America's CAR-MART Inc (CRMT) 2021 Q4 法說會逐字稿

Good morning, everyone. Thank you for holding, and welcome to America's Car-Mart Fourth Quarter Fiscal 2021 Conference Call. The topic of this call will be the earnings and operating results for the company's fourth quarter and full fiscal year 2021. Before we begin, I would like to remind everyone that this call is being recorded and will be available for replay for the next 30 days. The dial-in number and access information are included in last night's press release, which can be found on America's Car-Mart's website at www.car-mart.com.

As you all know, some of management's comments today may include forward-looking statements, 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, 2020, and its current and quarterly reports furnished to are filed with the Securities Exchange Commission on Forms 8-K and 10-Q.

Participating on the call this morning are Jeff Williams, the company's President and Chief Executive Officer; and Vickie Judy, Chief Financial Officer. And now I'd like to turn the call over to the company's Chief Executive Officer, Jeff Williams.

Okay. Well, thank you for joining us this morning. We are proud of our work, and we're pleased to see the continuing benefits from our various investments and initiatives, which are aimed at allowing us to leverage, scale and grow the business by improving the customer experience journey. There are many touch points and opportunities to exceed customer expectations in our business, and we believe that no other company can keep customers on the road and reduce the stress related to local transportation needs like America's Car-Mart can, and we will only get better over time.

Our ground level, local, personalized offering combined with our technology and scale, give us unique advantages in our market. We will continue to look to centralize noncore field functions that can be performed more efficiently with corporate support, without losing the benefits of our decentralized decision-making at ground level and close to the customer. This will allow our associates in the field to focus on service, and growing the number of customers we serve.

Our investments in the areas of customer experience, recruiting, training and retention, inventory procurement and management, are allowing us the ability to grow market share and move from a collections company to a sales company that's very good at collections. We're making good progress in all areas and our efforts in the technology area will continue to give us additional opportunities to utilize data to our advantage, and we have a very high expectation for our consumer-facing digital experiences as we move forward.

Our community-based bricks-and-mortar presence, combined with our digital opportunities, give our model real strength. We will continue to invest in our business to allow us to be the market leader over the long term. Our corporate customer experience team is making great progress and is directly involved with our consumers and working with our dealership personnel to ensure our customers have consistently great experiences. We will continue to look to industry partnerships, which are becoming a bigger part of our overall efforts.

Our current profits are strong, and we have an obligation to reinvest these current profits for our future. Customers need what we do, and we have an obligation to serve more customers over time. Our new service contracts that are rolling out company-wide, and the customer response has been very positive and very strong. Our associates are proud to be offering these new products that include extended terms, roadside assistance and oil changes, all in with "keeping you on the road" pledge.

We're making great progress with our inventory management efforts, and we're optimistic that we will continue to see significant benefits from this area of the business. We put together a strong team to lead our inventory transformation. Again, industry partnerships are playing a key role in our progress.

We're very proud of our company and the hard work and dedication of our associates. This last fiscal year, which started on May 1, 2020, that was extremely difficult but our associates continue to rise to the occasion, working many hours under very difficult and uncertain conditions, never wavering in their efforts to support each other, our customers and our communities, which show the resourcefulness and the creativity and how nimble our business can be because of the quality of our associates that we have in place and their dedication to our purpose.

Now I will turn it over to Vickie to go over some numbers. Vickie?

Hello, and good morning. Our total revenue increased 42.6%, up to $279 million resulting from a 24.3% increase in retail units sold, a 15.9% increase in average retail sales price, and interest income increased by 28.1%. Our same-store revenues were up 37.6%. Revenues from stores in the over 10 years of age category were up 41%. Stores in the 5 to 10-year category were up 48%, and revenues for stores in the less than 5 years of age category was up to about $15 million.

Our associates across the company worked tirelessly this past year and throughout the fourth quarter to serve our customers with exceptional service, which translated into productivity improvements of an average of 36.5 units sold per store per month. This was also possible due to the investments in our inventory, in our procurement processes, including our preferred vendor partner relationships. Our retail inventory was up due to higher quantities and combined with higher pricing. As a reminder, the inventory levels at April 30, 2020, were low due to the pandemic environment.

At quarter end, 16% or 11% of our dealerships were from 0 to 5 years old, 39% or 26% were from 5 to 10 years old, and the remaining 96% were 10 years old or older. Our overall productivity was 36.5 units sold per store per month compared to 30.2 for the prior year quarter and 31.1 for the sequential quarter. Our 10-year-plus lots produced 38.1 units sold per month per lot for the quarter compared to 30.5% for the prior year quarter. Lots in the 5 to 10-year category produced 34.4 compared to 27.4 for the prior year quarter. And the lots less than 5 years of age had productivity of 32.3 compared to 23.5 for the fourth quarter of last year.

Our down payment percentage was 8.7% compared to 7.8% for the prior year quarter. Collections as a percentage of average finance receivables were at 14.9% compared to 15% for the prior year quarter. Collection percentages were positively impacted by tax time refunds, stimulus payments and the CARES unemployment. The average originating contract term was 37.1 months compared to 31.8 for the prior year quarter and up from 35 months sequentially.

The average selling price was up 15.9% or $1,979, with a 5.3 month increase in the term compared to the prior year fourth quarter. These term increases are necessary to ensure affordability for our customers as the retail sales price increases. The quality of the vehicle in terms of age and mileage continues to improve as well. We will continue to be mindful of balancing this term length with affordability, but believe we are putting a better customer and higher quality vehicle for the most successful outcome.

Our weighted average contract term for the entire portfolio including modifications, was 37.3 months compared to 33.3 for the prior year quarter, and the weighted average age of the portfolio decreased slightly from approximately 8.8 months to 8.2 months. Interest income increased $6.7 million or 28.1% compared to the prior year quarter, primarily due to the $158 million increase in average finance receivables at 25.6% increase. The weighted average interest rate for all finance receivables at the end of the quarter was approximately 16.5%, relatively flat from the prior year quarter.

Gross profit per retail unit also increased by $800 to $6,032. This was a 15.3% increase compared to the prior year fourth quarter. The gross profit percentage was 40.2% compared to 40.5% for the prior year quarter and down from the sequential quarter at 40.6%. The reduction in gross profit resulted from the lower margin on the retail units, partially offset by improved wholesale margins due to the strong demand in the used car market and also lower repair costs. The increasing average selling prices result in lower gross margin percentages but higher gross margin dollars per unit as our gross margin percentages are lower at higher selling prices. The mix of the type of vehicles sold had increases in car and SUV sales over the prior quarter and pickup sales decreasing due to the high price and tight supply of trucks.

Our SG&A for the quarter was up $5.7 million compared to the prior year quarter, but down as a percentage of sales to 14.5% compared to 17.7% for the prior year quarter. SG&A as a percentage of total revenues as cost of sales and provision for credit losses was 45.6% compared to 54.6% for the prior year quarter, excluding the impact of the allowance changes. This metric is important for our integrated sales and finance business as a large part of our efforts are focused on keeping customers on the road. Our investments continue to be primarily payroll-focused as we build our customer experience team, invest in our procurement team and combined with increased commissions because of the higher net income.

Our new customer relationship module of our ERP system went live in May of '21, and we will continue to invest and improve our technology and digital platforms to enhance the customer experience as we move forward. We'll also be investing in additional marketing as we continue to promote our brand image with our new tagline and our new service contracts.

As always, our expectation is that we will continue to leverage these investments with market share growth over the long term. We are now serving over 7,400 additional customers compared to this time last year at an improved service level. For the current quarter, net charge-offs as a percentage of average finance receivables was 4.8%, down from 5.6% in the prior year fourth quarter and down from 6.4% for the quarter ended 4/30/19 prepandemic.

We saw improvements in delinquent accounts, and our accounts 30-plus past due was at 2.6% compared to 6.2% for the prior year fourth quarter. The CARES Act enhanced unemployment benefits and stimulus payments certainly contributed to this improvement, along with our increased efforts working with our customers to help them through these challenging times. Recovery rates of repossessed units also contributed to the decrease in net charge-offs. Recovery rates for the quarter were approximately 28.5% compared to 26.7% in the prior year quarter.

As a result of these improved delinquencies, our overall credit loss results and our outlook for projected losses, we have lowered allowance for credit losses from 26.5% to 24.5% as a percentage of finance receivables net of deferred revenue. This decrease in the allowance resulted in a $15.1 million pretax decrease in the provision for credit losses. This impact was a diluted earnings per share increase of $1.65, resulting in diluted earnings per share of $4.54, excluding the allowance change for the fourth quarter of '21.

The effective income tax rate was 21.5% for the fourth quarter of '21 compared to 15% for the prior year quarter. Income tax expense included an income tax benefit of $729,000 and $160,000 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 option exercises.

At quarter end, our total debt was approximately $226 million. We had $3 million in cash and approximately $99 million in additional availability under our revolving credit facilities. Our current debt, net of cash to finance receivables ratio is 27.6% compared to 25.1% at this time last year. This percentage increase relates to the increase in our inventory investment compared to this time last year, an additional $45.8 million.

During the fiscal year, we added $188.4 million in receivables. We increased inventory by $45.8 million, repurchased $10.6 million of our common stock and funded $9 million in capital expenditures, a total of $253.8 million with only a $67 million increase in debt net of cash. We are well positioned to serve more customers and grow our market share.

Now I'll turn it back to Jeff.

Okay. Well, thank you, Vickie. As to inventory, we do expect to see some continuing supply issues and related inflation with inventory. Our team has done nice work to ensure we have product to meet the increasing consumer demand for our offering. Prices are certainly higher than we would like. But we have been and will continue to be nimble and improve our inventory management processes as we go forward. Overall, our inventory is in very good shape going into the summer months.

As to growth, we are pleased with our productivity for the quarter as we move towards serving more customers per dealership. We are looking to pick up market share and grow volumes in an environment without stimulus money. Our primary source of growth over the next few years is productivity improvements from existing dealerships. We ended the year with 583 customers per dealership as our average and as we've stated previously, we do believe that a majority of our dealerships can and should be supporting 1,000 or more customers over time. We will also open some new stores and continue to look for acquisition opportunities.

Once again, we are very proud of the year, but we have a lot of work to do. We believe that we are in the early innings with our key initiatives and priorities, and we are pushing hard with the sense of urgency in all areas. The magnitude of the changes that we have been and are making are substantial. And as a decentralized company, we must always ensure that the rate of change can be digested in the field. And we believe we've been able to make these changes and improve the business at the right pace, and we do expect the pace to quicken as we go forward. We have great associates at all levels and recognize the magnitude of the opportunities we have in front of us, and they continue to take on more responsibilities and enthusiastically embrace the changes we're making for our future.

Thank you again, and we will now open it up for your questions. Operator?

(Operator Instructions) Your first question comes from the line of John Murphy with Bank of America.

Jeff, I guess just a first question. Can you talk about what the customer-facing digital opportunities are? How you're going after them? And what you think the upside over time is? And I think there's been in the retail community, a belief that the higher end consumer would have a higher propensity to use online tools, but it actually seems sort of like the subprime and lower to mid consumers actually where there's a lot more activity. So I'm just curious how you're going after this digital opportunity and what it means for the company?

Yes. John, the online credit application process, the online inventory that we're showing is -- we're making progress in that area. The loan origination system, we're working on a loan origination system to push more of transaction online. We do have capabilities of home deliveries and curbside deliveries, and we're going to improve those process as we move forward. A lot of our customers are -- will choose long-term to come into the dealership for some aspect of the transaction, but we feel like the effort we have in place, we're going to be as good as anybody from the digital side of things when we finish our efforts.

And when you combine that with the bricks and mortar, and a lot of consumers still want to come in and finish that transaction test drive that car at the dealership. We believe that we're going to see more folks starting the transactions online as we go forward, and we plan to invest significant time and resources and talent and making sure that our digital presence out there from a consumer standpoint is as good as anything they'll see from any other car dealerships. So we're very excited about the opportunities there.

And for us, it's all about making the transaction and the process seamless and intuitive and user-friendly from the consumer's standpoint. And our consumer being a subprime and deep subprime, as you mentioned, they're very savvy and very used to dealing online, and we're going to meet those needs for our consumer base. And we believe at the end of the day, we're going to have as good of an online presence and offering as anybody out there.

And John, I might just add to that. With this customer relationship module that we just got implemented in May, there will a continued, whether it's presale or post sale line of communication with the customer and the way they want to communicate, whether that's calling or going into the dealership, but then they will also have the opportunity to make a phone call to the customer care line here corporately or a text.

And again, that may be post sale for a repair issue or a question or payment issue or it may be presale regarding the inventory that's online or a question about the type of credit. So I think all of that combined is going to give a much better customer digital experience.

And just a follow-up. I would imagine it's very early days, but I mean are there any transactions that are going almost completely online and that you have in-home delivery? And where do you see that going over time?

It has not been a significant part of our business. We did a little bit of that during the pandemic, but our consumers still require quite a bit of handholding and they do want to come in for the most part and drive that car. But we are going to have a system set up and pushing toward the area. If home delivery is a big requirement, we're going to be able to meet that requirement. If curbside pick up is something consumers want, we're going to be able to meet that.

There hasn't been a big demand from our consumer base yet to do things 100% online and have that car delivered to a home, but we're going to -- we're working in that direction if and when that demand becomes real for us in our consumer base, we'll be ready, but it has not been a significant piece of our business at all to this point.

That's helpful. And then a second question. When you're talking about supporting 1,000 or more customers per dealership over time, I mean that's essentially a doubling from where you are right now or depending on how far this goes, maybe even more than that. What are the key drivers of that? I mean, you've shown the propensity to increase productivity over time. But that's a big step. So I mean, what are the key tools to get there? And what is a reasonable amount of time? Are we talking 3 years, 5 years, 10 years? I mean what's the thought process on that target?

Well, it is more of a mid- to long-term goal. We don't have an exact timeline, but all the efforts we're putting into improving that customer experience, increasing repeat business, making sure that our very best customers stay in the family. Historically, we've kind of congratulated customers for improving their credit and then giving them a wave as they went down the street to maybe the used car division of the new car dealerships, and we discovered that there's no reason to lose these good customers.

We can supply a better car. We can supply a better cost to the transaction. All costs in the transaction, we offer a very competitive offering from a cost standpoint. And then the support that we give a consumer after the sale, we believe is outstanding and better than they can get elsewhere in the market.

So really focused on keeping customers for life, improving the product that we offer, significantly improving the customer experience. There's a lot of stress involved with the car ownership in the areas we serve and we can give customers true peace of mind. We can put their minds at ease as related to that car and those car payments and the car maintenance and other issues that pop up that cause so much stress.

And if we can do that at a price point, an all-in price point that makes sense, then we believe focusing on repeat business, focusing on customer experience, focusing on improving the quality of the car, we believe that over time, our repeat business and our -- the number of customers we can serve for dealership, combined with the fact that we have a balance sheet and we have the capital to be investing in these markets. That's one thing that's extremely important. We know these markets. We know our staff. We know the existing customer base. And for us to push more investment into the markets we already know is certainly very attractive to us from a profit standpoint, a volume standpoint and a risk standpoint.

And so this is something that our balance sheet and how strong our balance sheet is certainly going to support our efforts to increase the number of customers served for dealership. We do believe those markets are out there. And it's up to us to go out there by market and figure out how to increase the number of customers served over time. We don't have a specific timeline on that, but we do feel like consumers and the communities are better when Car-Mart is there and when Car-Mart is expanding business and serving more customers. So we're very excited about the opportunities we have to leverage the structure we already have.

And then just lastly, I mean, you mentioned improving inventory management, but it sounds like that also means in some cases, increasing inventory, so you can increase sales. So what exactly is going on, on inventory management? It's obviously very difficult right now because there's not a lot of flow in the market in inventory, if you will, is tight. What does that mean? And where are you going on improving inventory management? What are the key targets we should be thinking of?

Well, it's -- like I mentioned a couple of areas. Our preferred vendor efforts, we are partnering with some very talented long-term wholesalers in our markets geographically. These are folks that are very good at buying cars, repairing cars and getting them ready to sell and very talented entrepreneurial folks in the markets we serve. These are folks we've known for years. But they have an interest in growing with our company and giving us a steady supply of high-quality, ready-to-sell units, and they're in good spots geographically to work with us. They're very interested in partnering with us to grow their businesses. So that effort is continuing and will expand as we go forward. But another area is going to be recalling.

Historically, we've not done reconditioning wholesaling off cars into the wholesale market. But as supply becomes tight, and we realize to have a steady flow of units at the lower price points. We really have to take a second and third look at the metal that's already in our network and have the ability to do some recon work within our system to turn a piece of metal into a good, solid, mechanically sound retail transaction for somebody who's maybe looking for a lower price point.

So a lot of good work is going on with the recon side of things. We're also looking at recon outside of the cars we already have in terms of auction purchases and reconditioning at the end of auction processes. We're looking at buying cars on a more dispersed basis nationwide to take advantage of different areas that maybe we haven't looked at in the past. We also have a lot of power in our model from 151 general managers that have the ability to keep a close eye on local supply and local opportunities.

So when you combine the corporate efforts we have in place with the fact that we do have a lot of talented GMs out there that do have the ability to cherry-pick and take advantage of local opportunities, we've got a pretty unique model here. And I think that's why you're seeing us come through the fourth quarter with additional sales and ending the quarter with a lot of products still available for sale going into the summer months, where other folks might be struggling with some inventory availability and having cars on the dealership.

So we're just pretty nimble in all these areas, and we're corporatizing some key aspects to our procurement and logistics efforts. We're also buying a fair amount of cars from the rental car chain that there may be a little higher price point that will support our higher-end consumers that historically may have left us for another offering because we didn't offer a newer option with a lower mile. So that's also a part of our mix and something that we're forming some partnerships with as we go forward.

And I'm very optimistic about the procurement, logistics, the inventory management side. And we're in the very early innings of some of these efforts, but what we're seeing so far gives us a lot of optimism for the direction we're going.

Jeff, I'm sorry, but you speak -- so it kind of seems like you're spreading to a lower end vehicle or an older vehicle and a younger vehicle. Is that a fair statement that you're kind of spreading the dispersion of what you're offering to the customer going down market a little bit and up market a little bit. Is that a fair characterization?

I don't think that's at the expense of the middle section either. We want to be a company that can supply all the price points. So we're not deemphasizing the middle. We're just spending with the supply situation the way it is, the shortage of cars, we're having to get a little more creative on the low end. And we certainly don't want to lose the middle section, and we have been talking about making sure we have offerings for that [top] side for a number of years now.

So this is just us and our efforts to make sure that a consumer in our towns can come to Car-Mart for all -- any price point, any and all price points, and we've got a good offering in all areas.

Your next question comes from the line of Kyle Joseph with Jefferies.

Congratulations on a really good quarter and year for that matter. Obviously, there is a lot going on in the quarter with tax refunds and stimulus. Just want to get a sense for how sales trended by month, if you could just give us a sense high level, doesn't even need to be numbers, but how sales were trended in February versus March and into April.

We had 3 really solid months. There's -- I guess it was maybe a little bit more February, but not...

March. March.

A little bit more March this year, I'm sorry. The tax refunds were a little bit late. Some of the stimulus was in March, maybe a little bit more in March, but February was strong. We had a nice finish in April. So all in all, it was it was a good quarter and each month within the quarter was good.

Got it. And then on -- everyone knows, used car prices are elevated and recognize you're offsetting a portion of that with the term extension, but can you give us a sense for how the average monthly payment has been trending kind of over the last year?

Yes. Our -- certainly, with the increased sales prices and the amount financed, we have seen an increase in the average payment. We're probably up, I don't know, $30, $35 for the year on the average payment overall. And -- but we keep a close eye on the quality of the applicant, the affordability of the transaction. And with our increase in the quality of the car we're offering, we are seeing a higher quality customer. So affordability is still strong, but certainly, with these price increases, we are seeing some increases in the monthly payments.

Got it. That makes sense. And then last question for me. Good inventory growth year-over-year. I know you talked about that comparing to pandemic levels. Can you give us a sense for how much of that is actual units versus price appreciation?

Yes. Just looking at the retail side, the units on hand are up about close to 50%...

A little over.

From this time last year. We're carrying about 50% more units at the end of April this year than we were last year. Now some of that was our reaction to the pandemic and really squeezing inventory at the end of April of '20. But from that point to this point, our units are up about 50% from where they started the year.

Your next question comes from the line of Vincent Caintic with Stephens.

I guess first one, a quick one. So you had really, really strong productivity per store at 36.5 cars sold a month. And I know that the fiscal fourth quarter is typically the strongest, but is the 36.5, is that a good number to run rate going forward? Or maybe should we temper that down as we think about when we're modeling fiscal 2022?

Well, our objective is to improve and increase productivity. We don't have a specific number, but we're making a lot of investments and focusing a lot of efforts on moving from a 40-year-old collection company to a sales company that can collect. And so we do expect to continue to bump up productivity, and all the efforts and all the investments we're making certainly are in line with that effort. We do expect to leverage these costs, as Vickie mentioned, as we go forward. But we are very focused on improving productivity and growing sales and growing customer accounts over time as we go forward, don't have a specific number for you.

There definitely would have been some stimulus impact in that. How much of it was stimulus, how much of it was regular tax time, how much of it was due to the improvements that we're making in our business is obviously fuzzy. But definitely a lot of good things just going on in our business, for sure.

Right. Understood. Yes, I guess, I'm trying to parse out how much of that is your investments, which really sound like they're taking hold and getting traction. So that's great. And second...

And Vincent, when you think about 36 sales per month per dealership, I think that over time, again, we don't have a time line, but a company that is established as we are and doing the great things that we're doing, we do expect productivity to improve significantly over time. 36 sales per dealership per month is not anything that anyone would consider to be an acceptable long-term sales rate. So there's a lot of productivity out there, and the investments we're making should allow us to certainly be more productive as we go forward. 36 sales per month is not very high.

Great. That's very helpful color. And that points towards your 1,000 customers per dealerships. I really appreciate that.

Second question. Your performance has been really impressive even as used car prices have been increasing. And I usually think about used car prices being higher as sort of a negative for Car-Mart all else being equal, but it's been very positive -- or you've had really positive results.

I'm sort of wondering, if we're still in the same environment with higher used car prices, and it seems like it's going to be that way through the rest of calendar year 2021, is that something that should we expect kind of the same strong results here? Does it seem like that might be a drag at some point? Or is this actually an opportunity or a very opportune environment for you?

Well, it's hard to know where prices are going to go. We don't expect prices to go up again in the next 12 months, like they have the previous 12, but there is a certain commodity aspect to the business we're in. We have to participate or set out changes in commodity prices, if you will, and we're not going to sit it out. We think that we can be nimble enough to make some really smart decisions and adjust to conditions as we need to adjust, but we believe that car prices are certainly not going to be going down. It's a question of how much they're going to be going up for the next, say, 1.5 years.

So we're building our efforts to survive and thrive and grow and prosper and get better in an environment where the cost of inventory is increasing, at least over the short term, it does benefit us in a couple of ways. One would be the fact that to operate in this business, the cost of capital, the cost of entry, the cost to fund this business with car prices up is much, much more expensive than it was in our balance sheet and our low leverage and our financial situation allows us to participate in a big way and pick up some market share from folks that might not have the ability to take advantage of situations as they come up.

So we're going to remain nimble and adjust to the market. We're going to control the things that we can control, but there is a commodity aspect to this business, and we need to be fully participating because we can keep customers on the road, we can keep them in their cars and successful. We believe in our markets better than anyone. And so we need to be out there and fully participate -- fully participating. And we'd certainly like to see a leveling off of used car prices, but that doesn't look like it's going to the case anytime soon.

Okay. Great. Yes, it's been very impressive that you've been able to pass along the car prices. I appreciate it.

Thank you.

(Operator Instructions) Your next question comes from the line of John Rowan with Janney.

Quick question. Obviously, the gross profit came down a little bit. Can you remind me if that -- obviously, you mentioned the higher sales price. Is there any function in there related to the service contracts? And whether or not the expense related to the service contracts may be actually in the different expense line? That will be it for me.

No, it would be in that same category. We have not seen really any additional cost per se, if you will, related to the new service contracts yet. We just started rolling those out across most states in February. We've been piloting them in a few locations for about a year now. So the cost aspect of the new service contracts is very minimal right now.

But going forward, could it impact gross profit margin next year?

Yes. Our expectation is that once the revenue is fully baked in and the costs are fully baked in that our gross profit on the service contracts will remain the same as it has been historically.

You have no further questions at this time. So I will turn the call back over for any closing remarks.

Okay. Well, once again, thank you for your interest in America's Car-Mart. Thank you for listening into our call this morning. We appreciate our associates and their dedication to making our company better. We really have been through a pretty tough year from an associate standpoint, with the pandemic and social unrest and our group and our team has really stuck together, and we're very proud of what we've done, but we're even more proud of where we're going to go with the company and very excited about our future. And we sure appreciate all of our great associates that are out there taking care of our customers and taking care of each other and making our communities better. So thank you, and have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.