AMERICAS CARMART INC (CRMT)

Overview

America’s Car-Mart, Inc., a Texas corporation initially formed in 1981 (the “Company”), is one of the largest publicly held automotive retailers in the United States focused exclusively on the “Integrated Auto Sales and Finance” segment of the used car market. The Company’s operations are principally conducted through its two operating subsidiaries, America’s Car Mart, Inc., an Arkansas corporation (“Car-Mart of Arkansas”), and Colonial Auto Finance, Inc., an Arkansas corporation (“Colonial”). References to the Company include the Company’s consolidated subsidiaries. The Company primarily sells older model used vehicles and provides financing for substantially all of its customers. Many of the Company’s customers have limited financial resources and would not qualify for conventional financing as a result of limited credit histories or past credit difficulties. As of January 31, 2026, the Company operated 136 dealerships located primarily in small cities throughout the South-Central United States. During the third quarter of fiscal 2026, the Company began implementation of a footprint optimization strategy through which it consolidated eighteen of its dealership locations with nearby higher performing dealerships.

Over the past ten fiscal years, the Company's revenue has grown at an average annual rate of 10.6%. For the first nine months of fiscal 2026, sales decreased by 6.1% compared to the prior-year period, driven primarily by a 9.4% decline in retail units sold (37,480 units versus 41,373 units), partially offset by a 2.6% increase in the average retail sales price to $20,041. Interest income also rose by 5.0%.

The Company has been focused on strengthening its underwriting and improving vehicle quality by procuring lower-mileage vehicles, while balancing affordability for customers. The Company believes this will aid in driving down our customers’ vehicle repair costs, reduce our service contract repair expenses, and lead to better recovery values in the event of repossession. When combined with inventory procurement efficiencies, these changes are expected to drive improved customer experience and contribute to better gross margins. The nine months ended January 31, 2026 have begun to reflect those improvements in repair expenses and wholesale retention, reflected in the gross margin improvements.

Over the last five fiscal years, the Company's provision for credit losses as a percentage of sales averaged 28.14%. During fiscal 2025, credit losses were 32.68% as a percentage of sales. For the first nine months of fiscal 2026, the provision for credit losses as a percentage of sales increased to 41.7%, compared to 33.7% for the same period of fiscal 2025, resulting from an increase in frequency of losses coupled with the effect of lower sales revenues. Based on the Company's current analysis of credit losses, the allowance for credit losses at January 31, 2026 was 25.53% of finance receivables, net of deferred revenue and pending accident protection plan claims, an increase from 24.31% at January 31, 2025 and an increase from 23.25% at April 30, 2025, resulting in a $24.5 million increase to the allowance for credit losses in the first nine months of fiscal 2026.

The Company’s credit losses and charge-offs continue to be influenced by broader market and economic conditions, including inflationary pressures on essential consumer expenditures such as vehicle insurance, rent, groceries, gasoline, childcare, and other staple items, as well as overall unemployment levels and the income profiles of its customer base. Notwithstanding these external factors, the Company believes that consistent execution of its established business

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practices remains the most significant determinant of its long-term credit loss performance. During the first quarter of fiscal 2026, the Company advanced its credit and collections infrastructure through enhancements to its loan origination system (“LOS”), including the deployment of an updated scorecard and embedded risk-based pricing, which are designed to more closely align expected returns with customer risk characteristics. Early indicators reflect a shift in originations toward higher-ranked customers, consistent with the system's intended functionality. The Company also implemented enhancements to its payments platform to facilitate increased utilization of online payment channels and promote more consistent customer payment behavior. Management believes these initiatives will strengthen underwriting discipline, support improved collection effectiveness, and provide a more scalable framework for future growth.

The Company's gross profit margin as a percentage of sales for the first nine months of fiscal 2026 was 36.7% of sales, consistent with 36.7% in the prior year period. The prior year period included a 150-basis point benefit from the impact of the service contract accounting change in estimate for revenue recognition. The gross margin improvement in the current year, after excluding the benefit in the prior year, results from a decrease in the aggregate cost of the vehicles sold related to the Company's initiatives around pricing discipline, lower frequency and severity of vehicle repair costs, and improved retention of wholesale buyers for vehicles repossessed by the Company. The Company's gross margin is based upon the cost of the vehicle purchased, with higher-priced vehicles typically having higher gross margin dollars but lower gross margin percentages. Gross margin is also affected by the percentage of wholesale sales to retail sales, which relates, for the most part, to repossessed vehicles sold at or near cost. The Company plans to continue to focus on managing gross margin dollars in the near term, as well as continuing to focus on improving wholesale results, cost controls, and operational improvement around the acquisition and disposal of vehicles.

The Company consistently focuses on collections. Each dealership is responsible for its own collections with supervisory involvement and oversight from the corporate office. Total collections of principal, interest, and late fees for the first nine months of fiscal 2026 increased by $21.4 million, or 4.1%, to $544.4 million over the prior year period. The average total collected per active customer per month increased to $582, compared to $563 for the same period in the prior year. These results underscore the positive impact of our enhanced payments platform, which has streamlined processes and improved overall collection efficiency.

Hiring, training, and retaining qualified associates is critical to the Company’s success. The rate at which the Company adds new dealerships and is able to implement operating initiatives is limited by the number of trained managers and support personnel the Company has at its disposal. Excessive turnover, particularly at the dealership manager level, could impact the Company’s ability to add new dealerships and to meet operational initiatives. The landscape for hiring remains very competitive. The Company has continued to add resources to recruit, train, and develop personnel, especially personnel targeted to fill dealership manager positions. The Company expects to continue to invest in the development of its workforce.

The Company continues to prioritize investments to improve its products and services and operate more efficiently over time. One of the Company’s largest recent investments has been improving its processes and technology for credit applications and decision-making through the new LOS. This online loan application system allows the consumer to apply for credit faster in anticipation of their vehicle purchase, authorize a soft credit pull during the application process, and receive a response via text message on the status of their application, as well as have access to centralized appointment setting. At the end of the third quarter, the Company had implemented the LOS in 127 of its 136 dealerships, with centralized decision-making on approvals of applications submitted via the online platform. The remaining nine dealerships, which were acquired, are still in their earn-out period or have yet to be integrated. Through the LOS, the Company has tightened its credit approval standards, primarily by requiring a higher down payment and shorter terms from certain customers.

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Three Months Ended January 31, 2026 vs. Three Months Ended January 31, 2025

Consolidated Operations

(Operating Statement Dollars in Thousands)

Total revenues decreased $38.9 million, or 12%, for the three months ended January 31, 2026 compared to the same period in the prior year. The decrease was driven primarily by lower retail sales volumes, reflecting management's deliberate decision to operate with more disciplined inventory levels and moderate originations to align sales activity with available funding capacity as part of broader initiatives to reposition and strengthen the Company's capital structure. This deliberate reduction in sales volume, combined with continued affordability pressures impacting customers, resulted in lower sales revenue during the quarter. The decline in total revenues was partially offset by an increase in interest income, and an increase in the weighted average interest rate on outstanding finance receivables to 17.66% compared to 17.51% in

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the prior year period. In addition, the average retail sales price increased to $20,634 compared to $19,275 in the prior year quarter, providing a modest offset to the reduction in unit volumes.

Cost of sales as a percentage of sales remained relatively consistent at 64.2% for the three months ended January 31, 2026 compared to 64.3% for the same period of the prior fiscal year, resulting in a gross margin as a percentage of sales of 35.8% for the current year period compared to 35.7% in the prior year period. The stability in gross margin percentage year-over-year reflects disciplined pricing strategies and improved gross profit per retail unit sold, which increased to $7,762 compared to $7,131 in the prior year period. Thes

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto appearing in Item 8 of this Annual Report on Form 10-K.

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Overview

America’s Car-Mart, Inc., a Texas corporation (the “Company”), is one of the largest publicly held automotive retailers in the United States focused exclusively on the “Integrated Auto Sales and Finance” segment of the used car market. References to the Company include the Company’s consolidated subsidiaries. The Company’s operations are principally conducted through its two operating subsidiaries, America’s Car Mart, Inc., an Arkansas corporation (“Car-Mart of Arkansas”), and Colonial Auto Finance, Inc., an Arkansas corporation (“Colonial”). Collectively, Car-Mart of Arkansas and Colonial are referred to herein as “Car-Mart.” The Company primarily sells older model used vehicles and provides financing for substantially all of its customers. Many of the Company’s customers have limited financial resources and would not qualify for conventional financing as a result of limited credit histories or past credit problems. As of April 30, 2026, the Company operated 94 dealerships located primarily in small cities throughout the South-Central United States.

Fiscal 2026 was a transitional year defined principally by the Company’s efforts to address its liquidity position and capital structure. Constraints on available origination capital led the Company to reduce finance receivable originations, lower inventory levels, and tighten underwriting standards. Beginning in the third quarter of fiscal 2026, the Company also undertook a footprint optimization initiative through which it consolidated 60 dealership locations into nearby, higher-performing dealerships, reducing its active dealership count from 154 at April 30, 2025 to 94 at April 30, 2026. On October 30, 2025, the Company closed a five-year, $300.0 million senior secured term loan facility with funds managed by Silver Point Capital, L.P., and used a portion of the proceeds to repay and retire its revolving line of credit, with the remainder used for general operating and corporate purposes. As further described under “Liquidity and Capital Resources” and in Note B to the Consolidated Financial Statements, the conditions affecting the Company’s liquidity and capital structure raise substantial doubt about its ability to continue as a going concern.

Total revenue for fiscal 2026 decreased 7.9% to $1,281.5 million, compared to a decline of 0.2% in fiscal 2025. The decrease was primarily attributable to a decline in retail units sold—reflecting the reduction in active dealership locations and the pause in inventory purchases resulting from the Company’s liquidity constraints—partially offset by a 3.4% increase in the average retail sales price and a 3.7% increase in interest and other income. The Company reported a net loss attributable to common stockholders of $139.2 million, or $16.79 per diluted share, for fiscal 2026, compared to net income of $17.9 million, or $2.33 per diluted share, for fiscal 2025. Notwithstanding the decline in revenue in each of the past two years, over the last ten fiscal years, the Company’s annual revenue growth has averaged 9.1%.

From fiscal 2024 to fiscal 2026, sales performance was shaped primarily by the Company's liquidity position and the resulting moderation of finance receivable originations. With limited origination capital available — and no revolving warehouse facility in place to bridge the period between origination and securitization following the Company's repayment and termination of its prior asset-backed revolving line of credit on October 30, 2025 — the Company deliberately reduced originations and lowered inventory levels, which in turn constrained retail unit volume. Finance receivable originations decreased to $952.5 million in fiscal 2026 from $1,075.1 million in fiscal 2025, and inventory declined to $54.1 million at April 30, 2026 from $112.2 million a year earlier. As a result, used vehicle sales revenue declined, driven principally by lower retail unit sales rather than by a change in underlying customer demand. Wholesale revenue also decreased, reflecting a lower volume of repossessed vehicles available for resale.

The Company generates revenue primarily through the sale of used vehicles—typically accompanied by a related service contract and accident protection plan—together with interest income and late fees from financing. Its cost structure is relatively fixed and is therefore sensitive to changes in sales volume. Revenue is influenced by competition, the availability of funding in the subprime automobile industry and for the Company specifically, broader macroeconomic conditions, and fluctuations in the cost of acquiring vehicles for resale. Because the Company's selling price is largely a function of its vehicle acquisition cost, increases in purchase costs generally result in higher selling prices, which can pressure gross margin percentages and contract terms as the Company seeks to preserve affordable payment options for a customer base with limited financial flexibility. Declines in new vehicle sales, particularly of domestic brands, reduce the future supply of used vehicles and tend to raise wholesale prices, and changes in consumer credit availability, broader economic conditions, and the imposition of (or threats to impose) tariffs or other trade restrictions could similarly affect both the demand for and the acquisition cost of vehicles.

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The Company has been focused on strengthening its underwriting and improving vehicle quality by procuring lower-mileage vehicles, while balancing affordability for customers. The Company believes this will aid in driving down our customers’ vehicle repair costs, reduce our service contract repair expenses, and lead to better recovery values in the event of repossession. When combined with inventory procurement efficiencies, these changes are expected to drive improved customer experience and contribute to better gross margins.

The Company places significant emphasis on building strong, long-term customer relationships, which it believes generate the repeat business that is integral to its success. It pairs a "local," face-to-face approach to customer service with continued investment in digital and online capabilities intended to deliver a more integrated, seamless sales and service experience, and, subject to recent inventory funding constraints, it offers a diverse mix of vehicles at a variety of price points to address affordability across a broad range of customer needs.

The Company closely monitors key underwriting variables—including down payments, contract terms, and customer credit scores—to support customers' ability to meet their payment obligations. After the sale, collections, delinquencies, and charge-offs are central to assessing the Company's financial condition and results of operations, and management monitors these measures on an ongoing basis to enable timely intervention and adjustments to strategy.

The Company maintains a consistent focus on collections. For most of fiscal 2026, collections were conducted at the dealership level under the oversight of the corporate office, and in the fourth quarter of fiscal 2026 the Company began rolling out a centralized collections model intended to improve the consistency and efficiency of its collection activities across its footprint. Total collections of principal, interest, and late fees increased by $15.9 million, or 2.2%, to $730.0 million in fiscal 2026, compared to $714.1 million in fiscal 2025. The average total collected per active customer per month increased to $590.56, compared to $575.48 for fiscal 2025. These results underscore the positive impact of our enhanced payments platform, which has streamlined processes and improved overall collection efficiency.

The credit performance of the Company's portfolio is reflected in the provision for credit losses, which increased to 40.8% of sales in fiscal 2026, from 32.7% in fiscal 2025 and 36.5% in fiscal 2024—the high end of a five-year range that has run from approximately 22.9% in fiscal 2022 to 40.8% in fiscal 2026. The increase as a percentage of sales reflected the reduction in finance receivable originations during the year—which lowered the sales base, along with changes in macroeconomic conditions affecting the Company's customer base. The provision also increased in absolute terms, to $419.2 million in fiscal 2026 from $374.6 million in fiscal 2025.

As of April 30, 2026, the Company's allowance for credit losses increased to 25.15% of finance receivables, net of deferred revenue and pending accident protection plan claims, from 23.25% at April 30, 2025. The increase was driven primarily by changes in macroeconomic conditions affecting the Company's customer base—including persistent inflation in essential goods and services and, in the fourth quarter, elevated fuel prices—which reduced customers' disposable income and contributed to an increase in the frequency of losses. The reduction in finance receivable originations undertaken to preserve liquidity also contributed to the higher allowance percentage by reducing the receivables base against which the allowance is measured. These factors were partially offset by shifts in portfolio mix, including the growing share of receivables originated through the Company's loan origination system ("LOS") and receivables from recently acquired locations. The LOS centralizes customer information—including internal credit scores, down-payment percentages, and credit reports—in a single location, which supports more informed credit decisions and stronger credit management.

The Company continuously seeks ways to improve operational efficiency, including refining its underwriting and collections processes. The Company’s proprietary credit scoring system allows for constant monitoring of contract quality. Corporate personnel regularly review credit scores and work with dealerships when scores fall outside acceptable thresholds. Additionally, the Company uses credit reporting and GPS technology to support its collections efforts, while its training department ensures ongoing improvement in collections practices. Effective execution of these business practices is considered the primary driver of the Company’s long-term credit loss performance.

Over the past five fiscal years, the Company’s gross margin as a percentage of sales has fluctuated, reaching a high of approximately 36.7% in fiscal 2025 and a low of 33.5% in fiscal 2023, with an average of 35.4%. Gross margin was 35.4% of sales in fiscal 2026, compared to 36.7% in fiscal 2025. The prior year included a 0.7% benefit resulting from a change in accounting estimate related to revenue recognition for service contracts implemented in the second quarter of fiscal 2025. The remaining year-over-year change reflects a higher average retail sales price, which increased $666 to $20,064 (and increased $303 to $17,618 excluding ancillary products), partially offset by the Company's initiatives around pricing discipline, lower frequency and severity of vehicle repair costs, and improved retention of wholesale buyers for

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vehicles repossessed by the Company. Because higher-priced vehicles typically carry higher gross margin dollars but lower gross margin percentages, the increase in average selling price contributed to higher gross profit dollars per unit even as the gross margin percentage declined; total gross profit per retail unit sold increased $74 over the prior fiscal year to $7,442. Gross margin is also affected by the percentage of wholesale sales to retail sales, which relates, for the most part, to repossessed vehicles sold at or near cost. The

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