. With the goal to keep customers for life and move that market as their credit profiles improve over time.

We will leverage the infrastructure we built and grow our top line in customer count. As we have said, even though we are 38 years old and have great history, in many ways we are a start-up company.

Many important initiatives are just getting of the ground and we are excited about our place in the world. Our team is putting everything we have and giving our customers a great experience and supporting our associates as they build their careers.

As we’ve said, our model represents the best way to serve this high touch market and we aim to be the best company in the world at providing transportation solutions to credit challenge customers. I will now turn it over to Vickie to go over some numbers.

Good morning. For the quarter, overall revenues were 172 million with same store revenues at 3.3%.

This resulted from a 4.1% increase in sales and a 9.5% increase in interest income. Revenues from the dealerships and the over 10 years of age category was up 2%.

Stores in the 5 to 10-year category was up 4%, and revenues for stores in the less than 5 years of age category was up about 34% to about 16 million. Most of the sales increase was a result of the increased selling price as sales volumes were basically flat.

Our average selling price increased to $11,410 a 3.6% increase or $395, compared to the prior year quarter. This was also an increase of $105 sequentially.

This resulted from continued high demand for vehicles in the used car market and our efforts to provide a high-quality vehicle for our customers. At quarter-end, [20 or 14%] of our dealerships were from 0 to 5 years old, [40 or 28%] were from 5 to 10 years old with the remaining 85 being 10 years old or older.

Our overall productivity was 29 units per month, down from 29.8, compared to the prior year quarter. Our 10-year-plus lots produced 31.8 units sold per month, per lot for the quarter, compared to 32.8 for the prior year quarter.

Lots in the 5 to 10-year category produced 26.6, compared to 26.8 for the prior year quarter. Lots less than five years of age had productivity of 21.7, compared to 22.1 for the first quarter of last year.

We continue to believe we have potential to increase sales volumes and improve productivity with the ongoing investments being made in our inventory, our field sales efforts and the digital area. Our down payment percentage was up slightly to 6.5%, compared to 6.1% for the prior year quarter.

Collections as a percent of finance [versus] average finance receivables was up 40 basis points to 13.5%, compared to 13.1% last year. The average originating contract term was 29.9 months, compared to 29.7 for the prior year quarter and up slightly from 29.8 sequentially.

Our weighted average contract term for the entire portfolio, including modifications was 32.1 month, compared to 32.4 for the prior July. The weighted average age of the portfolio was basically flat at approximately nine months.

Interest income increased 9.5% to 1.9 million – or 1.9 million compared to the prior year quarter, primarily due to the 41.5 million increase in average finance receivables at an 8.1% increase. The weighted average interest rate for all finance receivables at the end of the quarter was approximately 16.4, up from 16.3.

Our gross profit margin dollars per retail units sold increased by $104, [2.2%] to $4,886, compared to $4,782 in the prior year quarter. Our mix of retail units sold was consistent with the prior year.

SG&A for the quarter was up 2.3 million 19.1% of sales, compared to 18.3 for the prior year quarter. This increase was almost entirely related to salaries and benefits, including stock-based compensation as we’re making long-term investments focused on recruiting and developing great associates and an infrastructure to support a growing customer base.

We’ve added over 4,300 customers since this time last year. 1,600 since fiscal year-end and our efficiency improved again this quarter by based on the number of customers served per associate.

We’re focused on efficiencies and cost control, while continuing to invest for the long-term. To be able to grow and be prepared to capitalize on market opportunities.

As an integrated sales and finance company, we would not have seen the improvements in our credit losses and net income without these investments. For the current quarter, net charge offs as a percentage of average finance receivables was 5.4%, down from 6.4% in the prior year first quarter.

Both the frequency and severity of losses have improved, compared to the prior year as a result of our higher quality vehicle, improved deal structures, and improved collections practices. Our focus on customer experience and ensuring customer concerns are addressing results in a timely manner have contributed to the reduced frequency of losses.

Improved collections, 40 basis points better and higher recovery rate contributed to the decreased severity of losses. Recovery rates for the quarter were approximately 27%, compared to 28% last quarter, and 25% in the prior year quarter.

We’re very pleased with this continued improvement in credit results and the fact that we have more customers being successful and staying in their vehicles. As a result of these continued improvements in our net charge offs and the quality of our portfolio, we reduced the allowance for credit losses from 25% to 24.5%, resulting in a 2.6 million decrease in the allowance for credit losses as of July 31.

This was a 2 million after-tax benefit in net income or $0.29 per diluted share. Excluding this adjustment, the provision for credit losses on the income statement would have been 22.7% of sales for the current quarter, compared to 26.1% for the prior year quarter.

The effective income tax rate was 21.8% for the first quarter of fiscal 2020, compared to 17.1% for the prior year quarter. Income tax expense did include an additional income tax benefit of 276,000 and 943,000 related to share-based compensation for the current quarter and the prior year quarter respectively.

We continue to 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 159 million.

We had over 56 million in additional availability under our credit facilities and our current debt-to-equity is 58.1%, and our debt-to-finance receivables ratio is 28.3%. During the quarter, we repurchased 55,507 shares of our company for 4.7 million at an average of [$84.94] per share.

Since 2010, we’ve repurchased approximately 53% of the company for $229 million, at an average price of approximately $37 per share. We continue to have strong cash flows.

For the quarter, we added 17.8 million in finance receivables, repurchased 4.7 million of our common stock, funded $1 million in net CapEx, and increased inventory by 7.2 million, a total of 30.7 million with only 5.8 million increase in debt. Thank you.

I’ll now turn it back to Jeff.

Okay. Well, thank you, Vickie.

As mentioned in the press release, we did open two new dealerships during the quarter, one in Bryant, Arkansas and one in Conway, Arkansas. These dealerships have gotten off to a good start, and we expect great things from these locations, as well as the other new lots open in the last year.

We will add additional locations in the future at a rate that matches our ability to support customers and associates at the highest levels. Our focus over the near-term will continue to be to leverage our top performing general managers as we have a large number that can serve 1,000 customers or more in their existing markets.

These proven leaders are executing a very high levels and they deserve our full support and attention as they pick up market share and help us build our future leaders. As a company, with great customer experience as our guide, we are transitioning into being more aggressive in keeping customers for life and making the necessary investments with inventory, facilities, and associates to make that happen.

Once again, we’ve built an infrastructure that can support a significantly higher number of customers and we believe we have an obligation to grow as communities are better when Car-Mart is there. We will now open it up for questions.

Operator?

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

Could you share with us what you’re seeing in terms of credit availability in the subprime space, as well as the competitive environment there? And I guess relatedly, how low interest rate impact is dynamic?

Well, you know, we continue to see healthy competition out there. There’s still a lot of money available for subprime and deep subprime, so it is competitive.

We do believe that our offering and the pricing of our offering is very attractive to consumers. When you look at the total cost of ownership, and our job is to educate those consumers on the value that we have on our offering compared to others, but it is competitive.

The market certainly is flushed with cash and we’re trying to make our offering better, that customer experience better and to educate those consumers about the benefit and cost savings when dealing with Car-Mart, and we do have a lot of room, we believe, to be more aggressive with our repeat customers and the customers we know and keeping those customers in the family. But the competitive market is – it's pretty intense.

Okay. And I think – and I guess relatedly are you seeing any change in the credit health from your consumer?

Obviously, your credit metrics improved materially in recent quarters, but accounts over a 30-day past you picked up a little bit, what do you think was driving that?

Well, it was [such a slide]. We don't look at that as a big deal.

A slight increase in 30 plus. I’d say overall, the health of our customers is pretty strong; the wages are up; the hours worked are up.

We’re attracting more repeat customers with the offering. You know, we believe the overall portfolio is healthier today than it was a year ago.

Okay. Thank you.

I’ll just add to that the – the 30 plus and some of those – they are pretty sensitive to the day of the month that the – or the day of the week that the months closes on, so, you know, unless we’re seeing something out of the ordinary, we’re not too concerned about where that’s at right now.

Thank you. Thank you for the color.

I guess my last question; can you maybe talk more broadly on your capital allocation strategy? How you’re prioritizing share buybacks versus investment in managers, store openings, bringing down debt and so on?

Well, our first order of business is to always make investments for the business first prior to buybacks, and then, when we have excess cash, you know, then we invest in those buybacks opportunistically, but certainly our first order of business is to take care of our associates so that they can provide better service that we’re looking for, for our customers, and that's where our first priority is going to be.

And we have a number of – as mentioned, a number of general managers that are very talented in running good businesses. And so, capital allocations to those folks is the top priority for us as we try to build market share and improve and increase our already impressive repeat business percentages.

Okay. Thank you, and thank you very much.

That’s it from my end.

Thank you.

Hi, thanks for taking my questions. You know I guess one of which, you know, as we think about the improvement in collections that you guys have enjoyed, how much would you say is kind of driven by internal efficiency enhancements that you’ve been able to deliver versus kind of just, you know, benefits from the higher quality car?

We do believe that most of the improvements we’re seeing is from internal improvements. We have much better visibility on delinquent accounts.

We are getting resolution with delinquent accounts much quicker than we were before. We’re seeing productivity at the field level that we didn't have; the visibility is better; and we have a great team in place corporately to assist the field with collections efforts and training and hiring in the personnel matters involved with those account reps in the field.

So, we think the primary reason for lower credit losses is, you know, the basic improvements with the blocking and tackling and running the play in the field, but certainly, we do also believe we’re putting a better car out there, more mechanically sound car, customer expectations are higher, especially, as you try to attract a more creditworthy customer, you’ve got to put a good product out there. So that certainly is a piece of the equation too.

That’s helpful. Thank you.

And then, I guess, you know, as you mentioned the initiatives to kind of maintain the customer base, create customers for life, move up the credit spectrum with them, you know, how should we think about that and the influence over time on kind of the gross margin and also the other income revenue line item as you kind of progress with that customer base?

Well, that’s a good question, and you know, over time, over the years, customers – good customers sometimes have graduated beyond Car-Mart and moved on to special finance maybe at new car dealerships or independent dealers and we believe that when we look at pricing above us and what the customer is paying above us that there's quite a bit of room for us to move up with the quality of car, the age and mileage of the car, and keep some of those customers that we know and have known and our good credit risks by offering a better product, maybe a little longer term with a lower payment, the car quality would certainly support that. So, we're looking at being more aggressive with inventory and with underwriting and marketing to customers we already know.

As we see, what's going on above us, we think we've got some competitive advantages for markets above us a little bit, which would mean more inventory, carrying more inventory, the mix and quality of the inventory being a little higher and certainly our sales price is over time maybe continuing to drift up, which is a good thing.

Got it. That’s helpful color there.

And then, and just as we think about the unit volumes, you know, and kind of some of the headwinds that we’ve seen more recently there, can you just talk to us a little bit about kind of, you know, what's driving that? I know in the past you’ve mentioned kind of inventory mix and having the right mix to sell is important, but, you know, are you seeing any intensification of competition?

Or, you know, has there, you know, has there been any benefit that you’ve notice to this point about some of the website enhancements you’ve made? Just some more color on that and how we should think about kind of, you know, unit volumes on a go-forward basis would be great?

Well, we are – gain it’s a little bit of a transition. We are certainly improving the quality of our inventory, the quantity and the quality to be more competitive.

Really focusing in on repeat customers, the customers we already know, and it is competitive. There’s a lot of money and we’ve got to educate our consumers about the quality of our car, the value of the service, so we are in a little bit of our transition period with inventory, educating the consumers, the digital side is very new to us.

The online credit application. The pictures of inventory online.

The online marketing efforts, we are new in that side of things within the last quarter or two, and we're very optimistic there. We're going to see some nice movements in all those areas in the right direction with increased volumes, and we feel like the market is there for us.

The value proposition we bring is fantastic, but we’re in a little bit of a transition period, but in the meantime still selling plenty of cars and credit losses are fantastic. So, we’re really in a pretty good sport.

Great color there. I appreciate that.

And then last from me, you know the tax rate came in a little lower than what we’re looking for, any guidance you can provide about how we should think about the tax rate on a go forward basis would be great? Thank you.

Sure. The only difference really is the discrete item of the stock-based compensation and when exercises are done, we always get a benefit from those.

We do still continue to have some options that will be expiring over the next few quarters, but we don't know exactly when those get exercised. Otherwise, we should be pretty close or just under that 24% tax rate, excluding those discrete items.

Got it. Thank you very much.

Thank you.

Hi, good morning guys. Congratulations on another good quarter, and thanks for taking my questions.

First just one more on credit, if you don't mind, talked about better vehicles and better collections, anything on the underwriting front or any changes in terms of approval rates there?

No. The traffic has been up based on the improvements with inventory and the efforts to improve our field sales efforts and field, so traffic is actually up.

The online efforts have improved, online traffic obviously. And so, we're seeing more customers at the dealerships and online, and we’re being a little more selective.

And that’s a good thing for a finance company. We're always trying to find that right balance and make sure that we’re cherry picking and getting the very best credit risks, but the traffic has been solid both online and at the dealerships and we’re being a little more selective on the underwriting and we have some room to loosen up there, but we have room to really go after and be more aggressive with those higher rated customers.

Got it. And then one follow-up for me, just given the week we’ve had, can you just remind us how your business performs in economic cycles?

Well, you know, the only recent example is, not that recent anymore is the great recession and the company's credit results we’re actually at all-time lows, it’s the tail end of the last recession. So, by putting a good product out there for a fair price and supporting these customers, if credit was to constrict in the market significantly that would certainly be a positive for us, and as somebody that’s providing good basic affordable transportation with the service to support these customers and things that happen in their lives, the last recession was actually very good for Car-Mart.

Got it. Thanks very much for answering my questions.

Thank you.

Good morning.

Good morning.

Just wanted to drill down into severity and frequency and severity a little bit more. Obviously, you talked a lot about improving the quality you are providing to the consumer, how much of that decrease in loss frequency is a function of better mechanical soundness of the cars as opposed to a change in underwriting?

The majority of it is related to the cars. I mean, we continue to tweak our underwriting and obviously see our down payments and our upfront equity and a lot of that stuff is improving.

So, I would say the majority of it is related to the car, and just to us getting in front of the customer a little sooner, and making sure we’re resolving any issues on a timely basis. You know, if you let these guys go too far, then they can't get back out of it, and they can't catch up.

So, I think a lot of it is the car and again our internal processes.

Yes, but if you had to kind of break it out, we feel like the biggest factor in frequency is the good work our folks are doing in the field of visibility. We have on collections efforts and the quality of the car fits in there too, but it’s a combination of things.

Okay. And as far as security goes, I don't know if you gave out the information on duration, but we’ve obviously seen over the past year or so, we’ve seen duration come down, we’ve seen down payment go up and the cash conversion cycle improve, which should theoretically even in a static frequency situation reduce severity.

Is that – can you give the duration figure and speak to how much of that is driving the reduction in severity?

Yes. So, it’s not huge.

Our overall portfolio was at 32 months, compared – it’s 0.3, compared to last year, so not a big reduction in the term. We are keeping customers in their cars, a little over a month longer.

So, that contributes to some reduced severity there, and the car is better, when we, you know, if we do have to repo it and wholesale it. We're getting more on our market values there as well.

So, has there been a big change in the number of cars that you’re repo-ing and scrapping as opposed to repo-ing and taking back to auction?

No. It’s been really pretty consistent.

Okay. Alright.

Thank you very much.

Thank you.

Okay. Well, thank you again for listening to our call and your interest in America's Car-Mart.

And as always, we’d like to thank our associates for all the great work going on out there to take care of all customers. We feel like we’re in a great sport as a company.

Very excited about our future. We’re all on the same page and pulling the same direction, and think we have an obligation to grow and serve more customers over time and that’s where we're going.

So, you guys have a great day. Thank you.

Thank you.