America Stock Earnings Reports

Executives Present: Doug Campbell (President and CEO), Vickie Judy (CFO).

Financial Performance Highlights:

• Total Revenues: Decrease of $19 million (5.2%) attributed to lower retail units sold.
• Retail Units Sold: Average units sold per dealership per month dropped from 34.2 to 30.9 (-9.6%).
• Interest Income: Increased by 7.2% due to higher consumer contract interest rates (18.25% vs. 18%).
• Charge-offs: Increased to 6.4% of average finance receivables from 5.8% due to the back book of originated contracts from FY 22 and FY 23.
• Collections: Total collections increased by 4.3%, with monthly average per active customer rising to $562.

Operational Insights:

• Gross Margin: Improved by 30 basis points; efforts focused on pricing discipline and lower vehicle acquisition costs.
• Loan Origination System (LOS): Fully implemented in 147 out of 156 dealerships. 40% of the portfolio originated from LOS, leading to faster processing times and improved credit quality.
• Vendor Consolidation: Reduced vehicle vendors significantly, improving procurement efficiency and inventory turnover.

Business Strategies:

1. Affordability Focus: Aiming to reduce average retail prices to address consumer affordability challenges, with projected benefits in vehicle procurement costs expected to reach $500-$800 per vehicle.
2. Operational Excellence: Emphasis on improving sales and collections using new technology and focusing on return on invested capital.
3. Partnership with Cox Automotive: Expected to aid in improving procurement processes and inventory management.
4. Acquisition Strategy: Actively seeking acquisition opportunities to expand market presence while ensuring efficient integration.

Challenges and Outlook:

• Inventory Management: Increased inventory levels due to acquisitions but also a strategic reduction compared to prior-year levels.
• Market Conditions: Facing challenges from economic factors affecting consumer spending, resulting in softer application volumes.
• Competitive Environment: Smaller competitors experiencing financing difficulties may provide consolidation opportunities for America's Car-Mart.

Conclusion:

• The company is repositioning itself to handle current market conditions with a proactive strategy focused on affordability, operational efficiency, and strategic acquisitions.
• The management is committed to improving financial performance and delivering shareholder value through careful and strategic decision-making in the context of ongoing economic challenges.

Investment Implications:

Investors should monitor the company's ability to:

• Achieve targeted cost reductions and price improvements.
• Effectively execute its new operational strategies and technology integrations.
• Capitalize on acquisition opportunities while managing the challenges of the current market environment.