Good morning, and thank you for joining us, and thank you for your interest in America's Car-Mart. We're very excited to be celebrating 40-years in business, supporting our associates, our customers and making our communities better.

We will carry on these great traditions and continue to improve as our industry changes and the next 40-years will be even better. We will stay close to the consumer and focus on customer experience and provide unmatched support after the sale by keeping our customers on the road, giving them peace of mind by being part of the Car-Mart family.

We’ll deliver legendary service as we move this great company forward. We're making good progress with our various initiatives, which are foundational and focused on supporting our shift from a 40-year old collections company to a sales company that's very good at collections.

Our goal is to continue to gain market share and support an ever increasing customer base, allowing our field associates, led by our talented general managers, to have more time to focus on growing and improving their businesses. We have the balance sheet to support their growth.

This sales focus shift starts and ends with our ability to efficiently and effectively source good, affordable vehicles at increasing quantities. We're making good progress with our procurement and inventory management effort.

We're still in the early innings and we will continue to improve in this critically important area. We ended the quarter with 604 customers per dealership, that's an increase of 21 or about 3.6% for the first quarter.

We have significant opportunity and room to continue to serve more customers. And as we stated, we believe most of our dealerships can support 1,000 or more customers in the future as we continue to centralize some key inventory procurement and management aspects, and some other non-core support functions.

I'll now turn it over to Vickie to go over the numbers. Vickie?

Good morning, everyone. Our total revenue for the quarter increased 49.2%, up to $280 million.

That resulted from a 25% increase in retail units sold, a 20.4% increase in the average retail sales price and our interest income increased by 33.7%. Same-store revenues were up 46.7% with revenues from stores in the over 10 years of age, up 48%.

Stores in the 5 to 10 year category were up 56% and revenues for stores in the less than 5 years of age category were up to approximately $26 million. Our productivity improved to an average of 33.6 units sold per store per month, compared to 27.4 over the prior year quarter and to 29 units per store per month for the quarter ended 7/31/19 pre-pandemic.

We continue to invest in inventory to accommodate the higher sales volumes and to provide customers a quality mix of vehicles. Our retail inventory was up due to higher quantities, about 50% of the increase combined with higher pricing compared to the same time in the prior year.

At quarter end, 16 or 11% of our dealerships were from 0 to 5 years old, 38 or 25% were from 5 to 10 years old and the remaining 97 or 10 years old or older. Our 10 year plus lots produced 35.2 units sold per month per lot for the quarter compared to 31.2 for 7/31/19 pre-pandemic.

Our lots in the 5 to 10 year category produced 31.3 and 26.5 for the quarter ended 7/31/19. Our lots less than 5 years of age had productivity of 29.5 units per month per lot for the quarter.

Our down-payment percentage was 6.9%, compared to 7.6% for the prior year quarter, and collections as a percentage of average finance receivables was at 11.5% compared to 13% for the prior year quarter. Our collections remained strong with the reduction in line with the expected change due to the average term increases.

The prior year also included the impact of the pandemic related stimulus payments, which contributed to a higher collection percentage. The average originating contract term for the quarter was 38.8 months, compared to 32.4 for the prior year quarter, and up from 37.1 months sequentially.

The average selling price was up 20.4% or $2,600 with a 6.4 month increase in the term, compared to the prior year first quarter. Our term increases are necessary to be competitive and to ensure affordability for our customers as the retail sales cost increases.

The quality of the vehicle in terms of age and mileage continues to improve as well. And as always, we will continue to be mindful of balancing the term length with affordability but we believe we're putting a better customer and higher quality vehicle for the most successful outcome, combining that with our commitment to keep customers on the road with excellent service after the sale.

Our weighted average contract term for the entire portfolio, including modifications was 38.7 months compared to 33.9 for the prior year quarter. The weighted average age of the portfolio decreased slightly from approximately 9 months to 8.2 months.

Interest income increased 8.5 million or 33.7% compared to the prior year quarter, primarily due to the 217.1 million increase in average finance receivables, a 34.4% increase. The weighted average interest rates for all finance receivables at the end of the quarter was approximately 16.5%, relatively flat from the prior year quarter.

Total gross profit per retail unit increased $596 to $6,175, a 10.7% increase compared to the prior year first quarter. The gross profit percentage was 38.1% compared to 41.7% for the prior year quarter, and also down from sequential quarter at 40.2%.

The reduction in gross profit percentage resulted primarily from the lower margin on the retail units, partially offset by slightly lower repair costs. And increasing average selling prices result in lower gross margin percentages but higher gross margin dollars per unit as our gross margins are lower at a higher selling price.

And increasing average selling price will continue to put pressure on our gross profit percentage. The mix at the top of vehicles sold was comparable to the sequential quarter with increases in car and SUV sales and pickup trucks decreasing due to the high price and tight supply of trucks.

SG&A for the quarter was up 10 million compared to the prior year quarter and up 2.7 million sequentially, but down as a percentage of sales to 15.7% compared to 17.7% for the prior year quarter, and up from 14.5% sequentially. SG&A as a percentage of total revenues, less cost of sales and provision for credit losses is an important metric for our integrated sales and finance business as a large part of our efforts are focused on keeping our customers on the road.

This metric was 52.8% compared to 50.5% for the prior year quarter. The prior year first quarter reflected significantly reduced expenses and credit losses due to the impact of COVID-19.

We are now serving over 91,000 customers, an increase of more than 9,400 this time last year with over 2,100 associates. The SG&A increases have primarily been investments in our associates with increased headcount, increased wages and benefits, and increased commissions related to the higher net income.

We're also continuing our investments in our infrastructure with our ERP and CRM projects, facility updates, as well as expanding our marketing and advertising to support the transition to a sales company and our goal of increasing market share. All of this while continuing our commitment and investments in recruiting, training and retention, our inventory procurement and management, customer experience and our digital efforts.

For the current quarter, net charge-off as a percentage of average finance receivables was 4.3%, down from 4.8% in the prior year first quarter, and down from 5.4% for the quarter ended 7/31/19 pre-pandemic. Both our frequency of losses and severity of losses on a relative basis were improved compared to the prior year quarter.

Recovery rates have repossessed units also contributed to the decrease in net charge-offs. Recovery rates for the quarter were approximately 28.7%, compared to 24.5% in the prior year quarter.

Our accounts 30 plus past due were at 3.3%, compared to 2.6% in the prior year first quarter and 3.8% at 7/31/19 pre-pandemic. Although our portfolio continues to perform well and our focus is to support and serve our customers at the highest levels, there is still much uncertainty as the enhanced unemployment and stimulus payments end and the Delta variant continues to impact businesses and our customers’ lives.

The effective income tax rate was 21.4% for the first quarter of fiscal '22, compared to 23.4% for the prior year quarter. Income tax expense included an income tax benefit of $644,000 and $91,000 related to share-based compensation for the current quarter and the prior year quarter respectively.

We expect our base effective tax rate to be approximately 24% going forward, prior to any excess tax benefits from stock options exercises. At quarter end, our total debt was approximately $272 million.

We had $2.7 million in cash and approximately $53 million in additional availability under our revolving credit facilities. Our current debt net of cash to finance receivables ratio is 30.2%, compared to 25.4% at this time last year.

A large part of this increase relates to the increase in our inventory investment compared to this time last year, which was historically low due to the pandemic, an additional $40.8 million, and also due to our repurchases of our common stock. During this past quarter, we added $80.9 million in receivables, increased inventory by $14.8 million, repurchased $11.6 million of our common stock and funded $1.7 million in capital expenditures, a total of $109 million, with only a $46.1 million increase in debt, net of cash.

We are well-positioned to serve more customers and grow our market share. Thank you.

And now I'll turn it back to Jeff.

Okay. Well, thank you, Vickie.

Again, we're pleased with our growth, especially our productivity progress and ending the quarter with 33.6 units sold per dealership per month. We believe we have significant opportunity to continue to grow the business from the locations we currently have.

We did reach an agreement to purchase the retail finance business of The Carman in El Reno, Oklahoma from Jake Haller. Jake is one of our best preferred vendors, and we're excited to have a new Car-Mart location in El Reno, which will open very soon and have Jake shift over and focus his efforts on expanding our preferred vendor relationship.

Additionally, we expect to open our Norman, Oklahoma dealership in the second quarter and we will continue to open new dealerships and look for acquisition opportunities alongside and in conjunction with our investments aimed at increasing our market share and existing dealerships. We have a lot of room to grow from our existing dealership base, and that will be a focus of ours.

And we'll see the continuing productivity improvements that we've seen in the recent history. This past 18 months has been difficult with a pandemic, social and political unrest, now the Delta variant, the extreme shortage of use cars, difficulty with staffing and finding associates for us and more so with our vendor partners, has put additional strain and stress on our entire team.

But we have resilient people here at Car-Mart, who are committed to our mission, our vision and our values, and truly love the purpose in our work. Also, we have lot of very smart people here who see the potential we have, a window of opportunity that we have to make these foundational investments in key areas with a sense of urgency.

We are getting better each day, this is a hard work, the work we do is hard. And it takes a very special group of people to do what we've done over the last few years.

And we're even more optimistic about our future so. We'll now open it up for questions.

Operator?

Just a quick question. In terms of the child tax credit changes, do you see any impacts to the distributions in July and August and kind of give us your expectations for how that impacts the seasonality of the business going forward?

It's a little early to see the effect. We are seeing some improvements in collections in and around the 15th.

But it's a little early to tell. But we do expect a good percentage of our customers to benefit from those payments for the rest of this fall.

Got it. And then on the margin side, totally understand pressure there, frankly, surprised we hadn't seen it really yet.

But just wondering do you think this is kind of a good run rate? Was there any kind of one-time things in the quarter?

In my head, it was kind of -- you were selling inventory you sourced at kind of peak Manheim levels and since then, we've kind of seen the Manheim come down. So, have you seen any easing in terms of the tight supply?

Yes, it's getting a little better at certain price points. The car that we're looking for, that wholesale car under $10,000 is still pretty tight supply and we think it's going to stay that way for an extended period of time, but we are starting to see a little more availability and we do expect that gross margin dollar amount to continue to increase with the sales price increases and the percentage itself may be a little challenge, just a little bit and -- but we are seeing the market share gains.

So, the pricing of our product and the sourcing of our product is being well received by consumers with the market share improvements we've seen. So -- but we're thinking that the used car market for the product we offer is going to stay pretty tight for an extended period of time.

The car we're looking for is in high demand and we think it's going to stay that way, but our volumes are improving significantly. The quality of the car and the quality of the customer and the credit results of all being good and we're going to leverage our SG&A investments as we go forward, but that gross margin percentage is certainly going to stay a little lower and may go a little bit lower as we go forward, depending on the sales price of the car, but again, we're picking up good market share, good customers, good cars and leveraging the SG&A costs.

I guess the first question, so your sales productivity was better than expected this quarter, kind of continues what you've done last quarter, but when you think about that versus the affordability discussion, I'm sort of wondering how you're thinking about productivity and sales volumes going forward and some of the levers that you've been able to pull, for example, the higher loan terms like how much longer with term could you go? Are there other things that you could do to sustain the sales productivity with still affordability being the challenge?

Yes, that is a challenge for us, but even at that 38, 39-month term, we're still significantly below the competition. So, we've got a little room to go there.

We do think that many of our customers do appreciate, given that car pay for quicker and shorter terms are viewed as a positive, but it does have to be affordable. We know we have competition on the payment amount.

So, we'll continue to try to balance the attractiveness of our offering to those customers that do have choices and do focus on term and also offer a shorter term with our lower interest rate to those folks that are more focused on getting that car paid for. It’s a balance for us.

It always has been and it always will be. And we look to the market and the competition and the choices are consumers have and try to strike that balance with our efforts.

So, we will stay focused on that. Affordability is very important and we do feel like we're way below competition on that term and we do have some room there if consumer demand pushes us in that direction.

Okay. Got it.

Thanks, Jeff. And then the second question is actually a follow-up to Kyle's gross margin question, I think the gross margin's kind of been what's driving the stock this morning, but is it simply -- so gross margin percentages, if they're going to simply be just following what used car prices are doing or are there actions that you can take or other things that can be done in order to improve the margin since I remember in the past you've talked about different ways of sourcing inventory and other ways, but I was just wondering, is this something where we should just be, say, just looking at used car prices and building at it from the 38% you did this quarter or is there something else that you can do to improve that?

Well, yes, the price of the car -- with the significant increase in the price of used cars, it's just mathematically in the way we price cars based on what we pay for the car, it's just a factor and resulting from a higher dollar gross profit, but the percentage itself is going to be lower as you go up that price chain. We are working on efficiencies and expense management and everything that is underneath the cost of the car, the purchase cost, and we'll continue to squeeze out some efficiencies there.

But the retail sales price of that car and the competition in the markets and the overall ability to pass on the full percentages that we've had in the past with a higher dollar, is going to be a challenge for us, if you want to call it a challenge. But again, we're picking up market share, our pricing at the retail side is matching up very nicely and I think that's a big reason that we're seeing our volume improvements in a pretty difficult market with higher prices is that folks that had choices are looking at our offering and looking at our pricing and deciding that that's a good choice and with everything we're doing after the sales, service contract, oil changes, roadside assistance and everything we do here to keep those customers on the road, I think that is a reason that we're seeing increased market share and expect to continue to see productivity improvements as we go forward, but again, those gross margin percentages are probably going to stay in that 38% range and maybe even go a little lower as we go up on sales price.

We're doing our best to level off that sales price in the -- but some of that is dictated by the market, what's out there for us to buy, but we will adjust accordingly and we'd love to see a steadier, more consistent flow of product at the lower price points to allow even more customers to come into our family. We do think that pricing has led some folks out of the market, just based on availability.

We'd love to see more availability at the lower price points. We thought it would be at higher gross margin percentages, but that's a little bit out of our control at this point with what's going on with the used car market.

I should make sure I heard this right. You had 38.8 months of duration currently, correct, versus 32.4 last year?

Yes.

And then, how much of the decrease in the cash conversion cycle there, the collections relative to finance receivables, was a function of duration versus reduced down-payment?

It was all a reduction in the -- due to the term increase. Yes, we actually had some positives that offset it.

So, the term increase was the contributing factor to the lower collections.

Okay. And, is there -- I only looked back over the last few years.

I mean, at this cash collection rate -- have you ever hit this rate before? I don't see a number this low over the past few years and looking for a longer look back, I guess, whether or not there is a precedent relative to history of the company for close to the 11%, 11.5%.

Yes, it's -- this is the longest average term we've had and it all relates to the supply-demand imbalance for used cars. So we're doing our best to find a good solid, mechanically sound car at a low price and we're doing a good job there.

But there is a commodity aspect to the business and that term is going to have to go out, but again, we think we're buying a better car, putting it under a better customer. Collection results have been good and good customers do have choices and some make choices based on that payment amount.

So, we have to be in the game and again, our term is a lot shorter than others and we love to see it to be even shorter than it is. But that plays into consumer demand, affordability and good customers with choices, have to recognize that that term does play into those decisions on the retail side.

A separate question about credit. So you talked about getting better quality cars and have been -- and also attracting different customers higher up.

Just wondering when you think about the credit reserve ratio, the 24% that you've been booking and your net loss rate has been improving as well. Just wondering if that 24% is the right range or how you're thinking about it going forward as your cars are improving.

Yes, sure, Vincent. We look at that each quarter based on our historical knowledge and then, of course, taking into account our current portfolio as well.

We did see a slight uptick in delinquencies. We know there's, again, a lot of uncertainty with COVID.

And then, we don't have a lot of history with these longer-term contracts as well. So again, we think everything we're doing to support the customer, the vehicle we're putting them in, the customer that we have on our books, we feel very good about our portfolio.

But there are -- there is a lot of uncertainty out there, but we'll continue to look at that each quarter and evaluate that and adjust accordingly.

Okay. Well, again, thank you for joining us on this morning's call.

We are very optimistic about our business. We are convinced that most of our dealerships could and should be supporting a 1,000 customers or more.

The productivity improvements we saw in the quarter outstanding. We have a very solid balance sheet and are excited about funding our individual general managers as they grow their business and improve market share in their local markets.

We did buy back $12 million of stock during the quarter. We are very well-stocked on inventory.

And we've got a lot of good things going on these operational foundational investments we are making to allow us to serve an increasing number of customers. So, very excited about the business, where we're at, the people we have in place and very much enthusiastic about our future and our place in the world.

So, thank you. Have a great day.