America Car Mart : 2023 Annual Report

2023 Annual Report

To Our Fellow Stockholders:

Our industry, and America's Car-Mart's place in it, are essential. Supporting over 102,000 customers, or $1.4 billion in accounts receivable, we have an obligation to drive healthy, profitable growth as our customers' lives, and the communities we serve, are made better because of our work. Over 50% of our unit sales are to repeat customers. Many customers have alternative financing options but choose nonetheless to stay with us year after year because of peace of mind delivered by our local, decentralized, relationship-based solution. We are proud of the fact that Newsweek recently named us to its "Most Trustworthy Companies in America 2023" list.

Active Customers

Over the last 20+ years, we have compounded the number of customers served and annual revenue by 7.5% and 12.5%, respectively. In fiscal 2023 sales productivity increased by 3.0% to an average of thirty-four vehicles per dealership per month, serving an average of 660 customers. Within the next two years, we expect our dealerships to retail between 40-50 vehicles per month, eventually supporting 1,000 or more customers. As alternative credit offerings continue to tighten, higher credit customers increasingly shop with us. Our business model has shown its ability to effectively address the needs of our customers, as demonstrated by the growing demand for our services.

Significant Top-Line Growth ($'s in millions)

Our vision - to be America's best auto sales and finance company in the eyes of our associates and customers while improving the communities we serve - resonates outside the company. This is evidenced by the recent additions of several exceptionally talented leaders to our outstanding team. Doug Campbell joined us in October 2022 as President. Doug's deep auto industry knowledge, passion, and considerable management skills will take our company to the next level, helping us reach our full potential. Holly Thomson, who also joined us in October 2022 as Chief Digital Officer, is quickly bringing our digital offerings forward. Holly has several years of relevant experience and successive leadership roles with direct-to-consumer financial products and user experience teams. In order to capitalize on upcoming opportunities, we continue to add talented people in a variety of roles supporting both our associates and our customers.

We find ourselves in a unique and pivotal time, where various unprecedented factors are significantly affecting consumers, our industry, and your company. In a year, the pendulum has swung from a time when consumers had trillions, with no inflation, to a period marked by the absence of fiscal stimulus and high inflation. In our industry in particular, inflation has been especially pronounced. The mounting expenses related to higher used car prices, rent, fuel, vehicle insurance, groceries, and interest rates, among others, are unavoidable for our customers. While acknowledging these challenges, we remain committed to supporting them at a high level. We extended contract terms to keep payment increases lower than the overall increase in used-car prices. Further, we expect consumer affordability to improve as vehicle prices normalize in relation to overall inflation, wages, and employment.

Near-term industry challenges present substantial strategic opportunities for America's Car- Mart. Our healthy balance sheet and ongoing access to capital allow us to grow and take advantage of market opportunities. We had $500 million in equity with a book value per share of $78 on April 30, 2023. We recently completed our third asset-backednon-recourse term securitization and have a $600 million revolving line of credit with a group of commercial banks.

Total debt, net of cash, to finance receivables (non-GAAP) was 41.5% on April 30, 2023. Our financial model is flexible, and we will continue to deploy capital to maximize appropriate returns.

				Book Value per Share
$90.00
									$73.72	$78.29
$80.00
$70.00									$61.41
$60.00
							$45.80
$50.00
					$33.72	$38.95
$40.00
	$24.43		$28.39	$30.68
$22.46	$26.91
$30.00
$20.00
$10.00
$-
2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023

We are focused on growing over the long term at far higher margins. Future profit improvements will come from three areas. First, we are focused on increasing gross margin percentages as we streamline and strengthen our procurement and inventory management processes. We expect improved sourcing, reconditioning, logistics and wholesale results, together with aggressive inventory management, will reduce costs and drive improved margin percentages. Second, we expect to see improvements in credit losses as we leverage our recent investments, continue to improve the quality of our product, and attract higher credit-rated customers. Third, we can increase our profitability by leveraging our infrastructure investments through both productivity increases and acquisitions. Internally, we measure our progress in leveraging our scale by SG&A per unit sold, SG&A per account, and headcount. Importantly, a significant percentage of our current SG&A is related to our long-term business investments. Going forward, we expect to generate a return on equity in line with historical, pre-pandemic levels. We are focused on becoming a more productive, accountable organization by eliminating manual processes, rationalizing headcount, leveraging technology, and aggressively working to attract talented leaders and team members.